Delhi High Court
Delhi Development Authority vs M/S Harcharan Dass Gupta & Ors. on 10 October, 2012
Author: V. K. Jain
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 10.10.2012
+ CS(OS) No. 1336/2008
DELHI DEVELOPMENT AUTHORITY ..... Plaintiff
Through: Mr. Rakesh Mittal, Mr. Rajesh
Kumar Verma, Advocates
versus
M/S HARCHARAN DASS GUPTA & ORS. ..... Defendants
Through: None
CORAM:
HON'BLE MR. JUSTICE V.K.JAIN
JUDGMENT
V.K.JAIN, J. (ORAL)
1. This is a suit for recovery of Rs.7,82,41,640/-. The defendant no.1, which is
a partnership firm of defendants no.2 to 5, was awarded a contract for construction
of 400 LIG houses in Group-III, of the value of Rs.9,49,41,058/- and the stipulated
date for completion of the work was 16.8.2005. It is alleged in the plaint that from
the very beginning, the defendants did not adhere to the time-schedule as per the
contract between the parties. The defendant No. 1 was required to sign the formal
agreement within seven days of issue of award letter dated 7.8.2003. It, however,
delayed the signing of the agreement and avoided to start the work on totally flimsy
ground, that the terms and conditions of the tenders were contradictory. The
objections raised by the defendant vide letter dated 11.8.2003 were clarified by the
DDA vide letter dated 22.08.2003 and the defendant asked to start the construction
work. The defendant however, did not commence the work and raised frivolous
pleas vide letter dated 13.9.2003. The plaintiff was, therefore, constrained to issue
notice dated 9.10.2003 giving last and final opportunity to the defendant to start the
work. Thereafter, the agreement was signed by the defendant only on 17.10.2003
and the site was taken over on that very date, though it should have been taken over
by 17.8.2003. It is alleged that deficient drawings were submitted on 4.11.2003,
though they were required to be submitted by 15.9.2003 and a number of
deficiencies were found in those drawings, which were later re-submitted on
24.11.2003. Again there were major mistakes in the earlier drawings and the same
were accordingly returned to the defendants. Initially, the defendants informed the
plaintiff that there were some mistakes in the design calculation, but later informed
that there was no mistake in the design. The design was accordingly approved by
the plaintiff on 20.02.2004. On account of delay on the part of the defendants, the
work could not begin from 15.9.2003 to 27.01.2004. Since the defendants were
delaying the construction of work on one pretext or the other, the plaintiff issued a
show-cause notice to defendant No. 1 stating therein that it was required to achieve
25% progress within six months but the progress on the site was practically Nil.
The reasons given by the defendant for the delay were not found satisfactory by the
Superintendent Engineer. He, however, granted indulgence to them and cautioned
that he reserved the right to impose compensation in case sufficient progress was
not achieved within next three months. Since the defendants failed to achieve the
desired progress, the plaintiff issued another show cause notice stating therein that
the progress achieved at the site was only 7% as against the stipulated requirement
of 50% which ought to have been achieved at that time. The defendant was time
and again requested to accelerate the progress of the work. Since the defendants
failed to adhere to the time-schedule for completion of the work, compensation
amounting to Rs.94,94,106/- under Clause 16 of the agreement was levied upon
them by the Superintendent Engineer vide letter dated 7.3.2005. Since defendant
No. 1 had completely abandoned the work, a notice under Clause 17 of the
Agreement was also issued to it on 9.3.2005 and the contract was later rescinded
vide letter dated 7.5.2005.
2. The plaintiff had paid mobilization charges of Rs.47.47 lac to the defendants
against a bank guarantee of Rs.48 lac. The mobilization advance was to carry
interest @ 16% per annum. Consequent to recision of the contract, the plaintiff is
claiming Rs.18,93,622/- per annum being the balance of mobilization advance and
interest on it after adjusting the bank guarantee furnished by the defendants. The
plaintiff is also claiming Rs.4,36,023/- towards interest on the balance of
mobilization advance @ 16% per annum for the period from 3.11.2006, till filing
of the suit.
3. The plaintiff is claiming a sum of Rs.95,71,264/- from the defendants after
adjusting the credit balance and recoveries to be made under various heads
including the compensation levied under Clause 16 of the Agreement. The plaintiff
is also claiming Rs.47,68,151/- towards interest on the amount of compensation of
Rs.94,94,106 and Rs 4287/- towards interest on the amount of Rs 77158/- which
becomes payable to the it due to under recoveries.
4. It is alleged in the plaint that under Clause 17 of the Agreement, the plaintiff
was entitled to get such part of the work which remained unexecuted from another
contractor and recover the excess amount, if any, paid by it from the defendants.
After rescinding the contract on 7.5.2005, the plaintiff invited tenders for the
balance work to be executed at the risk and cost of the defendants. That work was
awarded to M/s C.R.Sons Builders & Developers @ Rs.8801/- per sq. meter plinth
area, whereas the work to the defendant had been awarded @ Rs.5109/- per square
meter plinth area. The excess amount which the plaintiff had to pay on this account
is Rs.6,30,51,492/-.
5. The following is the break-up of the amount of Rs.7,96,71,839/-, which had
become payable from the defendants:-
A. Balance Mobilization Advance - Rs.18,40,622/-
B. Interest on the amount of Rs.18,40,622/- - Rs.4,36,023/-
C. Net amount under 6th & Final Bill
including compensation levied under clause 16- Rs.95,71,264/-
D. Interest on the amount of Rs.94,94,106/- - Rs 47,68,151/-
and on the amount of Rs.47,68,151/- - Rs 4278/-
E. Risk and cost Amount - Rs.6,30,51,492/-
-------------------
7,96,71,839/-
-------------------
Some material of the defendants was abandoned by them on the site and that
material was transferred by the plaintiff to the new contractor. The defendant is
entitled to credit of Rs.14,30,199/- being the value of that material. The suit amount
of Rs.7,82,41,640/- arrived after deducting the aforesaid amount of Rs.14,30,199/-
from the gross amount of Rs.7,96,71,839/-.
6. The defendants filed written statement contesting the suit and took a
preliminary objection that the suit is barred by limitation. On merits it was alleged
that rescinding of the contract was illegal since the work could not be completed on
account of various hindrances on the part of the plaintiff, non-availability of the
site, non-approval of drawings and non-payment of the amount due for the work
executed by the defendants. It is alleged that no interest on the compensation is
envisaged in the contract between the parties. The defendants have denied
abandonment of the work and have alleged that they had to move out of the site
after the contract was rescinded by the plaintiff.
7. The following issues were framed on the pleadings of the parties:-
1. Whether the suit is barred by limitation? OPD
2. Whether plaintiff is entitled to recover an amount of Rs.7,82,41,640/-, as
claimed by it in para 26 of the plaint? OPP
3. Whether plaintiff is entitled to pendente lite and future interest, if so, on
what amount and at what rate? OPP
4. Relief.
8. The plaintiff has filed the affidavit of Mr. Radhey Shyam, Executive
Engineer, RPD XI, by way of evidence. In his affidavit, the witness has supported
on oath the case set out in the plaint and has proved various documents filed by the
plaintiff. He has stated that the defendant did not have necessary resources ready in
hand to start the work and therefore, delayed taking over the site for execution of
work. He has further stated that the defendant delayed signing of the formal
agreement in terms of award letter dated 7th August, 2003 on one pretext or the
other, stating that the terms and conditions of the tender were contradictory. It was
clarified to him that there was no question of ambiguity in the terms and conditions
of the tender. Despite that, the defendant did not come forward to sign the formal
agreement. It was only after issue of the notice dated 9 th October, 2003 that the
formal agreement was signed by the defendant on 17 th October, 2003. Thus,
according to the witness, defendant was responsible for the delay of more than 61
days by not executing the formal agreement within the stipulated period.
He has further sted that the drawings were submitted by the defendants only
on 15th September, 2003. Vide letter dated 5th January, 2004, the defendant then
informed the plaintiff that there was some mistake in the design/calculation, and
therefore, the design re-submitted by them be withheld. However, vide subsequent
letter dated 27th January, 2004, they informed the plaintiff that there was no mistae
in the design. Accordingly, the designs were approved on 20th February, 2004.
He has stated that the plaintiff, time and again, requested the defendant to
accelerate the progress of the work but the defendant completely failed to adhere to
the completion programme. Compensation amounting to Rs. 94,94,106/- was then
imposed upon the defendant by the Superintending Engineer. According to the
witness, since the defendant had completely abandoned the work, the plaintiff had
no option but to rescind the contract vide letter dated 7th May, 2005. He has also
stated that the defendant had failed to construct the requisit cement godown even
after 2½ months of issue of award letter, nor there was any activity at site and even
the site office was not constructed. According to him, the defendant brought Birla
Chetak brand cement at the site which was not an approved brand.
In his deposition, Mr. Radhey Shyam has stated that the Nala shown to the
lay out plan of the field investigation report existed only under 2 out of the 20
blocks consisting of 20 houses each, which the defendant was required to construct
and the remaining 18 blocks were free from any kind of hindrance. He has also
stated that the plaintiff did not suggest any increase in the length of row of blocks
and it was the defendant who chose to change increase of extension joint from 40
mm to 150 mm, which was agreed by the CDO of the plaintiff. According to this
witness, the defendant completely abandoned the work after November, 2004 and
removed construction equipment from the site he has claimed that the defendant
had completed about 7% of the work by the time it was abandoned by him.
The witness of the plaintiff has also stated that on recession of the contract,
the work was re-awarded to M/s.C.R.Sons Bldrs. & Developers at the rate of
8801/- per square meter plint area whereas the defendant was awarded this work at
the rate of Rs.5109/- per square meter plinth area. According to him, it was
difficult for the plaintiff to find another contractor for completion of the work
which was left incomplete by the defendant. He has stated that the difference of
the cost on account of the work being awarded to M/s.C.R.Sons Bldrs. &
Developers comes to Rs.6,30,51,492/-.
This witness has also stated that at the time of rescission of the contract,
some material such as TMT bars, stone aggregate, coarse sand, site office, godown,
labour huts, tube well, pump house, laboratory i/c 270 Mt. Length for electric
connection procured by defendant, was lying at this site, that material was
transferred to M/s.C.R.Sons Bldrs. & Developers and a sum of Rs.14,30,199/- was
deducted from their bill in this regard and adjustment from that amount has been
given to the defendant.
9. It is an admitted case that D-1 which is a partnership firm of defendants No.2
to 5 was awarded a contract for construction of 400 LIG Houses at the plinth area
rate of Rs.5109 per sq. mtr. and the time allowed for completing the construction
was 24 months. This is confirmed from a perusal of the work of the award letter
(Ex. P1), which is dated 07.08.2003. A perusal of this document would show that
the time of 24 months to complete the work was to be reckoned from 10th day after
the date of issue of letter. Therefore, the defendant should have commenced
execution of the work by 17.08.2003 and should have completed it by 16.08.2005.
It is an admitted position that the defendant did not complete the work by
16.08.2005.
10. The plea taken in the written statement is that the work suffered because of
various breaches committed by the plaintiff and various hindrances attributable to
it. It is alleged that contradictory conditions were stipulated in the award letter and
the work were delayed due to non-availability of clear sight failure to approve
drawings and non payment of dues for the work which had been executed. A
perusal of the record would show that vide letter dated 11.08.2003 (Ex.P-2), the
defendant wrote to the plaintiff that clause 1.3 and 2.2 of the award letter dated
07.08.2003 were contradictory. It was stated that they had quoted rates with
maintenance period of one year whereas the award letter stipulated watch and ward
of un-allotted houses for a period of three years. It was also stated in the letter that
during negotiations the maintenance period after completion of the houses had been
reduced from three years to one year since handing over of service to the civic
body was not likely to take place in the absence of peripheral services to be
rendered by the department with the provision for extension for further two years at
extra cost but the scope of work in clause 2 stipulated that the service were to
handed over to the respective department which was in-contravention of the
discussions during negotiations. Vide letter dated 22.08.2003 (Ex.P-3), DDA
informed the defendants that there was no contradiction in the award letter. It was
pointed out that Clause 1.3 of the award letter provided for maintenance for one
year after completion of the work and incase of need for maintenance beyond one
year the defendant was to be paid @ Rs.53 per sq. mtr. of plinth area per year upto
maximum of two years. It was further pointed out that as per Clause 2.2, the watch
and ward of un-allotted houses was to remain with the defendants for three years
after completion of the work and thereafter unalloted flats were to be made defect
free and handed over to the department. It was stated in the reply that there was no
negotiations in this regard with the defendant and the award letter was based on the
provisions of the tender document and as per defendants', negotiation letter dated
24.07.2003. The defendants were asked to attend the office of the plaintiff to sign
the formal agreement within seven days from the date of issue of the letter.
However, vide letter dated 13.09.2003, the defendants avoided execution of the
agreement on the ground that those were sharaadh days and therefore they would
sign the agreement only after 25.09.2003. A perusal of the notice Ex.P-5, send by
the plaintiff to the defendant on 09.10.2003 would show that the defendants did not
execute the agreement even after 25.09.2003. The defendants were, therefore,
given one last and final opportunity for taking over the site and execute the
agreement within seven days from the date of the letter. Admittedly, the agreement
was actually executed by the defendant on 16/17.10.2003. The drawings were
submitted by the defendants vide letter dated 04.11.2003 (Ex.P-6). The drawings
were returned with certain objections vide letter dated 06.11.2003 (Ex.P-7). This
was followed by a letter dated 07.11.2003 to the defendants asking them to give
undertaking as indicated in the letter with respect to handing over of the site and
the number of labours tents pitched by the defendants on the site, as also with
respect to the site office consisting yard laboratory etc. The drawings were re-
submitted by the defendants on 22.11.2003 vide letter Ex.P-9. However, before
these drawings could be approved by the plaintiffs, the defendant vide letter dated
05.01.2004 (Ex. P-9) informed the plaintiff that there was a calculation mistake in
working out the loads according to their structure designs and they were in the
process of submitting the same. The plaintiff was requested to withhold the earlier
structure designs submitted by the defendants. It would, thus, be seen that during
05.01.2004, the defendants had not been able to finalize the structure designs and
were still in the process of revising the same. Vide letter dated 16.01.2004, the
defendants were informed that they had failed to attain 25% progress within 1/4 th of
the period stipulated for completion of the construction and the progress at the site
was practically nil. The defendants were asked to show cause why compensation
under clause 16 of the agreement be not levied upon them. There was no response
from the defendants to this letter. Vide letter dated 27.01.2004 (Ex.P-11), the
defendants in continuation of their letter dated 05.01.2004, informed the plaintiff
that there were no calculation mistake in working out the loads, and therefore, the
structure designs submitted by them may be approved. Thus, it was only on
27.01.2004 that the defendants finally sought approval of the structure designs
submitted by them. The structure designs were approved by the plaintiff vide letter
dated 20.02.2004.
11. Vide letter dated 24.02.2004, (Ex.D-1), the defendants complained of
flooding at site and various damages caused by the agency executing the work on
the upstream of their site and stated that the accumulation of water had also
increased the level of water table, resulting in expenditure on pumping out the
same. The plaintiff was asked to define the work of the defendants and compensate
them for the losses sustained by them.
Vide letter dated 24.03.2004 (Ex. P-13), the plaintiff gave an opportunity to
the defendant to discuss the matter on 31.03.2004 before any action was taken
under Clause 16 of the agreement. Vide letter dated 17.05.2004 (Ex.D-2), the
defendants sought withdrawal of the notice dated 16.01.2004 issued under Clause
16 of the Contract. It was stated in the letter that on account of increase in width of
the expansion joint the dimensions shown in the lay out plan were not in
accordance with the dimensions prevailing on the ground, revision of lay out plan
had become necessary and work could not proceed further in the absence of revised
lay out plan.
Vide letter dated 30.06.2004 (Ex.P-14), the Superintendent Engineer of
DDA informed the defendants that they had miserably failed to organize the work
from the very beginning and had lost valuable time. The levy of compensation,
however, was deferred despite failure of the defendant to carry out their contractual
obligations and they were advised to mobilize all resources and material, to execute
the work.
Vide letter dated 04.10.2004 (Ex.D-3), the defendants complained that
payment of advances had been assessed by the plaintiff on a lower site, as a result
of which their funds to the tune of Rs.12 lacs had got blocked and secured
advanced had not been allowed on store aggregates. The plaintiff was requested to
pay full value of the material after assessing it on the value of prevailing market
rates.
Vide letter dated 08.10.2004 (Ex. D-4), the defendants sought
reimbursement for the extra expenditure alleged to have been incurred at them on
procurement TMT.
Vide letter dated 03.11.2004 (Ex. D-5), the defendant again sought payment
of secured advance on the basis of prevailing rates of the material brought by them
to the site. They also sought reimbursement on account of abnormal increase in
price of bricks/cement.
Vide show cause notice dated 04.11.2004 (Ex. P-15), the Clause 17, the
defendants were informed that actual progress of the work at that time was only
about 7% though ½ of the work should have been completed by 31.10.2004 as per
Clause 16 of the agreement. The defendants were asked to show cause why action
under sub-Clause 17(a) and/or 17(b) and/or 17(c) of the agreement be not taken
against them on account of breach of the contract on their part.
Vide notice dated 04.11.2004 (Ex.P-16) sent by the Superintendant Engineer
of DDA, the defendants were again asked to show cause within ten days as to why
the compensation under Clause 16 of the agreement be not levied upon them. It
was pointed out in the notice that despite sufficient opportunity given to them the
defendants had not shown progress in the matter of construction and the progress at
the site was only about 7% though it should have been 50% by 31.10.2004.
Reference was also made to the earlier notice dated 30.06.2004 whereby right to
impose compensation was reserved by the plaintiff.
The letter dated 08.10.2004 was replied by the plaintiff on 06.11.2004 and
the reply is Ex.D-6. It was stated in the reply that the defendants had delayed start
of the work by taking late possession, not signing the agreement in time and late
submission of foundation and other structural drawings. The defendants were also
informed that they have to procure TMT from the manufacturer as per the
agreement and the reimbursement of extra expenditure was beyond the scope of the
agreement. The defendants were asked to submit documentary evidence incase
TMT bars specific dia's were not available with the main procedures.
Vide letter dated 11.11.2004 (Ex.D-7), the defendants claimed that the delay
in commencement and execution of the work was not attributable to them and the
progress of the work had suffered, due to lack of planning at the end of the
plaintiff, which was reflected in the revision of the lay out plan almost 09 months
after the stipulated date of commencement of the work. It was also stated in the
letter that the DDA had granted permission to other contractors to procure the TMT
bars from sources other than the manufacturers.
Vide letter dated 11.11.2004, the defendants, again, wrote to the plaintiff that
they were being discriminated in the matter of secured advance since other
contractors were being paid at the rate of 75% of the prevailing rates of the
material, whereas they were being paid up to only about 40% of the cost of the
material procured by them. This letter was written in response to DDA's letter
dated 04.11.2004. Yet another letter was written by the defendants to DDA on
11.11.2004 (Ex.D-9), stating therein that there was no lapse or deficiency on their
part and they were not responsible for the delay in execution of the work.
Reference in this letter was made to the show-cause notice received from the
Executive Engineer in clause 17 of the agreement. Vide letter dated 16.11.2004,
the defendants, again, sought secured advance to the extent of 75% of the
prevailing market rate of re-enforced steel and other material.
Vide letter dated 23-11-2004 (Ex. P-17), the concerned Executive Engineer
informed the defendants that the position of the material at the site was very
alarming and if the same position continued, there would be no alternative except
to take action under various Clauses of the contract. It was stated that the progress
achieved was hardly 7.5% though it should have been more than 50%. Vide letter
dated 27.11.2004, the concerned Executive Engineer, again asked the defendants to
devote time and energy to accurate the progress of the work instead of exchanging
unnecessary correspondence.
Vide letter dated 29.11.2004 (Ex.D-14), the defendants sought permission to
procure 300 MT of TMT bars from the secondary producers. Vide letter dated
13.12.2004 (Ex.D-15), written to Engineer Member of DDA, the defendants
complained that they had not been permitted to procure re-enforced steel bars from
secondary manufacturers and had not been paid secured advance on bricks and
coarse aggregates, which they had brought on the site. They also complained about
non-payment of testing charges for steel and cement. Vide letter dated 13.12.2004,
the defendants, again, reiterated that delay in execution of the work was due to
reasons stated in their earlier letters and was not on account of lack of planning and
resources on their part. This letter was written in response to letter of DDA dated
27.11.2004.
Vide letter dated 14.03.2005 (Ex.D-19) in reply to the show-cause notice
under clause 17 of the agreement, the defendants informed the plaintiff about filing
of Suit No. 1435 of 2004 in this Court and requested that the outcome of the said
suit be awaited.
Vide letter dated 11.04.2005, written in response to DDA's letter dated
07.03.2005 the defendants refuted their liability to pay any amount to DDA
towards compensation. Vide letter dated 28.04.2005 (Ex.D-23), the defendants
stated that the work stood abandoned being sub judice and requested that 50 MT of
steel used by them in columns and rafts be recorded for payment and 20 MT of
TMT bars lying at the site be taken on record and the expenditure be reimbursed or
in the alternative they may be permitted to lift the same. Similar request was made
in respect of other material such as stone aggregate, stone dust, shuttering material,
etc.
Vide letter dated 01.06.2006, written in response to letter of DDA dated
05.05.2006, the defendants criticized the action of awarding the work of another
contractor and sought details and mode of working out the rate at which the work
had been awarded to that contractor.
12. The first claim of the plaintiff is with respect to the amount which was given
as mobilization advance to the defendants, after adjusting the amount of the bank
guarantee which the plaintiff invoked. It is alleged in para 26 of the plaint that the
plaintiff had extended mobilization advance of Rs 47.47 lakh to the defendants on
06.05.2004 at the interest of 16% per annum and the defendants had furnished a
number of bank guarantees for an aggregate sum of Rs 48 lakh to the plaintiff. The
amount of interest at the rate of 16% per annum from 06.05.2004 to 02.11.2006,
when the bank guarantees were encashed, comes to Rs 18,93,622/-. The balance
amount of Rs 29,06,378/- was adjusted by the plaintiff against the principal amount
of Rs 47.47 lakh. Thus, the plaintiff is entitled to recover the balance mobilization
advance, amounting to Rs 18,40,622/- from the defendants. Since the mobilization
advance carried interest at the rate of 16% per annum, the defendants are also liable
to pay interest on that amount on the aggregate rate of 16% per annum. The
amount of interest on Rs 18,40,622/- for the period from 03.11.2006, till filing of
this suit, comes to Rs 4,36,023/-. The plaintiff is entitled to recover the said
amount from the defendants.
13. Clause 16 of the agreement between the parties reads as under:-
"The works comprised in this tender are to be
commenced immediately on receipt of written orders
from the Divisional Officer to commence work. The time
allowed for carrying out of the work as entered in the
tender shall be strictly observed by the contractor and
shall be reckoned from the 10th day after the date on
which the order to commence the work is issued to the
contractor(s). The work shall throughout the stipulated
period of the contract be proceeded with all due diligence
(time being deemed to be the essence of the contract(s) on
the part of the contractor(s) and the contractor(s) shall
pay as compensation as amount equal to one percent or
such smaller amount as the Superintending Engineer
(whose decision in writing shall be final) may decide, on
the amount of the contract as shown in the tender for
every day that the work remains un-commenced or
unfinished, after the proper dates and further, to ensure
goods progress during the execution of the work, the
contract(s) shall be found, in all cases in which the time
allowed for any work exceeds one month to complete one
fourth of whole of the work before one fourth of the
whole time allowed under the contract has elapsed one
half of the work before one half of such time has elapsed,
and three fourth of the work before three fourths of such
time has elapsed. In the event of contractor(s) failing to
comply with the condition he/they shall be liable to pay
as compensation an amount equal to one percent or such
small amount as the Superintending Engineer, (whose
decision in writing shall be final may decide on the said
amount of the contract for every day that the due a
quantity of work remains incomplete; provided always
that entire amount of compensation to be paid under the
provisions of this clause shall not exceed ten percent on
the amount of the contract as shown in the tender.
In M/s J.G.Engineers Pvt. Ltd. v. Union of India & Anr. AIR 2011 SC
2477, Supreme Court considering a clause identical to clause 2 of the agreement
between the parties to this suit, inter alia held as under:
"14. Thus what is made final and conclusive by clauses
(2) and (3) of the agreement is not the decision of any
authority on the issue whether the contractor was
responsible for the delay or the department was
responsible for the delay or on the question whether
termination/rescission is valid or illegal. What is made
final, is the decisions on consequential issues relating to
quantification, if there is no dispute as to who committed
breach. That is, if the contractor admits that he is in
breach, or if the Arbitrator finds that the contractor is in
breach by being responsible for the delay, the decision of
the Superintending Engineer will be final in regard to two
issues. The first is the percentage (whether it should be
1% or less) of the value of the work that is to be levied as
liquidated damages per day. The second is the
determination of the actual excess cost in getting the
work completed through an alternative agency. The
decisions as to who is responsible for the delay in
execution and who committed breach is not made subject
to any decision of the respondents or its officers, nor
excepted from arbitration under any provision of the
contract."
Supreme Court in this regard also referred to the following view taken by it
in Bharat Sanchar Nigam Limited v. Motorola India Limited (2009) 2 SCC 337:
"x x x the decision contemplated under
Clause 16.2 of the agreement is the decision regarding the
quantification of the liquidated damages and not any
decision regarding the fixing of the liability of the
supplier. It is necessary as a condition precedent to find
that there has been a delay on the part of the supplier in
discharging his obligation for delivery under the
agreement."
It is thus for the Court to decide whether delay in execution of the work,
within the time stipulated in the agreement, was attributable to the defendants or to
the plaintiff. If the Court comes to the conclusion that delay in completion of the
work is attributable to the defendants, the decision of the Superintending Engineer
in respect of quantum of the compensation would be final and binding on the
parties and it would not be open to the Court to sit in appeal over the decision of
the Superintending Engineer with respect to the quantum of compensation and take
a view different from the view taken by him. On the other hand, if the Court finds
that the delay in execution of the work was attributable solely to the plaintiff, the
decision of the Superintending Engineer levying compensation would be without
jurisdiction. Similarly, if the Court finds that the defendants had failed to maintain
progress of the work in terms of the contract agreed between the parties and the
plaintiff was not responsible for the failure of the defendants to maintain the
required progress, it is not permissible for the Court to interfere with the amount of
compensation levied by the Superintending Engineer since his decision with
respect to quantum of the compensation is final and binding on the parties.
14. A perusal of the award dated 07.08.2003 would show that the defendants
were required to commence the work within 10 days from the date of issue of the
letter which would mean that they were required to commence the work by
17.08.2003. The award letter further shows that the work was required to be
completed within two years from the date of commencement, which would mean
that it was required to be completed by 16.08.2005.
A perusal of the clause 16 of the agreement would show that the defendants
were required to execute one fourth of the work before one fourth of the time
allowed under the contract had elapsed, one half of the work before one half of the
time allowed for completion of the work have elapsed and 3/4 th of the work before
three fourth of the time allowed for completing the work have elapsed. Therefore,
the defendants were required to complete 25% of the work by 16.02.2004 and 50%
of the work by 16.08.2004. The defendants were required to complete 75% of the
work by 16.02.2005. The contract was rescinded by DDA on 07.05.2005. It was
stated in the show-cause notice dated 04.11.2004 issued by the plaintiff to the
defendants that the progress achieved by that time was only 7%, though actual
progress achieved should have been more than 50% by that time. The averment to
this effect finds mention in para 13 and 14 of the plaint.
In their written statement, the defendants have not disputed that the work
executed by 31.10.2004 was only 7%. This was also their case that they had
executed more than 7% of the work by 31.10.2004. It has come in the unrebutted
deposition of PW-1 that the defendant had completed only about 7% of the work,
when the contract was rescinded. Thus, it can hardly be disputed that the
defendants did not adhere to the time schedule fixed in the agreement for
completion of the work.
The only plea taken in the written statement for delay in execution of the
work are that the award letter contained contradictory conditions and there were
hindrances on the part of the plaintiff i.e. non-availability of clear site, non-
approval of drawings on flimsy excuses and payment was not made for the extra
work executed by the defendants. No evidence has, however, been led by the
defendants to prove any lapse on the part of the plaintiff. No particular
contradiction in the terms and conditions of the award letter has been pointed out
by the defendants in the written statement. The work was awarded to the
defendants on 07.08.2003 and they executed a formal agreement on the same terms
which were contained in the award letter on 17.10.2003. Had there been any
contradictory conditions in the award letter, the defendants would not have
executed the formal agreement without the alleged contradictions being removed
from the terms of the agreement.
There is absolutely no evidence on record to prove that there was any delay
on the part of the plaintiff in handing over site to the defendants. It would be
pertinent to note here that CS(OS) No. 1435/2004 was filed by the defendants
when the plaintiff sought to invoke the bank guarantees which they had furnished
to the plaintiff. It was alleged in the plaint of that suit that DDA had played fraud
upon them by not informing them about existence of a Nala at the project site and,
therefore, the contract between the parties was void due to non-closure of material
facts. The case of DDA in that suit was that the Nala was duly shown in the site
plans. Rejecting the contention of the defendants, a Division Bench of this Court,
inter alia, held as under:-
"18. The tender documents which were given to all the
tenderers by respondent No.1 before awarding the
contract are part of the records. The appellant also
obtained the said tender documents and on the basis of
the same, its tender was submitted. In the said tender
documents, lay out plan is attached to the soil inspection
report at page 201. Existence of a nallah is clearly shown
in the said lay out plan attached. Clause 27 of the tender
documents also clearly requires the tenderer to inspect the
work site and to study the drawing, soil inspection
reports, tender documents and other conditions referred
therein. Clause 1 of the Specifications and conditions of
the tender, which appears at page 130 of the paper book,
requires the contractor to get acquainted with the
proposed site of contract and study specifications and
conditions carefully before tendering. The aforesaid
documents, which are on record and part of the tender
documents, clearly indicate that the appellant was
informed about the existence of a nallah at the project
site. The terms and conditions also require the tenderer
to inspect the site before submitting its tender. It was
also specifically stated in the terms of the tender that the
tenderer should submit the tender only after getting
acquainted with the site. Before submitting the tender the
appellant must have meticulously followed and complied
with the aforesaid conditions, including inspection of the
site and, therefore, we are prima facie satisfied that the
appellant had knowledge and information that there
existed a nallah at the project site.
19. It is stated by respondent No.1 that the pace of the
work of the appellant at the site was extremely slow for
which several notices had to be issued by the said
respondent to the appellant. The appellant also received
mobilization advance before filing of the aforesaid suit.
Therefore, it cannot be said that the appellant received
mobilization advance without having knowledge and
information about the location and situation of the project
site including the existence of nallah at the site.
Therefore, we are satisfied that the allegation now made
by the appellant that it did not have the information about
the existence of a nallah at the site is an afterthought and
is a ploy to get out of the contract by hook or by crook. It
is also interesting to note that not a single letter was
written by the appellant to respondent No.1 prior to the
receipt of the mobilization advance that it had no
knowledge regarding the site or that it had not inspected
the site at all.
20. The contract was awarded to the appellant on 7th
August, 2003 and site was handed over to the appellant
on 1st November, 2003. When possession of the site was
handed over to the appellant on the said date, it cannot be
expected that they received possession of the site for
starting construction work without having inspected the
site. A letter was also written by the appellant to the
DDA on 13th November, 2003 wherein also no mention
was made by the appellant of the fact that the appellant
was unaware of the existence of nallah at the site.
Although, in the plaint, a stand is taken that the appellant
became aware of the existence of the nallah only on 6th
November, 2003 but the contemporaneous documents on
or about the said date clearly belies the fact that the
appellant had no knowledge about the existence of a
nallah at the project site. The appellant also obtained
mobilization advance to the tune of Rs.47.47 lacs from
respondent No.1 on 6th May, 2004 and it cannot be
expected that the appellant had obtained the mobilization
advance without even inspecting the site in question
which was handed over to it on 1st November, 2003, i.e.
about six months prior to the date of release of
mobilization advance."
Thus, existence of a Nala at the site cannot be said to be hindrance on the
part of the plaintiff and the defendants had no justification to commit delay in
commencement or execution of the work on account of existence of Nala on the
site. As regards approval of drawings, there is no evidence of any abnormal delay
on the part of the plaintiff in approving the drawings. In fact, the defendants
themselves committed delay in submitting the drawings. As per the contract, the
foundation drawings were to be submitted on 15.09.2003, whereas the defendants
submitted the same on 04.11.2003 and even at that time, the drawings were not free
from deficiencies and had to be re-submitted on 24.11.2003. At this stage, the
defendants sought withholding of the drawings on the ground that there was some
mistake committed by them in drawings calculation. They sought approval of the
drawings vide letter dated 27.01.2004 and the drawings were approved on
20.02.2004, i.e., within about 24 days of the defendants seeking approval of the
drawings submitted by them. This is not the case of the defendants in the written
statement that under the agreement between the parties, the plaintiff was required
to approve drawings in a period of less than 24 days. The time taken by the
plaintiff for approval of the drawings cannot be said to be unreasonable,
considering the nature of the project and the work which the defendants were
required to execute.
As regards non-payment of the dues, I find that the written statement does
not indicate which payment was delayed and by how much time. There is
absolutely no evidence of any delay having been committed by the plaintiff in
payment of the work executed by the defendants. Therefore, it cannot be said that
the progress of the work was caused on account of delay in payments to the
defendants. I have extensively referred to the correspondence exchanged between
the parties. On the other hand, PW-1 Radhey Shyam is emphatic in his deposition
that the delay in commencement and execution of the work was attributable solely
to the defendants. This also becomes quite clear from a perusal of the
correspondence exchanged between the parties and a number of letters which the
plaintiff wrote to the defendants from time to time, asking them to accelerate the
execution of the work.
Since it is the defendants, who were solely responsible for delay in execution
of the work and a show-cause notice was also issued to them before levying
compensation, the Court would be justified in presuming that while levying the
compensation, the Superintending Engineer considered all the facts and
circumstances of the case. There is nothing on record to indicate that the
compensation levied by the Superintending Engineer was unreasonable. No
evidence has been led by the defendants to establish that amount of compensation
levied upon them was unreasonable or excessive. No evidence has been led by
them to prove that there was no legal injury cased to the plaintiff on account of
their failure to complete the contract. Therefore, the Superintending Engineer, in
my view, was fully entitled in law to levy compensation, amounting to Rs
94,94,106/- on the defendants.
15. The plaintiff has made certain adjustments from the amount of the final bill
submitted by the defendants to it. A sum of Rs 77,540/- was payable to the
defendants after adjustment of the value of the work which was show in the
previous bills and the outstanding secured advance. The plaintiff has claimed Rs
53,675/- towards interest on secured advance which was agreed at 16% per annum.
In the written statement, this is not the case of the defendants that the secured
advance was not to carry any interest or that it was to carry interest at less than
16% per annum. Therefore, the claim of the interest on secured advance is justified.
The Workers Welfare Cess and Work Tax are to be deducted from the bill and the
plaintiff has rightly claimed Rs 3102/- towards Work Tax, Rs 76930/- towards the
Workers Welfare Cess after adjusting the amount which it had already recovered.
Adjustment of Rs 3,044/- has been made towards income-tax and Rs 17,947/-
towards balance security deposit. The amount which remains payable to the
plaintiff in terms of the claim made in para 26(C) of the plaint comes to Rs
96,48,804/-, after adjusting the amount of Rs 77,540/- which was payable to the
defendants towards final bill. The net amount which remains payable to the
plaintiff against this claim comes to Rs 95,71,264/-. The plaintiff is entitled to
recover this amount from the defendants.
16. The plaintiff has also claimed interest on the amount of compensation. The
interest claimed is Rs 47,68,155/- at the rate of 16% per annum from the date of
levy till the date of filing of this suit. The plaintiff has also claimed interest
amounting to Rs 4,287/- on the amount of Rs 77,158/- which is the amount of
under-recoveries which remained payable to the plaintiff after adjustment from the
final bill. There is no agreement between the parties for payment of interest either
on the amount of compensation levied under clause 16 of the agreement or on the
recoveries towards security deposit, work tax, income-tax, workers welfare cess. It
seems that the plaintiff is also claiming interest on the amount of Rs 53,675/- which
was interest on the secured advance. Obviously, the plaintiff cannot claim interest
on interest, since the agreement between the parties did not envisage compound
interest on the amount of secured advance.
Section 3 of Interest Act, to the extent it is relevant, provides that in any
proceeding for the recovery of any debt or in any proceeding in which a claim of
interest in respect of any debt is made, the Court may allow interest to the person
entitled to the debt at a rate not exceeding the current rate of interest. The interest
under this provision can be allowed by the Court, if the proceedings relate to any
debt payable by virtue of a written instrument at a certain time, from the date when
the debt is payable to the date of institution of the proceedings and if the
proceedings do not relate to any such debt, then from the date mentioned in this
regard in a written notice given by the person entitled or the person making the
claim to the person liable, that interest will be claimed, up to the date of institution
of the proceedings.
In the present case, the amount of compensation was not payable at a
particular time. A notice dated 20.05.2005 was sent by the plaintiff to the
defendants, demanding the amount of Rs 94,94,106/- which was the quantum of
levy of compensation by the Superintending Engineer. It was also stated in the
notice that DDA shall also be entitled to interest on the said amount at the rate of
16% per annum. Therefore, interest under Section 3 of the Interest Act, 1978 can
be awarded to the plaintiff on the amount of compensation, with effect from
20.05.2005, till the date of filing of this suit. In the facts and circumstances of the
case, I am of the view that interest under Section 3 of Interests Act, 1978 should be
awarded to the plaintiff at the rate of 12% per annum on the amount of Rs
94,94,106/-. The learned counsel for the plaintiff states that the interest for the
period from 20.05.2005, till the filing of this suit on 05.05.2008 comes to Rs
33,70,407.63/-. The plaintiff is entitled to this amount from the defendants.
17. Clause 17 of the agreement between the parties reads as under:-
"In any case in which under any clause of this contract
the contractor shall have rendered himself/themselves
liable to pay compensation amounting to the whole of
his/their security deposit (whether paid in one sum or
deducted by instalment) or committed a breach of any of
the terms contained in Clause 20, the Divisional Officer
on behalf of DDA shall have power:-
(a) To rescind the contract (of which recession notice in
writing to the contractor(s) under the hand of the
Divisional Officer shall be conclusive evidence) and in
such case the security deposit of the contractor(s) shall
stand forfeited, and be absolutely at the disposal of DDA.
(b) To employ labour paid by the Delhi Development
Authority and supply materials to carry out the work or
any part of the work debiting the contractor(s) with the
cost of the labour and the price of the materials (the
amount of such cost and price certified by the Engineer-
in-charge shall be final and conclusive) and crediting
him/them with the value of the work done. The
certificate of the Divisional Officer as to the value of the
work done shall be final and conclusive against the
contractor(s).
(c) To take such part of the work as shall be unexecuted out
of his/their hands, and to give it to another/other
contractor(s) to complete. In which case any expenses
which may be incurred in excess of the sum which would
have been paid to the original contractor(s) if the whole
work had been executed by him/them (of the amount of
which excess the certificate in writing of the Divisional
Officer shall be final and conclusive) shall be borne and
paid by the original contractor(s) and may be deducted
from any money due to him/them by DDA under the
contract or otherwise or from his/their security deposit or
proceeds the sale thereof or a sufficient part thereof. The
cost of the work to be executed by the contractors shall be
determined based on market rates prevailing at the time
of actual execution of the work.
In the event of any of the above courses being adopted by
the Divisional Officer the contractor(s) shall have no
claim to compensation for any loss sustained by him/them
by reasons of his/their having purchased or procured any
material or entered into any engagements, or made any
advances on account of, or with a view of the execution
of the work or the performance of the contract. And in
case the contract shall be rescinded under the provisions
aforesaid, the contractor(s) shall not be entitled to recover
or be paid by any sum for any work therefore actually
performed under the contract, unless the Divisional
Officer will have certified in writing the performance of
such work and the value payable in respect thereof, and
he/they shall only be entitled to be paid the value so
certified."
In the present case, compensation has been levied by the Superintending
Engineer upon the defendants under clause 16 of the agreement. The levy of
compensation has been found to be legal and justified. It was the defendant, who
failed to maintain the required progress in execution of the work and thereby
compelled the plaintiff to rescind the contract. The concerned Executive Engineer
sent notice under clause 17 of the agreement to the defendants on 09.03.2005,
stating therein that they had abandoned the work and gave them 10 days' time.
The contract was ultimately rescinded by the plaintiff on 07.05.2005. In view of
clause 17 of the agreement, the plaintiff was entitled to get the unexecuted work
executed from the other contractor and any expenses incurred by DDA in excess of
the amount which it had contracted to pay to the defendants, can be recovered by it
from the defendants.
It has come in evidence that unexecuted work was awarded by the plaintiff
to M/s C.R. Sons Builders and Developers at the rate of Rs 8801/- per square metre
of plinth area. The rate agreed to be paid to the defendants was only Rs 5,109/- per
square metre of plinth area. The excess amount, which the plaintiff agreed to pay
to M/s C.R. Sons Builders and Developers for execution of the work, which was
left unexecuted by the defendants, comes to Rs 6,30,51,492/- as stated in the
affidavit of Mr. Radhey Shayam. The plaintiff is entitled to recover that amount
from the defendants.
18. For the reasons stated hereinabove, I hold that the plaintiff is entitled to the
following amounts from the defendants:-
a) balance of the mobilization advance: Rs 18,40,622/-
b) interest on mobilization advance: Rs 43,6,023/-
c) the principal amount in terms of claim in para 26(C) of the plaint comprising
compensation under clause 16 of the agreement and certain other recoveries:
Rs 95,71,264/-
d) interest on the amount of compensation Rs 33,70,407.63/-
e) excess amount paid to
M/s C.R. Sons, Builders and Developers Rs 6,30,51,492/-
The issue is decided accordingly.
As far as the recovery of balance mobilization advance is concerned, since
the contract was rescinded on 07.05.2005, the plaintiff had no cause of action to
claim this amount prior to that date. Having been filed on 05.05.2008, the suit is
within limitation as far as the balance mobilization advance is concerned.
Consequently, the suit to the extent it pertains to interest on mobilization advance
is also within limitation.
As far as recovery of compensation levied under clause 16 of the contract is
concerned, admittedly, the compensation was levied by the Superintending
Engineer prior to 07.03.2005. Vide letter dated 07.03.2005 the defendants were
informed about levying of compensation and were asked to deposit the same within
15 days from the date of the letter. Irrespective of whether the period of limitation
is computed from the date the compensation was levied or from the date stipulated
in the letter dated 07.03.2005 for making payment, the suit having been filed on
05.05.2008 is barred by limitation, as far as this claim is concerned. For the same
reason, the interest on the compensation levied under clause 16 of the contract is
also barred by limitation.
As far as the amount of Rs 77,158/- payable to the plaintiff on account of
under recoveries mentioned in para 26(C) of the plaint is concerned, the same is
within limitation since the final bill was prepared only in the year 2007.
Consequently, the claim for the interest on the amount of Rs 77,158/- would be
within limitation. The amount of interest on Rs 77,158/- at the rate of 12% per
annum, according to the learned counsel for the plaintiff, comes to Rs 3,215/. As
regards the amount of Rs 6,30,51,492/-, the same is within limitation since the
contract to M/s C.R. Sons Builders and Developers was awarded only on
14.02.2007, whereas the suit was filed on 05.05.2008. The issue is decided
accordingly.
In view of my finding on the issue No. 1&2, the plaintiff is entitled a decree
for recovery of the following amounts:-
1. Secured Advance: Rs 18,40,622/-
2. Interest on secured advance: Rs 4,36,023/-
3. Amount due to under-recoveries: Rs 77,158/-
4. Interest on under-recoveries: Rs 3,215/-
5. Difference between the cost of work
awarded to the defendant and the cost of the work
awarded to M/s C.R. Sons Builders and Developers: Rs 6,30,51,492/-
Order
For the reasons stated hereinabove, a decree for recovery of Rs 6,54,08,510/-
with proportionate cost and pendente lite and future interest at the rate of 12% per
annum is passed in favour of the plaintiff and against the defendants.
Decree sheet be drawn accordingly.
V.K.JAIN, J
OCTOBER 10, 2012
rd/rb/bg
