Case: M/S TULSI NARAYAN GARG Vs. THE M.P. ROAD DEVELOPMENT AUTHORITY

of the words it is clear that the right of the second party to assess damages would arise only if the breach of conditions is admitted or if no issue is made of it. If is was the intention of the parties that the officer acting on behalf of the State was also entitled to adjudicate upon a dispute regarding the breach of conditions the wording of clause 12 would have been entirely different. It cannot also be argued that a right to adjudicate upon an issue relating to a breach of conditions of the contract would flow from or is inhered in the right conferred to assess the damages arising from a breach of conditions. The power to assess damages, as pointed out by the Full Bench, is a subsidiary and consequential power and not the primary power. Even assuming for arguments sake that the terms of clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case the officer of the State, even though a party to the contract will be well within his rights in assessing the damages occasioned by the breach in view of the specific terms of clause 12.? (emphasis supplied)13. Taking assistance of the judgment of this Court, the full Bench of the Madhya Pradesh High Court also in the case reported in B.B. Verma and another(supra) observed that the Government or its officers were not justified to initiate recovery proceedings which is disputed by the contractor as payable under the contract by the State Government pending decision of the Arbitral Tribunal constituted under the Adhiniyam, 1983. It goes without saying that when the contractor disputes the damages claimed by the Authority or any Officer in its behalf, such an amount cannot be said to be due under the contract and cannot be recovered as arrear of land revenue until adjudicated in the pending reference before the Arbitral Tribunal. 14. In Virendra Sharma Vs. State of Madhya Pradesh and Ors. (Civil Appeal No. 5169 of 2016 decided on 13th May, 2016), in the similar circumstances, this Court has considered the terms and conditions of the contract of which a reference has been made where the contract was terminated on the ground that the contractor could not complete the work within the stipulated period and the department suffered huge losses. When the demand was raised by the department that was challenged by the contractor invoking arbitration and pending adjudication, the recovery which was invoked by the respondents was not considered to be legally sustainable in law. The extract of the order is as under:-O R D E R ?Leave granted. Admitted facts are that the appellant was awarded a contract by the respondents. The contract was terminated on the ground that the appellant could not complete the work within the stipulated period. The Superintendent Engineer also arrived at a conclusion that because of the alleged breach of contract by the appellant, Department had suffered loss and the amount of such loss be returned. The appellant did not agree with the same and as per the procedure prescribed in the contract, invoked arbitration. Admittedly, the matter is before the Arbitrator and no adjudication has taken place. It has yet to determine as to whether the decision of the Superintendent Engineer that the Department has suffered the loss, is correct or not. In these circumstances, inasmuch as the amount becomes due and payable only after adjudication, we are of the view that the recovery of the said amount cannot be made invoking the procedure of Land Revenue Act. The recovery orders are, accordingly, set aside. It would, however, be open to the Department to take further steps only after the Award is rendered by the Arbitrator depending upon the outcome thereof. The appeal stands disposed of.?15. We are also of the considered view that once the dispute is pending adjudication before the Arbitral Tribunal constituted under the Adhiniyam, 1983 in terms of clause 25 of the agreement, the respondent, in the facts and circumstances, was not justified to raise demand on termination of contract claiming liquidated damages and the respondent cannot become an arbiter in its own cause and unless the dispute is settled by a procedure prescribed under the law, the respondents would not be held to be justified in initiating recovery proceedings invoking the procedure under the Land Revenue Act. 16. The submission of the learned counsel for the respondents that the liquidated damages were determined by the General Manager of the 1st respondent after adjudication in terms of clause 24 of the agreement and accordingly, the respondents were justified in initiating recovery proceedings is without substance for the reason that clause 24 of the agreement provides an inbuilt mechanism but the decision of the competent authority is to be examined invoking clause 25 for arbitration by the Arbitral Tribunal on a reference if made under Section 7 of the Adhiniyam, 1983. 17. Indisputedly, in the instant cases, the reference petition is pending before the Arbitral Tribunal in reference to the liquidated damages claimed by the respondents. As long as the dispute remained pending adjudication, it was not justified on the part of the respondents to initiate recovery proceedings invoking the procedure under the Land Revenue Act without awaiting the outcome of the arbitral proceedings.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]9. It is not disputed that the termination of the agreement no. 11 and agreement no. 12 and consequential liquidated damages claimed by the respondents have been questioned by the appellant in reference petitions filed under Section 7 of the Adhiniyam, 1983 on 5th October, 2016 and 20th March 2017 respectively and both the references are pending adjudication before the Arbitral Tribunal where the dispute in reference to the claim of liquidated damages of the respondents is yet to the adjudicated.In terms of the clauses 44.1 read with 53.1 of the agreement, it emerges that if there are liquidated damages to be payable upon termination of contract by the contractor, inbuilt redressal system has been provided under Clause 24 which, in the instant cases, was invoked through the General Manager of the 1 st respondent and the party aggrieved thereof can certainly approach to the Arbitral Tribunal constituted under the Adhiniyam, 1983 in terms of clause 25 of the agreement.Indisputedly, in the instant cases, for both the two agreement nos. 11 and 12, the general manager of the 1 st respondent quantified the liquidated damages as alleged and that has been the subject matter of challenge raised by the appellant in the reference petitions filed before the Arbitral Tribunal under Section 7 of the Adhiniyam, 1983 which is still pending adjudication and once the remedial mechanism provided under the Adhiniyam, 1983 has been availed by the appellant which is pending adjudication, the respondents were not justified in initiating the recovery proceedings without awaiting the outcome of the arbitral proceedings. It is the settled principles of law that a party to an agreement cannot be an arbiter in his own cause.We are also of the considered view that once the dispute is pending adjudication before the Arbitral Tribunal constituted under the Adhiniyam, 1983 in terms of clause 25 of the agreement, the respondent, in the facts and circumstances, was not justified to raise demand on termination of contract claiming liquidated damages and the respondent cannot become an arbiter in its own cause and unless the dispute is settled by a procedure prescribed under the law, the respondents would not be held to be justified in initiating recovery proceedings invoking the procedure under the Land Revenue Act.The submission of the learned counsel for the respondents that the liquidated damages were determined by the General Manager of the 1st respondent after adjudication in terms of clause 24 of the agreement and accordingly, the respondents were justified in initiating recovery proceedings is without substance for the reason that clause 24 of the agreement provides an inbuilt mechanism but the decision of the competent authority is to be examined invoking clause 25 for arbitration by the Arbitral Tribunal on a reference if made under Section 7 of the Adhiniyam, 1983.Indisputedly, in the instant cases, the reference petition is pending before the Arbitral Tribunal in reference to the liquidated damages claimed by the respondents. As long as the dispute remained pending adjudication, it was not justified on the part of the respondents to initiate recovery proceedings invoking the procedure under the Land Revenue Act without awaiting the outcome of the arbitral proceedings.