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2023 DIGILAW 165 (KER)

Mohammed Ahnas. B, S/o B Abbas v. State Of Kerala

2023-02-15

SHAJI P.CHALY

body2023
JUDGMENT : The petitioner is a contractor. The grievance raised in the writ petition is in respect of the dismissal of the claim raised by him for differential price of bitumen on the basis of the contract in question due to price fluctuation during the tenure of the contract. The claims are raised on the basis of Exhibits P1 to P4 Government Order/Revised Government Orders issued by the State Government on various dates. 2. The basic material facts for the disposal of the writ petition are as follows: The petitioner had been awarded the work of improvement to Nellikatta Karamathodi Road Km 7/000 to 10/9000 in Kasaragod District having an estimated cost of more than Rs.4 crores. The last date of tender submission was 28.10.2020 and the bid opening was on 02.11.2020; and finally the agreement was executed on 21.12.2020. It is the further case of the petitioner that he finished the said work and the final bill was submitted to the Executive Engineer, Public Works Department, Pulikkunnu, Kasaragod, respondent No.6. The contention put forth by the petitioner is that in respect of road works, the respondents are already under obligation to allow the cost escalation due to price difference of bitumen as per G.O. No. 9386/2018 dated 13.11.2018, which was revised by further Government Order Nos. 2816/2020 and 3815 of 2021 dated 17.04.2020 and 30.04.2021 respectively. Therefore, the sum and substance of the contention advanced by the petitioner is that since he commenced the work after 21.12.2020 i.e., the date of agreement, he is entitled to secure the benefits of price escalation of bitumen from the respondents by virtue of Exhibit P4 revised order dated 30.04.2021. 3. I have heard the learned counsel for the petitioner Sri. U.P. Balakrishnan and the learned Senior Government Pleader Sri. K.V. Manoj Kumar, and perused the pleadings and materials on record. 4. On a perusal of the pleadings, it is categoric and clear that the contract was entered into by and between the petitioner and the State Government with definite conditions and clauses with respect to the execution of the contract that the price of the bitumen is also not liable to be reimbursed in the event of escalation. 4. On a perusal of the pleadings, it is categoric and clear that the contract was entered into by and between the petitioner and the State Government with definite conditions and clauses with respect to the execution of the contract that the price of the bitumen is also not liable to be reimbursed in the event of escalation. However, the contention of the petitioner is that by virtue of Exhibit P1 Government Order dated 13.11.2018, which was successively revised; and consequent to Exhibit P4 revised order dated 30.04.2021, the petitioner is entitled to get the price difference of bitumen from the respondents. Therefore, the question raised by the petitioner revolves around the said Government Orders. 5. Exhibit P1 Government Order dated 13.11.2018 was issued by the Principal Secretary (Finance) having found that the increase in the price of bitumen has an impact on the cost of road construction both in Public Works Department and the Local Self Government Department; and that since the price of bitumen as on April, 2018 had increased by 33% in the ongoing works with effect from 01.11.2018, the price difference of bitumen as on the date of closing of tender and the date of invoice (Invoice date on or after 01.11.2018) will be paid to the contractor on the production of original invoice for the actual quantity consumed for the works within the original term of completion. 6. It was also decided that the price difference will also be allowed to all works with extended term of completion (without fine extension). Accordingly, the Public Works Department was directed to publish the changes in the bitumen rate of Petroleum Corporations for the previous years for identifying the rate on closing date of tender. Therefore, on an analysis of the said Government Order, it is evident that the said Government Order was issued in order to tackle the situation that has arisen during the year 2018 and for providing price difference to ongoing works with effect from 01.11.2018, since the price of bitumen has increased by 33%. 7. Therefore, on an analysis of the said Government Order, it is evident that the said Government Order was issued in order to tackle the situation that has arisen during the year 2018 and for providing price difference to ongoing works with effect from 01.11.2018, since the price of bitumen has increased by 33%. 7. The said order was revised by the Government as per Exhibit P2 Government Order dated 17.04.2020, by which clause (1) of Exhibit P1 Government Order dated 13.11.2018 was modified to the extent that the price difference of bitumen as on the date of agreement between the contractor/accredited agency and the Implementing Officer and the date of invoice (Invoice date on or after 01.11.2018) may be paid to or recovered from the contractor or the accredited agency. 8. Which thus means, by the said revision, the Government also intended to recover the price from the contractor, if the price of the bitumen has decreased. Again, as per Exhibit P3 Government Order dated 25.09.2020, the Government Order dated 13.11.2018 and the subsequent Government Order dated 17.04.2020 was further modified apparently on the basis of the request made by the Chairman, Builders Association of India with respect to the date of closing of tender. Accordingly, para 3 of the order dated 17.04.2020 was modified in regard to the open tenders in the following manner: “(1) For open tenders, the price difference of bitumen as on the date of closing of tenders and the date of invoice (after 01.11.2018) will be payable. (2) for works of nomination, the price difference of bitumen as on the date of agreement and the date of invoice (after 01.11.2018) will be payable.” 9. The claim raised by the petitioner is basically dependent upon Exhibit P4 revised Government order dated 30.04.2021 issued by the Government on the basis of the representation submitted by the General Secretary of the Kerala Government Contractors Association and the Chairman, Builders Association of India before the Minister of Finance. The modification reads thus: 3) Government have examined the matter in detail and are pleased to modify para 3 of Government Order read as 3rd paper above as follows: #For works based on open tenders the price difference of Bitumen payable/recoverable shall be reckoned, as the difference of invoice value and the market rate of bitumen, as on the last date of submission of tender. #For works on nomination, the price difference of Bitumen payable/recoverable shall be reckoned, as the difference of invoice value and the market rate of bitumen, as on the date of agreement, as the case may be. 4. This Government Order is applicable for all ongoing works for which agreements are executed after 01.11.2018.” 10. Therefore, relying upon clause 4 of the aforesaid revised Government order, it is contended that the Government Order is applicable for all ongoing works and the works for which agreements are executed after 01.11.2018. Such a contention is raised by the petitioner, since according to him, he has executed the agreement on 21.12.2020 ie., after 01.11.2018. 11. But, in my considered opinion, Exhibit P4 Government Order dated 30.04.2021 is a revision of the Government Order dated 13.11.2018 due to the unprecedented escalation of bitumen price by 33%. It is on account of the said Government Order alone, the subsequent revision was made by the Government and Exhibits P2 to P4 orders are issued. Therefore, the contention advanced by the petitioner that Exhibit P4 is a general order applicable to all contracts on or after 01.11.2018, can never be sustained under law. It is important to note that the petitioner has executed the contract in question with definite terms and conditions in which there is no contingent offer or promise made by the Government that if the bitumen price is escalated, during the tenure of contract, the petitioner is entitled to get the price difference reimbursed; or there is no case for the petitioner that any of the term in the contract has any implied feature in that regard. Moreover, the petitioner has no case that the price of the bitumen increased in an unprecedented manner so as to cause detriment, prejudice and unexpected circumstances to carry on with the contract. 12. It is also equally significant to note that when the terms and conditions are agreed upon by the contractor and the State, the parties are bound by the covenants, unless any of the terms and conditions of the contract is void, or frustrated due to the impossibility to perform the contract. 12. It is also equally significant to note that when the terms and conditions are agreed upon by the contractor and the State, the parties are bound by the covenants, unless any of the terms and conditions of the contract is void, or frustrated due to the impossibility to perform the contract. The petitioner, even in accordance with his pleadings, is an experienced and seasoned contractor, and therefore he should have been aware of the likelihood of escalation in price of the materials to his disadvantage and reduction in price of the materials to his advantage, and could have only submitted the tender taking into account all pros and cons to resource out a profit. 13. To put it differently, while submitting a tender, a speculation of the present and future market condition of the major components of the work, likelihood of fluctuations in market, advantageous and disadvantageous, near easy availability of the products used in contract, and men and machinery, are all evaluated and a balance is struck by a bidder so as to generate a maximum profit and make the contract a viable and profitable one. This could only be the foundation of a bid submitted by an experienced contractor. 14. Therefore, merely because the price of one of the component materials has escalated, it can never be said that a contract has become impossible to be performed or frustrated, since such aspects are part and parcel of a tender; and it can never be said to be an unexpected or an impossible factor to frustrate a contract. Once a contract is entered into by and between the parties, both the parties are liable to discharge their obligations in accordance with the terms and conditions agreed upon, whatever be the consequences. 15. Section 56 of the Indian Contract Act, 1872 makes it clear that an agreement to do an act impossible in itself is void. Merely because a price escalation has taken place for one of the component products involved in the contract, a contract cannot be said to be impossible to be performed or turned out to be frustrated for that reason. Apart from the same, there is no case for the petitioner that there is any covenant made by and between the parties to tackle any contingency of any event happening in the future. Apart from the same, there is no case for the petitioner that there is any covenant made by and between the parties to tackle any contingency of any event happening in the future. True, if any such term is incorporated in a contract, the petitioner would have been eligible to claim in respect of the price escalation. 16. According to the petitioner, since the Government has made the offer in Exhibit P4 Government Order dated 30.04.2021 that the said Government Order is applicable for all ongoing works and the works for which agreements are executed after 01.11.2018, the Government is estopped from retracting from the offer made by the Government. The question with respect to the terms and conditions of the contract vis-a-vis the price escalation was considered by the Apex Court in South East Asia Marine Engg. & Constructions Ltd. (SEAMEC Ltd.) v. Oil India Ltd., [ (2020) 5 SCC 164 ], wherein the question considered was with respect to the demand of a contractor for the difference of price stating that the circular is a change in law; but held that there is no specific language admitting in contract. 17. After considering the provisions of the Indian Contract Act, 1872, especially Sections 32, 56 and 65, it was held as follows: “29. The contract was entered into between the parties in furtherance of a tender issued by the respondent herein. After considering the tender bids, the appellant issued a letter of intent. In furtherance of the letter of intent, the contract (Contract No. CCO/FC/0040/95) was for drilling oil wells and auxiliary operations. It is important to note that the contract price was payable to the “contractor” for full and proper performance of its contractual obligations. Further, Clauses 14.7 and 14.11 of the contract state that the rates, terms and conditions were to be in force until the completion or abandonment of the last well being drilled. 30. From the aforesaid discussion, it can be said that the contract was based on a fixed rate. The party, before entering the tender process, entered the contract after mitigating the risk of such an increase. If the purpose of the tender was to limit the risks of price variations, then the interpretation placed by the Arbitral Tribunal cannot be said to be possible one, as it would completely defeat the explicit wordings and purpose of the contract. The party, before entering the tender process, entered the contract after mitigating the risk of such an increase. If the purpose of the tender was to limit the risks of price variations, then the interpretation placed by the Arbitral Tribunal cannot be said to be possible one, as it would completely defeat the explicit wordings and purpose of the contract. There is no gainsaying that there will be price fluctuations which a prudent contractor would have taken into margin, while bidding in the tender. Such price fluctuations cannot be brought under Clause 23 unless specific language points to the inclusion.” 18. In Century Spg. and Mfg. Co. Ltd. v. Ulhasnagar Municipal Council, [ (1970) 1 SCC 582 ], it was held that if the promise is made in regard to a present or existing fact, the principle of estoppel can be enforced against the Government; but a promise in relation to a future transaction or act may not fall within the ambit of promissory estoppel. The said legal principle was followed by the Apex Court in A.P. TRANSCO v. Sai Renewable Power (P) Ltd., [ (2011) 11 SCC 34 ], and it was held that even if it can be assumed that there was a kind of unequivocal promise or representation to the respondents, the reviews have taken place only after the period specified under the guidelines and/or in the terms and conditions was over; and that such a matter primarily falls in the realm of contract and the parties would be governed by the agreements that they have signed; and once agreements are signed and are enforceable in law then the contractual obligations cannot be frustrated by the aid of promissory estoppel. It was further held in the said judgment that it will be difficult for the Court to hold that the guidelines can take the colour of a definite promise which in the letters of the Central Government itself were proposals to the State Government. It was further held therein that rights and liabilities arising from a binding contract cannot be escaped on the basis of some presumptions or inferences in relation to the facts leading to the execution of the contract between the parties. 19. In Joshi Technologies International Inc. It was further held therein that rights and liabilities arising from a binding contract cannot be escaped on the basis of some presumptions or inferences in relation to the facts leading to the execution of the contract between the parties. 19. In Joshi Technologies International Inc. v. Union of India [ (2015) 7 SCC 728 ], it was held that when a particular contract is entered into, its novation has to be on fulfillment of all procedural requirements. After assimilating the factual and legal circumstances, it was held that a contracting party cannot claim to be oblivious of the provisions of the law or the contents of the contract at the time of signing and, therefore, later on cannot seek retrospective amendment as a matter of right when no such right is conferred under the contract; and that even the doctrine of fairness and reasonableness applies only in the exercise of statutory or administrative actions of the State and not in the exercise of contractual obligation, and issues arising out of contractual matters are to be decided on the basis of law of contract and not on the basis of the administrative law. It was further held therein that the occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. 20. As I have pointed out above, there is no dispute with respect to the terms and conditions of the contract executed by the petitioner with the respondents and there is no covenant entered into by and between the parties that in the event of contingency of the price escalation of bitumen, the same would be paid by the Government. Therefore, a mere assumption and expectation by the petitioner that by virtue of the Government Orders in question, any contractor who has executed the contract after 01.11.2018 is entitled to get the escalation of the price of bitumen during the tenure of contract, is baseless and unfounded. As is well settled by the provisions of the Indian Contract Act and the principles of law discussed above, the petitioner being a party to a contract with definite terms and fixed price is bound by the terms and conditions entered into by and between the parties. 21. As is well settled by the provisions of the Indian Contract Act and the principles of law discussed above, the petitioner being a party to a contract with definite terms and fixed price is bound by the terms and conditions entered into by and between the parties. 21. Moreover, I do not think that the contention raised by the petitioner on account of Exhibit P4 Government Order dated 30.04.2021 revising the Government Order dated 13.11.2018 that he is entitled to get the benefit of the said Government Order, cannot be sustained, since the original Government Order for payment of the price escalation of the bitumen dated 13.11.2018 was issued by the Government to tackle the situation of an unprecedented increase of bitumen that has happened in the year 2018 consequent to the enhanced price of petroleum products and thus, increasing the price of bitumen by 33%. All the subsequent revision made by the Government and relied upon by the petitioner is only the revision of the Government Order dated 13.11.2018. Therefore, I am of the view that the said Government Orders would not enure to the benefit of the petitioner who has entered into the contract on 21.12.2020 with definite terms and conditions. Needless to say, writ petition fails and accordingly, it is dismissed.