Government authorities must deal with citizens fairly; arbitrary withholding of amounts beyond quantified losses is illegal.

JUDGMENT :

A. Muhamed Mustaque, J.

The fate of this appeal, at the instance of the writ petitioner, is based on a turn of events subsequent to the disposal of the writ petition.

2. The appellant is a contractor for executing the work relating to a road of a project sponsored by NABARD. The contract was terminated at the risk and cost of the appellant and another contractor was engaged to complete the work. The work was awarded to the Kerala State Construction Corporation. The Corporation in turn awarded the work to the appellant. The challenge regarding termination of the contract was unsuccessful as well as the claim for the bills for the work executed by the appellant including the release of security deposit.

3. We are not detailing the facts involved in this case obviously for the reason that we are now deciding this appeal based on admitted facts which are borne on the record.

4. Admittedly, as per 7th and part bill, the appellant was entitled to Rs.58,23,726/-. As seen from Annexure-A12, PWD already collected this amount from NABARD. It is also admitted in the affidavit filed along with I.A.No.2/2022 by PWD before this Court on 3/12/2019 that a sum of Rs.13,09,411/- is due under the 8th and final bill. As seen from Annexure-A10 produced along with I.A.No.1/2022 in the writ appeal, a sum of Rs.2,42,688.77 has been quantified as damage suffered. No other claim has been raised by PWD from the appellant. No one has a case that the new contractor engaged after the termination of the contract with the appellant has done the work covered by the part and 7th bill and 8th and final bill above.

5. The learned Government Pleader placed reliance on PWD manual, revised in 2012, which reads thus :

2116.2.1. Realisation of loss on account of termination

An amount equal to 30% of the cost of the remaining works at agreed rates of the terminated contract shall be recovered from the defaulted contractor towards the risk and cost. The contractor shall be directed to remit the risk and cost amount within three months. There is no need to wait till the work is arranged alternatively through another contractor and the total loss sustainable due to the default of the original contractor is assessed. Such loss, if any, shall be realised after completion of the work. If he fails to remit the amount within this periods following steps can be adopted for realisation of loss. The amount can be realised from the following.

2. EMD/Security

3. Bill amount / retention if any due to the contract.

4. Any dues from department to the contract.

5. Bank Guarantee / Performance Guarantee or By filling civil suit against the contractor

It was argued that the appellant is bound by a contract and based on the clause of PWD manual as above, the appellant can claim an amount only less than the amount covered by the clause as above. The learned Government Pleader also placed reliance on the judgment of the Apex Court in State of Gujarat Through Chief Secretary and Another v. Amber Builders [(2020) 2 SCC 540].

6. The learned Senior Counsel appearing for the appellant, on the other hand, placing reliance on the judgment of the Apex Court in M.P. Power Management Company Limited, Jabalpur v. Sky Power Southeast Solar India Private Limited and Others [2022 SCC Online SC 1591] submitted that the Court is not precluded from issuing any directions in the matter of contract, and any arbitrary action of the State or its instrumentality can be interfered with by invoking writ jurisdiction.

7. Placing reliance on Amber Builders case, the learned Government Pleader rightly pointed out that it is not necessary for the Government to have a recourse to adjudication, to withhold or recover any amount based on contract. The point in this case is in context to, not only the authority of the Government to withhold or recover the amount due to the contractor on a premise of breach of contract, but also on the authority of the Government to retain any amount in excess of the loss already quantified b