IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN TUESDAY, THE 16TH DECEMBER 2008 / 25TH AGRAHAYANA 1930 OP.No. 12292 of 2001(L) ----------------------- PETITIONER(S): --------------- A.SYAMKUMAR, SUDHA SOUDHAM, KAVIL WEST, KODUNGALLOOR. BY ADV. SRI.P.K.BALAKRISHNAN NAIR RESPONDENT(S): --------------- 1. K.S.E.B., REP. BY ITS SECRETARY, VAIDYUTHI BHAVAN, PATTOM, TRIVANDRUM. 2. THE EXE. ENGINEER, TRANSMISSION DIVISION, NALLALAM, KOZHIKODE. 3. THE DY. TAHSILDAR, REVENUE RECOVERY, KODUNGALLUR. ADV. SHRI.C.K.KARUNAKARAN, SC, KSEB FOR R1,R2 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 16/12/2008, THE COURT ON 16/12/2008 DELIVERED THE FOLLOWING: O.P.No. 12292 OF 2001 APPENDIX PETITIONER(S)' EXHIBITS P1. COPY OF THE REPLY NOTICE DTD.10.9.99. P2. COPY OF THE LETTER DTD.25.8.02 BY R2. P3. COPY OF THE REPLY LETTER DTD.28.9.00. P4. COPY OF THE DD DTD.17.3.2001. RESPONDENTS EXHIBITS: R1A. COPY OF THE AGREEMENT. B. COPY OF THE LETTER DTD.12.8.98. C. COPY OF THE POSTAL ACKNOWLEDGEMENT. Sdk+ ///True copy/// P.A. to Judge S.SIRI JAGAN, J. ================== O.P.No. 12292 of 2001 ================== Dated this the 16th day of December, 2008 J U D G M E N T The respondents awarded a contract to the petitioner for enhancing the capacity of the West Hill Sub Station Yard extension. That contract was cancelled, alleging that the petitioner did not execute the contract as per the agreement signed by the him, at the risk and cost of the petitioner. Thereafter, by Ext.P2 dated 25.8.2000, the petitioner was directed to remit an amount of Rs.73,210/- alleged to be the damages caused to the respondents on account of the non- completion of the work undertaken by the petitioner on contract. The petitioner objected to the same by filing Ext.P3 stating that the work could not be done not because of any fault on the part of the petitioner, but because of the Board did not give workable site and the departmental materials agreed to be supplied were not supplied to the petitioner. It was also stated that the Board cannot decide on its own as to whether there is breach of contract and unilaterally fix damages. Despite the same, revenue recovery proceedings were initiated as per Ext.P4. The petitioner o.p.12292/01 2 is challenging Exts.P2 and P4 in this original petition. 2. According to the petitioner, breach has been committed by the respondents themselves in so far as they did not carry out their part of the agreement by providing a workable site and by supplying the departmental materials as agreed to by them. The petitioner further submits that it is settled law that a party to an agreement cannot unilaterally decide as to whether there is breach of contract and assess damages for alleged breach of contract. The petitioner relies on the decision of the Supreme Court in State of Karnataka v. Remeshwara Rice Mills, Thirthahalli [AIR 1987 SC 1359] as well as the decisions of this Court in Rambal Company v. Kerala State Science & Technology Museum [2000 (2) KLT 613] and Paily v. State of Kerala [2000(3) KLT 343]. 3. A counter affidavit and an additional counter affidavit have been filed by the respondents. According to them, as per the terms of the agreement, respondents 1 and 2 are entitled to decide the question of breach of contract and the quantum of damages. They would submit that the entire responsibility for non o.p.12292/01 3 performance of the contract is squarely on the petitioner and therefore, the Board was well within their rights to cancel the contract at the risk and cost of the petitioner and to recover damages, which is only the difference between the amount quoted by the petitioner and the amount for which the Board had to re-tender the contract. 4. I have considered the rival contentions in detail. 5. I am not inclined to go into the question as to who is at fault in so far as the same is disputed. The question as to whether a contracting party can unilaterally decide as to whether there is breach of contract and assess damages for the breach has been settled by a catena of decisions of the Supreme Court and of this Court. In the decision in Remeshwara Rice Mills''s case (supra) the terms of the agreement permitted one of the parties to decide the question of quantum of damages also. After considering the terms of the contract, the Supreme Court held thus: “7. On a consideration of the matter we find ourselves unable to accept the contentions of Mr.Iyengar. The terms of Clause 12 do not afford scope for a liberal construction being made regarding the powers of the Deputy Commissioner to adjudicate upon a disputed o.p.12292/01 4 question of breach as well as to assess the damages arising from the breach. The crucial words in clause 12 are “and for any breach of conditions set forth hereinbefore, the first party shall be liable to pay damages to the second party as may be assessed by the second party”. On a plain reading of the words it is clear that the right of the second party to assess damages would arise only if the breach of conditions is admitted or if no issue is made of it. If it was the intention of the parties that the officer acting on behalf of the State was also entitled to adjudicate upon a dispute regarding the breach of conditions the wording of clause 12 would have been entirely different. It cannot also be argued that a right to adjudicate upon an issue relating to a breach of conditions of the contract would flow from or is inhered in the right conferred to assess the damages arising from a breach of conditions. The power to assess damages, as pointed out by the Full Bench, is a subsidiary and consequential power and not the primary power. Even assuming for argument's sake that the terms of clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the Officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case the Officer of the State, even though a party to the contract will be well within his rights, in assessing the damages occasioned by the breach in view of the specific terms of clause 12.” The above decision has been followed by this Court in the decisions in Rambal Company's case (supra) and Paily's case (supra). The facts of this case are squarely covered by the above said decisions. That being so, I am satisfied that respondents 1 and 2 could not have unilaterally decided that the petitioner had committed breach of contract and fixed the o.p.12292/01 5 quantum of damages also. The course open to respondents 1 and 2 in such cases was either to file a suit for damages, or, if the contract provided for arbitration, to appoint an arbitrator in accordance with the same. Without prejudice to such rights of respondents 1 and 2, this original petition is allowed and Exts.P2 and P4 are quashed. Sd/- sdk+ S.SIRI JAGAN, JUDGE ///True copy/// P.A. to Judge o.p.12292/01 6 S.SIRI JAGAN, J. ================ O.P.No. 12292 of 2001-L ================ J U D G M E N T 16th December, 2008