w w w . L a w y e r S e r v i c e s . i n



Kaikkara Construction Company, A Partnership firm, Represented by Its Managing Partner A. Abdul Salam, Kollam v/s State of Kerala, Rep. by The Chief Secretary to Government, Government Secretariat, Thiruvananthapuram & Others

    WP(C). Nos. 31363 of 2009 & 4856 of 2019

    Decided On, 11 March 2022

    At, High Court of Kerala

    By, THE HONOURABLE MR. JUSTICE P.V. KUNHIKRISHNAN

    For the Petitioner: K. Babu Thomas, Marykutty Babu, Advocates. For the Respondents: K.V. Sohan, State Attorney, K.V. Manoj Kumar, Sr. GP.



Judgment Text

Common Judgment:

1. It is a settled position that the unliquidated damages do not give rise to debt especially when the same is disputed until the liability is adjudicated and damages assessed by a decree or order of a court or by any other adjudicatory authority. One party to a contract cannot unilaterally assess the damages. But in these cases, the state challenges this proposition based on certain decisions of the apex court. Since these two writ petitions are connected, I am disposing of these two writ petitions by a common judgment. I will first narrate the facts in WP(C) No.31363 of 2009.

2. The petitioner was awarded the construction work of break waters in connection with the Ponnani Fisheries Harbour Project of the State Government. As per the terms of the agreement entered into by the petitioner with the Government in connection with the execution of work referred above, the petitioner ought to have completed the work on or before 31.3.2007. The case of the petitioner is that due to various reasons attributable exclusively to the respondents, the work could not be completed in full within the time stipulated. For completing the remaining part of the work, a minimum period of seven months further was required at that point of time. Hence, the petitioner on 7.2.2007 submitted an application for an extension of time. It is the case of the petitioner that since the reason for non-completion of the work was not attributable to the petitioner, the Harbour Engineering Department under which the work was executed recommended to the Government that time sought for by the petitioner can be granted. Consequently, based on Ext P1 Government Order,the Government allowed the request for extension of time but imposed a fine @ Rs.21,956/- per day for completion of the remaining part of the work. It is the case of the petitioner that the fine imposed by the Government as per Ext P1 order was approximately 1 crore and the same was even far above the anticipated profit of the petitioner. Hence, the petitioner again approached the Government to modify Ext P1 order and to permit them to complete the work without a fine. Subsequently, Ext P2 Government Order was passed based on the direction in Ext P3 judgment of this court.

3. Thereafter, it is the case of the petitioner that the 1st respondent illegally directed to terminate the contract by Ext P2 order. The termination of the contract effected by the 2nd respondent on 29.4.2005 at the risk and cost denying unconditional extension of time sought from 1.4.2007 to 31.12.2007. The respondents issued a notice inviting tenders for the balance work. Pursuant to Ext P3 judgment, the Government conducted a hearing on the issue of termination of the contract and in the course of the hearing, the petitioner contended that they had not committed any breach of the terms of the contract. It is the case of the petitioner that without considering the contentions of the petitioner, the Government restored its earlier decision as per Ext P4. Since a substantial amount is due to the petitioner, the petitioner decided to file a suit, and a Section 80 Civil Procedure Code notice was issued as evident by Ext P5. The Government sends a reply as per Ext P6. Thereafter, the petitioner was taking steps to file the suit. At that stage, the petitioner received Ext P7 notice from the 4th respondent stating that the petitioner is liable to pay a sum of Rs.4,34,12,105/- to the Government in connection with the rearranging of the work referred to above and directing them to pay the same to the Government. The petitioner sent Ext P8 reply. In Ext P8, the petitioner also stated that Government cannot determine the issue as to who has committed the breach of the terms of the contract, and therefore, determination of the alleged loss made by the Government on that basis is illegal. It is the case of the petitioner that after the award of contract for the balance work on 4.12.2008, Ext P4 order dated 12.12.2008 was passed by the 1st respondent affirming the termination of the contract at risk and cost willfully suppressing the material facts. Ext P9 is a letter sent by the petitioner demanding the payment of the unpaid value of work carried out, which was modified by a letter dated 15.4.2011. Ext P10 is the letter from the Executive Engineer dated 2.5.2011 to the 4th respondent transmitting Ext P9 for further action. Ext P11 is another representation for the petitioner which was returned for presentation before the Executive Engineer, Malappuram. Ext P12 is a notice-cum-bill submitted by the petitioner to the respondents demanding payment of Rs. 11,67, 41,925/-. It is the case of the petitioner that the Government of Kerala issued Ext P13 circular directing to obtain decree from the civil court before initiating revenue recovery proceedings for claiming damages at the time termination of the contract on risk and cost. As per Ext P10 judgment, this Court directed the Government to take a decision in Ext P10 representation. As per Ext P15, the Government declined the payment demanded and also declined the request for the appointment of an arbitraral tribunal for resolution of the dispute. Exts P16 and P17 are the other representations submitted by the petitioner before the Hon'ble Minister (Fisheries) and the 1st respondent. There was no reply to those representations. Thereafter Ext P18 notice was issued by the petitioner demanding payment due to the petitioner with interest. The Government of Kerala issued Ext P19 directing to allow extension of time for completing works delayed without imposing fine in the event of all bills presented for the value of work carried out remains unpaid. It is the case of the petitioner that, Ext P1 order was passed imposing a fine of Rs.36.44 lakhs for allowing extension of time from 1.4.2007 to 31.10.2007 and thereafter at Rs.21,956/- per day withholding Rs.1,58,75,214/- payable to the petitioner. Ext P20 is the revised estimate of work and Ext P21 is the copy of the preliminary specification in MDSS forming part of the agreement. It is submitted that Exts P22 and P23 revenue recovery proceedings were initiated to recover the amount when the interim order staying all further proceedings based on Ext P7 was in force. In such circumstances, the petitioner submits that this writ petition is filed with the following prayers.

(i).issue a writ of certiorari, or any other appropriate writ, direction or order calling for the records leading to Exhibit P7 notice No.D1/1643/2000/EE, dated 28-5-2009 of the fourth respondent and quashing the same.

(ii).issue a writ of certiorari or any other appropriate writ, or order to quash Ext. P1,P2, P4, P22 and P23 and all further proceedings pursuant to the same.

(iii) issue a writ of mandamus, or any other appropriate writ, or order, or direction to the respondents 1 to 4, to pay Rs.10,89,16,083/- due to the petitioner, together with interest at 12%/annum from the respective dates demanded in Ext P18 till payment of the same.

(iv) issue such other further relief as the Hon. Court deem, fit and proper to grant in the circumstances of the cases.[SIC]

4. W.P(C) NO.4856 of 2019 is filed by the petitioner against the illegal withholding of security deposit and EMD. The prayers in WP(C) No.4856 of 2019 is also extracted hereunder.

i) issue a writ of mandamus, or any other appropriate writ, or order, or direction to the 2nd respondent requiring to forthwith release the security deposits for Rs.3,00,000/- together with interest accrued on the same at 12%/ annum compounded from the date of completion of the works till release of the same, treating the same as fixed deposit in a nationalized bank and the EMD of Rs.50,000/-.

ii) declare that the respondents are bound to release and return security deposit of Rs.3,00,000/- together with interest accrued on them treating them as fixed deposit in any Nationalized bank, from the date of completion of the work till release of the same, computing interest at 12%/ annum compounded, treating the same as fixed deposit in any Nationalized bank.

iii) issue a writ of prohibition, or any other appropriate writ, or order, or direction to the respondents, interdicting them from in any way withholding security deposits and EMD furnished by the petitioner, on the ground of illegal termination of a contract, which became the subject matter of Ext.P7 order of stay granted by this Hon. Court.

iv) grant such other relief this Hon. Court may deem, proper, just, equitable and necessary in the peculiar facts and circumstances of the case including the costs incurred by the petitioner in these proceedings. [SIC]

5. Heard the counsel for the petitioner and the Government Pleader.

6. The counsel for the petitioner submitted that Ext P7 decision and the consequential recovery steps are unsustainable. The case of the petitioner is that when a breach of condition of a contract is alleged by one party in a contract, which is disputed by the other party, a unilateral decision claiming damages from one party will not stand. The counsel relied on the judgment of the Apex Court in Union of India v Raman Iron Foundry [(1974)2 SCC 231], State of Karnataka v Shree Rameshwara Rice Mills, Thirthahalli [(1987)2 SCC 160], J.G Engineers Private Limited v Union of India and another [(2011)5 SCC 758], State of Kerala and others v M.K.Jose [(2015) 9 SCC 433], and M/s.Gangotri Enterprises Limited v Union of India and others [(2016)11 SCC 720]. The Government Pleader on the other hand submitted that the proposition to the effect that one party to a contract cannot assess the damage for an alleged violation of a contract, when there is dispute from the other party to the contract is a proposition overruled by the Apex Court in subsequent judgment. The Government Pleader submitted that the judgment in Raman Iron Foundry's case was overruled by the Apex Court in M/s.H.M.Kamaluddin Ansari and Co. v Union of India and others [(1983)4 SCC 417]. Therefore, the Government Pleader submitted that in the light of the judgment of the Apex Court in M/s.H.M.Kamaluddin Ansari's case (supra), the principle laid down by the Apex Court in Raman Iron Foundry's case(supra) and Shree Rameshwara Rice Mill's case is no longer good law. The Government Pleader also submitted that in State of Gujarat and another v. Amber builders [(2020)2 SCC 540], it is clearly stated that the judgment in M/s.Gangortri Enterprises Ltd. is per incuriam because it relies upon Raman Iron Foundry's case which has been specifically overruled by 3 Judge bench in M/s.H.M.Kamaluddin Ansari's case. The Government Pleader also relied on the judgment of the Apex Court in Bharat Coking Coal Limited and others v Amr Dev Prabha and others [(2020)16 SCC 759] and submitted that a person seeking writ relief must satisfy the court that the right which he is seeking is one in public law and not merely contractual. It is also submitted that the balance is to be maintained between the need of commercial freedom, the real possibility of pollution illegality, and the slandering of public resources.

7. The short point to be decided in this case is whether Ext P7 demand notice is bad because it is a unilateral decision from the Government when the same is disputed by the petitioner and whether any independent adjudication about the alleged loss sustained to the Government is necessary in the facts and circumstances of this case. It is an admitted fact that Ext P7 is an order passed without hearing the petitioner. The contention of the petitioner is mainly based on the decisions of the Apex Court which deprecate unilateral decision to assess the damages sustained by one party to a contract when there is a dispute about the liability from other parties. In such a situation, the parties should obtain a decree from a civil court or should resolve the issue through arbitration or third party intervention is the observation of the Apex Court. The counsel for the petitioner relied on a series of decisions of the Apex Court to strengthen his contention. The first decision relied on by the counsel for the petitioner is Raman Iron Foundry's case (supra) and all the subsequent decisions are based on that decision. The Government Pleader submitted that Raman Iron Foundry's case is overruled by the Apex Court in M/s.H.M.Kamaluddin Ansari's case (supra). Therefore, this Court has to consider whether the general dictum laid down in Raman Iron Foundry's case is overruled in M/s.H.M.Kamaluddin Ansari's case.

8. In Raman Iron Foundry's case (supra), the Apex Court was interpreting Clause 18 of the general conditions of contract contained in the standard form of contract No.TGS and D68. Admittedly, Clause 2 in the agreement entered between the petitioner and the respondents, in this case, is similar to Clause 18 interpreted in Raman Iron Foundry's case. In Raman Iron Foundry's case, the two grounds raised before the Apex Court by the learned Solicitor General are extracted in paragraph 4 of that judgment. It will be better to extract two grounds which was discussed by the Apex Court separately based on the argument of the Solicitor General in Raman Iron Foundry's case.

4. There are in the main two grounds on which the learned Solicitor General, appearing on behalf of the appellant, challenged the order of interim injunction made by Mr. Justice Avadh Bihari.

A. The impugned order amounted in effect and substance to an order directing the appellant to pay the amounts of the pending bills of the respondent in respect of the other contracts and since the question of payment of the amounts of such pending bills did not form the subject matter of the reference which was pending before the arbitrator, the-learned-Judge had no jurisdiction under Section 41 read with the Second Schedule to make such an order and the impugned order was, therefore, outside the scope of his power and hence invalid.

B. Clause 18 comes into play when there is a claim for payment of a sum of, money arising out of or under the contract. It is not necessary that the sum of money must be due and payable to the purchaser. It is enough if there is a claim even for damages. Whenever there is such claim, the purchaser is given a right under Clause 18 to recover it by appropriating “any sum then due or which at any time thereafter may become due to the contractor under the contract" or under any other contract. The appellant was, therefore, entitled to recover the amount of its claim for damages against the respondent by appropriating the sums which subsequently became due to the respondent under other contracts, even though the claim for damages was contested by the respondent and was pending adjudication before the arbitrator. No interim injunction could be granted to prevent the exercise of such right. If interim injunction were to be granted in a case of this kind as of course merely on the ground, without anything more, that the claim for damages is pending adjudication and until it is determined in favour of the purchaser, it should not be allowed to be recovered by the purchaser out of other sums due to the contractor, it would render Clause 18 meaningless and ineffectual and the right to the purchaser under that clause would become illusory. Of course, it would be open to the Court even in such a case to grant interim injunction, if it is satisfied that the claim for damages is prima facie not well founded and the balance of convenience requires that, pending adjudication, the purchaser should be restrained from effecting recovery of the claim for damages from out of other sums due to the contractor. But here admittedly neither of these two factors was taken into consideration by the learned Judges and the order of interim injunction made by him cannot, therefore, be sustained.

9. The above two grounds were decided in Raman Iron Foundry's case separately as seen in Para 6 and 7 of that judgment. But a perusal of M/s.Kamaluddin Ansari's case it is clear that the ground (a) mentioned in paragraph 4 of Raman Iron Foundry's case is overruled. It will be better to extract the relevant portion in Kamaluddin Ansari's case.

“21. The learned counsel Shri Kacker, however, strongly relied on the following observations of the Court in Union of India v. Raman Iron Foundry(SCC p.238, para6):

"But here the order of interim injunction made by the learned Judge does not expressly or by necessary implication, carry any direction to the appellant to pay the amounts due to the respondent under other contracts. It is not only in form but also in substance a negative injunction. It has no positive content. What it does is merely to injunct the appellant from recovering, suo motu, the damages claimed by it from out of other amounts due to the respondent. It does not direct that the appellant shall pay such amounts to the respondents. The appellant can still refuse to pay such amounts if it thinks it has a valid defence and if the appellant does so, the only remedy open to the respondent would be to take measures in an appropriate forum for recovery of such amounts where it would be decided whether the appellant is liable to pay such amounts to the respondent or not. No breach of the order of interim injunction as such would be involved in non payment of such amounts by the appellant to the respondent. The only thing which the appellant is interdicted from doing is to make recovery of its claim for damages by appropriating such amounts in satisfaction of the claim. That is clearly within the power of the Court under S.41(b) because the claim for damages forms the subject matter of the arbitration proceedings and the Court can always say that until such claim is adjudicated upon, the appellant shall be restrained from recovering it by appropriating other amounts due to the respondent. The order of interim injunction made by the learned Judge cannot, therefore, be said to be outside the scope of his power under S.41(b) read with the Second Schedule."

With profound respect we find that the aforesaid observation is incongruous with the proposition of law laid down by this Court just before this observation. We find it difficult to agree with the observation of the Court that the impugned order in form and substance being in the negative the respondent could refuse to pay such amounts if it thinks it has a valid defence and if it chooses to do so there would be no breach of the injunction order.”

10. From the above it is clear that the findings in paragraph 6 of Raman Iron Foundry's case, which is the answer to ground A in para 4 of that decision is reversed in paragraph 21 of Kamaluddin Ansari's case (supra). The ground (B) mentioned in paragraph No.4 of the Raman Iron Foundry's case (supra), is discussed Kamaluddin Ansari's case (supra) from paragraph 27 onwards. Ground B mentioned in Raman Iron Foundry's case (supra), is mainly about the interpretation of Clause 18 of the General Conditions of contract. Thereafter the Apex Court declared that a claim for unliquidated damages does not give rise to debt until the liability is adjudicated and damages are assessed by a decree or order of a court or other adjudicatory authority. It will be better to extract the relevant portion of the judgment in Raman Iron Foundry's case (supra).

“11. Having discussed the proper interpretation of clause 18, we may now turn to consider what is the real nature of the claim for recovery of which the appellant is seeking to appropriate the sums due to the respondent under other contracts. The claim is admittedly one for damages for breach of the contract between the parties. Now, it is true that the damages which are claimed are liquidated damages under clause 14, but so far as the law in India is concerned, there is no qualitative difference in the nature of the claim whether it be for liquidated damages or for unliquidated damages. S.74 of the Indian Contract Act eliminates the somewhat elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties; a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty, and according to this principle, even if there is a stipulation by way of liquidated damages, a party complaining of breach of contract can recover only reasonable compensation for the injury sustained by him, the stipulated amount being merely the outside limit. It, therefore makes no difference in the present case that the claim of the appellant is for liquidated damages. It stands on the same footing as a claim for unliquidated damages. Now the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach become party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not an actionable claim and this position is made amply clear by the amendment in S.6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred. This has always been the law in England and as far back as 1858 we find it stated by Wightman, J., in Jones v. Thompson, (1858) 27 LJQB 234. "Ex parte Charles and several other cases decide that the amount of a verdict in an action for unliquidated damages is not a debt till judgment has been signed." It was held in this case that a claim for damages does not become a debt even after the jury has returned a verdict in favour of the plaintiff till the judgment is actually delivered. So also in O'Driscoll v. Manchester Insurance Committee, 1915 (3) KB 499. Swinfen Eady, L., J., said in reference to cases where the claim was for unliquidated damages "....... in such cases there is no debt at all until the verdict of the jury is pronounced assessing the damages and judgment is given". The same view has also been taken consistently by different High Court in India. We may mention only a few of the decisions, namely, Jabed Sheikh v. Taher Mallik, 45 Cal WN 519 : AIR 1941 Cal. 639; S. Milkha Singh v. M/s. N. K. Gopala Krishna Mudaliar, AIR 1956 Punj 174 Iron and Hardware (India) Co. v. Firm Shamlal and Bros, AIR 1954 Bom 423. Chagla, C. J., in the last mentioned case, stated the law in these terms:(at pp.425-26)

"In my opinion it would not be true to say that a person who commits a breach of the contract incurs any pecuniary liability, nor would it be true to say that the other party to the contract who complains of the breach has any amount due to him from the other party.

As already stated, the only right which he has is the right to go to a Court of law and recover damages. Now, damages are the compensation which a Court of law gives to a party for the injury which he has sustained. But, and this is most important to note, he does not get damages or compensation by reason of any existing obligation on the part of the person who has committed the breach. He gets compensation as a result of the fiat of the Court. Therefore, no pecuniary liability arises till the Court has determined that the party complaining of the breach is entitled to damages. Therefore, when damages are assessed, it would not be true to say that what the Court is doing is ascertaining a pecuniary liability which already existed. The Court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till that determination there is no liability at all upon the defendant."

This statement in our view represents the correct legal position and has our full concurrence. A claim for damages for breach of contract is, therefore, not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under clause 18, to recover the amount of such claim by appropriating other sums due to the contractor. On this view, it is not necessary for us to consider the other contention raised on behalf of the respondent, namely, that on a proper construction of clause 18, the purchaser is entitled to exercise the right conferred under that clause only where the claim for payment of a sum of money is either admitted by the contractor, or in case of dispute, adjudicated upon by a Court or other adjudicatory authority. We must, therefore, hold that the appellant had no right or authority under Clause 18 to appropriate the amounts of other pending bill of the respondent in or towards satisfaction of its claim for damages against the respondent and the learned Judge was justified in issuing an interim injunction restraining the appellant from doing so.”

(underline supplied)

11. The Apex Court held that when there is a breach of contract, the party who commits the breach does not incur any pecuniary obligation nor does the party complaining of the breach become entitled to a debt due from the other party. According to the Apex Court, the only right which the party aggrieved by the breach of the contract is the right to sue for damages. The Apex Court also observed that a claim for damages for breach of contract is, therefore, not a claim payable and the purchaser is not entitled, in the exercise of the right conferred upon it under Clause 18, to recover the amount of such claim by appropriating other sums due to the contractor. Hence, two principles are laid down by the Apex Court in Raman Iron Foundry's case (supra).

1) The law is well settled that a claim for unliquidated damages does not give rise to debt until the liability is adjudicated and damages assessed by a decree or order of a court or other adjudicatory authority. When a party who commits the breach does not eo instanti incur any pecuniary obligation nor does the party complaining of the breach become entitled to a debt due from the other party. The only right that the party aggrieved by the breach of the contract will get is the right to sue for damages.

2) A claim for damages for breach of contract is therefore not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under Clause 18, to recover the amount for such claim by appropriating other sum due to the contractor.

12. The above point discussed in Raman Iron Foundry's case (supra) again came up for consideration in Kamaluddin Ansari's case (supra) which was a larger bench decision. The relevant portion of the judgment in Kamaluddin Ansari's case (supra) is extracted hereunder :

“26. This Court in Union of India v. Raman Iron Foundry,while construing Clause 18 of the standard contract observed :

"It is true that the words "any claim for the payment of a sum of money" occurring in the opening part of clause 18 are words of great amplitude, wide enough to cover even a claim for damages, but it is a well settled rule of interpretation applicable alike to instruments as to statutes that the meaning of ordinary words is to be found not so much in strict etymological propriety of language nor even in popular use as in the subject or occasion on which they are used and the object which is intended to be attained. The context and collocation of a particular expression may show that it was not intended to be used in the sense which it ordinarily bears. Language is at best an imperfect medium of expression and a variety of meanings may often lie in a word or expression. The exact colour and shape of the meaning of any word or expression should not be ascertained by reading it in isolation, but it should be read structurally and in its context, for its meaning may vary with its contextual setting. We must therefore, read the words "any claim for the payment of a sum of money' occurring in the opening part of clause 18 not in isolation but in the context of the whole clause, for the intention of the parties to be gathered not from one part of the clause or the other but from the clause taken as a whole. It is in the light of this principle of interpretation that we must determine whether the words 'any claim for the payment of a sum of money' refer only to a claim for a sum due and payable which is admitted or in case of disputes, established in a Court of law or by arbitration or they also include a claim for damages which is disputed by the contractor."

27. The headings prefixed to a section or a group of sections in some modern statutes are regarded as preambles to those sections. They cannot control the plain words of the statutes but they may explain ambiguous words. The view is now well settled that the headings or titles prefixed to a section or a group of sections can be referred to in determining, the meaning of doubtful expressions. It is true that the Court is entitled, to look at the headings in an Act of Parliament to resolve any doubt they may have as to ambiguous words. The law is clear that those headings cannot be used to give a different effect to clear words in the section where there cannot be any doubt as to the ordinary meaning of the words. The golden rule is that when the words of a statute are clear, plain and unambiguous, that is, they are reasonably susceptible to only one meaning, the Courts are bound to give effect to that meaning irrespective of the consequences, duty of a judge is to expound and not to legislate, is a fundamental rule. If we apply the same principle to the interpretation of clause 18 of the standard form of contract, it would be clear that the clause unequivocally contemplates a claim for the payment and it is not open to the Union of India to appropriate any amount due to the contractor under other pending bills. It does not contemplate the amount due and, therefore, the heading of this clause which talks of only 'Recovery of sums due' will not control Clause 18. The clause in our opinion gives wide powers to the Union of India to recover the amount claimed by appropriating any sum then due or which at any time thereafter may become due to the contractor under other contracts.

28. Clause 18 of the standard form of contract, earlier was slightly differently worded and it read. 'whenever under this contract any sum of money is recoverable from and payable by the contractor'. But this formula was deliberately and advisedly altered when the present standard form was introduced and instead the words 'whenever any claim for payment of a sum of money arises' were substituted and this change in phraseology indicated that in order to attract the applicability of the present Cl. 18, it was not necessary that there should be a sum of money due and payable by the contractor to the purchaser, but it was enough if there was a mere claim on the part of the purchaser for payment of a sum of money by the contractor irrespective of the fact whether such sum of money was presently due and payable or not. This Court, however, did not attach importance to this aspect of the matter by observing :

"We do not think it is legitimate to construe Cl. 18 of the contract between the parties by reference to a corresponding clause which prevailed in an earlier standard form of contract. This is not a statute enacted by the legislature where it can be said that if the legislature has departed from the language used by it in an earlier enactment, it would be a fair presumption to make that the alteration in the language was deliberate and it was, intended to convey a different meaning. It is a clause in a contract which we are construing and there any reference to a similar or dissimilar clause in another contract would be irrelevant.

29. The Court itself while interpreting Cl. 18 of the contract has observed :

"It is true that the words "any claim for the payment of a sum of money'' occurring in the opening part of C1. 18 are words of great amplitude wide enough to cover even a claim for damages, but it is well settled rule of interpretation applicable alike to instruments as to statutes .........".

But while dealing with another aspect of clause 18 observed to the contrary that it should not be construed as a statute. It may, however, be pointed out that even after the change in the language of Clause 18 of the standard agreement the Union of India cannot be injuncted from withholding the amount under other bills of the contractor. But it can certainly be injuncted from recovering or appropriating, it to the damages claimed.

30. Shri. D. C. Singhania appearing along with Shri Kacker substantially reiterated the same argument in his written note.

31. We are clearly of the view that an injunction order restraining the respondents from withholding the amount due under other pending bills to the contractor virtually amounts to a direction to pay the amount to the contractor appellant. Such an order was clearly beyond the purview of Clause (b) of S.41 of the Arbitration Act. The Union of India has no objection to the giant of an injunction restraining it from recovering or appropriating the amount lying with it in respect of other claims of the contractor towards its claim for damages. But certainly Cl. 18 of the standard contract confers ample power upon the Union of India to withhold the amount and no injunction order could be passed restraining the Union of India from withholding the amount.”

(underline supplied)

13. From the above paragraphs, it is clear that the Apex Court interpreted Clause 18 and observed that, it unequivocally contemplates a claim for the payment and it is open to the Union of India to appropriate any amount due to the contractor under the pending bills. That shows that the Apex Court was considering the 2nd point raised in Raman Iron foundry's case (supra). In paragraph No.29 of the judgment in Kamaluddin Ansari's case, the Apex Court again observed that Clause 18 of the standard agreement, the Union of India cannot be injuncted from withholding the amount under other bills of the contractor. But it is clearly stated subsequently that, the Union of India can certainly be injuncted from recovering or appropriating it to the damages claimed. It is also observed that an injunction order restraining the Union of India from withholding the amount due under other pending bills to the contractor virtually amounts to a direction to pay the amount to the contractor-appellant. The Apex Court observed that such an order was clearly beyond the purview of Clause (b) of Section 41 of the Arbitration and Conciliation Act, 1996. Clause 18 of the standard contract confers ample power upon the Union of India to withhold the amount and no injunction order could be passed restraining the Union of India from withholding the amount. Therefore, it is clear that the Apex Court was considering only the right of the Government to withhold the amount that is due to the contractor. The principle laid down by the Apex Court in Raman Iron Foundry's case (supra), on this point is overruled. But the dictum laid down in Raman Iron Foundry's case (supra) regarding the claim for unliquidated damages without an adjudication from a court when there is dispute from the other party is not considered by the Apex Court in Kamaluddin Ansari's case (supra). That part of the judgment is not overruled by the Apex Court. Therefore, the contention of the Government Pleader that the entire principle laid down by the Apex Court in Raman Iron Foundry's case (supra) is overruled by the Apex Court in Kamaluddin Ansari's case (supra), cannot be accepted.

14. In Shree Rameshwara Rice Mills' case (supra), the Apex Court again considered this point in detail in paragraphs 7 & 8. The same is extracted hereunder :

7. On a consideration of the matter we find ourselves unable to accept the contentions of Mr.Iyenger. 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 herein before, 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 is was the intention of the parties than 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 nor 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.

8. We are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is not disputed.”

(underline supplied)

15. In the above judgment, the Apex Court laid down the principle that where a party to a contract dispute any breach of conditions, the adjudication should be by an independent person or body and not by other parties to the contract. That principle is in force even now. A Division Bench of this Court in Build Tech India Ltd. v. State of Kerala and others [2000 (2) KLJ 142] relied on the judgment of the Apex Court in Shree Rameshwara Rice Mills' case (supra) and observed like this :

2. We heard both sides. The pivotal question that arises for consideration is as to whether the breach in question is admitted by the petitioner or not. The refrain of the petitioner throughout is that it is the respondents 2 and 3 who have committed breach of contract by refusing to pay part bill for 10% of the work completed even though fund was available. Even according to the second respondent, the petitioner has done 20% of the work vide para.2 of Ext. P1. According to the petitioner, he completed about 10% of the work and submitted a bill for Rs.2.2 lakhs as early as in October, 1991. But the bill was not passed. Going by Exts.P2 and P3 we are of opinion that breach is not admitted by the petitioner. In such a situation the moot question that arises for consideration is, whether it will be open for the department to adjudicate upon the disputed question of breach as well as to assess the damages arising from the breach (in this case the damage suffered by the department on account of re-arranging the work through other agencies). As per the records, the petitioner executed the agreement on 30-1-1990 and Ext. P1 order of termination at his risk and cost was passed on 29-4-1992. However, re-arrangement was effected only on 4-7-1995 and the demand evidenced by Ext. P5 was made on 5-3-1996. On a consideration of the attendant facts and circumstances brought to our notice as stated above, we are of opinion that the petitioner cannot be said to have admitted breach of contract on his part. Even where the power of the State or its instrumentality under an agreement entered into by it with a private individual expressly provided for assessment of damages for breach of conditions of the agreement and recovery of damages, that power can be exercised only in cases where the breach is admitted or is not disputed. It is, by now, well settled that one of the contracting parties cannot adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. As already noticed, the petitioner has alleged in Exts.P2 and P3 and also in the original petition that he has not committed breach of contract and the failure to complete the work was due to lapses on the part of the department in honouring the bill submitted by him after completing part of the work. Even assuming that clause in an agreement empowers the State to adjudicate the question of breach as well as the quantum of damages, the adjudication by an officer of the State regarding the breach of contract and assessment of damage cannot be sustained in law because the parties to an agreement cannot be an arbiter in his own cause. The question as to whether there is a breach of contract and if so, what is the question of damages, are all matters which are best left to be adjudicated upon by a court or a tribunal and not by one of the contracting parties. The view we are taking finds support in the decision of the Supreme Court reported in State of Karnataka v. Rameshwara Rice Mills Thirthahalli (AIR 1987 SC 1359). There, it was contended that when the State is one of the contracting parties and seeks to recover damages for breach of that contract, the State cannot be a Judge in its own cause and cannot be its own arbiter to determine the liability and quantum of damages. Upholding the contention, the Apex Court held as follows:

"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 in 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 arguments 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 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.

We are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is not disputed.

Following the aforesaid decision, a Full Bench of this court in Abdul Rahiman v. Divisional Forest Officer, (1988 (2) KLT 290 (FB) held as follows:

When a contract is broken, the party who suffers by such breach is entitled to receive from the party who has broken the contract, compensation for any loss or damage caused to him thereby. This principle of S.73 of the Contract Act equally applies where one of the contesting parties is the Government. It is the breach of the contract that gives rise to the cause for damages. The primary duty therefore is to fix the liability for the breach. Assessment of damages is only an incidental or subsidiary function. The liability to pay damages is thus fastened where there is breach of contract.

However, when a dispute arises as to whether the contract has been broken or not, that dispute cannot be settled by one of the parties to the contract, for, he cannot be an arbiter in his own cause. The dispute may have to be referred to an arbitrator or the matter has to be settled in a court of law. This principle applies to the Government also as a party to the contract.

Where the breach of the contract is admitted ie. where there is no dispute that the contract has been broken by one of the parties, the Government as the party entitled to claim compensation for the breach need not wait for a determination by any outside agency as to whether there was any breach of contract. In that event, the question of damages alone remains to be considered. A sum can be named in the contract as the amount to be paid in case of breach, an amount in liquidation of the claim for compensation. The contract can thus provide for liquidated damages in the event of breach and the Government claiming that amount as compensation for the admitted breach committed by the other party to the contract, need not seek the aid of court or any outside agency for the fixation of the quantum of damages. Similarly, if the contract itself provides that "that one party shall be liable to pay damages to the second party as may be assessed by the second party", the assessment by the second party, in case the breach is admitted, is binding on the first party and there is no more any necessity for a further quantification of the damages by any outside agency. The party assessing the damage can straight away seek to recover the amount and if that party is the Government, it can have recourse to the remedy available under the Kerala Revenue Recovery Act."

3. The cumulative effect of the aforesaid decisions is that when breach is not admitted, one of the contracting parties cannot arrogate to itself the power to claim compensation for the breach from the other party without there being any adjudication by an outside agency as to whether there was any breach of contract. In the case on hand, going by the pleadings as already noticed, it cannot be held that the petitioner has admitted the breach. Therefore the respondents have no jurisdiction to quantify the damage or loss alleged to have sustained by it on account of the alleged breach.”

16. Therefore, the principle is that in a contract, one of the parties cannot assess the damages arising out of the breach of contract if there is a dispute, even if there is a clause empowering to assess damages. In such cases an adjudication by an independent authority is necessary.

17. The Government Pleader submitted that the judgment in M/s Gangotri Enterprises Ltd. v. Union of India [2016 (11) SCC 720] and Raman Iron Foundry's case (supra) is overruled in Kamaluddin Ansari's case (supra) and it is observed in paragraph No.21 of the Apex Court judgment in State of Gujarat v. Amber Builders [2020 (2) SCC 540]. There is no dispute on that. But a combined reading of the decisions of the Apex Court in Raman Iron Foundry's case (supra), Kamaluddin Ansari's case (supra), and also the latest judgment in State of Gujarat's case (supra) will show that the earlier dictum to the effect that there cannot be any unilateral decision by one party to the contract to assess the damages when there is dispute from the other party is not touched by the apex court. Therefore, the contention of the Government Pleader is to be rejected.

18. Then, the Government Pleader relied on the judgment of the Apex Court in Bharat Coking Coal Ltd.'s case (supra). The Government Pleader relied on paragraph No. 31 of the judgment, which is extracted hereunder :

“31. In cases where a constitutional right is infringed, writs would ordinarily be the appropriate remedy. In tender matters, such can be either when a party seeks to hold the State to its duty of treating all persons equally or prohibit it from acting arbitrarily; or when executive actions or legislative instruments are challenged for being in contravention to the freedom of carrying on trade and commerce. However, writs are impermissible when the allegation is solely with regard to violation of a contractual right or duty. Hence, the persons seeking writ relief must also actively satisfy the Court that the right it is seeking is one in public law, and not merely contractual. In doing so, a balance is maintained between the need for commercial freedom and the very real possibility of collusion, illegality and squandering of public resources.”

19. But in the above paragraph, it is clearly stated that the persons seeking writ relief must satisfy the Court that the right it is seeking is one in public law, and not merely contractual. In this case, admittedly, Ext.P7 is a notice issued without even affording an opportunity of hearing to the petitioner. It is a unilateral decision by the respondents, fixing damages. In such circumstances, the principle laid down by the Apex Court in Raman Iron Foundry's case (supra), Shree Rameshwara Rice Mills' case (supra), and the decision of this Court in Build Tech India Ltd's case (supra) are squarely applicable. Based on Build Tech India Ltd's case (supra), the Government issued a circular, which is produced along with the writ petition as Ext.P13. It will be better to extract Ext.P13 circular.

“CIRCULAR

Sub: PWD - Breach of contracts - filing of civil suits-regarding

In the judgment dated 27-3-2000 in OP NO.14115/96/E filed by Build Tech India, the Hon. High Court of Kerala held that once a breach of contract is not admitted by the apposite party, there should be a full-fledged adjudication by an independent agency or Tribunal before initiating coercive steps. The sum and substance of the above Court Order and other judicial pronouncements in this issue is that, when a dispute arises as to whether a contract has been violated or not, that dispute cannot be settled by one of the parties to the contract because he could not be an arbitrator in his own cause. The dispute has to be referred to an arbitrator or the same has to be settled in a court of law. Since there is no arbitration clause in the agreements executed at present, the question of referring disputes to arbitration under the agreement already executed is legally impossible. Therefore, the only course available for recovering the loss from the contractor is to file civil suit before the subordinate courts having jurisdiction. At present Government has been exempted from the payment of court fees. Therefore, there will not be any difficulty in filing Civil suits in consultation with the Government Pleaders concerned. The interest of Government can be served by issuing instructions to the Departmental Officers for filing civil suits before Court having jurisdiction, in consultation with the Government Pleaders concerned, immediately on termination of contract at the risk and cost of the contractor, instead of initiating revenue recovery steps.

Government have examined the matter in detail in consultation with Law Department. As constitution of Special Tribunals in such cases is not feasible, it has been decided to approach the civil courts for setting disputes involving breach of contract.

In the above circumstances, all departmental officers are directed that civil suits are to be filed before the respective Courts having jurisdiction over the area in consultation with the Government Pleaders concerned, immediately after termination of a contract at the risk and cost of the contractor.

LIDA JACOB

SECRETARY TO GOVT.”

20. The above circular also shows that the Government had accepted the principle laid down in Build Tech India Ltd's case (supra).

21. Moreover, when this writ petition came up for consideration first on 4.11.2009, this Court stayed the operation and implementation of Ext.P7 order. Thereafter, on 3.6.2010, this Court passed the following interim order, which is extracted hereunder :

“ Interim order is extended by a month.

This is a case where alleging breach of contact, the Government has quantified damages as due from the petitioner. It is settled law that a party to a contract, even if it is the Government, cannot unilaterally decide the question of breach of contract and quantum of damages thereon. But, if the writ petition is ultimately dismissed, when is a probable result, if there is actually breach of contract and if the petitioner is actually liable to pay damages, the claim of the Government for damages would be barred by limitation by the time the writ petition is heard. In the above circumstances, the learned Government Pleader shall immediately take steps to file a suit for damages against the petitioner before the appropriate civil court.”

22. Even though the above order was challenged by filing WA No. 723 of 2012, the division bench instead of interfering with the order, observed that the learned single judge can decide the matter finally. Meanwhile, the writ petition again came up for consideration before this Court on 29.7.2010. On that day, this Court passed the following interim order :

“The learned Government Pleader has placed before me a communication from the Secretary to Government to the Advocate General, which reads thus;

"Kind attention is invited to the reference cited. I am directed to Inform you that direction has already been given to Chief Engineer, Harbour Engineering Department/District Collector, Kollam to take appropriate action based on the Interim order dated 3.6.10 of the Hon'ble High Court."

Interim order is extended by a month.”

23. Again, when the matter came up for consideration on 12.1.2012, this Court passed the following order, which is also extracted hereunder:

“Post after a week. The learned Government Pleader shall get instructions as to why the respondents are not inclined to follow the observations in the orders dated 3.6.2010 and 29.7.2010.”

24. Thereafter, when the matter again came up for consideration on 20.6.2016, this Court after considering the judgment in Shree Rameshwara Rice Mills' case (supra) and Build Tech India Ltd's case (supra) directed the State to think about legislation for a permanent arbitration court to solve the dispute in cases like this. The order dated 20.6.2016 is also extracted hereunder :

“This writ petition is filed by a contractor challenging a demand raised by the State for the extra liability incurred for rearranging the work. The total demand now raised is for 4,34,12,105/-. The main challenge of the petitioner is by disputing entitlement by the State. Therefore, it is argued that the Government cannot unilaterally raise a demand.

2. The Honourable Supreme Court in State of Karnataka v. Rameswara Rice Mill [(1987) 2 SCC 160] paragraph 7 and 8 held as follows:

"7............. 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 Cl.12 are "and for any breach of conditions set forth herein before, 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. It 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 in 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 Sate 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 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 sell within his rights in assessing the damages occasioned by the breach in view of the specific terms of clause 12.

8. We are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is not disputed."

3. Following the above judgment the Division Bench of this Court in Build Tech. India v. State of Kerala & Ors. [2000 (2) KLJ 142] it was held as follows:

"The question as to whether there is a breach of contract and if so, what is the question of damages, are all matters, which are best left to be adjudicated upon by a court. or a tribunal and not by one of the contracting parties. When breach is not admitted, one of the contracting parties cannot arrogate to itself the power to claim compensation for the breach from the other party without there being any adjudication by an outside agency as to whether there was any breach of contract. In the case on hand; going by the pleadings as already noticed, it cannot be held that the petitioner has admitted the breach. Therefore the respondents have no jurisdiction to quantify the damage or loss alleged to have sustained by it on account of the alleged breach.”

It is disturbing for this Court that State is unable to resort to recovery by filing Civil suit and stake legitimate claim for compensation. It appears that the State has found out adhoc arbitration is not feasible for many reasons. However, State shall not fail to recover the loss sustained by it on account of breach of contractual obligation. Adhoc arbitration may not be ideal due to corruption and other related factors, but nothing deters from State having an institutional arbitration through a State Sponsored Scheme. It is open for the State to have a legislative for such a permanent arbitration court to resolve the disputes like this. This Court is of the view that the matter requires serious consideration, otherwise State will stand to lose a substantial chunk of amount being claimed as damages or compensation from the contractor. Considering the importance of this issue, this Court is of the view that the Advocate General or State Attorney shall appear before this Court on next date of posting to address this Court.

Hand over.

Post on 30.6.2016.”

25. Thereafter, the matter came up for consideration on 27.9.2017 and on that day also, an order was passed, which is also extracted hereunder :

“The State Attorney appeared before this Court and reported that resorting to arbitration for resolving the dispute between the State and the contractors is not an effective remedy. In such circumstances, it

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is appropriate for the State to have a separate court for resolving the dispute between the State and the contractors. The State shall seriously consider this issue in the light of the fact that large number of writ petitions are being filed challenging termination of the contracts. This Court in fact interfered in many of the matters relegating the State to work out their claim for loss before the civil court. It is to be noted that the proceedings before the civil court will take years to settle down. In such circumstances, it is appropriate for the State to have a separate court presided by an officer in the rank of District Judge for trying disputes arising from contracts awarded by the State. The State shall also consider this option in the light of the earlier order passed by this Court dated 20.06.2016.” 26. Even then there is no action. Hence on 14.3.2018, this Court passed the following order: “This writ petition is pending before this Court from the year 2009 onwards. It reflects a typical issue related to the dispute between the contractors and the State. This Court passed a series of orders directing the State to explore the possibility of an efficacious mechanism to settle such disputes through an institutional mode. Anyhow, taking note of the present dispute, this Court is of the view that the State should consider thrashing out the present dispute through an Arbitrator, preferably, a retired Judge of this Court as the Arbitrator, chosen by the Government. The State Attorney shall explore the possibility of appointing such Arbitrator of their own choice within a period of ten days. Post on 26.3.2018.” 27. Meanwhile, a writ petition was filed by the petitioner as W.P.(C.) No. 2337/2016 seeking a direction to the Government to consider the request to appoint a Technical Expert Arbitral Tribunal for resolution of the disputes that arose out of the construction of the breakwaters. The Government opposed the same. After considering the contention of both sides, this Court observed that the Government is vested with the power to appoint an arbitrator to resolve the disputes that arise under the contract. This Court directed to consider the representation as per judgment dated 11.7.2016 in W.P.(C.) No. 2337/2016. The relevant paragraphs in the above judgment is extracted hereunder : “7. On an evaluation of the said provision it is categoric and clear that, Government is vested with power to appoint any arbitrator to resolve the dispute that arises under the contract. Requesting the Government to invoke the said powers, petitioner has submitted Exts.P8 to P10 applications. Therefore, I think it is only appropriate that, Government is directed to take into consideration Clause 24 of Ext.P1 agreement and take a decision as to whether an arbitrator is to be appointed in order to resolve the dispute that arose between the petitioner and the Government, as per Ext.P1 agreement. 8. Therefore, there will be a direction to the first respondent to take a decision on Exts.P8 to P10 applications submitted by the petitioner, in accordance with law, within a period of two months from the date of receipt of a copy of this judgment. Writ petition is disposed of accordingly.” 28. Even then, no steps were taken by the respondents and the Government rejected the proposal to appoint an arbitrator. 29. In this background, this writ petition has to be considered. As I observed earlier, admittedly, Ext.P7 is a proceeding issued without giving an opportunity of hearing to the petitioner. Moreover, the damages is fixed by the respondents unilaterally, when there is a dispute from the side of the petitioner. In Ext.P7, the damage assessed is Rs.4,34,12,105/- and that also, without giving an opportunity of hearing to the petitioner and it is a unilateral decision. According to me, this violates the principle laid down by the Apex Court in Raman Iron Foundry's case (supra), Shree Rameshwara Rice Mills' case (supra) and also the dictum laid down by this Court in Build Tech India Ltd.'s case (supra). Moreover, it violates Ext.P13 circular issued by the Government itself. Therefore, according to me, Ext.P7 and all further proceedings consequent to Ext.P7 including the revenue recovery is to be set aside. It is a fact that this court was issuing directions after directions to assess the damages if any sustained to the state by resorting to appropriate legal proceedings and the first order was on 03.06.2010. But, it all falls on deaf ears. Now about 12 years elapsed. But this court cannot be a silent spectator to this. If really any damages are sustained to the state because of any violation of the terms of the contract by the contractor, one more opportunity can be given to the state to resort to the appropriate legal remedy in accordance to law, because the ultimate looser is the poor tax-paying citizens. Therefore I make it clear that the respondents are free to approach the civil court with a prayer to assess the damage if any and if any such suit or other proceedings are initiated by the respondents, the time during which this writ petition was pending before this Court will be excluded while calculating the limitation period. The petitioner will also get the same benefit if they approach the civil court for getting any amount due to them from the respondents. As far as the prayer in W.P.(C.) No. 4586/2019 is concerned, this Court cannot entertain the same, because there is a claim from the respondents for damages, which is to be assessed by a competent authority. Therefore, the prayer in W.P.(C.) No. 4856/2019 cannot be entertained. But as i stated earlier, the petitioner is also free to approach the civil court, if there is any legal claim due to them from the state. In such a situation also, the time during which this writ petition was pending before this Court will be excluded while calculating the limitation period. Therefore, these two writ petitions are disposed of in the following manner : 1) W.P.(C.) No.31363/2009 is allowed and Exts.P7, P22, and P23 are quashed. The petitioner and the respondents are free to approach the civil court or any other dispute redressal authority to redress their grievances if any. I make it clear that if the petitioner or respondents file any suit before the civil court or other proceedings before any other forum, the time during which this writ petition was pending before this Court will be excluded while calculating the limitation period. 2) W.P.(C.) No. 4856/2019 is dismissed and the petitioner is allowed to approach the civil court or any other authority to redress their grievance if any. If the petitioner approaches the civil court or any other authority, the time during which this writ petition was pending before this Court will be excluded while calculating the limitation period.
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