Kerala State Electricity Board vs Hindustan Construction Co. LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2006 Supreme(SC) 1132

2006(9) Supreme 657
SUPREME COURT OF INDIA
(From Kerala High Court)
Arijit Pasayat and S.H. Kapadia, JJ.
Kerala State Electricity Board - Appellant
versus
Hindustan Construction Co. Ltd. & Ors. - Respondents
Civil Appeal No. 1465 of 2000
With
Civil Appeal No. 1466 of 2000
Decided on 16-11-2006
Counsel for the Parties :
For the Appellant : T.L. Viswanath Iyer, Sr. Advocate, C.S. Rajan and M.T. George, Advocates.
For the Respondents : F.S. Nariman, Darius Khambatta, Sr. Advocates, P.H. Parekh, Bhavesh Punjvani, Sameer Parekh, Ajay Jha, Sumit Goel and P.V. Dinesh, Advocates.

Headnote:Companies Act, 1956 - Meetings - Essential points in Drafting Minutes - Effect of non-confirmation of minutes - Held, non confirmation of minutes does not have any effect on the decision taken at the earlier meeting - State Electricity Board entered into a contract with respondent company for construction of a power tunnel - Schedule for the work was fixed - Compensation claim for delay in completion of work - Electricity Board sanctioned to pay an interest free ad hoc advance to respondent company - On 30-4-1994, the Board resolved to pay a sum of Rs. 808.26 Lakhs to respondent company subject to adjustment of amount in relation to quantities - Board did not confirm the minutes dated 30-4-1994 relating to payment on the ground that Board needs to discuss the matter further - Respondent company filed petition before the High Court for direction to implement Board’s orders - High Court directed the Board to take a final decision within two months holding that no final decision had been taken in the matter - Board’s decision not to confirm the minutes of its previous meetings - Whether High Court was justified in holding that the subsequent decision taken not to confirm the minutes of its meeting cannot in any way dilute the decision taken earlier - Held, Yes - Dismissing the appeal.
       Held : If one reads the minutes of 30.4.1994 which were not confirmed at the meeting held on 30.5.1994 it is clear that it was merely noted that the Board decided to discuss the issue further. The High Court rightly took note of the fact that nothing happened for a long time. Counter affidavit was filed stating that the Board has not finally accepted the recommendations of the Ad hoc Committee for payment of Rs.808.26 lakhs as it was under no legal obligation to implement the order. The Committee was constituted by the appellant-Board. The varying stands, taken at different points of time show that the object was to avoid payment. The Ad hoc Committee which was appointed consisted of experts in the fields and also Additional Secretary and Under Secretary to the Government. Twenty one sittings were held, site visits were made and voluminous documents were considered. After a very detailed consideration of the whole matter, recommendations were made for making payment of Rs.808.26 lakhs as against claim of Rs.1688.08 lakhs by the respondents. The Board constituted another Sub-Committee consisting of two members, one of whom was the Convener and representative of the Board in the Ad hoc Committee. After considering the recommendations and the report the Board decided to make payment of Rs.250 lakhs as an interim payment. On 30.4.1994 unanimously a decision was taken to pay Rs.808.26 lakhs as noted by the Ad hoc Committee. (Para 28)
       In order to test the rival submissions the only thing that needs to be considered is the effect of non confirmation of the minutes. (Para 29)
       The High Courts view that the decision taken on 30.4.1994 has to be given effect to cannot be faulted. As rightly submitted by learned counsel for the respondents non confirmation of minutes does not have any effect on the decision taken at the earlier meeting. The position has been illuminatingly stated in Chetkar Jhas case (supra). Pursuant to the orders passed by this Court, Rs.500 lakhs have been paid to the respondents and Rs.300 lakhs have been deposited pursuant to the order dated 2.5.2006. The amount has been deposited with the Registry of this Court to be invested in Fixed Deposit. Let this amount be released to the respondents with interest accrued thereon. The respondents shall be entitled to interest @7.5% from the date of Division Benchs judgment i.e. 15.12.1998 after adjustment of the amounts paid and the interest elements so far as relatable to the payment. The balance amount shall be paid within a period of three months from today. (Para 30)

JUDGMENT

Arijit Pasayat, J. - Challenge in these appeals is to legality of the judgment rendered by a Division Bench of the Kerala High Court holding that the appellant was liable to implement the order of the appellant-Board dated 19.4.1994. Direction was further given to issue consequential orders on the basis of decision taken on 12.4.1994 and 30.4.1994 to make necessary payments as expeditiously as possible. The decision of the Board to cancel the earlier order dated 19.4.1994 on the basis of a decision taken at the meeting held on 25.1.1997 and communicated by order dated 29.3.1997 was set aside.

2. Background facts in a nutshell are as follows:

Appellant-Kerala State Electricity Board (hereinafter referred to as KSEB) entered into a contract with respondent no.1- Hindustan Construction Company Ltd. (in short HCC) for the construction of a 12.09 Km long and 6.65 M diameter concrete power tunnel for Lower Periyar Hydro Electric Power Project on 27.02.1984. The contract work had to be completed within 68 months from the date of the contract; i.e. to be completed on or before 26.10.1989. The estimated PAC of the work was Rs.14.92 crores including cost of departmental materials and the agreed PAC was Rs. 23.59 crores. The cost of departmental materials was Rs.3.94 crores. HCC started the work on 27.2.1984 itself.

As the work could not be completed on or before 26.10.1989 i.e. within the original period of completion, KSEB vide order No. TC2-2117/89 dated 14.3.1991 accorded sanction to extend the time of completion of the work upto 30.06.1992 subject to the terms and conditions of the contract then in force.

3. The schedule for the work as was fixed is given below:

Driving

Preparation and opening up faces2 Months

Driving adits5 Months

Driving Tunnel Proper at 75m/26 Months Month for an av.1920m

Total33 Months

Lining

Preparation2 Months

Concreting Floor Portion at7 Months300m/month for 1920m

Concreting sides and Arch at 12016 Months Months for 1920m

Work such as grouting, etc.and4 Monthsplugging adits

Total 29 Months

Final cleaning and handing over2 Months

Probable hold ups4 Months

4. HCC raises certain claims by way of compensation for the delay. The claims enumerated by HCC in their memorandum dated 6.5.1992 and subsequently updated upto December 1992, were under the following heads.

Issue No.1Compensation for Rs.283.80infructuous over lakhs heads and fixed expenses

Issue No.IICompensation for Rs.255.63 extra incidence of lakhsequipment charges

Issue No.IIICost of Financing Rs.639.25 (Original 503.73 lakhslakhs) later updated to)

Issue No.IVInterest on delayed Rs.56.21 payments-(Original-lakhs36.04 lakhs)(LaterUpdated to)

Issue No.VExtra ItemsRs.160.01 Lakhs

Issue No.VIClaims (Pending Rs.293.68 Claims and extra Lakhsitems)

Total Rs.1688.08 Lakhs

5. A meeting of the full time members of the Board with HCC was held on 8.7.1992 and the Chairman of KSEB agreed for the formation of a High Powered Committee as desired by HCC.

6. On 02.03.1993, KSEB constituted an Ad hoc committee to look into the claims raised by HCC. The terms of reference of the Committee were limited to the issues raised in the Memorandum dated 6.5.1992 and in accordance with the minutes of the discussion held by the full time members with HCC on 8.7.1992. After the Committee started functioning, further issues such as request of the company for interim relief of Rs.350 lakhs against their claims and issues regarding recovery rate of cement used for concreting non-payable over breakage in the tunnel were also referred to the Committee vide Chief Engineers letter No.D4-LPT1/93 dated 26.6.1993.

7. On 05.08.1993 Ad hoc Committee recommended interim release of funds amounting to Rs. 250 lakhs.

8. On 02.09.1993, the Ad-hoc Committee appointed by KSEB submitted its report on the claim of HCC, recommending KSEB to make a payment of Rs.808.26 lakhs against the aggregate claim of Rs.1688.08 lakhs made by the HCC. The said recommendations of the committee were based on the following conclusions:

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2006 Supreme(SC) 1132

Cases Referred (1)