Manohar Singh & Sons vs M/S Sandeep Coop. Group Housing ...
2011 Latest Caselaw 5594 Del

*             HIGH COURT OF DELHI : NEW DELHI

+                        CS(OS) No.198/2000

%                                    Judgment decided on:       21.11.2011

MANOHAR SINGH & SONS                       .......Plaintiffs
              Through: Ms. Anusuya Salwan, Adv. with
                       Ms Renuka Arora, Adv.

                         Versus

M/S SANDEEP COOP. GROUP HOUSING SOCIETY & ANR.
                                          .....Defendants
              Through: Defendants are ex-parte.

CORAM:
HON'BLE MR. JUSTICE MANMOHAN SINGH

1. Whether the Reporters of local papers may
   be allowed to see the judgment?

2. To be referred to Reporter or not?                       Yes

3. Whether the judgment should be reported                  Yes
   in the Digest?

MANMOHAN SINGH, J.

1. The plaintiff has filed the present suit for declaration declaring that the compensation levied by defendant No.2 vide his letter dated 12.01.2000 is illegal and a decree of permanent injunction permanently restraining the defendants from recovering the amount of Rs.3306440/- from the plaintiff.

2. In nutshell, the facts of the case are that the plaintiff is a partnership firm and defendant No.1 is a co-operative society and

defendant No.2 is the architect of defendant No.1 society who takes care of execution of construction work.

3. It is averred in the plaint that defendant No.1 invited tenders for construction of 218 flats and basement parking at plot No.35, Sector-13, Rohini, Delhi. On 15.06.1991, plaintiff filled the tenders in the tenders and deposited Rs.2 lac as security by a pay order. When the tender was opened, plaintiff turned out to be the successful bidder and on 03.07.1991 the plaintiff was awarded the work at a negotiable amount of Rs.6,71,28,677/-. Thereafter, a written agreement was also executed between the parties. As per the said agreement, the date of start of work was 18.07.1991 and the stipulated date of completion was 17.01.1994. The mode of payment was to be 50% of the bill would be paid within three days and balance within seven days after checking and recommendation by the Architect. 75% secured advance would be paid on the material brought at site for use in work against proper insurance cover.

4. As per the plaintiff, under the agreement between the parties, some of the stipulated materials like cement, steel and bricks were to be supplied by defendant No.1 at fixed rates provided in the agreement. But, the defendant No.1 failed to provide to provide the stipulated materials on time which resulted in infructuous expenditure to the plaintiff. Vide letters dated 27.07.1991, 03.09.1991 and 11.09.1991 the plaintiff informed the defendant about the materials not being supplied to it and that as a result of non-supply of materials, the staff hired the plaintiff was also not being utilized. Thereafter, the plaintiff also sent reminder letters dated 16.09.1991 and 23.09.1991 to

the defendants.

5. As per the averments made in the plaint, vide his letter dated 24.09.1991 the Architect informed the plaintiff, that he has changed the layout plan by changing the depth and width of the foundation of Blocks A to E and the work was hindered on this account. Vide letters dated 24.09.1991, 30.09.1991 and 14.10.1991 the plaintiff again called upon the defendants to make the materials available on time.

6. Further, it is stated that on 2.11.1991 the plaintiff submitted its second running bill amounting to Rs.4,89,547/- and as per the agreement, 50% payment was to made within three days, however, the payment was not made by the defendants. After letters dated 12.11.1991 and 10.12.1991 and several visits of the plaintiff to the defendant‟s office, only Rs.50,000/- were released towards the bill dated 02.11.1991 and the balance amount was paid in two installments. After that also the defendants continued to breach their part of the contract. In the year 1992 also the plaintiff sent several letters to the defendants complaining about the materials not being supplied to it, the details of those letters in given in para 11 of the plaint.

7. It is further stated by the plaintiffs that on 21.01.1992 the plaintiff informed the defendants that even after expiry of six months of the date of start of work, the plaintiff could execute the work to the tune of Rs.5 lac only whereas work to the tune of Rs.35,00,000/- per month should have been done. The payments towards 2nd and 3rd bill of the plaintiff were also not made. It is further averred in the plaint

that on 21.10.1994, defendant No.1 called the plaintiff to his and showing helplessness admitted that since the society is facing paucity of funds therefore, they will nether be able to make payments for the work already done nor carryout further works and also requested the plaintiff to carry out further works by arranging its own funds and that for such work it would have lien over the flats constructed. For this arrangement a supplementary agreement dated 21.10.1994 was entered into by the parties. The relevant portion of said agreement dated 21.10.1994 reads as under:

"That the payments due and payable by the Society to the Contractor, the Contractor shall have a lien on the flats constructed at the rate of Rs.3 lakhs per flat. The flats shall be released by M/s Manohar Singh & Sons and the possession handed over to the society in toto or in lots depending upon the quantum of payment to the contractor. The contractor M/s Manohar Singh & Sons shall be entitled to retain possession of such number of flats as are necessary to secure his due payment at the rate of Rupees three lakhs per flat"

8. As per the averments made in the plaint, after the said agreement was entered into, the defendant No.1 issued a cheque of Rs. 30,000/- dated 29.10.1994 to the plaintiff but the said cheque was returned back with remarks „insufficient funds‟. Thereafter the plaintiff made arrangements for the funds and restarted the work at the site. But in the mean time rates of all the items had increased and this fact was brought to the notice of the defendants by plaintiff‟s letter dated 31.07.199. In fact, as per clause 10(CC) of the agreement between the parties also, the plaintiff is entitled to escalation of labour and material and as per the said clause 10(CC).

9. Vide letters dated 18.12.1995, 17.07.1996 and 01.08.1996

the plaintiff submitted its escalation bills the payments for which as per the agreement were to be made within three days and balance within seven days from the date of submission of the bill. According to the plaintiff, it received the last payment of escalation on 11.09.1999 for Rs.20 lac and payment of a sum of Rs.10 lac was made on 25.09.1999. However, an amount of Rs.1, 32, 94, 059/- towards escalation bill is pending. In the meanwhile, on 05.07.1997, the defendant No.1 asked the defendants to provide the plaintiff with 38mm shutters with ISI mark instead of 35 mm shutters but since such shutters were not available in the market with the ISI mark, therefore, the plaintiff got 38mm thickness shutters and got their samples checked from Delhi Test House which gave a report that it conformed to ISI 2202 part I 1983 specifications and the plaintiff also got the samples tested from a Government of India undertaking which also gave a certificate that the samples conformed to ISI mark. But on 27.06.1998 the defendants refused to make payments towards the said shutters and asked the plaintiff to remove them from the site.

10. Further, it is averred in the plaint that, the defendant No.1 called upon the plaintiff to submit an extension of time performa stating the delays of extension of time. The defendants continued to harass the plaintiff. Vide letter dated 03.11.1998 the plaintiff asked the defendant No.1 to immediately make payment of its bills but instead of making payments the defendant No.1 handed over 11 letters to the plaintiff which were all dated 03.11.1998 and the same were duly replied by the plaintiff. Thereafter, on 29.11.1998 the parties entered into another agreement under which it was agreed that

the work of the defendant would be completed blockwise and as per the specifications of the contract and the payment will also be done blockwise. It was further agreed that the payment of pending escalation bill will be made along with the payment of work done for one block with escalation and that the extension of time for completion of work would also be extended to 31.05.1999. But despite the said agreement, the defendants sent a letter dated 12.04.1999 to the plaintiff stating that no escalation is due as the work has been delayed solely on account of the mismanagement of the plaintiff.

11. Thereafter, the plaintiff submitted its bills dated 15.05.1999, which was passed by the defendant No.1 only for an amount of Rs.1, 74, 640/- . The plaintiff immediately wrote to the defendants regarding its outstanding payment towards price escalation payable under clause 10(CC) of the agreement which had mounted upto Rs.1,20,00,000/-. In reply to the said letter of the plaintiff, the defendants wrote six letters to him levying their liability for payment of price escalation on the ground that extension of time had not been granted to the plaintiff.

12. The plaintiff reiterated its stand in its letters to the defendants dated 21.05.1999, 26.05.1999, 27.05.1999 and 10.06.1999. On 20.06.1999 the defendant No.2 issued a show cause notice under clause 3 of the agreement as to why the contract should not be rescinded and thereafter on 22.06.1999 also the defendant No.2 issued a letter to the plaintiff wherein it was stated that the bills of the plaintiff are being checked by the defendants and that the defendants

have to recover a substantial amount from the plaintiff for compensation under clause 2 of the agreement. The defendants further issued letters dated 02.08.1999 and 03.08.1999 to the plaintiff levying compensation under clause 14 of the agreement. The plaintiff duly replied to these letters of the defendants.

13. As per the averments made in the plaint, the defendants issued another show cause notice to the plaintiff under clause 3 of the agreement to which the plaintiff immediately replied. Vide letter dated 12.01.2000 the defendant No.2 levied compensation to the tune of Rs.33,06,440/- under clause and called upon the plaintiff to pay the said amount within 7 days.

14. Being aggrieved, the plaintiff filed the present suit on 29.01.2000.

15. On 22.09.2000 the defendants filed their written statement and counter claim of Rs.36,66,118/-. Wherein it is stated that for 20 months the plaintiff failed to carry out more than 10% of the work and then by letter dated 21.05.1993 the partner of the plaintiff firm Mr. Manohar Singh showed his inability to finish the work as they do not have engineers and security. The plaintiff even failed to adhere to his part of the agreement dated 29.11.1998 of finishing work on 31.05.1999. It also stated that the extension of time contained in letter dated 16.06.1998 was rejected by the defendant No.1 due to non- functioning of the plaintiff as the plaintiff never kept his promise of finishing work in 1994, 1997 and 1998 and thereafter stopped the work since 02.08.1999 because of which the defendant Society had to suffer heavily.

16. Further, it is stated that the defendant even failed to remove defects pointed out by the consultant engineers of the defendant No.1 and the Architect, defendant No.2. Thus, the penalty to the tune of Rs.33,06,440/- was rightly imposed on the plaintiff with interest @ 24% p.a. since 12.08.1999 which is recoverable from the plaintiff.

17. Vide order dated 01.06.2010 the defendants were proceeded ex-parte as the counsel for the defendants stopped appearing.

18. On 18.01.2006 the following two issues were framed:

"1. Whether the letter dated 12.1.2000 levying compensation under Clause-2 of the Agreement is illegal and arbitrary? OPP

2. Relief."

19. The plaintiff in support of the case filed original documents. By order dated 18.01.2006, the documents were deemed to be admitted. The plaintiff led the evidence by way of Sh. Manohar Singh Pannu, Ex.PW-1/A, partner of the plaintiff firm who proved various documents which are exhibited as Ex.PW1/1 to 1/83. Despite various opportunities granted, the defendants did not appear before the Joint Registrar for cross-examination of the plaintiff‟s witness. By order dated 01.06.2010, the defendants were proceeded ex-parte.

20. Additional affidavit Ex.PW1/B was filed by Sh. Manohar Singh Pannu where he deposed that during the pendency of the suit, the plaintiff and the defendant had invoked the arbitration clause. Justice Satpal (Retired Judge of Delhi High Court) was appointed as

the sole arbitrator to adjudicate upon the disputes of the parties. The sole arbitrator made and published his award on 10.11.2006. Copy of the same is Ex.PW-1/84.

21. The sole arbitrator decided the issue with respect to the breach of the agreement and held that the defendant was in breach and the time did not remain the essence of the contract. The objections filed to the award were dismissed by the learned Single Judge in OMP 41/2007 by order dated 21.01.2009. The said order is Ex.PW-1/85.

22. Against the said order, an appeal, being FAO (OS) 321/2009, was filed. The said appeal was dismissed and the same is Ex.PW-1/86.

23. The defendants though filed an affidavit of Mr. K.L.Hans, President of defendant No.1-society, in terms of their evidence, but the said witness did not appear for his cross-examination at the hands of the plaintiff. So, his affidavit cannot be read in evidence.

24. The evidence of the plaintiff has not been rebutted by the defendants. The witnesses of the plaintiff were also not cross- examined. Therefore, the statement made in the said affidavits is taken on record. In view thereof, I am of the view that the plaintiff is entitled for a decree as prayed for. The suit of the plaintiff is decreed in terms of clauses (a) and (b) of the prayer clause. The plaintiff is also entitled for the cost. Decree be drawn accordingly.

MANMOHAN SINGH, J.

NOVEMBER 21, 2011 jk