Dhanlaxmi Electricals vs State Of Gujarat

(PER : HONOURABLE MR.JUSTICE K.M.THAKER)

1. Heard Mr.Sukhvani, learned advocate for the petitioner and Mr.Tirthraj Pandya, learned AGP.

2. Rule. Learned AGP has waived service of Rule.

3. At the joint request and with consent of learned advocates for both the sides, the matter is taken up for final hearing.

4. In the present petition the petitioner has prayed, inter alia, that:

"12(b) This Hon'ble Court may kindly be pleased to issue an appropriate writ, order or directions to quash and set aside the Communications dated 04/10/2018 and 16/10/2018 with respect to recovery of alleged losses of Rs.1,47,640.44 from other ongoing contracts and Page 1 of 11 C/SCA/16586/2018 ORDER proposed penal action being arbitrary, unilateral, illegal, malafide and violative of Article-14, 19(1)(g) and 21 of the Constitution of India."

5. To justify the request in the petition, the petitioner has narrated below mentioned facts.

"2. The Petitioner is a proprietary concern of Varshaben Abehsinh Tadvi, and also Class "EI" Govt. App. Contractor which is valid till 31/12/2018, annexed herewith marked as Annexure-B is the copy of registration certificate.

3. The petitioner was awarded the following two contracts:-

(a) S.R. To E.I. In ITI Work Shop. At Bhavnagar, Agreement No.93/2013-14 Tender Cost : Rs.2,88,932.54 Date of work order : 26/12/2013.

Actual Date of Completion : 26/01/2014.

Refund of S. D. : 30/01/2015.

(b) S. R. To E. I. IN Majiraj Ba Girls High School Building Class Room, At Bhavnagar (Ground Floor), Agreement No.94/2013-14 Tender Cost : Rs.2,60,531.46 Date of work order : 26/12/2013.

Actual Date of Completion : 26/01/2014.

4. The petitioner submits that the Executive Engineer by letter dated 04/10/2018, alleged that item No.1 to 14 of Agreement No.93 of 2013-14 are defective due to which the Government has suffered the loss of Rs.1,25,083.68 which is required to be recovered and directed to deposit the said amount within 10 days in case, the amount will not be deposited the same shall be recovered from the amount payable for other ongoing contracts and directed to give the explanation within 30 days why not to take the penal action. The petitioner submits that alongwith the letter dated 04/10/2018 the copies of the letter dated 10/09/2018 from Chief Engineer to Superintending Engineer and letter dated 12/09/2018 from Superintending Engineer to Executive Page 2 of 11 C/SCA/16586/2018 ORDER Engineer were also provided, annexed herewith collectively marked as Annexure-C are the copies of the letters dated 04/10/2018, 10/09/2018 and 12/09/2018.

The petitioner by letter dated 10/10/2018, replied the letter dated 04/10/2018 and raised the contention that no details of alleged defects are provided and behind the back of petitioner the inspection was carried out which is ultra virus and not acceptable to the petitioner. The petitioner further raised the contention that the work was executed under the supervision of the Dy. Executive Engineer, Junagadh and the measurements were recorded by Dy. Executive Engineer, Junagadh, 10% measurement were cross checked the than Executive Engineer and accordingly the then Executive Engineer had released the payment and now, the Executive Engineer has served the notice which is not proper. The petitioner submits that against the tender cost of Rs.2.88 Lacs the notice has been served for depositing Rs.1.25 Lacs which is not legal and contractual. The petitioner submits that there is no decree passed by the Competent Court, therefore, the alleged recovery cannot be effected from other ongoing contracts and the said decision is unilateral, therefore, no recovery can be effected from other bills. The petitioner also raised the contention that as per the judgment of the Hon'ble Supreme Court the Rules for banning of business code be followed, annexed herewith marked as Annexure-D is the copy of letter dated 10/10/2018.

5. The petitioner submits that the Executive Engineer by letter dated 04/10/2018, alleged that item No.01 to 08 of Agreement No.94 of 2013-14 are defective due to which the Government has suffered the loss of Rs.22,556.76 which is required to be recovered and directed to deposit the said amount within 10 days in case, the amount will not be deposited the same shall be recovered from the amount payable for other ongoing contracts and directed to give the explanation within 30 days why not to take the penal action. The petitioner submits that alongwith the letter dated 04/10/2018 the copies of the letter dated 10/09/2018 from Chief Engineer to Superintending Engineer and letter dated 12/09/2018 from Superintending Engineer to Executive Engineer were also provided, annexed herewith collectively marked as Annexure-E are the copies of the Page 3 of 11 C/SCA/16586/2018 ORDER letters dated 04/10/2018, 10/09/2018 and 12/09/2018.

The petitioner by letter dated 10/10/2018, replied the letter dated 04/10/2018 and raised the contention that no details of alleged defects are provided and behind the back of petitioner the inspection was carried out which is ultra virus and not acceptable to the petitioner. The petitioner further raised the contention that the work was executed under the supervision of the Dy. Executive Engineer, Junagadh and the measurements were recorded by Dy. Executive Engineer, Junagadh, 10% measurement were cross checked the than Executive Engineer and accordingly the then Executive Engineer had released the payment and now, the Executive Engineer has served the notice which is not proper. The petitioner submits that against the tender cost of Rs.2.60 Lacs the notice has been served for depositing Rs.22.55 Thousands which is not legal and contractual. The petitioner submits that there is no decree passed by the Competent Court, therefore, the alleged recovery cannot be effected from other ongoing contracts and the said decision is unilateral, therefore, no recovery can be effected from other bills. The petitioner also raised the contention that as per the judgment of the Hon'ble Supreme Court the Rules for banning of business code be followed, annexed herewith marked as Annexure-F is the copy of letter dated 10/10/2018.

6. The petitioner submits that the reply has not been considered for all the three contracts and the Respondent has given the reply by letters dated 16/10/2018 and once again directed to deposit Rs.1,47,640.44 in 2 days or else the amount will be recovered from the amount payable of other contracts as well as penal action will be initiated, annexed herewith collectively marked as Annexure-G are the copies of letters dated 16/10/2018."

6. From the details mentioned it comes out that the petitioner was awarded two contracts vide separate work orders, both dated 26/12/2013.

7. According to the petitioner, contractor (petitioner) Page 4 of 11 C/SCA/16586/2018 ORDER executed the contract in accordance with the terms of the contract and completed the work during prescribed time limit.

8. The petitioner claims that the work related to Agreement No.93/2013-14 got completed on 26/01/2014 whereas the work of other contract i.e. work related to Agreement No.94/2013-14 got completed on 06/01/2014.

9. According to the petitioner, after completion of the work, the competent authority issued completion certificate and in January, 2015, the authority also issued refund order and returned the security deposit.

10. According to the petitioner, for almost 03 years nothing happened with regard to the said two contracts. During said period, any complaint or objection with regard to work and execution of contract was never raised.

11. Thereafter suddenly in October, 2018 the respondent issued communication with the allegation that there are certain defects in the work executed under the Agreement No.93/2013-14 as well as the work related to Agreement No.94/2013-14.

12. On the said premise the respondent submitted that they suffered loss to the tune of Rs.1,25,083.68 in respect of work under Agreement No.93/2013-14 and they also suffered loss to the tune of Rs.22,556.76 in respect of the work under Agreement No.94/2013-14.

13. The respondents, vide their intimation dated 04/10/2018, Page 5 of 11 C/SCA/16586/2018 ORDER also informed the petitioner that if it does not make the payment with regard to loss suffered by the department, then appropriate action will be taken for recovery of the amount and to black list the petitioner and to ban the petitioner from business.

14. It is further claimed by the petitioner that on receipt of such intimation/notice, the petitioner submitted reply/explanation as well as objection.

15. Aggrieved by the said intimation, the petitioner instituted present petition.

16. The petitioner has asserted that without prejudice to its rights and contentions, it has deposited the amount with the competent authority.

17. The petitioner is essentially and substantially aggrieved by the intimation that the respondent will initiate action to black-list the petitioner and ban the petitioner from business.

18. Mr. Sukhwani, learned advocate contended that the petitioner has paid the amount under protest and the petitioner has right/remedy under the contract to raise dispute before the Gujarat Public Works Contract Dispute Arbitration Tribunal (GPWCDAT) and that, therefore, the petitioner will take necessary steps in accordance with law against the said demand and intimation by the respondent and that, therefore, the proposed action should be actually subject to the result of the proceedings which will be instituted before the Tribunal and until then the respondent should not initiate Page 6 of 11 C/SCA/16586/2018 ORDER any proceedings to black list the petitioner or ban the petitioner from business, more particularly because the petitioner has, already paid-though under protest-the amount demanded by the department.

19. Mr. Sukhwani, learned advocate, in support of his request, relied upon the decision dated 15/02/2016 rendered by this Court in Special Civil Application No.14636 of 2015 wherein the Court has observed as under:

"4. In response to notice issued, the respondents have appeared and filed reply in which it is stated as under :

"5. The respondent No.2 humbly submits that the Executive Engineer, (Quality Control), Roads & Bldg. Dept.Bhavnagar inspected the site and submitted a detailed report about poor workmanship in execution of work and thereupon the State of Gujarat, Roads & Bldg. Dept. at Gandhinagar passed an order on 6.8.15 to make recovery and copy of the order dtd.6.8.15 is annexed as ANNEXUREA. It is most respectfully stated that immediately thereafter the impugned order is passed by the respnt. no.2 calling upon the petitioner to deposit an amount of Rs.13,12,512.36. The respnt. No.2 submits that as the work executed by the petitioner is defective and not as per the terms and conditions of the contract executed between the parties and it was found by the independent authority i.e. Executive Engineer, (Quality Control), Roads & Bldg. Division, Bhavnagar, the highest authority i.e. State of Gujarat has taken a decision and issued order on 6.8.15. The respnt. no.2 submits that the said decision of the State of Gujarat is just and legal and in the interest of administration and public at large. The respnt. No.2 submits that due to defective work the ultimate sufferers are the administration and public at large and that too at the cost of public exchequer."

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5. Learned counsel for the petitioner submitted that after 05 years of discharging the petitioner from the contractual obligations the authorities could not have initiated such unilateral recoveries. He relied of the decision of the Supreme Court AIR 1987 SC 1359 in this respect. Counsel further submitted that there is an arbitration clause in the contract between the parties.

6. Learned counsel Mr.Munshaw however submitted that the State authorities had inspected the road constructed by the petitioner. The construction was found to be defective. On the basis of report drawn by the authorities, the government directed the district panchayat to make the said recoveries.

7. In facts of the present case, we do not find that the respondent is authorised to make recovery without any process of adjudication whatsoever. After a long passage of time, relying on unilaterally obtained report, copy of which is not even supplied to the Court, the very quantification of damages, if at all, cannot be stated to have been established after following the process of law. We leave it to the respondents to make such recoveries after following the due process, the arbitration or civil proceedings as may be advised.

8. In view of this directions the impugned notice dated 10.8.2015 is quashed. The petition is disposed of Direct service is permitted."

20. Today, learned AGP has placed on record a communication dated 01/12/2018 whereby learned AGP is informed by the Executive Engineer that the petitioner has already deposited Rs.1,47,640.44 and that, therefore, at this stage, any need to initiate action for black listing or to ban the petitioner from business is not required nor contemplated.

21. The said communication also conveys that further action may be taken after instruction from the State Government.

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22. Learned AGP, relying on the said communication dated 01/12/2018, submitted that the respondent are to hold their hands and they are not to initiate any action to black list the petitioner or to ban the petitioner from business since the petitioner has paid the amount.

23. We have considered rival submissions and impugned communication dated 04/10/2018 as well as the communication dated 01/12/2018 addressed to learned AGP.

24. From the submissions made by learned AGP and so also from the letter dated 01/12/2018, it has emerged that the petitioner has indisputably paid the amount demanded by the respondents i.e. Rs.1,25,083.68 and Rs.22,556.76.

25. It also appears that there is no doubt with regard to the fact that the petitioner has right/remedy available under law and also in light of the terms of contract to institute proceedings/initiate dispute against the allegations and claim by the respondents, which is, according to the petitioner, raised belatedly.

26. Under the circumstances, it comes out that when the petitioner has already paid the amount, though under protest and without prejudice to its rights and contentions, any action to black list the petitioner until he exhausts the remedy available in law, would not be justified.

27. Action which was originally proposed by the respondents on the premise that the contractor has to make good the loss suffered by the department, for the present does not survive Page 9 of 11 C/SCA/16586/2018 ORDER inasmuch as the petitioner has already paid the amount.

28. Actually the respondent-Executive Engineer himself has clarified that any action to black-list the petitioner or to ban the petitioner from business is not instituted/initiated and such action is not under consideration or contemplation and upon payment of the amount in question, any need or any cause to initiate such action does not survive.

29. However, in view of the text of the letter dated 01/12/2018, present petition can be and deserves to be disposed of with appropriate clarification.

30. In view of the communication dated 01/12/2018 coupled with the fact that the petitioner has paid the amount, though under protest and without prejudice to its rights and contentions, it is clarified that until the expiry of time limit prescribed by law or under the agreement (for instituting appropriate proceedings before the Gujarat Public Works Contract Dispute Arbitration Tribunal in connection with the contract(s) in question and the disputed demand) and for submitting an application for appropriate interim relief against the proposed action in connection with above mentioned contracts/work orders. Such action, if required to be taken and if taken in connection with above mentioned work orders/contracts, then it will be subject to order passed by the Tribunal. It is clarified that aforesaid clarification/direction is applicable to the action taken in connection with the contracts/work orders mentioned above and not to any action in respect of any other contracts/work orders and/or on any other ground i.e. on any ground other Page 10 of 11 C/SCA/16586/2018 ORDER than the ground mentioned in notice issued in October, 2018. Differently said direction does not apply to any action in connection with any contract/work order or dispute/demand other than above mentioned three contracts.

(K.M.THAKER, J) (V. B. MAYANI, J) ila Page 11 of 11