IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.1509 of 2008 M/S SHARDA CONSTRUCTION Versus THE STATE OF BIHAR & ORS ----------- For the Petitioner : Mr. Raj Kishore Prasad Mr. Tej Bahadur Roy For the respondents : AAG-2 5 8.8.2008 Petitioner is a qualified registered Class I contractor. A tender was issued for up gradation/widening/ strengthening of old G.T.Road near Aurangabad measuring about 22.8 Kms..The estimated cost and agreement value of the said contract was Rs.5,03,80,347.00/-. Petitioner responded and was ultimately selected. He has now virtually completed the work and the same has been accepted but a dispute arose with regard to payment of escalation cost of bitumen, which has brought the petitioner to this Court. Counter affidavit has been filed and with the consent of the parties, the writ petition is being heard and disposed of at this stage itself. State in its counter took objection that the agreement having been entered into in Standard Form- F2, which contains no escalation cost, petitioner cannot demand and/or enforce any escalation cost. Then in the same very counter affidavit it is admitted by Annexure B that the State considering abnormal rise in price of bitumen which is the main ingredient requirement for road construction, considered the matter and resolved to grant price escalation in terms of Clause CA of Standard Bidding Document, even in respect of agreement, which was in Form F2 but then again another objection is raised that work not having been completed in time, this compensation for enhanced cost would not be available to the - 2 - petitioner. Though it is not in dispute that enhancement took place in the work period of the agreement itself. The petitioner, on the other hand, states that it is not in dispute that normally Form F2 is to be used for small contract i.e. contract under the value of 5 crores but at the time when the agreement was to be entered into, the form of agreement, so far as for bigger contracts are concerned, was not available hence Form 2 was used. Learned counsel for the petitioner appears to be correct in this regard as Annexure 3 to the Writ petition would show that Form F2 agreement (Annexure 1) does not include escalation cost but the Standard Bidding Document for works costing more than 5 crores Clause 10CA specifically provides for price adjustment/ escalation in respect of bitumen. Thus, the contention of the petitioner is that Clause 10CA of the Standard Bidding Document would and should apply. It is submitted that in any view of the matter the government being a fair government are bound by fair conduct. Once it appreciate abnormal rise in price of essential raw material and decides to compensate the contractor ,it could not put to conditionality on disbursement of such compensation. Having considered the matter, in my view, the contention as raised on behalf of the petitioner, must be accepted. As noticed above, for contract exceeding value of Rs. 5 crores , the terms and conditions in the Standard Bidding Document would apply. Admittedly, the present contract is of value exceeding Rs. 5 crores. The respondents are unable to explain as to how an agreement of value exceeding Rs. 5 crores was initiated in Form F2, which is meant for smaller contract. - 3 - In that view of the matter, the petitioner would be entitled to invoke Clause 10CA by itself but that may not be conclusively decided inasmuch as in my view, the government being conscious of its responsibility to citizen and being conscious of application of Article 14 of the Constitution and the concept of fairness and reasonableness contained therein to all its activity including contractual matter, rightly took a decision to apply the same very clause 10CA of the Standard Bidding Document to all contracts even Form F2 contract. The petitioner thus be entitled to escalation. The only impediment is with regard to rider put by the government with regard to timely completion of contract. In my view, there are two aspects of the matter, firstly, petitioner has pointed out that earlier for delay in the execution of work a penalty was imposed on the petitioner. Petitioner protested pointing out that the delay was not attributable to the petitioner. Authority considered the matter and refunded the penalty, so charged. Thus, petitioner rightly contends that the delay was thus condoned. Further even though the work of delay, at no point of time, the petitioner was put to any other disability nor the contract rescinded or delay penalty invoked. Thus, it cannot be said that the work was not accepted as duly completed. The second aspect of the matter is that the escalation clause is equitable clause for compensation due to unanticipated price rise during the period of contract. Government being a fair Government must act in accordance with Article 14 of the Constitution even in this contract and thus rightly provided for a just and fair compensation for unanticipated substantial rise in price of bitumen. Once the concept of price escalation - 4 - compensatory is accepted then putting condition denying it does not seem to be fair and proper. It would be entirely another matter, had the contract rescinded because of delay and then put the work further without granting cost escalation but that was never done. Price escalation is not disputed and applicability of the price escalation clause cannot be disputed. In that view of the matter, I hold that the petitioner is entitled to get benefit of the escalation clause, as referred to above. The authority would be well advised to work out the same and act in reasonable and fair manner and pay the same to the petitioner as it is only compensatory in nature. It is expected that the said exercise would be completed within two months from the date of production of a copy of this order before the concerned Executive Engineer. The writ application is accordingly allowed. singh (Navaniti Pd.. Singh)