APHC010572172014 IN THE HIGH COURT OF ANDHRA PRADESH WEDNESDAY,THE FIFTEENTH DAY OF APRIL TWO THOUSAND AND TWENTY SIX THE HONOURABLE SRI JUSTICE RAVI CHEEMALAPATI WRIT PETITION NO: 5939/2014 Between: 1. M/S. K.C.L-J.C.C.G(JV),, 209 SUMEL S.G.HIGHWAY, TALTEJ, HYDERABAD REP., BY ITS CHIEF EXECUTIVE OFFICER J.S.N.REDDY. 1. THE STATE GOVERNMENT OF ANDHRA PRADESH, REP., BY ITS PRINCIPAL SECRETARY, IRRIGATION & COMMA DEVELOPMENT DEPARTMENT, SECRETARIAT BUILDINGS, SAIFABAD, HYDERABAD. 2. THE ENGINEERINCHIEF, INDIRA SAGAR POLVARAM PROJECT, DOWLAISWARAM, EAST GODAVARI DISTRICT. 3. THE SUPERINTENDING ENGINEER, CONSTRUCTION CIRCLE, DOWLAISWARAM, EAST GODAVARI DI 4. THE EXECUTIVE ENGINEER, INDIRA SAGAR LEFT MAIN CANAL DIVISION, YELAMANCHILI, EAST GODAVARI DISTRICT. 1 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) WEDNESDAY,THE FIFTEENTH DAY OF APRIL TWO THOUSAND AND TWENTY SIX PRESENT THE HONOURABLE SRI JUSTICE RAVI CHEEMALAPATI WRIT PETITION NO: 5939/2014 J.C.C.G(JV),, 209 SUMEL - II, NEAR GURUDWARA, S.G.HIGHWAY, TALTEJ, HYDERABAD REP., BY ITS CHIEF EXECUTIVE OFFICER J.S.N.REDDY. ...PETITIONER AND THE STATE GOVERNMENT OF ANDHRA PRADESH, REP., BY ITS PRINCIPAL SECRETARY, IRRIGATION & COMMA DEVELOPMENT DEPARTMENT, SECRETARIAT BUILDINGS, SAIFABAD, HYDERABAD. THE ENGINEERINCHIEF, INDIRA SAGAR POLVARAM PROJECT, DOWLAISWARAM, EAST GODAVARI DISTRICT. THE SUPERINTENDING ENGINEER, CONSTRUCTION CIRCLE, DOWLAISWARAM, EAST GODAVARI DISTRICT. THE EXECUTIVE ENGINEER, INDIRA SAGAR LEFT MAIN CANAL DIVISION, YELAMANCHILI, EAST GODAVARI DISTRICT. ...RESPONDENT(S): RC,J W.P.No.5939 of 2014 IN THE HIGH COURT OF ANDHRA PRADESH [3332] WEDNESDAY,THE FIFTEENTH DAY OF APRIL THE HONOURABLE SRI JUSTICE RAVI CHEEMALAPATI II, NEAR GURUDWARA, S.G.HIGHWAY, TALTEJ, HYDERABAD REP., BY ITS CHIEF ...PETITIONER THE STATE GOVERNMENT OF ANDHRA PRADESH, REP., BY ITS PRINCIPAL SECRETARY, IRRIGATION & COMMAND AREA DEVELOPMENT DEPARTMENT, SECRETARIAT BUILDINGS, THE ENGINEERINCHIEF, INDIRA SAGAR POLVARAM PROJECT, THE SUPERINTENDING ENGINEER, CONSTRUCTION CIRCLE, THE EXECUTIVE ENGINEER, INDIRA SAGAR LEFT MAIN CANAL DIVISION, YELAMANCHILI, EAST GODAVARI DISTRICT. ...RESPONDENT(S): RC,J W.P.No.5939 of 2014 2 Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue an appropriate Writ, order or direction more particularly one in the nature of Writ of Mandamus declaring the the Memo No.16832/Ser.VII(V&E-2)/2006-13, dated 07-01-2014 issued by the respondent No.1 requesting the respondent No.4 to recover mobilization advance with an interest @ 15%per annum from the date of report of the Vigilance and Enforcement and consequential action of the respondent No.4 in insisting to pay a sum of Rs.1,99,52,238/- as interest on mobilization advance calculating the rate of interest @ 15%through his letter No.AB/A2/M.A/99M, dated 10-02-2014 and also withholding of the Bank Guarantees even after Re-payment of the mobilization advance as per the terms and conditions of the Agreement No.68/2004-2005, dated 14-03-2005 entered into by the petitioner with the respondent No.3 as arbitrary, illegal, colorable exercise of power, unilateral, contrary to the terms and conditions of the Agreement and violative of the principles of natural justice apart from being violative of the fundamental rights guaranteed to the petitioner under Articles 14, 19 & 21 of the Constitution of India and consequently set aside the same IA NO: 1 OF 2014(WPMP 7389 OF 2014 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to direct the respondent No.4 to consider the representation, dated 22-02-2014 submitted by the petitioner and release the Bank Guarantees worth about Rs.2 Crores, pending disposal of the above Writ Petition IA NO: 2 OF 2014(WPMP 7390 OF 2014 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further proceedings in pursuance of the letter No.AB/A2/M.A/99M, dated 10-02-2014 issued by the respondent No.4, pending disposal of the above Writ Petition IA NO: 1 OF 2015(WVMP 197 OF 2015 RC,J W.P.No.5939 of 2014 3 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased vacate the interim order passed in W.P.No. 5939 of 2014 dated 03.03.2014 and W.P.M.P.No.7390 of 2014 dated 18.2.2014 IA NO: 1 OF 2025 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to receive the Reply affidavit in WP No. 5939 of 2014 by allowing the leave petition and pass IA NO: 2 OF 2025 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased May be pleased to accept the additional counter affidavit and vacate the interim orders dated 03.03.2014 and 22.09.2025 passed in W.P.No.5939 of 2014 and dismiss the writ petition and pass IA NO: 1 OF 2026 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased May be pleased to accept the additional counter affidavit and vacate all the interim orders passed in W.P.No.5939 of 2014 dated 03.03.2014 18.12.2014 and 22.09.2025 and dismiss the writ petition and pass Counsel for the Petitioner: 1. V R REDDY KOVVURI Counsel for the Respondent(S): 1. GP FOR IRRIGATION & COMM AREA DEV 2. GP FOR IRRI AND CAD (AP) RC,J W.P.No.5939 of 2014 4 ORDER This Writ Petition is filed assailing the Memo No.16832/Ser.VII(V&E-2)/ 2006-13, dated 07.01.2014 issued by respondent no.1 requesting respondent no.4 to recover mobilization advance with interest at the rate of 15% per annum from the date of report of the Vigilance and Enforcement and consequential action of respondent no.4 in insisting the petitioner to pay a sum of Rs.1,99,52,238/- as interest @ 15% per annum through his letter No.AB/A2/M.A/99M, dated 10.12.2014 and also withholding of the Bank Guarantees even after repayment of the mobilization advance as per the terms and conditions of the Agreement No.68/2004-2005, dated 14.03.2005 entered into by the petitioner with respondent no.3, being arbitrary, illegal, colourable exercise of power, unilateral, contrary to the terms and conditions of the agreement and violative of principles of natural justice apart from fundamental rights guaranteed under the Constitution. 2. The averments of the writ affidavit, in brief, are that pursuant to a tender notification the petitioner submitted tender and was awarded contract considering the eligibility criteria and accordingly agreement No.68/2004- 2005, dated 14.03.2005 was entered into between petitioner and respondent no.3, as per which the awarded work has to be completed within 24 months, RC,J W.P.No.5939 of 2014 5 however with an option of extension of time under the circumstances specified at condition No.24.7. It is further stated in the affidavit that the time was extended till 31.03.2015 for completion of the balance work. That as per condition No.49.1, the awardee of the contract is permitted to avail the facility of mobilization advance in two installments equivalent to 10% of the contract amount i.e. 5 % for labour mobilization and 5% for machinery and equipment and the awardee shall furnish bank guarantee to be effective until the advance loan was completely repaid. That as per the said condition, an amount of Rs.8,75,00,000/- was released to the petitioner as mobilization advance, for which the petitioner furnished bank guarantee of Rs.10,50,00,000/-. That as per condition No.49.4, the respondents are entitled to collect mobilization advance by charging interest @ 8 % per annum from the date when mobilization advance is made, however if completion is delayed due to the circumstances beyond the control of the contractor, interest will be waived for the period for which extension is granted. That as per condition No.49.5, the value of the Bank Guarantee for mobilization advance payment can be progressively reduced by the amount repaid by the contractor. RC,J W.P.No.5939 of 2014 6 It is further stated in the writ affidavit that, respondent no.4-Executive Engineer, addressed letter dated 10.02.2014 stating that as per memo dated 07.01.2014, he was requested to recover mobilization advance with interest @ 15% per annum from the date of report of the Vigilance and Enforcement on the ground that the Vigilance and Enforcement pointed out that release of mobilization advance of Rs.3,10,00,000/- was irregular, and accordingly he proposed to recover a sum of Rs.1,99,52,238/- towards interest and called upon the petitioner to pay the amount within 10 days, else, necessary action would be taken as per conditions of the agreement. It is further stated in the writ affidavit that, earlier when the respondent no.4 called for an explanation through letter No.AB/A1/W2/P.7/590M, dated 13.09.2006 in so far as the observations made in the report of the Vigilance and Enforcement, the petitioner submitted explanation on 18.09.2006, but no final orders were communicated, however, the letter dated 10.02.2014 demanding payment of amount was issued. It is further stated in the writ affidavit that in response to the letter dated 10.02.2014, the petitioner submitted written representation dated 22.02.2014 bringing to the notice of respondent no.4 that the amount advanced towards mobilization advance of Rs.10,84,41,741/- and interest RC,J W.P.No.5939 of 2014 7 thereon of Rs.2,33,40,273/-, a total sum of Rs.13,17,82,014/-, has been recovered from the petitioner and so far Bank Guarantees for Rs.8.75 crores were released and though the petitioner is entitled to take back the Bank Guarantee for Rs.2.5 Crores, bank guarantee to the tune of Rs.50,00,000/- only was released withholding bank guarantee for the remaining amount of Rs.2 Crores and instead of releasing the said bank guarantee, respondent no.4 is insisting to pay Rs.1,99,52,238/- towards alleged differential interest amount @ 15 % per annum in view of memo dated 7.1.2014. It is further stated in the writ affidavit that as per condition no.49.4, the respondents are entitled to charge interest only @ 8% per annum, which already was recovered from the petitioner and the petitioner is not liable to pay enhanced rate of interest as claimed by respondent no.4 and therefore demanding the petitioner to pay an amount of Rs.1,99,52,238/- towards differential interest and withholding bank guarantees worth Rs.2 Crores is illegal. 3. The contents of the counter and additional counter filed by respondent no.4, in brief, are that, as per clause 49.1 of the agreement, the petitioner was paid Rs.17.50 Crores towards advance for mobilizing labour and for mobilizing machinery and equipment. It is further stated in the RC,J W.P.No.5939 of 2014 8 counter affidavit that on 28.10.2005, the Vigilance and Enforcement Officials have inspected the site and noted that release of machinery advance of Rs.3.10 Crores for equipment owned by M/s. Ketan Constructions Limited prior to agreement as against the Joint Venture to place the order runs contrary to the clarification of finance department vide 10376/F.3(2)-05-3, dated 08.12.2005 and hence though the equipment was mobilized at site the amount of Rs.3.10 Crores shall be recovered from the contractor in one lump as per clause 49.3 of the agreement. That in view of the report of the Vigilance department, the Government issued Memo dated 08.09.2006 to take necessary action and accordingly the respondent no.4 issued notice to the petitioner, who in response submitted representation. That thereafter the Government was addressed, which after seeking further information, finally ordered to recover 15 % on the Mobilization advance of Rs.3.10 crores released for equipment, vide memo dated 07.01.2014, since the amount was not recovered in lump sum as per the report of the Vigilance department, and till realization of the said amount, to safeguard the interest of the Government, it was decided to withhold bank guarantees, available with the department. The writ petition being meritless is to be dismissed. RC,J W.P.No.5939 of 2014 9 4. The petitioner filed reply affidavit contending that the petitioner is a Joint Venture of Jiangsu Communication Construction Group Company Limited and as per the terms and conditions of the contract, there is no prohibition either to buy or bring the old machinery to the site and there is no condition that the machinery which would be put to use to execute the contract must be owned and possessed by both the partners of the Joint Venture and the observation made by Vigilance and Enforcement that release of mobilization advance of Rs.3.10 Crores for equipment owned by Kethan Constructions Limited prior to agreement as against the Joint Venture runs contrary to the agreement and that the mobilization advance shall be recovered imposing interest at 15% per annum, as the said mobilization advance has been released on pre-owned machinery, is totally unsound and unsustainable. That there is no condition obligating the Joint Venture contractor either to buy new machinery on the name of the Joint Venture or to bring old machinery owned by Joint Venture and the clarification dated 08.12.2005 relied on by the respondents, does not override the terms and conditions of the agreement. That there is no misappropriation of the mobilization advance and the respondents have recovered the mobilization advance as per the terms and conditions of the agreement and therefore they cannot penalize the petitioner RC,J W.P.No.5939 of 2014 10 by way of recovery and thus the proceedings impugned are liable to be set aside. 5. Heard Sri V.R.Reddy Kovvuri, learned counsel for the petitioner, and Sri Satish Kumar, learned Assistant Government Pleader for Irrigation & Command Area Development. 6. Sri V.R.Reddy Kovvuri, learned counsel for the petitioner, while reiterating the contents of the writ affidavit and reply would contend that the basis for issuing the impugned proceedings is the clarification dated 08.12.2005 given by Finance (Works & Projects) Department, Government of Andhra Pradesh wherein it was stated that no mobilization advance is payable on the pre-owned machinery prior to conclusion of the agreement or on the machinery purchased by an individual firm in respect of joint ventures though the individual firm happens to be a partner in the joint venture. He would further contend that the agreement which is genesis of duties and obligations to be performed by either of the parties thereto does not explicitly outline a condition regarding the purchase of a vehicle and to bring an old vehicle owned by both the partners of the joint venture to the site and therefore, the clarification dated 08.12.2005, which will not have an overriding effect on the terms and conditions of the agreement, cannot alter, add or substitute the RC,J W.P.No.5939 of 2014 11 material terms and conditions already exist in a signed and binding agreement and therefore, the said clarification cannot be made basis for penalizing the petitioner by way of imposition of interest @ 15% per annum on the mobilization advance. He would further contend that the respondent authorities have already recovered the mobilization advance released towards machinery and equipment together with interest at 8% per annum and now they cannot be permitted to penalize the petitioner by imposition of interest at 15% per annum beyond the terms and conditions of the agreement, simply basing on a clarification without there being a condition or clause prohibiting purchase or bringing old machinery owned by one of the partners of the Joint Venture to the site. He would further contend that the demand made in the impugned proceedings is beyond the scope of the terms of the agreement and hence the same is liable to be set aside and the authorities may be directed to permit the petitioner to release the Bank Guarantee worth about Rs.2 Crores. Accordingly, prayed to allow the writ petition. 7. On the other hand, Sri Satish Kumar, learned Assistant Government Pleader for Irrigation and Command Area Development while reiterating the contents of the counter and additional counter affidavits would contend that as per clause 49.2 of the agreement, the petitioner was paid mobilization RC,J W.P.No.5939 of 2014 12 advance for machinery and equipment to the tune of Rs.3.10 crores and as per Clause 49.3 of the agreement, if the contractor misappropriated any portion of the advance loan, it shall become due to the Executive Engineer and payable immediately in one lump by the contractor. He would further contend that since the machinery brought to the site was pre-owned machinery prior to the conclusion of the agreement and that it was not purchased by the Joint Venture but for by one of the firms; based on the clarification given by the Government vide Memo dated 08.12.2005, the Vigilance and Enforcement vide appraisal report dated 26.05.2006 observed that since the mobilization for machinery and equipment was released contrary to the clarification dated 08.12.2005, the same has to be recovered from the contractor in one lump as per clause 49.3 of the agreement and accordingly the proceedings impugned in this writ petition came to be passed. He would further contend that since the mobilization advance was sanctioned on pre-owned machinery purchased prior to the date of the conclusion of the agreement and that the said machinery is not in the name of the Joint Venture, the same is liable to be recovered as per clause 49.3 of the agreement in one lump and as the same was not paid at once, an interest @ 15% per annum was imposed and therefore, there is no illegality in issuing RC,J W.P.No.5939 of 2014 13 the impugned proceedings and that the writ petition being meritless deserves dismissal. Accordingly, prayed to dismiss the writ petition. 8. Perused the material available on record and considered the submissions made by learned counsel for the parties. 9. The undisputed facts are that the petitioner was awarded contract worth more than one Crore and consequently the petitioner entered into an agreement vide Agreement No.68/2004-2005, dated 14.03.2005. As per clause 49.1 of the agreement, the contractor is permitted to avail the facility of mobilization advance in two installments equivalent to 10% of the contract amount i.e. 5% for labour mobilization and 5% for machinery and equipment, by furnishing Bank Guarantee for the amount so availed. Accordingly, the petitioner availed 10% of the contract amount i.e. 5% toward mobilizing labour and 5% for mobilizing machinery & equipment. As per clause 49.4 of the agreement, the respondents are entitled to collect the mobilization advance by charging interest at 8% per annum from the date the mobilization advance was made. It is also not in dispute that the petitioner had paid Rs.13,17,82,014/- towards principal mobilization advance and interest accrued thereupon i.e. Rs.10,84,41,741/- and Rs.2,33,40,273/- respectively. RC,J W.P.No.5939 of 2014 14 10. Now coming to the controversy involved in this writ petition, the Vigilance and Enforcement during their inspection found that mobilization advance for machinery and equipment was released as against the machinery owned by M/s. Ketan Constructions Limited prior to the conclusion of the agreement, which is contrary to the clarification of finance department vide Memo No.103276/F3(2)05-3, dated 08.12.2005 and it has further observed that though the equipment is mobilized at site the amount of Rs.3.10 Crores shall be recovered from the contractor in one lump sum as per clause 49.3 of agreement and pursuantly the Government issued Memo dated 08.09.2006 to take necessary action keeping in view the report of the Vigilance Department. 11. The relevant portion of the clarification of finance department dated 08.12.2005 referred to in the appraisal report of the Vigilance and Enforcement Department reads thus: “4. No mobilization advance is payable on the pre-owned machinery prior to conclusion of the agreement for the work or leased machinery or purchased by an individual firm in respect of joint ventures though that individual firm happens to be a partner in the joint venture.” 12. In view of the specific stance of the petitioner that the clarification given vide memo dated 08.12.2005 by the Finance department since stands RC,J W.P.No.5939 of 2014 15 outside the terms and conditions of a signed agreement, cannot be unilaterally applied, as it lacks legal standing to modify the agreement; it is relevant to examine the relevant clauses of condition No.49 of the agreement and for quick reference they are extracted hereunder: “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. Payment of loan will be done under separate certification by the Executive Engineer after (i) Execution of form of contract by the parties there to (ii) Provisions by the contractor of the further security in accordance with relevant condition and (iii) provision by the contract of a Bank Guarantee from scheduled Bank acceptable to the Executive Engineer for an amount equal to 10% of the contract amount as indicated in the letter of acceptance towards the installments of the advance mobilization loan, such bank guarantee to remain effective until the said advance loan has been completely repaid by the contractor out of the current earnings under the contract and certified accordingly by the Executive Engineer 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. 49.2 A form of Bank Guarantee acceptable to Executive Engineer is indicated (under formats of Securities). The advance mobilization loan shall be used by the contractor exclusively for mobilization expenditures, including the acquisition of constructional plant, in connection with the works. Payment of the second installment of advance mobilization loan equivalent to 5 %of the contract amount will be due within a period of 9 RC,J W.P.No.5939 of 2014 16 months for local purchase of machinery and equipment and within one year in case the machinery and equipment has to be imported under separate certification by the Engineer-in- Charge after (1) the value of the machinery and equipment procured, and brought to site and/or ordered (satisfactory evidence to be produced) by the contractor assessed at 100% for new machinery and 50% for old machinery brought to site and in working condition is equivalent to 5 %of the contract amount already paid as first advance loan and (ii) furnishing by the contractor of a bank guarantee for an amount equal to 5% (one percent towards interest) of the contract value. (emphasis applied) 13. The above clauses 49.1 & 49.2 of the agreement, even by the slightest inference stipulate that the machinery must be newly purchased and pre-owned machinery shall not be used for obtaining a mobilization advance and more so the pre-owned machinery shall be in the name of the Joint Venture but not in the name of any one of the partners of the said joint venture. Therefore, the clarification given by the finance department vide memo dated 08.12.2005, as rightly contended by the learned counsel for the petitioner, was not the real intention of the parties that signed the agreement. 14. Once a contract is signed, parties are strictly bound by its original terms and conditions. A party cannot unilaterally introduce new obligations, conditions, or changes by way of clarification without the express consent of the other party. Further, a clarification must confine itself to unearthing the RC,J W.P.No.5939 of 2014 17 true purport of an existing ambiguity in the conditions, and that no new conditions can be imposed under the guise of clarification. A clarification cannot be used to add a new clause, change the original scope of the terms and conditions and impose a new burden on one party that was not previously anticipated. Further, under the garb of clarification, no new condition can be imposed, more particularly when the original conditions of the agreement are unambiguous and clear. 15. A combined reading of the terms of the agreement and the clarification given by the Finance Department would make it evident that the said clarification changes the conditions of the agreement and imposes a new burden on the contractor unilaterally. Therefore, issuance of impugned proceedings based on the said clarification is wholly unsustainable. 16. Therefore, as rightly contended by learned counsel for the petitioner, since the mobilization advance towards machinery and equipment was released on the machinery procured and brought to the site, the said advance was released as per the terms of the agreement and hence there is no misappropriation of the said advance loan so as to enable the authorities to invoke clause 49.3 of the agreement. RC,J W.P.No.5939 of 2014 18 17. As stated supra, there is no dispute regarding repayment of the advance amount together with interest at 8% per annum as per clause 49.4 of the agreement. Hence, issuance of the impugned proceedings demanding the petitioner to pay Rs.1,99,52,238/- towards alleged differential interest amount @ 15 % per annum, is illegal and improper. 18. In view of the above, the writ petition is disposed of, setting aside Memo No.16832/Ser.VII(V&E-2)/2006-13, dated 07.01.2014 issued by respondent no.1 and the consequential letter No.AB/A2/M.A/99M, dated 10.02.2014 of respondent no.4. The respondent no.4 shall consider and dispose of the representation of the petitioner dated 22.02.2014 submitted for release of Bank Guarantee. There shall be no order as to costs. Pending miscellaneous petitions, if any, shall stand closed. ___________________________ JUSTICE RAVI CHEEMALAPATI 15TH April, 2026. RR L.R.copy be marked B/o RR