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Gujarat High Court
Judgename :N.N.MATHUR
NARMADA CEMENT COMPANY - Appellant
Versus
STATE - Respondent
S.C.A. 821 of 1995
Decided On : 11/06/1996
The position of law laid down by the Supreme Court is that even in respect of contractual obligations of the parties, the State is not relieved of its obligations of complying with the provisions of Art. 14 of the Constitution i.e. to act justly, fairly and reasonably. Applying to the facts of the present case, if it is found that the impugned act of the respondents is beyond the treatment of clause 26 of the agreement of 1990-91, the petition is maintainable, otherwise not.
[Para 4]
(b) Constitution of India 1950 - Arts. 226 and 14 - Legality of adjusting amount relating to agreement No. D-3 of 1990-91 against some other contracts of 1983-84 and 1988 - Interpretation of clause 26 of the agreement - Significantly clause 26 is under the heading set off of money due & payable - Money can be said to be due & payable only where a claim is either admitted ascertained or decreed by Court - In the case amount due under contracts of 1983-84 & 88 is under serious dispute between the parties and therefore can not be adjusted invoking clause 26 of agreement - Act of respondent No. 2 adjusting the amount of Rs. 18,68,508.56 allegedly said to be due from earlier contracts is unjust & unreasonable & in disregard of provision under Art. 14 - However claim for Rs. 408000/- against penalty for non- marking on cement bags is concerned, it arises out of contract & as such petition with regard the claim is not maintainable.
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.
[Para 6]
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. The respondents, in adjusting the amount of Rs. 18,68,508.56 which is said to be due from the earlier different contract than the agreement No. D-3 of 1990-91 have acted unjustly and unreasonably and in disregard of the provisions of Art. 14 of the Constitution of India. However, so far as the prayer with respect to Rs. 4,08,000/- against penalty for non-marking on cement bags is concerned, that arises out of the contract between the parties and as such the petition is not maintainable to that extent.
[Para 7]
( 1 ) THE petitioner-Company is engaged in manufacture of cement. Respondent No. 2 Executive Engineer, Irrigation Mechanical Division No. 3, invited tender for supply of ordinary portland cement and possolone portland cement having I. S. I. mark to the extent of 1,00,000 M. T. as per tender notice No. 4 of 1990-91. In response to the said tender notice, the petitioner submitted tender which was accepted and in pursuance thereto an agreement in Form-D was entered into between the petitioner and the respondent No. 2. The petitioner supplied 40,621. 75 M. T. cement under the contract costing Rs. 6,76,27,702. 31 against which the respondent made payment of Rs. 6,52,38,900. 80 by various cheques. An amount of Rs. 23,88,801. 49 has been withheld by respondent No. 2 alleging that the said amount has been adjusted on various accounts which is evident from the letter dated 8-8-1994 annexed at Annexure b. The details of the withheld amount of rs. 23,88,801. 49 as pointed out in the aforesaid communication are as under : a) Recoveries towards short supply of cement. Rs. 10,131. 90 b) Recovery towards cost of levy cement of drainage division, Navsari Rs. 9,792. 71 c) Charges of cement samples Rs. 74,082. 60 d) Amount due to be paid as interest on levy dispatches to different irrigation divisions by the Company on different accounts of levy cement Rs. 18,68,508. 56 e) Penalty for late supply Rs. 17,885. 72 f) Penalty for non-marking on cement bags Rs. 4,08,000. 00 total : Rs. 23,88,801. 49 and further break-up of an amount of Rs. 18,68,508. 56 has been given as under : i. Executive Engineer, Ukai Left Bank Canal Investigation division No. 2, Waldo, towards road freight charges relating to R. O. No. 13 dated 4-11-1988 Rs. 2,920. 00 ii. Executive Engineer, Ukai Left Bank Canal Investigation division No. 2, Waldo towards road freight claim as per letter No. 4608 dt. 27-1-1991 Rs. 8,030. 00 iii. Executive Engineer, Kakrapar Canal Division No. 2, surat, towards levy of interest claim against amount paid in 1983 Rs. 34,352. 51 iv. Executive Engineer, Ver-II Project Division Vyara, Surat towards claim of interest and rate difference against r. O. No. 4 of 1984 to 7 of 1984 Rs. 5,78,206. 05 v. Executive Engineer, Medium Irrigation Project Division, ankleshwar, towards interest for delay in refunding levy credit balance. Rs. 12,45,000. 00 total : Rs. 18,68,508. 56 it is thus evident that different amounts payable to different agencies under separate and distinct contracts of the years 1983 and 1988 are being adjusted from the bills of tender agreement No. D-3 of 1990-91. It is also pointed out that rs. 12,45,00. 00 at item No. 5 was allegedly due and payable by the petitioner to the Executive Engineer, Medium Irrigation Project Division, Ankleshwar. For the recovery of the amount, the said authority has filed Special Suit No. 351 of 1992 before the Court of Civil Judge (S. D.), Surat and the same is still pending. The petitioner has appeared in the said suit and is contesting the same. It is also stated that the amount of Rs. 12,45,000. 00 pertains to an agreement entered into between the petitioner and the Executive Engineer, M. T. P. Division, Ankleshwar, who is not a party to the tender agreement No. D-3 of 1990-91. The said contract relates to the period 1983-84. With respect to item No. IV, i. e. , Rs. 5,78,206. 05, it is stated that the said amount pertains to a contract between the petitioner and the Executive engineer, Ver-II, Project Division, Vyara, Surat towards the claim of interest relating to the contract of the year 1984. Similarly, the deduction of Rs. 2,920. 00 and rs. 8,030/- at time No. 1 and 2 are at the instance of the Executive Engineer, Ukai left Bank Canal Investigation Division No. 2, Waldo and the deduction of Rs. 34,352. 51 at item No. 3 is at the instance of Executive Engineer, Kakrapar Canal division No. 2, Surat. On these facts, the petitioner seeks declaration that the action of the respondents in dedu
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