IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :27.06.2008 CORAM THE HONOURABLE MR.JUSTICE S.NAGAMUTHU Writ Petition Nos.8450 of 2006, 31909 of 2007, W.P.M.P.No.9367 of 2006, W.V.M.P.No.1033 of 2006 in W.P.8450 of 2006 and M.P.No.1 of 2007 in W.P.No.31909 of 2007 M/s.Chandragiri Construction Company. Partnership Firm, rep. by its Managing Partner – K.M.Moideen Kunji, P.O.Thekkil, Kerala. ... Petitioner in both WPs vs. 1.The Chief Engineer, P.W.D. Water Resources Organisation, Chennai Region, Chepauk, Chennai – 600 005. 2.The Superintending Engineer, P.W.d. Water Resources Organisation, Shenbagathope Reservoir Project Division (I/c) I.B at Bagamarpet, Polur – 606 803. 3.The Executive Engineer, P.W.D. Water Resources Organisation, Shenbagathope Reservoir Project Division, Vellore. ... Respondents in W.P.8450/06 1.State of Tamil Nadu rep. by its Secretary to Government, Public Works Department, Fort St. George, Chennai – 600 009. 2.The Chief Engineer, P.W.D. Water Resources Organisation, Chennai Region, Chepauk, Chennai – 600 005. 3.The Superintending Engineer, Public Work Department (Water Resources Organisation), Project Circle, Vellore- 4. https://hcservices.ecourts.gov.in/hcservices/ 4.The Executive Engineer, Public Work Department, (Water Resources Organisation), Shenbagathope Reservoir Project, Thiruvannamalai District. ... Respondents in W.P.31909/07 Prayer in W.P.No.8450/06:- Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of certiorari, calling for the records relating to the impugned notice issued by the second respondent vide letter No.DO.2/F.11(A)/ 2005/09M/dated 03.03.2006 and quash the same. Prayer in W.P.No.31909/07:- Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of mandamus, directing the second respondent to pay the following admitted amount due to the petitioner in respect of the contract work viz., formation of a Reservoir with allied component works across Kamandalar near Shenbagathope Village, Polur Taluk, Thiruvannamalai District, State of Tamil Nadu. For Petitioner in both W.Ps : Mr.R.Krishnamoorthy, Senior Counsel for Mr.K.Premkumar For Respondents: Mr.V.Arun Addl.Govt.Pleader COMMON ORDER Though the miscellaneous petitions are listed today, by consent of both sides, the writ petitions are taken up for final disposal. 2.The managing partner of the partnership firm, M/s.Chandragiri Construction Company, has filed both the writ petitions representing the said firm. The petitioner is a registered state level contractor with the Public Works Department of the Government of Tamil Nadu and entitled to do works worth more than Rs.7500 lakhs. The first respondent called for eligible tenders in respect of the work of "Formation of a Reservoir with allied component works across Kamandalar near Shenbagathope village in Polur Taluk of Thiruvannamalai District", with a sanctioned estimate value of Rs.23.47 crores as early as in 1996-1997. In that process, the petitioner’s tender was accepted and a contract was entered into between the first respondent and petitioner on 24.08.2001. https://hcservices.ecourts.gov.in/hcservices/ 3.It is stated by the petitioner that owing to additional items of work as well as additional quantities, a revised estimate for a sum of Rs.34 crores was sanctioned by the first respondent which was later on increased to Rs.35.71 crores. It is further stated that due to non availability of good quality of sand from the quarry specified in the agreement as the source of procurement, the petitioner had to find out the source of sand that could provide good quality sand and sizable quantities to meet out the requirement for the project. Ultimately, such quantity of good sand was found out in the sand quarry at Cheyyar River near Okoor Village in Polur Taluk which is at distance of 40 kilo meters from the Shenbagathope Reservoir Project. For taking sand from the said quarry, necessary sanction was also obtained by the petitioner from the District Collector, Thiruvannamalai. For procuring sand from the said quarry and to transport the same to a distance of 40 kilo meters, the petitioner had to incur an additional expenditure. According to the petitioner, he is entitled for a sum of Rs.470/- per cubic meter of sand inclusive of its handling charges, cost of sand and Seniorage payable at quarry and the other incidentals incurred thereon for the quantity of about 65000 cubic meters or for the quantity as per the actuals reflected in the measurement books maintained by the Department. The petitioner has completed the work in all respects despite of all the hurdles. But the respondents have settled only 95% of the bills and 5% of balance which may work out to Rs.110 lakhs is due from the department. 4.Claiming the above said amount under various heads, the petitioner caused a notice on the first respondent on 14.11.2005 thereby making a demand for Rs.3.5 crores approximately and also prayed for appointment of an Arbitrator to decide the dispute between the parties as per the contract. Admittedly, the first respondent sent a reply on 27.01.2006 thereby refusing to appoint an Arbitrator. Thereafter, the petitioner filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 before this Court, praying for appointment of sole Arbitrator to decide the issue. The said application came to be dismissed on 30.03.2007 as not maintainable. 5.While so, according to the petitioner, the second respondent issued a show cause notice vide letter No.DO.2/F.11(A)/ 2005/09M/dated 03.03.2006 calling upon the petitioner to repay a sum of Rs.257.25 lakhs on the ground that in respect of the payments made there was an objection from the Accountant General stating that the said amount had been paid in excess. The petitioner was further called upon to pay the said sum within 15 days from the date of such notice. 6.Challenging the above show cause notice dated 03.03.2006 issued by the second respondent, the petitioner has filed https://hcservices.ecourts.gov.in/hcservices/ W.P.No.8450 of 2006. Subsequently, seeking for a writ of mandamus, to direct the second respondent to pay a sum of Rs.2,37,00,000/-, the petitioner has filed W.P.No.31909 of 2007. 7.Heard Mr.R.Krishnamoorthy, learned Senior counsel appearing for the petitioner in both the writ petitions and the learned Additional Government Pleader Mr.Arun appearing for the respondents. 8.Since the disputes in both the writ petitions emanate from the terms and conditions of the contract dated 24.08.2001, it is necessary to look into the relevant clauses in the said agreement. Clause 35 of the agreement, which deals with settlement of disputes is as follows:- "35.SETTLEMENT OF DISPUTES: In case of any dispute or difference between the parties to the contract either during the progress or with in the 3 months of the date of the completion of the works or after the determination abandonment or breach of the contract, or as to any matter or thing arising there under except as to the matters left to the sole discretion of the Executive Engineer under clauses 18,20,25.3,27,32,34,6 and 37 of the "General Conditions of Contract" or as to the with holding by the Executive Engineer or payment of any bill to which the contractor may claim to be entitled, the either party shall forth with give to the other notice of such dispute or difference and such dispute or difference shall be and is hereby referred to the arbitration of the superintending Engineer, PWD, WRO., Palar basin Circle, Chennai (hereinafter called the Arbitration) in cases where the value of claim is less than and upto Rs.50,000/-. In cases where the value of the claim is more than Rs.50,000/- the parties will seek remedy through the competent civil court. Subject as aforesaid to the provisions of the Arbitration Act 1940, or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force shall apply to the Arbitration proceedings under this clause. Upon every and any such references, the costs of and incidental to the reference and award respectively shall be in the discretion https://hcservices.ecourts.gov.in/hcservices/ of the Arbitrator subject to the conditions that the amount of such costs to be awarded to either party shall not, in respect of a monetary claim exceed the percentage set out below of any such award irrespective of the actual fees, costs and expenses incurred by either party; provided that where a monetary claim is disallowed in full, the said percentage shall be calculated on the amount of the claim. The Arbitrator may determine the amount of the costs to be awarded or direct the same to be taxed as between solicitor and client or as party and party and shall direct by whom and to whom in what manner the same shall be borne and paid. The fees for arbitration shall be levied, based on the value of claims referred to for arbitration. The fess shall be calculated ar 5% of the first Rs.10,000/- at 3% on the next Rs.40,000/-. Provided that the Government shall not be liable to any claim in respect of any such dispute or difference until the liability and the amount thereof shall have been referred to and decided by the Arbitrator. The Department may make payment to the contractors according to the arbitration award, as soon as the award is passed, when neither party object to the award and without obtaining a degree in the Court of Law." 9.Though initially arguments and counter arguments were advanced as to whether, as per the above clause, the disputes involved in these writ petitions are liable to be referred to an Arbitrator, later on the learned counsel for both parties agreed that these disputes cannot be referred to Arbitrator as per clause 35 of the agreement since the value of the claim made in both the writ petitions are more than Rs.50,000/-. 10.In cases where the value of the claim is more than Rs.50,000/-, the parties will seek remedy through the competent Civil Court. Relying on this clause in the agreement, the learned Additional Government Pleader would submit that in respect of the claim for Rs.2.37 crores made in W.P.No.31909 of 2007, it is for the petitioner to work out his remedies through a competent Civil Court and so, according to him, these writ petitions are not maintainable. https://hcservices.ecourts.gov.in/hcservices/ 11.But the learned Senior Counsel appearing for the petitioner would rely on the judgment of the Hon’ble Supreme Court in ABL INTERNATIONAL LTD., V. EZPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD., (2004 (3) SCC 553) to submit that a writ petition involving a consequential relief of monetary claim is maintainable. Therefore, according to the learned Senior Counsel, though there are certain disputed questions of fact, the writ petition in W.P.No.31909 of 2007, where the petitioner has made a monetary claim is maintainable. 12.In paragraph Nos.27 and 28 of the said judgment (cited supra) the Hon'ble Supreme Court has held as follows:- "27.From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition.: (a)In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable. (b)Merely because some disputed questions of fact arise for consideration,same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule. (c)A writ petition involving a consequential relief of monetary claim is also maintainable. 28.However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. Vs. Registrar of Trade Marks.)And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction." https://hcservices.ecourts.gov.in/hcservices/ 13.In this case it is seriously disputed that the respondents are not liable to pay any amount to the petitioner and instead, the petitioner alone has to repay the amount as per the Impugned order in W.P.No.8450 of 2006. Considering the huge amount involved in the claims made by the respective parties and also considering the nature of the disputes actually raised by the parties, though the Hon'ble Supreme Court in the above said judgement has held that merely because some disputed questions of fact arise for consideration, the same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule, in my considered opinion, the said disputed questions of fact arising for consideration in both these writ petitions cannot be adjudicated upon as they can be resolved only on evidence to be let in by the parties. Even in the said judgment, the Hon'ble Supreme Court has only held that refusal to entertain a writ petition should not be a matter of rule simply because more disputed questions of fact arise for consideration. In this case as I have already held the disputed questions are not only very serious in nature but also complicated. Therefore, in my considered opinion the writ petition in W.P.No.31909 of 2007 is not sustainable. 14.In Noble Resources Limited Vs. State of Orissa (2006(10) SCC 236), while dealing with the scope of Judicial review in respect of contractual matters after referring to various earlier judgments of the Hon'ble Supreme Court including ABL INTERNATIONAL LTD., V. EZPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD., (cited supra) the Hon'ble Supreme Court has held as follows:- "27.Contractual matters are, thus, not beyond the realm of judicial review. Its application may, however, be limited. 28.Although the terms of the invitation to tender may not be open to judicial scrutiny, but the courts can scrutinise the award of contract by the Government or its agencies in exercise of their power of judicial review to prevent arbitrariness of favouritism. (See Directorate of Education Vs. Educomp Datamatics Ltd) However, the court may refuse to exercise its jurisdiction, if it does not involve any public interest. 29.Although the scope of judicial review or the development of law in this field has been noticed hereinbefore particularly in the light of the decision of this Court in ABL International Ltd each case, however, must be decided on its own facts. Public interest as noticed hereinbefore, may be one of the factors to exercise the power of judicial review. In a case where a public law https://hcservices.ecourts.gov.in/hcservices/ wlement is involved, judicial review may be permissible.(Binny Ltd., Vs. V. Sadasivan and G.B. Mahajan Vs. Jalgaon Municipal Council) 30.In State of U.P. Vs. Johri Mal it was held: "30.It is well settled that while exercising the power of judicial review the court is more concerned with the decision making process than the merit of the decision itself. In doing so, it is often argued by the defender of an impugned decision that the court is not competent to exercise its power when there are serious disputed question of facts; when the decision of the Tribunal or the decision of the fact-finding body or the arbitrator is given finality by the statue which governs a given situation or which, by nature of the activity, the decision-maker's opinion on facts is final. But while examining and scrutinising the decision making process it becomes inevitable to also appreciate the facts of a given case as otherwise the decision cannot be tested under the grounds of illegality, irrationality or procedural impropriety. How far the court of judicial review can reappreciate the findings of facts depends on the ground of judicial review. For example, if a decision is challenged as irrational, it would be well-nigh impossible to record a finding whether a decision is rational or irrational without first evaluating the facts of the case and coming to a plausible conclusion and then testing the decision of the authority on the touchstone of the tests laid down by the court with special reference to a given case. This position is well settled in the Indian Administrative law. Therefore, to a limited extent of scrutinising the decision-making process, it is always open to the court to review the evaluation of facts by the decision-maker." 31. Another field where judicial review is permissible would be when mala fide or ulterior motive is attributed. In Asis Foundation and Construction Ltd. Vs. Trafalgar House Construction (I) Ltd. This court held: SCC p.746, para 9) " We are of the considered opinion that it was not within the permissible limits of interference for a court of law, particularly when there has been no allegation of malice or ulterior motive and particularly when the court has not found any mala fides or favouritism in the grant. It was further held:(SCC p.746, para 10) https://hcservices.ecourts.gov.in/hcservices/ "10.Therefore, though the principle of judicial review cannot be denied so far as exercise of contractual powers of government bodies are concerned, but it is intended to prevent arbitrariness or favouritism and it is exercised in the larger public interest or if it is brought to the notice of the court that in the matter of award of a contract, power has been exercised for any collateral purpose. But on examining the facts and circumstances of the present case and on going through the records we are of the considered opinion that none of the criteria has been satisfied justifying Court's interference in the grant of contract in favour of the appellant." 15.Having regard to the aforesaid legal principles, if the disputes in both the writ petitions are considered, in my considered opinion, there is no public interest at all involved these claims. As held by the Hon'ble Supreme Court if public interest is involved then this Court can have judicial review of the disputes. Since in the cases on hand, there is no element of public interest involved at all, these writ petitions are not maintainable. 16. It is settled law, that even in respect of contractual matters involving the State instrumentalities, though public interest is not involved, still, if any action of the State suffers from arbitrariness or favouritism, the said action can be subjected to judicial review under article 226 of the constitution of India. In the present case in W.P.No.31909 of 2007, so far, in respect of the claims made by the petitioner for additional sanction of amount to the tune of 3.5 crores, there has been no decision taken by the Government and thus there is no order available so as to review the same on the ground of arbitrariness or favourtism. 17.In respect of the Impugned order in W.P.No.8450 of 2006, on examination, I am convinced that the same suffers from arbitrariness and so this court should have judicial review of the said order. Admittedly before passing of the impugned order, no opportunity whatsoever was given to the petitioner to make his submissions. The impugned order has been made solely on the basis of the objection said to have been raised by the Accountant General. No copy of the said objection was furnished to the petitioner so as to enable him to submit his explanation. The petitioner has been completely kept in dark in respect of the details of the objection raised by the Accountant General. For all these reasons I have to necessarily hold that the said impugned order suffers from arbitrariness and so it requires to be set aside. https://hcservices.ecourts.gov.in/hcservices/ 18.As per clause 35 of the agreement when there is any dispute in regard to payment of any bill, the parties have to work out their remedy only through a competent civil Court. The second respondent has unilaterally passed the impugned order. Thus it has been passed in gross violation of clause 35 of the agreement. Since as concluded above, the impugned order under challenge in w.P.No.8450 of 2006 has been passed in arbitrary manner, I deem it appropriate to exercise the power under article 226 of the Constitution of India to set aside the said order leaving the option for the respondents to workout their remedies through competent Civil Court. Similarly in respect of the claim made by the petitioner in W.P.31909 of 2007 also it is open for the petitioner to work out his remedy through a competent Civil Court. 19.In the result, (a) W.P.No.8450 of 2006 is allowed and impugned order of the second respondent in letter No.DO.2/F.11(A)/2005/09M/ dated 03.03.2006 is quashed. However liberty is given to the respondents to work out their remedies through a competent Civil Court or in any other manner known to law, if any amount is due to be recovered from the petitioner as per audit report. (b)W.P.No.31909 is dismissed with a liberty to the petitioner to work out his remedy through a competent Civil Court. (c) It is made clear that if any such Civil Suit is instituted by any of the parties to these writ petitions, the Civil Court shall not be influenced by any of the observations made in this order. No costs. Consequently, connected miscellaneous petitions are closed. Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar. jbm/kpr To 1.The Chief Engineer, P.W.D. Water Resources Organisation, Chennai Region,Chepauk, Chennai – 600 005. https://hcservices.ecourts.gov.in/hcservices/ 2.The Superintending Engineer, P.W.D. Water Resources Organisation, Shenbagathope Reservoir Project Division (I/c) I.B at Bagamarpet, Polur – 606 803. 3.The Executive Engineer, P.W.D. Water Resources Organisation, Shenbagathope Reservoir Project Division, Vellore. 4.The Secretary to Government State of Tamil Nadu Public Works Department, Fort St. George,Chennai – 600 009. 5.The Superintending Engineer, Public Work Department (Water Resources Organisation), Project Circle, Vellore- 4. 2 ccs to Mr.K. Premkumar, Advocate, Sr. 33166, 33163 W.P.Nos.8450 of 2006 & 31909 of 2007 SSN (CO) kk 9/7 https://hcservices.ecourts.gov.in/hcservices/