J U D G M E N T

The Appeal suit is filed by the State representing the Divisional Engineer, Highways Department, Kallakurichi and others.

2. The suit was filed by the contractor to declare that the alleged cancellation of contract as null and void; to declare the action of withholding Rs.4,23,553/- payable to the plaintiff for the completion of culvert work as illegal, void and not enforceable and to release the EMD and FSD amount of Rs.2,28,500/- which was forfeited by the appellants.

3. The case of the plaintiff as found in the plaint is that he is class 1 registered contractor of the Highways department and the proprietor of Babuji Civil Construction. He entered into an agreement for the award of work for widening the intermediate lane road to double lane road (IL to DL) in Villupuram Mambalapattu at the estimated cost of Rs.94.80 lakhs. As per the agreement, the work has to be done within a period of nine months and the first 30% of the work to be done within the first quarter, 75% of the work to be done in the second quarter and the total completion of work by the end of the third quarter. The plaintiff and the Highways department entered into the agreement to that effect on

30.07.2008.

4. As per the terms of the contract, the work should have been completed by 30.04.2009. When the contractor commenced the work of widening the lane on both sides, he found that the lane on one side is not available for widening, and this was brought to the notice of the Superintending Engineer, who inspected the site and issued the inspection note on 18.04.2009, admitting non availability of land on one side of lane. Therefore, it was decided by the Highways department to widen one side instead of widening the road on both sides. While fact being so, the Highways department illegally terminated the contract on 08.05.2009 for not completing the contract in time, contrary to their own inspection report regarding the progress in the work and non availability of the land on one side. Further alleging that, there is no progress of the work. Rs.5,000/- penalty per day was imposed to the contractor and the money payable to the contractor for the completed other works namely CD work for a sum of Rs.4,23,553/- was withheld in spite of passing the bill after deducting the tax at source. Therefore, the plaintiff filed suit challenging the termination order as illegal and the order of withholding money payable to the plaintiff/contractor for the completed culvert work as unauthorised and illegal. Direction to release the EMD amount and to pay damages for the loss caused due to breach of contract. The suit was filed with a specific plea that the dispute cannot be referred to Arbitrator, even though, there is arbitration clause, since the value of the dispute is above Rs.2,00,000/-.

5. The Highways department Divisional Engineer, who is the 1st defendant, filed written statement denying the averments made in the plaint. According to his statement, the work for widening the intermediate lane road to double lane road was originally awarded to the plaintiff, who is the proprietor of Babuji Civil Construction. The agreement was executed on 30.07.2008 and the work site was handed over to the plaintiff on the same day i.e., 30.07.2008. He was supposed to complete the work by nine months as per the schedule mentioned in the contract. The contractor failed to complete the work as per the terms of agreement, inspite of several notice and intimation to commence and complete the work within the stipulated agreement period. Hence in the public interest, the agreement was determined on 08.05.2009. The existing width of the riding surface at the time of preparation of the estimation was 5.50 m from km 67/2 - 74/6. Hence both sides widening of 0.75 was proposed to maintain the existing centre camber properly. Further, the available right of way was 10 to 12 meter. Therefore, it was proposed for both sides widening with power roller compaction. Later, it was brought to th