BUILD TECH. INDIA Vs. STATE OF KERALA

JUDGEMENT

(1.) THE petitioner who is a contractor entered into an agreement with the second respondent Superintending Engineer for the construction of a R.C.C. Foot bridge connecting Kothuruthy Island in Andoor Panchayat in Taliparamba Taluk with the main land as per agreement No.SE(K)39/89-90 dt.30-1-1990 which came to be terminated as per Ext. P2 dated 29-1-1992 at his risk and cost. On receipt of Ext. P1 the petitioner sent Ext. P2 disputing breach of contract on his part and alleging that the completion of the work was delayed on account of the callous indifference on the part of the officials of the department and their non cooperative attitude. In Ext. P2 the petitioner has specifically stated that on completion of about 40% of the work a bill for Rs.2.2 lakhs was submitted in October, 1991. But the bill was not paid inspite of availability of funds so as to disable the petitioner from further proceedings with the work. Ext. P3 is the lawyer notice dt.25-10-1995 issued by the petitioner alleging that non completion of the work was on account of the non cooperation of the department in paying part bills. In Ext. P3 it is stated that a sum of Rs.4 lakhs is due to the petitioner from the department for the work done for which a demand is made therein to make immediate payment. Ext. P3 was replied by Ext. P4 by the third respondent Executive Engineer stating that Ext. P3 has been submitted to the second respondent for further necessary action. While matters remained like that, the petitioner received Ext. P5 demand notice from the 4th respondent calling upon him to pay the amount mentioned therein, viz. a sum of Rs.9,11,036/-. On receipt of Ext. P5 the petitioner moved this court with the present writ petition praying for the issuance of a writ of certiorari to quash Exts.P1 and P5 and for a declaration that the amount shown in Ext. P5 is not an amount recoverable under the provisions of the Revenue Recovery Act and that Ext. P1 issued by the second respondent is without jurisdiction and for other reliefs. A learned single Judge before whom the writ petition was placed for hearing, passed an order referring the matter to be heard by a Division Bench having regard to the importance of the question involved. Accordingly, the petition is placed before us for hearing.

(2.) WE heard both sides. The pivotal question that arises for consideration is as to whether the breach in question is admitted by the petitioner or not. The refrain of the petitioner throughout is that it is the respondents 2 and 3 who have committed breach of contract by refusing to pay part bill for 10% of the work completed even though fund was available. Even according to the second respondent, the petitioner has done 20% of the work vide para.2 of Ext. P1. According to the petitioner, he completed about 10% of the work and submitted a bill for Rs.2.2 lakhs as early as in October, 1991. But the bill was not passed. Going by Exts.P2 and P3 we are of opinion that breach is not admitted by the petitioner. In such a situation the moot question that arises for consideration is, whether it will be open for the department to adjudicate upon the disputed question of breach as well as to assess the damages arising from the breach (in this case the damage suffered by the department on account of re-arranging the work through other agencies). As per the records, the petitioner executed the agreement on 30-1-1990 and Ext. P1 order of termination at his risk and cost was passed on 29-4-1992. However, re-arrangement was effected only on 4-7-1995 and the demand evidenced by Ext. P5 was made on 5-3-1996. On a consideration of the attendant facts and circumstances brought to our notice as stated above, we are of opinion that the petitioner cannot be said to have admitted breach of contract on his part. Even where the power of the State or its instrumentality under an agreement entered into by it with a private individual expressly provided for assessment of damages for breach of conditions of the agreement and recovery of damages, that power can be exercised only in cases where the breach is admitted or is not disputed. It is, by now, well settled that one of the contracting parties cannot adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. As already noticed, the petitioner has alleged in Exts.P2 and P3 and also in the original petition that he has not committed breach of contract and the failure to complete the work was due to lapses on the part of the department in honouring the bill submitted by him after completing part of the work. Even assuming that clause in an agreement empowers the State to adjudicate the question of breach as well as the quantum of damages, the adjudication by an officer of the State regarding the breach of contract and assessment of damage cannot be sustained in law because the parties to an agreement cannot be an arbiter in his own cause. The question as to whether there is a breach of contract and if so, what is the question of damages, are all matters which are best left to be adjudicated upon by a court or a tribunal and not by one of the contracting parties. The view we are taking finds support in the decision of the Supreme Court reported in State of Karnataka v. Rameshwara Rice Mills Thirthahalli (AIR 1987 SC 1359). There, it was contended that when the State is one of the contracting parties and seeks to recover damages for breach of that contract, the State cannot be a Judge in its own cause and cannot be its own arbiter to determine the liability and quantum of damages. Upholding the contention, the apex court held as follows:

(3.) THE impugned orders and proceedings are bad when -approached from another angle also viz. in the context of Art.14 of the Constitution of India. Dealing with a similar situation, one of us (Narayana Kurup, J.) in Latheef v. Superintending Engineer (ILR 1993 (2) Ker. 426) had occasion to observe as follows: