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2012 DIGILAW 485 (MP)

Maa Vindhyawasini Constructions v. M. P. Rural Road Development Authority

2012-05-03

ALOK ARADHE, SUSHIL HARKAULI

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Judgment Shri Abhijeet Awasthy, learned counsel for the petitioner. Shri Vipin Mishra, learned counsel for the respondents. With the consent of learned counsel for the parties, the matter is heard finally. 2. In this petition the petitioner has challenged the validity of the order dated 1-10-2010 passed by the General Manager, M. P. Rural Road Development Authority by which the petitioner has been asked to pay a sum of Rs. 27,10,200/-by way of liquidated damages. In order to appreciate the petitioner's challenge to the impugned order, few facts need mention which are stated infra. 3. The petitioner was awarded a contract for construction and maintenance of the road under the Pradhanmantri Gramin Sadak Yojna in district - Sidhi by the respondent No. 2. The petitioner entered into an agreement with the respondent No. 2 on 25-9-2008 pursuant to which a work-order was issued on 26-9-2008 to the petitioner. The contract awarded to the petitioner was rescinded by the respondent No. 2 vide order dated 6-11-2009. Being aggrieved by rescission of the contract, the petitioner raised a claim of Rs. 35,67,645 along with interest at the rate of 14% vide letter dated 16-7-2010. The respondent No. 1 returned the claim of the petitioner vide order dated 4-1-2011. Thereafter the respondent No. 2 in purported exercise of power under Clause 44.1 of the agreement vide order dated 1-10-2010 asked the petitioner to deposit a sum of Rs. 27,10,200/- by way of liquidated damages. The petitioner thereupon filed the petition under section 7A of the M. P. Madhyastham Adhikaran Adhiniyam, 1983 (in short 'the Act') on 20-8-2011. In the aforesaid factual backdrop, the petitioner has approached this Court. 4. Learned counsel for the petitioner submitted that the action of the respondents in demanding a sum of Rs. 27,10,200 is per se arbitrary and is without authority of law. It is further submitted that a party to the contract cannot recover the amount from the contractor until and unless there is adjudication with regard to liability of the contractor to pay the amount in question. It is further submitted that a party to contract cannot be allowed to be a Judge in his own cause. It is further submitted that a party to the contract cannot recover the amount from the contractor until and unless there is adjudication with regard to liability of the contractor to pay the amount in question. It is further submitted that a party to contract cannot be allowed to be a Judge in his own cause. In support of his submissions, learned counsel for the petitioner has placed reliance on decision in State of Karnataka vs. Shree Rameshwara Rice Mills, Thirthahalli, AIR 1987 SC 1359 and B. B. Verma and another vs. State of M. P. and another, 2007(4) MPLJ (F.B.) 610 = AIR 2008 M. P. 202. On the other hand, learned counsel for the respondents submitted that action against the petitioner has been taken in terms of the contract in accordance with law. 5. We have considered the submissions made by learned counsel for the parties. Admittedly, the agreement has been executed between the parties. The damages may be of two types, namely, liquidated damages and unliquidated damages. Liquidated damages means an amount contractually stipulated as a reasonable estimation of actual damage to be recovered by one party if the other party breaches. The expression 'unliquidated damages means the amount of damages not specified or determined or ascertained, the amount of damages which are to be determined by a Court rather than specified by a contract. [See: Advanced Law Lexicon by P. Ramanatha Aiyar, 3rd Edition]. Thus, it is apparent that in order to ascertain liquidated damages no adjudication is required whereas in order to ascertain unliquidated damages, adjudication is required. In this connection, we may refer to clause 44.1 of the agreement which reads as under : "44.1 The Contractor shall pay liquidated damages to the Employer at the rate per week or part thereof stated in the Contract Data for the period that the Completion Date is later than the Intended Completion Date. Liquidated damages at the same rate shall be withheld if the Contractor fails to achieve the milestones prescribed in the Contract Data. However, in case the Contractor achieves the next milestone the amount of the liquidated damages already withheld shall be restored to the Contractor by adjustment in the next payment certificate. The total amount of liquidated damages shall not exceed the amount defined in the Contract Data. The Employer may deduct liquidated damages from payments due to the Contractor. However, in case the Contractor achieves the next milestone the amount of the liquidated damages already withheld shall be restored to the Contractor by adjustment in the next payment certificate. The total amount of liquidated damages shall not exceed the amount defined in the Contract Data. The Employer may deduct liquidated damages from payments due to the Contractor. Payment of liquidated damages shall not affect the Contractor's other liabilities." 6. Thus, from perusal of Clause 44.1 it is graphically clear that for ascertaining the liquidated damages no adjudication is required. From perusal of the order dated 1-10-2010, it is apparent that opportunity of hearing was given to the petitioner with regard to recovery of liquidated damages which he did not avail. Accordingly, in accordance with the formula prescribed in the agreement which is referred in clause 44.1 of the agreement, liquidated damage has been ascertained at Rs. 27,10,200/-. 7. At this stage, we may deal with the cases on which the reliance has been placed by learned counsel for the petitioner. In Shri Rameshwara Rice Mills (supra) the Supreme Court dealt with Clause 12 of the agreement which reads as under: "In token of the first party's willingness to abide by the above conditions, the first party has hereby deposited as security a sum of five Hundred Rupees only with the second party and for any breach of conditions set forth hereinbefore, the first party shall be liable to pay damages to the second party as may be assessed by the second party, in addition to the forfeiture in part or whole of the amount deposited by him. Any amount that may become due or payable by the first party to the second party under any part of the agreement, shall be deemed to be and may be recovered from the first party as if they were arrears on land revenue." 8. Thus, recovery of the amount as damages under Clause 12 of the said agreement was dependent upon the breach of the contract. In the aforesaid context, it was held that right of the second party to assess damages would arise only if there is breach of conditions of the contract is admitted or no issue is made out of it. Thus, recovery of the amount as damages under Clause 12 of the said agreement was dependent upon the breach of the contract. In the aforesaid context, it was held that right of the second party to assess damages would arise only if there is breach of conditions of the contract is admitted or no issue is made out of it. It was further held that if the intention of the parties would have been to empower the officer acting on behalf of the State Government to adjudicate upon the dispute regarding breach of conditions the wording of the Clause 12 would have been entirely different. Accordingly, it was held that the power of the State Government to assess the damages for breach of the conditions and recover the damages would be confined only to those cases where breach of condition is admitted or there is no dispute in that regard. Thus, the aforesaid case is of no assistance to the petitioner in the facts of the case. The Full Bench of this Court in B. B. Verma (supra) has held that under a clause of the agreement if any sum or money due under the contract to the government cannot be recovered by the government from the contractor as arrears of land revenue in accordance with the M. P. Land Revenue Code, 1959 without decision of the S. E. or tribunal under the Act where the contractor disputes the amount before the S. E. or the tribunal under the Act. The Full Bench of this Court in the aforesaid case has not dealt with the issue of recovery of liquidated damages. In the instant case, the amount in question is being recovered from the petitioner as liquidated damages which does not require any adjudication. Thus, the decision rendered by the Full Bench has no application to the facts of the case. 9. A specific query was put to the learned counsel for the petitioner with regard to his case on merits however, learned counsel for the petitioner submitted that since the dispute is pending before the tribunal under the Act therefore the amount in question cannot be recovered from the petitioner. 9. A specific query was put to the learned counsel for the petitioner with regard to his case on merits however, learned counsel for the petitioner submitted that since the dispute is pending before the tribunal under the Act therefore the amount in question cannot be recovered from the petitioner. We are not inclined to accept the aforesaid submission of the learned counsel for the petitioner for the reason that if the same is accepted it would be in aid of unscrupulous litigants who may lodge frivolous claims before the tribunal and can take advantage of pendency of dispute before the tribunal. It is also pertinent to mention here that proviso to section 17-A of the Act expressly takes away the power of the tribunal to grant any interim order by way of injunction, stay or attachment. Therefore, mere filing of the dispute before the tribunal would not entitle the petitioner to obtain stay of the proceedings for recovery. 10. In view of the preceding analysis, we do not find any merit in this petition. Accordingly, the writ petition fails and is hereby dismissed. Petition dismissed.