Full Judgment Text
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CASE NO.:
Appeal (civil) 1465 of 2000
PETITIONER:
Kerala State Electricity Board
RESPONDENT:
Hindustan Construction Co. Ltd.and Ors.
DATE OF JUDGMENT: 16/11/2006
BENCH:
ARIJIT PASAYAT & S.H. KAPADIA
JUDGMENT:
J U D G M E N T
WITH
(Civil Appeal No. 1466 of 2000)
ARIJIT PASAYAT, J.
Challenge in these appeals is to legality of the judgment
rendered by a Division Bench of the Kerala High Court holding
that the appellant was liable to implement the order of the
appellant-Board dated 19.4.1994. Direction was further given
to issue consequential orders on the basis of decision taken on
12.4.1994 and 30.4.1994 to make necessary payments as
expeditiously as possible. The decision of the Board to cancel
the earlier order dated 19.4.1994 on the basis of a decision
taken at the meeting held on 25.1.1997 and communicated by
order dated 29.3.1997 was set aside.
Background facts in a nutshell are as follows:
Appellant-Kerala State Electricity Board (hereinafter
referred to as ’KSEB’) entered into a contract with respondent
no.1- Hindustan Construction Company Ltd. (in short ’HCC’)
for the construction of a 12.09 Km long and 6.65 M diameter
concrete power tunnel for Lower Periyar Hydro Electric Power
Project on 27.02.1984. The contract work had to be completed
within 68 months from the date of the contract; i.e. to be
completed on or before 26.10.1989. The estimated PAC of the
work was Rs.14.92 crores including cost of departmental
materials and the agreed PAC was Rs. 23.59 crores. The cost
of departmental materials was Rs.3.94 crores. HCC started the
work on 27.2.1984 itself.
As the work could not be completed on or before
26.10.1989 i.e. within the original period of completion, KSEB
vide order No. TC2-2117/89 dated 14.3.1991 accorded
sanction to extend the time of completion of the work upto
30.06.1992 subject to the terms and conditions of the contract
then in force.
The schedule for the work as was fixed is given below:
Driving
Preparation and opening up faces
2 Months
Driving adits
5 Months
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Driving Tunnel Proper at 75m/Month
for an av.1920m
26 Months
Total
33 Months
Lining
Preparation
2 Months
Concreting Floor Portion at
300m/month for 1920m
7 Months
Concreting sides and Arch at 120
Months for 1920m
16 Months
Work such as grouting, etc.and
plugging adits
4 Months
Total
29 Months
Final cleaning and handing over
2 Months
Probable hold ups
4 Months
HCC raises certain claims by way of compensation for the
delay. The claims enumerated by HCC in their memorandum
dated 6.5.1992 and subsequently updated upto December
1992, were under the following heads.
Issue No.1
Compensation for infructuous
over heads and fixed expenses
Rs.283.80 lakhs
Issue No.II
Compensation for extra
incidence of equipment
charges
Rs.255.63 lakhs
Issue No.III
Cost of Financing (Original
503.73 lakhs) later updated to
Rs.639.25 lakhs
Issue No.IV
Interest on delayed payments-
(Original-36.04 lakhs)(Later
Updated to)
Rs.56.21 lakhs
Issue No.V
Extra Items
Rs.160.01
Lakhs
Issue No.VI
Claims (Pending Claims and
extra items)
Rs.293.68
Lakhs
Total
Rs.1688.08
Lakhs
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A meeting of the full time members of the Board with
HCC was held on 8.7.1992 and the Chairman of KSEB agreed
for the formation of a High Powered Committee as desired by
HCC.
On 02.03.1993, KSEB constituted an Ad hoc committee
to look into the claims raised by HCC. The terms of reference
of the Committee were limited to the issues raised in the
Memorandum dated 6.5.1992 and in accordance with the
minutes of the discussion held by the full time members with
HCC on 8.7.1992. After the Committee started functioning,
further issues such as request of the company for interim
relief of Rs.350 lakhs against their claims and issues regarding
recovery rate of cement used for concreting non-payable over
breakage in the tunnel were also referred to the Committee
vide Chief Engineer’s letter No.D4-LPT1/93 dated 26.6.1993.
On 05.08.1993 Ad hoc Committee recommended interim
release of funds amounting to Rs. 250 lakhs.
On 02.09.1993, the Ad-hoc Committee appointed by
KSEB submitted its report on the claim of HCC,
recommending KSEB to make a payment of Rs.808.26 lakhs
against the aggregate claim of Rs.1688.08 lakhs made by the
HCC. The said recommendations of the committee were based
on the following conclusions:
(1) The various delays occurred at different
stages and periods of execution of the work,
aggregating to 47 months were beyond the
control of HCC or covered under "Expected
Risks" as defined under Cl.8 of the contract.
(2) That, in granting extension of time to cover
the delay of 47 months beyond original
completion time of 68 months, the KSEB not
only did not impose any penalties or attempt to
get the balance work at any stage by any other
agency, at the risk and cost of the HCC, but
also continued to apply contract provisions
relating to cost escalations to schedule rates
during the extended period.
(3) The right to claim compensation exercised
by HCC in their memorandum is based on the
clear provisions of Cl.18 "Force Majeure" of the
contract.
Subsequently, on 13.10.1993 Board constituted a Sub
Committee to study the recommendations of the Ad-hoc
committee and to submit a note to the Board for discussion by
the full time members of the Board.
The said Sub Committee on 10.11.1993 submitted its
report recommending that the full time members may have a
discussion with the contractor on the various matters covered
in the report of the Ad\027hoc committee for a mutually
acceptable agreement.
The Board in its meeting held on 12.04.1994 decided to
sanction an interest free ad-hoc advance of Rs.250 lakhs
which shall be adjusted against the amount payable to HCC.
KSEB, on 19.04.1994, sanctioned to pay an interest free
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ad hoc advance of Rs.250 lakhs to M/s.HCC which was to be
adjusted against the amount payable to the company based on
the recommendations of the Ad- hoc Committee.
On 30.04.1994, the Board of KSEB resolved to pay a sum
of Rs.808.26 Lakhs to HCC subject to adjustment of amounts
in relation to quantities as indicated in the report.
The Board did not confirm the minutes dated 30.4.1994
relating to payment as per Ad hoc committee report, on the
ground that Board needs to discuss the matter further.
As the question relating to payment to HCC was raised in
Assembly, the State Government agreed to re-examine in the
public interest.
A meeting between HCC and KSEB was held on
25.09.1994. In the said meeting, Chairman KSEB states that
an early decision will be taken in the matter.
HCC filed OP No.762 of 1996 before the Kerala High
Court, with inter-alia following reliefs:
(a) to implement Board’s order dated
19.4.1994.
(b) to direct Board to issue consequential
orders on the basis of the internal decision of
Board at its meeting on 30.4.1994 (which had
only remained in the minutes of the Board
meeting and which was subsequently modified
by Annexure P-8 Page 149.
The High Court after perusing the files which were
produced pursuant to its directions, held that no final decision
has been taken in the matter and directed the Board to take a
final decision within two months.
HCC requested the Board on 31.10.1996 to pass
appropriate orders in view of the judgment. The request was
reiterated on 02.12.1996.
KSEB moved the High Court for extension of time to
comply with the direction dated 04.10.1996.
Board in view of the directions of the High Court
considered Ad-hoc committee report and on 25.01.1997
rejected the ad-hoc committee recommendations. HCC filed a
Writ Appeal No.343 of 1997 before the High Court against the
judgment dated 4.10.1996 in O.P.No.7623 of 1996. The Writ
appeal was filed on 12.02.1997.
Subsequently on 29.03.1997, Board passed formal order
cancelling the order of 19.4.1994.
During the pendency of the Writ Appeal, HCC filed an
application for amendment of the writ appeal by adding
additional grounds, which was allowed.
By the impugned judgment, the Writ Appeal was allowed,
directing the Board to implement the order of the Board dated
19.4.1994 and to issue consequential orders on the basis of
the decision of the Board dated 12.4.1994 and 30.4.1994 and
to make necessary payments and the order dated 29.3.1997 of
the Board was quashed.
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The High Court held in the impugned judgment that the
subsequent decision taken not to confirm the minutes at its
meeting held on 30.5.1994 cannot in any way dilute the
decision taken earlier by the Board on 19.4.1994. The High
Court was of the view that non confirmation of the minutes
cannot have the effect of wiping out the decision taken.
Accordingly, the directions as noted above were given.
Civil Appeal No. 1465 of 2000 is filed by the KSEB, while
Civil Appeal No. 1466 of 2000 is filed by the State of Kerala.
Learned counsel for the appellant in each case submitted that
the High Court went wrong in concluding that non
confirmation of minutes did not have the effect of wiping out
the decision taken earlier. When the minutes of the meeting
are not confirmed at the subsequent meeting, it means that
the decisions taken at the earlier Board’s meeting were
intended not to be given effect to. The inevitable conclusion is
that the decision is not enforceable. It is further submitted
that interests is not payable and on the basis of interim orders
passed, this Court had directed payment to the respondents
which has been made and nothing further is to be paid.
In response, learned counsel for the respondents
submitted that the Board’s decision was taken unanimously
and the effect of non confirmation of minutes cannot in any
way affect the decision which had already been taken.
If one reads the minutes of 30.4.1994 which were not
confirmed at the meeting held on 30.5.1994 it is clear that it
was merely noted that the Board decided to discuss the issue
further. The High Court rightly took note of the fact that
nothing happened for a long time. Counter affidavit was filed
stating that the Board has not finally accepted the
recommendations of the Ad hoc Committee for payment of
Rs.808.26 lakhs as it was under no legal obligation to
implement the order. The Committee was constituted by the
appellant-Board. The varying stands, taken at different points
of time show that the object was to avoid payment. The Ad hoc
Committee which was appointed consisted of experts in the
fields and also Additional Secretary and Under Secretary to
the Government. Twenty one sittings were held, site visits were
made and voluminous documents were considered. After a
very detailed consideration of the whole matter,
recommendations were made for making payment of
Rs.808.26 lakhs as against claim of Rs.1688.08 lakhs by the
respondents. The Board constituted another Sub-Committee
consisting of two members, one of whom was the Convener
and representative of the Board in the Ad hoc Committee.
After considering the recommendations and the report the
Board decided to make payment of Rs.250 lakhs as an interim
payment. On 30.4.1994 unanimously a decision was taken to
pay Rs.808.26 lakhs as noted by the Ad hoc Committee.
In order to test the rival submissions the only thing that
needs to be considered is the effect of non confirmation of the
minutes.
In Shackleton on the Law and Practice of Meetings, Tenth
Edition, at p.86 it has been stated as follows:
"5. Essential Points in Drafting Minutes:
Minutes should commence with the name of
the body concerned and give the type of
meeting (e.g executive committee). They should
state the date, time and place of the meeting
and the time the meeting finished (at the end
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of the minutes). They should also contain a
record of the names of the members present
and "in attendance," and whether present for
all or part of the meeting or a note of the list
attendance sheets or other document where
their names may be found. They should also
record the name of the member taking the
chair. Minutes should:
(a) be taken by the person best placed to do so.
Independence, discretion and a good
understanding of the business of the
organization are key here. It is recommended
that a member who is required to make a
significant contribution to the meeting does
not also take the minutes;
(b) be accurate\027if there are any especially
complex or technical areas recorded in the
minutes, it is good practice to double check
these with the relevant member to ensure
complete accuracy, whilst preparing the draft
minutes. The Chairman of the meeting should
be given the opportunity to comment on the
first draft before they are circulated to all
members;
(c) be clear and unambiguous\027minutes must
be easily understood; not just by the members
but by others who may need to glean a good
understanding of the company’s business and
decision-making e.g. auditors. Avoid too many
acronyms and technical language\027refer
instead to the papers for the detail if the reader
requires this;
(d) be well structured\027a good minute taker
will be able to omit the recording of
discussions which strayed away from the
agenda items and were not relevant. He should
also re-order the minutes to tie in with the
agenda if the meeting was not well chaired and
the meeting did not strictly follow the agenda
order;
(e) be concise\027not too long or too short,
dependent of course on the culture and style of
the organisation and the personal preferences
of the Chairman;
(f) record the essential elements of the
discussion on each item, i.e. narration which
is vital to an understanding of the proceedings.
This will encourage members to speak up next
time and also helps remind the organization
why they made a particular decision and how
they came to it. The full text of all resolutions
should be recorded;
(g) avoid comment and expressions of opinion
unless an essential part of the decision-
making process;
(h) be produced in a timely fashion\027minutes
should ideally be produced within 48 hours of
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the meeting to ensure accuracy. The minute
taker should agree with the Chairman a
sensible time period for distribution of the
minutes to members after the meeting, taking
into account any annual programme of
meetings and the period of time between each.
He/she should also agree whether any
attendees at the meeting are entitled to receive
copies of the minutes.
The past tense should be used to record events
at the meeting, e.g. "It was reported that," and
the past perfect tense for events prior to the
meeting, e.g. "Mr. X reported that he had
completed his survey."
The following are examples of minutes with
suggested improvements:
Mr. X reported that we had secured a further
contract on satisfactory terms from the Z Co.
Ltd.
The use of the word "we" instead of "the
company" is a common mistake. In addition,
the minute omits important particulars. The
following is suggested as a more useful record:
1A Mr. X reported the signature on behalf of
the company of a contact dated \005\005.with the
Z. Co. Ltd. for the purchase of a further 1,000
tonnes of coal of the same quality as that
previously supplied, at # \005\005per tonne, to be
delivered to the company’s Birmingham
factory, delivery as required July/December
[year]. The previous contract was at # \005\005..per
tonne. The approval of the contract was
ratified.
From a directors’ meeting:
2 Resolved that transfers of 1,000 Ordinary
shares produced be approved and passed.
The minute should read:
2A It was resolved that transfers nos \005..to
\005\005 inclusive, produced to the meeting, details
of transferor and transferee below, relating to
1,000 ordinary shares in the company, be and
they are hereby approved for registration and
that the common seal of the company be
affixed to certificates nos\005\005. to
\005\005\005\005\005..relating thereto.
From the meeting of a charity:
3 Mr Jones said that before we move on to
normal business there is a petition which is
being presented by the St. Albans branch for
the relief of VAT on charities. There are
petition forms here tonight and we hope that if
possible you will all sign before you leave.
An improved version:
3A The treasurer drew attention to a petition
which was being presented by the St Albans
branch for the relief of VAT on charities and
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invited members to sign it at the conclusion of
the meeting.
From the minutes of a management meeting:
4 Radios, cabs, yard and general housekeeping
were extremely poor. GENERAL COMMENT: "A
DISGRACE"!
This might be better written as:
4A The attendees felt that the standard of
housekeeping, particularly in respect of the
radios, cabs and yard, was extremely poor and
indeed disgraceful\027and it was agreed that
(action to be taken, by whom and in what
timescale.)
Within a single paragraph it may not be
necessary to introduce every sentence with
words which imply reported speech. For
example, the minutes of a meeting of the
council of an association could (quite correctly)
read as follows:
5 The chairman expressed disappointment at
the figures for 1996. She stressed the need for
urgent action, to avoid exhaustion of the
reserves. She said that, with additional
expenditure on the awards, pressure on
resources would be acute. She pointed out that
part of the problem resulted from the decision of
previous councils not to increase subscription
rates.
This could be better reported as follows:
5A The chairman expressed disappointment at
the figures for 1996. With additional
expenditure on the awards, and because
previous councils had decided not to increase
subscription rates, urgent action was
necessary to avoid exhaustion of the reserves.
The names of the proposers and seconders of
motions are usually shown, but there is no
need to record details of voting. Motions which
are not seconded need not be recorded
although it can be useful in understanding the
collective will of members.
6. CONFIRMATION OF THE MINUTES
Decisions once arrived at do not need
confirmation:
At a vestry meeting it was the usual procedure
to read over at the next meeting the
resolutions of the preceding one. At the second
of two meetings there was considerable
diversity of opinion as to the votes admitted at
the first meeting, but judgment was to the
effect that there was no necessity for the
confirmation by the second vestry of what was
legally done at the first, if the first was a legal
vestry meeting the election thereat was legal.
However, confirmation of the minutes as an
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accurate record of the decisions made at the
previous meeting is usually obtained by
submitting them to the chairman of the next
meeting for signature. If they have not been
previously circulated he will ask the secretary
to read them, and, if the meeting confirms
(usually on a show of hands) that they are a
correct record, he will sign them. If they have
previously been circulated, he will sign them
without their being read out if the meeting so
agrees.
The chairman who signs the minutes at the
next meeting need not necessarily have been
the chairman of the previous meeting or
indeed even present at the meeting of which
the minutes are a record. His action in signing
them is merely to record that they are a correct
record of the business transacted.
There may however be occasions where the
Chairman although having no reason to
question the accuracy of the record, refuses to
sign the minutes. In such cases a record
should be made in the minutes to the effect
that the minutes of the previous meeting were
correct.
If there is a considerable interval between
meetings, the chairman can sign the minutes
as soon as they have been prepared: this
power is useful too when the minutes are
needed to confirm to third parties that a
particular decision has been made.
In Chetkar Jha v. Viswanath Prasad Verma and Ors.
(1971 (1) SCR 586) it was noted inter alia as follows:
"The question then is whether the minutes, as
drafted and placed before the meeting on July
3, 1963, could be altered as was done on that
day. The alteration clearly was not of a minor
or a clerical error but constituted a substantial
change. Minutes of a meeting are recorded to
safeguard against future disputes as to what
had taken place thereat. They are a record of
the fact that a meeting was held and of the
decision taken thereat. Usually they are
written up after the termination of the meeting,
often from rough notes taken by the person
who is to draft them and then are placed
before the next meeting for what is generally
known as "confirmation", though they are
placed for verification and not for confirmation.
Indeed, there is no question of any
confirmation at the next meeting of a decision
already taken, for, a decision once taken does
not require any confirmation. Accordingly,
when minutes of a meeting are placed before
the next meeting only thing that can be done is
to see whether the decision taken at the
earlier meeting has been properly recorded or
not. The accuracy of the minutes and not the
validity of the decision is, therefore, before the
meeting. Once a decision is duly taken it can
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only be changed by a substantive resolution
properly adopted for such a change. When,
therefore, a decision is taken and is minuted
and such minutes are signed by the Chairman
they become prima facie evidence of what took
place at the meeting. In the case of company
meetings, every meeting of directors or
managers in respect of whose proceedings
minutes have been so made is deemed to have
been properly held and convened and all
proceedings had there to have been duly had
and all appointments of directors, managers or
liquidators are deemed to be valid unless the
contrary is proved. (cf. Halsbury’s Laws of
England, 3rd Edn. vol. 6, p. 318). This is the
position when minutes have been signed by
the Chairman. After such signature they
cannot be altered. But before the minutes are
signed they can be altered if found to be
inaccurate or not in accord with what was
actually decided. If that were not to be so, it
would result in great hardship and
inconvenience, for, however, inaccurate they
are, they cannot be altered to bring them in
conformity with the actual decision. [of. Talbot,
W.F., Company Meetings, (1951 ed. P.82).
This was precisely what was done at the
meeting of July 3, 1963 and no objection to
the course adopted then by the Chairman and
the Syndicate could be validly taken
particularly as none present then had raised
any protest against the alteration. The
decision relied on by Mr. Jha in In re
Botherham Alum and Chemical Company
(1884 (25) Ch.D.p.103) is altogether on a
different question and cannot be of any
assistance.
Since the Vice-Chancellor was right in his
understanding that what had been decided at
the meeting of May 7, 1963 was not to accept
the Commission’s recommendation and since
such refusal to accept meant under Section
26(4) that the matter should be sent back to
the Commission for recommendation, his
action in asking the Commission to reconsider
clearly fell under Section 26(4) and could not
be said to be unwarranted as the Chancellor
ruled. Since that was actually the decision of
the Syndicate, the Vice-Chancellor was bound
to follow it up by writing to the Commission to
reconsider its recommendation. It is somewhat
difficult to appreciate the Chancellor’s
observation that that action was unwarranted
as it was without the Syndicate’s sanction.
Once the Syndicate had taken the decision of
not accepting the recommendation, it was
obligatory under s. 26(4) to refer back the
matter to the Commission. The action taken by
the Vice-Chancellor was consequential and
required no further sanction of the Syndicate.
Equally unsustainable was the view of the
Chancellor that the alteration in the minutes
on July 3, 1963 constituted a revision or a
recission of the earlier decision or that such
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revision or recission could not be made before
the expiry of six months as provided by the
rule passed by the Syndicate in 1952. In our
view, the revised advertisement, the remission
of the matter to the Commission, the
recommendation of respondent 1 by the
Commission and the proceedings of the
Syndicate’s meeting of July 3, 1963 including
the revision of the draft minutes were all in
accordance with the provisions of the Act and
the University Statutes and therefore the
Chancellor had no jurisdiction under Section
9(4) of the Act to annul the decision of the
Syndicate or the proceedings of the meeting of
July 3, 1963".
Above being the position, the High Court’s view that the
decision taken on 30.4.1994 has to be given effect to cannot
be faulted. As rightly submitted by learned counsel for the
respondents non confirmation of minutes does not have any
effect on the decision taken at the earlier meeting. The position
has been illuminatingly stated in Chetkar Jha’s case (supra).
Pursuant to the orders passed by this Court, Rs.500
lakhs have been paid to the respondents and Rs.300 lakhs
have been deposited pursuant to the order dated 2.5.2006.
The amount has been deposited with the Registry of this Court
to be invested in Fixed Deposit. Let this amount be released to
the respondents with interest accrued thereon. The
respondents shall be entitled to interest @7.5% from the date
of Division Bench’s judgment i.e. 15.12.1998 after adjustment
of the amounts paid and the interest elements so far as
relatable to the payment. The balance amount shall be paid
within a period of three months from today.
The appeals are dismissed with the aforesaid
modifications. There will be no order as to costs.