KIRLOSKAR BROTHERS LIMITED Vs. KARNATAKA NEERAVARI NIGAM LIMITED

JUDGEMENT

(1.) The petitioner is a Company incorporated under the Companies Act. The petitioner is before this Court calling in question the action initiated by the respondent-Karnataka Neeravari Nigam Limited, for recovery of alleged loss sustained by the respondents, since the petitioner was in breach of a contract entered between the parties in the month of June 2007.

(2.) The respondent-Karnataka Neeravari Nigam Limited (for short 'KNNL'), a Government of Karnataka undertaking, entered into an agreement with the petitioner for carrying out the work of design, supply, installation, testing and commissioning of Lift Irrigation system for Bakrihalla-Kadahinabylu Lift Irrigation Scheme in N.R.Pura Taluk, Chickamagalur District on Turn key basis. The cost of work was estimated at Rs. 8,38,52,000/- and the petitioner had paid the Earnest Money Deposit of Rs. 8,38,520/- under the Scheme. The work entrusted to the petitioner was to be completed within a period of 18 months. According to the petitioner, the petitioner was to get the site surveyed and was required to submit a detailed project report to the respondents, before execution of the work. Due to heavy rains, the consultant could not conduct the survey and therefore there was delay in submitting the detailed project report to the respondents. Further, it was submitted that after the project report was prepared, it was found that the cost of execution would escalate by over 25% due to unavoidable circumstances. Therefore, the petitioner sought to negotiate with the respondents regarding the price escalation. Ultimately, the request for price escalation was rejected by the respondents and thereafter, since the petitioners never commenced the work, the respondents terminated the contract by issuance of letter dated 06.12008.

(3.) Thereafter, it appears that the petitioner was directed to stop the work with risk and cost as on 01.01.2009. Though the petitioner objected to the unilateral decision of the respondents in terminating the contract, the respondent-authorities forfeited the security deposit furnished by the petitioner by way of a bank guarantee to the tune of Rs. 8,38,000/-. It is an admitted fact that subsequent to the termination of the contract of the petitioner, the respondents have entered into an agreement with one M/s.Arun Engineering Project Private Limited, Bangalore, and work was entrusted at a higher cost of Rs. 12.54 crores.