1. They are heard.
By this writ petition under Article 226 of the Constitution of India, the petitioner is praying for quashment of order dated 15.09.2014 issued by the respondent No.2.
2. Brief facts of the case are that a contract for construction of high level submersible bridge across river Angrer near Kheda Village for Kheda approach road on Pithampur Kheda Road, District Dhar was awarded to the petitioner @ 1.01% above SOR for road and bridge works issued by EinC, PWD, M.P. and enforce from 15.04.2009 amended upto the date of issue of NIT has been accepted by EinC, PWD, Bhopal on behalf of the Governor of M. P.
3. After signing of agreement, the work order was issued on 12.11.2012. As per work order, the petitioner was to complete the work within 12 months excluding rainy season but the same was not completed and inspite of various notices to carry out the progress in the work, there was no progress in the work in proportion to the time stipulated in the work order and the extent of work, which was to be carried out by the petitioner.
4. As per Clause 7.12, the work was to be done by the contractor according to time schedule so fixed by the authority and as per Clause 7.13, the time allowed for carrying out of the work was to be strictly adhered to by the contractor and in violation to the aforesaid clauses of the agreement, the department has every right to rescind the contract as per the provisions of Clause 3 of the agreement. The Clauses 7.12, 7.13 and 3 of the agreement are relevant, which reads as under :
"7.12 TIME SCHEDULE The work shall be done by the contractor according to the time schedule fixed by the competent authority.
7.13 TIME OF CONTRACT Time allowed for carrying out the work as entered in the NIT shall be strictly observed by the contractor and shall be reckoned from the date of work order to commence the work.
5. CLAUSE 3 of the Agreement In any case in which under any clause or clauses of this contract the contractor shall have rendered himself liable to pay compensation amounting to the whole of his security deposit (whether paid in one sum or deducted by installments) or committed a breach of any of the rules contained in clause 24 or in the case of abandonment of the work, except due to permanent disability or death of the contractor, or any other clause, the Divisional Officer on behalf of the Governor of Madhya Pradesh shall give a notice before 15 days for work costing upto Rs.10.00 lacs and before 30 days for works costing above Rs.10.00 lacs and in the event of the contractor failing to comply with the directions contained in the said notice shall have power to adopt any of the following courses, as he may deem best in the interest of the Government.
(c) To measure up the work of the contractor and to take such part thereof as shall be unexecuted out of his hand and to give it to another contractor to complete in which case any expenses which may be incurred in excess of the sum which would have been paid to the original contractor if the whole work had been executed by him (of the amount of which excess certificate in writing of the Divisional Officer shall be final and conclusive) shall be borne and paid by the original contractor and may be deducted from any money due to him by Government under the contract or otherwise or from his security deposit or the proceeds of sale thereof or a sufficient part thereof."
5. In the case in hand, the petitioner had only completed the work worth Rs.2,98,366/out of work of Rs.132.00 lacs. The work of construction of bridge is at Pithampur, which is a work of specialized nature and is a time bound work, which is to be completed within the time frames so provided in the work order.
6. Inpite of notices and number of promises given by the petitioner, he failed to complete the work. The department was not left with any other option but to rescind the contract of the petitioner looking to the slow progress in the work and, therefore, his work was rescind.
7. As per Clause 3 of the agreement, the left over work was given to other agency after finalization of the bill of the petitioner and the rate quoted by other agency was 17% above SOR and the difference between the petitioner's rate and the rate quoted by the other agency was 16.99% of the total amount of the contract, which came to Rs.21,92,678/.
8. The department passed the orders dated 15.09.2014 and 23.09.2014. As per provisions of Clause 3 of the agreement, directed the petitioner to deposit the amount, which was the difference of the amount, which the State Government was to incur due to giving work to a different agency in respect of work, which was left over by the petitioner. It is this action, which has been impugned in this writ petition.
9. Learned counsel for the petitioner has submitted that Clause 29 of the agreement deals with arbitration and as per the aforesaid clause, if any dispute arise between between the parties, the matter shall be referred to the Superintending Engineer for deciding the said dispute and if any one is dissatisfied then, an appeal is made before the Chief Engineer. He further submitted that in the present case, order dated 15.09.2014 was passed by the Chief Engineer and, therefore, no useful purpose will be served in raising the dispute before the Superintending Engineer. He further submitted that in pursuance to the order passed by the Chief Engineer, the Executive Engineer on 23.09.2014 passed the order for demand for recovery of the amount in question. He further submitted that unless and until the dispute is decided by the competent authority, the difference amount cannot be recovered from the petitioner. In support of the aforesaid arguments, learned counsel for the petitioner has drawn out attention to the Full Bench decision in the case of B. B. Verma and another vs. State of M. P. and another reported in 2007(III) MPJR (FB) 251 and the decision of the Apex Court in the matter of State of Karnataka vs. Shree Rameshwara Rice Mills, Thirthahalli reported in AIR 1987 SC 1359.
10. In reply, learned Dy. G.A. submits that as per the agreement, the petitioner has failed to challenge the order of recovery either by raising a dispute as per Clause 29 of the agreement or filing a petition under Section 7 of the M. P. Madhyastham Adhikaran Adhiniyam, 1993 (in short "Adhiniyam"), the demand issued by the State is final because due to breach committed by the petitioner, the State has suffered a loss of Rs.21,92,678/and as per Clause 3, the petitioner is liable to pay the aforesaid amount. She further submitted that if the petitioner is aggrieved by the aforesaid order of recovery, he may refer the matter to the Tribunal, which is the proper forum but he has failed to refer the matter and, therefore, the Full Bench decision cited by the petitioner will not be applicable in the present facts and circumstances of the case. She also submits that where a contractor does not complete the work entrusted to him under the contract and the unexecuted part of the work is entrusted to another contractor for completion and the Government incurs additional expenses for having the work done by other contractor, the additional expenses sought to be recovered by the Government are nothing but damages within the meaning of Section 73 of the Indian Contract Act, 1872 and prays for dismissal of the writ petition.
11. In the case of B. B. Verma (Supra), the appellants therein raised the dispute before the Executive Engineer and, thereafter, challenged the impugned orders of recovery. In the present case, no such dispute was raised and, therefore, decision of the Full Bench will not be applicable and is distinguishable on facts.
12. In the case of Rameshwara (Supra), it has been held that the Court was construing Clause 12 of the contract concerned therein, which ran as follows :
In token of the first party's willingness to abide by the above conditions, the first party has hereby deposited as security a sum of Five Hundred Rupees only with the second party and for any breach of conditions set forth hereinbefore, the first party shall be liable to pay damages to the second party as may be assessed by the second party, in addition to the forfeiture in part or whole of the amount deposited by him. Any amounts that may become due or payable by the first party to the second party under any part of the agreement, shall be deemed to be and may be recovered from the first party as if they were arrears of land revenue".
The contract was between the State of Mysore, and Shree Rameshwara Rice Mills. Alleging that the Mills had committed a breach of contract by making short delivery of rice, the State demanded payment of damages, assessed at Rs. 7,344.16 Ps. by the Deputy Commissioner. Since the Mills failed to pay the said amount, the State initiated proceedings under the Revenue Recovery Act, to recover the amount as if it were arrears of land revenue. The mills thereupon instituted a suit for a declaration that the recovery proceedings are illegal, and for a permanent injunction restraining the State from pursuing the recovery proceedings. In two other similar matters, however, the contractors approached the High Court of Karnataka by way of writ petitions under Article 226 of the Constitution, challenging the validity of the assessment of damages and recovery proceedings. The second appeal preferred by the State was dismissed and the writ petitions filed by the contactors were allowed by the High Court, whereupon the matter was taken to Supreme Court. Construing said Clause 12, the Supreme Court made the following observations :
".....The terms of Clause 12 do not afford scope for a liberal construction being made regarding the powers of the Deputy Commissioner to adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. The crucial words in Clause 12 are "and for any breach of conditions set forth hereinbefore, the first party shall be liable to pay damages to the second party as may be assessed by the second party". On a plain reading of the words it is clear that the right of the second party to assess damages would arise only if the breach of conditions is admitted or if no issue is made of it. If it was the intention of the parties that the officer acting on behalf of the State was also entitled to adjudicate upon a dispute regarding the breach of conditions the wording of Clause 12 would have been entirely different. It cannot also be argued that a right to adjudicate upon an issue relating to a breach of conditions of the contract would flow from or is inhered in the right conferred to assess the damages arising from a breach of conditions. The power to assess damages, as pointed out by the Full Bench, is a subsidiary and consequential power and not the primary power. Even assuming for argument's sake that the terms of Clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case the officer of the State, even though a party to the contract will be well within his rights in assessing the damages occasioned by the breach in view of the specific terms of Clause 12.....".
13. It would be evident from a reading of the above observations that the said Clause, according to the Supreme Court, did not empower the State to determine whether there was a breach of contract on the part of the Mills. It was further held that the power to assess damages was consequential to breach. If the State had no power to adjudicate upon the issue relating to breach of contract by the Mills, it follows logically that it had no power also to assess the damages, which is merely a consequential aspect. It is, no doubt, true that the Court did not stop there, and proceeded to observe further that even if the said clause is construed as empowering the State to determine whether a breach has been committed by the Mills, such a clause would be unsustainable, since "Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract......". At the same time, the Court observed further that the position would be different where there in no dispute, or there is consensus between the contracting parties regarding the breach of conditions. In such a case, it was held, the State, even though a party to the contract, will be well within its rights in assessing the damages occasioned by the breach, in view of the specific terms of Clause 12.
14. Even assuming that the learned counsel for the petitioner is right in saying that one party to a contract is not empowered to determine that the other party to the contract has committed a breach, or to assess damages/compensation which it is entitled to under the contract, it only means that in such a case, the remedy lies in approaching either the Arbitration Tribunal or the Civil Court for appropriate relief. A writ petition, in any event, is not a remedy available in such a situation.
15. For the above reasons, we are of the view that in absence of any dispute raised by the petitioner challenging the decision of recession of contract before the competent authority, the respondent/State is empowered to issue the demand for the loss suffered either due to awarding of contract to other agency and as per terms of the contract, the petitioner is liable to pay the said amount. Thus, the action of the State is just and proper. The writ petition filed by the petitioner has no merit and is accordingly, dismissed. No order as to costs.