Set-offs against contractual payments require an adjudication of liability to be valid under the contract terms.

O R D E R

The State has come up with this review petition essentially feeling aggrieved by the direction issued by this Court pursuant to correction carried out in the judgment. By the said direction, this Court ordered that the petitioner should also be given the bills mentioned in Ext.P5.

2. The writ petitioner is a contractor, which is engaged in executing works for both Public Works Department and the Irrigation Department. In Ext.P5, certain amounts due to the petitioner was ordered to be withheld because of the termination of the contract. Ext.P5 communication was issued by the Executive Engineer of the Irrigation Department with reference to the letter issued by the Superintending Engineer, Project Circle, Piravom. 3. Learned Government Pleader would submit that since the contracts referred in Ext.P5 are terminated at the risk and cost of the writ petitioner, the State is entitled to withhold the amounts due to the petitioner. Learned counsel drawn my attention to paragraphs 6 and 7 in the review petition. The main plank of the argument of the learned Government Pleader is that as per Clause 50 of the special condition of the agreement, any sum of money due and payable to the contractor may be appropriated by the Government and set off against any claims of Government for the payment of a sum of money due to the contractor under the contract. Therefore, it is submitted that since the contract has been terminated at the risk and cost of the writ petitioner, the amounts referred under the bills mentioned in Ext.P5 are liable to be set off against the loss suffered by the Government.

4. It is submitted at the Bar that the termination of the contract is under challenge, which is pending. It is to be noted that the writ petitioner disputes its liability to the State. It is apparent that there is no adjudication or determination of entitlement of loss claimed by the State. Therefore, it cannot per se hold that there is determination of liability due to the Government as referred under Clause 50 of the special conditions to enable the State to set off any amount if there is liability on the part of the contractor as referred under Clause 50 of the special condition of the agreement.

5. In such a situation, I am of the view that the bills referred in Ext.P5 are also liable to be released to the petitioner subject to right of the State to proceed against the writ petitioner in accordance with law for recovery of any loss suffered by them after determining the liability of the contractor. Therefore, this Court is of the view that the amount due to the writ petitioner shall be settled by the 6th respondent in the writ petition within a period of three months from the date of receipt of a copy of this order.

This review petition is disposed of as above.