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2016 DIGILAW 687 (ORI)

B. Engineers & Builders Ltd. v. State of Orissa

2016-08-23

B.R.SARANGI, VINEET SARAN

body2016
JUDGMENT VINEET SARAN, C.J. - In response to Tender Call Notice issued by the Orissa State Housing Board-opposite parties 2 and 3, for joint venture building project to be constructed over an area of Ac. 3.71 dec. at Mail Sahi, Bhubaneswar, the petitioner had submitted its offer on 6.4.1998. By order dated 25.6.1998, the Government of Orissa-opposite party no. 1, approved the contract to be executed in favour of the petitioner in exercise of power conferred under Section 15(1)(a) of the Orissa Housing Board Act, 1968. Then on 30.6.1998, the Orissa State Housing Board (for short ‘the Board’) intimated the petitioner that the offer of the petitioner for taking of the Multi-storeyed Commercial/Residential Complex under joint venture building project at Mali Sahi, Bhubaneswar has been accepted and pending finalization and signing of the agreement, the petitioner was advised to go ahead with the preliminary work of site cleaning, preparation of architectural design etc. so as to save time. Then on 14.10.1998, the agreement for the said joint venture project was executed between the Board and the petitioner. Thereafter, the petitioner commenced the construction work after the building construction plan was duly approved by Bhubaneswar Development Authority on 1.5.1999. While the work was in progress and the structural construction was completed up to fourth floor, and also the excavation work of the commercial complex was completed, on 17.5.2000 the opposite party no.2-Board, through its Secretary, wrote to the petitioner intimating it that the agreement executed on 14.10.1998 requires certain amendments, as detailed in the said communication. Thereafter, the petitioner negotiated the matter with the officers of the Board and did not agree for any amendment in the agreement already executed, according to which the petitioner was carrying on construction work. Then by order dated 2.6.2000, the Board cancelled the agreement dated 14.10.1998 on the following grounds. “(i) As the agreement executed is in contravention of the decision of the Board and the detailed tender conditions mentioned in the tender information brochure floated for the purpose, the execution of the said agreement is invalid and amounts to fraud. (ii) You are directed to stop work until further orders failing which the Housing Board, as the owner of the land, will be constrained to take physical possession of the houses already constructed and dispose the same according to law. (ii) You are directed to stop work until further orders failing which the Housing Board, as the owner of the land, will be constrained to take physical possession of the houses already constructed and dispose the same according to law. In such situation, M/s. B. Engineers and Builders will have to bear the cost incurred for taking over physical possession of the building. (iii) This is without prejudice to the criminal action that may be initiated for the loss to the Government and O.S.H.B. through fraud.” 2.Being aggrieved by the same, the petitioner has filed this writ petition for quashing the letters dated 17.5.2000 and 2.6.2000 issued by the Board. Further prayer has also been made for a direction to the opposite parties to abide by the agreement dated 14.10.1998, and the permitting the petitioner to carry on the construction work in terms thereof. 3.We have heard Mr. G.M. Rath, learned counsel for the petitioner; Mr. P.K. Muduli, learned Addl. Standing Counsel for opposite party no. 1; and Sri D.Nayak, learned counsel for the contesting opposite parties 2 and 3, and perused the record. 4.The question to be considered in this writ petition is, as to whether after execution of a contract by a statutory body (Board) with a private contractor (petitioner), can such statutory body unilaterally direct the contractor to modify the terms of the agreement, and if it refuses to do so, cancel the agreement, even after the contractor has invested money and commenced substantial work in compliance of such agreement/contract. 5.It is not disputed that structural construction upto fourth floor had already been completed and excavation of commercial complex had also been completed, prior to the issuance of letter dated 17.5.2000 seeking modification of the agreement. Thus, it is established that the petitioner had acted upon the agreement and commenced the work meaning thereby that it had also made investment. It is not the case of the opposite party-Board that the petitioner violated any of the terms of the agreement dated 14.10.1998. 6.Mr. D. Nayak, learned counsel for the opposite party-Board has submitted that the board was justified in directing the petitioner to modify the terms of the agreement, as the agreement dated 14.10.1998, was not in terms of the prior approval granted by the State Government on 25.06.1998, and was also in variation of the terms of the bid documents. 6.Mr. D. Nayak, learned counsel for the opposite party-Board has submitted that the board was justified in directing the petitioner to modify the terms of the agreement, as the agreement dated 14.10.1998, was not in terms of the prior approval granted by the State Government on 25.06.1998, and was also in variation of the terms of the bid documents. In support of his submission he relied on Section 15(4) of the Orissa Housing Board Act, 1968. 7.Section 15 deals with “Execution of Contracts.” The relevant sub-Section (1)(a) and (4) of Section 15 of the Act, 1968 provides as follows: “S. 15. Execution of contracts – (1) Every contract shall be made on behalf of the Board by the Chairman: Provided that – (a) no contract involving an expenditure of rupees ten lakhs and above shall be made without the previous sanction of the State Government; (4) A contract not made or executed as provided in this Section and the rules made in that behalf shall not be binding on the Board.” In view of the aforementioned provisions, no contract involving an expenditure of rupees ten lakhs and above shall be made without the previous sanction of the State Government. A contract not made or executed as provided in this Section and the rules made in that behalf, shall not be binding on the board. 8.The basic claims flows from the ‘agreement’ dated 14.10.1998 executed between the Board and the petitioner. The said ‘agreement’, in Latin terms called “agregatiomentium” means “a consensus of two or more minds in anything done or to be done”. “Agreement” includes any arrangement or understanding or action in concert,- (i) whether or not, such arrangement, understanding or action is formal or in writing; or (ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceeding. Otherwise also, every promise and every set of promises forming the consideration for each other is an agreement. In Felthouse v. Bindley, (1862)142 ER 1037, it has been held that an ‘agreement’ is an instrument between the parties, who willfully agree to perform certain acts or refrain from doing something. The parties to the instrument should be agreed about the subject-matter at the same time and in the same sense. The two or more parties which are agreed must communicate with each other. The parties to the instrument should be agreed about the subject-matter at the same time and in the same sense. The two or more parties which are agreed must communicate with each other. In W.T. Lamp & sons v. Govind Brick Co Ltd. (1932)1 KB 71, an ‘agreement’ is a commercial document. In view of aforementioned analysis the opposite party is bound by the condition of terms of the agreement executed on 14.10.1998. 9.It is not the case of the Board that the agreement dated 14.10.1998 was executed without the approval of the State Government. The approval granted by the State Government on 25.06.1998 has been filed by the Board along with counter affidavit under Annexure-C/2. In the said communication, it is clearly stated that “the State Government in H & U.D. Department have been pleased to accord approval for execution of a joint venture building project of Orissa State Housing Board for multi-storeyed, commercial-cum-residential complex at Mali Sahi over the land measuring Ac 3.71 decimals as allotted in favour of the Board in the G.A. Department letter No. 15793/CA dated 22.12.1994. The Housing Complex in this land will be constructed by B. Engineers and Builders Private Limited with a negotiated amount of Rs. 7,17,32,225/-( rupees seven crores seventeen lakh thirty-two thousand two hundred and twenty-five) only with a stipulation that the Orissa State Housing Board is to execute an agreement with the execution firm viz. B. Engineers and Builders Pvt. Ltd. to the effect that a minimum 25% of the built up area of the apartments/Group Housing as per the stipulated agreement, shall be available to the OSHB, Bhubaneswar free of cost. “ 10.The approval was thus clearly granted, permitting the Board to enter into an agreement with the petitioner for construction of the complex. From the agreement it is revealed that the petitioner was required to provide the space of 18686 sq. ft. to the Board as per the schedule indicated therein. Learned counsel for the opposite party-Board could not pint out anywhere in the agreement as to the total area of construction to be raised. The built up area to be provided by the petitioner has been specified. It is not the case of the Board that such area has not been given to the Board or that the petitioner has not paid the requisite amount as mentioned in the schedule. The built up area to be provided by the petitioner has been specified. It is not the case of the Board that such area has not been given to the Board or that the petitioner has not paid the requisite amount as mentioned in the schedule. 11.The order cancelling the contract does not indicate that there is any violation of terms of agreement by the petitioner. If at all there is any deviation from the bid documents, in terms of the agreement, it was not the fault of the petitioner, as the agreement was entered into after negotiation between the petitioner and the Board, after which due approval was obtained from the State Government and then alone the agreement was signed by none other than the Chairman of the Board himself. If the contention of the learned counsel for the Board is accepted that the Chairman had defrauded the Board, then nowhere in the counter affidavit it is mentioned as to what action has been taken against the Chairman, who had signed the agreement. If there was any discrepancy in the signing of the agreement, then the Board should have first taken appropriate action against the officer who had signed the agreement on behalf of the Board, and then only could they have acted against the petitioner, who had, by the time the order dated 02.06.2000 was passed, admittedly invested substantial amount in compliance with the agreement dated 14.10.1998. 12.This writ petition was filed in the year 2000 and by interim order dated 05.06.2000 passed by this Court, the order of cancellation by the letter dated 02.06.2000 had been stayed. We are informed that in pursuance of the interim order the construction of the building has already been completed, and the petitioner has already sold certain constructed area and has offered the Board certain built up area, which, according to the petitioner, is in terms of the agreement dated 14.10.1998. 13.In view of the aforesaid facts, and the discussions made hereinbefore, we are of the opinion that the cancellation of the agreement dated 14.10.1998 by order dated 02.06.2000 cannot be justified in law, and is thus liable to be quashed. Accordingly, the order dated 02.06.2000 is quashed. Similarly, the earlier order dated 17.05.2000 requiring the petitioner to amend certain clauses of the agreement cannot be sustained in law, and the same is also quashed. Accordingly, the order dated 02.06.2000 is quashed. Similarly, the earlier order dated 17.05.2000 requiring the petitioner to amend certain clauses of the agreement cannot be sustained in law, and the same is also quashed. 14.Since the construction has already been completed, it is for the opposite party-Board to take over the possession of whatever built up area is required to be handed over to it by the petitioner, and in case there is any deviation from the terms of the agreement dated 14.10.1998, the Board shall be free to take suitable action against the petitioner in accordance with law. The writ petition stands allowed to the extent indicated above. Petition allowed to the extent indicated.