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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.