Akil Kureshi, J.:— Petitioner has challenged directions contained in communication dated 11.11.2014 asking the petitioner to deposit a sum of Rs. 1,09,00,092/- within seven days, failing which, the Government would recover such amount from the petitioner's deposits or bills of the other pending works of the Government.

2. Brief facts are as under:

The petitioner was awarded a contract for strengthening of section of Limbdi-Sayla National Highway under work order dated 31.07.2007 The work had to be completed within nine months. Estimated cost of the work was Rs. 8.80 crores. Case of the petitioner is that, such work was completed on 30.04.2008 as per the terms and conditions of the contract and final bill was also paid by the respondents. However, on account of heavy rains, part of the road has been damaged. Respondents, therefore, called upon the petitioner to repair such damaged portions. According to the petitioner, such repairing work was carried out once the rain stopped. This was conveyed to the authorities on 15.12.2010

3. The defect liability period of the contract was three years which got over on 30.04.2011 The petitioner, therefore, requested under letter dated 10.09.1992 to the respondents to release the security deposit. The respondents released such security deposit under covering letter dated 10.09.2012

4. On 11.11.2014, the respondents issued the impugned communication calling upon the petitioner to pay a sum of Rs. 1,09,00,092/- on the premise that the petitioner had not carried out the road repair work. As noted, the respondents threatened the petitioner that if such sum is not paid within seven days, the same would be recovered from security deposit and bills of the pending works.

5. Learned counsel for the petitioner submitted that, without quantification of damages from the competent Court or forum it is not possible for the respondents to recover any amount from the petitioner that too from other ongoing works of the petitioner and long after the defect liability period was over. Counsel relied on certain decisions to which, we would refer at later stage.

6. On the other hand, learned AGP Mr. Patel opposed the petition contending that the petitioner had carried out work which was of defective nature. The petitioner was asked on several occasions to carry out the repair of the damaged stretches of the road. Since the petitioner failed to do so, the authorities had to award such contract to another agency at the risk of the petitioner. If the petitioner has any dispute, he has to approach the Court of law. Counsel relied on Clause 43A of the Contract which provided that:

“any sum money due and payable to the Contractor (Including the security deposit returnable to the contract) executing any Government work or work of any District Panchayat wholly financed as grant-in-aid under this contract shall be appropriate by any District Panchayat/Government and shall be set off against any claim of the Government/District Panchayat of Gujarat State by the District Panchayat of Gujarat State/Government for the payment of a sum of money arising out or under any other contract made by the contractor with the Government/District Panchayat of Gujarat State for the work wholly financed as grant-in-aid by Government of Gujarat State. When no such amount for purpose of the recovery from the contractor against any claim of the Government/District Panchayat of Gujarat State is available, such a recovery shall be made from the contractor as arrears of land revenue.”

7. Facts are not seriously in dispute. As per the department, the petitioner's work being not satisfactory, the road was damaged due to rainfall, which the petitioner had to repair. The case of the petitioner is that, such repair work was also completed which the department disputes. Whatever be the disputes between the petitioner and the department on this score, we cannot get away from the fact that, upon completion of the defect liability clause, the Government also released the security deposit of the petitioner. The action of the respondents, thereafter, to raise the recovery of Rs. 1,09,00,092/- and threatening to recover the same if not paid by the petitioner, from the security deposit and running bills of other ongoing contracts, would not be permissible. Even the above referred Clause 43A of the contract, on which, heavy reliance is placed by the counsel would not authorize the Government to do so.

8. In case of State Of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli, Thirthahalli reported in (1987) 2 SCC 160 : AIR 1987 SC 1359 under somewhat similar circumstances, the Supreme Court observed as under:

“7. On a consideration of the matter we find ourselves unable to accept the contentions of Mr. Iyenger. The terms of Clause 12 do not afford scope for a liberal construction being made regarding the power of the Deputy Commissioner to adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. The crucial words in clause 12 are “and for any breach of conditions set forth hereinbefore, the first party shall be liable to pay damages to the second party as may be assessed by the second party”. On a plain reading 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 it 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 argument's 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 or 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.

8. We are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is disputed.”

9. Learned Single Judge of this Court in case of Narmada Cement Co. v. State of Gujarat vide order dated 22.10.1996 in Special Civil Application No. 821 of 1995 interpreted the similar clause contained in the contract and observed as under:

“6……………. It is significant to notice that clause 26 of the agreement is under the heading “set off of money” due and payable. The sum can be said to be due and payable only where a claim is either admitted or in a case of dispute settled by resorting to the judicial process. Thus, where the claim is adjudicated upon by a Civil Court or an arbitrator and the breach of the contract is established and the amount of damages ascertained and decreed that a debt due and payable comes into existence, till then it is nothing more than a mere right to sue for damages and it does not fall within the words “due and payable……….

7. Thus, I am clearly of the view that in the present case, clause 26 of the agreement cannot be attracted by the respondent to recover the amount by way of set off from the bills of agreement of 1990-91. The amount said to be due under other contracts of 1983-84 and 1988 and the same has been seriously disputed by the respondents. Thus the amount disputed has not been crystalised. It is only after the amount is crystalised by settlement or by judicial process, instead of going for execution, that the amount can be adjusted by invoking clause 26 of the agreement.”

10. Division Bench of this Court in judgement dated 16.09.2009 confirmed the decision of learned Single Judge in case of Narmada Cement Co. v. State of Gujarat (supra). It was observed as under:

“We are of the view that only in cases where the claim is crystallized, the State Government can set off and adjust those amounts from the money due and payable in respect of the other contract. So far as the facts of the present case, we are of the view that the judgment rendered by the Apex Court in the case of Lakshmichand & Balchand (Supra) would squarely apply. Interpreting Clause 71 of the Contract, the Apex Court held as under:

“In regard to the claim to adjustment on the second count the position is more controversial. The claim is founded in the doctrine of equitable set off, but we do not find evidence before us to bring the case within the operation of the doctrine. It is not a case where cross demands rise out of the same transaction or the demands are so connected in their nature and circumstances that they can be looked upon as part of one transaction. Nor can assistance be derived from Clause 71. The benefit of that provision can be claimed only if the amount sought to be retained is an ascertained sum, an amount which can be readily adjusted against the amount payable under the other contract. Here, the amount sought to be adjusted has yet to be determined as a liability against the contractor. It has been disputed by the appellant. Accordingly, Clause 71 cannot be invoked. xxx xx”

In our view, Clause 26 would come to the rescue of the State Government only if the amount is adjusted towards a claim which is crystallized, not otherwise. We, therefore, fully endorse the view of the learned Single Judge on the interpretation of Clause 26.”

11. Recently, Division Bench of this Court, in judgement dated 21.01.2016 in Special Civil Application No. 13025 of 2015 in case of M.S Khurana Engineering Limited v. Ahmedabad Municipal Corporation followed this decision and held as under:

“5. Thus it is well settled that without quantification and crystallization of the amount of recovery, the employer of the contract cannot unilaterally recover such amounts from the ongoing contract work of the same contractor in connection with another contract. In the said decision, Clause 26 of the contract which permitted such recovery was interpreted as to mean that recovery would be permissible only if the amount is adjusted towards the claim which is crystallized but not otherwise.

6. That being the position, respondents cannot be allowed to recover said sum from the payments due and payable to the petitioner in connection with the other ongoing contract works. To that limited extent, petition must succeed. It is therefore, provided that such amount shall not be recovered from the petitioner's payments due in connection with the other contract works. However, this would not prevent the respondents from seeking recovery through other means as permissible in law. Petition is disposed of accordingly. Direct service is permitted.”

12. Under the circumstances, this petition is allowed. Impugned communication dated 11.11.2014 is set aside. Direct service is permitted.