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2021 Supreme(Online)(KER) 26709
HIGH COURT OF KERALA
N. NAGARESH, J
MADHU, – Appellant
Versus
THE STATE OF KERALA, – Respondent
WP(C)/7472/2020
SRI.C.S.MANILAL SRI.S.NIDHEESH
The court established that claims for 30% of costs under the PWD Manual can be recovered through revenue recovery proceedings despite objections regarding the necessity for prior judicial assessment.
Headnote:
Revenue - Government Contract - Revenue Recovery Act Section 7 - The court held that revenue recovery proceedings can be initiated for the recovery of 30% of the cost of remaining works under the PWD Manual, despite objections concerning the lack of prior adjudication of damages.
Fact of the Case:
The petitioner, a government contractor, challenged the validity of revenue recovery proceedings initiated for unpaid dues after the termination of his contract based on claimed liquidated damages, arguing that these cannot be levied without an adjudication.
Issues: The main issues were whether the amount due could be recovered without prior adjudication and whether the 30% recovery provision allowed for revenue recovery actions.
Ratio Decidendi: The court ruled that recovery of liquidated damages does not establish a debt until adjudication, but the specific provisions in the PWD Manual allow immediate recovery for contract termination without awaiting alternative arrangements.
Final Decision: The writ petition was dismissed as lacking merit.
J U D G M E N T
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Dated this the 26th day of April, 2021 The petitioner, who is a Government Contractor, has approached this Court seeking to quash Exts.P1 and P2 to P6 and to declare that revenue recovery proceedings cannot be invoked in respect of tentative liability and inabilities which are not quantified or adjudicated by the Civil Court or other Adjudicating Authority and hence the recovery proceedings are illegal and non-est.
2. The petitioner was selected for award of the work “Widening the existing Veliavallampathy Canal from Ch: 8930m to 9210m”. The probable amount of contract was ₹
13,31,163/-. An agreement was executed on 18.05.2004.
The site was handed over to the petitioner on 31.12.2004. The work had to be completed before 30.06.2005. The respondents later extended the period up to 31.12.2005. 3. The petitioner states that the estimate was revised ₹
at the instance of the Department to 18,89,475/- on 22.04.2005. According to the petitioner, the work could not be completed due to non-supply of Departmental materials and on account of denial of part bills. The petitioner completed ₹
substantial work and raised a part bill for 12,50,075/-.
₹
However, only 8,41,837/- was paid. An amount of ₹
3,55,947/- is yet to be paid.
4. While so, one Mayilswami filed a complaint before the Enquiry Commissioner and Special Judge, Thrissur. The Enquiry Commissioner ordered a quick verification. In the quick verification, the Vigilance found that the total volume of ₹
the work done by the petitioner is 11,97,784/- and after ₹
deducting the first part bill of 8,41,837.60, the balance ₹
amount due is 3,55,947.20. The Vigilance recommended termination of the contract at the risk and cost of the petitioner. Thereupon, without issuing any notice, the contract was cancelled as per Ext.P1 proceedings.
5. The petitioner states that the security amount of ₹
1,00,000/- which was directed to be adjusted against another work of the petitioner was later released on 28.04.2007. Retention amount due to the petitioner was also released on ₹
31.03.2006. The petitioner also remitted 26,665/- being the amount quantified as the cost of cement.
6. The petitioner states that though the Department attempted to re-tender the balance work twice, the work was not carried out. As the work could not be carried out, the actual risk and cost cannot be quantified in order to fix any liability on the petitioner. Without quantifying the liability, the Department issued a requisition to the revenue authority for ₹
recovery and amount of 2,99,999/- from the petitioner. Accordingly, Ext.P6 demand notice was issued under Section 7 of the Revenue Recovery Act . The petitioner challenges Exts.P1 and P6.
7. The learned counsel for the petitioner, relying on the judgment of the Apex Court inUnion of India v. Raman Iron Foundry [ AIR 1974 SC 1265 ], argued that a claim for liquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a court or other Adjudicating Authority. Relying on the judgment of this Court inAbraham Sebastian v. State of Kerala [2002 (3) KLT839], the learned counsel argued that actual loss which the Government had to suffer in a terminated contract can be assessed only after the completion of the work and till then, no revenue recovery proceedings can be initiated against the appellant.
8. As regards realisation of 30% of the cost provided under the PWD Manual, the learned counsel for the petitioner argued that the said 30% amount can be realised only from EMD/security, bill amount/retention amount, any dues from the Department to the contractor or bank guarantee/ performance guarantee or by filing a civil suit. Revenue recovery proceedings cannot be resorted to for recovering the said 30% of the cost.
9. The 4th respondent–Executive Engineer contested the case filing counter affidavit. According to the 4th respondent, the Government is entitled to recover 30% of the cost through revenue
