Kerala
State Science & Technology Museum Vs. Rambal Company & Ors [2006] Insc
467 (2 August 2006)
Arijit
Pasayat & Lokeshwar Singh Panta
WITH CIVIL
APPEAL NO. 3211 OF 2006 (Arising out of SLP (C) No. 7048/2001) ARIJIT PASAYAT,
J.
Challenge
in these appeals is to the judgment of a Division Bench of the Kerala High
Court holding that quantification of damages done and demanded from the
respondent No.1 cannot be legally sustained and accordingly they were set
aside. The writ petition was directed to be placed before the Division Bench by
a learned Single Judge. But the question referred by learned Single Judge i.e.
question of limitation was left open to be adjudicated by the appropriate
authority in accordance with law.
The
background facts in a nutshell are as follows :-
The
respondent No.1 had entered into Ext. P1 agreement with the appellant-Kerala State Science and Technology, Thiruvananthapuram which is a
society registered under the Travancore Cochin Literary and Scientific
Societies Registration Act, 1995, on 16.05.1988 for the construction of
planetarium building of the Kerala State Science and Technology Museum and allied Civil Works. Dispute having arisen between the
parties the agreement came to be terminated by Ext. P2 termination notice dated
03.11.1989 issued by the appellant. Ext. P2 was followed by Ext. R1(c) letter
from the managing Partner of the respondent No.1 allegedly admitting the breach
of contract. Suit notice dated 06.11.1990 issued by the appellant to the
respondent No.1 which was replied by it as per Ext. P3 dated 31.12.1990
repudiating the alleged breach and raising a counter-claim.
According
to the respondent No.1 there was a long silence after Ext. P3 which was broken
on 12.01.1998 on which date it received Ext. P4 demand notice from the Deputy Tahsildar
(RR), Thiruvananthapuram under Section 34 of the Revenue Recovery Act 1968
calling upon it to remit an amount of Rs.22,10,303/- with future interest at
the rate of 12% from 01.04.97. On receipt of Ext. P4 the respondent No.1 moved
the High Court with Arbitration Request No.2/98 under Section 11 of the
Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator for
resolution of all disputes and differences between the parties concerning the
performance of the work under Ext. P1 agreement. The request was resisted by
the appellant contending, inter-alia, that there is no provision for
arbitration in Ext. P1 agreement. It was also contended that as per clause 54
of Ext P1 agreement, there is a specific exclusion of resolution of disputes by
arbitration and the Civil Courts at Thiruvananthapurarn alone are clothed with
jurisdiction to resolve the disputes arising between the parties out of Ext.P1
agreement. In other words, not only Ext. P1 does not contain an arbitration
clause, on the contrary, Ext. P1 specifically rules out arbitration as a mode
of settlement of disputes or claims arising out of Ext. P1.
Accepting
the said contentions the High Court rejected the request. After the said order
was passed by the High Court, the respondent No.1 filed writ petition, being
O.P. No. 22633/98 to quash Ext. P4 demand notice and for other reliefs which
came to be disposed of by judgment dated 17.11.98 directing the District
Collector to consider and pass orders on the representation preferred by the
respondent No.1 within one month from the date of receipt of a copy of the
judgment. Pending issuance of orders by the District Collector as aforesaid,
the demand notice as evidenced by Ext. P4 was stayed. As a sequel to the
judgment, the District Collector passed an order rejecting Ext. P8. Upon
rejection of Ext.P8 by District Collector's order Ext.P4 was revived and the
respondent No.1 was called upon to pay the amount mentioned therein being the
loss suffered by the appellant in re-arranging the work at the risk and cost of
the respondent No.1. It was at this stage, that the said respondent moved the
High Court by filing a writ petition praying for the issuance of a writ of
certiorari or any other appropriate writ, direction or order quashing the order
and Ext.P4 demand notice as illegal and arbitrary and for the issuance of a
writ of mandamus declaring that revenue recovery proceedings may be initiated
against the respondent No.1 only after prior adjudication by a court of law or
any other independent judicial/quasi-judicial body and other reliefs.
When
the writ petition came up for hearing before learned Single Judge, it was
contended by the learned counsel for the writ-petitioner that since breach of
contract is not admitted, the first respondent (present appellant), standing in
the position of another party to the contract, cannot unilaterally assess the
damage alleged to have sustained by it on account of the alleged default on the
part of the writ-petitioner. It was also contended that the amount demanded as
per Ext. P4 is time barred.
Further
contention of the writ-petitioner was that since the entire proceedings are
barred, a time barred debt cannot be recovered by recourse to revenue recovery
proceedings. Stand of the first respondent (present appellant) it is a society
owned by the State and, therefore, Article 112 of the Limitation Act, 1963 (in
short the 'Limitation Act') is applicable and in that view, the demand raised
is well within time. In view of the nature of the contentions raised, learned
Single Judge felt that the matter should be placed before a Division Bench.
The
Division Bench proceeded on the basis as if the main question that arose for
consideration was where a breach of conditions of a contract is not admitted,
whether is open for the contractee to adjudicate upon the disputed question of
breach as well as to assess the damages arising from the breach. Though the
High Court take note of the fact that the appellants placed reliance on the
document Ex.RI (C) to contend that there was admitted breach of contract which
resulted in termination of the contract, the respondent No.1 disputed the
position and submitted that no breach of contract can be spelt out as seen from
the document Ex.P3.
High
Court came to the conclusion that one of the contracting parties cannot
adjudicate upon a disputed question of breach as well as assess the damage
arising from the breach. It, however, noted that the position would be
different where there is no dispute or there is consensus between the
contracting parties regarding breach of conditions. In such a case an officer
of the State even though a party to the contract will be well within its right
in assessing the damages in view of the specific terms of clause 12 of the
Contract.
In
support of the appeals, learned counsel for the appellants submitted that there
was no dispute about breach of contract. In fact, in the letter dated 14.2.1990
Ex.R1(C) it was accepted that there was breach of contract. The relevant
portions of the document read as follows :
"We
fully realize that the above demand put forth by the then General Manger Sreekumar
asking for enhancement of rates is against the spirit of the agreed contract
and that is why the museum and the Government took the decision to rearrange
the work through some other agency at out risk and cost.
We
therefore, humbly request you to kindly permit us to withdraw the company's
letter referred above and offer the said work by our company.
-
We are ready to
complete the work without any change in the rates for all times of work that we
have agreed previously.
-
We are ready to
complete the work in all aspects without even giving us any Mobilisation
advance by the museum.
-
We request for
an extension of 12 months time to complete the work in all respects and we will
strive our level best to finish the same much in advance." It was further
submitted that before the learned Single Judge it was not disputed that there
was a breach of contract.
In
fact, the only point urged before learned Single Judge related to the question
whether the claim was barred by time.
Stand
was that a time barred demand cannot be enforced through revenue recovery
proceedings. That was the issue which forms subject-matter of dispute and
considering the importance of that matter, learned single judge felt that the
matter should be heard by a Division Bench. It was submitted that when a
reference is made by learned Single Judge to the Division Bench on a particular
issue, the Division Bench cannot travel beyond that issue and decide other
matters.
In
response, learned counsel for the respondent No.1 submitted that in fact there
was no reference by learned Single Judge, who only held that considering the
importance of the matter the case should be heard by a Division Bench. It is
also submitted that there was dispute regarding breach of conditions of
contract.
It is
fairly well settled that when reference is made on a specific issued either by
a learned Single Judge or Division Bench to a larger Bench i.e. Division Bench or
Full Bench or Constitution Bench, as the case may be, the Larger Bench cannot
adjudicate upon an issue which is not the question referred. (See: Kesho Nath Khurana
v. Union of India and Others [1981 (Supp.) SCC 38], Samaresh Chandra Bose v. The
District Magistrate, Burdwan and Others [1972 (2) SCC 476] and K.C.P. Ltd. v.
State Trading Corporation of India and
Another [1995 Supp. (3) SCC 466].
In the
instant case, there was no reference to Division Bench. Learned Single Judge
felt that in view of the contentions, a Division Bench should hear the case.
We
find that before learned Single Judge there was practically no dispute that
there was breach of conditions of contract. In fact learned Single Judge noted
the position as follows:
"The
question of termination of contract with effect from 25.11.1989 is not
disputed.
Petitioner
did not challenge the termination order. As per the terms of the contract, if
it is re-tendered, the difference in the re-tender amount and the loss suffered
have to be paid by the petitioner apart from the liquid damages."
(Underlined for emphasis) The learned Single Judge also noted that the main
contention of the writ petitioner was that the amount demanded was time barred.
Reference was made to Section 71 of the Kerala Revenue Recovery Act, 1968.
Therefore, it was contended before learned Single Judge that when the matter is
time barred even if the demand is correct it cannot be enforced through revenue
recovery proceedings. Stand of the appellants on the contrary was that the society
is owned by the State and, therefore, Article 112 of the Limitation Act, 1963
is applicable and the demand was raised within time.
Considering
the rival submissions learned Single Judge held that in view of the nature of
contention the matter should be heard by a Division Bench.
Unfortunately
the Division Bench did not consider the contentions which were raised before
the learned Single Judge. It also did not record any positive finding as to
whether the document relied upon by the appellant clearly established admission
of a breach of contract. The portion of the order of learned Single Judge,
quoted above, suggests that there was no dispute when read in the context of
the letter dated 14.2.1990.
As
rightly contended by learned counsel for the appellant the basic issue related
to the question whether the demand was barred by limitation. As noted above the
Division Bench of the High Court did not examine this question.
Above
being the question we set aside the order of the Division Bench and remit the
matter back for fresh consideration limiting the examination to the question
whether the demand by barred by limitation. Interim order dated 1.10.1999 shall
be operative till the disposal of the matter by the Division Bench. We make it
clear that merely because interim protection has been given that shall not be
considered to be expression of opinion on merits.
The
appeals are disposed of accordingly. No costs.
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