Gujarat High Court
State Of Gujarat vs Solanki Construction Thro' Solanki ... on 30 July, 2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 2975 of 2004
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK
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Approved for Reporting Yes No
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STATE OF GUJARAT & ANR.
Versus
SOLANKI CONSTRUCTION THRO' SOLANKI BHALJIBHAI AMARSINH-
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Appearance:
MS ROSHNI PATEL, ASST. GOVERNMENT PLEADER for the Appellant(s)
No. 1,2
MR PARAS SUKHWANI FOR MR KG SUKHWANI(871) for the Defendant(s)
No. 1
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CORAM:HONOURABLE MR. JUSTICE HEMANT M.
PRACHCHHAK
Date : 30/07/2025
ORAL JUDGMENT
1. The present First Appeal is filed under Section 96 of the
Civil Procedure Code, 1908 at the instance of the appellant -
State being aggrieved and dissatisfied with the judgment and
decree dated 28.11.2003 passed by the learned Joint Civil
Judge (S.D.), Dhrangadhra (herein after referred to as "the trial
court") in Special Civil Suit No. 5 of 1992, whereby, the learned
Judge partly allowed the suit filed by the respondent herein
and directed the appellant to pay decreetal amount of
Rs.6,12,500/- with interest @ 6% per annum from the date of
the suit till realization.
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2. Brief facts leading to the present appeal are as under :-
2.1 The respondent filed a suit for the recovery of
Rs.13,50,038/- as follows:
Claim No. Amount Description
1. Rs. 500/- On account of time limit deposit
2. Rs. 12000/- On account of the excess approval
pending
3. Rs. 5300/- On account of the 53 loads washout
of sands
4. Rs. 30000/- Idle establishments charges
5. Rs. 1032238/- On account of price escalation
2.2 It is the case of the appellant that, the respondent
entered into contract of work of strengthening Viramgam -
Dhrangadhra - Malvan Road Sect. Dhrangadhra Malvan by
providing 37.5 MM Lean Caccamam between K.M. 44/0 to 66/8
Km. Hot Mix Plant and Pava Finisheer. That, the estimated cost
of the work was Rs.45,02,612.66 paise and respondent's
tender amounted to Rs.60,10,496.89 paise, 33.49% above the
estimated cost. That, the work order was issued to the
respondent on 27.3.1990 and the work was required to be
completed as stipulated within time limit prescribed i.e. on or
before 28.11.1990.
2.3 It is the case of the appellant that, since the respondent
could not complete the said work within time limit, he applied
for extension of limit. As a matter of fact that the respondent
had started his work on 25.05.1990 only because it was
obligatory to start work within 60 days from the work order.
Thereafter, as per government notification, no asphalt work to
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continue during monsoon season i.e. from 15 th June to 15th
October, he was directed to stop the work. That, taking under
advantage of this direction and blaming the department for not
completing the road side surface racing, he demanded the
extension. Even then, authorities had considered and allowed
extension, so that the respondent could complete the work
order. However, the respondent did not complete the work
even within the extended time limit. That, there was no
condition for price escalation yet the respondent claimed huge
amount on account of price escalation. Without considering the
evidence on record in proper perspective the learned Civil
Judge allowed the suit as aforesaid vide judgment and decree
dated 28.11.2003.
3. Being aggrieved and dissatisfied with the impugned
judgment and award dated 28.11.2003 passed by the learned
Joint Civil Judge (S.D.), Dhrangadhra in Special Civil Suit No. 5
of 1992, the appellant - State has preferred this appeal.
4. Heard learned Assistant Government Pleader Ms. Roshni
Patel, appearing for the appellant - State and learned advocate
Mr. Paras Sukhwani, appearing for the respondent - Company.
5. Learned AGP Ms. Patel has submitted that the impugned
judgment and award passed by the trial court is contrary to the
provisions of law, facts and evidence available on record of the
case. She has submitted that so far as the amount of deposit is
concerned, they have no objection to pay back the amount of
deposit. She has further submitted that they had tried their
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level best and worked with full care and caution and no breach
on their part or any negligence on their part was committed.
She has submitted that the respondent was granted extension
and the proposal for Diesel, Cement, Petrol were also sent to
the concerned department time to time as per the working
condition of the respondent, however, the respondent himself
has abandoned the work and did not fulfill as contractual
obligation. She has further submitted that the appellant had
never stopped the respondent from performing contract,
however, the trial court has erred in holding that the appellant
was responsible for the delay occurred. She has submitted that
the trail court has erred in granting idle establishment and
price escalation, which were not part of the contract between
the parties and therefore, the award of this amount is without
jurisdiction and contrary to the terms of contract. She has
submitted that the impugned judgment and order passed by
the trial court suffers from the patent illegality inasmuch as it
granted price escalation without assigning any reason.
5.1 Learned AGP Ms. Patel has submitted that the respondent
has not completed the work within the time limit stipulated in
the contract and thus, the respondent has committed breach
of terms of contract and therefore, he is not entitled to seek
any damages as claimed in the suit. She has further submitted
that the delay was at the instance of the respondent and
therefore, he is not entitled to seek any escalation in price,
however, the trial court has awarded Rs.5 Lac towards
escalation of price which is on very higher side. She has
submitted that the trial court has also awarded Rs. 1 Lac
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towards idle establishment, Rs.500/- towards time limit deposit
and Rs.12,000/- towards excess approval pending, which is
also on very higher side without there being any cogent and
material evidence led by the respondent, which is erroneous,
illegal and unjust thus, the trial court has committed a serious
error while allowing the suit of the respondent. In support of
her submissions, learned AGP Ms. Patel has referred and relied
upon the decision of the Hon'ble Ape Court rendered in case of
NTPC Ltd. vs. M/s. Deconar Services Pvt. Ltd., reported
in [2021] SCC OnLine 498, more particularly, paragraphs 17,
18 and 20 and urged that the present appeal be allowed and
the impugned judgment and award passed by the trial court be
quashed and set aside.
6. Per contra, learned advocate Mr. Paras Sukhwani,
appearing for the respondent Company, has submitted that the
trial court has passed the impugned judgment and award after
considering all the relevant aspects that the work could not be
commenced due to the delay on the part of the appellant in
handing over the site in time and the appellant had not
provided material within stipulated time and therefore, the
time was extended by the appellant without there being any
condition stipulated at the time of extension of time and
therefore, now they cannot take shelter on the ground of
delay. He has submitted that the on the contrary, the
respondent had claimed Rs.10,32,238/- towards price
escalation, however, the trial court has awarded only Rs. 5 Lac
and thus the trial court has not committed any error while
passing the impugned judgment and award. Referring to
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paragraphs 11, 12 and 13 of the impugned judgment and
award, learned advocate Mr. Sukhwani has submitted that the
trial court has considered the facts and the documents
produced on record including the documents at Exh.-78, 79
and 80 and the document at Exh.-117, which clearly shows
that time was extended by the appellant from 27.11.1990 to
06.06.1991, wherein there was no condition stipulated. He has
further submitted that after appreciating the documentary
evidence at Exh.-79 and 80 while discussing the claim of the
respondent in paragraphs 15 to 19, the trial court has rightly
passed the impugned judgment and award in favour of the
respondent and therefore, the no interference is required to be
called for in the present appeal and the present appeal be
dismissed.
6.1 In support of his submissions, learned advocate Mr.
Sukhwani has referred and relied upon the decisions of the
Hon'ble Apex Court as follows :
[I] Hyderabad Municipal Corporation vs. M.
Krishnaswami Mudaliar and another, reported in AIR
1985 SC 607, paragraph 2, which reads as under :
"2. Under Ex. A-1 drainage work for CSIR Laboratory at Uppal was
entrusted to the respondent-plaintiff and under the terms of the
contract the work was to be completed by the plaintiff within a
period of one year, i.e., from 26th March 1951 to 25th March 1952.
Admittedly at the instance of the Executive Engineer, P.W.D. due to
financial difficulties-less budget having been provided for in the
year 1951-52 the plaintiff was requested to spread over the work
for two years more, that is to say to complete the same in three
years but the respondent-plaintiff was agreeable to spread over the
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work for two years more as suggested on condition that extra
payment will have to be made to him in view of increased rates of
either material or wages. The Government did not intimate to the
respondent-plaintiff that no extra payment on account of increased
rates would be paid to him or that he will have to complete the work
on the basis of original rates. In fact no reply was sent by the
Government and a studied silence was maintained by the
Government in regard to the respondent-plaintiff's demand for extra
payment, in spite of several reminders in that behalf, till the plaintiff
actually completed the work during the spread over period and only
when after completion of work the plaintiff-respondent submitted
his final bill claiming 20 per cent extra over and above the rates
originally agreed upon between the parties the Government stated
that he was not entitled to increased rates. After considering the
correspondence exchanged between the parties and the other
material on record the High Court has taken the view that the
Government was liable to make extra payment for the work done as
there was no dispute that the rates of material, etc. had increased
during the extended period of two years and plaintiff was entitled to
such extra payment. After considering the relevant material on
record we are of the view that both in equity and in law the plaintiff
contractor is entitled to receive extra payment and the High Court
was right in deciding the question in respondent-plaintiff's favour.
Since subsequent to the entering into the agreement Ex. A-1 the
Drainage Division was transferred from P.W.D. to Hyderabad
Municipal Corporation the liability to make this extra payment in our
view has been properly saddled on the appellant Corporation."
[II] P.M. Paul, Appellant vs. Union of India, reported in
AIR 1989 SC 1034, paragraph 12, which reads as under :
"12. In the instant case, it is asserted that the extension of time was
granted and the arbitrator has granted 20% of the escalation cost.
Escalation is a normal incident arising out of gap of time in this
inflationary age in performing any contract. The arbitrator has held
that there was delay, and he has further referred to this aspect in
his award. The arbitrator has noted that Claim I related to the losses
caused due to increase in prices of materials and cost of labour and
transport during the extended period of contract from 9.5. 1980 for
the work under phase I, and from 9.11.80 for the work under phase
II. The total amount shown was Rs.5,47,618.50. After discussing the
evidence and the sub- missions the arbitrator found that it was
evident that there was escalation and, therefore, he came to the
conclusion that it was reasonable to allow 20% of the compensation
under Claim I, he has accordingly allowed the same. This was a
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matter which was within the jurisdiction of the arbitrator and,
hence, the arbitrator had not misconducted himself in awarding the
amount as he has done."
[III] Food Corporation of India vs. M/s. A.M. Ahmed and
Co. and Anr., reported in AIR 2007 SC 829, Head Note-B,
which reads as under :
"Head Note-B : Arbitration Act (10 of 1940), S.30 - Award - Setting
aside of - Misconduct - Contract with Food Corporation of India -
Escalation of costs due to statutory wage revision - Arbitrator has
jurisdiction to go into said question - By awarding wage revision
costs, arbitrator cannot be said to have misconducted himself - No
error apparent on record - Award held, valid."
[IV] M/s. Associated Construction vs. Pawanhans
Helicopters Pvt. Ltd., reported in AIR 2008 SC 2911,
Head Note-A, which reads as under :
"Head Note-A : Arbitration Act (10 of 1940), (since repealed) S.30,
S.33 - Powers of Court - Award of contract - Delay in completion by
contractor attributed to respondents - Time was essence of contract
- Terms of contract providing no escalation during pendency of
contract - However, such embargo would not be carried beyond
period of completion of contract - Award of arbitrator awarding
price escalation to contractor - Not so unconscionable that it
required interference - Moreso, as Court does not sit as one in
appeal over award of the arbitrator."
[V] NTPC Ltd. vs. M/s. Deconar Services Pvt. Ltd.,
reported in AIR OnLine 2021 SC 251, paragraphs 18 to 20
and 25, which reads as under :
"18. The second issue pertains to the grant of escalation charges for
work done by the respondent beyond the scheduled period of the
contract. It is significant to note herein that the Arbitrator only
allowed a part of the claim made by the respondent under this
head. In Civil Appeal No. 6483 of 2014, the Arbitrator awarded a
sum of Rs. 17,86,212/ against a claim of Rs. 66,98,773/, while in
Civil Appeal No. 6484 of 2014, the Arbitrator awarded a sum of Rs.
3,03,419/ as against a claim of Rs. 42,20,261/. The Arbitrator took a
view on the construction of the clauses of the contract that the firm
price clause operated only with respect to the period for which the
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contract subsisted, and would not subsist beyond the scheduled
period of the contract. The Arbitrator also noted that the appellant
accepted the work undertaken by the respondent beyond the period
of the contract without objections. The Arbitrator also carefully
assessed the period of delay attributable to the appellant and
awarded escalation to the respondent only for the same.
19. With respect to the question of law as to whether the Arbitrator
could order such an escalation, this Court has, in a catena of
judgments, upheld the same. A threeJudge Bench of 11 this Court in
Assam State Electricity Board v. Buildworth Private Limited, (2017)
8 SCC 146, was faced with almost identical circumstances. In that
case, the Arbitrator granted escalation charges beyond what was
permissible under the contract between the parties, which
prescribed a cap on the same. Upholding such an award, the Court
in that case held as follows:
"13. The arbitrator has taken the view that the provision for
price escalation would not bind the claimant beyond the
scheduled date of completion. This view of the arbitrator is
based on a construction of the provisions of the contract, the
correspondence between the parties and the conduct of the
Board in allowing the completion of the contract even beyond
the formal extended date of 691983 up to 3111986. Matters
relating to the construction of a contract lie within the
province of the Arbitral Tribunal. Moreover, in the present
case, the view which has been adopted by the arbitrator is
based on evidentiary material which was relevant to the
decision. There is no error apparent on the face of the record
which could have warranted the interference of the court
within the parameters available under the Arbitration Act,
1940. The arbitrator has neither misconducted himself in the
proceedings nor is the award otherwise invalid."
(emphasis supplied)
20. We are of the opinion that the above holding of this Court is
directly applicable to the present case. The Arbitrator in the present
case has constructed the present contract, and the fixed price
clause, in the same manner. This construction was on the basis of
the evidence on record and the submissions of the counsel before
him. The Arbitrator has carefully delineated the period of delay
attributable to the appellant, and has granted the claim of the
respondent only to that limited extent.
25. It is clear from the above analysis that any decision regarding
the issue of whether an arbitrator can award a particular claim or
not, will revolve on the construction of the contract in that case, the
evidence placed before the arbitrator and other facts and
circumstances of the case. No general principle can be evolved as
to whether some claim can be granted or not. The judgments
placed on record by the appellant, wherein claim for escalation was
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denied, have to therefore be read in the context of their facts, and
cannot be read in isolation. It is clear that all the judgments cited by
the appellant can be distinguished on facts."
7. I have heard the learned advocates appearing for the
respective parties and perused the material placed on record. I
have also perused the impugned judgment and award passed
by the trial court, the issues framed by the trail court at Exh.-
18 referred in para-4 and answered in para-5. On perusal of
the Record & Proceedings and on examining and verifying the
documentary as well as oral evidence led before the trial court,
it appears that the trial court after considering the facts while
deciding the issue Nos.1 and 2 has given elaborate details and
recorded the reasons in the said paragraph and huts, I do not
find any infirmity in the impugned judgment and award passed
by the trial court. The trial court while allowing the claim of the
respondent on the contrary has awarded Rs.5 Lac towards
price escalation and has not awarded total amount as prayed
for by the respondent in the suit which is just and adequate
amount towards price escalation for the period of seven
months and hence I am of the opinion that the trial court has
not committed any error and there is no any infirmity or any
illegality committed by the trial court in passing the impugned
judgment and award. On perusal of the aforesaid decisions
cited by the learned advocate Mr. Sukhwani and the ratio laid
down by the Hon'ble Apex Court in the said decisions, I am of
the opinion that the present appeal is required to be dismissed
and no interference is required to be called for in the
impugned judgment and award passed by the trial court.
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8. In the result, the present appeal being devoid of any
merits, deserves to be dismissed and accordingly, it is
dismissed. The judgment and decree passed by the trial court
is hereby upheld. No order as to costs.
9. At this juncture, learned AGP Ms. Patel has produced on
record communication addressed by the Executive Engineer,
Surendranagar and submitted that 50% of the decreetal
amount alongwith interest @ 6% p.a. has been deposited by
the appellant before the trial court concerned.
10. In view of above, the appellant is hereby directed to
deposit remaining 50% of the decreetal amount alongwith
interest before the trial court concerned, within a period of
eight (8) weeks from the date of receipt of copy of this order.
Once the amount is deposited by the appellant, the same shall
be disbursed in favour of the respondent, after proper
verification and after following due procedure, through
RTGS/NEFT. Decree be drawn accordingly. Record and
proceedings, if any, be sent back to the concerned Court
forthwith.
(HEMANT M. PRACHCHHAK,J)
Dolly
