IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD THURSDAY, THE THIRTY FIRST DAY OF MARCH TWO THOUSAND AND FIVE PRESENT THE HON'BLE SRI DEVINDER GUPTA,THE CHIEF JUSTICE and THE HON'BLE MR JUSTICE B.SESHASAYANA REDDY WRIT APPEAL NO : 1721 of 2000 (Writ Appeal under Clause 15 of the Letters Patent against the Order dated 02/08/2000 in WP NO : 24089 OF 1998 on the file of the High Court.) Between: 1 Government of A.P. rep.by the Commissioner and Ex.Officio Secretary to Government I&CAD Department Secretariat Buildings, Hyderabad 2 Chief Engineer (Projects) Neelam Sanjiva Reddy Sagar Project, 6th Floor, Gagan Vihar, Opp:Gandhi Bhavan MJ Road, Hyderabad 3 Superintending Engineer SRBC, Circle NO.3 Nandyal, Kurnool Dist 4 Executive Engineer SRBC Division 3-4 Koilkuntla Kurnool Dist ..... APPELLANT(S) AND Sri Rama Engineering constructions (Engineers & Contractors) Plot No.13, Kalyannagar, Hyderabad, rep.by its Managing Partner, V.V.Raghava Chowdary .....RESPONDENT Counsel for the Appellants: GP FOR IRRIGATION & COMM AREA DEV. Counsel for the Respondent : Mr M.R.K.Chowdary, Senior Advocate for MR.MUMMANENI.SRINIVASA RAO The Court made the following order: JUDGMENT: (per Hon’ble Sri Devinder Gupta, the Chief Justice) --- 1. Learned single Judge by his order dated 2.8.2000 allowed the writ petition of the respondent-contractor, hereinafter referred to as the ‘petitioner’, thereby declaring the action of the first appellant in issuing the order in G.O.Ms.No. 118, Irrigation & CAD Department, dated 29.6.1998 and the consequential actions of the other appellants in giving effect to the impugned orders by way of making payment under final bill to the writ petitioner resulting in non-payment of Rupees 3.03 crores as illegal, arbitrary, discriminatory and unconstitutional and consequently directing the appellants to make payment of the withheld amount, including the recovered amount with interest from the date of passing of the impugned order. 2. The appeal questioning the said order of the learned single Judge is filed by the State Government, inter alia, on the ground that the learned single Judge ought not to have entertained money claim of the writ petitioner in respect of a commercial transaction arising out of a non-statutory concluded contract in exercise of jurisdiction under Article 226 of the Constitution of India, more particularly in view of highly contentious and disputed questions of fact arising for consideration. 3. Facts in brief are that the petitioner was awarded work of excavation of Srisailam Right Branch Canal from 116 KMs to 141 KMs including construction of structures and lining under Package XIII. The agreement was entered into between the petitioner and the respondents on 8.5.1991 at a cost of Rs.23.57 crores. Work was commenced on 2.7.1991. It was to be completed by June 1994, but the period was extended up to 30.6.1995. Again three months extension was granted up to 30.9.1995. Extension became necessary owing to change in scope of the work and addition of new items of work of the project resulting in increase of the amount of contract. Different items of works were included in the tender estimates with reference to the requirements indicated in the bidding documents. It also indicated quantities of various items of excavation of soil work, etc. Amongst other items the quantity of F & F rock was estimated as 119 Cubic Metre both in the tender estimates and the bidding documents. After commencement of the work, it was noticed that the quantity of F & F rock was many times more than indicated in the estimates and the bidding documents. Variation was in unreasonable proportion and was on very high side. This also led to the re-classification of the strata during the course when canal was exposed. The actual execution of F & F Rock thus came to 6,94,824 Cubic Metre., as against 119 Cubic Metre. The rate for F & F rock in the agreement was mentioned at Rs. 126/- per Cubic Metre. 4. Petitioner’s case is that award of the contract does not depend upon particular individual rate of any individual item accepted. The rates indicated as bid prices do have an integral effect in evaluating the work of the contract and the amount was arrived basing on the estimated bill of quantities and agreed prices with reference to quantities. Once the contract is concluded, the rates on each items of work specified cannot be altered by any of the parties either without notice or with notice except by way of breach of contract. After commencement of the work there was actual execution contrary to the factual estimates on higher side, for which under the contract the rate quoted was accepted, i.e., Rs. 126/- per Cubic Metre. The respondents were bound to pay the agreed amount. Due to increase in the quantity thereby unexpected quantities, which resulted in increase in the quantity thereby enlarging the budget for the work, in order to meet the requirement of payment, in spite of increase in expenditure, the department started devising ways and means to reduce the burden by indirectly inducing themselves to reduce the rate for which they were not entitled. The petitioner, thus, resisted any reduction or variation in the rate of excavation of F & F rock in the entire canal area. Resultantly, the respondents appointed a Committee for which G.O.Ms.No. 134 dated 16.9.1998 was issued. It was amended by G.O.Rt.No.708 dated 19.5.1995. The Government decided to have the views of the Chief Technical Examiner and Deputy Financial Adviser also. They were included as Members. Thus, experts went into various details of the case and were asked to make suitable recommendations. The Committee made its recommendations and submitted the same to the Government on 31.12.1995. As regards F & F rock in addition to twelve items the Committee opined that agreed rate has to be paid in respect of actual quantity executed. Despite recommendations of the expert committee and despite the fact that the entire work was carried out by the petitioner, the amount was not paid to the petitioner. The Government did not disclose its mind and did not come to any conclusion, but ultimately passed the impugned order in G.O.Ms.No. 118, Irrigation & Command Area Development, Department unilaterally ignoring the report of the expert committee and directing payment to be made at the rate of Rs. 90/- per Cubic Metre instead of Rs. 126/- per Cubic Metre, which resulted in heavy loss to the petitioner to the tune of Rs. 3.03 crores. 5. The petitioner’s case is that on receipt of impugned orders, final bill was prepared by Appellants 3 and 4 giving effect to the orders of the Government resulting in recovery of amount to the extent that had already been paid to the petitioner and in refusing to include the amount, which was due and payable under the terms of contract in terms of the final bill. The total amount payable to the petitioner was thus refused to be paid to the tune of Rs. 3.03 crores by virtue of the impugned orders passed by the Government and thus the petitioner questioned the said order of the Government being arbitrary, illegal, and discriminatory and sought the direction prayed for. 6. The writ petition was resisted by the respondents/appellants herein. Preliminary objection was raised as regard maintainability of the writ petition alleging that the relief prayed for in the writ petition relates to fixation of rates for certain works done by the petitioner in respect of the contract awarded and the petitioner is seeking direction for payment of amounts which according to the petitioner were agreed to be paid. Thus the issue in the writ petition involves determination of quantum of the amount to which the petitioners claims entitled. The parties are governed by contract dated 8.5.1991. The relief sought for in the writ petitioner is nothing but enforcement of contractual rights. The petitioner is not entitled to invoke the jurisdiction under Article 226 of the Constitution. As per clause 56.2 (2) of the General Conditions of Agreement, all claims above Rs. 50,000/- are to be settled by a Court of Competent jurisdiction by way of civil suit and claims below Rs. 50,000/- have to be got resolved by arbitration. 7. On merits the appellants alleged that the work of earth excavation, lining and construction of structures on SRBC from 116.00 to 141.00 was awarded to M/s. Sri Rama Engineering Constructions, Hyderabad by the Superintending/Engineer, SRBC, Circle No. 3, Nandyal under Agreement No. 11CB’91-92 dated 8.5.1991 for Rs. 23, 57, 28, 597/- with 45.01% excess over the estimated value. The work was scheduled to be completed by 1.7.1994. Later on extension of time to complete the works was granted up to 30.9.1995. In view of the variation in classification of soils during execution of work the Superintending Engineer, SRBC, Circle No. III Nandyal and Superintending Engineer D & I Circle Srisailam Project jointly inspected the open reclassification on 24.1.1992. The quantity of F & F rock was found to have increased considerably during actual execution of work. As against the estimated quantity of F & F rock of 119 Cubic Metre, the actual quantity during execution was found to be 6,94,824 Cubic Metre. The respondents thereafter referred to Clause 32 (1) of the Conditions of Agreement according to which the contractor is bound to execute the quantities over and above the quantities set out in the bill of quantities and no variation while executing the work either in the quantities or other, vitiate or invalidate the contract but the value if any of such variation shall be taken into account while ascertaining the amount of the contract price. It was stated that the extra work done was proportionately on higher side as compared to the estimated quantities, therefore, as per Clause 32 (3) and (b) of Volume I of the General and Special Conditions of Contract, in the event of disagreement, the appellant was entitled to fix rates which in its opinion would be reasonable and appropriate. Appellants while quoting Clause 32 (3) of the General and Special Conditions of Contract justified its action saying that during actual execution of work, highly excessive variations in classification of soils and quantity of F & F rocks were noticed. As against the estimated quantity of F & F rock of 119 Cubic Metre it was found to be 6,94,824 Cubic Metre. Similarly, hard rock was not estimated at all and was not included in agreement but in actual execution the hard rock excavated was found to be 6,19,277 Cubic Metre. “Nandyal Shales” was estimated as 13,91,672 Cubic Metre. During execution and inspection the said classification was not at all found. In these circumstances the deviation in quantity in so far as F & F rock being on quite higher side, it was considered unreasonable to apply the rate of Rs. 126/- per Cubic Metre, keeping in view the meagre estimated quantity of 119 Cubic Metre. Moreover the contract did not contain any rate for additional work. In the opinion of the competent authority adoption of rate of Rs. 126/- per Cubic Metre for the F & F rock over the quantities mentioned in the agreement was unreasonable, the contractor was offered the rate of Rs. 90/- per Cubic Metre as per Clause 32.3 (3) (b) of the Agreement, keeping in view the nature of work and site conditions based on day work field data. The respondent disagreed for the said rate of Rs. 90/- per Cubic Metre and insisted for payment at Rs. 126/- per cubic metre. In the meeting held on 11.6.1993, discussions took place between the Superintending Engineer and the Executive Engineer on one hand and the Managing Partner of the petitioner/firm on the other. Minutes were recorded which read: “F & F rock. This is a new item not covered in the schedule. The Contractor has not agreed for the rate of Rs.90/- offered for this item. Hence the rate of Rs. 90/- (Ninety rupees only) is fixed for payment of this item under this schedule.” 8. Thus, the third respondent acting for and on behalf of the Governor of Andhra Pradesh being the employer negotiated with the petitioner for fixing suitable rate. The petitioner disagreed and ultimately the third respondent fixed Rs. 90/- per Cubic Metre, which in his opinion was reasonable and proper in the circumstances. Accordingly, the third respondent reported the matter to the Government for permission to fix the said rate. The Government accepted the rate at Rs.90/- per Cubic Metre and issued order in G.O.Ms.No. 118 dated 29.6.1998 permitting fixation of Rs.90/- per Cubic Metre for the entire extra work done. The respondents-appellants claimed that Clause 32 confers absolute power on the employer to fix rate or price, which in his opinion is reasonable and proper. The rate so fixed by the third respondent in the meeting held on 11.6.1993 having been approved by the Government was thus final and binding. As regards constitution of Committee and its recommendations, the respondents’ reply was that the opinion rendered by the Committee, being recommendatory in nature, was not binding and thus was ignored. 9. Narration of the facts aforementioned would show that the writ petitioner claimed to be entitled and to be paid, even for the extra work of the quantity of F & F rock, executed which was abnormally in excess of the estimated quantities of 119 Cubic Metre at the rate of Rs. 126/- per Cubic Metre, being the agreed rate further saying that the respondents have got no authority and jurisdiction to fix any other rate. The case of the respondents is that this extraordinary and disproportionate excess work from the estimated quantity is not governed by the rate agreed. Clause 32 would be applicable and employer is entitled to fix its own rate. There were negotiations between the parties and various discussions took place. During actual execution of work huge variations in classification of soils’ and quantity of rocks were noticed. There being disproportionate deviations, the employer was justified in fixing the rate, which according to him was reasonable. As there was dispute amongst the parties and in case the petitioner had to question the legality and validity of the said order, it has to prove its case in a court of law. It is not a case in which only interpretation of a clause in the agreement is involved. Highly disputed questions of law and fact are involved, e.g., What were the circumstances which led to the increase in the extraordinary quantity of work executed? Whether or not the agreement provided for the same rates even for the excessive quantity of work, if not, what would be the reasonable amount in the facts and circumstances – in case the rate fixed by the respondents is not found to be reasonable and whether the petitioner is entitled to contractual rate or any other rate. Thus, the dispute between the parties is not on questions of law alone or on, interpretation of terms of agreement but also on facts, as to their respective rights vis- à-vis terms of contract. The respondents, thus, alleged that in these circumstances, it was not appropriate to entertain such a claim in exercise of jurisdiction under Article 226 of the Constitution and issue the direction as prayed for payment of the amount. It would have been appropriate to relegate the petitioner to ordinary remedy of filing civil suit. 10. Learned single Judge rejected the objections of the respondents and held that it was permissible to the court to entertain writ petition in such like matters and thus proceeded to hold the impugned order of the respondents to be illegal, arbitrary and without jurisdiction and allowed the writ as prayed for i.e., directing payment of the amount. 11. Before us learned Advocate General appearing for the appellants urged that choosing the remedy of filing writ petition was not appropriate one. Writ petition ought to have been dismissed relegating the petitioner to avail the remedy of civil suit. There were highly disputed questions of law and fact arising for determination. Learned Advocate General contended that the learned single Judge lost sight of the fact that the excess amount of Rs. 1,81,38,382/- paid to the respondent during the period 26.1.1992 to 14.7.1993 at the rate of Rs. 126/- per Cubic Metre stood already recovered from the respondent against the last part-bill dated 7.8.1998. The final bill payable to the writ petitioner was under process and would have been paid in usual course. It was further contended that the rate of Rs. 90/- per cubic metre was offered to the respondent for F & F rock, keeping in view the nature of work and site conditions based on day work field data as well as the price paid to the contractors in the adjacent similarly situated reaches. It was also contended that having received the benefit of fixation of rates for the hard rock by the employer, in terms of Clause 32 (3) of the Agreement, it was not open to the writ petitioner to approbate and reprobate and to question the action of the employer in fixing the rate for F & F rock by exercising the very same power under Clause 32 (3) of the agreement. Lastly, it was contended that fixation of rate at Rs. 126/- per Cubic Metre by the Committee was arbitrary and highly excessive and without any basis. The department had already initiated disciplinary proceedings against the officers who had proposed such an excessive rate. 12. Learned counsel for the writ petitioner submitted that it is not an universal rule that filing of writ petition under Article 226 of the Constitution of India is not the appropriate remedy in such like cases. It depends upon the facts and circumstances of each case. Writ petition under Article 226 can be entertained even in such cases where the relief prayed for is monetary claim and even where disputed questions of fact are raised. Relegating the writ petitioner to ordinary remedy of civil court would cause immense prejudice to the writ petitioner inasmuch as the basic facts in this case are not at all in dispute. The case can be decided without any further evidence on the basis of the material placed before the Court. The question involved is only about interpretation of a clause of the agreement. Therefore, the learned single Judge was perfectly justified in having set aside illegal and arbitrary order of the Government and consequently in allowing the writ petition. 13. Learned counsel for the parties referred to numerous decisions of the Apex Court including those which are referred to in the judgment of learned single Judge. All of them need not be dealt with by us inasmuch as the principles of law are now well settled and we would refer only to the decisions, which fully cover the submissions made on behalf of the parties. 14. Learned single Judge took note of various decisions cited and relied upon by the parties before him on the two points, which according to the learned single Judge arose for consideration:- (i) Whether the writ petition is maintainable for enforcement of the contractual obligation arising under the agreement dated 8.5.1991; and (ii) Whether writ can be issued in contractual matters if the opinion of the State were found to be arbitrary offending Article 14 of the Constitution of India. Third point was also examined by the learned single Judge “whether G.O.Ms.No. 118 dated 29.6.1998 was valid and competent”. 15. Learned single Judge on review of various judgments concluded that the action of the State or the instrumentalities of the Act even in contractual sphere is also amenable to judicial review under writ jurisdiction, but with certain limitations. If it is found that the State has acted arbitrarily and in violation of Article 14 of the Constitution even in non-statutory contracts also the said action is liable to be declared as unconstitutional and the State cannot plead immunity from Article 14 of all its actions. Arbitrariness may creep, at any stage, even in contractual matters, such as the stage of tender qualification, during the process of finalization of tenders, subsequent to entering into contracts, during the currency of contracts and even after the period of contract. Thus, there is no definite yardstick of interference by courts under Article 226 of Constitution of India. Learned single Judge referred to the decisions reported in E.R. Royappa v. State of Tamil Nadu, Radha Krishna Agarwal v. State of Bihar, Maneka Gandhi v. Union of India, R.D. Shetty v. International Airport Authority of India, R.D. Shetty v. International Airport Authority, Kasturi Lal Lakshmi Reddy v. State of J & K, Som Prakash Rekhi v. Union of India, Fertilizer Corporation Kamgar Union v. Union of India, Ajay Hasia v. Khalid Mujib Sehravardi, Chief Constable of the North Wales Police v. Evans, Asst. Collector, Central Excise v. Dunlop India Ltd., LIC of India v. Escorts Ltd., Dwarkadas Marfatia v. Board of Trustees of the Port of Bombay, Fasih Chaudhary v. Director General, Doordarshan, Mahabir Auto Stores v. Indian Oil Corporation, Shrilekha Vidyarthi v. State of U.P., R v. Secretary of State for the Home Deptt. Ex. Brind, Assistant Excise Commissioner v. Issac Peter, Tata Cellular v. Union of India, Union of India v. M/s. Graphic Industries Co., State of U.P. v. Bridge Roof & Co., Ramniklal N. Bhutta v. State of Maharashtra, Asia Foundations and Constructions Ltd. v. Tratalyar House Constructions, State of M.P. v. M.V. Vyavsaya & Co., Raunaq International Ltd. v. IVR Construction Ltd., State of H.P. v. Raja Mahendra Pral, Air India Ltd. v. Cochin International Airport Ltd.. 16. Relying on the principles as culled out by the learned single Judge from the decisions aforementioned, he referred to Clause 32 of the Contract entered between the parties and then referred to the minutes of the meeting as recorded in the recommendations which made to the Government by the Committee appointed for the purpose that the rate for F & F rock item 1 (d) the agreement rate has to be paid irrespective of the actual quantity met with in terms of the agreement condition, which in fact had not been approved by the Government. Learned single Judge observed that the very approach of the Superintending Engineer was misconceived when he proceeded to classify this item as a new item in the minutes of the meeting with the contractor. Without deciding the question as to whether it was a new item as was the stand taken by the Superintending Engineer or the item referred to in the agreement, learned single Judge proceeded on the basis that as the matter had been referred by the Government to the Committee and the Committee had affirmed that the writ petitioner is entitled to be paid at Rs. 126 per Cubic Metre by giving a go-bye to the high power committee, the very act of the Government in fixing the rate at Rs. 90/- was arbitrary and illegal. Learned single Judge also proceeded to observe that fixation of Rs. 90/- per Cubic Metre was not an issue in the writ petition and it was not required to be considered whether fixation of Rs. 90/- per Cubic Metre was or was not justified. The issue was whether the action of the Government in not paying at Rs. 126/- per Cubic Metre to the writ petitioner was arbitrary or not. Thus, the process adopted by the Government in reducing the amount from Rs. 126/- to Rs. 90/- per Cubic Metre, according to the learned single Judge, had to be tested on the touchstone of Article 14 of the Constitution. The approach of the Government was termed as highly unreasonable, unjust and unfair and also contrary to public interest and held that if the approach of the Government is found to be contrary to terms of contract, it would be unreasonable and unfair action on the part of the Government and the court would certainly interdict the action of the Government. Learned single Judge also observed that when the terms of the contract provide for a particular mode or process to be adopted and