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2023 Supreme(Online)(KER) 31956
HIGH COURT OF KERALA
A.J.DESAI, CJ, V. G. Arun, J
PATHANAPURAM BLOCK PANCHAYATH – Appellant
Versus
JOHN MATHEW – Respondent
WA 317 2018
SRI.LEO GEORGE, ANCHAL C.VIJAYAN, SR. GOVERNMENT PLEADER, SRI.K.P.HARISH, SRI.KRISHNA LAL S. (B/O)
The court ruled that disputes over contract breaches must be settled by civil courts before any retention of amounts due to a contractor can be validly enforced.
Headnote:
Contract - Construction Agreement - Kerala High Court Act 1958 Section 5 - The court concluded that the Block Panchayat could not withhold the retention amount and security deposit without a civil court's determination of breach, emphasizing that such issues must be adjudicated effectively by appropriate judicial mechanisms.
Fact of the Case:
A contractor entered into an agreement with a Block Panchayat for road construction but could not complete the work due to the Panchayat's inaction in relocating necessary utilities. Subsequently, the Panchayat issued a demand notice for recovery of costs, including retention and security amounts.
Issues: The key issue was whether the Block Panchayat was entitled to withhold the retention amount and security deposit claimed from the contractor without a decision from the civil court adjudicating the breach of contract.
Ratio Decidendi: It was established that until a competent court resolved the breach and claims by both parties, the Block Panchayat lacked the authority to deny the contractor's rights to the retention and security deposit.
Final Decision: The appeal was dismissed, affirming the order to refund the retention and security amount to the contractor.
JUDGMENT
Dated this the 17th day of November 2023 A.J. Desai, C.J.
By way of the present appeal filed under section 5 of the Kerala High Court Act , 1958, the appellant Block Panchayat has challenged the order dated 22.08.2017 in R.P.No.366 of 2016 filed in W.P.(C)No.33901 of 2011 by which the learned single Judge has, while allowing the writ petition, quashed and set aside the impugned notice dated 26.11.2011 (Exhibit P11) itself and declared that the original petitioner/1st respondent herein to be entitled to refund of two items i.e., retention amount and security deposit furnished by the original petitioner at the time when the parties entered into a contract for construction work of the Cheruvumukku – Iravicodu Road.
2. Short facts that arise from the records are as under:
The original petitioner, who is a contractor by profession, entered into an agreement with the appellant Block Panchayat for the construction of Cheruvumukku – Iravicodu Road. It is the case of the original petitioner that he could not complete the work within the time specified in the contract since the Panchayat did not take any steps for shifting the electric posts, telephone cables and water supply lines passing through the middle of the road, thereby making it impossible for the original petitioner to proceed with the work of laying the road. Ultimately, a notice came to be issued by the appellant Panchayat on 26.11.2011, demanding an amount of Rs.23,35,286/- (Rupees twenty-three lakhs thirty-five thousand two hundred and eighty-six only) from the original petitioner, which included the retention amount and security deposit furnished by him.
3. The original petitioner thereupon filed W.P.(C)No.33901 of 2011 before this court and in response to the notice issued by the learned single Judge, a counter affidavit was filed by the appellant Panchayat. The learned single Judge, after considering the rival submissions and the documents produced, allowed the writ petition and quashed and set aside Exhibit P11 notice issued by the appellant Panchayat, by holding that the parties can approach the civil court since the allegations levelled against each other can be decided only by a competent civil court after considering the evidence produced and examining the witnesses on either side.
4. Aggrieved by the said judgment dated 24.02.2016, the original petitioner filed R.P.No.366 of 2016, which was finally disposed of by the impugned order dated 22.08.2017, directing the appellant Panchayat to refund the retention amount and the security deposit, which was lying with them. Hence this appeal.
5. Learned counsel appearing for the appellant would submit that the review petition could not have been allowed after permitting the parties to adjudicate the issues before the competent civil court. He would submit that the learned single Judge has committed an error in observing that the relief sought in the review petition is an ancillary relief. He would submit that even to get the retention amount as well as the security deposit, the contractor has to establish that the Panchayat had committed a breach of contract for which, the contractor should approach the civil court. He therefore would submit that the appeal be allowed and the order dated 26.11.2011 passed in the review petition be quashed and set aside.
6. On the other hand, the learned Advocate appearing for the 1st respondent/original petitioner supported the decision rendered by the learned single Judge in the review petition. By taking us through the prayers in the writ petition, he would submit that the petitioner has not only challenged the notice dated 26.11.2011 but has also prayed to refund the retention amount and security deposit. By taking us through the judgment in the writ petition, he would submit that the authority could not have demanded the amount referred in the notice and accordingly, the said notice came to be quashed and set aside. He would submit that the learned single Judge has directed the p
