Ferro Concrete Construction (India) vs State of Madhya Pradesh

Calling in question the tenability of the communications dated 27/28.06.2014 and 23.07.2014 which has the effect of unilaterally changing the terms and conditions of a contract entered into between the parties, the petitioners have filed this petition.

The petitioner are a joint venture, which has been awarded a contract for construction of a dam known as Pagra Dam, Banda, District Sagar. The work order was issued on 22-04-2013 and according to the tender submitted vide Annexure P-1, an agreement was entered into between the parties. In the agreement in question, specific schedule for payment of the bills for the work done was incorporated, the same is contained in Clause 4.3.7 and clause 4.3.17.2 as contained in the agreement at page nos. 86 and 91 of the paper book. Grievance of the petitioners now is that after having entered into the contract with a specific schedule for payment as stipulated in the agreement, the respondents have issued the aforesaid executive instructions which has the effect of unilaterally changing the entire schedule for payment. Accordingly contending that a joint agreement entered into between the parties cannot be changed unilaterally by issuing a general execution orders as has been done in this case, the writ petition has been filed.

Shri R.N.Singh, learned Senior Counsel invites our attention to the terms and conditions of the contract as indicated hereinabove and by referring to the impugned action, it is his contention that the terms and conditions of the contract which were entered into between the parties much before the circular impugned came into force is having the effect of unilaterally changing of terms which is impermissible. In support of his contention, he places reliance on a judgment of the Supreme Court in the case of Bharat Sanchar Nigam Ltd. and Another Vs. BPL Mobile Cellular Ltd. and Others, and in view of the principles laid down by the Supreme Court in paras 39, 43 and 44, it is said that the terms and conditions of the contract cannot be changed unilaterally in the manner done.

The respondents have filed reply and it is only said in the reply that as the department has issued a circular in the matter of rescheduling payments to be made to various contractor with whom work contract has been entered into, it is said that the department is only executing the same. It is stated that Clause 4.3.7 and clause 4.3.17.2 only prescribes condition for payment and does not prescribe any specific mode for payment and therefore, the respondents refute the contentions made.

We have considered the rival contentions of the parties and we find that in the agreement in question in clause 4.3.7, it is clearly stipulated that the contractor shall submit a bill for the work done and receive a monthly payment proportionate to the part thereof, as approved and passed by the Engineer-in-Chief whose certificate of such approval and passing of the sum so payable shall be final and conclusive against the contractor. Similarly in clause 4.3.17.2, the proposal is made for security deposit and 50% performance security and the manner in which remaining amount of performance security is to be made refundable. Now by the impugned circulars filed as Annexures P-4 and P- 6, general instructions have been issued by the department on 28-06-14 and again on 23-07-2014 whereby a separate mode of r payment for the work done by the contractor its mode is indicated . In fact Annexure P-4 dated 28-06-2014 is a departmental circular issued by the Engineer-in-Chief whereby the mode of payment in the matter of execution of work done by the contractor have been changed. Admittedly this general circular is issued subsequent to agreement entered into between the parties, which has effect of unilaterally changing the specific schedule for payment of the bills for the work done, as was originally agreed to between the parties .

That apart the circular can only have prospective effect, it cannot be implemented without the consent and approval of the contractor in a unilaterally manner retrospectively. In view of the above, we are of the considered view that the circular has the effect of entirely changing the terms and conditions of the agreement entered into between the parties with regard to the mode of bill. Once the parties have entered into an agreement and in the said agreement a specific mode for payment of the bills for work done by the contractor and the procedure for approval is contemplated, the same cannot be changed unilaterally in the manner done. If the respondents wanted to change the specific schedule for payment or the mode for payment to be made, it can only be done with the consent of the petitioners an not in the manner done. Therefore, we find much force on the contentions made by Shri R.N.Singh, Senior Counsel for the petitioners to say that the circular in question will have the effect on varying the terms and conditions of the agreement and once the petitioner has not been consulted nor his consent and approval granted, the process and the mode of payment as stipulated in the agreement cannot be changed and enforced on the petitioners. This principle is also laid down in the case of Bharat Sanchar Nigam Limited(supra) wherein it has been laid down by the Supreme Court that the administrative instructions and circulars cannot have the effect of changing the contract in a unilaterally manner. It has been held that to enforce this administrative instructions, hearing and obtaining consent of the persons concerned is a pre condition.

It has been held by the Supreme Court in the aforesaid case that Section 8 of the Contract Act provides for acceptance of the proposal by conduct as against other modes of acceptance. It has been held by the Supreme Court after taking note of the provisions of Section 8 that when terms of contract have been mutually agreed upon, the same in terms of Section 8 becomes a concluded contract and once a concluded contract is arrived at, the parties were bound thereby. If there was to any alternation or modification to the terms thereof, it was required to be done either by an express agreement or by necessary implication and it is held by the Supreme Court that this would negate the application of doctrine of ''acceptance sub silentio''. It was found in the said case that in the matter of changing of tariff by an internal circular, there was nothing to indicate that there was acceptance of the same by one of the parties after a concluded contract was arrived at. Change of the tariff by a circular unilaterally was found to be illegal by the Supreme Court. It was held by the Supreme Court that if the parties were ad idem as regards the terms of the contract, no change in the tariff could not have been made unilaterally. Any novation of the contract or any change thereof was required to be done in the same terms as are required to be done in entering into a valid and concluded contract.

If the principle laid down by the Supreme Court as indicated hereinabove in the aforesaid case is applied to the facts and circumstances of the present case, we have no hesitation in holding that the respondents have modified or changed the contract in question unilaterally without consent of the appellant, this is not permissible.

Accordingly finding no justification on the part of the respondents in enforcing the circulars Annexures P-4 and P-6 so far as the execution of the present contract between the parties are concerned, this petition is allowed. Circular Annexures P-4 dated 27/28.6.2014 and Annexure P-6 dated 23-07-2014 in the matter of execution of the contract in question is held to be unsustainable and the respondents are restrained from enforcing the circulars in question until and unless consent and approval is given by the petitioners for the same.

With the aforesaid the petition stands allowed and disposed of.