HON’BLE SHRI G.S.SINGHVI, THE CHIEF JUSTICE WRIT PETITION No.17689 of 1995 Between: G.V. Pratap Reddy …Petitioner. AND Government of Andhra Pradesh, represented by its Principal Secretary, Irrigation Department (Telugu Ganga Project) Secretariat, Hyderabad & others. …Respondents. :: O R D E R :: Counsel for the Petitioner : Sri Vedula Venkataramana Counsel for the Respondents : Government Pleader for Irrigation 10th APRIL 2006 Whether Executive Engineer, TGP, Division-I, Velugodu, Kurnool District (respondent No.3) could withhold Rs.1,01,10,960/- from the bills payable to the petitioner in relation to the works undertaken in execution of contracts other than the contract of formation of V.B.R. earth dam from KM 3.250 to KM 4.00 from + 254.00 to 268 and from KM 4.00 to KM 4.30 from + 249 to 258.00 on the ground that the petitioner had violated the terms of the latter contract is the question which arises for determination in this petition filed under Article 226 of the Constitution. The petitioner is a registered special class contractor. In furtherance of tender notice issued by Superintending Engineer, ID, TGP Circle, Nandyal (respondent No.2), the petitioner submitted tender for execution of work relating to formation of V.B.R. earth dam, as described hereinabove. The tender submitted by the petitioner was accepted by the competent authority and the work was awarded to him. As per the terms of the agreement executed between the parties on 6-5-1991, the soils were to be brought from the specified quarry with the lead of 1 to 3 km. for item No.1 i.e., earth work excavation of impervious soils for forming hearting zone and lead of 5 to 56 km for item No.2 i.e., earth work excavation of semi-pervious and pervious soils for forming casing zone to V.B.R. earth dam. As per the cross section appended to the agreement at note item No.21, the petitioner was prohibited from excavating the soil within 500 meters from the heel of the dam. During the course of inspection on 13-4-1992, respondent No.2 noted that poclains of the petitioner were excavating soil from within 500 meters from the heel of the dam. Immediately thereafter, respondent No.3 vide his letters No.EE/TGP/DB/307M, dated 4-5-1992, EE/TGP/DB/664M, dated 3-9-1992, EE/TGP/DB/D3/F.40/686M, dated 15-9-1992 and letter dated 12-11-1993 pointed out the same to the petitioner and called upon him to backfill the excavated area with soil to its normal level. Respondent No.3 made it clear to the petitioner that if he fails to do so suitable action will be taken by the department and costs recovered from his bills. For the sake of reference, the third letter sent by respondent No.3 is reproduced below: GOVERNMENT OF ANDHRA PRADESH IRRIGATION & C.A.D. (P.W.) DEPARTMENT From: To Sri B.V.Subbaiah, B.E., M.I.E., Sri G.V.Pratap Reddy, Executive Engineer, Special Class Contractor, T.G.P. Division No.1, Congress Office Road, Velgode-518533. Khammam-507 001. Kurnool District, A.P. Letter No,.EE/TGP/DB/D3/F.40/686 M, dated 15-9-1992 Gentlemen, Sub: Formation of V.B.R. Earth Dam from KM 3.25 to KM 4.00 (+) 254.00 to 268.0 and from KM 4.00 to KM 4.30 from +249 to +269.00 completion of balance works – regarding. Ref: 1.SE/TGP/NBDL/L.S.Agt.No.4/91-92, dt.6-5-1991. 2.This office Lr.No.EE/TGP/DB/307M, DT.4-5-1992. 3.This Office Lr.No.EE/TGP/DB/F.40/510 M, dt.9-7-1992. -.- The above work was entrusted to you in the reference 1st cited. As per agreement conditions the date of concluding of agreement is the date of commencement of works. In the reference 2nd cited, it was already informed to you that, your poclains were seen excavating soils within 500 meters of upstream of heel of earth dam, and requested to backfill the excavated area with the soils to its normal level duly consolidated. You have not taken any steps to backfill the excavated area so far. If you fail to do so action will be taken by the department to backfill it and the cost will be recovered from your bills. Please note that further payments will not be made unless you backfill the excavated pits to its normal level duly consolidated. The total value of work done is Rs.305.00 lakhs against 390.46 lakhs i.e., 78% of work is completed. Further it was already informed to you in this office Lr.No.510M, dt.9-7-1992 to tackle the upstream revetment work in two layers. But the revetment work is not yet taken up by you. Therefore, you are requested to take suitable steps to tackle upstream revetment work to backfill the excavated pits to do so suitable penal action will be taken as per terms and conditions of contract and as per PS to APSS. The receipt of this notice may please be acknowledged. Yours faithfully, Sd/-B.V.Subbaiah 8/9, Executive Engineer, T.G.P.Division No.1,Velgode.” In his reply dated 17-11-1993, the petitioner claimed that he was not responsible for the soil excavation within 500 meters of the heel of the dam and someone else may have done this. On receipt of that communication, respondent No.3 vide his letter No.EE/TGP/DD/D3/F.40/ 68M, dated 31-1-1994 informed the petitioner that the contractors who had executed the work earlier did not excavate soils within 500 meters of the earth heel and, as a matter of fact, his poclains were seen excavating soils. After some further correspondence, in which both the parties reiterated their respective stands, respondent No.3 sent communication dated 21-3-1995 to the Branch Manager, Andhra Bank, Lhammad that as per Government instructions, the assets of the contractor be freezed. By another communication dated 4-5-1995, respondent No.3 requested Superintending Engineer, TGP, HLC Circle, Anantapur to withhold an amount of Rs.1,01,10,960/- from the work bills of the petitioner or from any deposits available in his organisation and to remit the same in favour of Assistant Pay & Accounts Officer, T.G.P., Nandyal. Respondent No.3 also sent letter dated 25-7-1995 to the petitioner that his assets have been freezed and that if he does not undertake the task of backfilling, then the amounts will be recovered from the assets available with the department. On receipt of the aforementioned communication, the petitioner filed this petition for grant of a declaration that unilateral quantification of the amount sought to be recovered from him was illegal, arbitrary and violative of the terms of the articles of agreement. He averred that the action taken by the respondents in general and respondent No.3 in particular to withhold an amount of Rs.1,01,10,960/- was wholly arbitrary and violative of his fundamental right to equality. He further averred that respondent No.3 did not have jurisdiction to determine the cost likely to be incurred for backfilling the soil by presuming that he had illegally excavated the soil from within 500 meters of the heel of the dam. He pleaded that in terms of clause 3 of the articles of agreement, the dispute can be adjudicated by a civil court and respondent No.3 does not have the power to unilaterally decide the same. In the counter affidavit dated 18-11-1998 filed by Sri R.Prabhakar Reddy, Superintending Engineer, T.G.P. Circle, Nandyal, it has been further averred that the petitioner illegally excavated soil from the restricted area. It has been further averred that on discovery of the illegal excavation of soil by the petitioner, the competent authority issued notices to him to backfill the excavated area to its normal level. However, he did not take any steps in this regard and, therefore, it became necessary to withhold the amounts payable to him. Paragraphs 3 and 4 of the affidavit of Sri Prabhakar Reddy read as under: “3. It is respectfully submitted that the work of formation of V.B.R. Earth dam from KM 3.250 to 4.000 KM from +254.00 to(+) 268.00 and from KM 4.000 to 4.3000 KM from (+) 249.00 to (+) 268.00 was concluded with the petitioner by the 2nd respondent under Superintending Engineer’s letter L.S. Agreement No.4/91-92/SE/TGP/NDL, dt.6-5- 1991. As per agreement conditions, the soils are to be brought from the specified quarry with a lead of 1 to 3 KM for the item No.1 i.e., Earth work excavation of semipervious and pervious soils for forming casing zone to V.B.R. earth dam of Schedule-A of agreement. Further as per cross section appended to agreement at note item 21, the contractor should not excavate the soils within 500 mts from the heel of the dam. But the contractor has excavated the soils within 500 mts to a tune of quantity 3,07,000 Cum instead of obtaining them as per agreement lead. This illegal excavation was pointed out by the then Superintending Engineer, T.G.P. Circle, Nandyal during inspection of works on 13-4-1992. The petitioner was addressed vide Executive Engineer, T.G.P. Division No.I, Velugodu Lr.No.307M, dt.4-5-1992 (2) Lr. No.664M, dt.3-9-1992 (3) Lr.No.686M, dt.15-9-1992 and (4) Lr.No.68 M, dt.31-1-1994 stating that the illegal excavation was done within 500 mts and informed to backfill the excavated area to its normal level duly consolidated. It was also informed to the petitioner that if he fails to do so, suitable action will be taken by the department to recover the cost of refilling from the petitioner. Hence it is absolutely false to state that the petitioner was not informed. Accordingly the approximate cost of refilling the excavated area within 500 mts with S.S.R. 1994-95 works out to Rs.224.62 lakhs and the difference in lead charges works out to Rs.11,45,532/- for the above quantity of 3,07,000 Cum. After deducting the amounts (B.G. for Rs.8,50,000/- + withheld amount Rs.6,21,388/- + amount recovered towards difference in lead Rs.2,27,854/- + work done but not paid Rs.17,18,515/- to a tune of Rs.34,17,757/- available with the department the balance amount to be recovered works out to Rs.2,01,89,775/- (Rs.2,24,62,000/- + Rs.11,45,532/-) – (Rs.34,17,757/-) from the petitioner bills or assets available with the various unit offices. 4. It is respectfully submitted that the contractor had committed the breach of contract and violated the terms and conditions of the contract by excavating the soils within 500 mts from the heel of the dam which endangers the safety of the reservoir. For taking up the remedial measures refilling costs is proposed to be recovered from the petitioner. The action taken for effecting the recovery from the other works of the petitioner is as per the rules and to safeguard the interest of the Government. As aforesaid, the work of formation of V.B.R. from KM 3.250 to 4.000 from (+) 254.00 to (+) 268.00 and from KM 4.000 to KM 4.300 (+) 249.00 to (+) 268.00 was entrusted to the petitioner under L.S. Agreement No.4/91-92/SE/TGP/NDL, dt.6-5-1991. The contention of the petitioner is not correct stating that he was entrusted the balance work left over by the other agency. The work of formation of V.B.R. Earth dam up to + 249.00 from KM 4.000 to 5.300 was entrusted to Sri Dega Narasimha Rao, Contractor under L.S. Agreement No.21/87-88/SE/TGP/ NDL, dt.5-12-1987 under 1st phase of work. By the time of commencing the work by the petitioner the formation of earth bund upto (+) 249.00 was completed by other agency. The date of commencement for the petitioner work operates from the date of signing of agreement i.e., 6-5-1991. The petitioner has completed the formation of earth bund by 5/92. There was no hindrance or obstructions made to him by the department during execution of work. As the contractor excavated the soils within 500 mts from the heel of the dam during execution of work, the contractor was informed, to backfill the excavated area by the 3rd respondent in Lr.No.(1) 307 M, dt.4-5-1992 (2) 664 M, dt.3-9-1992 (3) 686 M, dt.15-9-1992 and (4) 68 M, dt.31-1-1994. But the contractor failed to do so payment was to the contractor in L.S. X & XI part bills duly recovering the difference of cost in lead charges for the approximate quantity excavated. It was proposed to recover the cost of refilling after finalising the exact quantity amount. This was not finalised during the execution of work. The statement made by the petitioner that he is executing the work sincerely, according to terms and conditions is totally false as he has committed breach of contract by violating the agreement conditions and specifications by excavating the soils within 500 mts from the heel of the dam as against the specified lead in the agreement, causing danger to the safety of the dam. The actual amounts withheld are furnished in para 2 above.” In the additional affidavit dated 28-12-2005 filed by Sri G. Gopal Reddy, Superintending Engineer, FAC, TGP Circle, Nandyal, reference has been made to notices dated 5-5-1995 and 25-7-1995 issued to the petitioner to backfill the excavated area and it has been averred that the cost of backfilling the excavated area was worked out in accordance with the Government Memo No.15053/TGP/I/94-14, dated 24-12-2001. Sri Gopal Reddy has further averred that vide letter dated 26-1-2003, Chief Engineer, TGP informed the Government that five contractors including the petitioner have illegally excavated soil within 500 meters and the total cost of backfilling is Rs.4,41,00,000/- and recovery towards lead difference charges is to the tune of Rs.13,73,613/-. Out of this, the petitioner’s liability is Rs.1,14,33,710/- towards backfilling cost and Rs.4,01,556/- towards lead difference charges(totalling Rs.1,18,35,266/-). According to Sri Gopal Reddy, a sum of Rs.34,17,757/- is available in the account of the petitioner and, therefore, an additional amount of Rs.84,17,509/- has to be recovered from him. Along with his affidavit, Sri Gopal Reddy has filed copies of letters dated 4-5-1992, 3-9-1992, 15-9- 1992, 31-1-194, 5-5-1995, 25-7-1995, 18-4-1995, 24-12-2001, 31-7-1995, 26-1-2003, 6-3-2002, 22-12-2003, 4-5-1995 and 6-5-1991. Sri Vedula Venkataramana, learned counsel for the petitioner argued that the self serving exercise undertaken by respondent No.3 to determine the cost of filling the excavated area is plainly illegal and the same could not be made basis for a withholding the payment of bills raised by the petitioner in lieu of execution of other works. He submitted that the so-called dispute regarding the alleged illegal excavation from within 500 meters of the heel of the dam can be adjudicated by the civil court in terms of clause 3 of the articles of agreement and, therefore, the determination made by respondent No.3 is liable to be treated as nullity. Sri Venkataramana relied on the judgment of the Supreme Court in State of Karnataka v. Rameshwara Rice Mills, Thirthahalli[1] and argued that the so-called breach of the terms of the agreement does not entitle the respondents to adjudicate upon the dispute and, in any case, the respondents cannot withhold the payment of bills raised in respect of other contracts. Learned Government Pleader for Irrigation relied on the contents of articles of agreement dated 6-5-1991 entered into between the parties to show that the petitioner had agreed to abide by the Andhra Pradesh Standard Specifications. He than referred to Clauses 66 and 71 of the Andhra Pradesh Standard Specifications and argued that the Government is entitled to retain or deduct the amount from any money that may be due or may become due to the contractor under articles of agreement dated 6-5-1991 and/or under any contract or contracts or any other account. He argued that the respondents did not commit any illegality by withholding the amount payable in relation to the bills submitted in lieu of execution of other works. Learned Government Pleader also emphasised that the remedy available to the petitioner in terms of clause 3 of the articles of agreement is to file civil suit and argued that the High Court should not entertain his grievance under Article 226 of the Constitution more so because highly contentious facts are required to be decided for the purpose of determining his entitlement to receive the amount of Rs.1,01,10,960/-. I have given serious thought to the entire matter. The petitioner has not controverted the assertion contained in the counter affidavit filed on behalf of the respondents that he had signed the Andhra Pradesh Standard Specifications and Addenda Form maintained in the Circle Office and agreed to be bound by the conditions of the Andhra Pradesh Standard Specifications for items of works described in Schedule A. He has also not controverted that in terms of Clause 66 of the Andhra Pradesh Standard Specifications, the contractor can be held liable for fraud or willful neglect or default in the execution of the contract or any willful or unauthorised deviations from the drawings, specifications, instructions and directions and that in terms of Clause 71, the Government can retain or deduct the amount from any money that may be due or become due from the contractor under the same agreement or any other contract or contracts or any other account. Therefore, the decision of the Government to withhold the amount representing the cost of backfilling of the area lying within 500 meters of the heel of the dam from the bills of other contracts cannot be termed as arbitrary or illegal per se. The petitioner has not placed any material on the record of the writ petition to show that the facts found by respondent No.2 at the time of inspection carried out on 13-4-1992 namely, that his poclains were seen excavating soils within 500 meters of upstream of the heel of the dam are incorrect. He has also not denied that respondent No.3 had repeatedly asked him to backfill the excavated area with the soil to its normal level. It is also not his case that on receipt of communications dated 4-5-1992, 3-9-1992, 15-9-1992, 12-11-1993, 30-1-1994, 5-5- 1995 and 25-7-1995, he had taken steps to refill the excavated area. Therefore, the exercise undertaken by respondent No.3 for deducting the amount (cost of backfilling the excavated area) cannot be declared as without jurisdiction or vitiated due to violation of principles of natural justice. If the petitioner has any grievance against withholding of the amount representing the cost of re-filling the excavated area, the remedy available to him is to file a civil suit. Clause 3(1)(ii) of the articles of agreement clearly provides that all claims above Rs.50,000/- in value shall be decided by way of civil court of competent jurisdiction by regular suit and not by arbitration. Clause 3(2) provides that a reference for adjudication can be made by either party within six months from the preparation of the bill. Since this remedy was available to the petitioner in accordance with the terms of the agreement, the same will have to be treated as an effective alternative remedy and there is no justification for exercise of power by this Court under Article 226 of the Constitution of India ignoring the rule of alternative remedy. Even otherwise, in exercise of its jurisdiction under Article 226 of the Constitution of India, the High Court cannot decide the contentious issues relating to alleged illegal excavation of soil by the petitioner from within 500 meters of the hill of the dam and his liability to backfill the excavated area. In this connection, I may usefully refer to some Judgments of the Supreme Court. In State of U.P. v. Bridge & Roof Co.(India) Ltd.[2], the Supreme Court was called upon to consider whether the rates quoted by the contractor were inclusive of the sales tax, if any, on the constructional plants, materials and supplies required for the purpose of execution of the contract. The respondent, who was awarded contract for rehabilitation and improvement of certain stretch of road in Uttar Pradesh applied to the Commissioner of Sales Tax, Uttar Pradesh for composition of tax liability. The Deputy Commissioner, Sales Tax, in exercise of the power delegated to him by the Commissioner, passed order dated 27-5-1992 that sales tax should be deducted at the rate of 1% at the time of payment of balance amount. After three years, the respondent filed writ petition in Allahabad High Court questioning the deduction of sales tax. The High Court did not go into the issue of maintainability of the writ petition, but disposed of the same by observing that the Government shall deduct only 1% of the bill in question up to 31-3-1995. While setting aside the High Court’s order on merits, the Supreme Court held: “15. In our opinion, the very remedy adopted by the respondent is misconceived. It is not entitled to any relief in these proceedings, i.e., in the writ petition filed by it. The High Court appears to be right in not pronouncing upon any of the several contentions raised in the writ petition by both the parties and in merely reiterating the effect of the order of the Deputy Commissioner made under the proviso to Section 8-D(1). 16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, may be, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant-Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition. The prayer in the writ petition, viz., to restrain the Government from deducting a particular amount from the writ petitioner’s bill(s) was not a prayer which could be granted by the High Court under Article 226. Indeed, the High Court has not granted the said prayer. 17. Secondly, whether there has been a reduction in the statutory liability on account of a change in law within the meaning of sub-clause (4) of clause 70 of the contract is again not a matter to be agitated in the writ petition. That is again a matter relating to interpretation of a term of the contract and should be agitated before the arbitrator or the civil court, as the case may be. If any amount is wrongly withheld by the Government, the remedy of the respondent is to raise a dispute as provided by the contract or to approach the civil court, as the case may be, according to law. Similarly if the Government says that any overpayment has been made to the respondent, its remedy also is the same. 18. Accordingly, it must be held that the writ petition filed by the respondent for the issuance of a writ of mandamus restraining the Government from deducting or withholding a particular sum, which according to the respondent is payable to it under the contract, was wholly misconceived and was not maintainable in law. (See the decision of this Court in Asstt. Excise Commr. v. Issac Peter[3] where the law on the subject has been discussed fully.) The writ petition ought to have been dismissed on this ground alone. 21. There is yet another substantial reason for not entertaining the writ petition. The contract in question contains a clause providing inter alia for settlement of disputes by reference to arbitration (clause 67 of the contract). The arbitrators can decide both questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising from the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extraordinary jurisdiction of the High Court under Article 226. The existence of an effective alternative remedy — in this case, provided in the contract itself — is a good ground for the court to decline to exercise its extraordinary jurisdiction under Article 226. The said article was not meant to supplant the existing remedies at law but only to supplement them in certain well-recognised situations. As pointed out above, the prayer for issuance of a writ of mandamus was wholly misconceived in this case since the respondent was not seeking to enforce any statutory right of theirs nor was it seeking to enforce any statutory obligation cast upon the appellants. Indeed, the very resort to Article 226 — whether for issuance of mandamus or any other writ, order or direction —