Mehta Construction Co. Vs. the State of Rajasthan and ors. - Court Judgment

Excerpt:
constitution of india - article 226--question of guilty of breach of contract adjudicated by contracting officer and not by arbitrator or civil court or independent person--held, order in quashed.;it must be held that whether the petitioner was guilty of committing breach of conditions of agreement or not, has necessarily to be adjudicated not by party to the agreement but by an independent person, may it be a court or an arbitrator appointed under the terms of agreement. there is no dispute before me that such an adjudication has not been referred to arbitration or to a civil court but the determination has been made by an officer of the state of rajasthan who is one of the contracting-party.;writ allowed - - 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. 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 the law because a party to the agreement cannot be an arbiter in his own cause. in such a case the officer of the state, even through a party to the contract will be well within the rights in assessing the damages occasioned by the breachin view of the specific terms of clause 12. 8. a careful reading of the ratio of the aforesaid decision leads one to conclude that while the assessment of quantum of damages may be left to one of the contracting-parties where the breach of agreement is admitted, or not disputed;rajesh balia, j.1. the petitioner was awarded a contract for construction of road for work of rmc from chuck no. 0 to 85 of sorri kamla amba project. according to the terms of agreement, the work was to commence from 22.5.1979 and was to be completed by 21.3.1980, which date was extented from time to time, sometimes on the representation of the petitioner and sometime suo moto. vide order dated 30th june, 1982 (annx. 10), the petitioner was informed that he has committed brench of contract by not completing the work within the time allowed and, therefore, clause (2) of the agreement entitles the respondent-department for damages of rs. 23421/-, to be paid by the petitioner to the government. the petitioner did not deposit this amkount. thereafter, proceedings against the petitioner was taken for recovery of rs. 1,20,437.38 by issuing a requisition on 15.3.1983. the collector, banswara rejected the petitioner's objection on the ground that if there is an agreement between a private individual and the government, and the individual does not comply with the terms of contract, the damages for breach of such contract can be recovered from the defaulting party, under the public demands recovery act. the petitioner also raised objection that the amkong has not been determined in accordance with law. both the objections of petitioner were rejected by the collector banswara vide his order dated july 23, 1986 (annx. 11). thereafter, the s.d.o., kishangarh (ajmer) paissed an order of attachment for recovering a sum of rs. 1,20,437.38, which consisted of rs. 32,750/- as damaged and rs. 97,687.38 as interest and other expenses : totaling to rs. 1,20,437.38. the petitioner has challenged issuance of orders annexures 10, 11 and 12.2. the only ground raised in the petition is that the respondents being one of the contracting-party, had no authority to adjudicate upon the alleged breach of contract and to determine the damages for such breach.3. the terms of the agreement did not authorised the respondents to be an adjudicator in his own case and, even if it were so authorised, such authuority would have been invalied being contrary to the principles of fair play and reasonableness. he relies on a decision of supreme court in state of karnataka v. shree rameshwara rice mills thirthahalli, ecc. air 1987 sc 1359. learned counsel for the respondents appearing on behalf of the state has supported the recovery proceedings and contested the petition on the ground that according to the terms of agreement, the respondents were fully competent to determine the question of breach and to assess the damages, arising out of such breach, to be recovered from the petitioner.4. i have carefully considered the pleadings of the parties and arguments raised before me.5. from the material place on record, it is apparent that the petitioner has been consistently raising his plea before the government that they (state has to complete/execute the work and has not paid compensation to the phategars of the land to be acquired. in the face of requisite land having not been placed at the disposal of the contractor, it was not possible for the contractor to have entered the land and to carry on the work over the land which have not been made available to the contractor. he has also raised certain disputes about his difficulty for not completing the work in time.6. be that as it may, the fact remain the one question the petitioner has raised before the authorities concerned is that the land has not been mate available to the petitioner for carrying on the execution of work thereon, which is strictly related to completion of work within time. no souht, it is true that the work was not completed within time stipulated, as originally or as extended from time to time; but still the question remains whether responsibility of committing breach lay on the petitioner or on the government. merely because the work was not completed within stipulated time, it can not be assumed that the petitioner was guilty of committing breach of conditions of the agreement. it has to be determined as to at whose door lay the reason for not concluding the contract within time. if the land on which the construction was to be raised, was khatedari land of third parties and was not acquired in accordance with law and mat available to the petitioner for making it possible for him to enter in that land and raise construction, it cannot be said that the petitioner had committed breach of contract. on the other had, the petitioner's contention is founds to be incorrect and it is found that the government has acquired the land over which the work was to be executed by the petitioner by way of acquisition proceedings or by negotiations and it was made available to the petitioner in time, for completing the work thereon; the petitioner may definitely be held liable for committing breach of agreement by not completing the execution of work within time. however, the relevancy of this controversy, it appears, is that there was a dispute between the contracting parties as to who committed breach of agreement. in that view of the matter, the question arises whether it was open for the respondents to assess and demand damages for the alleged breach under the terms of agreement and to recover the same as public demand.7. their lordships of supreme court in state of karnataka's case (supra), faced with the very precise situation spoke thus:on a consideration of the matter we find ourselves unable to accept the contentions of mr. iyengar. 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 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 sate 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 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 the law because a party to the agreement cannot be an arbiter in his own cause. interest 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 through a party to the contract will be well within the rights in assessing the damages occasioned by the breachin view of the specific terms of clause 12.8. a careful reading of the ratio of the aforesaid decision leads one to conclude that while the assessment of quantum of damages may be left to one of the contracting-parties where the breach of agreement is admitted, or not disputed; the question of adjudicating whether the other party has committed breach of contract or not?, cannot be left to be adjudicated by one of contracting-parties, and, even if the terms of agreement were to so provide, the adjudication by one of the contracting-parties cannot be sustained under law because a party to the agreement cannot be an aribiter in his own cause.9. in view of aforesaid clear pronouncement of the apex court, it must be held that whether the petitioner was guilty of committing breach of conditions of agreement or not, has necessarily to be adjudicated not by party to the agreement but by an independent person, may it be a court or an arbitrator appointed under the terms of agreement. there is no dispute before me that such an adjudication has not been referred to arbitration or to a civil court but the determination has been made by an officer of the state of rajasthan who is one of the contracting-party. in that view of the mater, the petition must succeed.10. accordingly, the petition is allowed. the order annx. 10 is quashed. the consequential proceedings under the public demand recovery act for recovering the said demand alongwith its interest and expenses vide annx. 11 and 12 also quashed. however, it is made clear that respective parties are free to agitate their right in an appropriate form as may be available to them for determining the breach of contract and damages arising therefrom.11. the parties are left to bear their own costs.