Delhi High Court
M/S Saini Construction Company vs Delhi Jal Board on 29 October, 2015
Author: Pradeep Nandrajog
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on : October 12, 2015
Judgment Delivered on : October 29,, 2015
+ RFA (OS) 48/2015
M/S. SAINI CONSTRUCTION COMPANY .....Appellant
Represented by: Mr.Raman Kapur, Sr.Advocate
instructed by Mr.Dhiraj Sachdeva
and Mr.Varun Kapur, Advocates
versus
DELHI JAL BOARD .....Respondent
Represented by: Mr.Suresh Tripathi, Advocate
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MS. JUSTICE MUKTA GUPTA
PRADEEP NANDRAJOG, J.
1. The appellant was the plaintiff and the respondent was the
defendant before the learned Single Judge. We shall be referring to the
parties by their nomenclature in the suit.
2. Shorn of unnecessary details, relevant facts for the purposes of
adjudication of the present appeal are that the plaintiff filed a suit for
recovery of `66,72,626/- (Rupees Sixty Six Lakhs Seventy Two
Thousand Six Hundred and Twenty Six only) together with interest @
15% per annum on the original side of this Court against the defendant :
Delhi Jal Board.
3. Concise, case of the plaintiff was:-
a) On May 10, 2006, the plaintiff a sole proprietorship concern was
awarded work of „providing and laying 800 mm diameter rising
main/feeder main from Vikas Marg to Vishwakarma Park (Geeta
Colony), UGR & BPS in Trans Yamuna Area‟ vide order No.1/2006-2007
by the defendant.
b) As per the contract entered into between the parties, the stipulated
date of start of work was May 22, 2006 and work was to be completed
within a period of six months from date of start of work i.e. on or before
November 21, 2006.
c) The plaintiff made all necessary arrangements for start of work on
the stipulated date but could not timely start the work on account of
failure of defendant to fulfill its obligations under the contract viz. (i)
providing full and hindrance free site for execution of work; (ii) issuance
of drawings/details for the works; (iii) providing lay out for execution of
work; (iv) obtaining necessary permissions from local authorities; (v)
making timely payments for execution of work; and (vi) inspection and
approval of material/pipes etc. before procurement and use.
d) The plaintiff could not start the execution of the work on time
because of failure of the defendant in taking necessary road cutting
permission(s) from local authorities such as MCD, PWD, DDA etc.
before start of work. The defendant acknowledge in its letter dated
August 24, 2006 that road cutting permission from MCD, PWD is likely
to be obtained by August 30, 2006 and thus no work could be undertaken
at the site before September 01, 2006. (We note that major emphasis was
placed by the plaintiff on the fact that defendant did not timely take road
cutting permission from the local authorities).
e) The defendant did not approve the drawings of valves submitted by
agency M/sPAVCO Engineering in time, particularly those of sluices
valves, which delayed the completion of work.
f) Despite its best efforts the plaintiff could not complete the
execution of the work on time due to hindrances encountered by it at the
site; such as faulty underground electricity/MTNL cables, damaged and
leaking old water sewerages etc.
g) The plaintiff submitted the drawings for approval on July 03, 2006
but the same were approved by the defendant only on October 19, 2006
which majorly delayed the completion of work.
h) The contract required the plaintiff to procure pipes/MS Plates from
SAIL however SAIL did not have requisite materials in its stock which
constrained the plaintiff to procure pipes/MS Plates from local market.
Further, the pipes/valves etc. procured by plaintiff were not timely
inspected by third party M/s MEACON. The non-availability of requisite
material(s) with SAIL and delay of testing of pipes/valves by third party
majorly contributed to the delay in completion of work.
i) On various occasions, the plaintiff wrote to the defendant to the
effect that plaintiff cannot be blamed for delay in completion of work and
the delay is entirely attributable to the defendant.
j) Despite the fact that delay occasioned in completion of work was
entirely attributable to the defendant, the defendant illegally levied
penalty for delay in completion of work calculated @ 9% of contract
value upon the plaintiff in terms of clause 2 of contract. Additionally, the
defendant illegally rescinded the contract on May 21, 2007 and forfeited
security deposit and encashed performance guarantee of plaintiff in terms
of clause 3 of contract.
4. In the backdrop of afore-noted averments made in the plaint, the
plaintiff claimed a sum of `66,72,626/- (Rupees Sixty Six Lakhs Seventy
Two Thousand Six Hundred and Twenty Six only) from the defendant
calculated in the following manner:-
"i) Amount of performance guarantee illegally encashed by
defendant = `9,76,700/-;
ii) Amount of security deposit illegally forfeited by
defendant: = `7,73,000/-;
iii) Amount of penalty illegally levied by defendant (9% of
contract value) = `17,58,033.90;
iv) Amount claimed on account of damages, compensation
etc for breach of contract committed by defendant =
`10,00,000/-;
v) Amount claimed on account of expenses incurred by
plaintiff on supervisors, security guards etc. = `1,56,000/-
vi) Amount claimed on account of Loss of Profit =
`10,62,341/-;
vii) Amount claimed on account of payment due for executed
work = `5,62,713.85.
Total = `66,72,626/-"
5. We note that the plaintiff has summarized the reasons which it i.e.
the plaintiff claimed delayed the completion of work and were entirely
attributable to the defendant in paragraphs 11 and 12 of the plaint and the
same reads as under:-
"11. That the Plaintiff further submit that the required
permission for road cutting from MCD and PWD was awaited
and the work could be taken up only in first week of September
2006 against the stipulated date of start on 22.05.2006. Four
months time was lost initially without practically any work
against 6 months allotted for completion of work. The
hindrances were existing besides the road cutting permission
that the PWD office was existing in the alignment of the work,
which was required to be demolished. The approval of the
drawings for the valves etc. were delayed considerably and
inspection of materials M.S.Plates, valves were another bottle
neck in the progress of work as explained in various references
from time to time. The Defendants have also been delaying the
payment for the work executed by the Plaintiff.
12. That the Plaintiff explained the entire cause of delay vide
their letter dated 22.12.2006. The plaintiff on 31.01.2007
brought out further hindrances during the work such as existing
the underground services like cables of MTNL, Electricity,
Telephone etc., damaged and leaking old water and sewerage
line in the alignment. Plaintiff has procured sufficient quantity
of pipes and placed orders of supply of 78 valves. Payments are
still not being released for over `35 lakhs. The Plaintiff
informed on 09.02.2007 that the testing of pipe are delayed by
the third party M/S MEACON. This fact has also been
confirmed by Defendant vide their letter dated 23.02.2007. M/s
Shiv Durga Land also confirmed on 24.02.2007 that the valves
are received but there are to be checked by M/S MECON."
(Emphasis Supplied)
6. In the written statement filed the defendant essentially contended
that the plaintiff is blameworthy for delayed start/completion of work.
Briefly summarized, the case set up by the defendant in its written
statement is as under:-
a) Initially, the date of start of work was April 08, 2006 but the same
got extended to May 22, 2006 due to failure of plaintiff in depositing
performance guarantee within a period of fifteen days of issuance of
Letter of Intent on March 24, 2006.
b) The plaintiff did not timely arrange MS Plates which fact stands
admitted by the plaintiff in its letter dated November 27, 2006 wherein
plaintiff has expressed for not arranging MS Plates in time due to „family
problems‟ and sought extension of time for completion of work till
February, 2007. Further, Clause 1.4.1 of Special Conditions of Contract
required the plaintiff to procure MS Plates from reputed manufacturers
like SAIL, TISCO and JINDAL but plaintiff procured MS Plates from
open market, that too after considerably delay, thereby breaching the
essential term of the contract concerning quality of the material to be used
in laying of the pipes.
c) Drawings of valves were not required to be approved by the
defendant since specifications regarding valves already formed part of the
contract. In fact, the plaintiff never arranged for the valves constraining
the defendant to arrange for the same.
d) There was no obligation on the defendant to obtain road cutting
permission from local authorities. On the contrary, clause 1.12.4.1 of
Special Conditions of Contract prescribed that „For areas which require
special permission from any other authority, separate drawing shall be
prepared by the Contractor for getting permission from appropriate
authority. Such permission can be for road crossing, railway track
crossing, road cutting, cable shifting, Nallahs crossing and other utilities
etc. Application for such permission addressed to the utility authority
shall be moved by the Contractor and pursued by him. Any delay for
getting the permission shall be to the contractors account. DJB shall help
the contractor to the extent of issuing an essential letter. Amounts
demanded by utility department for restoration of heir utilities shall
initially be paid by the Contractor after informing the Employer and such
amount paid to the other departments shall be reimbursed by the DJB
with in three weeks to the Contractor as is clarified in the earlier
Chapter.' requiring the contractor i.e. the plaintiff to obtain road cutting
permission from the local authorities.
e) The work was originally required to be completed till November
21, 2006 however the plaintiff was given extension till February, 2007.
When the plaintiff could only complete 50% of work even after lapse of
about three months of extended date of completion of work the defendant
was constrained to rescind the contract on May 21, 2007 and levy penalty
upon plaintiff for delayed execution of work.
7. Being relevant, we note that the defendant replied to paragraphs 11
and 12 of the plaint in its written statement as follows:-
"11. That the contents of the Para-11 of the Plaintiff are
wrong and therefore denied. The road cutting permission, as
stated in the foregoing, was required to be obtained by the
plaintiff himself. The hindrances alleged to have been noticed
by the Plaintiff were to be taken care of by the Plaintiff himself
in accordance with the contractual conditions. There was
building that was required to be demolished as stated by the
plaintiff, it is submitted that the new contractor, who completed
the work in question, could complete the said work without
demolishing the said building. The question of approval of
drawings of valves did not arise for the reasons stated in the
foregoing. Third party inspection was taken at the
manufacturing unit for fabrication of the pipes. During the
inspection, it was observed that the plates which were procured
for manufacturing of the pipes were not as per the
specifications. To use the plates below specifications required
the permission from the competent authority. On the request of
the Plaintiff, vide letter dt. 9.2.207, the process of taking
permission was processed (copy of the letter dt.9.2.07 is
annexed as Annexure-R-4). After taking permission, the
inspection of the pipes could be possible by the third party
agency. There was no fault of the department for delay in
inspection and the same was done by the third party from time
to time as requested by the Plaintiff.
(12) That the contents of the Para-12 of the Plaintiff are
wrong and therefore denied. The content of this para on the
reply appears to be repetition of the earlier paras. The cause of
delay as alleged to have been explained vide letter dated
22.12.2006 are not explainable. The letter dt. 22.2.07 written by
the defendant rather demolishes the false pleas of the Plaintiff
with regard to delay in execution of the work. This is incorrect
that the Plaintiff has procured sufficient quantity of pipes and
placed orders of supply of 78 nos. of pipes. The fact remains
that requisite number of pipes were never procured by the
Plaintiff. So far as payment of `35 lacs is concerned, it is
submitted that no payment of `35 lacs was ever due to be paid
to the plaintiff. The Plaintiff was paid `17 lacs and the said
amount stood released in favor of Plaintiff in time. It is
submitted that during inspection, it was observed that the pipes
brought by the Plaintiff was of less thickness and found to be
below specifications i.e. less than 8mm thickness as per the
requirement of the contract. A request was made by the Plaintiff
vide letter dt.9.2.07 requesting that since by mistake the said
quality of pipes were sent, therefore, they might be kindly
approved by the Plaintiff. A request of the Plaintiff was
accordingly processed for approval of the competent authority
and a decision dt.23.02.07 that the competent authority was
pleased to render the decision thereby allowing the Plaintiff to
use the said pipes. Even though they did not confirm the
provision of contract. Therefore, it is evident that there is no
delay on behalf of the defendant in allowing the inspection of
the said pipes, as alleged.
It is submitted that the Plaintiff was to arrange the valve as per
the contract conditions. There was, however, no step was taken
by the Plaintiff with regard to the same. The use of the valve so
as to provided interim relief to the area residents was
considered and therefore the defendant at its own had arranged
the said sluice valve on 1.3.07. It may be noted that the Plaintiff
in this regard had acted some considerable delay, namely even
after lapse of three months and originally the scheduled
completion date, the Plaintiff could not arrange the said valve.
In fact, the letter dt.28.02.07 written by the Plaintiff and
received by the defendant on 2.3.07 requesting for the
inspection of valve at Kolkata was of no consequence by the
said time, as explained herein above, the defendant had
arranged the said valve on its own."
(Emphasis Supplied)
8. In the replication filed the plaintiff denied the averments made by
defendant in its written statement and reiterated the stand taken by it in
the plaint.
9. On the basis of pleadings of parties, following issues were settled
by the learned Single Judge:-
"(i) Whether the recession or termination of contract dated
24.03.2006 vide letter dated 21.05.2007 by the defendant was
lawful? OPP
(ii) Whether the time was of essence both at the inception
and during the performance of the contract dated 24.03.2006?
OPP
(iii) Whether the penalty imposed under Clause 2 of the
contract dated 24.03.2006 was lawful? OPP
(iv) Whether forfeiture of security deposit and encashment of
performance guarantee by the defendant was lawful? OPP
(v) Whether the plaintiff is entitled to damages and loss of
profit? OPP
(vi) Whether the plaintiff is entitled to sums referred to in
Paragraph 22 at Page 21 of the plaint amounting in all to
`5,62,713.85/-? OPP
(vii) Whether the plaintiff is entitled to interest? If so, what
would be the amount, rate and period? OPP
(viii) Whether the plaintiff has suffered any loss or damage as
a consequence of any act or omission and/or during
commission of the plaintiff. If so, to what extent? OPD
(ix) Reliefs."
10. At the trial, the plaintiff examined Mr.Hawa Singh Saini,
proprietor of plaintiff concern, who deposed on the lines of the case set
up in the plaint. Being relevant, we note following portion of cross-
examination of the witness:-
"I did not write any letter to the civic agencies for seeking
permission to cut the road. (Vol. I wrote letter to the defendant
for the said permission). I had not sent any letter to the
defendant stating therein that delay had occurred due to my
family problem. Till February, 2007 approximately 50% of
work was complete. I had intimated the defendant and also
sought the permission to acquire plates from open market and
the same is already exhibited as Ex.P4. I have no idea whether
defendant had approved my request or not....
MS Plates were received immediately, but I do not recollect the
date when the same were received. I placed one consolidated
order for the MS Plate, but the same was not supplied in time.
Accordingly, I acquired the same from market and sought
necessary permission from the defendants. I had also furnished
non-availability certificate from the supplier. It is correct that I
had sent the letter dated 20.09.2006 and 27.12.2006, both the
letters bears my signatures. The same are already exhibited as
ExD5 and D13 respectively. I had sent a letter to the defendant
stating therein that I will not charge any extra amount for
providing collar joint. (Vol. The said letter was obtained from
me under pressure)....
....It is correct that Sluice Valves was to be arranged by me.
(Vol. Which I had already arranged, but my drawings were not
approved by the defendant and third party). It is correct to
suggest that the said Valves were supplied by the defendant to
me...."
(Emphasis Supplied)
11. In support of its case, the defendant examined Mr.P.K.Atray,
Executive Engineer (Project), W-1, Delhi Jal Board who deposed on the
lines of the case set up by the defendant in its written statement. Being
relevant, we note following portion of cross-examination of the witness:-
"....It is correct that there were several primary obligations
which were to be fulfilled by the defendant, those obligations
were duly fulfilled. The road cutting permission from MCD and
PWD was to be applied by the plaintiff. The work was
originally to be started on 08.04.2006 and date of completion
was six months i.e. 21.11.2006. It is correct that as per
Ex.PW1/9 letter dated 24.08.2006 road cutting permission was
likely to be obtained by 30.08.2006. It is wrong to suggest that
the hindrance free site was not provided at the stipulated time.
....
It is wrong to suggest that due to timely permissions not being
given the work to be undertaken by the plaintiff was delayed. It
is wrong to suggest that there were hindrances from the other
agencies like MTNL, Power supply. It is wrong to suggest that
the department did not make timely payments which were also
one of the causes of delay in completion of the project. It is
wrong to suggest that the work was illegally rescinded and an
illegal penalty was imposed under Clause 2 of the Agreement.
It is wrong to suggest that I am deposing falsely."
(Emphasis Supplied)
12. Be it noted here that the plaintiff did not give any suggestion to the
witness of the defendant viz. Mr.P.K.Atray to the effect that timely
inspection of material(s) was not conducted by third party
M/S.MEACON which (also) led to delay in completion of work.
13. Since we find that the case set up by the parties essentially hinges
upon the documentary evidence adduced by them, we extensively note
the documentary evidence adduced by the parties.
14. The details of the relevant documentary evidence adduced by the
plaintiff is as under:-
S. Description of Whether Particulars of
No. document admitted or document/Remarks, if any
denied by
defendant
1. Ex.PW-1/1: Letter Admitted. The letter awards work in
dated March 24, question to plaintiff. The
2006 written by letter records that plaintiff is
defendant to required to deposit
plaintiff. Performance Guarantee in
sum of `9,76,700/- within
fifteen days of issuance of
said letter and date of start
of work will be reckoned
after sixteen days of
issuance of said letter.
2. Ex.PW-1/2: Letter Admitted. The letter records that
dated May 10, Performance Guarantee was
2006 written by submitted by plaintiff on
defendant to May 08, 2006 and date of
plaintiff. start of work will now be
reckoned as May 22, 2006.
3. Ex.PW-1/3: Letter Receipt of Plaintiff placed an order of
dated May 30, letter 350 MT of MS Plates of 8
2006 written by admitted. mm thickness with SAIL.
plaintiff to SAIL
4. Ex.PW-1/4: Letter Admitted. Plaintiff informs that it has
dated June 06, placed an order 350 MT of
2006 written by MS Plates with SAIL and
plaintiff to same shall be available by
defendant. June 15, 2006 and it has
also purchased 50 MT of
MS Plates from local
market and pipes of 800
mm diameter are being cast
at M/s Bamrah Fabrication,
Noida and M/s Precision
Engineers and Fabricators
at Karala.
The letter also records that
defendant should assist the
plaintiff to get necessary
permission from local
authorities such as DDA,
MCD, PWD, Horticulture
Departments of MCD,
PWD, Flood Control
Department.
5. Ex.PW-1/7: Letter Admitted. Letter records that drawings
dated July 03, submitted by M/s Pavco
2006 written by Engineering be approved by
plaintiff to the defendant.
defendant.
6. Ex.PW-1/8: Letter Admitted. Letter records that MCD
dated July 06, should urgently grant road
2006 written by cutting permission for work
Executive in question as work is of
Engineer, Delhi highly urgent nature and
Jal Board to involves public interest.
Executive
Engineer, MCD.
7. Ex.PW-1/9: Letter Admitted. The contents of said letter
dated August 24, shall be noted in the later
2006 written by part of this judgment.
Executive
Engineer, Delhi
Jal Board to
plaintiff.
8. Ex.PW-1/10: Admitted. Letter records that plaintiff
Letter dated should immediately procure
October 19, 2006 required valves in
written by accordance with
defendant to specifications given in
plaintiff. contract.
9. Ex.PW-1/11: First Receipt of This letter is written by
letter dated letter plaintiff in response to letter
October 26, 2006 admitted. dated Letter dated October
written by plaintiff 19, 2006 written by
to defendant. defendant.
The letter records that on
October 18, 2006 a meeting
was held between plaintiff
and an official of defendant
wherein it was decided that
defendant shall approve
drawings of sluice, air and
non-return valves within a
day or two but nothing has
been heard in said regard
till date.
The letter further records
that defendant should
approve the drawings at
earliest so that same could
be forwarded to
manufacturer M/s Shiv
Durga for its casting.
10. Ex.PW-1/12: Admitted. This letter is written by
Second letter dated plaintiff in response to letter
October 26, 2006 dated Letter dated October
written by plaintiff 19, 2006 written by
to defendant. defendant.
The letter records that on
October 18, 2006 a meeting
was held between plaintiff
and an official of defendant
wherein it was decided that
plaintiff shall procure
sluice, air and non-return
valves as per BQ and tender
conditions; plaintiff has
accordingly ordered the
manufacturer to do the same
and manufacturer has stated
that it will take him one
month to complete said job.
The letter further records
that MS pipes of 800 mm
diameter shall reach the site
after a week and work shall
be completed at the earliest
without further loss of time.
11. Ex.PW-1/13: Admitted. Letter records that
Letter dated defendant should permit the
November 09, plaintiff to provide collar
2006 written by joints instead of butt
plaintiff to welding.
defendant.
12. Ex.PW-1/14: Admitted. Letter essentially records
Letter dated that plaintiff is not
November 27, blameworthy for delay in
2006 written by start/completion of work.
plaintiff to
defendant.
13. Ex.PW-1/15a: Admitted. Letter essentially records
Letter dated that plaintiff is not
February 05, 2007 blameworthy for delay in
written by plaintiff start/completion of work.
to defendant.
14. Ex.PW-1/16: Contents of The contents of said letter
Letter dated letter denied. shall be noted in the later
February 09, 2007 part of this judgment.
written by plaintiff
to defendant.
15. Ex.PW-1/17: Receipt of The letter essentially
Letter dated letter records that execution of
February 26, 2007 admitted. work majorly got delayed
written by plaintiff due to failure of defendant
to defendant. Contents of in timely getting road
letter denied. cutting permission from
local authorities; pipes were
arranged and lying with
manufacturer since June,
2006; pipes could not
brought to site before
October, 2006 due to delay
in inspection/approval of
the same by third
party/defendant; pipes were
immediately laid after
inspection and approval
thereof in October, 2006
and 90% of work is
completed till date.
16. Ex.PW-1/18: Receipt of Letter essentially records
Letter dated letter that plaintiff is not
February 26, 2007 admitted. blameworthy for delay in
written by plaintiff start/completion of work.
to defendant. Contents of
letter denied.
17. Ex.PW-1/20: Admitted. Letter seeks permission of
Letter dated March defendant to extend the time
22, 2007 written for completion of work by
by plaintiff to June 30, 2007.
defendant.
18. Ex.PW-1/21: First Receipt of Letter records that reliance
letter dated March letter placed by defendant upon
28, 2007 written admitted. Clause 1.12.4.1 of Special
by plaintiff to Conditions of Contract is
defendant. Contents of misplaced.
letter denied.
The letter further records
that due to a typographical
error it was wrongly stated
in the letter dated March 26,
2007 that 90% of work is
completed and correct
position is that 50% of work
has been completed.
19. Ex.PW-1/22: Admitted. The relevant portion of
Second letter dated letter shall be noted in the
March 28, 2007 later part of this judgment.
written by plaintiff
to defendant.
20. Ex.PW-1/23: Admitted. Plaintiff informs that it has
Letter dated April booked 150 MT of MS
04, 2007 written Plates of 8 mm thickness
by plaintiff to with SAIL on April 03,
defendant. 2007; letter dated February
28, 2007 was written by
plaintiff to defendant
requiring the defendant to
get sluice, air valves etc
inspected from M/s
MEACON but no
satisfactory reply was
received from defendant in
said regard; defendant is
once again requested to get
inspected the materials from
MEACON at the earliest.
21. Ex.PW-1/24: Admitted. Letter records that plaintiff
Letter dated April cannot be blamed for delay
14, 2007 written in arranging the valves at
by plaintiff to the site for valves procured
defendant. by plaintiff have not been
inspected by plaintiff till
date and permission be
given to defendant to
procure MS Plates from
local suppliers as required
MS Plates are not available
with SAIL and other
agencies named in the
contract.
Significantly, the letter talks
about two endorsements
dated April 11/16 April,
2007 regarding supply of
material made by an official
of SAIL on letter dated
April 03, 2007 written by
plaintiff to SAIL
22. Ex.PW-1/25: Receipt of Plaintiff placed an order of
Letter dated April copy of said 150 MT of MS Plates of 8
03, 2007 written letter mm thickness with SAIL.
by plaintiff to admitted.
SAIL. Significantly, two
endorsements dated April
11/16 April, 2007 have
been made on said letter
purportedly by an official of
SAIL.
The first endorsement dated
April 11, 2007 is to the
effect „Regret material is
not available at Delhi
warehouse on date‟.
The second endorsement
dated April 16, 2007 is to
the effect „Plates are
supplied as per quality &
tolerance of IS (illegible).‟
23. Ex.PW-1/26: Receipt of Letter records that due to
Letter dated May letter non-availability of requisite
05, 2007 written admitted. stock with SAIL plaintiff
by plaintiff to has procured 23 MT of MS
defendant. Plates from M/s Radhey
Enterprises vide invoice
dated April 27, 2007
however the defendant is
not making arrangements
for inspection of said plates
due to which reason
plaintiff is unable to
complete the work by June
30, 2007.
24. Ex.PW-1/27: Admitted. Letter records that the
Letter dated May defendant delayed
16, 2007 written inspection of MS Plates
by plaintiff to procured by the plaintiff
defendant. due to change of third party
from MEACON to RITES
for a period of about two
months from April 01, 2007
to May 31, 2007.
25. Ex.PW-1/28: Admitted. Letter essentially reiterates
Letter dated May the contents of letter
21, 2007 written Ex.PW-1/27 dated May 16,
by plaintiff to 2007 written by the
defendant. plaintiff.
26. Ex.PW-1/29: Admitted. Letter informs that penalty
Letter dated May under Clause 2 of contract
21, 2007 issued by has been imposed upon
defendant to plaintiff for delaying the
plaintiff. completion of work.
27. Ex.PW-1/30: Admitted. Letter informs that
Letter dated May defendant has rescinded the
21, 2007 written contract and
by defendant to encashed/forfeited
plaintiff. performance guarantee and
security deposit of plaintiff
under Clause 3 of contract
on account of plaintiff
having delayed the
completion of work.
28. Ex.PW-1/32: Admitted. By virtue of said letter,
Letter dated May plaintiff responds to letter
28, 2007 written (s) dated May 21, 2007 of
by plaintiff to defendant essentially to the
defendant. effect that defendant and
not plaintiff is blameworthy
for delay in completion of
work.
29. Ex.PW-1/33: Admitted. Legal notice issued by
Legal notice dated plaintiff to defendant
July 16, 2007 essentially stating therein
issued by plaintiff that actions of defendant of
to defendant. rescinding the contract and
invoking clauses 2 and 3 of
contract are illegal and
arbitrary.
15. Being relevant, we note that letter Ex.PW-1/9 dated August 24,
2006 written by the Executive Engineer, Delhi Jal Board to the plaintiff
reads as under:-
"Kindly refer above said subject. It is to inform that the road
cutting permissions from M.C.D. and PWD are likely to be
obtained by 30.8.2006. You are hereby requested to keep the
required pipes in readiness, get them tested as per contract and
gear up for undertaking the work at site from September 1 st
week onwards. It may be treated as most urgent."
(Emphasis Supplied)
16. The letter Ex.PW-1/16 dated February 09, 2007 written by the
plaintiff to the defendant reads as under:-
"On the above subject in continuation to our letter dated
31.1.2007, 5.2.2007 and 6.2.2007, it is submitted that apart
from 10 Nos. of Pipes inspected and approved by you alongwith
third party M/s Macon on 3.2.2007, further 15 nos of pipes
were ready by 6.2.2006, and as such vide our letter dated
6.2.2007 we had requested your goodself to arrange the visit of
rep. of M/s Macon and get the pipes inspected and approved at
the site. But till date the visit has not been arranged and pipes
have not been inspected. Further about 55 Nos. of pipes are
ready for inspection at factory. You are therefore requested to
expedite the factory visit for inspection and approval of pipes,
so that the same can be brought to site and laid.
Regarding supply of valves etc. we have received letter dated
2.2.2007 from the manufacturer, who had promised to supply
the same by the last week of Feb, 2007, in view of position
detailed therein. The photocopy of the letter is enclosed
herewith for your ready reference. The request for payments for
the work already done as made in our previous letters may
kindly be looked into and expedite."
17. The relevant portion of the letter Ex.PW-1/22 dated March 28,
2007 written by the plaintiff to the defendant reads as under:-
"On the above subject with reference to your letter No.370
dated 1.3.2007 it is submitted that after approval by MECON
the pipes have been brought at site and already used.
Regarding inspection of valve we had requested for inspection
vide our letter dated 28.2.2007 received in your office on
2.3.2007. But till date no program has been given and no date
has been fixed though it is more than one month since...."
18. The details of the relevant documentary evidence adduced by the
defendant is as under:-
S. Description of Whether Particulars of
No. document admitted or document/Remarks, if any
denied by
plaintiff
1. Ex.DW-1/1: Letter Admitted. Letters records that plaintiff
dated April 07, is unable to submit the
2006 written by Performance Guarantee up
plaintiff to to April 26, 2006 'due to
defendant. unavoidable circumstances
and bank strike‟.
2. Ex.D-2: Letter Denied. Letters records that MS
dated September Plates of 88 mm diameter
05, 2006 written have not been procured by
by defendant to plaintiff till date; same may
plaintiff. be procured immediately
and date and time be fixed
up for inspection of the
same.
3. Ex.D-3: Show Receipt of Notice issued to plaintiff
cause notice dated notice calling upon him to show
September 12, admitted. cause why actions under
2006 issued by clauses 2 and 3 of contract
defendant to Contents of be not taken against him for
plaintiff. notice denied. delaying completion of
work.
4. Ex.D-4: Letter Admitted. Letter records that „order of
dated September supply has been placed and
13, 2006 written same shall be procured
by plaintiff to shortly‟.
defendant.
5. Ex.D-5: Letter Admitted. The said letter was written
dated September by plaintiff in response to
20, 2006 written show cause notice Ex.D-3
by plaintiff to dated September 12, 2006
defendant. issued by defendant and
contents of same shall be
noted in the later part of this
judgment.
6. Ex.D-6: Letter Admitted. Letter records that the
dated September plaintiff has purchased 10
21, 2006 written mm thick plates and pipes
by plaintiff to are being casted at M/s
defendant. Amar Singh Bambra at
Greater Noida and order has
been given for purchase of
MS Plates for 8 mm
thickness.
7. Ex.D-7: Letter Admitted. The contents of said letter
dated October 09, shall be noted in the later
2006 written by part of this judgment.
plaintiff to
defendant.
8. Ex.D-8: Letter Admitted. Letter records that plaintiff
dated October 11, has purchased MS Plates of
2006 written by 8 mm thickness and pipes
plaintiff to are being casted at M/s
defendant. Amar Singh Bambra at
Greater Noida and third
party may test the same on
September 13, 2006.
9. Ex.D-11: Letter Receipt of Letter records that plaintiff
dated November letter was granted extension for
20, 2006 written admitted. completion of work till
by defendant to February 2007; only 10% of
plaintiff. Contents of work has been completed
letter denied. till date and work be
completed within extended
time.
10. Ex.D-12: Letter Receipt of Letter (again) cautions the
dated December letter plaintiff and work in
15, 2006 written admitted. question is not progressing
by defendant to at a satisfactory pace.
plaintiff. Contents of
letter denied.
11. Ex.D-13: LetterAdmitted. The contents of said letter
dated December shall be noted in the later
27, 2006 written part of this judgment.
by plaintiff to
defendant.
12. Ex.D-16 (Ex.DW- Admitted. The contents of said letter
1/4): Letter dated shall be noted in the later
February 09, 2007 part of this judgment.
written by plaintiff
to defendant.
13. Ex.D-17 and Admitted. Letters (again) cautions the
Ex.D-18: Two plaintiff and work in
letters dated question is not progressing
February 14, 2007 at a satisfactory pace.
written by plaintiff
to defendant.
14. Ex.D-22: Letter Admitted By virtue of said letter, the
dated February 22, defendant refutes the claim
2007 written by of plaintiff that delay in
defendant to completion of work is
plaintiff. attributable to defendant.
The letter further records
that plaintiff is misreading
letter dated August 24, 2006
written by the defendant on
the aspect of 'road cutting
permission' and it was
plaintiff which was required
to obtain road cutting
permission from local
authorities in terms of
clause 1.12.4.1 of Special
Conditions of Contract.
15. Ex.D-19: Letter Admitted. Letter records that
dated February 28, directions be issued by
2007 written by defendant to M/S
plaintiff to MEACON for inspection of
defendant. materials (sluice valves and
other valves etc) at the
factory of M/s Shiv Durga
Company at Kolkata.
16. Ex.D-20: Letter Receipt of The contents of said letter
dated February 28, letter shall be noted in the later
2007/March 01, admitted. part of this judgment.
2007 written by
defendant to Contents of
plaintiff. letter denied.
17. Ex.D-21: Letter Receipt of Letters (again) cautions the
dated March 14, letter plaintiff and work in
2007 written by admitted. question is not progressing
defendant to at a satisfactory pace.
plaintiff. Contents of
letter denied. Letter further records that
plaintiff failed to honor its
commitment to procure
valves in the month of
February, 2007 which
constrained the defendant to
arrange sluice valve
required for interconnection
on March 01, 2007.
18. Ex.D-22 and Receipt of Letters (again) cautions the
Ex.D-23: Two letter plaintiff and work in
letters dated admitted. question is not progressing
March 19, 2007 at a satisfactory pace.
written by Contents of
defendant to letter denied.
plaintiff.
19. Ex.D-25: Letter Receipt of The relevant portion of said
dated April 12, letter letter shall be noted in the
2007 written by admitted. later part of this judgment.
defendant to
plaintiff. Contents of
letter denied.
20. Ex.D-26: Letter Receipt of The relevant portion of said
dated May 14, letter letter shall be noted in the
2007 written by admitted. later part of this judgment.
defendant to
plaintiff. Contents of
letter denied.
21. Ex.D-28: Reply to Receipt of ----
legal notice dated notice
July 16, 2007 admitted.
issued by plaintiff.
Contents of
notice denied.
19. The letter, Ex.D-5 dated September 20, 2006, written by the
plaintiff in response to the show cause notice Ex.D-3 dated September 12,
2006, issued by the defendant reads as under:-
"With reference to your Letter no.F2(33)/EE
(Project)I/2006/2007/1467 dated 12.9.2006 and telegram dated
12.9.06 it is stated that due to some family circumstances, I
could not purchase the 8mm thick M.S. plates and work was not
started in time. The order has been placed for purchase of 8mm
thick plates and same will be received very soon. The 100 mm
thick plate have been purchased and sent to manufacturing site
to M/S Bamrah Fabrication. The inspection of MS plates can be
done. The pit has been made for hanging the pipe by trenchless.
It is also promised that the work will be completed within the
completion period of CA. The progress report can be taken in
the month of November 2006. If any delay is found in
completion of the work in time the action can be taken as per
CA. Therefore it is humbly requested that the notice under
clause 2, 3 may please be withdrawn."
(Emphasis Supplied)
20. The letter Ex.D-7 dated October 09, 2006, written by the plaintiff
to the defendant reads as under:-
"Please refer to your Letter No. F.2(33)/EE(Project)-
I/2006/1524 dt. 4.10.2006 on the above noted subject.
The details of documents required by your goodself are as
under:-
1. Bills attached and remaining plates will be procured 50
MT/- 100 MT/- per month.
2. The plates are being tested by Third Party M/s. Mecon
Limited. After testing the plates the pipe will be coated and will
be brought at the site within a period of 15 days. After that 15
pipes in the month of November, 60 pipes in December, 70
pipes in Jan and remaining in February 2007.
3. The work of laying of pipes will be taken up after receipt
of pipes i.e. end of this month.
4. I am determined in completing the work please.
Submitted for your kind perusal please."
(Emphasis Supplied)
21. The letter Ex.D-13 dated December 27, 2006 written by the
plaintiff to the defendant reads as under:-
"It is humbly submitted in connection with above work that 4
pipes have reached the site and 18 pipes are lying in the factory
which shall reach the site in today‟s night and 24620 kgs of MS
Plates have reached the factory against bills Nos.1057 and
1058 dated 04.12.2006 and the photocopies of bills are
attached. In addition to this, 80 tonnes plates have been booked
and same shall reach the factory in the next week.
Therefore I request and assure you that the work which I was
require to complete in December could not be completed by me
in December due to domestic problems and shall complete the
same in January under any circumstance and I again assure as
stated by me in my previous letters that I shall complete the
work in February under any circumstance.
Therefore I humbly pray that I be given opportunity till
February (28-2-07)."
(Translated Version) (Emphasis Supplied)
22. The letter Ex.D-16 (Ex.DW-1/4) dated February 09, 2007 written
by the plaintiff to the defendant reads as under:-
"It is submitted that during inspection of pipe on 3-2-07 some
shortcoming was found in thickness of pipe which was very less.
It was also discussed in the factory that same was OK
according to plate code but there was some shortcoming
according to contract. Till date plates confirming to the
specifications given in the contract were procured, my intention
was also the same, but this time due to some reason a
shortcoming has occurred in this lot. I assure you that this type
of shortcoming shall not occur in future and plates shall be
again procured as per contract specifications.
I request that if you feel right then this shortcoming be
compensation with money. This lot had about 55 pipes 6 meters
long which are prepared or being prepared in the factory. The
compensation be taken in the next running bill."
23. The letter dated Ex.D-20 dated February 28, 2007/March 01, 2007
written by the defendant to the plaintiff reads as under:-
"Sir,
As you aware that during inspection on 3.2.07, some deficiency
in plate thickness was noticed. The same issue was raised by
IIIrd party inspection agency M/S MECON Ltd. As per
Contract Clause 1.6.1 of spl. Condition, no negative tolerance
in plate wall thickness is allowed. So these pipes were unfit
under the said clause, and the same was conveyed to you on
phone.
M/S MECON Ltd., IIIrd party inspection agency had raised the
issue and seeking the decision through their inspection note
dated 3.2.07 on the deficiency in plate thickness.
Under this circumstances, inspection for these pipes was only
possible, when the approval from the competent authority was
received. Accordingly on your request made through letter
dated 9.2.07. Case for granting permission to use the same lot
of MS plate of negative tolerance was perused due to urgency
of work. On approval by the competent authority on 22.2.07,
M/S MECON was requested to inspect the pipes at factory.
Factory was inspected jointly by DJB an official & Sh. Taneja
from MECON Ltd. on 22.2.07. On that day pipes were not
ready for hydro testing, as well as outside coating & wrapping
of thirteen finished pipes was found of lesser thickness i.e. 1.5
mm to 2.5 mm in place of 4 mm. and thus rejected and asked to
rectify. M/s MECON was conveyed the approval for use of the
said lot of plate on 23.2.07. On rectifying the out side coal tar
wrapping, inspection was again done on 24.2.07 at factory and
final acceptance for the delivery of pipes will be given by M/S
MECON Ltd., after submission of desired test report/result of
outer surface wrapping & inside lining from the lab.
Department had never delayed for arranging IIIrd party
inspection & making inspection for delivery of pipes at site.
Where as you are failed to arrange desired test result, so please
expedite immediately without any further delay.
Regarding the supply of valves, you failed to stick to your
programme. Till date no inspection has been done of these
valves, so how could valves can be supplied when only one day
is left in completing Feb.07."
24. The relevant portion of the letter Ex.D-25 dated April 12, 2007
written by the defendant to the plaintiff reads as under:-
"Sir,
With reference to above letter it is to point out here that the
delivery of the pipes at site was possible only on your request
dated 9.2.07 to allow as a special case for deficit plate
thickness for a lot of fifty pipes only. The approval was taken by
the competent authority & conveyed to MECON regarding the
plate thickness confirming as per I.S. 3589 on 23.2.07.
Regarding the inspection of valves, we have already intimated
M/S MECON Ltd. for inspection of valves on 12.3.07. It was
also desired to know through that intimation letter, likely time
& date of inspection. So that if possible department may like to
join the inspection. Inspection programme is still awaited from
M/S MECON. However 800mmdia main sluice valve which was
to be fixed by you at interconnection was arranged by the
department & the same was fixed on 1.3.07, after your failure
to procure the same by that date. As well as 300mm dia sluice
valve which was required to fix at scour point was arranged by
you from the local market & the same was fixed on 10.3.07."
(Emphasis Supplied)
25. The relevant portion of the letter Ex.D-26 dated May 14, 2007
written by the defendant to the plaintiff reads as under:-
"Your request through letter dated 28.2.07, delivered in this
office on 2.3.07 for inspection of the valves at Kolkata after
fixing of valve which was already arranged by the department
shows that it was deliberately delayed by you. The valves,
which were not ready since last few months, suddenly became
ready, which shows your misleading approach/intention. Major
valves like sluice valve, non return valve, scour valve, pressure
relief valve & air valves were to be fixed in the stretch which
has already been commissioned. In this stretch either the
required valve was arranged by the department or purchased
from local market. Non return valve & pressure relief valve
were not fixed due to urgency. All such above activities show
that delay in arranging valve is totally on your part."
26. Vide impugned judgment and decree dated February 03, 2015, the
learned Single Judge has dismissed the suit filed by the plaintiff.
27. Briefly stated the reasons given by the learned Single Judge are as
under:-
a) The plaintiff commenced the execution of work with one month
delay by not submitting Performance Guarantee within the prescribed
period.
b) In view of clear prescription contained in clause 1.12.4.1 of Special
Conditions of Contract that plaintiff has to obtain road cutting permission
from local authorities the defendant can in no way be blamed for delay
caused in obtaining road cutting permission, particularly when seen in
light of deposition of Hawa Singh Saini PW-1, the proprietor of plaintiff
concern, that he did not write any letter to any civic agency seeking road
cutting permission. Letter Ex.PW-1/9 dated August 24, 2006 written by
the defendant cannot override or supersede express terms of contract
entered into between the parties. The non-timely grant of road cutting
permission was a substantial reason for delay in execution of work and
attributable to plaintiff alone.
c) The other reasons given by the plaintiff which led to delay in
execution of work and were attributable to defendant viz. (i) MS
plates/pipes and valves could not be timely procured by plaintiff because
of delay in approval of drawings by the defendant; (ii) drawings were not
approved by defendant within time; (iii) delay on part of third party M/S
MECON in approving MS pipes; (iv) insistence of defendant of procuring
MS pipes/plates from SAIL and same being out of stock with SAIL; and
(v) delay in releasing of payments by defendant, were also against the
terms of the contract.
d) The communication exchanged between the parties, particularly
letter Ex.D-4 dated September 13, 2006 written by the plaintiff to the
defendant reveals that the plaintiff had procured MS plates/pipes with
considerable delay and falsifies the claim of plaintiff that plaintiff had
placed an order of MS plates with SAIL on May 30, 2006.
e) In view of the approval granted by the competent authority of the
defendant to the plaintiff to use plates below specifications the inspection
of pipes was not possible by the third party and thus delay in inspection
by third party is also attributable to plaintiff alone.
f) The communication exchanged between the parties reveals that the
plaintiff did not on time arrange the valves and attempt on the part of the
plaintiff to seek approval of drawings of valves from the defendant was a
ploy to delay the matter inasmuch as procurement of valves was not co-
related with the approval of drawings; specifications of valves already
formed part of contract and approval of drawings/designs was not
necessary.
g) Letter Ex.D-22 dated February 22, 2007 written by the defendant to
the plaintiff belies the claim of the plaintiff that the defendant did not
timely release the payments of running bills to the plaintiff.
h) The defendant was well within its right to rescind the contract on
May 21, 2007 on account of delay on part of the plaintiff in executing the
work, particularly in view of the prescription contained in clause 1.12.2.1
of Special Conditions of Contract that time is essence of the contract.
i) The defendant was well within its right to levy penalty (10% of
contract value) in terms of clause 2 of contract entered into between the
parties in view of dictum of law laid down by Supreme Court in the
decision reported as (2003) 5 SCC 705 ONGC Vs. Saw Pipes Ltd. that
where contract itself has pre-estimated liquidated damages which would
be incurred by the department in the case of breach, there is no necessity
on the part of department to prove actual losses suffered by it.
j) The plaintiff has failed to establish its case that the delay in
execution of work was attributable to the defendant and damages, if any,
suffered by it on account of recession of contract by the defendant. In
fact, it was the defendant which suffered damages on account of failure of
plaintiff to complete the work within stipulated time.
28. Aggrieved by the aforesaid, the plaintiff has filed the above
captioned appeal under Section 96 of Code of Civil Procedure.
29. In the present appeal, the plaintiff (appellant) as also defendant
(respondent) have reiterated their respective stands taken by them before
the learned Single Judge.
30. As already recorded in the order dated October 12, 2015 passed by
us in the present appeal (while reserving the arguments in the present
appeal) the plaintiff had limited the arguments to the penalty in sum of
`17,58,033.90, earnest money (converted into security deposit) in sum of
`7,73,000/- and invocation of performance guarantee in sum of
`9,76,000/- and gave up claim for damages in sum of `10 lacs for profit
which the plaintiff could have earned for the balance work as also claim
in sum of `5,62,713.85 which were allegedly illegally recovered from the
running bills for the work done.
31. In addition to reiterating the stand taken by plaintiff before the
learned Single Judge, learned senior counsel appearing for plaintiff
advanced following two arguments:-
A The learned Single Judge did not correctly appreciate the letter
Ex.PW-1/9 dated August 24, 2006 written by defendant to the plaintiff.
Counsel emphasized that letter Ex.PW-1/9 clearly brought out that it was
defendant (and not plaintiff) which was liaisoning with local authorities
(MCD and PWD) for obtaining road cutting permission and that plaintiff
could not commenced the work at site before first week of September,
2006 as site was not made available to the plaintiff before that time.
Counsel pointed out that letter Ex.PW-1/8 dated July 06, 2006 written by
Executive Engineer, Delhi Jal Board to Executive Engineer, MCD
seeking road cutting permission further made matter clear that it was
defendant who was required to obtain road cutting permission from local
authorities.
B The learned Single Judge did not even touch, much less deal, with
the argument advanced by the plaintiff that one of the substantial reasons
for delay in execution of work was on account of delay in carrying out
inspection of materials (pipes, plates, valves etc.) by third party M/s
MECON. Counsel emphasized that letter Ex.D-25 dated April 12, 2007
written by defendant to plaintiff brings out that inspection of materials
was considerably delayed by third party M/s MECON. It was highlighted
that letter Ex.D-25 records that on March 12, 2007 defendant had sent
intimation to third party M/s MECON to carry out inspection of material
but received no response from MECON in said regard even one month
thereafter till April 12, 2007. Counsel argued that said aspect of matter,
particularly letter Ex.D-25 dated April 12, 2007 written by defendant to
plaintiff, has been completely lost sight by the learned Single Judge.
32. From the afore-noted conspectus of facts, it is apparent that the
core question to be adjudicated in the present appeal is: Who is
responsible for delay in execution of work in question? Whether plaintiff
(contractor) or defendant (Delhi Jal Board)?
33. On March 24, 2006 Letter of Intent was issued by the defendant
awarding the work of „providing and laying 800 mm diameter rising
main/feeder main from Vikas Marg to Vishwakarma Park (Geeta
Colony), UGR & BPS in Trans Yamuna Area‟ to the plaintiff.
34. The plaintiff was required to furnish Performance Guarantee within
a period of fifteen days of issuance of Letter of Intent and execution of
work was to be started on April 08, 2006. However, it was claimed by
plaintiff that it could not furnish Performance Guarantee up to April 26,
2006 „due to unavoidable circumstances and bank strike‟. (See letter
Ex.DW-1/1 dated April 07, 2006 written by plaintiff to defendant.) The
Performance Guarantee was furnished by the plaintiff only on May 08,
2006 and execution of work was now to be started on May 22, 2006. We
do not know the „unavoidable circumstances‟ due to which plaintiff could
not timely submit the Performance Guarantee for plaintiff has chosen not
to throw light upon the same. The fact of the matter is that start of work
got delayed by about one and half month on account of delay on part of
plaintiff in furnishing the Performance Guarantee.
35. On June 06, 2006 the plaintiff informed the defendant that it has
placed an order of 350 MT of MS Plates with SAIL and same shall be
available by June 15, 2006 and it has also purchased 50 MT of MS Plates
from local market and pipes of 800 mm diameter are being cast at M/s
Bamrah Fabrication, Noida and M/s Precision Engineers and Fabricators
at Karala. (See letter Ex.PW-1/3 dated May 30, 2006 written by the
plaintiff to SAIL and letter Ex.PW-1/4 dated June 06, 2006 written by the
plaintiff to the defendant.)
36. However, the letters produced (and proved) by the defendant tell a
different story. Letter Ex.D-4 dated September 13, 2006 written by the
plaintiff to the defendant records that „order of supply (of 8 mm MS
Plates) has been placed and same shall be procured shortly‟. Letter
Ex.D-5 (an admitted document by proprietor of plaintiff) dated
September 20, 2006 written by the plaintiff to the defendant records that
the plaintiff could not purchase 8 mm thick MS Plates due to some
unavoidable family circumstances and thus work could not be started
on time. (Most significantly, letter Ex.D-5 nowhere makes mention of the
fact(s) that start/completion of work got delayed due to delay in obtaining
road cutting permission by the defendant or delay in inspection of
material(s) procured by the plaintiff by the third party M/S MECON).
Letter Ex.D-6 dated September 21, 2006 written by the plaintiff to the
defendant records that the plaintiff has given order for purchase of MS
plates of 8 mm thickness. A conjunctive reading of letters Ex.D-4, Ex.D-
5 and Ex.D-6 dated September 13, 2006, September 20, 2006 and
September 21, 2006 respectively written by the plaintiff to the defendant
completely belies the claim made by the plaintiff in its letter Ex.PW-1/4
dated June 06, 2006 that it has placed an order of 350 MT of MS Plates
with SAIL and same shall be available by June 15, 2006 and it has also
purchased 50 MT of MS Plates from local market and pipes of 800 mm
diameter are being cast at M/s Bamrah Fabrication, Noida and M/s
Precision Engineers and Fabricators at Karala. In fact, the first lot of
pipes (procured by the plaintiff) saw the light of day only in the first week
of October, 2006 i.e. after a lapse of period of more than four months
from the date of start of execution of work as admitted by the plaintiff
itself in the letter Ex.D-7 dated October 09, 2006 written by the plaintiff
to the defendant.
37. The plaintiff then started the story of approval of drawings of
valves by the defendant before procurement of valves. (See letter dated
July 03, 2006 written by plaintiff to defendant. dated October 26, 2006
written by plaintiff to defendant.) The falsity in said story of plaintiff is
writ large from two letters dated Ex.PW-1/11 and Ex.PW-1/12 dated
October 26, 2006 written by plaintiff to defendant. Whereas first letter
Ex.PW-1/11 records that on October 18, 2006 a meeting was held
between the plaintiff and the staff of the defendant wherein it was decided
that the defendant shall approve drawings of sluice, air and non-return
valves within a day or two but nothing has been heard in said regard till
date; the second letter Ex.PW-1/12 records that on October 18, 2006 a
meeting was held between the plaintiff and the staff of the defendant
wherein it was decided that the plaintiff shall procure sluice, air and non-
return valves as per BQ and tender conditions; the plaintiff has
accordingly ordered the manufacturer to do the same and manufacturer
has stated that it will take him one month to complete said job. As per the
plaintiff two diametrically opposite decisions were taken by the staff of
the defendant in the meeting held on October 18, 2006, which cannot be
the case. The falsity of said story of the plaintiff, in turn brings out that
the plaintiff has not procured valves on time and was making up stories to
somehow or the other cover up the delay in procuring the valves.
38. We now note letter Ex.D-13 dated December 27, 2006 written by
the plaintiff to the defendant. Most significantly, the letter Ex.D-13 (an
admitted document by the proprietor of plaintiff) records that the plaintiff
has not been able to complete work within prescribed period due to
domestic problems and he be given time till February, 2007 to complete
the work. (Yet again, letter Ex.D-13 nowhere makes mention of the
fact(s) that start/completion of work got delayed due to delay in obtaining
road cutting permission by the defendant or delay in inspection of
material(s) procured by the plaintiff by the third party M/S MECON).
39. Evidence show that the defendant generously accepted the request
of the plaintiff and granted extension of time of about three months to the
plaintiff to complete the work by February 28, 2007, as against the
original date of completion of November 21, 2006. However, the things
did not change for good and execution of the work continued to progress
at a snail pace. By this time, the plaintiff changed tack and started
blaming the defendant for the delay in execution of the work primarily for
the reasons: - (i) defendant did not obtain timely road cutting permission
from local authorities which considerably delayed the start of work; (ii)
third party M/s MECON did not timely conduct inspection of material(s)
procured by the plaintiff leading to major delay in execution of work.
40. It does not lie in the mouth of the plaintiff to claim that the
defendant was required to obtain road cutting permission from the local
authorities in view of clear prescription contained in clause 1.12.4.1 of
Special Conditions of Contract that the Contractor (Plaintiff) is required
to obtain road cutting permission from the local authorities. The letters
Ex.PW-1/8 and PW-1/9 dated July 06, 2006 written by Executive
Engineer, Delhi Jal Board to Executive Engineer, MCD and dated August
24, 2006 written by Executive Engineer, Delhi Jal Board to plaintiff
respectively heavily relied upon by the plaintiff nowhere brings out that it
was the defendant which was pursuing the matter regarding grant of road
cutting permission with the local authorities. At best, letters Ex.PW-1/8
and PW-1/9 merely bring out the defendant was assisting the plaintiff in
the matter regarding grant of road cutting permission by the local
authorities. In view of the clear prescription contained in clause 1.12.4.1
of Special Conditions of Contract requiring the plaintiff to obtain road
cutting permission from the local authorities, the plaintiff could not have
shunned its obligation of obtaining the road cutting permission and
putting the same on the defendant. In this regards, it is also worth
mentioning that Hawa Singh Saini PW-1, proprietor of plaintiff concern,
has admitted in his testimony that he did not write even a single letter to
any civic agency seeking road cutting permission.
41. On the issue of alleged delay of inspection of material(s) by third
party M/s MECON, we find that first letter on said aspect is letter Ex.D-8
dated October 11, 2006 written by the plaintiff to the defendant records
that the plaintiff had purchased MS Plates of 8 mm thickness and pipes
were being casted at M/s.Amar Singh Bambra at Greater Noida and third
party may test the same on September 13, 2006. There is a major fallacy
in the letter Ex.D-8, in that, said letter is dated October 11, 2006 and
requires the third party to inspect MS Plates on September 13, 2006 i.e. a
month prior to issuance of letter Ex.D-8.
42. There is then a lull of about three months on the aspect of delay of
inspection by M/S MECON after which plaintiff wakes up on February
09, 2007 by writing letter Ex.PW-1/16 to the defendant talking about
delay in inspection of material(s) by the third party M/S MECON. On the
same day i.e. February 09, 2007 another letter Ex.D-16 (an admitted
document by proprietor of plaintiff) was written by the plaintiff to the
defendant admitting therein that third party : M/S MECON has found
shortcomings in the pipes procured by the plaintiff; and the plaintiff be
permitted to use said deficient pipes and that the plaintiff would ensure in
future that no shortcomings is found in the pipes in future. On one hand,
the plaintiff was complaining about delay in inspection by M/S MECON
and on other hand was seeking condonation of defects found by M/S
MECON in the inspection. Strange!
43. Thereafter a very clever game was played by the plaintiff. Due to
delay in procurement of sluice valve by the plaintiff, the defendant itself
arranged the sluice valve on March 03, 2007. Having come to know of
the same, the plaintiff cleverly wrote letter Ex.D-19 dated February 28,
2007 to the defendant stating therein that defendant should get inspect the
sluice and other valves from M/S MEACON at factory of its
manufacturer at Kolkata. The letter Ex.D-19 dated February 28, 2007 was
received by the defendant at its office on March 02, 2007, a fact admitted
in letter Ex.PW-1/22 dated March 28, 2007, by which time the sluice
valve was already arranged by the defendant.
44. On the issue of inspection of material by M/S MECON, it is also
worth noting that plaintiff has claimed in its plaint that defendant as also
manufacturer M/S Shiv Durga had confirmed in letters dated February
23/24, 2007 written by them that third party M/S MECON is delaying
inspection of material(s) procured by the plaintiff. No such letters has
produced on record by the plaintiff and adverse inference should be
drawn against plaintiff on said count. We thus find no merit whatsoever
in the claim made by the plaintiff that execution of work got delayed on
account of delay on part of third party M/S MECON in inspecting the
materials procured by the plaintiff.
45. Lastly, we note that another track was taken by the plaintiff to
contend that it is not blameworthy for delay in completion of work viz.
requisite material was not available with SAIL. In support of said
contention, plaintiff placed reliance upon two endorsements dated April
11/16 April, 2007 purportedly by an official of SAIL on the letter Ex.PW-
1/25 dated April 03, 2007. The first endorsement dated April 11, 2007 is
to the effect „Regret material is not available at Delhi warehouse on
date‟. The second endorsement dated April 16, 2007 is to the effect
„Plates are supplied as per quality & tolerance of IS (illegible).‟ No
official from SAIL has been produced in witness-box by the plaintiff to
establish that said endorsements were indeed made by an official of
SAIL. Further, we find that plaintiff talks about said two endorsements in
its letter Ex.PW-1/25 dated April 14, 2007. How could the endorsement
dated April 16, 2007 find mention in the letter dated April 16, 2007?
There is thus a big question mark on the genuineness of said two
endorsements purportedly made by an official of SAIL.
46. The upshot of the above discussion is that the delay in
start/completion of execution of work is entirely attributable to the
plaintiff.
47. Concededly, clauses 2 and 3 of the contract entered into between
the parties prescribes levy of penalty @ 10% of contract value as also
forfeiture of security deposit and invocation of performance guarantee
upon the contractor (plaintiff) in case of breach of contract committed by
the contractor.
48. Law on the subject has been authoritatively laid down in paragraph
68 of decision of Supreme Court reported as 2003 (5) SCC 705 ONGC vs.
Saw Pipes Ltd. which reads as under:-
"68. From the aforesaid discussions, it can be held that:
(1) Terms of contract are required to be taken into
consideration before arriving at the conclusion whether the
party claiming damages is entitled to the same.
(2) If the terms are clear and unambiguous stipulating the
liquidated damages in case of the breach of contract unless it
is held that such estimate of damages/compensation is
unreasonable or is by way of penalty, party who has committed
the breach is required to pay such compensation and that is
what is provided in Section 73 of the Contract Act.
(3) Section 74 is to be read along with Section 73 and,
therefore, in every case of breach of contract, the person
aggrieved by the breach is not required to prove actual loss or
damage suffered by him before he can claim a decree. The
court is competent to award reasonable compensation in case
of breach even if no actual damage is proved to have been
suffered in consequence of the breach of a contract.
(4) In some contracts, it would be impossible for the court
to assess the compensation arising from breach and if the
compensation contemplated is not by way of penalty or
unreasonable, the court can award the same if it is genuine
pre-estimate by the parties as the measure of reasonable
compensation."
49. In a nutshell, Supreme Court holds in Saw Pipes's case (supra) that
a liquidated damage would be a damage which on the face of it ensues if
there is a breach of a contract, but its estimation is not possible and thus
the parties would be perfectly justified in quantifying the same as a
reasonable pre-estimate of the loss. Such am amount would be
recoverable as a loss; without proof of the quantum of the loss; because
the quantum has been agreed to by the parties; and the loss is inherent.
50. Suffice it to state that observations made by Supreme Court in para
68 of Saw Pipes's case (supra) are squarely applicable in the present case
as per which delayed constructions such as completing construction of
road or bridges within stipulated time would be difficult to be linked with
actual losses suffered by the State and in such cases the pre-estimated
damages envisaged in the contract have to be paid.
51. Now, laying of water pipes is not something from which revenue
would be generated by the State. It is a public utility service for providing
water to its citizens. That apart, in a delayed project, interest on blocked
capital would obviously be a measure of damages.
52. In view thereof, no fault can be found with the act of defendant of
levying penalty in terms of clauses 2 and 3 of contract entered into
between the parties upon the plaintiff for having delayed execution of
work in question.
53. In view of above discussion, the present appeal is dismissed with
cost against the appellant and in favour of the respondent.
(PRADEEP NANDRAJOG)
JUDGE
(MUKTA GUPTA)
JUDGE
OCTOBER 29, 2015
mamta
