Point of law: Unliquidated damages do not give rise to debt especially when the same is disputed until the liability is adjudicated and damages assessed by a decree or order of a court or by any other adjudicatory authority.

JUDGMENT :

It is a settled position that the unliquidated damages do not give rise to debt especially when the same is disputed until the liability is adjudicated and damages assessed by a decree or order of a court or by any other adjudicatory authority. One party to a contract cannot unilaterally assess the damages. But in these cases, the state challenges this proposition based on certain decisions of the apex court. Since these two writ petitions are connected, I am disposing of these two writ petitions by a common judgment. I will first narrate the facts in WP(C) No.31363 of 2009.

2. The petitioner was awarded the construction work of break waters in connection with the Ponnani Fisheries Harbour Project of the State Government. As per the terms of the agreement entered into by the petitioner with the Government in connection with the execution of work referred above, the petitioner ought to have completed the work on or before 31.3.2007. The case of the petitioner is that due to various reasons attributable exclusively to the respondents, the work could not be completed in full within the time stipulated. For completing the remaining part of the work, a minimum period of seven months further was required at that point of time. Hence, the petitioner on 7.2.2007 submitted an application for an extension of time. It is the case of the petitioner that since the reason for non-completion of the work was not attributable to the petitioner, the Harbour Engineering Department under which the work was executed recommended to the Government that time sought for by the petitioner can be granted. Consequently, based on Ext P1 Government Order, the Government allowed the request for extension of time but imposed a fine @ Rs.21,956/-per day for completion of the remaining part of the work. It is the case of the petitioner that the fine imposed by the Government as per Ext P1 order was approximately 1 crore and the same was even far above the anticipated profit of the petitioner. Hence, the petitioner again approached the Government to modify Ext P1 order and to permit them to complete the work without a fine. Subsequently, Ext P2 Government Order was passed based on the direction in Ext P3 judgment of this court.

3. Thereafter, it is the case of the petitioner that the 1st respondent illegally directed to terminate the contract by Ext P2 order. The termination of the contract effected by the 2nd respondent on 29.4.2005 at the risk and cost denying unconditional extension of time sought from 1.4.2007 to 31.12.2007. The respondents issued a notice inviting tenders for the balance work. Pursuant to Ext P3 judgment, the Government conducted a hearing on the issue of termination of the contract and in the course of the hearing, the petitioner contended that they had not committed any breach of the terms of the contract. It is the case of the petitioner that without considering the contentions of the petitioner, the Government restored its earlier decision as per Ext P4. Since a substantial amount is due to the petitioner, the petitioner decided to file a suit, and a Section 80 Civil Procedure Code notice was issued as evident by Ext P5. The Government sends a reply as per Ext P6. Thereafter, the petitioner was taking steps to file the suit. At that stage, the petitioner received Ext P7 notice from the 4th respondent stating that the petitioner is liable to pay a sum of Rs.4,34,12,105/-to the Government in connection with the rearranging of the work referred to above and directing them to pay the same to the Government. The petitioner sent Ext P8 reply. In Ext P8, the petitioner also stated that Government cannot determine the issue as to who has committed the breach of the terms of the contract, and therefore, determination of the alleged loss made by the Government on that basis is illegal. It is the case of the petitioner that after the award of contract for the balance work on 4.12.2008, Ext P4 order dated 12.12.2008 was passed by the 1st r