JUDGMENT
Dated this the 16thday of November, 2022 The 1stpetitioner is a joint venture formed for execution of high value contracts and the 2ndpetitioner is its power of attorney holder. The 1stpetitioner was awarded the work;
"up-gradation of the road from Ponkunnam to Thodupuzha and Thodupuzha Bypass as per Ext. P2 letter of acceptance dated 04.02.2014". Due to a mistake in assessment committed by the officials of the 2ndrespondent, the Bill of Quantity(BoQ) with respect to hard rock was estimated as 1850 cu.mt. As against this, 80449.32 cu.mt of hard rock had to be executed. As the increased quantity of hard rock qualified for rate revision, the petitioners demanded Rs.5,702/- per cu.mt, while the 2ndrespondent fixed the rate at Rs.4,875/- per cu.mt. As the work had to go on without break petitioner agreed for the rate fixed by the 2ndrespondent under protest and executed a supplementary agreement for 76600 cu.mt of hard rock, Thereafter, the 1stpetitioner raised a dispute before the
4
Dispute Board constituted as per Clause 20.2 of the the general conditions of the contract. The Dispute Board, after hearing the parties, recommended the rate of Rs.4,875/- suggested by the 2ndrespondent for the excess quantity. Although there is provision for expressing dissatisfaction with the recommendation of the Dispute Board and intimating its intention to commence arbitration, neither the petitioners nor the second respondent expressed dissatisfaction within the stipulated time limit of 28 days. In spite of the dispute having thus attained finality, the issue was unnecessarily forwarded to the Chief Technical Examiner. The said official submitted a report finding that the rate for the excess quantity of hard rock should have been fixed at Rs.994/- instead of Rs.4,875/-. This resulted in the enhanced rate fixed for hard rock being adjusted against the further Bill of Quantity payments, including the final bill. The work was completed on 28.03.2017 and the defect liability period got over by 27.03.2018. Thereupon, completion certificate was issued and performance guarantee furnished by the petitioners, released. According to
5
the petitioners, the total quantity of hard rock was 80449.32 cu.mt out of which, 125% of the original BoQ of 1850 cu.mt amounting to Rs.1,38,75,000/- was paid and the amount of Rs.38,09,16,998/- due towards the balance quantity of 78136.82 cu.mt at the rate of Rs.4875/- was completely adjusted against other items in the Bill of Quantity. Aggrieved by the unilateral and illegal adjustment of the amounts legitimately due, the 1stpetitioner filed W.P.(C) No. 1700 of 2017. That writ petition was disposed of by Ext.P8 judgment. Even though the 1stpetitioner had moved an application under Section 11(4) of the Arbitration and Conciliation Act, 1996, seeking reference of the dispute to arbitration, the arbitration request (AR NO. 55 of 2017) was later withdrawn, as the respondents had informed that the Government may review the decision to adjust the enhanced rate of hard rock based on reports to be received from the Legal and Vigilance Department. Thereafter, the vigilance enquiry was completed and the matter was placed before the Law Secretary. The Law Secretary after carefully studying all aspects, submitted Ext.
6
P10 report, the relevant portion of which reads as under;
" Since the KSTP agreed for a rate of Rs.4875/- before the Dispute Review Board, and since the Dispute Review Board's decision has binding effect as per Clause 24, the amount may be paid to the Contractor."
Based on the report, certain payments were made by the 2nd respondent, leaving a balance amount of Rs.38,09,16,998/-. The petitioners' repeated request for release of the balance amount having fallen on deaf ears, this writ petition is filed seeking a direction to the respondents for forthwith pay the sum of Rs.38,09,16,998/- with interest due thereon.
2. After hearing the counsel on either side, this Court, on 14.12.2021 directed the 1strespondent to consider the petitioners' representation and take a decision thereon in a time bound manner. Accordingly, 1strespondent considered the representation and issued G.O.(Rt) No.177/2022/PWD dated 18.02.2022 rejecting the request for payment made by the petitioners with liberty to settle the dispute through the forum of dispute resolution provided in the contract.
7
3. Adv. Joseph Kodianthara, learned Senior Counsel appearing for the petitioners submitted that the Dispute Board having recommended payment at the rate of Rs.4,875/- per cu.mt and neither of the parties having expressed dissatisfaction with the Dispute Board's decision within 28 days, the decision has attained finality as per the stipulation in Clause 20.4 of Ext. P4 conditions of contract. The Dispute Board's decision cannot be circumvented by obtaining a report from the Chief Technical Examiner. As the subject work is funded by the World Bank, the norms are fixed by the International Federation of Consulting Engineers (FIDIC). The preface to the General Conditions specifically states that the conditions of the contract are the World Bank harmonised edition of the conditions of contract for construction prepared and copyrighted by the FIDIC. Ext. P6 Circular of the Central Vigilance Commission also specifically states that, in so far as World Bank projects are concerned, the department/organization have no other alternative but to go by the criteria prescribed by the World Bank. This precisely, is
8
the reasoning of in Ext P10 report of the Law Secretary. In Ext. P10 report, the Law Secretary has clearly stated that, since the KSDP agreed for a rate of Rs.4,875/- before the dispute review board, which has binding effect as per Clause 24, the amount has to be paid to the contractor. It is pertinent to note that the Vigilance and Anti Corruption Bureau had failed to find any mistake on the petitioner's part but, on the other hand, it categorically found that the mistake in fixing the quantity of hard rock is that of the Engineers of the 2nd respondent. The position being thus clear, the respondents are bound to make the payment. The report of the Chief Technical Examiner is based on the PWD Manual which has no application in World Bank funded projects and is to be eschewed. The order passed by the Chief Secretary, is of no relevance, since the decision of the Dispute Board is binding on the parties. Reliance is placed on the decision in ABL International Ltd. And Others Vs. Export Credit Guarantee Corporation of India Ltd. And Others (2004)
3 SCC 553) to contend that when the State acts in an
9
arbitrary manner, the affected person is entitled to seek remedy under Article 226, even in matters of contract.
4. Adv. K.V. Manojkumar, learned Senior Government Pleader and Standing Counsel for the 2ndrespondent submitted that the huge variation in the quantity of rock excavated from the site resulted in the accepted contract price of Rs.227,13,73,548/- rising to Rs.285,33,30,573/-. Therefore, the Finance Department of the Government of Kerala took the stand that, releasing the payment of hard rock proposed by the Project Director and upheld by the Dispute Board will be unfair to the Government and result in undue benefit to the contractor. Although the Dispute Board recommended Rs.4,875/-, the KSDP was dissatisfied with that decision. Hence, The Chief Technical Examiner was required to enquire and submit a report. The report submitted by the CTE was considered by the Steering Committee and based on the recommendations therein, it was decided to adjust the excess amount from the future bills. If the petitioners are aggrieved by the decision and non-payment of the excess amount, they
10
should resort to arbitration as provided under Clause 20.7 of Ext.P4 and cannot straight away approach this Court under Article 226.
5. Indisputably, the contract in question is covered by Exts.P3 and P4 conditions of contract. As contended by the petitioners, being a World Bank funded project the PWD Manual or the Financial Code has no application and it is the conditions of the contract, prepared in terms of the FIDIC guidelines, that will govern the issue. As per Clause 20.4 of Ext.P4, if a dispute arises between the parties, either party may refer the dispute in writing to the Dispute Board for its decision. Accordingly, the dispute regarding the price of hard rock fixed unilaterally by the 2ndrespondent was referred to the Dispute Board at the petitioners' instance. The Dispute Board after hearing both parties made Ext.P5 recommendation, stating that the rate of Rs.4,875/- for the excess quantity arrived at, based on negotiation, is binding on the parties. As per Clause 20.4 of Ext.P4, either party can express its dissatisfaction and intention to commence
11
arbitration within 28 days. If no notice of dissatisfaction is given within 28 days, the decision becomes final and binding upon the parties. In Ext. P10 report, the Law Secretary had recommended to pay the amount in view of the binding effect of Clause 20.4. Of course, as per Clause 20.7 of Ext.P4 in the event a party fails to comply with the final and binding Dispute Board decision, the other party may refer the failure itself to arbitration. In this regard, it is pertinent to note that the petitioners had resorted to such remedy by approaching this Court with an arbitration reference, but the AR was subsequently withdrawn on the assurance that the Government is intending to reconsider its decision to adjust the excess amount towards future bills. In such circumstances I find considerable merit in the contention of the petitioners that the so-called enquiry and report by the Chief Technical Examiner and his recommendations made with reference to the PWD Manual and the Financial Code cannot have any impact as far as the binding nature of the Dispute Board's decision is concerned. For the same reason, the Chief
12
Secretary's findings are also of no relevance. In my considered opinion, relegating the petitioners to the remedy of arbitration at this stage, that too after the petitioners being cajoled into withdrawing the earlier arbitration reference, will be too unjust an action. When the Government and its organisations enter into contracts, they too are expected to act in a just and reasonable manner.
For the aforementioned reasons, the writ petition is allowed and the respondents are directed to pay the 1st petitioner the sum of Rs.38,09,16,998/- within three months. The petitioners' entitlement for interest is left open to be agitated before the appropriate forum.
Sd/-
V.G.ARUN
JUDGE
sb
14
GOVERNMENT OF KERALA BY THE 1ST PETITIONER.
EXHIBIT P12 TRUE COPY OF LETTER DATED 26.09.2018 ISSUED
BY THE 1ST PETITIONER TO THE PRINCIPAL
SECRETARY, PUBLIC WORKS DEPARTMENT,
GOVERNMENT OF KERALA, THIRUVANANTHAPURAM.
EXHIBIT P13 TRUE COPY OF LETTER DATED 29.08.2018 ISSUED
BY THE 1ST PETITIONER TO THE HON'BLE MINISTER
FOR PUBLIC WORKS DEPARTMENT, GOVERNMENT OF
KERALA,THIRUVANANTHAPURAM.
EXHIBIT P14 TRUE COPY OF LETTER DATED 12.03.2019
ADDRESSED TO THE HON'BLE CHIEF MINISTER OF
KERALA.
EXHIBIT P15 TURE COPY OF LETTER DATED 03.08.2019
ADDRESSED TO THE PROJECT DIRECTOR OF THE 2ND
RESPONDENT FROM THE 1ST PETITIONER.
EXHIBIT P16 TRUE COPY OF LETTER DATED 29.08.2019
ADDRESSED TO THE HON'BLE CHIEF MINISTER,
GOVERNMENT OF KERALA, THIRUVANANTHAPURAM FROM
THE 1ST PETITIONER.
Exhibit P17 TRUE COPY OF THE VARIATION ORDER AGREEMENT
DATED 20.04.2016.
Exhibit P18 TRUE COPY OF THE LETTER DATED 2/11/2021 SENT BY THE PETITIONERS TO THE HON'BLE CHIEF
SECRETARY OF THE STATE OF KERALA
Ext.P17 TRUE COPY OF THE VARIATION ORDER AGREEMENT
DATED 20.04.2016.
EXT. P18 TRUE COPY OF THE LETTER DATED 02.11.2021 SENT
BY THE PETITIONRS TO THE HON'BLE CHIEF
SECRETARY OF THE STATE OF KERALA.
RESPONDENTS'EXTS:
ANNEXURE R2(a) TRUE COPY OF THE DECISION DATED 06.08.2016 ANNEXURE R2(b) TRUE COPY OF THE LETTER PWD-D2/91/2016 PWD
15
DATED 06.01.2017
ANNEXURE R2(c) TRUE COPY OF THE LETTER NO,306083/IND &PW- B3/2016FIN DATED 25.01.2019.
ANNEXURE R2(d1) TRUE COPY OF THE LETTER DATED 16.05.2017 ANNEXURE R2(d2) TRUE COPY OF THE LETTERE DATED 18.04.2017
ANNEXURE R2(e) TRUE COPY OF THE ORDER NO.398/2014/KSTP/PWD/PMT DATED 31.03.2017 ANNEXURE R2(f) TRUE COPY OF THE DECISION OF THE STEERING
COMMITTEE DATED 09.10.2018
ANNEXURE R2(g) TRUE COPY OF THE NOTE NO.306083/IND&PW B3/16/FIN DATED 28.12.2020