*THE HONOURABLE SRI JUSTICE V.V.S.RAO +ELECTION PETITION Nos.1 and 4 of 2004 % 30.8.2007 # Dr.N.Sudhakar Rao and another. ...Petitioners Vs. $ Dugyala Srinivasa Rao and others. ...Respondents ! COUNSEL FOR PETITIONERS: Learned Senior Counsel Sri M.R.K.Chowdary. ^ COUNSEL FOR RESPONDENTS: Learned Senior Counsel Sri Movva Chandrasekhar Rao. <GIST >HEAD NOTE: ? CASES REFERRED: 1 AIR 1969 SC 302 2 AIR 1969 SC 447 3 (1981) 3 SCC 260 4 AIR 1993 SC 212 5 AIR 2001 SC 2583 = (2001) 7 SCC 425 6 (2002) 5 SCC 568 7 AIR 2002 SC 3524 = (2002) 8 SCC 467 8 (2005) 1 SCC 212 9 AIR 2006 SC 918 = (2006) 2 SCC 682 10 AIR 1962 SC 779 11 AIR 1964 SC 1714 12 AIR 1977 SC 2149 13 AIR 1988 SC 2149 14 AIR 1969 SC 1201 = (1969) 3 SCC 238 15 AIR 1984 SC 209 = (1984) 1 SCC 390 16 AIR 1987 SC 1577 17 AIR 2002 SC 241 = (2002) 1 SCC 160 18 AIR 1984 SC 988 = (1984) 2 SCC 205 19 AIR 1975 SC 420 = (1975) 1 SCC 589 20 AIR 1950 FC 140 21 AIR 1974 SC 1281 = (1974) 4 SCC 396 22 AIR 1975 SC 641 = (1975) 3 SCC 638 23 AIR 1977 SC 2257 = (1977) 4 SCC 377 24 AIR 1979 SC 429 = (1979) 1 SCC 477 25 AIR 1989 SC 1289 = (1989) 2 SCC 484 26 (1995) 4 SCC 51 27 (1999) 9 SCC 386 28 AIR 1962 SC 110 29 AIR 1962 SC 113 30 AIR 1963 SC 1685 31 AIR 1977 SC 151 32 AIR 1954 SC 236 33 AIR 1964 SC 254 34 AIR 1959 SC 876 35 AIR 1966 SC 580 36 AIR 1971 SC 1943 37 AIR 1976 SC 2130 38 AIR 2005 SC 1624 = (2005) 1 SCC 212 39 AIR 1986 SC 1370 40 (1988) 3 Comp.LJ 1 (SC) 41 1897 Appeal Cases 22 = (1895-1899) All ER 33 42 AIR 1963 MP 316 THE HON’BLE SRI JUSTICE V.V.S.RAO ELECTION PETITION Nos.1 and 3 of 2004 COMMON JUDGMENT: Introduction: Election for 263-Chennur Legislative Assembly Constituency in Andhra Praesh was held on 20.4.2004. Petitioner, Dr.N.Sudhakar Rao, first respondent, Dr.Dugyala Srinivasa Rao, and respondents 2 to 5 in E.P. No.3 of 2004 contested the election. Petitioner was in the fray on behalf of Telugu Desam Party and first respondent contested as Telangana Rashtra Samithi (TRS) candidate. Second respondent was Bahujan Samaj Party candidate, third respondent was Praja Party candidate whereas respondents 4 and 5 contested as Independents. The counting was held on 11.5.2004. First respondent secured 67,912 votes and was declared elected as Member of Legislative Assembly (MLA) of Chennur constituency. Petitioner got 59,821 votes and he was nearest rival of the elected candidate. This petition is filed under Sections 80A, 81, 100 and 101 of the Representation of the People Act, 1951 (the Act, for brevity) and the Rules made there under, challenging the election of first respondent. He also seeks declaration that the election of first respondent is void and for further declaration that the petitioner is duly elected as MLA of Chennur constituency. E.P.No.1 of 2004 is filed by Sri P.Saibaba Rao, a voter whose name is allegedly registered at Sl.No.1047, Block 3 and 4 of Laxmakkapalli village forming part of Chennur constituency. In this petition, a declaration is sought to declare the election of first respondent as void. Therefore by order dated 13.4.2005 and with the consent of Counsel appearing on both the sides, E.P.Nos.1 and 3 of 2004 were clubbed and the evidence was recorded in E.P.No.3 of 2004. This common judgment shall dispose of both the Election Petitions. Pleadings in E.P.No.3 of 2004: As per the notification issued by the Election Commission of India period for filing nominations is from 24.3.2004 to 31.3.2004 before 3.00 pm. As per election schedule fixed scrutiny of nominations was on 02.4.2004 and for withdrawals 05.4.2004 3.00 pm. The polling was held on 20.4.2004 from 8.00 am to 5.00 pm and the counting took place on 11.5.2004. On that day, the Returning Officer declared in Form No.21-E under Rule 64 of Conduct of Election Rules, 1961, that first respondent was elected. Subsequently, it is noticed that first respondent is disqualified under Section 9-A of the Act, as he is found to have had contracts which were subsisting in respect of execution of certain works undertaken by Government. First respondent is a Special Class Contractor. The execution of the work of laying roads and other constructions was entrusted to him. He did not fully execute these works. Certain parts of the works entrusted to him remained incomplete. There was no termination of contract by mutual consent having effect of discharging first respondent from liability under the contracts. Therefore, he is disqualified for being chosen as MLA. The defeated candidate in his election petition has pointed out three works in regard to the alleged disqualification incurred by first respondent. For the sake of convenience, these works are referred to as (i) Road works to Reponi and Khanapur; (ii) Kakatiya canal works; and (iii) Moripirala-Zafargad road work entrusted to M/s.Yamuna Projects Limited (hereafter called, YPL). The summary of these allegations may be noticed in brief under three headings as under. (i) Reponi and Khanapur Road Works The Superintending Engineer (SE), (Panchayat Raj), Warangal, issued tender notice dated 11.4.2002 inviting bids for package No.AP/21/11/01 under PMGSY (Prime Minister Gram Sadak Yojana phase-II scheme) consisting of eight works at an estimated cost of Rs.141.28 lakhs. First respondent submitted tender. The same was accepted by the Chief Engineer (CE), Panchayat Raj, Hyderabad, by letter of acceptance, dated 24.5.2002. In pursuance thereof, SE on behalf of the Governor of Andhra Pradesh entered into an agreement on 23.10.2002 with first respondent. First respondent agreed for retention of two bank guarantees by Government for the purpose of performance guarantee. First respondent also agreed for withholding of 3% of the value of the work done for running Account Current (AC) bill as additional security for fulfillment of the contract as per Andhra Pradesh Detailed Standard Specifications and General Principles of Engineering Contracts (APSS), which would form part of the contract dated 23.10.2002. The package of four works is within the jurisdiction of the EE, Panchayat Raj, Mahaboobabad and four other works are within the jurisdiction of the EE, Warangal. First respondent completed the four works of Warangal division but blacktopping of Reponi road and Khanapur roads in Mahaboobabad division remained incomplete. After he was chosen as TRS candidate for 263-Chennur Legislative Assembly constituency, first respondent suppressed about incomplete works and gave application to SE on 31.3.2004 seeking cancellation of works covered by the agreement dated 23.10.2002. This was done to get-over disqualification contemplated under Section 9-A of the Act. In pursuance of the application, SE issued proceedings in his memo dated 31.3.2004 stating that the contract is closed at the request of the contractor to enable him to contest legislative assembly general elections. The application made by first respondent is not genuine as on 31.1.2004, the question of filing nomination for the election did not arise and the said application/representation was brought into existence in connivance with the SE. The SE concerned cannot close the contract at the behest of the contractor to facilitate him to file nomination on 31.3.2004. The contract was not terminated on 31.3.2004 and the action of the SE does not amount to cancellation of the contract. Thus the contract between first respondent and Government of Andhra Pradesh is in subsistence attracting Section 9- A of the Act. (ii) Kakatiya canal work: First respondent entered into an agreement dated 28.8.2002 in relation to the works undertaken by the Irrigation and Command Area Development, Sriram Sagar Project, Stage-II. This work related to embankment of Kakatiya canal from KM 291 to 292 including structures. First respondent failed to complete the works within stipulated time and continued to execute the works till the end of March 2004 beyond the stipulated time. The contract between first respondent and Government did not come to end. (iii) YPL Works: First respondent promoted YPL for carrying out contract works with Government. The said company entered into the contract on 20.10.2003 with Government to execute the road work from Moripirala to Zafargad from KM 2/580 to KM 16/800 at an estimated cost of Rs.1,16,44,013/-. YPL enterd into agreement with SE, Roads & Buildings, Warangal. The stamp papers used for the agreement were purchased in the name of first respondent on 20.8.2003. YPL did not complete the work and the work is going on. Earlier first respondent was Managing Director of YPL and now he is Chairman of the company. Road work from Palakurthi – Nancharimadur, Panchayat road to Thorruru – Veligonda, PWD road via Peda Vangara from KM0/0 to KM 8/050 was also entrusted to YPL. The stamp paper for the agreement dated 16.6.2003 between the SE and YPL was purchased in the name of first respondent. YPL was also given the contract for the road work between Giripuram to Ramapuram viz Venkampad and Bavojigudem from KM 0/0 to KM 9/630 under agreement dated 12.5.2003. All the three works entrusted to YPL under contract are not completed. First respondent has been executing these works in his personal capacity as Chairman of YPL. The works were entrusted to YPL when first respondent was Managing Director. Even though the works are executed by YPL, Section 9-A of the Act is attracted because first respondent is the kingpin in incorporating YPL and he is running the company for his benefit being major beneficiary. Pleadings in E.P.No.1 of 2004: This petition is filed by the voter of Chennur Legislative Assembly constituency. He makes allegations in relation to the road works of Reponi and Khanapur as well as YPL works. It is not necessary again to repeat these allegations in view of the summary noticed regarding these allegations from E.P.No.3 of 2004. Defence of first respondent: First respondent filed written statement in E.P.No.1 of 2004 as well as in E.P.No.3 of 2004. In his written statement filed in E.P.No.1 of 2004, he admits the contract for eight package works under contract dated 23.10.2002. He also admits the contract in relation to the work of formation of embankment of Kakatiya main canal on 28.8.2002. He further admits the entrustment of contracts for road works to YPL. However first respondent denies that he incurred disqualification under Section 9-A of the Act by reason of subsisting contract entered into by him with Government. His defence on this aspect in relation to the three allegations for three different works is as follows. (i) Reponi and Khanapur Road Works First respondent entered into agreement on 23.10.2002 with the SE in respect of eight works constituting a package, but the allegations that he agreed for retention of the bank guarantee by Government, that he agreed to withhold 3% of the value of the work as additional security, that he signed APSS and that since the security deposits are not returned to him the contract in question is not terminated are incorrect and denied. First respondent executed six works out of eight works covered by the agreement dated 23.10.2002 except the road works of Reponi and Khanapur. Since he was selected as a candidate from 263-Chennur Legislative Assembly constitutency on the intervening night of 30/31.3.2004, he submitted a letter to the SE on 31.3.2004 at 10.40 am to terminate the agreement and obtained endorsement on the copy of the said letter from the SE and EE on 31.3.2004 itself. The SE immediately issued orders in his memo dated 31.3.2004 closing the contract under the said agreement and thus the agreement was terminated by mutual consent before filing the nomination on 31.3.2004 at 2.30 pm. The EEs of Warangal and Mahaboobabad were instructed to submit closing statements for the purpose of releasing the payments to first respondent. Hence the allegation that the contract was not terminated on 31.3.2004 before filing nomination is incorrect and denied. (ii) Kakatiya canal work: The work relating to formation of embankment of Kakatiya main canal including structures was completed by 25.3.2004 which was acknowledged by the EE who in turn informed the same to the SE vide letter dated 14.6.2004. Further by way of abundant caution, first respondent gave a letter to the SE, Irrigation, on 31.3.2004 at 11.00 am terminating the contract and hence the allegation that the contract has not come to an end is not correct. (iii) YPL works: The allegation that first respondent promoted YPL for the purpose of carrying out contract works with Government of Andhra Pradesh and other agency is admitted. The other allegations in paragraph-3 of E.P. are denied. The allegation that the works obtained by YPL are for the benefit of first respondent is false, incorrect and denied. The stamp papers for entering into contract with the SE, R&B for Moripirala to Zafargad road work and for entering into contracts in respect of other two works by YPL were purchased by first respondent in the capacity of Chairman and Managing Director (CMD) and not in his personal capacity. He submitted his resignation to the post of CMD of YPL. In the Board meeting held on 11.9.2003 at 11.00 am, at the Registered Office of the company at Warangal, a special resolution was passed accepting the resignation of first respondent as CMD of YPL. Smt.J.Bharathi, W/o.Sampath Rao, Director of the company, was appointed as CMD of YPL. The Board of Directors requested one of the Directors of the company, Sri P.Ratnakara Rao, to communicate about the resolution to Government departments, financial institutions and others and also to submit the documents to all the persons dealing with Government. The resolution of the Board of Directors of YPL accepting the resignation of first respondent as CMD was informed to the Registrar of Companies (RoC). Necessary information in Form No.23 and Form No.32 under the provisions of the Companies Act, 1956 (Companies Act, for brevity), was furnished to RoC. First respondent ceased to be the CMD of YPL by 11.9.2003 and hence the allegation that he continued in the said position is not correct. The allegations that Section 9-A of the Act is applicable as the contracts executed by YPL are for the benefit of first respondent being major beneficiary for the works carried out and that he is interested in all the contracts which are subsisting are false and denied. YPL is a legal entity and all the works undertaken by it are for the benefit of the company. The allegation that first respondent was under disqualification as the contracts for construction of roads entered into by YPL contained several incomplete works is incorrect and denied. First respondent also filed written statement in E.P.No.1 of 2004 denying various allegations. It is however not necessary to advert to these averments as they are similar to the averments made in the written statement in E.P.No.3 of 2004. Issues: On 08.10.2004 this Court framed four issues in E.P.No.1 of 2004 as under. 1. Whether the contracts entered into by the respondent in the course of his business with Government of Andhra Pradesh for the execution of works undertaken by Government, were subsisting, and therefore the respondent is disqualified to be elected as Member of Legislative Assembly from 263-Chennur, A.P. Legislative Assembly constituency as per Section 9-A of Representation of People Act, 1951? 2. Whether the respondent has validly terminated the agreement No.AP21/11/01, dated 23.10.2002, on 31.3.2004 before filing nomination? 3. Whether the respondent is the Chairman and Managing Director as on the date of scrutiny of nominations and whether he was executing any contracts on behalf of M/s.Yamuna Projects Pvt. Ltd., on the date of scrutiny and if so whether he is disqualified? 4. To what relief? This Court framed seven issues in E.P.No.3 of 2004, which are as under. 1. Whether the contracts entered into by first respondent in the course of his business with Government of Andhra Pradesh for the execution of works undertaken by Government, were subsisting, and therefore first respondent is disqualified to be elected as Member of Legislative Assembly from 263 Chennur, A.P. Legislative Assembly constitution as per Section 9-A of Representation of the People Act, 1951? 2. Whether it is not competent for the Superintending Engineer, Panchayat Raj, Warangal, to accept the termination of contract entered into by first respondent with Government of Andhra Pradesh? 3. Whether first respondent has completed the works relating to embankment of Kakatiya main canal in Agreement No.6/2002- 2003 dated 28.8.2002 before the date of scrutiny? 4. Whether first respondent has validly terminated the works relating to Agreement No.6/2002-2003 dated 28.8.2002? 5. Whether the respondent is the Chairman and Managing Director as on the date of scrutiny of nominations and whether he was executing any contracts on behalf of M/s.Yamuna Projects Pvt. Ltd., on the date of scrutiny and if so whether he is disqualified? 6. Whether the petitioner is entitled for declaring him as validly elected candidate for 263 Chennur, A.P. Legislative Assembly constituency as per Section 101 of Representation of People Act, 1951? 7. To what relief? Subsequently, Counsel for the petitioners filed E.A.Nos.1124 and 1135 of 2004 praying this Court to recast the issues. Considering these applications, on 09.11.2004, this Court recast the issues in E.P. No.3 of 2004, as under. 1. Whether the contracts entered into by first respondent in the course of his business with Government of Andhra Pradesh for the execution of works undertaken by Government, were subsisting, and therefore first respondent is disqualified to be elected as Member of Legislative Assembly from 263 Chennur, A.P. Legislative Assembly Constituency as per Section 9-A of Representation of the People Act, 1951? 2. Whether the proceedings of the Superintending Engineer, P.R. Circle, Warangal, in his Memo No.T1/PMGSY/PH- II/AP.21/11/01/ 2004, dated 31.3.2004 amounts to valid termination of the contract entered into by first respondent with Government of Andhra Pradesh? 3. Whether first respondent has completed the works relating to embankment of Kakitya main canal in Agreement No.6/2002- 2003 dated 28.8.2002 before the date of scrutiny? 4. Whether first respondent has validly terminated the works relating to embankment of Kakatiya Main Canal in Agreement No.6/2002-2003 dated 28.8.2002? 5. Whether the respondent is having substantial interest in the three works under execution by M/s.Yamuna Projects Pvt. Ltd., and thereby incurred disqualification under Section 9-A of the Representation of the People Act, 1951? 6. Whether the petitioner is entitled for declaring him as validly elected candidate for 263 Chennur, A.P. Legislative Assembly constituency as per Section 101 of Representation of People Act, 1951? 7. To what relief? During trial, petitioner in E.P.No.3 of 2004 examined himself as P.W.1. The petitioner in E.P.No.1 of 2004 deposed as P.W.2. P.W.3 is the then CE, Panchayat Raj. P.W.4 is the then SE. P.W.5 is the then EE, Mahaboobabad. The SE, R&B deposed as P.W.6 and produced two agreements executed by YPL in relation to separate works. Be it noted that P.Ws.3 to 6 were summoned by the petitioner to give evidence and also to produce documents. Petitioners also marked Exs.A.1 to A.35. First respondent Dr.Dugyala Srinivasa Rao examined himself as R.W.1 and marked Ex.B.1, which is the copy of the Minutes of the Board meeting of YPL. Documents summoned and produced by P.W.6 are marked as Exs.X.1 to X.6. Issues 1 & 2 Issues 1 and 2 raise two questions, namely, whether contract entered into by first respondent in relation to package works was subsisting and therefore he was disqualified to be elected as MLA and whether proceedings of the SE dated 31.3.2004 amounts to valid termination of the contract entered into by first respondent. Whether contract of first respondent for execution of works undertaken by Government was subsisting as on the date fixed for scrutiny of nominations i.e., 02.4.2004¨. That first respondent was entrusted with PMGSY Phase-II package works covered by Ex.A.4 contract and that he executed six works out of eight works, is not denied. That two works in Mahabubabad division within the jurisdiction of P.W.5 were incomplete as on 31.3.2004 is also not denied. Indeed in written statement, first respondent admits that two works, namely, Reponi and Khanapur road works were incomplete as blacktopping was not done as on 31.3.2004, last date for filing nominations. It is also admitted that first respondent submitted a letter on 31.3.2004 to SE (PW.4) and he issued proceedings, which is also not seriously disputed by the petitioners. Here it may be noticed that pursuant to the letter of first respondent (Ex.A.18), P.W.4 issued proceedings informing first respondent that package work is closed. This letter is found in the original file of P.W.4, which is marked as Ex.A.17. On the same day, P.W.4 also sent a communication to P.W.5 (EE, Panchayat Raj, Mahabubabad) as well as EE, Warangal, informing them about the closure of the work and asking them to submit closing statements of the work. This memo dated 31.3.2004 is marked as Ex.A.3/ A.20 (which is also found at page No.43 of Ex.A.17). In Ex.A.3/A.20, in the reference entry, representation of first respondent is mentioned as dated 31.1.2004. Learned Counsel appearing for both the parties admit that it is a mistake and that first respondent made an application on 31.3.2004 only, seeking cancellation of all package works. Learned Senior Counsel for the petitioners in both the election petitions, Sri M.R.K. Choudary, refers to the evidence of P.W.1, as well as Ex.A.18, Ex.A.3/A.20 and various documents in Ex.A.17 file, and contends that Ex.A.3 issued by P.W.4 does not amount to termination of contract concerned by Ex.A.4 and that it does not evidence closure of contract. According to learned Senior Counsel, Ex.A.3 only discloses the intention to close the contract as per departmental norms and per se does not result in closure of the contract. It is also his submission that closure does not amount to cancellation of contract and therefore the contract for execution of work between first respondent and Government must be deemed to be subsisting as on 02.4.2004. Attention of this Court is invited to decisions in Abdul Rahiman v Sadasiva[1], Konappa v Vishwanath[2], Munishamappa v Venkatarayappa[3], Sewaram v Sobaram Singh[4], Shibu Soren v Dayanand Sahay[5], Prakash Khandre v Dr.Vijay Kumar Khandre[6], Rajashekar Basavaraja Patil v Subash Kaliar[7], Dale & Carrington Invt. (P) Ltd v P.K.Prathapan[8] and Shrikant v Vasantrao[9] On this aspect, alternative submission of the learned Senior Counsel is that if Ex.A.3 is treated as termination of contract, P.W.4 is not competent to terminate the contract and power to enter into contract does not include power to terminate the contract. According to learned Senior Counsel, P.W.4 has no power either to accept or terminate the contract and that he is only authorized to sign the contract on behalf of Government. Therefore, it is urged, the termination of contract as alleged by first respondent is not in accordance with Article 299(1) of the Constitution of India (Constitution). In this regard, reliance is placed on State of West Bengal v B.K.Mondal[10], Karamshi v State of Bombay[11], Bihar E.G.F Coop Socy. v Sipahi Singh[12] and State of Punjab v Om Prakash Baldev Krishan[13]. Learned Senior Counsel also relies on Andhra Pradesh Standard Specifications (APSS) and executive instructions issued in paragraph 159 of Andhra Pradesh Public Works Department Code (PWD Code, for brevity). Learned Senior Counsel for first respondent, Sri M.Chandrasekhar Rao, made submissions to the following effect. The election petition does not disclose material facts as required under Section 83(1)(a) of the Act and therefore petition has to be dismissed as required under Order VII Rule 11(a) of Code of Civil Procedure, 1908 (CPC). He relies on Samant N.Balakrishna v George Fernandez[14], Charan Lal Sahu v Giani Zail Singh[15], Dhartipakar Madanlal Agarwal v Rajiv Gandhi[16] and Santosh Yadav v Narender Singh[17]. He nextly contends that the contract between Government and first respondent was terminated on 31.3.2004 and it was not subsisting as on the date of scrutiny of nominations. He invites attention of this Court to a letter