Ananda Builders Ltd. Vs. Bangladesh Inland Water Transport Authority and others, 57 DLR (AD) (2005) 31

Case No: Civil Appeal No. 300 of 2002

Judge: Mohammad Fazlul Karim ,

Court: Appellate Division ,,

Advocate: Mr. Rafique-ul-Huq,Mr. Mahmudul Islam,,

Citation: 57 DLR (AD) (2005) 31

Case Year: 2005

Appellant: Ananda Builders Ltd.

Respondent: Bangladesh Inland Water Transport Authority and others

Subject: Constitutional Law,

Delivery Date: 2004-04-06

Supreme Court
Appellate Division
(Civil) 
 
Present:
Md. Fazlul Karim J
MA Aziz J
Amirul Kabir Chowdhury J
 
Ananda Builders Ltd.
..........Appellant
Vs.
Bangladesh Inland Water Transport Authority and others
…....Respondents
 
Judgment
April 6, 2004.
 
The Constitution of Bangladesh, 1972
Article 102
When the contract is entered into by a public authority in exercise of its statutory power in terms of statutory provisions any breach thereof may entitle the aggrieved party to invoke the writ…….(20) 
A contract does not become a statutory contract simply because a public functionary entered into the contract unless a statute stipulates terms which have been incorporated in the contract….(19)
 
Cases referred to:
Sharping Matshyajibi Samabaya Samity vs. Bangladesh 39 DLR (AD) 85; Bangladesh Power Development Board vs. Md Asaduzzaman Sikder 8 MLR (AD) 241.
 
Lawyers involved:
Rafique-ul‑Huq, Senior Advocate, Abdur Razzaque, Senior Advocate with him, instructed by Md. Nawab Ali, Advocate‑on‑Record‑ For the Appellant.
Mahmudul Islam, Senior Advocate, instructed by Sufia Khatun, Advocate‑on‑Record‑For Respondent No. 1.
Dispensed with‑ Respondent No. 2
Ex parte‑ Respondent No. 3.
 
Civil Appeal No. 300 of 2002
(From the judgment and order dated 8th May 2001 passed by the High Court Division in Writ Petition No. 5311 of 2000). 
 
JUDGMENT
 
Md. Fazlul Karim, J.
 
This appeal by leave is to consider the submissions of the learned Counsel for the appellant that:
  1. The High Court Division has failed to appreciate the fact that the committee appointed by the Ministry of Shipping recommended the application of price escalation made by the petitioner and accordingly, the World Bank was willing to disburse the money but the respondents unlawfully declined to claim the money from the World Bank. 
  2. The High Court Division has committed error in law in holding that the contract was an ordinary commercial one inasmuch as the agreement has given rise to international obligation and, as such, it cannot be termed as an ordinary commercial contract. Since the respondents have entered into a contract in its sovereign capacity it is no longer an ordinary commercial contract.
  3. The High Court Division erroneously held that the petitioner's claim of price adjustment on the basis of clauses 2.24 and 2.25 of the Guidelines for Procurement under BIWTA and IDA Credits were not incorporated in the two contracts entered into between the petitioner and the BIWTA and, as such, the petitioner is not entitled to get any benefit from the aforesaid clauses. 
  4. The High Court Division committed error of law as well as on facts in finding that the petitioner has waived his claim for price adjustment since he completed the second contract at the previous rate. 
  5. The High Court Division erred in law in holding that there was no legal basis for legitimate expectation by the petitioner as no assurance was ever given either by the BIWTA or by the Government inasmuch as the recommendation made by the committee was assistance by the respondents to the petitioner. 
2. The case of the appellant, in short, is that the appellant participated in a bid and was awarded work for the construction of 175 pontoons and 2 tugboats and ancillary works and services under the "Inland Pontoon Facilities" of BIWTA financed by IDA being credit No. 2232 Bangladesh under IWT-­ III  project bid package No. 1‑30‑7. The first contract was signed on 2nd February, 1997 between the appellant and BIWTA two years after another bid was made for the construction of 100 pontoons and tugboat. The works under the first contract was completed in. October 1998. The second contract was signed between the parties on 23rd March 1998 for the procurement of 75 pontoons and one tug boat at the same prices quoted in the 1995 bid. The total contract price of the second contract was US$ 29, 67,266 plus Taka 8, 44,76,843. On 22 January 1998 the appellant made an application to BIWTA for an adjustment of the contract price by 10% due to an unusual lapse of time between submission of bids and the signing of contracts. Work on the second contract was completed in August 1999. Upon the appellant's application the Ministry of Shipping appointed a committee on 24‑3‑1999 to examine and submit a report on the increase in price as requested. The committee recommended a price increase by way of compensation under clauses 2.24 and 2.25 of the Guidelines for Procurement of International Bank for Reconstruction and Development (IBRD) Loans and IDA Credits. It also suggested a price adjustment of US$ 150,152 plus Taka 10, 21,444.00 for the first contract and US$ 31,349 plus Taka 12,719,204 for the second contract amounting to Taka 22,930,648 plus US$ 181,501 and 75% of that compensation (that is Taka 17,197,986 plus 136,125) was to be borne by the World Bank's Credit Fund and the remaining 25% to be borne by the Government of Bangladesh. By its letter dated 13th September 2000 the World Bank informed the Shipping Ministry that they had no objection to the price adjustment of Taka. 17,197,986 plus US$ 136,125 to the appellant. On 25th September 2000 the appellant submitted an Invoice and Bill of Exchange for Taka 22,930,648 plus US$ 1,81,501 for realisation of the said amount. But the respondents have failed to take any steps for claiming the said amount from the World Bank. 
 
3. The High Court Division discharged the Rule holding, inter alia, that the appellant has not entered into a contract with an International agency but the appellant has entered into a contract with BIWTA, a local authority which obtained funds from international Organisations such as the World Bank and the IDA, so that the contract between the appellant and BIWTA is only a private contract between a Government functionary and a private individual. That the appellant's claim for price adjustment on the basis of clauses 2.24 and 2.25 of the Guidelines for Procurement under International Bank for Reconstruction and Development and IDA credits were not incorporated into the two contracts entered into between the appellant and BIWTA and, as such, the appellant is not entitled to get any benefit from the aforesaid clauses. That the appellant has waived his claim for price adjustment since he completed the second contract at the previous rate mentioned in the 1995 bid. That there is no legal basis for any legitimate expectation as there was no assurance ever given either by BIWTA or the Government. That the contract not having provided for price adjustment and the respondents having no other legal obligation arising out of any commercial contract other than the contractual obligation, there is no scope for price adjustment to be made in favour of the appellant, more so these matters arose out of the alleged contractual obligation based on certain disputed questions of fact which cannot be decided under writ jurisdiction.
 
4. Mr. Rafique‑ul‑Huq with Mr. Abdur Razzaque, the learned Counsels for the appellant, submitted that the High Court Division has failed to appreciate the fact that the Committee appointed by the Ministry of Shipping recommended the application for price escalation made by the appellant and accordingly, the World Bank was willing to disburse the money but the respondents unlawfully declined to claim the money from the World Bank. The learned Counsels further submitted that the High Court Division has erred in law in holding that the contract was an ordinary commercial contract inasmuch as the agreement has given rise to international obligation and, as such, it cannot be termed as an ordinary commercial contract although the respondents have not entered into a contract in its sovereign capacity. The learned Counsels further submitted that the High Court Division has committed error of law in holding that the appellant has not entered into a contract with an International Agency but the appellant has entered into a contract with BIWTA, a local authority which got funds from an International organisation like World Bank and IDA making the trading between the appellant and BIWTA a trading of international character. The learned Counsels lastly, submitted that the High Court Division erroneously held that the appellant's claim of price adjustment on the basis of. clauses 2.24 and 2.25 of the Guidelines for Procurement under IBRD and IDA Credits were not incorporated in the two contracts entered into between the appellant and the BIWTA and, as such, the appellant is not entitled to get any benefit out of the aforesaid clauses by necessary implication and because of agreeing by all the functionaries involved in the contract the contractor has legitimate expectation of getting the escalation of prices in respect of the contract work and that the appellant is accordingly, entitled to payment of liquidated amount of money on account of escalated price as have been found and recommended by the Committee set up by the concerned Ministry with due approval of the World Bank which has kept the amount separated and would be available on requisition by the respondent No.1, the Water Transport Authority for disburse­ment/payment to the appellant. 
 
5. Mr. Mahmudul Islam, the learned Counsel appearing for the respondent No.1, has however submitted that the contract is not a statutory contract or a sovereign contract but an ordinary commercial contract between the parties and that in clause 28 of the Contract agreement it has been clearly stipulated that the purchaser and supplier shall resolve amicably any dispute resorting to the .arbitration clause inasmuch as the claim has not been raised by way of any dispute as contemplated under the agreement and even if the same is a dispute it could be resolved under the said clause by way of an arbitration. The learned Counsel has further submitted with reference to clause 1.1 of the guidelines that the purpose of the guidelines was not to govern the contract or that the appellant's claim of price adjustment on the basis of clauses 2.24 and 2.25 of the said guidelines under IBRD and IDA were not incorporated in the two contracts under reference between the concerned parties so as to entitle the appellants of the benefits if there be any. The learned Counsel has seriously argued as to the maintainability of the writ in order to enforce the contractual obligations as the parties with open eyes and hands freely entered into a contract. Mr .Islam has pointed out that the grievance of the appellant did not arise out of the contract or by implication arising there from and has submitted that no claim could be based on the basis of the said imaginary, unrealistic and baseless claim. 
 
6. In order to appreciate the argument of the parties clause 1.1 of the guidelines is quoted as under:   
 
Clause 1.1The purpose of these guidelines is to inform rights those arising out of a project that is financed in full or in part by a loan from the International Bank for Reconstruction and Development (IBRD) on a credit from the International Development Association (IDA) of the arrangements to be made for procuring the goods and works (including related services) required for the project. The loan agreement governs the legal relationships between the borrowers and the Bank and the guidelines are made applicable to procurement of goods and work for the subjects as provided in the agreement This rights and obligations of the borrower and the providers of goods are governed by the bidding documents and by the contracts signed by the borrowers with the providers of goods and works and not by this guidelines on the loan agreements. No party other than the parties to the loan agreement shall derive any rights therefrom or have any claim to loan proceeds.”
 
7. The said clause highlights the provisions, inter alia that the rights and obligations of the borrower and the providers of goods/and works for the project are governed by the bidding documents and by the contract signed by the borrower with the providers of goods and work and not by these guidelines on the loan agreement 8. Thus, it is very clear that the rights and liabilities of the requiring body employer and the contractor shall be governed by the terms of the bidding documents and consequent contract for the purpose and thus the loan agreement between the borrower (requiring body) and the donor Bank or the guidelines shall have no bearing on the said contract. Accordingly, the parties to the contract shall have their corresponding rights and liabilities arising out of the contract entered into between them and since there is no such provision therein for escalation or enhancement of price or adjustment of any price in the contract the alleged claimed adjustment of price is undoubtedly not contemplated under the contract between the parties. 
 
9. Clause 2.24 as referred to above is quoted as under:   
 
Clause 2.24: Bidding documents shall state either that (i) bid process will be fixed or  (ii) that price adjustment will be made to reflect any changes (upwards or downwards) in major cost components of the contract such as labour, equipment, materials and fuel. Price adjustment provisions are usually not neces­sary in simple contracts involving delivery of goods or completion of works within eighteen months. but shall be included in contracts which extend beyond eighteen months. However, it is normal commercial practice to obtain firm prices for some types of equipment regardless of the delivery time and in such cases price adjustment provision are not needed.’’ 
 
10. The said clause provides that the bidding documents shall state either that the bid process will be fixed or that price adjustment will be made to reflect any changes in major cost component of the contract, etc subject to certain time frame. 
 
11. Clause 2.25 runs as under:    
 
"Clause 2.25: Price may be adjusted by the use of a prescribed formula (or formulae) which breaks down the total price into components that are adjusted by price indices specified for each component or alternatively on the basis of documentary evidence (including actual invoices) provided by the supplier on Coordinator the use of the formula method of price adjustment is referable to that of documentary evidence. The method to be used, the formula (if applicable) and the base date for application shall be clearly defined in the binding documents. If the payment currently is different from the source of the input and corresponding index, a correction factor shall be applied in the formula to avoid incorrect adjustment."
 
12. Clause 2.25 under reference provides for the formula to be used on how the aforesaid price may be adjusted. It may be mentioned here that the aforesaid clause of the Guidelines for pronounce­ment under IBRD and IDA credits were not incorporated in the contracts and, as such, the appellant is not entitled to get any benefit out of those clauses even by way of any implication. Since the bidding document provided that the bid process could be fixed and in the instant case bid was for a fixed amount there is no requirement of price adjustment in the contract and both the contracts are fixed price contract therefore, the price adjustment mechanism is not a part of the contract. Admittedly the 1st contract was dated 2nd February.1997and completed in October 1998 and during the continuation of the 1st contract 2nd contract was entered into without any reservation and under the circumstance the appellant under the aforesaid clause 1.1, was not entitled to any price escalation/ adjustment. The contract is the conclusive document so far as the bid price and all other relevant matters are concerned and the contract having not provided for price adjustment there is no scope for price adjustment, which move would surely burden BIWTA respondent with unstipulated and unnecessary burden not sustainable in law. Furthermore, clauses 2.24 and 2.25 of the Guidelines for Procurement are not applicable, not being incorporated in the contract so, the appellants are not entitled to get any benefit out of these clauses. 
 
13. The High Court Division also observed as under:     
 
“…………………….we find that the contract is a conclusive document so far as the bid price and all other relevant matters are concerned.
 
Having regard to the facts and circumstances of the case and in view of our discussion made above we are of the view that the contract having not provided for price adjustment and the respondents have no legal obligation arising out of any commercial contract other than the contractual obligation and, as such, we hold that there is no scope for price adjustment to be made in favour of the petitioner as these matters arose out of the contractual obligation based on disputed facts which cannot be decided under writ jurisdiction." 
 
14. The appellant has also relied upon the alleged report of the unilateral Committee formed by the Ministry of Shipping for examining the application for price escalation submitted by the appellant stating that as per IDA guideline the respondent BIWTA was obliged to provide a place adjustment  formula for the extended bid validity period on its request for extension of bid validity, as a matter of natural justice the appellant legally held rationale for such compensatory adjustment, the demand for compensation may also be considered for the sustainability of such a newly established domestic international investment and the financial burden may not be possible to compensate under the available project since the contractual framework may not substantiate such a demand and accordingly, suggested to the concerned authority to provide in future price adjustment mechanism, if the bid validity is extended due to exceptional reasons for fixed price bids.
 
15. It will not be out of place to mention here that the said exercise of the Committee was at the instance of some highups in the Ministry of Shipping acting unilaterally as admittedly BIWTA, the requiring body respondent, is not a party to the said exercise and some sort of decision on the basis of the report was sought to be imposed unilaterally upon the respondent according to whom there was no occasion for claiming price escalation under the existing contracts, it is further amazing that in spite of the above facts Director (Planning) who was not even authorised in this regard instructed the project co‑coordinator who has, in his turn, approached the financier World Bank with a request for making arrangement for payment of bills for issuance of "no objection" to the compensation for price escalation and the World Bank accordingly issued no objection for the reasons best known to it without any rhyme or reason. 
 
16. This is one of the glaring examples how certain officials in the Ministry, not directly concerned with the project, unnecessarily meddled themselves in some transactions/ contracts to  which they are not even parties and are all out to injure the requiring body financially, for the reasons which are not contemplated in the concerned contracts and best known to them and even exuberant to obtain the undue approval of no objection from the donors so as to ensure financial benefits to the  contractors which undoubtedly constitutes miscon­duct on their part. This type of attitude demons­trates over eagerness of some officials in providing undue financial benefits to others even beyond the contractual terms usurping their official positions for the reasons best known to them. Neither the Government nor the BIWTA has accepted the recommendations of the Committee and the alleged recommendation has not created any enforceable legal right to get the price escalation and, as such, no legitimate expectation of the appellant ever arose. We simply fail to understand the exuberance of some officials which are beyond the contract stipulations and accordingly, we totally disapprove and deprecate such attitude of the concerned officials. 
 
17. The learned Counsel for the respondent No. 1 has raised a pertinent question as to maintainability of the writ submitting. inter alia, .that the appellant was seeking to enforce a commercial contract, alright pure and simple, entered into between the appellant and the respondent No.1 having no root whatsoever in any statutory provision. 
 
18. The learned Counsel for the appellant however, on the maintainability of the writ, submitted that the instant contract is not an ordinary commercial contract but the contract has its root in an international obligation pursuant to a project financed by IBRD and IDA inasmuch as the respondents have entered into a contract in its sovereign capacity and, as such, it is no longer an ordinary commercial contract and has relied on the decision in the case of Sharping Matshyajibi Samabaya Samity vs Bangladesh reported in 39 DLR (AD) 85 in which contract was entered into by the Government in sovereign capacity wherein it has been held that a writ petition is maintainable if the contract is a statutory contract or one entered into on the basis of sovereign capacity, in the instant case it is apparent that the contract is an ordinary commercial contract having no root in any statute or was not entered into in sovereign capacity.
 
19. A contract does not become a statutory contract simply because a public functionary entered into the contract unless a statute stipulates terms which have been incorporated in the contract. 
 
20. In case of Bangladesh Power Development Board vs. Md Asaduzzaman Sikder reported in 8 MLR (AD) 241 reviewing certain decisions on the subject in the Subcontinent it has, inter alia, held that in order to be a sovereign contract, the contract shall have to be entered into by the Government in the capacity of sovereign; when contract is entered into in exercise of an enabling power conferred by any statute that by itself would not render the contract a statutory one unless the contract contains prescribed terms and conditions rooted in the Statute, when a statute expressly or impliedly confers power on a statutory body to enter into any contract in order to enable it to discharge its function. Thus when the contract is entered into by a public authority in exercise of its statutory power in terms of statutory provisions any breach thereof may entitle the aggrieved party to invoke the writ jurisdiction because the relief sought for is against breach of its statutory obligation. 
 
21. In view of the above legal position and in the facts and circumstances of the instant case apart from the fact that there is no merit in the Rule the instant writ petition is also not maintainable. 
 
22. Accordingly, the impugned judgment and order of the High Court Division do not call for any interference.
 
In the result the appeal is dismissed without any order as to costs. 
 
Ed.