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2014 Supreme(Jhk) 668
In the High Court of Jharkhand at Ranchi
R.R. PRASAD, J.
M/s. Neo Built Corporation – Petitioner
Versus
State of Jharkhand & Ors. – Respondents
W.P.(C) No.6344 of 2011 with W.P.(C) No.1103 of 2012
Decided on: 2.7.2014
Advocate Appeared:
For the Petitioner: M/s. Rajiv Ranjan and Krishna Murari
For the State: Mr. Rajesh Kumar
A claim for damages for breach of contract is not a claim for a sum presently due and payable, and the purchaser is not entitled to recover the amount of such claim by appropriating other sums due to the contractor.
Headnote:
Contract - Government Contract Dispute - Clause 18 of the agreement - Recovery of Sums due - Union of India vs. Raman Iron Foundry (AIR 1974 SC 1265)
Fact of the Case:
The petitioner entered into agreements with the State for road construction. The State rescinded the contracts due to alleged breaches by the petitioner and imposed penalties. The petitioner filed writ applications seeking to quash the orders.
Finding of the Court:
The court found that the State's recovery of penalties from the petitioner's security deposit for one contract to adjust the damages claimed under another contract was illegal, citing Union of India vs. Raman Iron Foundry (AIR 1974 SC 1265). The court quashed the order for the recovery of the amount and held the State liable to pay the petitioner.
Issues: Dispute over contract rescission, penalties, and recovery of damages from security deposits.
Ratio Decidendi: A claim for damages for breach of contract is not a claim for a sum presently due and payable, and the purchaser is not entitled to recover the amount of such claim by appropriating other sums due to the contractor (Union of India vs. Raman Iron Foundry).
Final Decision: The court quashed the order for the recovery of the amount and held the State liable to pay the petitioner, with the State being at liberty to realize it in accordance with the law.
Since the subject matter of both the writ applications are interlinked with each other, both the cases were heard and are being disposed of by this common order.
2. According to the case of the petitioner, the petitioner did enter into an agreement with the authority of the State for widening and strengthening of Madhupur Lahajori Road from 0.00 Km. To 21.643 Km. Right from the beginning, the petitioner faced difficulties in executing the work on account of possession of land being not given in the wake of serious objection being raised by the villager on account of non-receipt of the compensation amount. Ultimately, final measurement was taken on 22.6.2009 by which time only 10% of the work could be done, payment of which was made to the petitioner but without there being any fault on the part of the petitioner, the work order was rescinded, vide order dated 9.8.2010 (Annexure 10) and ultimately, security was forfeited and penalty was imposed. Thereupon, the Executive Engineer, vide its letter dated 17.8.2011 (Annexure 11) communicated to the petitioner that the petitioner is liable to pay a sum of Rs.2,29,40,620/- as penalty and if the same is not deposited, then in that event, the said money will be forfeited in respect of other work being done by the petitioner relating to widening and strengthening of Satsangnager-Bhirkhibad Road. In that event, the petitioner did file a writ application bearing W.P.(C) No.6344 of 2011 seeking quashing of the order dated 9.8.2010 ( Annexure 10) as well the order dated 17.8.2011 (Annexure 11).
3. A counter affidavit has been filed wherein it has been stated that as per the agreement bearing no.20F2/07-08 dated 10.3.2008, the work was to be completed by 8.3.2009 but the petitioner did not take any step sincerely to get the work executed. The petitioner in spite of being reminded repeatedly did not deploy adequate tools, plants, machineries and technical personnel which were necessary for ensuring timely execution of the work.
4. Whatever work had been done, that was found to be sub-standard not conforming the specification and under such situation, the work was rescinded and thereby a sum of Rs.2,29,14,620/- was found recoverable. Since the security furnished by the contractor against the said agreement was not sufficient to adjust the amount, rest recoverable amount has been adjusted against the security furnished by the same contractor in relation to another agreement (ISBD/08-09) relating to widening and strengthening of Satsangnager-Bhirkhibad Road.
5. Further it has been stated that the petitioner never started the work in right earnest. He always raised imaginary issue of law and order and thereby he caused huge loss to the public exchequer and under the circumstances, several notices were given. In spite of that when the petitioner did not do anything in carrying out the work, the contract was rescinded and thereupon the contract has been allotted to other person, who has been doing the work smoothly.
6. So far as the other case W.P.(C) No.1103 of 2012 is concerned, it is the case of the petitioner that the petitioner entered into an agreement (ISBD/08-09) on 17.3.2008 for strengthening and widening of Satsangnager-Bhirkhibad Road. Pursuant to that, the petitioner started work enthusiastically so that it be completed within time but in the meantime, pace of the work got hampered on account of the fact that electric poles and water pipes were not removed. In spite of that, the petitioner was able to do 90% of the work whereas 10% of the work could not be executed on account of the aforesaid difficulties. In spite of that, contract of the petitioner was rescinded, vide order dated 11.11.2011 (Annexure 8) which is under challenged.
7. It be stated that before the work was rescinded, the Executive Engineer passed an order as contained in Memo no.1359 dated 8.10.2011 (Annexure 10) for adjustment of the amount of damage relating to other contract (20.F2/07-08) from the amount of security an
