Point of Law: Government contract - Revenue recovery proceedings - Government can very well resort to revenue recovery as the 30% of the cost of the remaining works at agreed rates of a terminated contract, is a sum due to the Government.

JUDGMENT :

N. NAGARESH, J.

1. The petitioner, who is a Government Contractor, has approached this Court seeking to quash Exts.P1 and P2 to P6 and to declare that revenue recovery proceedings cannot be invoked in respect of tentative liability and inabilities which are not quantified or adjudicated by the Civil Court or other Adjudicating Authority and hence the recovery proceedings are illegal and non-est.

2. The petitioner was selected for award of the work “Widening the existing Veliavallampathy Canal from Ch: 8930m to 9210m.” The probable amount of contract was Rs. 13,31,163/-. An agreement was executed on 18.05.2004. The site was handed over to the petitioner on 31.12.2004. The work had to be completed before 30.06.2005. The respondents later extended the period up to 31.12.2005.

3. The petitioner states that the estimate was revised at the instance of the Department to Rs. 18,89,475/- on 22.04.2005. According to the petitioner, the work could not be completed due to non-supply of Departmental materials and on account of denial of part bills. The petitioner completed substantial work and raised a part bill for Rs. 12,50,075/-. However, only Rs. 8,41,837/- was paid. An amount of Rs. 3,55,947/- is yet to be paid.

4. While so, one Mayilswami filed a complaint before the Enquiry Commissioner and Special Judge, Thrissur. The Enquiry Commissioner ordered a quick verification. In the quick verification, the Vigilance found that the total volume of the work done by the petitioner is Rs. 11,97,784/- and after deducting the first part bill of Rs. 8,41,837.60 the balance amount due is Rs. 3,55,947.20. The Vigilance recommended termination of the contract at the risk and cost of the petitioner. Thereupon, without issuing any notice, the contract was cancelled as per Ext.P1 proceedings.

5. The petitioner states that the security amount of Rs. 1,00,000/- which was directed to be adjusted against another work of the petitioner was later released on 28.04.2007. Retention amount due to the petitioner was also released on 31.03.2006. The petitioner also remitted Rs. 26,665/- being the amount quantified as the cost of cement.

6. The petitioner states that though the Department attempted to re-tender the balance work twice, the work was not carried out. As the work could not be carried out, the actual risk and cost cannot be quantified in order to fix any liability on the petitioner. Without quantifying the liability, the Department issued a requisition to the revenue authority for recovery and amount of Rs. 2,99,999/- from the petitioner. Accordingly, Ext.P6 demand notice was issued under Section 7 of the Revenue Recovery Act. The petitioner challenges Exts.P1 and P6.

7. The learned counsel for the petitioner, relying on the judgment of the Apex Court in Union of India vs. Raman Iron Foundry, AIR 1974 SC 1265, argued that a claim for liquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a court or other Adjudicating Authority. Relying on the judgment of this Court in Abraham Sebastian vs. State of Kerala, 2002 (3) KLT 839, the learned counsel argued that actual loss which the Government had to suffer in a terminated contract can be assessed only after the completion of the work and till then, no revenue recovery proceedings can be initiated against the appellant.

8. As regards realisation of 30% of the cost provided under the PWD Manual, the learned counsel for the petitioner argued that the said 30% amount can be realised only from EMD/security, bill amount/retention amount, any dues from the Department to the contractor or bank guarantee/performance guarantee or by filing a civil suit. Revenue recovery proceedings cannot be resorted to for recovering the said 30% of the cost.

9. The 4th respondent-Executive Engineer contested the case filing counter affidavit. According to the 4th respondent, the Government is entitled to recover 30% of the cost through revenue recovery procee