Food Corporation Of India vs M/S Rai Baraily Construction ...
2015 Latest Caselaw 3395 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Court No. - 34								   AFR
 

 
Case :- FIRST APPEAL No. - 71 of 2001
 
Appellant :- Food Corporation Of India
 
Respondent :- M/S Rai Baraily Construction Company
 
Counsel for Appellant :- Prabodh Gaur,Satya Prakash
 
Counsel for Respondent :- Pradeep Verma
 

 
Hon'ble Sudhir Agarwal,J.

Hon'ble Rakesh Srivastava,J.

1. This is plaintiff's appeal under Section 96 of the Code of Civil Procedure arising from judgment and decree dated 07.12.1999 passed by Sri Chandramauli Shukla, Additional Civil Judge (Sr. Div.), Shahjahanpur, decreeing partly, plaintiff's Original Suit No. 120 of 1993.

2. Food Corporation of India (hereinafter referred to as 'FCI') the plaintiff, instituted aforesaid Original Suit No. 120 of 1993 in the court of Additional Civil Judge (Sr. Div.), Shahjahanpur for recovery of Rs. 57,15,705/- from defendants and also interest at the rate of 18% per annum on the aforesaid amount, pendente lite, besides cost of suit.

3. The plaint case set up by plaintiff FCI is that it is a statutory body established under Food Corporation Act, 1964 (hereinafter referred to as 'Act, 1964') having its Headquarters at 16-20, Barakhamba Lane, New Delhi and Regional Office at 506, Habibullah Estate, Hazratganj, Lucknow. The tender for construction of 30,000 MT capacity godowns at Butter Complex, Roza Road, Shahjahanpur was called on 11.05.1987. Defendant no. 1, M/s Raibareilly Construction Company through its managing partner Sri Kamlesh Kumar Singh, submitted tender and it was accepted vide telegram dated 21.07.1987. An agreement was executed between FCI and defendant no. 1 on 27.12.1987. The estimated cost and tender value of the work were Rs. 1,26,23,488/- and Rs. 1,51,22,933/- respectively. The stipulated date of start and completion of work were 28.07.1987 & 27.10.1988 respectively as per agreement. Defendant no. 1 commenced work pursuant to agreement and executed it till 30.04.1990. It failed to complete work despite given sufficient extension of time and notices. The defendants abandoned the work of construction on 01.05.1990 without any intimation to plaintiff FCI. Show cause notice dated 27.04.1989 was served by registered post but remained un-replied by defendant no. 1. The defendants tendered several undertakings on different dates to complete work but failed every time. The plaintiff ultimately rescinded the contract by notice dated 25.07.1990. The defendants were served a notice to attend joint and final measurement of work performed by them on 27.08.1990, as per the procedure, failing which measurement work would be done ex-parte which would be final and binding upon defendants. Again defendants failed to attend joint measurement and final measurements were taken in their absence. The plaintiff was always ready and willing to execute and perform his part of contract but the defendants failed to perform their contract and complete the work within stipulated period. The time was essence of the contract. Since remaining work was got to be done, plaintiffs had to proceed for further tenders. The loss, if any, to be suffered by plaintiff, the defendants were liable thereto. The plaintiff incurred an extra cost of Rs. 45,21,973/- in getting balance work completed. The details of balance work and the manner in which it was completed by third party, was explained in para 18 as under:-

(i)	    Differential cost of work :-
 
Estimated cost of balance work : Rs. 68,23,994/-
 
Put to tender 
 
Rates awarded to new contractor: 90.96% above E.C.
 
Rates of defaulting contractor : 19.80% above E.C.
 
Difference in rate : 71.16%
 
	Final Estimated value of balance: Rs. 90,00,000/-
 
		Work done.
 
	Corresponding risk & cost amount: Rs. 33,53,791/-
 

 
(ii)	    Extra amount incurred by FCI for :
 
Procurement of cement due to increase in prices in the delayed period of completion of work: Rs. 9,09723/-
 

 
(iii)	    Extra amount incurred by FCI : 
 
for procurement of A.C. Sheets and Ridges due to increase in prices in the delayed period for completion of work : Rs. 2,58,459/-
 

 
Total risk & Cost amount
 
Total (i)+(ii)=(iii) : 			Rs. 45,21,973/-
 

 

4. As per clause 2 of the agreement, the Contractor is also liable to pay 1% or such smaller amount as determined by officials of FCI with rider that the entire amount of compensation payable by Contractor under clause 2 would not exceed 10% of the contract price of work. In view thereof defendants are liable to pay Rs. 15,12,294/- which is 10% of the contract value of work for the delay from 27.10.1998 to 01.05.1990.

5. The plaintiff, thus, was entitled to recover Rs. 60,34,267/- (Rs. 45,21,973/- plus Rs. 15,12,294/-). Since there is deposit of Rs. 3,18,562/- lying with the plaintiff which belong to defendant no. 1, plaintiff is entitled to deduct the same from total amount recoverable and after deducting the same, balance remained Rs. 57,15,705/-. The suit for recovery was filed for the aforesaid amount of Rs. 57,15,705/-. Defendants were given notice dated 19.11.1992 to reimburse the amount which they failed, hence the suit.

6. The defendants contested the suit by filing written statement dated 03.07.1995. Beside preliminary objections that the suit was not maintainable, plaint is not signed by competent authority, barred by limitation and non-impleadment of proper parties, the defendants replied plaintiff's claim in detail admitting that plaintiff invited tenders for construction of 30,000 MT capacity godowns at Butter Complex, Roza Road, Shahjahanpur on 11.05.1987. There were more than three competitors and everyone had put in its own rates with different terms and conditions. The issuance of telegram and execution of agreement by competent authority on the part of plaintiff was denied by defendants. However, they admitted to have executed work but blamed plaintiff for delay by not making available the site in time and other facilities as also supply of raw material like cement which was the responsibility of plaintiff. The plaintiff never cooperated, and harassed defendants in execution of work. The plaintiff did not supply drawings and designs of work in time. After completion of tie beams of godowns 1, 2 & 3, accessories were issued late which affected progress of work. After stipulated period the plaintiff threatened defendants to continue with work else no payment would be released and under duress and coercion, certain letters in the form and language as desired by plaintiff, were issued and work also continued. The plaintiff committed breach of contract and is responsible for non-completion of work within stipulated period. The allegation of abandonment of work by defendants on 01.05.1990 was denied. Various other obstructions were also created by plaintiff on account of which work could not be completed. The defendants never received intimation regarding measurement of work or recession of contract. The bearing capacity of soil was not proper. Site for one of the godowns was not free from encumbrance. There was sub-soil water which resulted in delay of work. Payment for dewatering was not released by plaintiffs. Layout was not given. Cement and steel were not issued in time. Payment of work executed was not released. There is no liability of defendants to pay any amount to the plaintiffs. Law of mitigation was not followed by plaintiffs. Further, damages claimed 90.96% above the estimated cost of Rs. 63,23,994/- is unjustified in as much as it is based on the rates quoted by U.P. Jal Nigam which always quotes higher rates than normal. The defendants were always ready and willing to execute work but plaintiff did not grant extension with mala fide intention and denied opportunity to complete balance work. It is denied that the time was essence of the contract. Retention and adjustment of Rs. 3,18,562/- or deposit lying with plaintiffs is illegal. In the additional pleas, defendants requested the court below to appoint an Arbitrator to decide dispute and counter dispute of parties.

7. Besides documentary evidence the parties led oral evidence. On behalf of plaintiff-appellant, Sri Brijpal Agarwal, Assistant Manager Civil Engineer was examined as PW-1, Sri N.K. Kathoria, Deputy Manager FCI as PW-2, Sri C.B. Mishra, Assistant Manager Civil FCI, as PW-3, Sri S.K. Saxena, Assistant Manager as PW-4, Sri Javed Siddiqui, Junior Engineer as PW-5 and Sri Vinay Kumar as PW-6.

8. On behalf of defendants-respondents oral evidence of Sri Kallu Singh as DW-1, Sri Shivnayak Singh as DW-2, Sri Bhagwati Prasad Jain as DW-3, Sri Ramnarayan Singh as DW-4, Sri Dharam Pal Goyal as PW-5 and Sri Kamlesh Kumar Singh as DW-6 was recorded. The Trial Court formulated following six issues:-

1& D;k oknh Hkkjrh; [kk| fuxe izfroknh ls eq0&[email protected]&:0 18 izfr'kr okf"kZd C;kt ds lkFk izkIr djus dh vf/kdkjh gSA

1. Whether the plaintiff Food Corporation of India is entitled to get compensation to the tune of Rs. 5715705/- alongwith 18 % annual interest from the defendant?

2& D;k oknh dk okn le; okf/kr gS tSlk fd c;ku rgjhjh esa vafdr fd;k x;k gSA

2. Whether the plaintiff's suit is time-barred, as mentioned in the written statement?

3& D;k Jh ,u0ds0 dFkwfj;k dks okni= gLrk{kfjr djus dk vf/kdkj izkIr gS ugha gS] tSlk fd c;ku rgjhjh esa vafdr fd;k x;k gS] ;fn gka rks izHkkoA

3. Whether Sri N.K. Kathuria is authorized to sign the plaint or not, as mentioned in the written statement? If so, its effect?

4& D;k oknh dh ykijokgh ds dkj.k lafonk dk dk;Z iwjk ugha gks ldk] tSlk fd c;ku rgjhjh esa vafdr fd;k x;k gSA

4. Whether the contract work could not be finalized due to negligence of the plaintiff, as mentioned in the written statement?

5& D;k oknh }kjk uksfVl u fn;s tkus ds dkj.k dk okn fujLr gksus ;ksX; gS] tSlkfd izfrokni= esa vafdr gSA

5. Whether due to notice being not given by the plaintiff, the suit is liable to be dismissed, as mentioned in the written statement?

6& D;k oknh fdlh vuqrks"k dks izkIr djus dk vf/kdkjh gSA

6. Whether the plaintiff is entitled to get any relief?

(English Translation by Court)

9. Issues 1, 4 & 5 were taken together. Court below answered issue 1 holding that plaintiff is not entitled to recover the entire amount i.e. Rs. 57,15,705/- from the defendants. Rs. 2,58,459/- was claimed as excess payment made on A.C. sheets, Rs. 9,09,723/- was claimed as excess payment on cement and Rs. 15,12,294/- towards 10% penalty but none of these items were held recoverable from defendants. With respect to comparative risk and cost amount which was claimed as Rs. 33,63,791/-, the court below has held that defendants would be liable to pay only to the extent plaintiff has suffered the cost of increase on accounts of the acts attributable to defendants. The issue 5 was returned against plaintiff and issue 4 was answered partly in favour of plaintiffs and defendants both. Issue 2, with respect to the question of limitation and maintainability of suit, was answered in favour of plaintiff and it was held that the suit was within period of limitation and not barred by time. Issue 3 was answered against the defendants and issue 6 was answered partly in favour of plaintiff by decreeing the suit partly holding that plaintiff would be entitled to recover only such amount of excess cost, it has incurred, for which defendants were responsible, and this would be recomputed by plaintiff accordingly.

10. Since the substantial claim of plaintiff-appellant has been disallowed by court below, hence this appeal at the instance of the plaintiff.

11. Before this Court Sri Satya Prakash, learned counsel for plaintiff appellant contended that defendants were guilty of not completing contract within time, therefore, were liable to pay not only penalty under clause 2 of agreement but also excess cost incurred by plaintiff-appellant in getting the balance work completed.

12. In our view, there have arisen only three points for determination, adjudication of this appeal.

i. Whether the court below has rightly held that plaintiff failed to prove that defendants were totally responsible for non compliance of agreement?

ii. Whether the court below has rightly held that defendants were not liable to pay penal amount in clause 2 of the agreement as also the entire excess cost incurred by plaintiff in getting the balance work completed?

iii. Whether time was the essence of the contract and its effect on the rights of the parties?

13. The admitted facts before this Court are that tender of the defendant respondent no. 1 was accepted on 21.07.1987 and as per agreement the work was to be completed within 15 months i.e. between 28.08.1987 to 27.10.1988. The work could not be completed within time and it was extended from time to time at different stages up to 31.12.1988, 31.01.1989, 31.03.1989, 31.05.1989, 31.07.1989, 30.11.1989, 31.03.1990 and lastly 30.04.1990. No period was thereafter extended and the work contract was rescinded on 25.07.1990.

14. The exhibit 37 is the letter dated 07.04.1988 sent by Assistant Manager, FCI to Deputy Manager which shows that site was handed over to Contractor's representatives on 29.08.1987. It is also admitted that supply of cement to Contractor commenced by FCI on 27.11.1987. It was the responsibility of FCI to make requisite quantity of cement available to Contractor.

15. The grievance of the Contractor was that cement was not supplied in the requisite quantity. At times, he purchased cement from open market from its own. In this regard court below summoned cement register maintained by the plaintiff-appellant but it could not be produced since it had lost. From the statement of PW-1 it is also admitted that the defendant-Contractor on its own purchased 1100 bags of cement for the purpose of construction work for 5 months. The material which was responsibility of plaintiff-appellant to supply was not actually supplied which delayed the work. In this regard statement of PW-1, as noticed by the court below, reads as under:-

Þlk{kh dh i`"B 15 ij LohdkjksfDr gS fd izfroknhx.k us 11 lkS osXl lhesUV dz; djds fuekZ.k fd;k Fkk vkSj 5 eghus rd lkekuks dh vkiwfrZ u gksus ds dkj.k ;fn Bsdsnkj us dk;Z ugha fd;k vkSj fQj [kqn lhesUV ds CkSXl [kjhn dj dk;Z fd;k FkkAß

"Page 15 has an admission from the witness that the defendants had, by purchasing 1100 bags of cement, carried out the construction work; and on account of non-supply of material for 5 months, the contractor did not perform any work and thereafter purchased bags of cement on his own and carried out the work."

(English Translation by Court)

16. It is also admitted by PW-1 that site of godown no. 5 was changed in December, 1987 by Manager of FCI. He also admits that electrical work in godown was to be performed by another contractor who did not complete his work within the prescribed time of eight months. In this regard statement of PW-1, as noticed by the court below, reads as under:-

Þlk{kh us ;g Lohdkj fd;k gS fd rduhdh :i ls tc rd fctyh dk dke iwjk ugha gks tk;s xksnke dks Vsdvksoj ugha fd;k tk ldrk Fkk vkSj ;g fctyh dk dk;Z 8 ekg ds le; esa nwljh dEiuh dks iwjk djuk Fkk] ftlus le; ds vUnj dk;Z ugha fd;k FkkAß

"The witness has admitted that technically, the take over of the godown could not have been effected until completion of electrification work, and this electrification work was to be completed by another company within 8 months, which did not perform within time."

(English Translation by Court)

17. PW-3, Sri C.V. Misra, Assistant Manager (Civil), FCI also admitted that cement register and interruption register were lost but when the same lost cannot be said since he was on leave at that time and subsequently after rejoining, this fact came to his knowledge but registers could not be traced. However, one cement register Ex. 100Ka which contains entries w.e.f. 31..07.1989 was produced. PW-3 also admitted that a Peepal tree interrupted the godown site and in another godown there was shifting of the chamber. He also admits that before imposing penalty on the Contractor, registers are checked to find out who is responsible for delay and if the Contractor is found responsible for delay, penalty is imposed. On the different sites DW-4 has specifically pointed out that due to standing of trees on the site, it was not clear to proceed for construction and the standing trees were auctioned on 17.09.1990 before that the site was not clear. Godowns no. 1 to 4 were completed and 5 & 6 got delayed due to various reasons attributable to the plaintiff-appellant.

18. We find that in the agreement it was mentioned that time shall be deemed to be essence of the contract. Clause 2 of the agreement further says that the contractor shall proceed to execute the work with due diligence and shall pay compensation of the amount provided therein as per the decision of the authority concerned who may decide on the contract price of the whole work for every 15 days or part thereof that the work remain uncommenced or unfinished after the stipulated dates. The proviso states that in any case the amount of compensation shall not exceed 10% of the contract price of the work. The combined reading of clause 2 makes it clear that apparently the period of work could be the essence of contract. The contractor shall execute the work with due diligence. However, otherwise the competent authority may take a decision to ask the contractor to pay compensation for delay in work and for this purpose the authority has to take a decision when it was so required. It clearly means that by application of mind, the authority will decide as to whether the contractor has proceeded with due diligence or not or the delay is attributable to FCI itself. If the delay is on account of FCI and not attributable to contractor, the authority concerned may not determine any amount of compensation by taking a decision in this regard. Since the aforesaid decision is bound to impose a financial liability upon contractor the authority concerned had to take a decision objectively. It is not the case of appellant that any such decision objectively was taken by the authority concerned at the appropriate stages. In the suit compensation of maximum permissible amount under clause 2 has been claimed without pleading and prove that the contractor did not execute the work with due diligence or that there did not exist any reason, justifying a lesser compensation than the maximum of 10%. In the entirety of the things, the court below, in our view, has rightly held that for delay where the plaintiff-appellant is responsible, no liability can be imposed upon the contractor and if on account of non-completion of the work for the reasons attributable to the plaintiff, there is some escalation in the price when the work was executed by another contractor, for such loss, the defendant respondent would not be liable. Further to the extent the defendant respondent has not caused delay, any escalation of cost of remaining work otherwise, for that he cannot be held liable. This view taken by court below is very reasonable and we apparently find no reason to take a different view.

19. Section 73 of the Indian Contract Act, 1872 (hereinafter referred to as 'the Act, 1872') entitles a person who has suffered a loss or damage by breach of contract to initiate action for recovery of such damage. Section 73 of the Act, 1872 reads as under:-

73. Compensation for loss or damage caused by breach of contract.--When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. --When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it." Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract.--When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. --When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract."

Explanation.--In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account."

20. In order to show that a contract has been breached the plaintiff is bound to show that he has performed or ready to perform his part of contract throughout and not on account of any act or omission or lapse or negligence attributable to it, circumstances have been created so as to result in breach of a contract. The damage which can be awarded in case of breach of contract is to compensate for distress, vexatious or loss etc. and not punitive damage. The plaintiff is under a duty to mitigate the causes of action. The functions of damage and contract is to compensate for expectation of loss i.e. to give the plaintiff, gains he had expected from performance of the contract. In order to claim damages for breach of contract, such breach has to be proved first before setting up about the question of damage. It is also to be seen as to whether there was any essential condition in the contract for its due performance and whether such essential condition includes some act or omission on the part of plaintiff for the reason that in such a case, the plaintiff has to show that he has performed his part of contract properly.

21. In the present case we find that the plaintiff has miserably failed on these aspects.

22. In the matter of supply of material which was the responsibility of FCI, it has committed default. The relevant documents were not produced in Court which could have thrown light on the matter. Hence for that reason, the plaintiff has to suffer. So far as liability of compensation under clause 2 is concerned, no objective decision has been taken by any competent authority that the contractor did not execute work with due diligence and hence is liable to pay compensation of any particular amount. Since no objective decision has been taken at all, in the suit plaintiff cannot claim compensation at the highest permissible limit under clause 2. The court below has, therefore, rightly disallowed the same to the appellant.

23. We, therefore, answer all the three questions against the appellant. The appeal is devoid of merits.

24. Dismissed with costs.

Order Date :- 26.10.2015

Pradeep/-