Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2013 Supreme(Pat) 926

IN THE HIGH COURT OF JUDICATURE AT PATNA
JYOTI SARAN, J.
State of Bihar through the Chief Secretary, Bihar, Patna.
Versus
M/S Kumar Construction Company, through its Proprietos Narender Kumar Singh S/O Sri Prabhunath Singh Village- Dumri, P.S- Doriganj, Saran At Chapra. - Opposite Party
Civil Revision No.196 of 2012 In C.REF. 118 of 2010
Decided On : 19-08-2013

Advocates:
Advocate Appeared:
For the Petitioner/s: Mr.J.S.Arora, S.C.6 Mr.Amit Bhushan, A.C to S.C.6
For the Respondent/s: Mr. Jitendra Singh, Sr. Adv. Mr. Mr.Mrigank Mauli, Adv.

The court emphasized that the power of forfeiture of security deposit can only be exercised in accordance with the terms of the contract and must be based on the principle of loss suffered by the party seeking forfeiture.

Headnote:
Condonation of Delay - Bihar Public Works Contract Disputes Arbitration Tribunal Act, 2008 - Section 3 - Summary of the acts and sections referenced and discussed by the court: The court discussed the rescission of a contract under the Bihar Public Works Contract Disputes Arbitration Tribunal Act, 2008, and the clauses of the Conditions of Contract including Clause 2, Clause 3, Clause 5, and Clause 14. The court also referred to the judgment of the Supreme Court in A.I.R 2003 SC 2629; (2003) 5 SCC 705 (Oil and Natural Gas Corporation Ltd. v. SAW Pipes Ltd.) to determine the applicability of the principles laid down in the judgments relied upon by the Tribunal.
Fact of the Case:

The civil revision application was filed for condonation of delay in filing the civil revision application and was directed against the part of the award passed by the Bihar Public Contract Disputes Arbitration Tribunal. The dispute arose from a works contract for construction/widening and strengthening of a road. The State rescinded the contract and forfeited the security deposit, leading to a reference case by the contractor for payment of dues and release of the forfeited amounts.
Finding of the Court:

The court found that the State's order rescinding the contract and forfeiting the security deposit was not based on the principle of loss suffered, and the State failed to demonstrate any loss suffered. The court also noted that the order of forfeiture was a consequence of rescinding the contract and not a means to recompense the loss/damage suffered by the State. The court dismissed the civil revision application.
Issues: The issues included the validity of the State's order rescinding the contract and forfeiting the security deposit, the applicability of the clauses of the Conditions of Contract, and the requirement for the State to demonstrate loss suffered.
Ratio Decidendi: The court held that the State's order of forfeiture was not based on the principle of loss suffered and was a consequence of rescinding the contract. The court also emphasized that the State failed to demonstrate any loss suffered, and the order of forfeiture was not a means to recompense the loss/damage suffered by the State.
Final Decision: The civil revision application was dismissed, and no costs were awarded.

C.A.V. ORDER

This interlocutory application has been filed praying for condonation of delay of 100 days occurred in filing the civil revision application.

2. It is stated that the delay has occurred in obtaining the departmental approval and thus there is no deliberate laches on the part of the petitioner-State in preferring the application.

3. I have heard learned counsel for the parties on the prayer for limitation and upon being satisfied by the reasons assigned, the prayer is allowed.

4. The delay is condoned. This interlocutory application is allowed.

C.R.No. 196 of 2012

5. This civil revision application is directed against the part of the award dated 16.3.2012 passed by the Bihar Public Contract Disputes Arbitration Tribunal constituted under Section 3 of the Bihar Public Works Contract Disputes Arbitration Tribunal Act, 2008 (hereinafter referred to as the „Act?), in Reference Case No. 118 of 2010 to the extent the Tribunal has held the contractor who is the opposite party herein, entitled to refund of the security deposit of Rs. 18,13,377/-, earnest money of Rs. 14,21,400/-, refund of the amount deducted for extension of time of Rs. 8,04,661/- and refund of penalty amount of Rs. 16,46,936/- together with simple interest quantified at 10% payable with effect from 15.4.2008 until its realization.

6. With the consent of the parties the matter has been taken up for disposal at the stage of admission itself.

7. A brief summary of facts essential for disposal of this application is that the opposite party was awarded works contract by the petitioners for construction/widening and strengthening of the Chapra Marhaura Road in Kilometer 1(part), 3(part) and 4 to 23 i.e. total of 20.32 kilometers under the plan head of 2006-07. The total cost of work was estimated at Rs. 6,58,77,428/-. An agreement was entered into between the parties to that effect on 31.1.2007 and a copy whereof is placed at Annexure 1 of the present application. Under the contract, the work was to commence on 22.1.2007 and was to be completed by 30.6.2007. Since the work was not completed by the opposite party until 31.3.2008, the contract was rescinded under an order dated 15.4.2008, a copy whereof is placed at Annexure-1 of the supplementary counter affidavit of the opposite party. The opposite party filed an application before the Tribunal giving rise to the reference case in question for payment of the following amounts:-

(i) The payment of dues of Rs. 74,00,000/- which was subsequently revised to Rs. 88,02,228/-.

(ii) The release of the deducted penalty amount of Rs.16,00,000/-

(iii) The release of earnest money of Rs. 14,21,400/-.

(iii) The release of retention money deducted at the rate of 10% from every bill.

(iv) Quashing of the rescinding order dated 15.4.2008.

(v) Quashing of the order bearing letter No. 964 dated 21.5.2008 in respect of forfeiture of security deposit of Rs. 15,26,684.

8. The claim was contested by the State who is the petitioner before this Court by submitting a statement demonstrating that it was the opposite party on whom an amount of Rs. 15,25,684/- was found due, thereby showing a negative bill.

9. The claim of the contractor-opposite party was primarily contested on grounds that the quality of work was below standard and that the contractor had not maintained the specifications of the construction materials as required to be maintained under the contract and which was a violation of Clauses 10A and 16 of the Contract. The contractor-opposite party was also charged with threatening the Engineers. It was further contended that the contractor had not completed the work even after nine months of the expiry of the work schedule which was a violation of Clause 5 of the Condition of Contract. It is the case of the State that the contractor had in the entire contract period, executed only 28% of the work which was a violation of Clause 2 and Schedule (f) of the Agreement. The State thus on grounds set forth, vide order passed on 15.4

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