IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR. JUSTICE S.S.SATHEESACHANDRAN TUESDAY, THE 6TH JULY 2010 / 15TH ASHADHA 1932 AFA.No. 19 of 1994 -------------------- AGAINST THE JUDGEMENT DATED 26/08/1993 IN AS.441/1990 OF THE HIGH COURT OS.74/1985 of SUB COURT, VADAKARA .................... APPELLANTS/RESPONDENTS/DEFENDANTS: --------------------------------------------------------------- 1. STATE OF KERALA, REPRESENTED BY ITS SECRETARY, WATER AND POWER DEPARTMENT, TRIVANDRUM. 2. THE DISTRICT COLLECTOR, KOZHIKODE. 3. THE SUPERINTENDING ENGINEER, P.W.D.PROJECTS CIRCLE, CALICUT - 673 001. BY GOVERNMENT PLEADER SRI.M.P.RAMANAND. RESPONDENT/APPELLANT/PLAINTIFF: ------------------------------------------------------- K.ABDUL KHADAR, S/O.UKKAS MAMMUNHI, BAWINJA, THEKKILPERI P.O. CHENGALA, KASARAGOD. ADV. SRI.RAJIV.V.GEORGE THIS APPEAL FROM FIRST APPEAL HAVING BEEN FINALLY HEARDON 05/07/2010, THE COURT ON 06/07/2010 DELIVERED THE FOLLOWING: Thottathil B.Radhakrishnan & S.S.Satheesachandran, JJ. = = = = = = = = = = = = = = = = = = = = = = = = A.F.A.19 of 1994 = = = = = = = = = = = = = = = = = = = = = = = = Dated this the 6th day of July, 2010. Judgment Thottathil B.Radhakrishnan, J. “CR” 1.State of Kerala and others, the defendants in a suit for recovery of money based on a contract are the appellants in this intra court appeal against the judgment of the learned Single Judge decreeing the suit in reversal of its dismissal by the court of first instance. 2.A contract for the rectification of a particular road in connection with the Kuttiadi Irrigation Project was awarded to the plaintiff by the State of Kerala though the third respondent Superintending Engineer, to be carried out under the immediate control of the Executive Engineer. The contract between the parties (taken on record AFA19/94 -: 2 :- as Ext.B6 by the learned Single Judge as additional evidence in the first appeal) was entered into between the plaintiff and the Superintending Engineer acting on behalf of the Government. Improvement was to be effected to the Mokeri-Kayakkodi Road from 0/000 Kms. to 4/700 Kms. The total estimated cost of the work was Rs.4,87,582/-. 3.Going by Ext.B6 and other attendant documents, the rate of progress to be achieved and the proportionate value of work to be done from time to time was that 25% of the work was to be completed in 1¼ months, 50% in 2½ months, 75% in 3¾ months and 100% in five months. The agreement included provisions for extension of the period of the contract even on payment of penalty. Therefore, time was not of the essence of the contract. We are fortified in this view, among other, by the judgment of this Court in State v. K.Bhaskaran, AIR 1985 Kerala 49. It is also a matter of record that even between the parties to AFA19/94 -: 3 :- the suit supplementary agreements were executed, including Ext.A2. 4.While the work was in progress, part bills were paid. Retention amounts were deducted therefrom. Security was also retained. 5.Ultimately, it appears that the work was not completed. Alleging that the defendants had committed breach in discharging their obligations under the reciprocal terms of the contract, the plaintiff issued Ext.A10, though the work was extended even at the request of the plaintiff earlier. As per Ext.A10, the plaintiff repudiated the agreement. Thereafter, a show cause notice was issued by the defendants and, as per Ext.B2, the defendants purported to "terminate" the contract, thereby repudiating it. 6.The plaintiff sued on the allegation that the work could not be completed because the required bitumen was not supplied by the defendants in AFA19/94 -: 4 :- terms of the agreement by delivering it at Kuttiadi and also because various other factors contributed to the delay in the work. While he alleged that those shortcomings are attributable to the defendants, they turned to accuse him for the delay. For the purpose of the work, the Department was to provide 600 MT of cement and 300 quintals of steel to be delivered at Badagara and 1650T of bitumen to be delivered at Kuttiadi. This is clearly evidenced by Ext.B6. Adverting to Ext.A12, it can be seen that the defendants stand to admit that bitumen was not available in Kuttiadi and was made available at Badagara which, going by the materials including the impugned judgment, is 70 Kms. away from Kuttiadi. That fact is also not disputed before us. The clear term of the contract being that the defendants would provide bitumen at Kuttiadi, it would not suffice as a defence for the defendants to contend that bitumen was available in Badagara. The materials tend to show that the plaintiff had even gone to Badagara to take delivery of the bitumen from AFA19/94 -: 5 :- Badagara, though he would say that the officers in charge of the depot at Badagara refused to release bitumen on the plea that appropriate intent was not placed by the competent officer in the Government. In this context, the plea of the defendants is that intent was actually placed and communicated to the Badagara office. In our view, this would be wholly insufficient because the clear term of the agreement between the parties was that the entire quantity of bitumen required for the work would be delivered at Kuttiadi. We notice this with emphasis, going by Ext.B6, because as regards cement and steel, the specific term was that it will be delivered at Badagara. 7.With the aforesaid, the learned Single Judge assimilating the entire evidence came to the conclusion on facts that the contract consisted of reciprocal promises and without the defendants performing their part of the contract relating to the delivery of bitumen and also certain other aspects, the plaintiff could not be mulcted with AFA19/94 -: 6 :- any responsibility for not having completed the work. As a consequence, the learned Single Judge reversed the findings of the court of first instance and granted a decree in favour of the plaintiff for recovery of Rs.48,605.95 with 12% interest from the date of suit till realisation. 8.Perusing the pleading and evidence on record as noted by us above, in the light of the arguments advanced by the learned Government Pleader and the learned counsel for the plaintiff, we do not find any ground to interfere with those findings on facts, rendered by the learned Single Judge. 9.However, in paragraphs 25 and 26 of the impugned judgment reported as 1993(2) KLJ 977, the learned Single Judge followed the decision in Roshan Lal Sethi v. Chief Secretary, AIR 1971 J & K 91 and held that only the Executive Engineer was authorised to determine the contract and therefore, the Superintending Engineer did not have the authority to repudiate it by issuing a AFA19/94 -: 7 :- termination letter, going by the terms of the agreement between the parties which is Ext.B6. Essentially, it is this finding that faces the Government with more gravity, having regard to the different litigations that it has to face. We, therefore, proceed to consider whether on the facts and in the circumstances of the case, the learned Single Judge was justified in holding so. 10.The Articles of Agreement between the parties, among other things, provides in clause 2 thereof as follows: “(2) The term Executive Engineer, in the said conditions shall mean the Public Works Officer in charge of the KyIP.No.II Badagara- Division, who shall be competent to exercise all the powers and privileges reserved herein, in favour of the Government, with the previous sanction of or subject to the ratification by the Superintending Engineer, P.W.D., Project Circle, Calicut in cases where such sanction or ratification may be necessary.” (emphasis supplied) AFA19/94 -: 8 :- The Conditions of Contract provide in Clause 2 as follows: “2. In every case in which under any clause or clauses of this contract the contractor shall have rendered himself liable to damages amounting to the whole of his security deposit, the Executive Engineer shall have power either to rescind the contract altogether or to have the work completed without further notice at the contractor's risk or expense as he may deem best suited to the interest of the Government and the contractor shall have no claim to compensation for any loss that may accrue from any materials he may have collected or engagements he may have entered into, on account of his work and in the latter case the Executive Engineer shall have power to deduct whatever amount may be expended on the completion of the work, from any sums that may be due or become due from the Government to the Contractor on account of this or any other work or recover such sums from him and his AFA19/94 -: 9 :- assets movable and immovable under the provisions of the Revenue Recovery Act for the time being in force as if they were arrears of land revenue or otherwise as Government may choose. And in case the contract shall be rescinded under the provisions aforesaid the contractor shall not be entitled to recover or be paid any sum for any work theretofore actually performed under this contract unless and until the Executive Engineer shall have certified the performance of such work and the value thereof, and he shall only be entitled to be paid the value so certified.” 11.The argument that appears to have appealed to the learned Single Judge is that the specific condition of the contract between the parties is to the effect that the Executive Engineer shall have power either to rescind the contract altogether or to have the work completed without further notice, at the contractor's risk or expense as he may deem best suited to the interest of the Government and such authority of the AFA19/94 -: 10 :- Executive Engineer has been specifically laid down as a term of the contract between the parties and therefore, the Superintending Engineer, though the agreement authority, cannot be treated to have the power to repudiate, rescind or terminate the contract or even to arrange the remaining work at the risk and cost of the contractor. 12.Article 299 of the Constitution stands to advise that all contracts in the exercise of executive power of the State shall be expressed to be made by the Governor and all such contracts made in exercise of that power shall be executed on behalf of the Governor by such person and in such manner as he may direct or authorise, however that, the Governor shall not be personally liable in respect of any contract so executed, nor shall any person making or executing any such contract on behalf of any of them be personally liable in respect thereof. The said constitutional provision categorically dictates that the ultimate power to contract, affecting the affairs of the State, is AFA19/94 -: 11 :- with the State itself and the expression of that contract, in exercise of executive authority, is regulated by Article 299. In the hierarchy, the distribution of business of the Government is done by empowering officers at the appropriate level to enter into such transactions as may be found necessary and conducive to be left under their control. In so far as the contract in hand is concerned, the Superintending Engineer, PWD Project Circle, Calicut is the officer who signed the contract on behalf of the State. The Articles of Agreement clearly states that it is made between His Excellency the Governor of Kerala through the Superintending Engineer, PWD Project Circle, Calicut acting for and on behalf of the Government of Kerala. Obviously, therefore, the contract is entered into by the Government of Kerala and it is within the contracting power of the State to repudiate or rescind such a contract. At any rate, it will be immediately within the authority of the Superintending Engineer to rescind or repudiate the contract. The powers of AFA19/94 -: 12 :- the Executive Engineer under Clause 2 of the Conditions of Contract, to rescind, repudiate, arrange the remaining work at risk and cost etc. are powers that the Executive Engineer may exercise, subject to previous sanction or ratification in terms of Clause 2 among the Articles of Agreement, quoted above. Therefore, when the Executive Engineer acts under Condition No.2 among the Conditions of Contracts, he acts merely as the delegate of the Superintending Engineer who is the authorised officer in terms of the Articles of Agreement, forming part of the contract between the plaintiff and the Government of Kerala. 13.In the aforesaid view, we are unable to agree with Roshan Lal Sethi(supra), that the relationship of the parties is governed by the terms of the agreement and therefore only those who have been mentioned in any particular clause can exercise powers and none else, may be superior or inferior. AFA19/94 -: 13 :- 14.With this, we advert to the decision Union of India v. K.H.Rao, AIR 1976 SC 626 referred to by the learned counsel for the plaintiff. There, the Apex Court was considering whether the identity of the officer who rescinded the contract was referable to proper authority in terms of the contract that fell for consideration. The plaintiff in that case entered into an agreement with the defendant Union of India through its Military Head Quarter, Madras Area, contracting to supply onions for a particular period. The suit related to the supply to the Bangalore Depot. The plaintiff supplied the onions to that depot for a particular period. He, thereafter, completely stopped the supply notwithstanding the demands from time to time. After some correspondence, he was informed by letter that the contract stood rescinded. That communication of rescission was signed by one J.H.Wadia, then a Lt. Colonel. On facts, it was held that the acceptance was not sanctioned by that authority and the contracting AFA19/94 -: 14 :- authority was different and hence, the plaintiff in that case was entitled to succeed. We are of the view that the said decision rests on the particular facts of that case, which are wholly dissimilar to the matter involved in this appeal and cannot be applied as a precedent on the core issue of law which we have noticed and dealt with above. In the case in hand, what falls for consideration is as to whether a subordinate in the hierarchy who is authorised to exercise powers of repudiation, rescission etc. subject to prior permission or ratification of the agreement authority could be held to be the sole authority to repudiate or rescind a contract, that too, to the exclusion of the agreement authority. 15.For the aforesaid reasons, we vacate the findings in paragraphs 25 and 26 of the impugned judgment and sustain the decree as granted by the learned Single Judge in A.S.441/1990 upholding the other reasons stated therein. AFA19/94 -: 15 :- Subject to what is stated above, the appeal is dismissed with costs. If any amount has already been deposited before the court below, let that be released forthwith without prejudice to any further execution proceedings in accordance with law. Thottathil B.Radhakrishnan, Judge. S.S.Satheesachandran, Judge. Sha/1407 AFA19/94 -: 16 :- Thottathil B.Radhakrishnan & S.S.Satheesachandran, JJ. = = = = = = = = = = = = = = = = = A.F.A.No.19 of 1994 = = = = = = = = = = = = = = = = = Judgment 6th July, 2010.