Point of Law : Under Section 70 of Indian Contract Act, 1872, a person who enjoys benefits of non-gratuitous act is bound to make compensation to person from whom such service is availed.

JUDGMENT :

A. Muhamed Mustaque, J.

This appeal was filed by the State challenging a decree allowing the plaintiff to recover Rs.62,58,000/- together with 6% interest from the State.

2. The plaintiff is a contractor and he was engaged by the Public Works Department (PWD) for dredging, cleaning and improving the boundary canal in West Cochin known as Rameswaram-Calwati Canal. The nature of work has been specifically mentioned in the agreement executed between the plaintiff and the Department. The plaintiff had a two-fold claim. One is based on the agreement and the other is based on the work undertaken on the alleged instruction of the Department and the local MLA. According to the plaintiff, though he was entitled for more than Rs.97,45,032/- from the Department, he limited his claim to Rs.47 Lakhs for the purpose of valuation and court fee. Besides the above claim, he also demanded the return of the retention amount of Rs.9 Lakhs and Rs.1 Lakh deposited towards security. The plaintiff also claimed damages to the tune of Rs.5 Lakhs from the Department.

3. The trial court allowed all other claims except the claim for damages. We are not able to discern from the trial court judgment as to how the trial court arrived at the calculation of the amount. At the appellate stage, the learned counsel for the appellant pointed out that a calculation statement was made based on measurements recorded in Ext.B2 series and that statement was given to the trial court Judge. A copy of the calculation statement was also made available before us for perusal.

4. The learned Senior Government Pleader Sri. K.V. Manoj Kumar pointed out that the trial court having declined the relief as against the declaration to the effect that the plaintiff was not liable to execute the remaining part of the work and that the balance work shall not be at his risk and cost, this Court could not have granted the decree sought by the plaintiff for recovering the money. The learned Government Pleader further submitted that the contract having been terminated at the risk of the plaintiff, he is liable to compensate the government for the loss.

5. Before we proceed to decide the question involved in this case, we need to state the law regarding quantification of loss and recovery by the State based on contract. There are different views expressed at the Bar in regard to the unilateral determination of loss and retention of the amount due as well as also recovery by the State based on the alleged breach of contract. It is to be noted that the State is empowered to recover its dues by raising demand as public dues of revenue on land under the Revenue Recovery Act, 1890. The question is whether the State can unilaterally determine its loss and has any right to retain any amount payable to the plaintiff contractor.

6. In Union of India v. Raman Iron Foundry [(1974) 2 SCC 231], a two judges Bench of the Apex Court opined that based on a Government contract, the Government had no right or authority to appropriate the amounts of a contractor from pending bills towards satisfaction of its claim for damages without independent adjudication by the adjudicating authority. This decision was overruled by a three judge bench decision of the Apex Court in Kamaluddin Ansari and Co. v. Union of India [(1983) 4 SCC 417]. The Apex Court is of the view that though the Government can be injuncted from recovering or appropriating the amount under the bills of the contractor for the damages claimed, it cannot be injuncted from withholding such amount under the bills. In State of Gujarat through Chief Secretary and Another v. Amber Builders [(2020) 2 SCC 540], the views of the three bench decision in Ansari’s case has been reiterated.

7. In the State, the Kerala Public Works Department manual is followed as part of the works awarded by the State Government and the Public Works Department. Clause 2116.2.1 stipulates realisation of loss on account of termination, which reads thus :

“Realisation of loss on