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THE HONBLE SRI JUSTICE A. RAMALINGESWARA RAO
Writ Petition No. 28092 of 2017
10-10-2017
M/s Jaiprakash-Gayatri Joint Venture, Rep. by its Authorised Signatory G. Venkateswara Rao and others Petitioners
State of Andhra Pradesh, Rep. by its Principal Secretary, Irrigation and Command Area Development Department, Amaravati, Gun
Counsel for the Petitioners :Sri S. Ravi, learned Senior
Counsel appearing for Sri V.R.N. Prashanth
Counsel for the Respondents: GP for Irrigation
<Gist :
>Head Note :
? Cases referred:
1. 2017(5) ALD 556
2. (2011) 6 SCC 508
3. (2011) 9 SCC 354
4. (2014) 9 SCC 1
HONBLE SRI JUSTICE A. RAMALINGESWARA RAO
Writ Petition No.28092 of 2017
Order:
Heard learned Senior Counsel, Sri S. Ravi for the petitioners and
learned Government Pleader for the respondents.
This Writ Petition was filed challenging the action of the
respondents in calling upon the first petitioner to pay an amount of
Rs.5,59,80,000/- with interest at 8% p.a., from the date of payment of
the amounts and in issuing letter dated 26.07.2017 by the fourth
respondent as illegal, arbitrary and also sought stay of further
proceedings of invocation of bank guarantees.
When the Writ Petition came up for admission on 22.08.2017, time
was granted and posted the matter to 29.08.2017, but the respondents
did not give proper instructions to the learned Government Pleader, and
hence this Court was constrained to grant stay of further action in the
instant case. Seeking vacation of the said stay, the respondents filed
W.V.M.P.No.3839 of 2017 on 13.09.2017 and while extending the interim
order up to 10.10.2017, this Writ Petition was taken up for hearing on
merits as the matter relates to invocation of bank guarantee.
The undisputed facts in this case are that the third respondent
entered into an Agreement No.8 SE/2007-2008 dated 25.06.2007 for the
work of Package No.04/2006 pertaining to investigation, design and
earth work excavation of GNSS Main Canal from KM 119.000 to KM
141.350 including construction of CM & CD works including formation of
Uddimadugu Reservoir and distributory system including field channels to
feed an Ayacut of 10000 acres in Kadapa District. The work has to be
completed in forty eight (48) months. The petitioners became the lowest
tenderers pursuant to quoting of an amount of Rs.111,96,00,000/- being
minus 23.3885% of less than the tender value. As per Clause 49 of the
general conditions of contract, which forms part of the agreement, the
contractor is entitled to avail the mobilization advance in two installments
equivalent to 10% of the contract amount (5% for labour mobilization
and 5% for machinery and equipment) named in the letter of acceptance.
The 5% of the amount shall be paid in two installments i.e., 1% of the
said amount shall be paid after concluding the agreement and the balance
of 4% under two installments shall be released after commencement of
the work i.e., after completion of investigation, survey and designs. The
1% of the amount was paid in a sum of Rs.58,98,000/- on 05.09.2007
and Rs.55,98,000/- on 24.09.2007. The balance of 4% of mobilization
advance was also paid in two installments of Rs.1,34,40,000/- on
05.07.2008 and Rs.3,13,44,000/- on 24.07.2008. Since the petitioners
were required to submit bank guarantees, the first petitioner submitted
bank guarantee for Rs.6,71,76,000/- instead of an amount of
Rs.5,59,80,000/- released by the respondents. Though the petitioners
were not asked to submit the bank guarantees towards interest, the
petitioners submitted excess bank guarantees as above. The bank
guarantees are valid up to 08.01.2018. The commission on bank
guarantee should be borne by the first petitioner only. It appears that
the site could not be handed over to the petitioners as no forest clearance
was obtained. In those circumstances, extension of time was granted
from 25.06.2011 to 24.06.2014, from 25.06.2014 to 31.03.2015, from
01.04.2015 to 31.07.2015, from 01.08.2015 to 30.09.2015 and lastly
from 01.10.2015 to 31.03.2016. Since the first petitioner opted to close
the contract, no further extension was granted by the Government and
the issue with regard to pre-closure of the contract is pending with the
Government pursuant to letter No.CE(P) & DWRO/WRD/KDP/TS-3/Pack-
IV/2016, dated 05.06.2016 of the Chief Engineer. The fourth respondent
addressed a letter on 26.07.2017 to the first petitioner asking to pay
back the mobilization advance of Rs.5,59,80,000/- with interest at 8%
p.a., up to date from the date of payment within 14 days, and further
stating that failing the same the bank guarantee available with the
department would be encashed. It is stated that the said letter was
issued pursuant to failure of the petitioners to pay back the amount in
spite of the letter of the Superintending Engineer dated 22.06.2016.
Challenging the said letter, the present Writ Petition is filed.
The respondents defended their action stating that there is no
element of public law involved in the contract and in view of the decision
of this Court in M/s.Lanco Infratech Limited v. Power Finance
Corporation, New Delhi this Writ Petition is liable to be dismissed.
The first petitioner entered into an agreement with the Superintending
Engineer, GNSS Circle, Kadapa, but not with the third respondent and the
concerned Superintending Engineer was not made a party to the present
Writ Petition, hence, it is liable to be dismissed. The forest clearance
could not be obtained and possession of the site could not be given to the
petitioners due to non-availability of the land for compensatory
afforestation. No claim for compensation on account of delays or
hindrances from whatsoever cause shall lie, but reasonable extension of
time will be allowed by the Executive Engineer and accordingly extension
of time was granted. Since the first petitioner opted to close the
contract, no further extension of contract was granted after 31.03.2016.
No fundamental breach was committed by the respondents and the
contract is no longer existing. The permission from the Forest
Department was obtained for conducting investigation and though the
same was intimated to the petitioner, the petitioner vide its reply dated
14.04.2016 stated that it is not in a position to take up balance survey
and investigation work. Since the proposal submitted by the petitioner
with regard to hydraulic particulars was not in accordance with the norms,
the competent authority observed certain deficiencies in the proposal and
communicated for rectification way back in 2008. Due to incomplete
survey, investigation and design operations by the first petitioner, the
revocation of mobilization advance has become mandatory. The proposal
submitted by the Chief Engineer (Project), Kadapa on 05.06.2016 to the
Government is pending with the Government. Even after approval of
hydraulic particulars submitted by the first petitioner, the first petitioner
has not submitted the designs and drawings of structures, ayacut
registers, block command maps, land plan schedules etc., which do not
require any forest clearance. It is possible to conduct investigation for
which forest clearance was not a hindrance and in spite of the same the
first petitioner has not made any attempt to complete the investigation.
Though the requisite permission was obtained from the District Forest
Officer, Kadapa to conduct survey work, the first petitioner could not
complete the balance survey work. Thus, the purpose for release of
mobilization advance was not fulfilled. In fact, the second installment
amount of 4% should not have been released as the investigation itself
was not completed, but the second installment was released with the fond
hope that the first petitioner may complete the investigation. Even after
lapse of 10 years, the first petitioner could not complete the investigation
works.
In the light of the above facts, the following points require to be
decided.
1) Whether the Writ Petition is maintainable challenging the letter
dated 26.07.2017 issued by the 4th respondent?
2) Whether the action of the respondents is fair in the facts and
circumstances of the case?
The details of the bank guarantees furnished by the first petitioner
towards the mobilization advance are as follows:
Sl.No
.
Bank Guarantee No.
Date
Amount
Rs.
Name of
the Bank
Purpose
1.
09541GPER004407
25.04.200
7
2,80,00,00
0
Bank of
Baroda
EMD
2.
G84GOPG07190000
1
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
3.
G84GOPG07190000
2
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
4.
G84GOPG07190000
5
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
5.
G84GOPG07190000
6
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
6.
G84GOPG07190000
7
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
7.
G84GOPG07190000
8
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
8.
G84GOPG07190000
9
09.07.200
7
71,76,000
Canara
Bank
Mobilization
Advance
The case of the first petitioner is that it is incurring an amount of
Rs.1,07,79,703/- towards commission charges for keeping the
mobilization advance bank guarantees alive and till date an amount of
Rs.81,16,170/- was paid towards commission charges. The first
petitioner also paid an amount of Rs.26,63,533/- towards commission
charges for performance bank guarantee. The further case of the
petitioners is that as per Clause 20 of the terms and conditions of the
agreement, the department shall give possession of the site to the
Contractor and if possession of a part of the site is given, the department
shall ensure that the site so handed over was amenable to carry out the
work at the site by the Contractor. The respondents failed to handover
the possession of the site and it disabled the first petitioner to execute
the work. The land in 98% of the reach of Package No.4 is passing
through the reserved forest area and though they completed the
investigation, survey and submitted hydraulic particulars along with the
proposed alignment, the site was not handed over. They requested for
waiving/reimbursement of interest charges on mobilization advance and
bank guarantee commission, but there was no response from the
respondents. They requested for closure of the contract way back in the
year 2010 and settle their accounts. After five extensions which expired
on 31.03.2016, though the first petitioner sought extension of time from
01.04.2016 to 31.03.2017, no orders have been passed. As per Clause
49.3 of the terms and conditions of the agreement, mobilization advance
can be recovered, if there is any misappropriation of the said amount, but
there is no allegation to the said effect. The respondents are not
empowered to recover the said amount in one lump sum and recovery can
be affected only under Clauses 49.5 and 49.6 and the obligation to pay
back the amount would arise only on closure of the contract, but the
respondents have not taken any action. In fact, the respondents are
liable to pay huge amount of Rs.32.00 Crores to the first petitioner.
Though, no interest can be levied under Clause 49.4 of the agreement,
the interest is sought to be recovered from the mobilization advance. In
those circumstances, they challenged the impugned letter.
The relevant Clauses of the agreement dated 25.06.2007 read as
follows:
20 Possession of the Site:
20.3 The Department shall give possession of the site to the
Contractor. If possession of a part site is given, the
Department will ensure that the part site so handed
over is amenable to carry out the work at site by the
Contractor.
23 Settlement of disputes:
23.3 If any dispute of difference of any kind whatsoever
arises between the department and the Contractor in
connection with, or arising out of the Contract,
whether during the progress of the works or after their
completion and whether before or after the
termination, abandonment or breach of the Contract, it
shall in the first place, be referred to and settled by the
Engineer-in-charge who shall, within a period of thirty
days after being requested by the Contractor to do so,
give written notice of his decision to the Contractor.
Upon receipt of the written notice of the decision of
the Engineer-in-Charge the Contractor shall promptly
proceed without delay to comply with such notice of
decision.
23.4 If the Engineer-in-Charge fails to give notice of his
decision in writing within a period of thirty days after
being requested or if the Contractor is dissatisfied with
the notice of the decision of the Engineer-in-Charge,
the Contractor may within thirty days after receiving
the notice of decision appeal to the Department who
shall offer an opportunity to the Contractor to be
heard and to offer evidence in support of his appeal,
the Department shall give notice of his decision within
a period of thirty days after the Contractor has given
the said evidence in support of his appeal, subject to
arbitration, as hereinafter provided. Such decision of
the Department in respect of every matter so referred
shall be final and binding upon the Contractor and shall
forthwith be given effect to by the Contractor, who
shall proceed with the execution of the works with all
due diligence whether he requires arbitration as
hereinafter provided, or not. If the Department has
given written notice of his decision to the Contractor
and no claim to arbitration, has been communicated to
him by the Contractor within a period of thirty days
from receipt of such notice the said decision shall
remain final and binding upon the Contractor. If the
Department fail to give notice of his decision, as
aforesaid within a period of thirty days after being
requested as aforesaid, or if the Contractor be
dissatisfied with any such decision, then and in any
such case the Contractor within thirty days after the
expiration of the first named period of thirty days as
the case may be, require that the matter or matters in
dispute be referred to arbitration as detailed below:-
SETTLEMENT OF CLAIMS:
Settlement of claims for Rs.50,000/- and below by
Arbitration.
All disputes or difference arising of or relating to the
Contract shall be referred to the adjudication as
follows:
a) Claims up to a value of Rs.10,000/-
Superintending Engineer, T.G.P. Circle, Kadapa.
b) Claims above Rs.10,000/- and up to Rs.50,000/- -
Chief Engineer, T.G.P., Srikalahasti.
The arbitration shall be conducted in accordance with
the provisions of Indian Arbitration and Conciliation
Act, 1996 or any statutory modification thereof.
The arbitrator shall state his reasons in passing the
award.
Claims above Rs.50,000/-.
All claims of above Rs.50,000/- are to be settled by a
Civil Court of competent jurisdiction by way of Civil
Suit and not by arbitration.
A reference for adjudication under this clauses shall be
made by the Contractor within six months from the
date of intimating the contractor of the preparation of
final bill or his having accepted payment which ever is
earlier.
24.9 Save in so far as the contract may prescribe, the extent
of portions of the site of which the contractor is to be
given possession from time to time and the order in
which such portions shall be made available to him
and, subject to any requirement in the contract as to
the order in which the works shall be executed, the
Superintending Engineer will, with the Executive
Engineers written order to commence the works, give
to the contractor possession of so much of the site as
may be required to enable the contractor to
commence and proceed with the execution of the
works in accordance with the programme if any, and
otherwise in accordance with such reasonable
proposals of the contractor as he shall by written
notice to the Superintending Engineer, make and will
from time to time as the works proceed, give to the
contractor possession of such further portions of the
site as may be required to enable the contractor to
proceed with the execution of the works with due
dispatch in accordance with the said programme or
proposals as the case may be; if the contractor suffers
delay or incurs cost from failure on the part of the
Superintending Engineer to give possession in
accordance with the terms of this clause, the
Superintending Engineer shall grant an extension of
time for the completion of works and the contractor is
not entitled for any compensation what so ever in this
regard.
24.12 Delays and extension of time:
No claim for compensation on account of delays
or hindrances to the work from any cause whatever
shall lie, except as hereafter defined. Reasonable
extension of time will be allowed by the Executive
Engineer or by the Officer competent to sanction the
extension, for unavoidable delays, such as may result
from causes, which in the opinion of the Executive
Engineer, are undoubtedly beyond the control of the
contractor. The Executive Engineer shall assess the
period of delay or hindrance caused by any written
instructions issued by him, at twenty five per cent in
excess or the actual working period so lost.
In the event of the Executive Engineer failing to
issue necessary instructions and thereby causing delay
and hindrance to the contractor, the latter shall have the
right to claim an assessment of such delay by the
Superintending Engineer of the Circle whose decision will
be final and binding. The contractor shall lodge in
writing with the Executive Engineer a statement of claim
for any delay or hindrance referred to above, within
fourteen days from its occurrence, otherwise no
extension of time will be allowed.
Whenever authorized alterations or additions
made during the progress of the work are of such a
nature in the opinion of the Executive Engineer as to
justify an extension of time in consequence thereof,
such extension will be granted in writing by the Executive
Engineer or other competent authority when ordering
such alterations or additions.
49. Mobilization Advance:
49.1 The contractors for works exceeding more than Rs.1.00
Crore of estimated contract value are permitted to
avail the facility of mobilization advance in two
installments equivalent to 10% of the contract amount
(5% for labour mobilization and 5% for machinery and
equipment) named in the letter of acceptance payable
as per above. Advance shall be paid in 2 installments
i.e., at 1% after concluding the agreement and the 2nd
installment of balance 4% of mobilization advance
shall be released after commencement of the work
i.e., after completion of investigation, survey and
designs. Payment of the loan will be done under
separate certification by the Executive Engineer after
(i) Execution of the form of agreement by the parties
thereto (ii) Provisions by the contractor of the further
security in accordance with relevant condition and (iii)
provision by the contractor of a Bank Guarantee from
scheduled Bank acceptable to the Executive Engineer
for an amount equal to 10% of a contract amount as
indicated in the letter of acceptance valid up to the
Agreement period towards the installment of the
advance mobilization loan. The advance mobilization
loan will be paid in 30 days after fulfilling the above
I, ii and iii items. Advance mobilization loan will be
paid only in case of contracts with estimated contract
value exceeding Rs.100 lakhs.
49.3 Should the contractor misappropriate any portion of
the advance loan, it shall become due to the Executive
Engineer and payable immediately in one lump by the
contractor and no further loan will be considered
thereafter.
49.4 The above advance shall bear an interest of 8% per
annum. The interest on the amounts paid as advance
is chargeable from the date the amount is paid.
However, if completion is delayed by circumstances
beyond control of the contractor for which an
extension has been granted by the Executive
Engineer/Superintending Engineer the interest charges
on such advances shall be waived for the period of
extension.
49.5 The value of Bank Guarantee for the advance payment
given to the contractor can be progressively reduced
by the amount repaid by the contractor as certified by
the Executive Engineer.
49.6 Recovery of advances:
49.6.1 The advance loan together with interest at the rate of
8% as specified in the above shall be repaid within
percentages deductions from the intermediate
payments under the contract. Deduction shall
commence in the next interim payment following that
in which the total of all such payments to the
contractor have reached 10 percent of the contract
amount and shall be made at the rate of 20 percent of
amount of all interim payments in which the loan was
made together with interest payable up to that date,
until such time as the loan together with interest at the
rate specified in para above shall be completely repaid
prior to the expiry of the contract period including
authorized extensions for completion.
The correspondence in the case indicates that way back on
07.03.2008 permission was issued by the Divisional Forest Officer, Kadapa
for surveying and investigation work in Palakonda Reserve Forest,
Vongimalla Reserve Forest and Vontimitta Reserve Forest areas for a
period of one month. In fact, a letter was addressed to Canara Bank on
09.06.2011 by the Executive Engineer to liquidate the bank guarantees
and send a Demand Draft for a total amount of Rs.6,71,76,000/-. It
appears that the first petitioner addressed a letter on 24.02.2014 to close
the agreement and settle their account as per G.O.Ms.No.1, Finance
(W&P) Department, dated 25.02.2012 and as per Clause 58 of APSS, but
it is informed to the first petitioner by the Executive Engineer on
29.04.2014 that in the said letter there was no mention with regard to
repayment of mobilization advance already taken towards labour
component of Rs.5,59,80,000/- with interest. Another permission was
obtained on 11.09.2015 for survey work from the Forest Department.
The Chief Engineer in his report dated 05.06.2016 addressed to the
Secretary to Government (Major Irrigation) sought instructions with
regard to payment of bill to the Contractor for an amount of
Rs.33,86,790/- towards investigation work, recovery of principal amount
and interest on mobilization advance from the first petitioner of an
amount of Rs.6,98,68,882/- consisting a principal of Rs.5,59,80,000/- and
Rs.1,38,88,882/- and seeking orders for closure of contract and
settlement of accounts. The Secretary to Government had not
communicated any decision so far. But, a clarification was issued on
12.11.2016 stating that the interest shall be levied till the entire
mobilization advance is recovered even beyond agreement period.
Thereafter, the Executive Engineer had issued the impugned letter to the
first petitioner. The first petitioner submitted a reply on 08.08.2017 to
the fourth respondent and the fourth respondent addressed a letter to the
third respondent seeking instructions for recovery of the amount
furnished by bank guarantees.
The above facts would disclose that the amount sought to be
recovered is of the amount belonging to the respondents which was given
towards mobilization advance. It is not the money of the petitioners. As
on 05.06.2016, an amount of Rs.33,86,790/- only is outstanding towards
work bill for investigation and labour component submitted by the first
petitioner. This could be seen from the report of the Chief Engineer on
that date. The letter dated 11.08.2017 addressed to the Superintending
Engineer by the present Executive Engineer shows that the payment of
second installment on mobilization advance of an amount of
Rs.4,47,84,000/- was not as per the agreement conditions. The letter of
the Executive Engineer addressed to the Superintending Engineer
ultimately states as follows:
i. The agency have not completed the investigation
work in full shape so far for which forest clearance is not a
hurdle even though necessary permission from the forest
authorities is obtained for conducting survey work in the forest
zone and communicated to the agency.
ii. The orders of the Government on the issue of closure
of contract and settlement of accounts is not a criteria for
repayment of the mobilization advance with up to date interest
of 8% by the agency as this amount is repayable in any case
and
iii. The forest clearance is getting delayed and keeping
huge amount of advance with the agency is leading to audit
objections.
Necessary action may please be taken by the competent
authority to encash the mobilization advance B.Gs.
Also I submit that necessary instructions may please be
communicated to recover the up to date interest on the
mobilization advance amount, by encashment of EMD B.Gs.
I am herewith enclosing 7 Nos. of mobilization advance
B.Gs in original for this purpose.
This is submitted for favour of further necessary action.
This Court had an occasion to consider the issue relating to the
maintainability of Writ Petition, more particularly with regard to
invocation of bank guarantees in M/s. Lanco Infratech Limiteds case
(supra) and after surveying the entire case law on this point held as
follows:
What emerges from the above discussion is that
though the respondent is a State within the meaning of Article 12
of the Constitution of India, in the absence of any element of
public law, the Writ Petition in a contractual matter is not
maintainable. In respect of bank guarantees, the satisfaction of
the beneficiary is final with regard to breach of the covenants
between the beneficiary and the person on whose behalf the
bank guarantee was issued and the bank has no other
alternative except to honour the payment under the guarantee.
In the case before me, though the respondents
satisfy the requirement of State, no relief can be granted in the
present Writ Petition in the absence of any element of public
law. The contract between the petitioners and the respondents
are purely private contracts. The first point is answered
accordingly.
Hence, I am of the opinion that the present Writ Petition
challenging the letter dated 26.07.2017 is not maintainable and the Writ
Petition is liable to be dismissed.
Coming to the fairness of action on which the entire Writ Petition
is based, even assuming that the Writ Petition can be entertained, the
action of the fourth respondent cannot be held to be arbitrary. As stated
above, at the cost of repetition, it has to be borne in mind that the
amount covered by the bank guarantees was given to the first petitioner
towards mobilization advance by the respondents and it is the
respondents money. This Court is purposely refraining from expressing
any opinion on the merits of the case, as it may eventually prejudice the
rights of the parties in a future litigation, if any. Who committed the
breach of contract and whether the party who suffered such breach is
entitled to compensation, is a matter to be decided in appropriate
proceedings. As rightly opined by the Executive Engineer in his
communication addressed to the Superintending Engineer on 11.08.2017,
the second installment of Rs.4,47,84,000/- should not have been released
to the first petitioner without completion of the survey work. Whatever
may be the reason, the work could not go ahead for the last 10 years.
The first petitioner sought closure of the agreement and the Chief
Engineer sought instructions from the Government way back on
05.06.2016. The Secretary to Government (Major Irrigation) sat over the
file for the reasons best known to him. Learned counsel for the
petitioners submits that the bank guarantees cannot be invoked without
closure of the agreement and without settling its account. But, the
closure of the agreement and settlement of accounts has nothing to do
with the invocation of the bank guarantee by the party in whose favour it
was given, as the satisfaction of the beneficiary is primary and this Court
cannot go into that aspect of the matter. It is not a case where fraud is
alleged or the amount cannot be recovered at a later date by the affected
party. In the facts and circumstances of the case, it cannot be held that
the impugned letter of the fourth respondent is arbitrary and the first
petitioner cannot challenge the communication of the fourth respondent.
Before parting with the case, when the facts are so glaring, it is
necessary for this Court to make comments on the functioning of the
officers who are entrusted with public money. The second installment of
the mobilization advance to the tune of Rs.4,47,84,000/- was released
way back in July 2008. The respondents allowed the first petitioner to
use the said amount for all these years. No timely decision was taken, but
routine extensions of agreement were granted. The first respondent has
not filed any counter affidavit in the present case indicating the reasons
for sitting over the file for the last more than one year. There is clear
dereliction of duty from the then Executive Engineer to the present
Secretary to Government (Major Irrigation). The doctrine of public trust
has taken firm roots in our judicial system. In Noida Enterpreneurs
Association v. Noida and others , the Supreme Court ordered CBI
enquiry when the authorities passed order in colourable exercise of power
favouring himself and certain contractors. The observations of the
Supreme Court in that context are as follows:
41. Power vested by the State in a public authority
should be viewed as a trust coupled with duty to be exercised
in larger public and social interest. Power is to be exercised
strictly adhering to the statutory provisions and fact situation
of a case. Public authorities cannot play fast and loose with
the powers vested in them. A decision taken in an arbitrary
manner contradicts the principle of legitimate expectation. An
authority is under a legal obligation to exercise the power
reasonably and in good faith to effectuate the purpose for
which power stood conferred. In this context, in good faith
means for legitimate reasons. It must be exercised bona fide
for the purpose and for none other. (Vide Commr. Of Police
v. Gordhandas Bhanji, AIR 1952 SC 16, Sirsi Municipality
v. Cecelia Kom Francis Tellis, (1973) 1 SCC 409, State of
Punjab v. Gurdial Singh (1980) 2 SCC 471, Collector
(District Magistrate) v. Raja Ram Jaiswal, (1985) 3 SCC
1, Delhi Admn. v. Manohar Lal (2002) 7 SCC 222, and N.D.
Jayal v. Union of India (2004) 9 SCC 362).
In a later decision, one of the Judges in Delhi Airtech Services
Private Limited v. State of Uttar Pradesh , in a case arising out of
Land Acquisition proceedings has to say this regarding the duty of
officers:
213. These authorities are instrumentalities of the State
and the officers are empowered to exercise the power on
behalf of the State. Such exercise of power attains greater
significance when it arises from the statutory provisions. The
level of expectation of timely and just performance of duty is
higher, as compared to the cases where the power is
executively exercised in discharge of its regular business. Thus,
all administrative norms and principles of fair performance are
applicable to them with equal force, as they are to the
government department, if not with a greater rigour. The well
established precepts of public trust and public accountability
are fully applicable to the functions which emerge from the
public servants or even the persons holding public office.
214. In State of Bihar v. Subhash Singh [(1997) 4
SCC 430], this Court, in exercise of the powers of judicial
review, stated that the doctrine of `full faith and credit' applies
to the acts done by the officers in the hierarchy of the State.
They have to faithfully discharge their duties to elongate public
purpose.
215. The concept of public accountability and
performance of functions takes in its ambit, proper and timely
action in accordance with law. Public duty and public obligation
both are essentials of good administration whether by the
State or its instrumentalities. In Centre for Public Interest
Litigation v. Union of India [(2005) 8 SCC 202], this Court
declared the dictum that State actions causing loss are
actionable under public law. This is a result of innovation, a
new tool with the courts which are the protectors of civil
liberties of the citizens and would ensure protection against
devastating results of State action. The principles of public
accountability and transparency in State action are applicable
to cases of executive or statutory exercise of power, besides
requiring that such actions also not lack bona fides. All these
principles enunciated by the Court over a passage of time
clearly mandate that public officers are answerable for both
their inaction and irresponsible actions. If what ought to have
been done is not done, responsibility should be fixed on the
erring officers; then alone, the real public purpose of an
answerable administration would be satisfied.
216. The doctrine of `full faith and credit' applies to the
acts done by the officers. There is a presumptive evidence of
regularity in official acts, done or performed, and there should
be faithful discharge of duties to elongate public purpose in
accordance with the procedure prescribed. Avoidance and delay
in decision making process in Government hierarchy is a matter
of growing concern. Sometimes delayed decisions can cause
prejudice to the rights of the parties besides there being
violation of the statutory rule.
217. This Court had occasion to express its concern in
different cases from time to time in relation to such matters. In
State of A.P. v. Food Corporation of India [(2004) 13 SCC
53], this Court observed that it is a known fact that in
transactions of Government business, no one would own
personal responsibility and decisions would be leisurely taken
at various levels.
218. Principles of public accountability are applicable to
such officers/officials with all their rigour. Greater the power to
decide, higher is the responsibility to be just and fair. The
dimensions of administrative law permit judicial intervention in
decisions, though of administrative nature, which are ex facie
discriminatory. The adverse impact of lack of probity in
discharge of public duties can result in varied defects, not only
in the decision making process but in the final decision as well.
Every officer in the hierarchy of the State, by virtue of his
being `public officer' or `public servant', is accountable for his
decisions to the public as well as to the State. This concept of
dual responsibility should be applied with its rigours in the
larger public interest and for proper governance.
In recent days we are coming across cases of Crores of rupees of
ill-gotten money unearthed from the Engineers, Town Planners and other
officers and though the said cases are few, it is shocking the conscious of
enlightened citizens. What is conscience of the court is beautifully
expressed by one of the Judges in the Constitution Bench decision of
Manoj Narula v. Union of India , as follows:
143. Court is the conscience of the Constitution of
India. Conscience is the moral sense of right and wrong of a
person. (Ref. Oxford English Dictionary.) Right or wrong, for
court, not in the ethical sense of morality but in the
constitutional sense. Conscience does not speak to endorse
ones good conduct; but when things go wrong, it always
speaks; whether you listen or not. It is a gentle and sweet
reminder for rectitude. That is the function of conscience.
When things go wrong constitutionally, unless the conscience
speaks, it is not good conscience; it will be accused of as
numb conscience.
In this atmosphere it is necessary to have more transparency and
probity in discharge of duties by officers. It is the duty of this Court to
order probe, when there are clear cases of misuse of public money and
this is one such instance. The facts available before this court are not
sufficient to point out finger on any one. It requires enquiry. Hence, it is
hoped that the Chief Secretary to Government would go through the files
in the instant case and take necessary action against the officers who
were negligent in their duties.
For all the above reasons, the Writ Petition is dismissed. There
shall be no order as to costs.
As a sequel thereto, the miscellaneous petitions, if any, pending in
this Writ Petition shall stand closed.
____________________________
A.RAMALINGESWARA RAO, J
Date: 10th October 2017
THE HONBLE SRI JUSTICE A. RAMALINGESWARA RAO
Writ Petition No. 28092 of 2017
10-10-2017
M/s Jaiprakash-Gayatri Joint Venture, Rep. by its Authorised Signatory G. Venkateswara Rao and others Petitioners
State of Andhra Pradesh, Rep. by its Principal Secretary, Irrigation and Command Area Development Department, Amaravati, Gun
Counsel for the Petitioners :Sri S. Ravi, learned Senior
Counsel appearing for Sri V.R.N. Prashanth
Counsel for the Respondents: GP for Irrigation
<Gist :
>Head Note :
? Cases referred:
1. 2017(5) ALD 556
2. (2011) 6 SCC 508
3. (2011) 9 SCC 354
4. (2014) 9 SCC 1
HONBLE SRI JUSTICE A. RAMALINGESWARA RAO
Writ Petition No.28092 of 2017
Order:
Heard learned Senior Counsel, Sri S. Ravi for the petitioners and
learned Government Pleader for the respondents.
This Writ Petition was filed challenging the action of the
respondents in calling upon the first petitioner to pay an amount of
Rs.5,59,80,000/- with interest at 8% p.a., from the date of payment of
the amounts and in issuing letter dated 26.07.2017 by the fourth
respondent as illegal, arbitrary and also sought stay of further
proceedings of invocation of bank guarantees.
When the Writ Petition came up for admission on 22.08.2017, time
was granted and posted the matter to 29.08.2017, but the respondents
did not give proper instructions to the learned Government Pleader, and
hence this Court was constrained to grant stay of further action in the
instant case. Seeking vacation of the said stay, the respondents filed
W.V.M.P.No.3839 of 2017 on 13.09.2017 and while extending the interim
order up to 10.10.2017, this Writ Petition was taken up for hearing on
merits as the matter relates to invocation of bank guarantee.
The undisputed facts in this case are that the third respondent
entered into an Agreement No.8 SE/2007-2008 dated 25.06.2007 for the
work of Package No.04/2006 pertaining to investigation, design and
earth work excavation of GNSS Main Canal from KM 119.000 to KM
141.350 including construction of CM & CD works including formation of
Uddimadugu Reservoir and distributory system including field channels to
feed an Ayacut of 10000 acres in Kadapa District. The work has to be
completed in forty eight (48) months. The petitioners became the lowest
tenderers pursuant to quoting of an amount of Rs.111,96,00,000/- being
minus 23.3885% of less than the tender value. As per Clause 49 of the
general conditions of contract, which forms part of the agreement, the
contractor is entitled to avail the mobilization advance in two installments
equivalent to 10% of the contract amount (5% for labour mobilization
and 5% for machinery and equipment) named in the letter of acceptance.
The 5% of the amount shall be paid in two installments i.e., 1% of the
said amount shall be paid after concluding the agreement and the balance
of 4% under two installments shall be released after commencement of
the work i.e., after completion of investigation, survey and designs. The
1% of the amount was paid in a sum of Rs.58,98,000/- on 05.09.2007
and Rs.55,98,000/- on 24.09.2007. The balance of 4% of mobilization
advance was also paid in two installments of Rs.1,34,40,000/- on
05.07.2008 and Rs.3,13,44,000/- on 24.07.2008. Since the petitioners
were required to submit bank guarantees, the first petitioner submitted
bank guarantee for Rs.6,71,76,000/- instead of an amount of
Rs.5,59,80,000/- released by the respondents. Though the petitioners
were not asked to submit the bank guarantees towards interest, the
petitioners submitted excess bank guarantees as above. The bank
guarantees are valid up to 08.01.2018. The commission on bank
guarantee should be borne by the first petitioner only. It appears that
the site could not be handed over to the petitioners as no forest clearance
was obtained. In those circumstances, extension of time was granted
from 25.06.2011 to 24.06.2014, from 25.06.2014 to 31.03.2015, from
01.04.2015 to 31.07.2015, from 01.08.2015 to 30.09.2015 and lastly
from 01.10.2015 to 31.03.2016. Since the first petitioner opted to close
the contract, no further extension was granted by the Government and
the issue with regard to pre-closure of the contract is pending with the
Government pursuant to letter No.CE(P) & DWRO/WRD/KDP/TS-3/Pack-
IV/2016, dated 05.06.2016 of the Chief Engineer. The fourth respondent
addressed a letter on 26.07.2017 to the first petitioner asking to pay
back the mobilization advance of Rs.5,59,80,000/- with interest at 8%
p.a., up to date from the date of payment within 14 days, and further
stating that failing the same the bank guarantee available with the
department would be encashed. It is stated that the said letter was
issued pursuant to failure of the petitioners to pay back the amount in
spite of the letter of the Superintending Engineer dated 22.06.2016.
Challenging the said letter, the present Writ Petition is filed.
The respondents defended their action stating that there is no
element of public law involved in the contract and in view of the decision
of this Court in M/s.Lanco Infratech Limited v. Power Finance
Corporation, New Delhi this Writ Petition is liable to be dismissed.
The first petitioner entered into an agreement with the Superintending
Engineer, GNSS Circle, Kadapa, but not with the third respondent and the
concerned Superintending Engineer was not made a party to the present
Writ Petition, hence, it is liable to be dismissed. The forest clearance
could not be obtained and possession of the site could not be given to the
petitioners due to non-availability of the land for compensatory
afforestation. No claim for compensation on account of delays or
hindrances from whatsoever cause shall lie, but reasonable extension of
time will be allowed by the Executive Engineer and accordingly extension
of time was granted. Since the first petitioner opted to close the
contract, no further extension of contract was granted after 31.03.2016.
No fundamental breach was committed by the respondents and the
contract is no longer existing. The permission from the Forest
Department was obtained for conducting investigation and though the
same was intimated to the petitioner, the petitioner vide its reply dated
14.04.2016 stated that it is not in a position to take up balance survey
and investigation work. Since the proposal submitted by the petitioner
with regard to hydraulic particulars was not in accordance with the norms,
the competent authority observed certain deficiencies in the proposal and
communicated for rectification way back in 2008. Due to incomplete
survey, investigation and design operations by the first petitioner, the
revocation of mobilization advance has become mandatory. The proposal
submitted by the Chief Engineer (Project), Kadapa on 05.06.2016 to the
Government is pending with the Government. Even after approval of
hydraulic particulars submitted by the first petitioner, the first petitioner
has not submitted the designs and drawings of structures, ayacut
registers, block command maps, land plan schedules etc., which do not
require any forest clearance. It is possible to conduct investigation for
which forest clearance was not a hindrance and in spite of the same the
first petitioner has not made any attempt to complete the investigation.
Though the requisite permission was obtained from the District Forest
Officer, Kadapa to conduct survey work, the first petitioner could not
complete the balance survey work. Thus, the purpose for release of
mobilization advance was not fulfilled. In fact, the second installment
amount of 4% should not have been released as the investigation itself
was not completed, but the second installment was released with the fond
hope that the first petitioner may complete the investigation. Even after
lapse of 10 years, the first petitioner could not complete the investigation
works.
In the light of the above facts, the following points require to be
decided.
1) Whether the Writ Petition is maintainable challenging the letter
dated 26.07.2017 issued by the 4th respondent?
2) Whether the action of the respondents is fair in the facts and
circumstances of the case?
The details of the bank guarantees furnished by the first petitioner
towards the mobilization advance are as follows:
Sl.No
.
Bank Guarantee No.
Date
Amount
Rs.
Name of
the Bank
Purpose
1.
09541GPER004407
25.04.200
7
2,80,00,00
0
Bank of
Baroda
EMD
2.
G84GOPG07190000
1
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
3.
G84GOPG07190000
2
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
4.
G84GOPG07190000
5
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
5.
G84GOPG07190000
6
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
6.
G84GOPG07190000
7
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
7.
G84GOPG07190000
8
09.07.200
7
1,00,00,00
0
Canara
Bank
Mobilization
Advance
8.
G84GOPG07190000
9
09.07.200
7
71,76,000
Canara
Bank
Mobilization
Advance
The case of the first petitioner is that it is incurring an amount of
Rs.1,07,79,703/- towards commission charges for keeping the
mobilization advance bank guarantees alive and till date an amount of
Rs.81,16,170/- was paid towards commission charges. The first
petitioner also paid an amount of Rs.26,63,533/- towards commission
charges for performance bank guarantee. The further case of the
petitioners is that as per Clause 20 of the terms and conditions of the
agreement, the department shall give possession of the site to the
Contractor and if possession of a part of the site is given, the department
shall ensure that the site so handed over was amenable to carry out the
work at the site by the Contractor. The respondents failed to handover
the possession of the site and it disabled the first petitioner to execute
the work. The land in 98% of the reach of Package No.4 is passing
through the reserved forest area and though they completed the
investigation, survey and submitted hydraulic particulars along with the
proposed alignment, the site was not handed over. They requested for
waiving/reimbursement of interest charges on mobilization advance and
bank guarantee commission, but there was no response from the
respondents. They requested for closure of the contract way back in the
year 2010 and settle their accounts. After five extensions which expired
on 31.03.2016, though the first petitioner sought extension of time from
01.04.2016 to 31.03.2017, no orders have been passed. As per Clause
49.3 of the terms and conditions of the agreement, mobilization advance
can be recovered, if there is any misappropriation of the said amount, but
there is no allegation to the said effect. The respondents are not
empowered to recover the said amount in one lump sum and recovery can
be affected only under Clauses 49.5 and 49.6 and the obligation to pay
back the amount would arise only on closure of the contract, but the
respondents have not taken any action. In fact, the respondents are
liable to pay huge amount of Rs.32.00 Crores to the first petitioner.
Though, no interest can be levied under Clause 49.4 of the agreement,
the interest is sought to be recovered from the mobilization advance. In
those circumstances, they challenged the impugned letter.
The relevant Clauses of the agreement dated 25.06.2007 read as
follows:
20 Possession of the Site:
20.3 The Department shall give possession of the site to the
Contractor. If possession of a part site is given, the
Department will ensure that the part site so handed
over is amenable to carry out the work at site by the
Contractor.
23 Settlement of disputes:
23.3 If any dispute of difference of any kind whatsoever
arises between the department and the Contractor in
connection with, or arising out of the Contract,
whether during the progress of the works or after their
completion and whether before or after the
termination, abandonment or breach of the Contract, it
shall in the first place, be referred to and settled by the
Engineer-in-charge who shall, within a period of thirty
days after being requested by the Contractor to do so,
give written notice of his decision to the Contractor.
Upon receipt of the written notice of the decision of
the Engineer-in-Charge the Contractor shall promptly
proceed without delay to comply with such notice of
decision.
23.4 If the Engineer-in-Charge fails to give notice of his
decision in writing within a period of thirty days after
being requested or if the Contractor is dissatisfied with
the notice of the decision of the Engineer-in-Charge,
the Contractor may within thirty days after receiving
the notice of decision appeal to the Department who
shall offer an opportunity to the Contractor to be
heard and to offer evidence in support of his appeal,
the Department shall give notice of his decision within
a period of thirty days after the Contractor has given
the said evidence in support of his appeal, subject to
arbitration, as hereinafter provided. Such decision of
the Department in respect of every matter so referred
shall be final and binding upon the Contractor and shall
forthwith be given effect to by the Contractor, who
shall proceed with the execution of the works with all
due diligence whether he requires arbitration as
hereinafter provided, or not. If the Department has
given written notice of his decision to the Contractor
and no claim to arbitration, has been communicated to
him by the Contractor within a period of thirty days
from receipt of such notice the said decision shall
remain final and binding upon the Contractor. If the
Department fail to give notice of his decision, as
aforesaid within a period of thirty days after being
requested as aforesaid, or if the Contractor be
dissatisfied with any such decision, then and in any
such case the Contractor within thirty days after the
expiration of the first named period of thirty days as
the case may be, require that the matter or matters in
dispute be referred to arbitration as detailed below:-
SETTLEMENT OF CLAIMS:
Settlement of claims for Rs.50,000/- and below by
Arbitration.
All disputes or difference arising of or relating to the
Contract shall be referred to the adjudication as
follows:
a) Claims up to a value of Rs.10,000/-
Superintending Engineer, T.G.P. Circle, Kadapa.
b) Claims above Rs.10,000/- and up to Rs.50,000/- -
Chief Engineer, T.G.P., Srikalahasti.
The arbitration shall be conducted in accordance with
the provisions of Indian Arbitration and Conciliation
Act, 1996 or any statutory modification thereof.
The arbitrator shall state his reasons in passing the
award.
Claims above Rs.50,000/-.
All claims of above Rs.50,000/- are to be settled by a
Civil Court of competent jurisdiction by way of Civil
Suit and not by arbitration.
A reference for adjudication under this clauses shall be
made by the Contractor within six months from the
date of intimating the contractor of the preparation of
final bill or his having accepted payment which ever is
earlier.
24.9 Save in so far as the contract may prescribe, the extent
of portions of the site of which the contractor is to be
given possession from time to time and the order in
which such portions shall be made available to him
and, subject to any requirement in the contract as to
the order in which the works shall be executed, the
Superintending Engineer will, with the Executive
Engineers written order to commence the works, give
to the contractor possession of so much of the site as
may be required to enable the contractor to
commence and proceed with the execution of the
works in accordance with the programme if any, and
otherwise in accordance with such reasonable
proposals of the contractor as he shall by written
notice to the Superintending Engineer, make and will
from time to time as the works proceed, give to the
contractor possession of such further portions of the
site as may be required to enable the contractor to
proceed with the execution of the works with due
dispatch in accordance with the said programme or
proposals as the case may be; if the contractor suffers
delay or incurs cost from failure on the part of the
Superintending Engineer to give possession in
accordance with the terms of this clause, the
Superintending Engineer shall grant an extension of
time for the completion of works and the contractor is
not entitled for any compensation what so ever in this
regard.
24.12 Delays and extension of time:
No claim for compensation on account of delays
or hindrances to the work from any cause whatever
shall lie, except as hereafter defined. Reasonable
extension of time will be allowed by the Executive
Engineer or by the Officer competent to sanction the
extension, for unavoidable delays, such as may result
from causes, which in the opinion of the Executive
Engineer, are undoubtedly beyond the control of the
contractor. The Executive Engineer shall assess the
period of delay or hindrance caused by any written
instructions issued by him, at twenty five per cent in
excess or the actual working period so lost.
In the event of the Executive Engineer failing to
issue necessary instructions and thereby causing delay
and hindrance to the contractor, the latter shall have the
right to claim an assessment of such delay by the
Superintending Engineer of the Circle whose decision will
be final and binding. The contractor shall lodge in
writing with the Executive Engineer a statement of claim
for any delay or hindrance referred to above, within
fourteen days from its occurrence, otherwise no
extension of time will be allowed.
Whenever authorized alterations or additions
made during the progress of the work are of such a
nature in the opinion of the Executive Engineer as to
justify an extension of time in consequence thereof,
such extension will be granted in writing by the Executive
Engineer or other competent authority when ordering
such alterations or additions.
49. Mobilization Advance:
49.1 The contractors for works exceeding more than Rs.1.00
Crore of estimated contract value are permitted to
avail the facility of mobilization advance in two
installments equivalent to 10% of the contract amount
(5% for labour mobilization and 5% for machinery and
equipment) named in the letter of acceptance payable
as per above. Advance shall be paid in 2 installments
i.e., at 1% after concluding the agreement and the 2nd
installment of balance 4% of mobilization advance
shall be released after commencement of the work
i.e., after completion of investigation, survey and
designs. Payment of the loan will be done under
separate certification by the Executive Engineer after
(i) Execution of the form of agreement by the parties
thereto (ii) Provisions by the contractor of the further
security in accordance with relevant condition and (iii)
provision by the contractor of a Bank Guarantee from
scheduled Bank acceptable to the Executive Engineer
for an amount equal to 10% of a contract amount as
indicated in the letter of acceptance valid up to the
Agreement period towards the installment of the
advance mobilization loan. The advance mobilization
loan will be paid in 30 days after fulfilling the above
I, ii and iii items. Advance mobilization loan will be
paid only in case of contracts with estimated contract
value exceeding Rs.100 lakhs.
49.3 Should the contractor misappropriate any portion of
the advance loan, it shall become due to the Executive
Engineer and payable immediately in one lump by the
contractor and no further loan will be considered
thereafter.
49.4 The above advance shall bear an interest of 8% per
annum. The interest on the amounts paid as advance
is chargeable from the date the amount is paid.
However, if completion is delayed by circumstances
beyond control of the contractor for which an
extension has been granted by the Executive
Engineer/Superintending Engineer the interest charges
on such advances shall be waived for the period of
extension.
49.5 The value of Bank Guarantee for the advance payment
given to the contractor can be progressively reduced
by the amount repaid by the contractor as certified by
the Executive Engineer.
49.6 Recovery of advances:
49.6.1 The advance loan together with interest at the rate of
8% as specified in the above shall be repaid within
percentages deductions from the intermediate
payments under the contract. Deduction shall
commence in the next interim payment following that
in which the total of all such payments to the
contractor have reached 10 percent of the contract
amount and shall be made at the rate of 20 percent of
amount of all interim payments in which the loan was
made together with interest payable up to that date,
until such time as the loan together with interest at the
rate specified in para above shall be completely repaid
prior to the expiry of the contract period including
authorized extensions for completion.
The correspondence in the case indicates that way back on
07.03.2008 permission was issued by the Divisional Forest Officer, Kadapa
for surveying and investigation work in Palakonda Reserve Forest,
Vongimalla Reserve Forest and Vontimitta Reserve Forest areas for a
period of one month. In fact, a letter was addressed to Canara Bank on
09.06.2011 by the Executive Engineer to liquidate the bank guarantees
and send a Demand Draft for a total amount of Rs.6,71,76,000/-. It
appears that the first petitioner addressed a letter on 24.02.2014 to close
the agreement and settle their account as per G.O.Ms.No.1, Finance
(W&P) Department, dated 25.02.2012 and as per Clause 58 of APSS, but
it is informed to the first petitioner by the Executive Engineer on
29.04.2014 that in the said letter there was no mention with regard to
repayment of mobilization advance already taken towards labour
component of Rs.5,59,80,000/- with interest. Another permission was
obtained on 11.09.2015 for survey work from the Forest Department.
The Chief Engineer in his report dated 05.06.2016 addressed to the
Secretary to Government (Major Irrigation) sought instructions with
regard to payment of bill to the Contractor for an amount of
Rs.33,86,790/- towards investigation work, recovery of principal amount
and interest on mobilization advance from the first petitioner of an
amount of Rs.6,98,68,882/- consisting a principal of Rs.5,59,80,000/- and
Rs.1,38,88,882/- and seeking orders for closure of contract and
settlement of accounts. The Secretary to Government had not
communicated any decision so far. But, a clarification was issued on
12.11.2016 stating that the interest shall be levied till the entire
mobilization advance is recovered even beyond agreement period.
Thereafter, the Executive Engineer had issued the impugned letter to the
first petitioner. The first petitioner submitted a reply on 08.08.2017 to
the fourth respondent and the fourth respondent addressed a letter to the
third respondent seeking instructions for recovery of the amount
furnished by bank guarantees.
The above facts would disclose that the amount sought to be
recovered is of the amount belonging to the respondents which was given
towards mobilization advance. It is not the money of the petitioners. As
on 05.06.2016, an amount of Rs.33,86,790/- only is outstanding towards
work bill for investigation and labour component submitted by the first
petitioner. This could be seen from the report of the Chief Engineer on
that date. The letter dated 11.08.2017 addressed to the Superintending
Engineer by the present Executive Engineer shows that the payment of
second installment on mobilization advance of an amount of
Rs.4,47,84,000/- was not as per the agreement conditions. The letter of
the Executive Engineer addressed to the Superintending Engineer
ultimately states as follows:
i. The agency have not completed the investigation
work in full shape so far for which forest clearance is not a
hurdle even though necessary permission from the forest
authorities is obtained for conducting survey work in the forest
zone and communicated to the agency.
ii. The orders of the Government on the issue of closure
of contract and settlement of accounts is not a criteria for
repayment of the mobilization advance with up to date interest
of 8% by the agency as this amount is repayable in any case
and
iii. The forest clearance is getting delayed and keeping
huge amount of advance with the agency is leading to audit
objections.
Necessary action may please be taken by the competent
authority to encash the mobilization advance B.Gs.
Also I submit that necessary instructions may please be
communicated to recover the up to date interest on the
mobilization advance amount, by encashment of EMD B.Gs.
I am herewith enclosing 7 Nos. of mobilization advance
B.Gs in original for this purpose.
This is submitted for favour of further necessary action.
This Court had an occasion to consider the issue relating to the
maintainability of Writ Petition, more particularly with regard to
invocation of bank guarantees in M/s. Lanco Infratech Limiteds case
(supra) and after surveying the entire case law on this point held as
follows:
What emerges from the above discussion is that
though the respondent is a State within the meaning of Article 12
of the Constitution of India, in the absence of any element of
public law, the Writ Petition in a contractual matter is not
maintainable. In respect of bank guarantees, the satisfaction of
the beneficiary is final with regard to breach of the covenants
between the beneficiary and the person on whose behalf the
bank guarantee was issued and the bank has no other
alternative except to honour the payment under the guarantee.
In the case before me, though the respondents
satisfy the requirement of State, no relief can be granted in the
present Writ Petition in the absence of any element of public
law. The contract between the petitioners and the respondents
are purely private contracts. The first point is answered
accordingly.
Hence, I am of the opinion that the present Writ Petition
challenging the letter dated 26.07.2017 is not maintainable and the Writ
Petition is liable to be dismissed.
Coming to the fairness of action on which the entire Writ Petition
is based, even assuming that the Writ Petition can be entertained, the
action of the fourth respondent cannot be held to be arbitrary. As stated
above, at the cost of repetition, it has to be borne in mind that the
amount covered by the bank guarantees was given to the first petitioner
towards mobilization advance by the respondents and it is the
respondents money. This Court is purposely refraining from expressing
any opinion on the merits of the case, as it may eventually prejudice the
rights of the parties in a future litigation, if any. Who committed the
breach of contract and whether the party who suffered such breach is
entitled to compensation, is a matter to be decided in appropriate
proceedings. As rightly opined by the Executive Engineer in his
communication addressed to the Superintending Engineer on 11.08.2017,
the second installment of Rs.4,47,84,000/- should not have been released
to the first petitioner without completion of the survey work. Whatever
may be the reason, the work could not go ahead for the last 10 years.
The first petitioner sought closure of the agreement and the Chief
Engineer sought instructions from the Government way back on
05.06.2016. The Secretary to Government (Major Irrigation) sat over the
file for the reasons best known to him. Learned counsel for the
petitioners submits that the bank guarantees cannot be invoked without
closure of the agreement and without settling its account. But, the
closure of the agreement and settlement of accounts has nothing to do
with the invocation of the bank guarantee by the party in whose favour it
was given, as the satisfaction of the beneficiary is primary and this Court
cannot go into that aspect of the matter. It is not a case where fraud is
alleged or the amount cannot be recovered at a later date by the affected
party. In the facts and circumstances of the case, it cannot be held that
the impugned letter of the fourth respondent is arbitrary and the first
petitioner cannot challenge the communication of the fourth respondent.
Before parting with the case, when the facts are so glaring, it is
necessary for this Court to make comments on the functioning of the
officers who are entrusted with public money. The second installment of
the mobilization advance to the tune of Rs.4,47,84,000/- was released
way back in July 2008. The respondents allowed the first petitioner to
use the said amount for all these years. No timely decision was taken, but
routine extensions of agreement were granted. The first respondent has
not filed any counter affidavit in the present case indicating the reasons
for sitting over the file for the last more than one year. There is clear
dereliction of duty from the then Executive Engineer to the present
Secretary to Government (Major Irrigation). The doctrine of public trust
has taken firm roots in our judicial system. In Noida Enterpreneurs
Association v. Noida and others , the Supreme Court ordered CBI
enquiry when the authorities passed order in colourable exercise of power
favouring himself and certain contractors. The observations of the
Supreme Court in that context are as follows:
41. Power vested by the State in a public authority
should be viewed as a trust coupled with duty to be exercised
in larger public and social interest. Power is to be exercised
strictly adhering to the statutory provisions and fact situation
of a case. Public authorities cannot play fast and loose with
the powers vested in them. A decision taken in an arbitrary
manner contradicts the principle of legitimate expectation. An
authority is under a legal obligation to exercise the power
reasonably and in good faith to effectuate the purpose for
which power stood conferred. In this context, in good faith
means for legitimate reasons. It must be exercised bona fide
for the purpose and for none other. (Vide Commr. Of Police
v. Gordhandas Bhanji, AIR 1952 SC 16, Sirsi Municipality
v. Cecelia Kom Francis Tellis, (1973) 1 SCC 409, State of
Punjab v. Gurdial Singh (1980) 2 SCC 471, Collector
(District Magistrate) v. Raja Ram Jaiswal, (1985) 3 SCC
1, Delhi Admn. v. Manohar Lal (2002) 7 SCC 222, and N.D.
Jayal v. Union of India (2004) 9 SCC 362).
In a later decision, one of the Judges in Delhi Airtech Services
Private Limited v. State of Uttar Pradesh , in a case arising out of
Land Acquisition proceedings has to say this regarding the duty of
officers:
213. These authorities are instrumentalities of the State
and the officers are empowered to exercise the power on
behalf of the State. Such exercise of power attains greater
significance when it arises from the statutory provisions. The
level of expectation of timely and just performance of duty is
higher, as compared to the cases where the power is
executively exercised in discharge of its regular business. Thus,
all administrative norms and principles of fair performance are
applicable to them with equal force, as they are to the
government department, if not with a greater rigour. The well
established precepts of public trust and public accountability
are fully applicable to the functions which emerge from the
public servants or even the persons holding public office.
214. In State of Bihar v. Subhash Singh [(1997) 4
SCC 430], this Court, in exercise of the powers of judicial
review, stated that the doctrine of `full faith and credit' applies
to the acts done by the officers in the hierarchy of the State.
They have to faithfully discharge their duties to elongate public
purpose.
215. The concept of public accountability and
performance of functions takes in its ambit, proper and timely
action in accordance with law. Public duty and public obligation
both are essentials of good administration whether by the
State or its instrumentalities. In Centre for Public Interest
Litigation v. Union of India [(2005) 8 SCC 202], this Court
declared the dictum that State actions causing loss are
actionable under public law. This is a result of innovation, a
new tool with the courts which are the protectors of civil
liberties of the citizens and would ensure protection against
devastating results of State action. The principles of public
accountability and transparency in State action are applicable
to cases of executive or statutory exercise of power, besides
requiring that such actions also not lack bona fides. All these
principles enunciated by the Court over a passage of time
clearly mandate that public officers are answerable for both
their inaction and irresponsible actions. If what ought to have
been done is not done, responsibility should be fixed on the
erring officers; then alone, the real public purpose of an
answerable administration would be satisfied.
216. The doctrine of `full faith and credit' applies to the
acts done by the officers. There is a presumptive evidence of
regularity in official acts, done or performed, and there should
be faithful discharge of duties to elongate public purpose in
accordance with the procedure prescribed. Avoidance and delay
in decision making process in Government hierarchy is a matter
of growing concern. Sometimes delayed decisions can cause
prejudice to the rights of the parties besides there being
violation of the statutory rule.
217. This Court had occasion to express its concern in
different cases from time to time in relation to such matters. In
State of A.P. v. Food Corporation of India [(2004) 13 SCC
53], this Court observed that it is a known fact that in
transactions of Government business, no one would own
personal responsibility and decisions would be leisurely taken
at various levels.
218. Principles of public accountability are applicable to
such officers/officials with all their rigour. Greater the power to
decide, higher is the responsibility to be just and fair. The
dimensions of administrative law permit judicial intervention in
decisions, though of administrative nature, which are ex facie
discriminatory. The adverse impact of lack of probity in
discharge of public duties can result in varied defects, not only
in the decision making process but in the final decision as well.
Every officer in the hierarchy of the State, by virtue of his
being `public officer' or `public servant', is accountable for his
decisions to the public as well as to the State. This concept of
dual responsibility should be applied with its rigours in the
larger public interest and for proper governance.
In recent days we are coming across cases of Crores of rupees of
ill-gotten money unearthed from the Engineers, Town Planners and other
officers and though the said cases are few, it is shocking the conscious of
enlightened citizens. What is conscience of the court is beautifully
expressed by one of the Judges in the Constitution Bench decision of
Manoj Narula v. Union of India , as follows:
143. Court is the conscience of the Constitution of
India. Conscience is the moral sense of right and wrong of a
person. (Ref. Oxford English Dictionary.) Right or wrong, for
court, not in the ethical sense of morality but in the
constitutional sense. Conscience does not speak to endorse
ones good conduct; but when things go wrong, it always
speaks; whether you listen or not. It is a gentle and sweet
reminder for rectitude. That is the function of conscience.
When things go wrong constitutionally, unless the conscience
speaks, it is not good conscience; it will be accused of as
numb conscience.
In this atmosphere it is necessary to have more transparency and
probity in discharge of duties by officers. It is the duty of this Court to
order probe, when there are clear cases of misuse of public money and
this is one such instance. The facts available before this court are not
sufficient to point out finger on any one. It requires enquiry. Hence, it is
hoped that the Chief Secretary to Government would go through the files
in the instant case and take necessary action against the officers who
were negligent in their duties.
For all the above reasons, the Writ Petition is dismissed. There
shall be no order as to costs.
As a sequel thereto, the miscellaneous petitions, if any, pending in
this Writ Petition shall stand closed.
____________________________
A.RAMALINGESWARA RAO, J
Date: 10th October 2017
