1. Contract, for supply and staking of PCC Blocks of size 225 mm x 112 mm x 200 mm in M-50 Grade Cement con crete for surfacing works between KM 104 and 106 on Srinagar Sonmarg Goomri Road, was awarded to the peti tioner for an amount of Rs. 1, 38, 33, 344/- only. The contract was awarded vide communication dated 24.04.2006 and site was handed over on 01.06.2006. The petitioner was in formed that the date of completion of work would be 29.08.2006. The date was, however, extended upto 31.08.2007 by levying compensation of Rs. 15, 000/-. The respondents, in their reply affidavit/objections, have further pleaded that the work was not com pleted within the time extended for completion of the same and that delay was caused because of non submission of mixed design from the reputed labo ratory approved by the OC contract. 2. As the contract work could not be executed in full, repeated communica tions were sent to the petitioner. Since the petitioner, allegedly, failed to com plete the work, the respondents, by in voking clause 28 of the General Condi tions of Contract IAFW-1815(R) (GCC for short), terminated the contract at the risk and cost of the petitioner. The work was ordered to be re-tendered and the contract was awarded for balance work in favour of M/S Chenab Construction Company at the value of Rs. 2, 07, 43, 056/-. In view of the re-tendering of work and awarding contract for comple tion of work to another contractor, the respondents sought to recover the amount of Rs. 69, 09, 712/- from the petitioner for which a letter of recovery was also sent to the petitioner. The pleadings of the parties further reveal that the petitioner was awarded an other contract CA No. CE(P)BCN/45/ 2009-10. The respondents, as per their claim, in order to safeguard and inter est of the Government, invoked clause 67 and 70 of the GCC IAFW-2249 and ordered for deferment of payment of Rs. 69, 09, 712 / - out of the payment due to the petitioner in the 2nd contract. 3. In view of the dispute raised in respect of execution of work allotted to the petitioner vide acceptance letter No. 800653/23/E8 dated 24.04.2006, the petitioner requested for appoint ment of an Arbitrator. The competent authority appointed the Arbitrator and arbitration proceedings are going on. 4.
3. In view of the dispute raised in respect of execution of work allotted to the petitioner vide acceptance letter No. 800653/23/E8 dated 24.04.2006, the petitioner requested for appoint ment of an Arbitrator. The competent authority appointed the Arbitrator and arbitration proceedings are going on. 4. The petitioner has filed this writ petition praying therein that by issu ance of writ of certiorari, order dated 05.07.2010, forming annexure-P3 to the writ petition, be quashed and it is fur ther prayed that the respondents be directed to release all the payments in favour of the petitioner for the work done in pursuance of the contract al lotted to him in the year 2009. It is fur ther prayed that the respondents be directed to allow the petitioner to par ticipate and compete in all the future tendering processes initiated or likely to be initiated by the respondents with further prayer to prohibit the respon dents from withholding payment of the petitioner of any other contract because of pendency of dispute with respect to the contract allotted vide order dated 24.04.2006. 5. The communication which is sought to be quashed in this writ peti tion is reproduced hereunder: "Tele: 0194-2300984 2300912 Headquarter 32 Boarder Roads Task Force Pin: 939932 C/056APO 05 Jul 10 8512/20/E8 M/S Zeal Construction Co. Pantha Chowk, Srinagar. Kashmir-191101 PROVINDING LAYING WITH PAVERS AND CONSOLIDATION OF READY MIX GRADING AS PER TABLE 400-11 AND SATISFYING THE PHYSICAL RE QUIREMENT AS PER TABLE NO. 400-10 OF MORT&H SPECIFICATIONS FOR WMM 75MM THICK (CONSOLI DATED 02 LA YER) AND WMM1OOMM THICK (CONSOLIDATED SINGLE LAYER) FOR PAYMENT WORKS BE TWEEN KM 40. 00 TO KM 52.00 ON SSG ROAD IN 122 RCC/32BRTF SECTOR PROJECT BEACON IN J&K STATE, CA NO. CE IP) BCN145/2009-10. Dear Sir, 1. Please refer to:— (a) HQ Ce (P) Beacon letter No. 800653/65/E8 dated 16th Feb. 10. (b) Your letter No. ZCC/10/ 43 dated 18 June 10 2. It is intimated that risk and cost contract has been concluded against CA No. CE (P) BCN/03/20906-07 on your default and Rs. 69, 09, 711, 00 is to be recovered from you as advised vide HQ CE (P). Beacon letter quoted under reference at sub para 1 (a) above. 3. In view above, release of payment of 1st RAR in respect of CA No. CE (P) BCN/45/2009-10 for Rs. 32, 71. 500. 00 at this juncture is not feasible.
69, 09, 711, 00 is to be recovered from you as advised vide HQ CE (P). Beacon letter quoted under reference at sub para 1 (a) above. 3. In view above, release of payment of 1st RAR in respect of CA No. CE (P) BCN/45/2009-10 for Rs. 32, 71. 500. 00 at this juncture is not feasible. Yours sincerely, Sd/- (Rajeev Kumar) Executive Engineer SW For Commander. Copy, to: - HQ CE (P) Beacon/E8. For information with their letter No. 800134/43/E8 dated 01 Jul 10 please C/o 56APO." 6. Heard learned counsel for the parties. Considered the matter. 7. Mr. Haqani, learned counsel for the petitioner, submitted that the dis pute which has been raised in respect of earlier contract which was allotted to the petitioner in the year 2006 and in which arbitration proceedings are pending, cannot become basis in law for withholding the amount to which the petitioner has been found entitled to in respect of the second work allotted to him in the year 2009. He further sub mitted that as the sum which is, alleg edly, to be recovered from the peti tioner, has neither been ascertained nor found to be due in a properly con stituted judicial forum, the respondents cannot either recover the said amount or withhold the same from the peti tioner from his payments which are due to him as per second contract. Learned counsel, in support of his con tention, referred to and relied upon case titled Union of India - appellant Vs. Raman Iron Foundary - respon dents, reported in AIR 1974 SC 1265 (for short Raman Iron Foundary case). He further submitted that the petitioner has been, literally, black listed by the respondents and is not permitted to participate in the process of allotment of other contracts by the respondents. Mr. Haqani further submitted that re spondents, in law, cannot prevent the petitioner from participating in tender process and other allotment of works. It is further submitted that the action of the respondents is illegal and is violative of principles of natural justice. 8. Mr.
Mr. Haqani further submitted that re spondents, in law, cannot prevent the petitioner from participating in tender process and other allotment of works. It is further submitted that the action of the respondents is illegal and is violative of principles of natural justice. 8. Mr. S. A. Makroo, learned ASGI, while referring to clauses 67, 70, 34 & 37 of the GCC, submitted that the re spondents, in terms of the said clauses, have power to recover the amount, for which claim is made by them, from the due amount of the petitioner which is to be paid to him for the reason of hav ing executed another work. He also sub mitted that the writ petition is not maintainable, in as much as, the dis pute between the parties can be settled either in arbitration proceedings or by filing a civil suit and the writ petition, for that matter, is not competent. He, besides, relying upon the Raman Iron Foundary case, also referred to and re lied upon the case titled Prem Nath Gupta Vs. Union of India and others reported in 2010 (3) JKJ 843 (HC) and submitted that in identical circum stances, the Court has dismissed the writ petition. Mr. Makroo also submitted that in view of the conduct of the petitioner, the respondents are within their authority not to allow him (peti tioner) to participate in any tender pro cess/s and are not under any obliga tion to allot any contract to him. 9. In order to appreciate the contro versy raised, it will be appropriate to reproduce the relevant part of clauses, 67, 70, 34 and 37 of the GCC: "67. Recovery from Contractor,-(a) Whenver any claim(s) for payment of sum of money arise(s) out of or under this Contract against same or agree for effecting adjustment from any amounts due to him by the Govern ment.
Recovery from Contractor,-(a) Whenver any claim(s) for payment of sum of money arise(s) out of or under this Contract against same or agree for effecting adjustment from any amounts due to him by the Govern ment. If, however, he refuses or ne glects to make the payment on de mand, or does not agree for effecting adjustment from any amounts due to him, Government shall be entitled to withhold an amount not exceeding the amount of the claim(s) from any sun when due or which at any time there after may become due to the Contrac tor, under this or any other Contract with the Government or from any other sun due to the contractor from the Government (which may be available with the Government) or from the Contractor's Security Deposit or Secu rity bond amount and retain the same by way of lien till such time payment is made by the Contractor or till the claim(s) is/are settled or adjudicated upon or till the contractor, at his ex pense furnishes fixed Deposit Receipt(s) duly endorsed as directed by the Accepting Officer, or a Guar antee Bond from a Scheduled Bank for an amount equal to the amount of the claim(s) in the form as directed by the Accepting Officer. (b) It is an agreed condition of this Contract that the sum of money so withheld or retained as an by way of lien under this condition by the Gov ernment, will be kept withheld or re tained as such by the Government, till the claim(s) arising out of or under this Contract is/are settled or adjudi cated upon and that the Contractor will have no claim for interest or damage whatsoever on any account in respect of such sum so withheld. (c) For the purpose of this condition, where the contractor is a partnership Firm, the Government shall be entitled to withhold in whole or in part as may be necessary, to cover the amount claimed, any sum found payable to any partner of the Firm, whether in his individual capacity or otherwise.
(c) For the purpose of this condition, where the contractor is a partnership Firm, the Government shall be entitled to withhold in whole or in part as may be necessary, to cover the amount claimed, any sum found payable to any partner of the Firm, whether in his individual capacity or otherwise. (d) Any amount due to the Contractor under this contract may be withheld by way of lien against any amount claimed or which may at any time hereafter be claimed by the Govern ment from the contractor on any ac count whatsoever, under this or any other contract between them, and retained, till the claim(s) is/are settled or adjudicated upon. (e) Government reserve the right to carry outpost-payment audit and tech nical examination of the works and Final Bill, including all supporting voucher, abstracts, etc. Government further reserve the right to carry out the aforesaid examination and enforce recovery when detected, notwithstand ing the fact that the amount of the Fi nal Bill may have been included by one of the parties as an item of dis pute before an Arbitrator appointed under the Arbitration clause of the Contract and notwithstanding the fact that the amount of Final Bill figures in the Arbitrators award....." 70. Arbitration,- All disputes, be tween the parties to the Contract (other than those for which the decision of the C. W.F. or any other person is by the Contract expressed to be final and binding) shall after written notice by either party to the Contract to the other of them, be referred to the sole arbi tration of an [serving Officer having degree in Engineering or equivalent or having passed final/direct final ex amination of sub-Division-n of Insti tution of Surveyor (India) recognized by the Government of India] to be ap pointed by the authority mentioned in the tender documents. Unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the works or termina tion or determination of the Contract under Condition No's 55, 56 and 57 hereof.
Unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the works or termina tion or determination of the Contract under Condition No's 55, 56 and 57 hereof. Provided that in the event of the aban donment of the works or cancellation of the Contract under Condition No's. 52, 53 or 54 hereof, such reference shall not take place until alternative arrangements have been finalized by the Government to get the Works com pleted by or through any other Con tractor or Contractors or Agency or Agencies. Provided always that commencement or continuance of any arbitration pro ceeding hereunder or otherwise shall not in any manner militate against the Government's right of recovery from the contractor as provided in Condi tion 67 hereof......’’ 34. RECOVERY FROM CONTRAC-TOR-(a) Whenever any claim(s) for payment of a sum of money arise(s) out of or under this Contract against the Contractor, the Contractor shall on demand make the payment of the same or agree for effecting adjust ment from any amounts due to him by the Government. If, however, he refuses or neglects to make the pay ment on demand or does not agree for effecting adjustment from any amounts due to him, Gout, shall be entitled to withhold an amount not exceeding the amount of the claim(s) from any sum then due or which at any time thereafter may become due to the Contractor under this or any other contract with the Government or from any other sum due to the Con tractor from the Government or from the Contractors Security Deposit or Security Bond amount and retain the same by way of lien till such time. Payment is made by the Contractor or till the Contractor at his expense fur nishes fixed Deposit receipt(s) duly endorsed as directed by the Accept ing officer or a Guarantee Bond from a Scheduled Bank for an amount equal to the amount of the claim(s) in the form as directed by the Accepting Officer.
Payment is made by the Contractor or till the Contractor at his expense fur nishes fixed Deposit receipt(s) duly endorsed as directed by the Accept ing officer or a Guarantee Bond from a Scheduled Bank for an amount equal to the amount of the claim(s) in the form as directed by the Accepting Officer. (b) It is an agreed condition of this contract that the sum of money so with held or retained as and by way of lien under this Condition by the Govern ment will be kept withheld or retained as such by the Government till the claim(s) arising out of or under this contract is/are settled or adjudicated upon and that the contractor will have no claim for interest or damages what soever on any account in respect of such sum so withheld. (c) For the purpose of this Condition, where the Contractor is a Partnership Firm, the Government shall be entitled to withhold in whole or in part as may be necessary to cover the amount claimed, any sum found payable to any partner of the firm, whether in his individual capacity or otherwise. (d) Any amount due to the Contractor under this contract may be withheld by way of lien against any amount claimed or which may at any time hereafter be claimed by the Govern ment from the Contractor on any ac count whatsoever, under this or any other contract between them and re tained till the claim(s) is/are settled/ adjudicated upon...." 37. ARBITRATION.-All disputes be tween the parties to the Contract, (other than those for which the deci sion of the CWE or any other person is by the Contract expressed to the fi nal and binding) shall after written notice by either party to the contract to the other of them, be referred to the sole arbitration equivalent or having passed final/direct final examination of sub-division-U of Institution of Sur veyor (India) recognized by the Govt. of India to be appointed by the au thority mentioned in the tender docu ments. Unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the Supplies or termi nation or determination of the Contract under Condition numbers 29, 30 and 30A hereof. Provided that in the event of abandon ment of the Supplies or cancellation of the Contract under Condition Nos.
Unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the Supplies or termi nation or determination of the Contract under Condition numbers 29, 30 and 30A hereof. Provided that in the event of abandon ment of the Supplies or cancellation of the Contract under Condition Nos. 26, 27 or 28 hereof, such reference shall not take place until alternative arrangements have been finalized by the Government to get the Supplies completed by or through any other Contractor or Contractors or Agency or Agencies. [Provided always that commencement of continuance of any arbitration pro ceedings hereunder or otherwise shall not in any manner militate against the Governments rights of recovery from the Contractor as provided in condi tion 34 thereof]......’’ 10. Clauses 18 & 24 of the GCC which were in existence at the time Raman Iron Foundary case was consid ered and which are reflected in para graph 2 of the said judgment are repro duced hereunder" “2/……………….. "18. Whenever any claim for the payment of a sum arises out of or under the contract against the contrac tor, the purchaser shall be entitled to recover such sum by appropriating in whole or in part, the security, if any, deposited by the contractor, and for the purpose aforesaid, shall be en titled to sell and/or, realize securities forming the whole or part of any such security deposit.
In the event of the security being insufficient, the bal ance and if no security has been taken from the contractor, the entire sum recoverable shall be recovered by ap propriating any sum then due or which at any time thereafter may become due to the contractor with the pur chaser or the Government or any per son, contracting through the Secretary, if such sum even be not sufficient to cover the full amount recoverable, the contractor shall on demand pay to the purchaser the balance remaining due.............’’ "24 Arbitration: In the event of any question dis pute or difference arising under these conditions or any special conditions of contract, or in connection with the contract, (except as to any matters the decision of which is specially provided for by these or the special conditions) the same shall be referred to the sole arbitration of an Officer in the Minis try of Law, appointed to be the arbi trator by the Director General of Sup plies and Disposals. It will be no ob jection that the arbitrator is a Govern ment servant, that he had to deal with the matters to which the contract re lates or that in the course of his du ties as a Government servant he has expressed views on all or any of the matters in dispute or difference. The award of the arbitrator shall be final and binding on the parties to this con tract............" Work under the contract shall, if reasonably possible, continue during the arbitration proceedings and no payment due to or payable by the purchaser shall be withheld on ac count of such proceedings.......’’ 11. The Raman Iron Foundary case aforementioned is decided by a bench of Hon’ble two Judges. The said case came under consideration of the Hon’ble Supreme Court in case titled M/S. HM. Kalamuddin Ansari & Co. Vs. Union of India and others, reported in 1984 SC 29 (for short Ansari's case). The bench, which heard and decided the said case, comprised of three HonTale Judges. Paragraph 3 of the judg ment, in which clauses 18 & 24 of the GCC feel for consideration of the Hon’ble Supreme Court, is reproduced hereunder: "31............................. "18.
Vs. Union of India and others, reported in 1984 SC 29 (for short Ansari's case). The bench, which heard and decided the said case, comprised of three HonTale Judges. Paragraph 3 of the judg ment, in which clauses 18 & 24 of the GCC feel for consideration of the Hon’ble Supreme Court, is reproduced hereunder: "31............................. "18. Recovery of Sums Due: When ever any claim for the payment of sum of money arises out or under the contract against the contractor, purchaser shall be entitled to recover such sum by appropriating in whole or part, the security, if any, deposited by the con tractor, and for the purpose aforesaid, shall be entitled to sell and/or real ize securities forming the whole part of any such security deposit. In the event of the security being insufficient the balance and if no security has been taken from the contractor, the (sic) sum recoverable shall be recov ered by appropriating any sum then due which at any time thereafter may become due to the contractor under contract or any other contract with the purchaser or the Government or per sons contracting through the Secre tary. If such sum even be not suffi cient cover the full amount recover able, the contractor shall on demand pay to the purchaser the balance re maining due........" 24. Arbitration" In the event of any question or difference arising under these conditions or any special con ditions of contract, or in connection with this contract (except as to any matters the decision of which is spe cially provided for by these or the spe cial conditions) the same shall be re ferred to the sole arbitration of any officer in the Ministry of Law, ap pointed to be the arbitrator by the Di rector General of Supplies and Dis posals. It will be no objection that the arbitrator is a Government servant, that he had to deal with the matters to which the contract relates or that in the course of his duties as a Gov ernment servant he has expressed views on all or any of the matters in dispute or difference. The award of the arbitrator shall be final and bind ing on the parties to the contract." 12.
The award of the arbitrator shall be final and bind ing on the parties to the contract." 12. The Hon'ble Supreme Court, in Raman Iron Foundary case, while in terpreting the clause 18 of the GCC, held that recovery of sums presently due and payable by the contractor to the purchaser does not lay down, substan tially, the rights and obligations of the parties under the contract. It was fur ther held that it merely intended to pro vide a mode of recovery of "a claim for payment of sum of money arising out of or under the contract". The Hon'ble Su preme Court held that on the interpre tation of language of clause 18 of the GCC, a claim for a sum is that which is due and payable, i.e. presently recov erable and may be recovered by the mode therein provided. It was further held that "it is difficult to believe that the contracting parties could have intended that even though sum is due and payable to the contractor from the purchaser un der the contract, the purchaser should be entitled to recover it by adopting the mode set out in clause 18 of the GCC. It is im portant to note that clause 18 of the GCC does not create a lien on other sums due to the contractor or due to the purchaser until the claim against the contractor is satisfied. If, to secure payment of a claim, then even if the claim for a sum not pres ently due and payable, the purpose of the provision would not have been so startling or unusual, but the right given to the pur chaser, under clause 18 of the GCC, is a right to recover the amount of his claim by appropriating other sums due to the contractor and on the interpretation of the appellant, this can be done even if the claim is for a sum which is not due or payable in praesenti and the purchaser is otherwise not entitled to recover it.
That would, indeed, be a highly extra ordinary result which we would be loath to read in absence of clear and compelling lan guage." The Hon'ble Supreme Court, after referring to the judgments of dif ferent Courts too ruled that "a claim for damages for breach of contract is, there fore, not a claim for a sum presently due and pay able and the purchaser is not en titled, in exercise of the right conferred upon it, under clause 18 of the GCC, to recover the amount of such claim by ap propriating other sums due to the contrac tor." It was, ultimately, held in the afore mentioned judgment that the Union of India, which was the appellant, had no right and authority under clause 18 of the GCC to appropriate the amount of other pending bills of the respondents therein or towards satisfaction of its claims for damages against the respon dents. 13. The Supreme Court in Ansari's case ruled that the heading of clause 18 of the GCC which talks of "recovery of sums due" will not control clause 18. The Supreme Court further ruled that the said clause gives vide powers to the Union of India to recover the amount claimed by appropriating any sum then due or which, at any time thereafter, may become due to the contractor un der other contracts (refer paragraph 26 of the judgment). 14. Reverting back to the facts of this case, it would be appropriate to state that there is a perceptible and marked difference between the lan guage used in clause 18 of the GCC which became subject matter of con sideration of the Hon'ble Supreme Court in the aforementioned two judg ments and clauses 67 & 34 of the GCC, and relevant for purposes of disposal of this case, in as much as, clause 67 of the GCC authorizes the respondents to withhold the amount not exceeding the amount of claim from any sum then due or which, at any time thereafter, be comes due to the contractor under the existing contract or in any other con tract and the respondents are also authorized to retain the sum by way of lien till such time payment is made by the contractor.
Proviso to clauses 70 & 37 of the GCC does authorize the respon dents to retain the said amount not withstanding the fact that the matter has been referred to arbitration and that the dispute is to be resolved by the Arbitrator. The judgment passed in Raman Iron Foundary case, upon which both the learned counsel relied, does not help either of the two, in as much as, the clause which was under con sideration in the said case before the Hon'ble Supreme Court is, materially and substantially, different from the clause which is applicable to the facts of this case. Under clause 18 of the GCC in Raman Iron Foundary case, the Union of India was given power of re covery of amount, for which claim would be made, from the amount which would be due to the contractor in any other contract. Clause 67 of the GCC, which is attracted to the facts of this case and which is referred to and relied upon, does not confer power of recovery on the Union of India and until same is deter mined or adjudicated upon, but autho rizes it to withhold the amount and re tain the sum by way of lien. The law laid down by the Hon'ble Supreme Court in Raman Iron Foundary case, would not be applicable to the facts of this case and reliance placed by the learned counsel for the petitioner, is thus, ren dered inconsequential. No reliance can be further placed on the said judgment in view of the observations made by the Hon'ble Supreme Court in Ansari's case aforementioned, in as much as, it was stated that clause 18 of the GCC gives wide powers to the Union of India to "re cover the amount claimed by appropriat ing any sum then due or which, at any time thereafter, may become due to the contractor or other contractors." The Hon'ble Supreme Court in Raman Iron Foundary case, at its paragraph 8, has approved the manner and method of withholding and retaining of a sum as lien when it stated that "if merely a right of lien or retention was given to secure payment of claim, where if the sum not presently due and payable, the aforesaid provisions of the GCC would not have been so startling and unusual." 15.
In view of clause 67 of the GCC and as observed by the Hon'ble Supreme Court, the respondents have power to withhold and retain the amount from the amount payment of which has been deferred in terms of the impugned com munication. The said action of the re spondents does not call for any inter ference in view of the aforesaid discus sion. 16. This writ petition, to the extent of dispute raised, is not maintainable as the dispute is of pure civil nature and could be settled in arbitration or by filing appropriate proceedings before a legally constituted judicial forum. There is no breach of contract in view of the language in which clause 67 of the GCC is couched. In absence of any challenge to clause 67 of the GCC, this writ petition is held to be not maintain able. 17. However, the claim of the peti tioner that he has been black listed, in as much as, he is not being permit ted to participate in future tender pro cesses, which fact is admitted by the respondents in their reply affidavit/ob jections, is held to be illegal. The peti tioner has a right to carry on his trade, business/occupation at the same is guaranteed by article 19 of the Consti tution of India. The petitioner can be prevented from participating in the ten dering process only when he is put on prior notice and is given opportunity of hearing and thereafter appropriate or ders are passed. The petitioner would, otherwise, be stigmatized and the ac tion of the respondents, besides being unjust, would fall foul of the mandate contained in article 14 of the Consti tution of India. It is, accordingly, held that until such time the petitioner is afforded opportunity of hearing and a reasoned order is passed, he cannot be prevented from responding to the ten der notification/s and from participat ing in the tendering process. 18. Disposed of along with connected CMPs.