IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR FRIDAY, THE 25TH JANUARY 2008 / 5TH MAGHA 1929 OP.No. 2862 of 2003(N) -------------------------------- PETITIONER: ------------------- K.ABDUL HAMEED, KOLIPPURATHU HOUSE, ANATHAYOOR P.O., MALAPPURAM DISTRICT, PIN-673 640. BY ADV. SRI.G.HARIHARAN RESPONDENTS: ------------------------ 1. EXECUTIVE ENGINEER (MINOR IRRIGATION), MALAPPURAM. 2. STATE OF KERALA, REPRESENTED BY THE SECRETARY,IRRIGATION DEPARTMENT SECRETARIAT, TRIVANDRUM. 3. IRRIGATION DEPARTMENT, SECRETARIAT, TRIVANDRUM. BY GOVERNMENT PLEADER SMT.N.SUDHA DEVI THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 25/01/2008 ALONG WITH WPC NO. 18545 OF 2003 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OP. NO.2862/2003 ORDER ON CMP. NO.5119/2003 IN OP. NO.2862/2003 DISMISSED 25.01.2008 SD/- T.R.RAMACHANDRAN NAIR, JUDGE APPENDIX PETITIONERS EXHIBITS EXT.P1:- COPY OF THE NOTIFICATION DT. 31.7.02 ISSUED BY THE IST RESPONDENT. EXT.P2:- COPY OF THE COMMUNICATION NO.D2/1515/90(TOLL) DT. 22.11.02. EXT.P3:- COPY OF THE COMMUNICATION DT. 29.11.02 SENT BY THE PETITIONER TO THE IST RESPONDENT. EXT.P4:- COPY OF THE TENDER. EXT.P5:- COPY OF THE COMMUNICATION DT. 3.1.2003 SENT BY THE PETITIONER TO THE IST RESPONDENT. EXT.P6:- COPY OF THE NOTICE DT. 8.1.03 SENT BY THE IST RESPONDENT TO THE PETITIONER. EXT.P7:- COPY OF THE COMMUNICATION DT. 15.1.03 ISSUED FROM THE OFFICE OF THE IST RESPONDENT. /TRUE COPY/ P.A. TO JUDGE tss T.R. Ramachandran Nair, J. - - - - - - - - - - - - - - - - - - - - - - - - O.P.NO.2862 of 2003-N & W.P.(C) No.18545 of 2003-G - - - - -- - - - - - - - - - - - - - - - - - - - - Dated this the 25th day of January, 2008. JUDGMENT Both these writ petitions are filed by the petitioner who was a participant in a tender for the right to collect toll for the period commencing from 1.10.2002 to 31.3.2003. In O.P. No.2862/2003, the challenge is against Exts.P6 and P7 by which the security amount and the Earnest Money Deposit have been ordered to be forfeited. In the other writ petition, the challenge is against Ext.P8 by which the alleged loss caused to the Government has been directed to be remitted by him. 2. Pursuant to Ext.P1 notification, the petitioner had submitted his tender and he being the highest bidder, was served with Ext.P2 communication conveying the acceptance of the tender for an amount of Rs.4,01,1000/-. The petitioner had deposited a sum of Rs.35,000/- as security. In fact, Ext.P2 is dated 22.11.2002, even though the period for collection of toll was from 1.10.2002. This was on account of the order of stay passed by this court in O.P. No.25138/2002. The petitioner's case is that since there was a delay of nearly two months which considerably OP 2862/03 & 18545/03 -2- changed the circumstances, he filed a representation Ext.P3 seeking for a re- tender of the right to collect the toll and return the amounts deposited by him. According to him, he was not liable to execute the agreement for the tender amount of Rs.4,01,000/- in view of the admitted delay in the matter. In reply, by Ext.P4 the petitioner was informed that going by clause 2 of the additional conditions, while accepting his tender corresponding reduction will be allowed to him for the period during which the order of stay was in force. Therefore, he was directed to execute the agreement urgently. Again, the petitioner pointed out in Ext.P5 that at least 75% of the total tender amount may be allowed as reduction for the period missed, since there was a loss of 75% of the total expected collection of toll as the main festival seasons like Sabarimala and Ramsan are over. By Ext.P6 dated 8.1.2003, the petitioner was informed that the security deposit and the Earnest Money Deposit are being forfeited to the Government and by Ext.P7, consequential orders were passed. This was on the ground that the petitioner's action in not executing the contract amounts to violation of the terms of the tender notice. 3. As per Ext.P8 in Writ Petition No.18545/2003, the petitioner was asked to recoup the loss to the tune of Rs.1,22,900/-. The petitioner has raised various grounds to challenge these orders. 4. Learned counsel for the petitioner submitted that in view of the OP 2862/03 & 18545/03 -3- change in the original period, which was to start from 1.10.2002, the petitioner is fully justified in not executing the contract in terms of the communication for acceptance of tender, as that would have adversely affected him to a great extent. It is pointed out that even though the respondents offered to reduce the amount, no such proposals were communicated to him and as there is an alteration in period for collection of toll, his client was right in not executing the contract as ordered by the authorities. It is further pointed out that the alleged loss is only one raised against the petitioner without any adjudication by an independent authority. In view of the fact that he had not executed the contract, the respondents, at any rate, cannot arbitrarily fix the amount as they cannot be arbiters of their own cause. It is also pointed out that the amount shown as loss is also not correct and the quantification has been made without any information to him. 5. In the counter affidavit, the stand taken is that the reasons stated by the petitioner to refuse to execute the agreement are untenable. The petitioner should have executed the work after getting the corresponding deduction from the quoted amount which he failed to do. The reasons stated by the petitioner for not doing the work for the remaining period are also unsustainable. It is stated that under the prevailing rules, the respondents had to negotiate with the next lowest tenderer for awarding the work to him OP 2862/03 & 18545/03 -4- and since he also refused to accept the tender, the remaining tenderers were requested to submit better offers and the best offer submitted by one among the remaining tenderers, was accepted and the work was awarded to the said person for an amount of Rs.2,21,502/- for six months at the risk and cost of the petitioner. Accordingly, the petitioner is answerable for the balance amount of Rs.1,51,973/-. 6. This is a case where there is admitted delay because of the order of stay granted by this court in O.P. No.25138/2002. Therefore, even though the period was to start from 1.10.2002, the agreement could not be executed. The question is whether in such circumstances, the respondents can impose the alleged loss against the petitioner without any quantification by an independent body, as the petitioner is not accepting that there is a breach on his part. This question was considered by the Supreme Court in the decision reported in State of Karnataka v. K. Krishnappa Naidu and Co. (AIR 1987 SC 1359). The question whether there is power to assess damages in cases where breach is not admitted, was considered in that decision. It was held that “interest of justice and equity required 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.” Their Lordships laid down the principle thus: OP 2862/03 & 18545/03 -5- “...............On a plain reading of the words it is clear that the right of the State Govt. 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 the clause would have been entirely different. A right to adjudicate upon an issue relating to a breach of conditions of the contract cannot be said to flow from or is inhered in the right conferred to assess the damages arising from a breach of conditions. The power to assess damages is a subsidiary and consequential power and not the primary power. Even assuming that the terms of the relevant clause afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as the quantum of damages, the adjudication by the officer of State Govt. regarding the breach of the contract cannot 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” A Full Bench of this court followed the said dictum in Abdul Rahiman v. Divisional Forest Officer (1988 (2) KLT 290) and it was observed that “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.” 7. The facts of the case have to be analysed in the light of the above principles. It is relevant to notice that there was change of circumstances in view of the order of stay, because of which there was delay in communicating the acceptance of the tender and the same was communicated only by letter dated 22.11.2002 which is after the date fixed OP 2862/03 & 18545/03 -6- for starting of the period for collection of toll, i.e. 1.10.2002. The relevant period of contract is from 1.10.2002 to 31.3.2003. In Ext.P3, the petitioner pointed out this aspect and informed the respondents that he is withdrawing from the offer and requested to have a re-tender of the matter. In Ext.P4, even though the Executive Engineer stated that “corresponding reduction will be allowed” for the period from 1.10.2002 to 22.11.2003, it does not appear that any concrete proposal was made on this aspect. Therefore, the petitioner requested for 75% of the total tender amount to be reduced for the period missed. Even in answer to this, no proper reply was given as regards the amount of reduction. These subsequent events show that the contract could not be executed as per the original bid amount, since the respondents themselves were ready to reduce the amount. Therefore, alterations were envisaged which did not fructify as there was no proper proposal from the part of the respondents. The respondents thereafter unilaterally decided to forfeit the amount without waiting for any more alleging violation of the agreement on the part of the petitioner. Ultimately, when Ext.P8 was issued on 13.5.2003, it does not appear that there was a proper adjudication of the alleged liability. A reading of Ext.P8 shows that for the period from 4.12.2002 to 31.3.2003 (118 days) toll was collected directly by the department. The amount originally due to the Government during the above period is shown as Rs.2,59,989/- and the amount collected after re- OP 2862/03 & 18545/03 -7- arrangement is Rs.71,806/-. The difference in the amount is shown as the liability on the part of the petitioner. Herein also, it is to be noticed that the re-arrangement was not by way of a competitive tender. The counter affidavit shows that the next lowest tenderer also refused to render help and what was done by the respondents, was to accept the offer from one among the remaining tenderers and not a fresh tender. This is done by relying upon a clause referred to and extracted in paragraph 5 of the counter affidavit. Therefore, admittedly the process was done only by negotiation and not by inviting competitive tenders and the entire circumstances for clinching the bid have not been stated in the counter affidavit also. Even in the clause relied upon in paragraph 5 of the counter affidavit, there is no stipulation that the said arrangement will be at the risk and cost of the highest bidder. At any rate, the said clause relied upon in paragraph 5 of the counter affidavit may empower the authority to take follow up action in the event of failure of the highest bidder to execute the agreement. Going by the said clause, the earnest money deposit alone can be forfeited. In fact, these unilateral conditions will not, according to me, make the petitioner liable for the alleged loss in the absence of a concluded contract, even if there is a condition that the said re-arrangement will be at the risk and cost of the highest bidder. When the respondents were ready to negotiate with the other tenderers whose tenders were not originally acceptable to them, it can OP 2862/03 & 18545/03 -8- be inferred that the amount will be much less. 8. Herein, the petitioner disputes the loss fixed against him on the ground that no independent body has gone into the question. In the light of the legal principles stated in the decisions cited above (AIR 1987 SC 1359 and 1988 (2) KLT 290), the said stand taken by the petitioner is perfectly correct and legal. For the foregoing reasons, the original petitions are allowed. Exts.P7 and P8 in W.P.(C) No.18545/2003 are hereby quashed. It is declared that without adjudication by any independent body or civil court, liability, if any, cannot be sought to be recovered from the petitioner. (T.R. Ramachandran Nair, Judge.) kav/ OP 2862/03 & 18545/03 -9- T.R. Ramachandran Nair, J. - - - - - - - - - - - - - - - - - - - - - - O.P. No.2862 of 2003-N & W.P.(C) NO.18545 of 2003-G - - - - - - - - - - - - - - - - - - - - - - JUDGMENT 25th January, 2008.