Bangalore District Court
Karamchand Thaparandbroscoal Sl vs Karnataka Power Corpn Ltd on 1 December, 2025
1 O.S. No.2692/1986
C/w. O.S. No.4173/1987
KABC010003101986
C.R.P.67 Govt. of Karnataka
Form No.9 (Civil)
Title Sheet for
Judgments in
Suits
(R.P.91)
TITLE SHEET FOR JUDGMENTS IN SUITS
IN THE COURT OF THE XL ADDL. CITY CIVIL &
SESSIONS JUDGE AT BENGALURU CITY : (CCH-41)
::Present::
Smt. Veena N., B.A.L., L.L.B.,
XL Addl. City Civil & Sessions Judge,
Bengaluru City.
Dated this 01st day of December, 2025.
O.S. No.2692/1986
PLAINTIFF :: Karamchand Thapar & Bros. (Coal Sales) Ltd., a
company incorporated under the Companies Act,
having its registered Office at: Thaper House,
No.25, Brabourne Road, Calcutta - 700 001 and
a Branch at: 'Badami House', Sri. Narasimharaja
Square, Bangalore - 560 002. Represented
herein by its Manager of the Bangalore Branch
and Attorney Holder - Mr. Amarnath Vhavale.
(By Sri. S.G.Sundara Swamy, Advocate)
V/s.
2 O.S. No.2692/1986
C/w. O.S. No.4173/1987
DEFENDANT :: Karnataka Power Corporation Ltd., a Government
Company incorporated under the Companies Act,
having its Registered Office at: Bharatiya Vidya
Bhavan Building, Race Course Road, Bangalore
- 560 001, represented herein by its Managing
Director.
(By Sri. Ajay J. Nandalike, Advocate)
Date of Institution of the :: 10-07-1986
Suit
Nature of the Suit :: INJUNCTION
Date of commencement of :: 29-01-1999
recording of evidence
Date on which the :: 01-12-2025
Judgment was
pronounced
Total Duration :: Year/s Month/s Day/s
39 04 21
O.S. No.4173/1987
PLAINTIFF :: Karnataka Power Corporation Ltd. A
Government company Incorporated under the
Companies Act, having its Registered Office at:
Shakti Bhavan, Race course Road, Bangalore -
560 001.
(By Sri. Ajay J. Nandalike, Advocate)
V/s.
DEFENDANTS :: 1. Karamachand Thapar & Bros. (Coal Sales)
Ltd., a company incorporated under the
Companies Act, having its registered Office at:
Thapar House, No.25, Brabourne Road,
Calcutta - 700 001.
3 O.S. No.2692/1986
C/w. O.S. No.4173/1987
:: 2. The Oriental Bank of Commerce. By its
Senior Manager, Thapper House, Brabourne
Road Branch, Calcutta - 700 001.
(By Sri. S.G.Sundara Swamy, Advocate)
Date of Institution of the :: 21-09-1987
Suit
Nature of the Suit :: MONEY SUIT
Date of commencement :: 29-01-1999
of
recording of evidence
Date on which the :: 01-12-2025
Judgment was
pronounced
Total Duration :: Year/s Month/s Day/s
38 02 10
(VEENA N.)
XL Addl. City Civil & Sessions Judge,
Bengaluru City.
JUDGMENT
Suit bearing O.S. No.2692/1986 is filed for recovery of Rs.40,74,265.10 with interest at the rate of 18% per annum from the date of suit till its realization and for consequential relief of permanent injunction restraining the defendant from enforcing the Bank 4 O.S. No.2692/1986 C/w. O.S. No.4173/1987 guarantee dated 02.08.1972 for Rs.3,33,333.33/- each issued by Oriental Bank of Commerce in favour of defendant.
The suit bearing O.S. No.4173/1987 is one for recovery of Rs.28,82,614.19 from defendant No.1 and to direct defendant No.2 to pay to the plaintiff a sum of Rs.6,66,666.66 covered by the bank guarantee dated 02.08.1972 bearing No.56/72 & 57/72 with interest from the date of suit till its realization.
2. Case of the plaintiff O.S. No.2692/1986 in brief is as here under:-
The plaintiff is a company incorporated under the Companies Act, having its registered Office at: Thapar House, No.25, Brabourne Road, Calcutta. M/s. Thapar Intrafor Company of India Ltd., was another Company incorporated under the Companies Act, which had entered into the contract which is the subject matter of this suit. The said company i.e. M/s. Thapar Intrafor 5 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Company of India Ltd., amalgamated with plaintiff company with effect from 01.11.1982, as per order dated 12.12.1984 passed by the Hon'ble High Court of Judicature at Calcutta in Company Petition No.506/1983 sanctioning the Scheme of amalgamation. The entire under taking of the said company (TICIL) stood vested in plaintiff on such amalgamation and plaintiff became entitled to the benefits of all contracts entered into by the said company. The defendant is a Government Company incorporated under Companies Act. Defendant has executed many Hydro-Electric Projects in the State of Karnataka, for generation of Electricity. One such is the Kalinadi Hydro Electric Project.
3. It is stated that in response to an invitation for tenders from defendant, plaintiff submitted their tender for the execution of reach No.I and II of the Head Race Tunnel from Bommanahalli lake to surge point of Kalinadi Hydro Electric Project under Letter 6 O.S. No.2692/1986 C/w. O.S. No.4173/1987 dated 26.07.1971. The tender invited by the defendant was subject to special terms and conditions. On receiving the tender offer of plaintiff, the defendant called the officers of plaintiff for discussions and after negotiations held on 25.08.1971, the plaintiff gave a letter dated 06.09.1971 containing certain clarifications and modifications with regard to the terms and conditions contained in their letter dated 26.07.1971. After further discussions held on 22.09.1971, the plaintiff gave one more letter dated 25.09.1971 giving further clarifications and changes with regard to special terms and conditions. By Letter dated 12.10.1971, the defendant accepted the plaintiff's offer and communicated its decision to award the work in both reaches of the head-race tunnel to the plaintiff.
4. Later, the parties entered into agreement dated 27.06.1972 under which, the plaintiff agreed to execute the work of construction of head race tunnel from Bommanahalli lake to surge point of Kalinadi 7 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Hydro Electric Project in accordance with the conditions stipulated in the agreement dated 27.06.1972, which also contained 3 letters dated 26.07.1971, 06.09.1971 and 25.09.1971 of the plaintiff and the letter of acceptance dated 12.10.1971 of the defendant. It also provided that in the event of any ambiguity regarding alteration of any clause, as per the conditions contained in the 3 letters of the plaintiff, what was stated in the three letters should be taken as correct. During the execution of work, a supplemental agreement was entered into between the plaintiff and defendant on 08.10.1975. In pursuance of the said contract, the work was commenced by plaintiff on 01.01.1972 and was completed and handed over on 29.07.1979.
5. Under the terms of contract, a pre-final bill should be prepared by the defendant including all items and quantities as per the agreement and payment should be done within 3 months of handing over and only extra items and extra quantities were to remain to 8 O.S. No.2692/1986 C/w. O.S. No.4173/1987 be finalized in the final bill as per clause 1(iv) of Conditions of Contract. The final bill should be prepared and released by the defendant within 18 months from the date of handing over the work. Though the work was completed on 29.07.1979, defendant did not prepare the pre-final bill and there was enormous delay on the part of defendant in preparing the bill and hence after many reminders, the defendant wrote a letter on 05.07.1982 stating that the final bill was ready for plaintiff's signature. But when plaintiff approached the office, it was found that the bill was not ready and plaintiff informed the defendant. Later by letter dated 07.04.1984 the defendants wrote to the plaintiff stating that the measurement books and final bill was ready for signature and the defendant also conveyed their final decision on certain disputed items to which plaintiff sent a reply dated 11.06.1984 pointing out the final bill was still under preparation and objecting to levy of interest on equipment advance etc. On persistent demands by the plaintiff, the defendant finally issued final bill on 9 O.S. No.2692/1986 C/w. O.S. No.4173/1987 21.09.1984. The last running bill was 09.06.1981 with regard to Schedule B items and final bill prepared on 16.01.1982 was with regard to extra items. The plaintiff noticed that the bill was a minus bill i.e. a bill showing the payments and recoveries were more than the value of the work done. Plaintiff found that various unauthorized and illegal debits had been made and some items for which payment was due had been either omitted or given credit belatedly. It was also found that to make it a nil bill, the defendant also adjusted various sums from out of the amounts payable to plaintiff with regard to another contract.
6. Hence, the plaintiff issued notice on 02.04.1986 objecting to various debits and omissions and called upon the defendant to rework the bill by giving credit to the amounts omitted and reversing the wrong debits, to which the defendant neither complied nor sent any reply. The plaintiff has in detail mentioned the errors in the final bill, which comes to 10 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Rs.24,94,694.68. It is stated that each of the omissions recoveries is erroneous, unauthorized and illegal. The recoveries and the omissions in the final bill under different heads are narrated as hereunder:
(i) So far as plugging of adits is concerned, it is stated that, for the purpose of excavation of the tunnels, plaintiff was required to execute the tunnel work simultaneously on several faces and accordingly it executed the work simultaneously on 9 faces. For providing access to these faces for excavation, and also for the purpose of ventilation and disposal of muck, plaintiff was permitted to sink shafts or drive adits. After the tunnel work was completed, these adits, shafts, has to be plugged and were in fact so plugged with concrete. The tender documents originally issued, provided that the defendant would not be liable for the cost of making such shafts, adits or plugging them and that the unit rate for excavation and concreting quoted by the plaintiff should include the cost of making the adits and plugging them while submitting its offer. The 11 O.S. No.2692/1986 C/w. O.S. No.4173/1987 plaintiff did not agree to many of the terms of the tender documents and sought various additions, alterations and deletions. After negotiations, the defendants made some changes in the general conditions, detailed specifications etc. and also agreed that conditions contained in the plaintiff's three letters would form part of contract. Accordingly, one of the changes so made in the contract, as finally entered relates to payment for plugging adits. Clause 6.29 of the detailed specifications was amended by adding a para, providing that the contract for plugging the arrears would be paid at the unit rates of lining and that plugging should be done, as directed by the engineer in charge. This clause was introduced after discussions and negotiations and superseded all other earlier provisions and correspondences. Thus clause 6.29 of the detailed specifications introduced and provided for payment for the plugging of adits at unit rates for lining.
Plaintiff did not agree to clause 2.06 of detailed specifications and clause 10 of general conditions. 12 O.S. No.2692/1986
C/w. O.S. No.4173/1987 Once the agreement is executed with certain revised terms, it is not permissible to contend that on the basis of original tender form issued to the plaintiff, the work of plugging adits was not to be paid for.
7. The plaintiff executed the work of adits plugging to an extent of 1041.276 cubic meter. This work was measured and included in the running bills dated 24.08.1979, 08.09.1979 and 29.09.1979 as per contract. The value of the said work at the unit rates for concreting with permissible escalations works out to Rs.4,04,167/-. Thereafter, for the first time, the defendant informed the plaintiff that their managing director had ordered that the cost of plugging adits would be reckoned as having been included in the unit rates quoted for excavation and mining. While finalising the accounts, the plaintiff explained the nature and quantum of work involved in plugging the adits. Finally, the plaintiff received the letter on 05.07.1985 wherein the defendant informed that their decision regarding 13 O.S. No.2692/1986 C/w. O.S. No.4173/1987 plugging of adits as per letter dated 4/11.02.1984 holds good. On the basis of such decision, the entire work of plugging the adits has been omitted in entirety in the final bill and no provision for payment therefore is made in it. Consequently, the payments made towards plugging of adits in the running bills became payments on account towards the contract. The omission to pay for the work of plugging the adits has been carried out by the plaintiff in the final bill is wholly opposed to the agreed terms of contract and defendant is bound to pay for the work done as agreed under the contract.
(ii) Notional cost of transportation of cement from Dandeli stores to Ambika Nagar stores : It is stated that the plaintiff had to execute the work at item wise rates mentioned in Schedule B subject to defendant supplying the materials mentioned in Schedule A at the rates specified therein. Cement is one such item agreed to be supplied by the defendant at a fixed price of Rs.235/- per metric tonne and the place of delivery being defendant's stores at Dandeli. Accordingly, 14 O.S. No.2692/1986 C/w. O.S. No.4173/1987 cement was issued by the defendant to the plaintiff from its stores at Dandeli from 1972. In the end of 1973, defendant opened a new cement depot in the same Dandeli area at a place newly named as Ambika Nagar. Thereafter from November, 1973 most of the cement required for the work was supplied from Ambika Nagar depot. Though there was a few occasions when cement was supplied from old Dandeli stores. The supplies continued upto 1979 when the work was completed. The defendant charged rate at the rate of Rs.235/- per metric tonne and made recoveries accordingly from the running bills paid to the plaintiff. This was wholly in accordance with the contract. However, in the year 1978, for the first time, the defendant tried to contend that the nominal cost of transportation of cement, was more than from original point of issue at Dandeli Stores at the new point of issue at Ambika Nagar and it should be borne by the plaintiff. It is stated that the change of point of delivery from Dandeli Stores to Ambika Nagar Depot was not at 15 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the instance of plaintiff, but was made by defendant to suit its convenience. The change was made about 2 years after the commencement of the work, without the consent or consultation of the plaintiff. A mere change of the point of delivery from the original place to a nearer depot in the same Dandeli area will not entitle the defendant to claim any amount as cost of transportation from the original point of delivery to the altered point of delivery in the absence of any contract in their behalf. The defendant purchased bulk quantities of cement and received the deliveries directly either at the Dandeli Stores or at Ambikanagar Depot from the suppliers without incurring any extra costs or expenses for delivery at Ambika Nagar Depot. In the absence of any contract or agreement, defendant is not entitled to claim any amount on account of notional transportation from Dandeli Stores to Ambika Nagar depot. Further, as per the contract dated 08.08.1972, the defendant agreed to supply cement at the same rate of Rs.235/- per metric tonne, whether delivery was at Dandeli or 16 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Ambika Nagar and this would establish that the parties never treated delivery from Dandeli stores and Ambika Nagar depot as being different. The defendant has debited a sum of Rs.4,22,537.14 in the final bill towards transportation cost of cement stating that the said debit was being made in perseverance of the instructions of the managing director of the defendant. No such transportation cost was ever shown or sought to be recovered from the running bills at any time and the recovery now sought to be made in the final bill for the first time is neither valid nor justifiable as there is no contract between the parties, entitling the defendant to claim or recover national transportation charges.
(iii) Escalations in the cost of indigenous capital equipment and electricity used in the work of dewatering and pumping and other extra items of work :
It is stated that one of the items of work which had to be carried out by the plaintiff in the construction of head race tunnel was removal of seepage water. As per the contract, the plaintiff was not entitled to make payment 17 O.S. No.2692/1986 C/w. O.S. No.4173/1987 with regard to pumping of water from the tunnel upto 50 GPM and in regard to the dewatering upto 1 cusec per working phase. Note 2 to Schedule B provided that for dewatering exceeding 1 cusec per working phase, the plaintiff will be paid at the rate of Rs.1/- per GPM per day. During the progress of the work, it was found that dewatering was of a magnitude not contemplated at all at the time of entering into the contract. In respect of the excess work of dewatering and pumping, the defendant agreed to make payment to the plaintiff calculated at the rate of Rs.1.95 per KWH for the energy consumed for dewatering 1 cusec per phase and pumping from common sump in excess of 50 GPM for the whole tunnel, treating this work as an extra item. This was as against the claim of Rs.3.65 per KWH claimed by the plaintiff.
8. The plaintiff had purchased and used various indigenous machinery for the work and some of the indigenous machinery were purchased and used for 18 O.S. No.2692/1986 C/w. O.S. No.4173/1987 dewatering and pumping only and some were purchased and used for other works connected with the contract. As per clause 2 of the supplemental agreement dated 08.10.1975, the plaintiff shall be paid that proportion of the increase in the price of new indigenous capital equipment purchased by them as their usage in the project bears to the expected life of the equipment. In view of such an express provision in the contract, the defendant paid Rs.55,79,704.21. Towards the proportionate increase in the price of the new indigenous capital equipment purchased and used in the project including the work of dewatering and pumping. Thereafter the defendant stated that the work of dewatering and pumping being an extra item of work, the rate of Rs.1.95 Will be paid per KWH of electricity consumed till the completion of the work and therefore clause 2 of the supplemental agreement providing for payment of proportionate increase in the price of new indigenous capital equipment would not apply. Consequently the defendant debited a sum of 19 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Rs.9,11,868.35 in the final bill to recover back the proportionate increases paid in regard to the new indigenous equipment used in the work of dewatering and pumping and other extra items of work. The defendant has made a similar debit with regard to electricity escalations and has debited Rs.5,19,341.03 in the final bill to recover the amount paid to the plaintiffs on account of increase in electricity tariff for electricity consumed for dewatering and pumping work. According to the plaintiff, the work of dewatering and pumping is an extra item and the escalation in electricity tariffs is liable to be borne by defendant.
9. In the year 1981, the defendant contended that the electricity escalations were not payable and they had proposed to recover from the plaintiff the escalation paid with regard to electricity used for extra items including pumping and dewatering and escalations paid with regard to indigenous capital equipment used on extra items of work including 20 O.S. No.2692/1986 C/w. O.S. No.4173/1987 dewatering and pumping. The defendant informed vide letter dated 26.04.1985 that the escalations were not payable and according to defendant the rate of Rs.1.95 per KWH paid for work of dewatering and pumping held good till completion of work. All provisions of the contract apply to extra items of work also and the work of excess dewatering and pumping is called as an extra work because it does not fall under Schedule B for the purpose of payment and the only difference between items of work specified in Schedule B and extra item is that, Schedule B contains the rates payable in regard to the items already listed, but with regard to extra items, the rate has to be worked out in the manner contemplated in the contract or by mutual agreement. Hence the work of dewatering and pumping is governed and controlled by the provisions of the contract. The defendant has sought for refund of Rs.5,19,341.03 towards indigenous capital equipment escalation in the final bill and thus the debit of Rs.9,11,868.35 and Rs.5,19,341/- in the final bill is not 21 O.S. No.2692/1986 C/w. O.S. No.4173/1987 tenable and is unjustified and contrary to the terms of contract.
(iv) Recovery of rebate at 2 percent on the amounts paid on account of escalation towards electricity charges and cost of indigenous capital equipments : It is stated that the defendant has debited a sum of Rs.61,183/- in the final bill as 2.25 % rebate on the amount paid towards escalation on electricity tariff and a sum of Rs.1,11,594.08 has been debited as 2% rebate on the amount paid towards escalation due to increase in cost of new indigenous capital equipments. The plaintiff in its letter dated 26.07.1971 and 06.09.1971 agreed to give 2% rebate in their rates, if both reach I and reach II of the tunnel were awarded to them, this rebate would not apply to escalations. Clause 3(b)(i) of the Note to Schedule B of the agreement provides that contractors will be compensated for any statutory increase over and above the electricity tariff in force in November, 1971 with regard to electricity consumed and clause 2 of the 22 O.S. No.2692/1986 C/w. O.S. No.4173/1987 supplemental agreement provided that the plaintiff will be paid that proportion of the increase in prices of new indigenous capital equipments purchased by them. Thus the escalations in electricity tariff and cost of new indigenous capital equipments were given to plaintiff in perseverance of specific provisions in the contract and plaintiff agreed to give a rebate of 2 percent only on the rates quoted by them and not on the escalations on various accounts. Hence the defendant is not entitled to claim 2% rebate on the said escalation amounts and the debits of Rs.54,386.57 and the balance of Rs.6,797.18 being the 0.25% rebate and Rs.1,11,594.98 are untenable, illegal and unauthorised.
(v) Recovery of proportionate cost of workmen's compensation and gratuity attributable for extra items and 11% over breaks : It is stated that a sum of Rs.32,108.30 has been debited in the final bill towards recovery of workmen's compensation and gratuity paid to plaintiff, attributable for proportionately for extra items. Similarly a sum of Rs.4,243.75 is debited 23 O.S. No.2692/1986 C/w. O.S. No.4173/1987 towards workmen compensation and gratuity allocable to 11% over break not payable. These debates are untenable and contrary to the terms of contract.
(vi) Recoveries in sales tax, forest development tax etc. : It is stated that a sum of Rs.34,448.56 is debited on account of sales tax and surcharge thereon and forest development tax of Rs.19,156.13 and turnover tax on royalty for sand and aggregates used by the plaintiff in work. Clause 1 of the detailed specifications provides that the plaintiff should pay royalty charges for sand and aggregates and the contract does not provide for payment of sales tax, surcharge on sales tax etc. Under the contract, if any new law or levy is made having a financial bearing on the plaintiff, subsequent to the tender, the defendant should make extra payment to cover the increase in prices as a consequence of such levies. Thus, it is the defendant who should bear the same or reimburse the same to the plaintiff and these debits are unauthorised and illegal.
24 O.S. No.2692/1986
C/w. O.S. No.4173/1987
(vii) Insofar as delay in giving credit for excess interest and rebate is concerned, a sum of Rs.38,408.83 towards rebate at 0.25 percent and Rs.1,22,298/- towards interest were recovered in excess in the various running bills up to 1979. Defendant has now given credit to the said sum of Rs.38,408.83 and Rs.1,22,298/- which were deducted in excess of what was due. Such credit has been given in the final bill. Though these excess recoveries were made in the running bill upto 1979, the credit should be given to these sums with effect from the respective dates when these recoveries were made in the running bills. If credit is given with effect from the respective dates of recoveries, the plaintiff will be saving interest on a corresponding amount which plaintiff was due to the defendant at that time. By giving credit to these amounts only on 21.09.1984, the effect is that the defendant charged interest on the amounts due to them which would have been avoided by giving credit on the 25 O.S. No.2692/1986 C/w. O.S. No.4173/1987 respective dates of recovery.
(viii) Recovery of interest on machinery advance after 29.07.1979 : It is stated that when the work was completed, according to the defendant, a sum of Rs.6,48,075.75 was lying to the credit of plaintiff in the miscellaneous deposit account. Apart from the excess recoveries of Rs.1,60,706/- as on the date of completion of work, the amount due to the plaintiff was much more than the machinery advance of Rs.10,69,607/-. Hence the defendant could not charge any interest on the machinery advance from 29.07.1979 a sum of Rs.2,39,741/- debited as interest on the machinery advance in the final bill is erroneous.
10. The defendant is due for a sum of Rs.27,34,406/- and as per the contract, the final bill had to be settled within a period of 18 months from the date of handing over the work and it ought to have been prepared and settled by 28.01.1981, as the site was handed over to defendant on 29.07.1979. The plaintiff 26 O.S. No.2692/1986 C/w. O.S. No.4173/1987 had invested huge amounts for the excavation of the work and had borrowed heavily from banks and companies for executing the work. If the defendant had settled the final bill within the time stipulated, the plaintiff could have discharged their liabilities and saved payment of interest. Hence the plaintiff is entitled to interest on the amounts due from 29.01.1981 on a sum of Rs.27,34,406/- till the date of payment. The rate of interest charged by nationalized banks with regard to commercial transactions is not less than 18% and hence the plaintiff is also entitled for interest at the rate of 18 percent. The plaintiff issued a registered notice calling for the defendant to pay the amount along with interest and since it was neither complied nor replied, the present suit is filed.
11. In pursuance to the summons issued, the defendant caused appearance and filed its written statement, wherein it is admitted that execution of work relating to reach I and II of HRT from Bommanahalli 27 O.S. No.2692/1986 C/w. O.S. No.4173/1987 lake to surge point of Kalinadi Hydro Electric Project was entrusted to the plaintiff under the terms and conditions of the agreement, dated 27.06.1972 and that a supplemental agreement was entered into between them on 08.10.1985 and work was commenced by the plaintiff on 01.02.1972 and completed on 27.07.1979. It is stated that the final bill was prepared in the year 1984 and had been sent to the plaintiff and as it was not signed by the plaintiff, the same was again furnished in the year 1986 and the delay in completion of the final bill, after completion of the work was unavoidable due to a series of complicated and disputed claims for recovery raised by the plaintiff and the plaintiff did not furnish material consumption account. All payments were made to the plaintiff by way of work advance till the completion of work through running account bills. As the debits under various accounts of the plaintiff far exceeded the amounts payable to the plaintiff in the final bill, a pre-final bill was not prepared. The defendant could not fully recover the 28 O.S. No.2692/1986 C/w. O.S. No.4173/1987 debit balances even after admitting the HRT final bill and extra items RL bill. Thus, nothing is due to the plaintiff on account of HRT contract claims made in the suit. The terms and conditions of the original agreement stands modified to the extent indicated in the supplemental agreement and the correspondence cited in the preamble to the supplemental agreement. The said correspondence bears the signature of the plaintiff's power of attorney in token of plaintiff's acceptance of the modifications therein. The plaintiff is not entitled to ignore the said modifications in computing the claims made against the defendant.
12. So far as plugging of adits is concerned, it is contended that under the terms of contract, the defendant is under no obligation and is not liable to pay the plaintiff, any amount for the work of plugging the adits at the unit rates for lining. Para 3 of clause 2.06 of the detailed specifications to the agreement dated 27.06.1972 provides that the contractor Shall execute 29 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the tunnel from not less than 4 phases simultaneously so as to complete the work within the time specified, that he may be allowed to drive any additional adits if he finds it necessary and after obtaining the prior approval of the engineer in charge, that providing such adits shall not be paid by the corporation and that the contractor shall plug them back with such materials and in such manner as may be directed by the engineer in charge at his own risk and cost. Clause 10 of the agreement specifies that the proposed shafts and adits in the agreement drawings are only for guidance, that it is entirely the responsibility of the contractor to select the number and location of the adits so as to complete the work in scheduled time and that no extra payment will be made to the contractor for these adits and that plugging them back shall also be done at his own cost. In Para No.9B of the original offer dated 26.07.1971, the plaintiff has clearly stated that our unit rates quoted for excavation and concreting includes the cost of making adits and their plugging back also. However, 30 O.S. No.2692/1986 C/w. O.S. No.4173/1987 during the making of these adits, it was agreed that on a percentage basis for the excavation involving these adits and this amount can be adjusted from overall price for the tunnel.
13. Further, the plaintiff has made it clarified in its letter dated 06.09.1971 at Para No.9B that payment for making the adits may be made on the basis of actual tunneling rates, treating this entire payment for making of these adits as an advance and this advance can be recovered from their running bills on pro-rata basis and this advance will not be covered by a bank guarantee from the plaintiff's side.
14. Further, as per clause No.2.02(e) of the main agreement, a provision has been made stating that payments for making adits and shafts will be made by the Corporation on the basis of actual tunnelling rates, treating this entire payment for making of these adits and shafts as an advance. As per clause 6.29 of detailed specifications of the main agreement, concrete 31 O.S. No.2692/1986 C/w. O.S. No.4173/1987 for plugging back the adits points will be payable at the unit rates of lining. All these advances paid for these adits have been recovered from the plaintiff from subsequent bills, as per its letter attached to the main agreement. The inclusion of Para 2 of clause 6.29 of the detailed specifications was only intended to provide for making interim payments as advance for the work executed at the unit rates of lining with a view to meet the contractor's labour requirements. The agreement dated 27.06.1972 also provides that if there is any ambiguity regarding alteration of the clause as per the conditions of the contract, the original letter or letters of clarification shall be taken as correct. From the clarifications issued by the contractor in his letter dated 26.07.1971, the unit rates quoted for excavation and concreting are inclusive of the cost of making adits and their plugging back also. Hence the payments released to the contractor for completing are inclusive of the component of plugging of adits. In view of all this interim payments made to the contractor in R.A bills for 32 O.S. No.2692/1986 C/w. O.S. No.4173/1987 plugging of adits at the unit rates of lining have been deleted from the final bill. Clause 7 of the original agreement provides that the intermediate payments shall be regarded as payments by way of advance against the final payments only and not as payments for the work actually done and completed. Hence, the action of the defendant from deleting from the final bills, the entire quantity of plugging back the adits is in accordance with the provisions of the main agreement and hence the plaintiff is not entitled to claim payment of Rs.4,04,167/- on account of plugging of adits.
15. So far as additional cost of transportation of cement from Dandeli to Ambika Nagar is concerned, it is contended that at the time of inviting tenders, Dandeli stores was shown as a place for issue of cement and the contractor had quoted his rates on the basis of lead charges from Dandeli stores to the work site. As such there was a proportionate reduction in the rates quoted towards lead charges from Dandeli Stores to the work 33 O.S. No.2692/1986 C/w. O.S. No.4173/1987 spot consequent to the saving of 18 kilometers. Since the defendant has incurred extra expenditure for the transportation of the cement from Dandeli to Ambika Nagar, the same was recovered as per the actuals in the final bill based on the rates of transportation incurred during 1974-75 to 1981. For the purpose of recovery of transportation charges, cement which was directly transported to Ambika Nagar and which was not routed from Dandeli was not considered. Hence the question of reversing or deleting the said recovery in the final bill does not arise. The rates quoted by the plaintiff were inclusive of the lead charges from Dandeli and not from Ambika Nagar. As a result of the actual issue of cement at Ambika Nagar, the defendant was justified in recovering the actual expenditure incurred by him from the transportation of cement from Dandeli to Ambika Nagar. As per the terms of the agreement and clause 4 of the supplemental agreement, the transportation charges from the defendant's stores to work sites shall be borne by the plaintiff and that the 34 O.S. No.2692/1986 C/w. O.S. No.4173/1987 plaintiff has agreed to the proportionate recovery of actual extra costs incurred by the defendant for transportation of cement from Dandeli to Ambikanagar. In view of clear reduction of 18 kilometers in the distance in transportation, the plaintiff is benefited by reducing its expenditure and the defendant stood to lose by increasing the expenditure for the coverage of distance. Under the circumstances, the plaintiff is not entitled to refund of transportation charges, which has been rightly recovered based on actuals.
16. So far as escalation in the cost of indigenous capital equipment and electricity used in the work of dewatering and pumping and other extra items of work is concerned, it is contended that as per the agreement if the dewatering exceeds Rs.1/- cusec per working phase, the contractor will be paid at the rate of Rs.1/- per GPM per day. During the execution of the work it was found that the seepage was more than they anticipated at the tendering stage. Hence, after 35 O.S. No.2692/1986 C/w. O.S. No.4173/1987 considering the full implications of dewatering component such as total cost of pumping, electricity etc. this item was treated as an extra item and a rate of Rs.1.95/- per KWH was fixed and payments were made accordingly. Right from the inception of the contract work, in acceptance of the above rate, the plaintiff had executed an agreement dated 30.09.83 and under scheduled D of supplemental agreement, the plaintiff accepted to treat this item as an extra item and agreed for recovery of the proportionate escalations on the cost of indigenous capital equipments and electricity escalations for the said extra item of work. All escalations on dewatering and pumping into the limit specified in the agreement have already been released to the plaintiff within the unit rates quoted for the respective items of the contract. The proportionate recovery of escalation had been restricted only to the dewatering beyond Rs.1/- cusec and pumping beyond 50 GPM. As the above item has been treated as an extra item and the rate of Rs.1.95 payable is inclusive 36 O.S. No.2692/1986 C/w. O.S. No.4173/1987 of the element of escalations, at the time of preparing the final bill, the escalation is worked out based on overall cost of work on a proportionate basis and amount recoverable was assessed at Rs.9,11,868.35. Considering the nature of the work and equipments used on the works, the escalation paid on indigenous equipments have been bifurcated by the defendant into 3 categories. Under the circumstances, final amount recoverable from the plaintiff towards proportionate cost of escalation is Rs.5,33,061/- as against Rs.4,94,285.40 as alleged by the plaintiff. Similarly, escalation on electricity amounting to Rs.27.19 Lakhs included in the final bill was in respect of energy allocable for Schedule B items, as also was dewatering and pumping and other extra items of HRP. The rate of Rs.1.95 per KWH fixed for dewatering activities is the rate applicable for the entire period of contract and includes the element of escalation. Hence, the proportionate escalation amount for dewatering and extra items has been effected in the final bill. 37 O.S. No.2692/1986
C/w. O.S. No.4173/1987
17. So far as recovery of rebate is concerned, it is stated that the contractor in its letter of clarification had earlier offered of rebate at 2% in the rates in case both reach I and reach II of the tunnel are avoided to avoid problems at the site. The agreement also makes it clear that the contractor will give a rebate of 2% if he is awarded reach I and reach II together as offered in the original tender. During the course of execution of the work, the defendant made a thorough review of the clauses in the agreements and letters enclosed to it and it was stated that as escalations and extra item payments are not payments on account of rates, it would not be correct to deduct 2% from the escalation and extra item payment, but it would be appropriate to calculate the escalations on the value of Schedule B items. Further clause 9 of the agreement provides that the contractor shall give a rebate of ¼% of the net value of the bill for prompt payment of the bill within 50 days of the submission of the bill. The defendant therefore accepted the above offer of rebate made by 38 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the contractor subject to condition that it was on the net payment of the accounting for all the recoveries. In accordance with the provisions of the contract, the escalations have been made on 98% of the value of work done and effected ¼% of rebate on left value of the bills. The plaintiff was also eligible for certain escalations as provided in the main agreement and the supplemental agreement. Thus, rebate offered by the contractor has been effected indirectly for assessing escalations due under Items F(i) to F(vi) and 2% has been directly effected for indigenous escalations and 2¼% for electricity escalations and hence the question of refund of rebate recovering the final bill does not arise.
18. Regarding the recovery of cost of workman's compensation and gratuity is concerned, it is stated that as per clause 8 of the agreement, the contractor is entitled for payment of gratuity on proof of payment made to the workmen. However, this is 39 O.S. No.2692/1986 C/w. O.S. No.4173/1987 restricted only to the period during which the said workmen worked in the defendants project. As per the terms of the supplemental agreement, the contractor is eligible for payment of additional costs of workmen compensation consequent on the modification in the Act and the revision of minimum wages, as and when individual cases are brought up. Further the corporation had deducted proportionate compensation and gratuity for extra items and 11% over breaks encountered in excavation of tunnel. After taking into consideration of all aspects, a thorough rate for dewatering and pumping was settled. Similarly, the rates payable for other extra items also are inclusive of all the implications of the respective items In question, as contemplated under the supplemental agreement. As the rate fixed for extra items are inclusive of the element of escalation payable to contractor on account of gratuity and workman's compensation, the recovery of gratuity and workmen's compensation by the defendant in the final bill is in order. So far as the over 40 O.S. No.2692/1986 C/w. O.S. No.4173/1987 breaks is concerned, as per clause 2.15 of the agreement, only extra excavation done beyond the pay lines for any reason other than the reasons mentioned therein shall not be paid for and shall be filled back with cement concrete used for lining of the tunnels at the contractor's own costs. Hence, the proportionate workman's compensation gratuity is recovered in the final bill of the contractor. As the balance 11% over breaks has been decided as not payable, the proportionate costs of excavation and compensation are also not paid to the contractor, which is in accordance with the main agreement and supplemental agreement.
19. So far as the recovery of tax is concerned, it is stated that as per the plaintiff's letter, it was clarified that extra payment to cover any increase in price wage structure, due to enactment of new law by State and Central Government, after mutual consultation with the defendant, and the tenderer takes into account all such 41 O.S. No.2692/1986 C/w. O.S. No.4173/1987 laws, which may have been enacted and have bearing on their work. Since Forest Department has Forest development tax, sale tax and turnover of tax on royalty were not due to enactment of new law, these taxes are not refundable. The plaintiff has also agreed to this under clause 7 of the supplemental agreement and therefore cannot seek for refund of the tax. Since the same stands modified as per his clarification letter and clause 7 of the supplemental agreement regarding royalty to be paid by the plaintiff, as per clause 1 of the detailed specifications of the main agreement, the materials should be obtained by the contractors from the quarries specified and approved by the engineer. The royalty charge as per schedule enclosed or as may be revised by the Government from time to time shall be paid by the contractor, which will be deducted from the bills. As the recovery of the tax and royalty has been rightly made as per the terms of agreement, the payment is not entitled for refund of the said amount. 42 O.S. No.2692/1986
C/w. O.S. No.4173/1987
20. It is stated that the recovery of interest made on advance outstanding as per the books is in accordance with clause 4 of the supplemental agreement and hence the question of giving credit towards rebate at 0.25% amounting to Rs.38,408.83 as well as excess interest from the respective dates of recovery does not arise for consideration.
21. So far as recovery of interest on Machinery advance is concerned, it is stated that the recovery was made in proportion to use, as per Note 2 to Schedule A of agreement. Corresponding debits were made to the plaintiff's account after 01.04.1980 even though the transaction refers to a period prior to 1978-79. Hence the adjustment of credit balance available in the plaintiff's sundry debtors account for subsequent debits arising out of transactions that took place prior to 1978- 79 is in order and cannot be questioned.
22. It is further contended that the plaintiff has agreed to the rates mentioned in the supplemental 43 O.S. No.2692/1986 C/w. O.S. No.4173/1987 agreements and the plaintiff is not ready to accept the other terms and conditions stipulated in the said agreements. Interest recoverable on machinery advance has been assessed from the date of advancing the loan to the date of recovery as per clause 4 of the supplemental agreement. As the amount recoverable from the plaintiff is in respect of the HRT contract, the defendant has recovered the same under the final bill. Further, the letter dated 09.09.1982 annexed to the supplemental agreement makes it clear that any dues arising out of the HRT contract need to be recovered from the plaintiff's bill in respect of surge tank and pressure shaft contract. The interest claimed by the plaintiff is unreasonable and the defendant is not liable to repay the amount with interest as claimed by the plaintiff. The defendant has not committed any breach of contract and is under no obligation to pay any interest. The final bill of HRT was admitted subject to adjustment of balance amount of sundry debtors account of HRT contract and final computation of higher 44 O.S. No.2692/1986 C/w. O.S. No.4173/1987 charges and recoveries thereof in the bills of plaintiff for construction of surge tank and pressure shaft works. The plaintiff is due to the defendant in a total sum of Rs.45,38,042.44 and the defendant is entitled to recover the same from the plaintiff's bills relating to the contract for construction of surge tank and pressure shaft works and hence the plaintiff is not entitled for the relief claimed and sought for dismissal of suit.
23. Case of the plaintiff in O.S. No.4173/1987 in brief is as here under:-
The plaintiff is a State Government undertaking incorporated under the Companies Act, engaged in the construction and maintenance of the Power Projects in the State of Karnataka. The defendant No.1 is a company incorporated under the companies Act and has its registered office at Thapar House, No.25, Brabourne Road, Calcutta. M/s. Thapar Intrafor Company of India Ltd., another company M/s. Thapar Intrafor Company of India Ltd., hereinafter called the 45 O.S. No.2692/1986 C/w. O.S. No.4173/1987 TICIL registered under the Companies Act got itself amalgamated with the defendant No.1 with effect from 01.11.1982 by virtue of an order passed by the Hon'ble High Court of Judicature, Calcutta, on 12.12.1984 in Company Petition No.506/1983. As a result of the amalgamation of the assets and liabilities of the TICIL stood vested in the defendant No.1 with effect from 01.11.1982. It is stated that in response to the plaintiff's invitation for tender the defendant No.1 submitted tender for execution of the work or Reach-1 and 2 of the Head Race Tunnel from Bommanahalli Lake to Surge Point of the Kali Nadi Hydro-Electric Project under cover of its letter dated 26.07.1971. The plaintiff by letter dated 12.10.1971 accepted the defendant No.1's offer and agreed to award the execution of the work to the defendant No.1. Thereafter, on 27.06.1972 the parties entered into an agreement under which the defendant No.1 agreed to execute the work of construction of Head Race Tunnel from Bommanahalli Late Intake to the Surge Point of Kali Nadi Hydro- 46 O.S. No.2692/1986
C/w. O.S. No.4173/1987 Electric Project in accordance with the conditions, correspondence and details in the annexures to the agreement consisting of the definition of the terms used in the conditions of the contract, letter of tender, general rules and directions for the guidance of contractor, tender for works, conditions of contract, schedule "A" regarding materials to be supplied to the defendant No.1 by the plaintiff, schedule of quantities and rates, general conditions relating to execution of work, general specifications and detailed specifications, the 3 letters dated 26.07.1971, 06.09.1971 & 25.09.1971 of the defendant No.1, the letter of acceptance dated 12.10.1971 of the plaintiff and the drawings. The agreement also provides that in the event of any ambiguity regarding alteration of the clause according to the conditions of contract, what has been stated in the 3 clarificatory letters shall be taken as correct. During the course of execution of the work supplemental agreements were entered into between the parties on 08.10.1975, 30.09.1983 & 30.09.1983. 47 O.S. No.2692/1986
C/w. O.S. No.4173/1987
24. It is stated that the work under the contract in the suit was commenced by the defendant No.1 on 01.01.1972 and completed on 27.07.1979. Though the work had to be completed on 31.01.1976, The defendant sought extension of time periodically and completed the work only on 27.07.1979. Since defendant No.1 did not complete the work within the revised schedule, the plaintiff was put to heavy loss of revenue. According to the terms of main agreement, the date of completion of the work is the date on which the site of the work is cleared by defendant No.1. Under clause 4 of the note attached to Schedule A of the main agreement, it was necessary for defendant No.1 to maintain an account of the receipt and use of cement and to submit the same monthly to the plaintiff. Under Note No.13 attached to Schedule A, the contractor had the option to use materials like cement and steel for ancillery works like construction of housing colonies. Defendant No.1 was required to furnish details of material consumption for the main work and ancillery 48 O.S. No.2692/1986 C/w. O.S. No.4173/1987 works. Defendant No.1 did not furnish such accounts. As the final bill and recovery schedules prepared by the plaintiff were not signed by defendant No.1, in spite of repeated requests by letters, the final bill was prepared by the plaintiff on 22.09.1984, subject to adjustment of balance amount of sundry debtors account and final consultation of hire charges and recoveries thereof. As the amount recoverable from defendant No.1 in respect of construction of head race tunnel was much more than the amount due from defendant No.1 to the plaintiff, under the final bill, the plaintiff had no alternative but to recover the excess from the bills of defendant No.1 in respect of the surge tank and pressure shaft contract.
25. It is specifically stated in the Letter dated 04.09.1982 that the amount due from defendant No.1 to the plaintiff under the contract may be recovered from out of the amount payable to defendant No.1 in respect of surge tank and pressure shaft contract. The 49 O.S. No.2692/1986 C/w. O.S. No.4173/1987 defendant No.1 chose to dispute certain recoveries from it by filing O.S. No.2692/1986. Several items of money remained to be recoverable by the plaintiff from defendant No.1, even after the adjustment in respect of HRT contract. The defendant No.1 is liable to pay a sum of Rs.20,17,409.45. The debit balance of Rs.11,26,143/- is claimed as the difference between the issue rate and market rate of steel and explosives issued to defendant No.1 outside Schedule A of the agreement. The amount is computed as per Note No.4 Annexure of agreement.
26. Earlier to 1975-76 32,600 kgs of gelatin and 32,450 kgs of super dyne had been drawn by defendant No.1 and the cost thereof was recoverable from defendant No.1 according to Note No.4 of the main agreement. On a later computation at the rate of Rs.5.90 per kg of gelatin and Rs.5.55 per kg of super dyne, the cost worked out to Rs.3,72,437.50. As per Note No.4 of the main agreement, the amount was 50 O.S. No.2692/1986 C/w. O.S. No.4173/1987 computed at Rs.4,92,369.38 a sum of Rs.1,19,931.88 was refunded to defendant No.1 in November 1975, against an indemnity bond. On a final computation, difference of Rs.1,630/- became recoverable by the plaintiffs from defendant No.1.
27. Initially, the cost of spares issued to defendant No.1 was computed at plaintiff's issue rate. The cost of these spares was recoverable at the prevailing market rate plus 11% transporting, handling and storage charges as on the date of supply. The plaintiff by its letter decided to work out the cost of these spares, according to the market rate prevailing on the date of issue, but the market rates could not be obtained. The difference in the costs had therefore to be worked out by updating the procurement costs with reference to the R.B.I index for machinery spares. The difference so worked out is Rs.5,96,549.78 which is payable by defendant No.1 to the plaintiff. 51 O.S. No.2692/1986
C/w. O.S. No.4173/1987
28. On the request of defendant No.1 by his letter dated 22.03.1976, the plaintiff paid an advance of Rs.9,73,637.63 for procurement of rails. The defendant No.1 agreed that it could be treated as an advance for the purchase of equipments. The cost of the rails has been recovered from defendant No.1's bills. Since, the above mentioned amount was treated as advance, it is payable by defendant No.1 with interest at 9% per annum. The plaintiff issued 99,232.60 metric tons of cement to defendant No.1 against its indent for HRT wall. It was found that defendant No.1 had drawn 4,358.372 metric tons of cement in excess of the actual requirement of the work. As per the terms of agreement, the plaintiff is entitled to recover from defendant No.1 the excess of cement so drawn by the defendant. The difference in the cost of cement works out to Rs.12,08,669.15.
29. The defendant No.1 had not accounted for steal of the value of Rs.24,520/- drawn from the plaintiff 52 O.S. No.2692/1986 C/w. O.S. No.4173/1987 in excess of its requirement for HRT work. This amount is also recoverable by the plaintiff. While preparing the final bill, it was found that the defendant No.1 had drawn a sum of Rs.16,68,844.09 under running account bills. As per Government Order dated 13.12.1976, interest at 6% per annum on excess payments made in running account bills is chargeable. The interest so payable by defendant No.1 to the plaintiff is Rs.5,85,333/-.
30. Initially defendant No.1 was debited only with the book value of machinery equipment. Under clause 4 of the agreement, the value of the machinery equipment was reviewed by the plaintiff to include 11% of the book value as centage charges. The centage charges so computed comes to Rs.2,96,608.11. The defendant No.1 is also liable to pay the said amount. The interest so payable by defendant No.1 works out to Rs.66,290.80 at the rate of 5% per annum. The plaintiff 53 O.S. No.2692/1986 C/w. O.S. No.4173/1987 is thus entitled to recover a sum of Rs.3,62,898/- towards centage charges and interest thereon.
31. Further, during the period of execution of work, the defendant No.1 has drawn a number of non- schedule A items i.e. steel materials. The cost of these materials was recovered from the running account bills of defendant No.1 at issue rates. The plaintiff is entitled to recover the cost of such materials at market rates. The procurement cost of these materials on the RBI index is Rs.2,99,465.12 which is payable by defendant No.1 to the plaintiff.
32. On examination of the statement of steel account, it was noticed that defendant No.1 had been short debited by a sum of Rs.416.19, which is also recoverable a sum of Rs.4,702/- is refundable by plaintiff to defendant No.1 under the miscellaneous deposit account.
54 O.S. No.2692/1986
C/w. O.S. No.4173/1987
33. In respect of indigenous capital equipments, escalation Allocable for dewatering and extra items, a difference of Rs.3,78,206/- is refundable to defendant No.1 by the plaintiff. Thus, the total amount refundable to defendant No.1 is Rs.3,82,908.48. The defendant is thus liable to pay to the plaintiff a sum of Rs.28,22,614.12 and this is after adjustment of all the amounts legally due to defendant No.1 in respect of HRT contract. The defendant No.2 bank has given two guarantees bearing No.56/72 and 57/72 dated 02.08.1972 for a sum of Rs.6,66,666.66 for the due performance of the HRT contract by defendant No.1, the said guarantees are modified and extended from time to time are enforceable. But the plaintiff has prevented from collecting the said amount from defendant No.2 by obtaining an injunction order in O.S. No.2692/1986. The defendant No.2 is therefore liable to make good the amount of Rs.6,66,666.66 under the bank guarantees to the plaintiff. The plaintiff had specifically reserved the right to file a separate suit for 55 O.S. No.2692/1986 C/w. O.S. No.4173/1987 recovery of the money from defendant No.1 in O.S. No.2692/1986. Hence the suit.
34. In pursuance to the summons issued, the defendants No.1 and 2 caused appearance. However, the defendant No.2 has not chosen to contest the suit by filing written statement. The defendant No.1 has in its written statement admitted the execution of the agreement and the supplementary agreement dated 08.10.1975, but has denied the allegation of the plaintiff that two other supplemental agreements were entered into on 30.09.1983. It is stated that when the work was completed on 29.07.1979, the question of entering into supplemental agreements on 30.09.1983, during the course of execution of work, as alleged, does not arise. The defendant No.1 by letters dated 22.03.1984 and 04.04.1984 denied having executed any such agreements. The alleged supplemental agreements said to have been executed more than 4 years after the completion of the work do not form part of the contract 56 O.S. No.2692/1986 C/w. O.S. No.4173/1987 between the parties and do not bind the defendant No.1. The said supplemental agreements are not signed by any authorized person by defendant No.1 to sign the agreements or alter the terms of existing agreement. It is stated that the work was completed on 27.07.1979 and it should have been completed on 31.01.1976. The completion of work was delayed on account of delays attributable to the plaintiff, like (a) delay in delivery of site of work, (b) delay in giving drawings necessary for executing the work, (c) change of designs and ordering additions and alterations and change from dumper adit to skid adit, (d) execution of extra items of work, (e) Encountering shear zones in many areas of work not contemplated at the time of agreement, (f) Delay in supply of Scheduled A materials by the plaintiff. In view of such delays, which were all on account of reasons beyond the control of defendant No.1, plaintiff granted extensions of time for completion from time to time. It is stated that the date of completion of work is not the date on which the site of work is 57 O.S. No.2692/1986 C/w. O.S. No.4173/1987 cleared by defendant No.1. Clause 6 of the conditions of the contract provides that on completion of work, the defendant No.1 shall report to the Divisional Engineer about completion of work and hand over the work to the Divisional Engineer and the Project Engineer of the plaintiff shall then furnish the defendant No.1 with a certificate of completion of work within 30 days of handing over of the work.
35. Under the terms of contract, a pre-final bill should be prepared by the defendant including all items and quantities as per the agreement and payment should be done within 3 months of handing over and only extra items and extra quantities were to remain to be finalized in the final bill as per clause 1 (iv) of Conditions of Contract. The final bill should be prepared and released by the defendant within 18 months from the date of handing over the work. Though the work was completed on 29.07.1979, defendant did not prepare the pre-final bill and there was enormous delay 58 O.S. No.2692/1986 C/w. O.S. No.4173/1987 on the part of defendant in preparing the bill and hence after many reminders, the defendant wrote a letter on 05.07.1982 stating that the final bill was ready for plaintiff's signature. But when plaintiff approached the office it was found that the bill was not ready and plaintiff informed the defendant, by letter dated 07.04.1984 the defendants wrote to the plaintiff stating that the measurement books and final bill was ready for signature and the defendant also conveyed their final decision on certain disputed items to which Plaintiff sent a reply dated 11.06.1984 pointing out the final bill was still under preparation and objecting to levy of interest on equipment advance etc. On persistent demands by the plaintiff, the defendant finally issued final bill on 21.09.1984. The last running bill was 09.06.1981 with regard to Schedule B items and final bill was prepared on 16.01.1982 was with regard to extra items. The plaintiff noticed that the bill was a minus bill i.e. a bill showing the payments and recoveries were more than the value of the work done. 59 O.S. No.2692/1986
C/w. O.S. No.4173/1987 Plaintiff found that various unauthorised and illegal debits had been made and that some items for which payment was due had been either omitted or given credit belatedly. It was also found that to make it a nil bill, the defendant also adjusted various sums from out of the amounts payable to plaintiff with regard to another contract.
36. Hence the plaintiff issued notice on 02.04.1986 objecting to various debits and omissions and called upon the defendant to rework the bill by giving credit to the amounts omitted and reversing the wrong debits, to which the defendant neither complied nor sent any reply. Hence, this defendant No.1 has filed a suit in O.S. No.2692/1986 against the plaintiff for recovery of Rs.27,34,406.20 with interest thereon from 29.01.1981 till its realisation.
37. This defendant has denied that clause No.4 of annexure-7 to the contract provides that if the 60 O.S. No.2692/1986 C/w. O.S. No.4173/1987 defendant No.1 obtains any materials (other than schedule 'A' materials) from the plaintiff, the price of such material shall be as per the current market rates at the time plus 11% transporting, handling and storage charges. This term contained was not accepted by the defendant No.1 and was modified by para No.24(b) of the defendant No.1's letter dated 06.09.1971. The said clause provided that in regard to materials not mentioned in schedule 'A', neither the plaintiff is bound to issue such materials nor the defendant No.1 is bound to take such materials from plaintiff and that if such materials are taken by the defendant No.1, the same will be paid according to the Departmental Rules and Rates for such releases.
38. It is further contended that the Departmental Rules and Practice of plaintiff has been that in regard to materials not mentioned in schedule 'A' and supplied to contractors, the material will be charged at their book value plus storage charges. Accordingly, ever from the 61 O.S. No.2692/1986 C/w. O.S. No.4173/1987 commencement of work till the completion of work (from 1972 to 1979) the Departmental Rules and Practice were followed by charging for such materials, the Book Value plus storage charges (11%). This was so not only several other contractors. Many years after the completion of the work and handing over of the work, on account of certain internal administrative instructions, on 19.03.1986 for the first time, the plaintiff arbitrarily and unilaterally decided to charge for such materials, market rates prevailing at the time of issue of such materials, plus 11% towards storage and transportation. Such decision is contrary to the terms of contract and not binding on defendant No.1. Having supplied such materials and recovered the price thereof at their book value plus storage charges and having got the work executed at the contract rates, the plaintiff cannot unilaterally increase the cost of such materials. If the plaintiff was to charge for such items at market rates, the defendant No.1 would have purchased the materials in open market at competitive prices and 62 O.S. No.2692/1986 C/w. O.S. No.4173/1987 would have increased the unit rates for work done instead of the rates tending that they are entitled to charge alleged market rates prevailing at the date of issue. Hence, the claim of Rs.11,261.43 is untenable and baseless and is liable to be rejected.
39. This defendant has denied that it is due for Rs.1,630/- as difference on final computation with regard to supply of Gelatine and super dines. It is stated that the plaintiff has recovered Rs.4,92,369.38 though the amount payable was Rs.3,72,437.50 and the plaintiff has recovered an excess of Rs.1,19,931.88 in the year 1975 and the matter was closed. Hence, the question of making final computation does not arise and the defendant is not due for Rs.1,630/-. So far as, the cost of spares is concerned, it is stated that the as per the terms of supplementary agreement the plaintiff and defendant have agreed to several amendments to the original agreement relating to hiring of machinery and the agreement provides that if the plaintiff made 63 O.S. No.2692/1986 C/w. O.S. No.4173/1987 available any spares the issue price will be the cost of the spares at stores plus storage charges in view of the express contract between the parties, the plaintiff cannot unilaterally alter that, 6 years after the completion of the work, the price of such spares. It is stated that updating the procurement cost with reference to RBI index is not a proper method for ascertaining the market value. It is admitted that the plaintiff advanced a sum of Rs.9,73,637.63 to defendant No.1. It is stated that it was agreed and understood between the parties that it will not be treated as interest bearing advance and no interest would be charged thereon. In view of such agreement, the plaintiff recovered back only the advance amount and not any interest and the decision to collect interest is an after thought and not based on any agreement. Even if it is assumed that any interest is payable on the said sum the interest could be charged is only 5% and not 9% as claimed by the plaintiffs. So far as, excess usage of cement is concerned, the plaintiff has shown 64 O.S. No.2692/1986 C/w. O.S. No.4173/1987 1817.926 Mt. as unaccounted quantity in the final bill and determined the value of the cement at the market rate plus 11% and recovered a sum of Rs.4,59,923.13 from the final bill. Hence, the matter regarding unaccounted cement is closed. So far as, the purchase of steel is concerned in the final bill the unaccounted steel is determined as 38.190 + 16.202 Mt. and for the said quantities the plaintiff has recovered Rs.30,389.93 + Rs.25,606.23 from the final bill and hence, the matter is thus closed and the plaintiff is estopped from claiming this amount.
40. This defendant has denied that the government order is applicable to the contract between the plaintiff and defendant No.1 and on that basis a sum of Rs.5,85,333/- is payable as interest by the defendant to the plaintiff. It is stated that there is no excess payments to the defendant No.1 by the plaintiff under any running bills. On the other hand, large amounts were either wrongly debited or omitted from 65 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the amounts payable to defendant No.1 while making the running accounts. There is no term in the contract that provides for payment of interest in regard to any excess payment made in the running account bills. The plaintiff had never notified or informed the defendant No.1 at any time that interest will be charged on any excess payment made under the running bills. If any excess payment is made, it was not at the instance of this defendant. The plaintiff was always due in huge amounts to first defendant and hence the question of the defendant No.1 charging any interest in respect of any alleged excess payments does not arise. The government order does not form part of the contract and has no bearing or relevance to the contract between the parties. Hence, this defendant is not liable to pay any interest as claimed by the plaint.
41. It is admitted that certain machinery equipment was sold by the plaintiff to defendant No.1. Sale of such machinery was an independent 66 O.S. No.2692/1986 C/w. O.S. No.4173/1987 commercial transaction not forming part of the head race tunnel contract between the parties. The contract provides for only hiring of machinery and it does not provide for sale of machinery or equipment. The price that was agreed to be paid by first defendant to the plaintiff with regard to machinery was a mutually agreed price. Hence the question of charging a revised price does not arise. Clause 4 of Annexure 7 of the Contract dealt with supply of material required for and used in the construction and does not relate to machinery or equipments. It is superseded by Clause 24B of defendant No.1 letter dated 06.09.1971. Even that provision is inapplicable for the sale of machinery. The contract only contemplates hiring of machinery and the terms with regard to such hiring are set out in detail in the contract. Thus sale of machinery by the plaintiff to defendant No.1 is not covered by any terms of contract and is an independent and completed transaction. The machineries were sold by the plaintiff to the defendant No.1 and the plaintiff received the agreed price in full 67 O.S. No.2692/1986 C/w. O.S. No.4173/1987 from the defendant No.1 and the matter was closed and the plaintiff cannot reopen or review the matter and he is estopped from making any claim for revision in price in respect of such sale. The contract does not provide for nor empower the plaintiff to claim centage charges at 11% on the book value with regard to sale of machinery. Hence there is no basis of the claim either under the contract or in law.
42. It is admitted that during the execution of the work, this defendant had drawn several items of steel material from plaintiff. The cost of such material were recovered fully from the running account bills at issue rates as per clause 24B of Letter dated 06.09.1971 and hence the plaintiff is estopped from recovering the cost of such material at market rates and it is contrary to the express terms of contract. The clause No.4 of Annexure provides that the price of such material will be paid according to the departmental rules for such release of materials. The fact that 68 O.S. No.2692/1986 C/w. O.S. No.4173/1987 recovery was made in regard to such supplies at book value or cost plus storage transportation cost, throughout the period of contract shows, that Departmental Rules of practice has been followed to recover the book value, costs plus expenses and not at market rates. The said supplies having been made in terms of the agreement and the costs thereof having been fully recovered, the question of plaintiff now charging the price of such materials to market rate does not arise. The plaintiff cannot fix the market rates by updating the procurement rates on the basis of RBI index. There is no agreement or provision for arriving at the market rate by updating the procurement rates on the basis of RBI index. Hence the claim of Rs.2,99,465.12 alleged to be the difference between the market rate and issue rates for sale of materials by the plaintiff to this defendant are liable to be rejected.
43. It is also admitted that at the instance of 1 st defendant, the 2nd defendant has issued two 69 O.S. No.2692/1986 C/w. O.S. No.4173/1987 guarantees dated 02.08.1972 for Rs.10,00,000/- each in favour of plaintiff in regard to the HRT contract. These said guarantees were extended from time to time for a total amount of Rs.6,66,666.66. The work was completed more than 10 years back. The guarantees are no longer enforceable. Large amounts due to the defendant No.1 has been withheld by plaintiff. By making belated and baseless claims, plaintiff is trying to counter valid claim of defendant No.1. As no amount is due to plaintiff, the question of plaintiff enforcing the bank guarantees or recovering the amount under them does not arise.
44. It is further contended that the suit is barred by law of limitation and there is no cause of action to file the suit. There is neither a demand for payment nor any acknowledgment in regard to the said claim within 3 years before the suit. Hence, the suit is to be rejected on this ground. Thus, contending these facts, sought for dismissal of suit.
70 O.S. No.2692/1986
C/w. O.S. No.4173/1987
45. The aforesaid pleadings have occasioned following:-
ISSUES IN O.S. NO.2692/1986
1. Whether the plaintiff proves that they became aware of the final bill only on its receipt under the defendant's covering letter dated 15.03.1986, though the final bill dated 21.09.1986 was finalised only in the beginning of 1986 ?
2. Does plaintiff prove the debits in the final bill to the extent of Rs.24,94,694.68 as detailed in para 9 of the plaint are unauthorised and illegal ?
3. Whether the plaintiff proves the defendant is due Rs.27,34,406-20 after including the unauthorised and illegal debits ?
4. Whether the plaintiff proves they are entitled to the interest claimed in the plaint ?
5. Does defendant prove the plaintiff is still due Rs.45,38,042-44 to the defendant ?71 O.S. No.2692/1986
C/w. O.S. No.4173/1987
6. Whether the plaintiff is entitled to the permanent injunction prayed in the plaint ?
7. To what reliefs the plaintiff is entitled to ?
46. The aforesaid pleadings have occasioned following:-
ISSUES IN O.S. NO.4173/1987
1. Whether the plaintiff proves two supplemental agreements were entered into between the plaintiff and 1st defendant on 30.09.1983 ?
2. Whether the plaintiff is entitled to adjust the short fall under the H.R.T. contract against the amounts payable to the 1st defendant in respect of the Surge Tank and Pressure Shaft contract ?
3. Whether the plaintiff proves that 1 st defendant is due in all under the various heads Rs.28,82,614-19 ?72 O.S. No.2692/1986
C/w. O.S. No.4173/1987
4. Whether the plaintiff is estopped from claiming various amounts mentioned in the plaint ?
5. Whether the defendants are liable to pay interest as claimed in the plaint ?
6. Whether the defendants prove as the work was completed more than 10 years back the bank guarantees are no longer in force ?
7. Whether the suit is barred by law of limitation ?
8. Whether the plaintiff is entitled to the interest claimed in the plaint ?
9. To what relief the plaintiff is entitled to ?
47. In order to establish his claim, the Branch Manager of the plaintiff company got examined himself as P.W.1 and he has relied upon 45 documents marked at Ex.P.1 to Ex.P.45. During the course of cross- examination of D.W.1, 10 documents were confronted and are marked as Ex.P.46 to Ex.P.56.
73 O.S. No.2692/1986
C/w. O.S. No.4173/1987
48. Per contra, the Accounts Officer on behalf of defendant Karnataka Power Corporation Ltd. got examined himself as D.W.1 and he has relied upon 33 documents marked at Ex.D.8 to Ex.D.40. During the course of cross-examination of P.W.1, 7 documents were confronted and are marked as Ex.D.1 to Ex.D.7.
49. Heard learned counsel for plaintiff and defendants and perused records.
50. My findings to the above issues in O.S. No.2692/1986 is as follows:
ISSUE No.1 :: In the Affirmative.
ISSUE No.2 :: Partly In the Affirmative.
ISSUE No.3 :: Partly In the Affirmative.
ISSUE No.4 :: Partly in the Affirmative.
ISSUE No.5 :: In the Negative.
ISSUE No.6 :: Does not survive for
consideration.
ISSUE No.7 :: As per final order.
74 O.S. No.2692/1986
C/w. O.S. No.4173/1987
51. My findings to the above issues in O.S. No.4173/1987 is as follows:
ISSUE No.1 :: In the Negative.
ISSUE No.2 :: In the Negative.
ISSUE No.3 :: In the Negative.
ISSUE No.4 :: In the Affirmative.
ISSUE No.5 :: In the Negative.
ISSUE No.6 :: Does not survive for
consideration.
ISSUE No.7 :: In the Affirmative.
ISSUE No.8 :: In the Negative.
ISSUE No.9 :: As per final order for the
following;
REASONS
52. ISSUE NO.1 IN O.S. NO.2692/1986 :: The present suit is filed by the plaintiff as against Karnataka Power Corporation Limited for recovery of Rs.40,74,265.10 with interest at the rate of 18% per annum from the date of suit till its realization and for Permanent injunction to restrain the defendant from making any further debits to the final bill dated 75 O.S. No.2692/1986 C/w. O.S. No.4173/1987 21.09.1984 and from recovering any amount towards the head race tunnel contract, from out of the amounts payable to the plaintiff with regard to other contracts and also to restrain the defendant from enforcing the bank guarantees of Rs.3,33,333/- each dated 02.08.1972 issued by defendant No.2.
53. The suit bearing O.S. No.4173/1987 has been filed by the Karnataka Power Corporation Limited for recovery of a sum of Rs.28,82,614.19 with future interest from the date of suit till its realisation and to direct the defendant No.2 to pay to the plaintiff a sum of Rs.6,66,666.66 by the bank guarantees with future interest thereon from the date of suit till payment.
54. Both these suits arise out of the same contract dated 27.06.1972 and since the issues involved in both the suits and the subject matter involved and the parties were also one and the same, both the suits were clubbed by this court vide order dated 22.08.2002. Hence for the purpose of 76 O.S. No.2692/1986 C/w. O.S. No.4173/1987 convenience, the plaintiff in O.S. No.2692/1986 is treated as P.W.1 and the plaintiff in O.S. No.4173/1987 is treated as D.W.1 and their evidence was recorded accordingly.
55. The undisputed facts which is evident from the records is that, the plaintiff is a company duly incorporated under the Companies Act. The contract forming the subject matter of the present suit was entered into by the plaintiff company Mrs. Thapar Intrafor Company of India Limited. Pursuant to the scheme of amalgamation sanctioned by Hon'ble High Court of Calcutta by its order dated 12.12.1984 in Company Petition No.506/1983, Thapar Intrafor Company of India Ltd. was amalgamated with the plaintiff company with effect from 01.11.1982. Upon such amalgamation, the entire undertaking, assets, liabilities and obligations of the said company, including all contractual rights and entitlements, stood vested in the plaintiff, thereby making the plaintiff the successor 77 O.S. No.2692/1986 C/w. O.S. No.4173/1987 in interest to all the benefits and liabilities arising under the subject contract. Likewise, it is also not disputed that, the defendant is a government company incorporated under the Companies Act and it is engaged in the development and execution of hydroelectric projects in the state of Karnataka and is the project authority for the Kalinadi Hydro Electric Project under which the subject works were undertaken.
56. Further, the fact remains undisputed that the defendant invited tenders from contractors for construction of Reach No.I and II of the head race tunnel from Bommanahalli lake to the surge point of Kalinadi Hydroelectric Project. In response to the tender invited, the plaintiff submitted its tender under the cover letter dated 26.07.1971 containing terms and conditions. After discussions, the plaintiff submitted clarifications and modifications by letter dated 06.09.1971 and after another round of discussions, the 78 O.S. No.2692/1986 C/w. O.S. No.4173/1987 plaintiff issued another additional letter dated 25.09.1971 regarding modifications of certain conditions. Based on the clarifications and confirmations provided, the defendant accepted the offer and conveyed its decision to award the work by letter dated 12.10.1971. Thereafter, both the parties entered into a formal agreement dated 27.06.1972 under which the plaintiff undertook to execute the work of constructing the HRT as per the terms and conditions set out in the agreement, which also included general and special conditions of contract, schedules of quantities, rates and general and detailed specifications. The agreement expressly incorporated the plaintiff's letters dated 26.07.1971, 06.09.1971 and 25.09.1971. and the defendant's letter of acceptance dated 12.10.1971 forming an integral part of the contract. Further, according to the plaintiff, the agreement provided that in the event of any ambiguity in the terms, the interpretations contained in the plaintiff's clarificatory letters would prevail. 79 O.S. No.2692/1986
C/w. O.S. No.4173/1987
57. Now the dispute between the parties is that, according to the plaintiff, it commenced execution of the work on 01.02.1972 and handed over the completed work to the defendant on 29.07.1979. In the meanwhile, a supplemental agreement was entered into between the parties on 08.10.1975 modifying and supplementing certain terms of the original contract. As per the terms of the said contract, the defendant was under a clear obligation to prepare and release a pre-final bill within 3 months of completion and the final bill has to be prepared within 18 months thereof. Despite the said terms of the contract, the defendant failed to prepare or release the pre-final bill. Finally, the final bill was prepared which showed that some large unauthorized debits without any basis in contract were shown in the bill. The defendant also had adjusted various sums out of the amounts payable to the plaintiff with regard to another contract for construction of surge tank and pressure shaft. According to the plaintiff, the said bill is not in conformity with the terms of the contract and the 80 O.S. No.2692/1986 C/w. O.S. No.4173/1987 bill is unilateral and is based on erroneous and arbitrary computations and hence the plaintiff issued registered legal notice objecting to the wrong debits and omissions and the defendant was called upon to rework the final bill.
58. According to the plaintiff, the errors and omissions noticed in the final bill was Rs.24,94,624/-. It is stated that each of the omissions or recoveries regarding plugging of pallets, recovery of notional cost of transportation of cement, escalation in the cost of indigenous capital equipment and electricity relating to dewatering and pumping and other extra items of work, recovery back of the amounts paid to the plaintiff, towards increase in electricity tariff and extra items and recovery of rebate at 2% on the amounts paid on account of escalation towards electricity charges and cost of indigenous capital equipments and recovery of proportionate cost of workmen's compensation and gratuity and recoveries in final bill towards sales taxes 81 O.S. No.2692/1986 C/w. O.S. No.4173/1987 and other taxes and delay in giving credit given for excess interest debited and recovery of interest on machinery advance are all illegal. It is the case of plaintiff that if the unauthorized and illegal debits are excluded, a sum of Rs.27,34,406.20 is payable by the defendant to the plaintiff under the final bill. In addition to the plaintiff is claiming interest at 9% from 29.01.1981 which comes to Rs.40,74,265.10 and hence the suit is filed.
59. On the contrary, the defendant has refuted the claim of plaintiff and has stated that the deductions are valid and the plaintiff is not entitled to any refund. According to the defendant, no amounts are due to the plaintiff and on the other hand, the plaintiff owes to the defendant a sum of Rs.45,38,042.44, recoverable from the plaintiff's bills for the surge tank and pressure shaft.
60. Learned Senior Counsel appearing for the plaintiff in his arguments submits that, as per the terms 82 O.S. No.2692/1986 C/w. O.S. No.4173/1987 and conditions set forth in the contract dated 27.06.1972, the defendant had to prepare and release the final bill within a period of 18 months from the date of completion and handing over the work and the plaintiff completed the work on 29.07.1979 and the defendant ought to have prepared the final bill not later than January 1981 and there was inordinate and unjustifiable delay on the part of the defendant in the preparation and release of the said final bill. It is submitted that several reminders were issued by the plaintiff and the defendant vide its letter dated 05.07.1982 informed the plaintiff that the final bill was ready for signature. But when the plaintiff approached the office of the concerned, it was discovered that, the final bill had not been prepared. It is submitted that the defendant's delay in finalising the bill was an attempt to charge interest on advances while evading liability to pay interest on amounts due to the plaintiff. It was only in the year 1986, the plaintiff became aware that the final bill had been completed and the contents were not 83 O.S. No.2692/1986 C/w. O.S. No.4173/1987 disclosed to the plaintiff until much later. It is further submitted that the plaintiff addressed a letter dated 15.02.1986 formally requesting a copy of the final bill and in response to the said letter, the defendant transmitted a copy of final bill to the plaintiff and only then the plaintiff came to know about the omissions in the bill. In view of the chronology of events, the plaintiff's awareness of the finalisation of the bill and its contents can only be traced out to the defendant's communication dated 15.03.1986 and the defendant has not produced any document to show that the plaintiff was aware of the preparation of the bill and its contents prior to 15.03.1986.
61. On the contrary, learned counsel for the defendant in his argument submits that the plaintiff has not produced any document except the covering letter to show they became aware of the final bill only on 15.03.1986. It is submitted that the defendant has time and again followed up with the plaintiff to get signatures 84 O.S. No.2692/1986 C/w. O.S. No.4173/1987 and requested it to send back the final bill. However, there was no response from the plaintiff and only with a malafide intention to bring the matter within the period of limitation for the purpose of filing the suit, the said contention is raised by the plaintiff. It is further submitted that supplementary agreements were entered into on 30.09.1983 in order to settle certain outstanding claims and issues and some claims were resolved and the plaintiff has received amounts pursuant thereto and therefore plaintiff was fully aware of the quantum of amount due and payable as the same were calculated in terms of HRT contract. and the supplementary agreements and therefore the alleged contention of the plaintiff that it became aware of the final bill only in 1986 is untenable and the plaintiff has not substantiated this contention by any documents or oral evidence to this effect.
62. Having heard the arguments put forth by both the respected senior counsels, this court proceeds 85 O.S. No.2692/1986 C/w. O.S. No.4173/1987 to analyse the oral and documentary evidence relied upon by both the parties to determine whether the plaintiffs became aware of the final bill only on the receipt of letter issued by the defendant dated 15.03.1986 or as to whether the said contention is raised by the plaintiff, only to bring the suit within the period of limitation, as they were well aware of the quantum of amount due and payable by the defendant by virtue of the Supplementary Agreements No.1 and 2 dated 30.09.1983.
63. In order to discharge the burden, the plaintiff company got examined through its Branch Manager as P.W.1 and he has in his evidence deposed that Head Race Tunnel is in respect of Bommanahalli pick up dam, where the plaintiff has to construct tunnel underground for generation of power to the surge tank. Plaintiff handed over the project after the completion of the entire work to the defendant on September 1979. The pre-final bill after completion of the work is 86 O.S. No.2692/1986 C/w. O.S. No.4173/1987 prepared by the defendant within period of 3 months. Defendant is also required to prepare the final bill within 18 months from handing over the work. Defendant did not prepare the final bill as per the terms of the agreement even after 18 months. The plaintiff on several occasions asked the defendant for the reason about non preparing the final bill. Defendant informed plaintiff that after inspection of the books and materials they will prepare the final bill and accordingly, they have intimated in 1982. Defendant as per their assurance did not prepare the bills. The plaintiff visited the workshop and found out the final bill was not prepared. Plaintiff again wrote a letter to the defendant in this regard, but no reply was given.
64. He has further deposed that the Defendant addressed a letter to the plaintiff in 1984 that the final bill is ready, but it was not done. Defendant sent final bill in 1986 for verification on the constant demands of the plaintiff. The said bill was pre-dated September 87 O.S. No.2692/1986 C/w. O.S. No.4173/1987 1984. Defendant gave 3 months time for verification and return of final bill. On verification it was found that that there were various omissions and recoveries in the final bill and the same was returned to the defendant for proper verification and necessary corrections. The plaintiff has sent its protest and objections regarding the final bill and subsequently issued a legal notice to the defendant and the defendant did not reply to the same and hence the suit is filed.
65. To substantiate the same, P.W.1 has relied upon Ex.P.1 to Ex.P.13. Ex.P.1 is the agreement dated 27.06.1972 entered into between the plaintiff and defendant company which is not disputed. Ex.P.4 is the letter communication by the plaintiff company to the defendant dated 10.02.1981 regarding finalization of HRT bill and the release of security deposits and it shows that the work of HRT is handed over to the defendant on 31.07.1979 and a period of 1½ year is over as on 31.01.1981 and it is stated that the final bill 88 O.S. No.2692/1986 C/w. O.S. No.4173/1987 should have been paid as on that date. It is further stated that 66.6% of the security deposit should have been refunded well before the said date and balance of 33.3% was to be refunded by 31.04.1981 and the plaintiff company has requested the defendant company to release the payments together with security deposits without further delay as per the terms of contract. Ex.P.5 is letter dated 29.04.1981 issued by the plaintiff company to the defendant regarding Indigenous HRT bill finalization and it is also stated that the finalization of Indigenous escalation matter has been pending since 1979 July and for the last 6 months it has been pending in the office and it is requested to pass orders to enable the bill to be finalized. Ex.P.6 is the letter dated 07.07.1982 wherein the plaintiff company has again requested the defendant company stating that as per the letter issued by the defendant on 05.07.1982, the final bill of HRT is not ready for the scrutiny and the signature of the plaintiff and it is requested to intimate the plaintiff, so that the plaintiff 89 O.S. No.2692/1986 C/w. O.S. No.4173/1987 can send its representative for checking and signature and requested to prepare the final bill. Ex.P.8 is the letter dated 07.04.1984 which shows the defendant has issued letter and the plaintiff company is requested to sign the measurement books and schedule B final bills and escalation bills of HRT final bills. Ex.P.10 is the letter issued by plaintiff dated 11.06.1984 requesting the defendant company for finalization of HRT contract and it is stated that the final bill is being prepared by the corporation and it is taking its own time for preparation of the same. Further Ex.P.11 is the letter dated 12.07.1984 which shows in response to the letter issued by the defendant company to sign the measurement books and to prepare final bills of HRT. It is stated that the plaintiff is making arrangements to sign the measurement books in respect to the items to which they agree. Ex.P.12 is again letter issued by the plaintiff company to the defendant seeking to arrange a copy of the final bill of HRT without further delay. So after all these various letter communications and 90 O.S. No.2692/1986 C/w. O.S. No.4173/1987 repeated reminders issued by the plaintiff company, as per Ex.P.13 the defendant has issued letter dated 15.03.1986 along with copy of final bill of HRT with a direction to the plaintiff to return the bills within 3 months as the bills are yet to be accepted in full and final settlement.
66. So on analysis of the evidence of P.W.1 and the documents relied upon by P.W.1, it is evident that it was obligatory upon the part of defendant to prepare and release the final bill within a period of 18 months from the date of completion and handing over the contract work. It is also evident from these letter correspondences and the admission of the defendant in the written statement that the work was completed by the plaintiff on 29.07.1979. So by this, the final bill ought to have been prepared and finalized by the defendant within 18 months from the date of completion of work. The letter communication done by the plaintiff which is discussed herein before makes it clear that 91 O.S. No.2692/1986 C/w. O.S. No.4173/1987 final bill was not handed over to the plaintiff and repeated reminders and letters were issued by the plaintiff calling upon the defendant to prepare the final bill and release the fund. Finally, the defendant vide letter dated 15.03.1986 i.e. as per Ex.P.13 for the first time has prepared the final bill and forwarded to the plaintiff. On analysis of the correspondence and the exhibits discussed herein before, it demonstrates that the final bill was not made available to the plaintiff within 18 months as per the terms of contract and on the other hand, the plaintiff through its letter as per Ex.P.4, Ex.P.6, Ex.P.8, Ex.P.11 & Ex.P.12 has issued several reminders to the defendant informing that the final bill was not prepared and the plaintiff has categorically pointed out that the final bill was over due and has requested to refund the security deposit amount.
67. Finally in response to the letters addressed by the plaintiff as per Ex.P.12 the defendant as per 92 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Ex.P.13 letter dated 15.03.1986 has transmitted copy of the final bill to the plaintiff with a request that the bill be returned within a period of 3 months indicating that the bill had yet to be finally accepted or settled. So these chronology of events establishes that the plaintiffs became aware of the final bill prepared by the defendant only on 15.03.1986 and not before that.
68. On the contrary, the defendant has not produced any documents and hence, the arguments putforth by defendant counsel that except the covering letter dated 15.03.1986, the plaintiffs have not produced any document to show they became aware of the final bill only on 15.03.1986 is not tenable. Since these letters communication makes it clear that only when the defendant has forwarded the copy of the final bill along with the letter Ex.P.13, the plaintiff has become aware of the final bill and thus, the plaintiff has established that it became aware of the final bill only in the year 1986, when it received the letter as per 93 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Ex.P.13 along with copy of the final bill from the defendant. Hence, issue No.1 is answered in the Affirmative.
69. ISSUE NO.1 IN O.S. NO.4173/1987 ::
Learned counsel for the defendant in his arguments submits that during the course of execution of the work, supplementary agreements were entered into between the parties on 08.10.1975, 30.09.1983 and 30.09.1983. Hence the claims and disputes arising between the parties regarding the dues payable have already been settled by way of these supplementary agreements. It is submitted that the contentions of the plaintiff that the agreement is executed after the completion of work is negated for the reason that a letter was addressed by the defendant to the plaintiff on 09.09.1977 that is well before construction work was finished and the possession of site was handed over and in the said letter, the defendant provided certain concessions to the plaintiff regarding payment of increased costs due 94 O.S. No.2692/1986 C/w. O.S. No.4173/1987 to revision of minimum wages, payment of additional costs in the working through the adits, payment of costs of abandoned addicts at two sites, payment of dewatering and pumping in exercise of provisions of the agreement, payment of additional costs. The said concessions were provided on certain conditions that, the plaintiff will agree to accept the settlement of the claims in the manner indicated as final and will not litigate or agitate further in the matter. The supplementary agreement is executed incorporating the terms of this letter in order to give a legal binding to the letter and the payments under the HRT contract, the final bills and the measurement books were not settled between the parties, hence the HRT contract cannot be said to have been concluded. It is submitted that the plaintiff has improved upon their case in the course of evidence that the agreements are not binding upon them by saying two contrary things that the agreements were signed by a person who was not authorized by the plaintiff and secondly has contended that the 95 O.S. No.2692/1986 C/w. O.S. No.4173/1987 agreements were executed under coercion. The plaintiff has changed its case from contending that the agreements were signed by someone who was not authorized to sign the agreements to the allegation that the same were executed under coercion and both these grounds are mutually contradictory to each other, as a signatory, Mr. N.K.Pal was either authorized but coerced to sign the documents or he was not authorized. It is submitted that as per Ex.D.6 and Ex.D.7, Mr. N.K.Pal has signed the supplementary agreements and the power of attorney dated 30.10.1981 in favour of N.K.Pal which is marked as Ex.D.1, shows that it has been executed by the plaintiff company in favour of its attorney. So the original of the said document is in the possession of the plaintiff and if it was not, the burden was upon the plaintiff to prove that Mr. Pal was not authorized to sign the agreements and the document was supposed to be produced by the plaintiff which is not produced and from this it can be held that the plaintiff has intentionally not produced the 96 O.S. No.2692/1986 C/w. O.S. No.4173/1987 document and the document which is produced at Ex.P.50 is an incomplete document and the plaintiff has produced incomplete document Ex.P.50 only to evade the performance of its obligations under the supplementary agreements by taking a stand that Mr. N.K. Pal was not authorized by it. It is further submitted that according to the plaintiff, it became aware of the agreement only in the year 1983. However, the said agreements were never challenged by it either by filing complaints addressing the issue with defendant when it became aware of the document or by pleading and proving coercion. The plaintiff could have challenged and disputed the execution of these agreements, even in O.S. No.2692/1986 or even prior to filing of the suit, but the same was never challenged. The plaintiff, after enjoying the benefits, cannot dispute the validity of the documents when it never disputed the agreements at the time of receiving the concessions and benefits under the agreements. Learned counsel for defendant relying upon Section 70 of Indian Contract Act submits 97 O.S. No.2692/1986 C/w. O.S. No.4173/1987 that in case of the obligation of the person enjoying the benefits of the non-gratuitous act, the said person is bound to make compensation up to the former in respect of or to restore the thing so done or delivered.
70. Learned Counsel for the defendant has relied upon the judgment of Hon'ble Apex court in case of Bharathi Cellular Ltd. V/s. Union of India - (2010) 10, SCC 174 and relying upon the said judgment, it is submitted that a person cannot aprobate and reprobate or accept and reject the same instrument.
71. Learned counsel for the defendant relying upon the doctrine of indoor management submits that the defendant is an outsider to the plaintiff and cannot be expected to be privy to the internal affairs of the plaintiff company and alleged contention of the plaintiff that Mr. N.K.Pal was transferred to Calcutta somewhere in 1981-1982 and he was also retired from the plaintiff company in the same year are not only contradictory 98 O.S. No.2692/1986 C/w. O.S. No.4173/1987 but also matters of internal affairs of the company, which an outsider party cannot be expected to have the knowledge of, unless being notified to this effect. Hence, under such circumstances, assuming without admitting that N.K.Pal had not been authorized, defendant company cannot be expected to know that he was no longer working in the company. Further relying upon Section 114 of the Indian Evidence Act, it is submitted that the Court can presume the existence of any fact which it seems likely to have happened and that the said N.K.Pal was an authorized representative of the plaintiff company, has to be presumed by the court. In support of his arguments upon the doctrine of indoor management, the learned counsel for the defendant has relied upon the judgment of Hon'ble Apex Court in case of MRF Ltd. V/s. Manohar Parrikar reported in 2010, Volume 11, SCC 374, where the Hon'ble Apex Court has explained the doctrine of indoor management.
99 O.S. No.2692/1986
C/w. O.S. No.4173/1987
72. On the contrary, learned Senior Counsel for the plaintiff in his arguments submits that the defendant has not produced any credible evidence to establish that the supplemental agreements dated 30.09.1983 were executed by a duly authorized officer of the plaintiff. Furthermore, the improbability of executing such agreements, years after the completion of the works, combined with the plaintiff's failure to examine a key witness, leads to the inescapable conclusion that the due execution of the said agreements has not been proved. As such, the agreements cannot be held to be legally binding or operative instruments governing the rights and obligations of the plaintiff.
73. Having heard the arguments put forth by both the counsels, this Court proceeds to determine the due execution of supplementary agreements dated 30.09.1983. In order to discharge the burden cast upon, the defendant got examined through its officer as D.W.1 and he has in his evidence deposed that the plaintiff 100 O.S. No.2692/1986 C/w. O.S. No.4173/1987 has from time to time authorized different persons to oversee the working of the contract, receive payments, negotiate with defendant company, sign measurement books, bills and enter into contracts. The employees so authorized by the plaintiff have been dealing with the defendant time to time. Sri N.K.Pal was one such employee who had been authorized by the plaintiff to represent it in its affairs with the defendant. During the execution of the work, pursuant to the negotiations between the parties, the defendant has given further benefits including revision of rates for certain items and for certain extra items agreed to between the parties. The defendant being a Government of Karnataka undertaking, it was necessary that the terms of understanding be recorded by a formal written agreement signed by the parties. The terms of understanding between the parties were thus recorded in two agreements and signed by the parties on 30.09.1983. The said agreements came to be signed after the terms were discussed, negotiated and agreed 101 O.S. No.2692/1986 C/w. O.S. No.4173/1987 to by the parties. The defendant had intimated the plaintiff to make necessary arrangements for executing the agreements by its letter dated 17.09.1983. Pursuant thereto, the plaintiff has sent its representative N.K.Pal to sign the agreements. The said Mr. N.K.Pal has signed the agreements dated 30.09.1983 on behalf of the plaintiff and finally settled the various items of concessions offered to the plaintiff with agreements having been signed between the parties. The plaintiff as an afterthought wanted to go back upon the agreements and persist with certain unreasonable claims made by them. The plaintiffs have contended that Mr. N.K.Pal had not been given the power of attorney and that he could not have signed any agreements and that the agreements signed between the parties was not binding upon the plaintiff. It is stated that the assertion of the plaintiff in this regard is entirely false and an afterthought for the purpose of enabling them to make additional claims in O.S. No.2692/1986. The supplementary agreements are final, conclusive 102 O.S. No.2692/1986 C/w. O.S. No.4173/1987 and binding on the parties with regard to the various issues that have been settled therein. Hence, it is not open for the plaintiff to make any claims contrary to the terms of the agreements.
74. D.W.1 has produced Ex.D.1 which shows one Mr. Pramod Chopra who was the General Manager of the plaintiff company and Ex.D.3 is a notarial certificate dated 12.10.1981 issued by the defendant company which shows Pramod Chopra has signed as a General Manager of the plaintiff company. Further, the defendant has produced power of attorney executed in favour of N.K.Pal and the letter under which the power of attorney was received by the defendant and therefore the plaintiff has failed to prove any fact to the contrary.
75. On the contrary, P.W.1 states that the plaintiff came to know of the agreements in September 1983 and Mr. Pal has no such power to sign the 103 O.S. No.2692/1986 C/w. O.S. No.4173/1987 document and it wrote to the defendant company that any such document signed by the Mr. Pal may be treated as null and void. During cross examination of P.W.1, he admits Ex.D.6 and Ex.D.7 which are the supplementary agreements dated 30.09.1983. But he says the plaintiff company had not authorized Mr. Pal to represent the plaintiff company in its affairs with the defendant and the plaintiff company has not executed any power of attorney in favour of Mr. Pal and he retired somewhere in the year 1981 or 1982 and the documents are available in their company and that he has no impediment to produce the said document. He also admits that the plaintiff company has not initiated any criminal proceedings against Mr. Pal on the basis of the personal knowledge. He states that after the project work was over, Mr. Pal was transferred to Calcutta and he was transferred in the year 1981-82 and after his transfer, he has no knowledge about his whereabouts. P.W.1 also admits that he is not aware that Mr. Pal was involved in series of negotiations with 104 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the defendant regarding the various issues that arose during the execution of work.
76. The evidence of P.W.1 no doubt shows Ex.D.5 and Ex.D.6 are admitted by the plaintiff and the signatures are though admitted it is stated that the documents are signed under coercion and Mr. Pal was not authorized to sign such agreements. No doubt, in the present issue, the burden of proving the due execution of the Supplemental Agreements dated 30.09.1983 is upon the defendant. According to the defendant, these agreements were executed by an authorized representative of the plaintiff and it is binding upon the plaintiff and they form integral part of the contractual framework governing the execution of the work undertaken under the head race tunnel contract. Ex.D.6 and Ex.D.7 are the disputed supplemental agreements dated 30.09.1983, which is pertaining to execution of extra items of work in the Head Race Tunnel and about several issues regarding 105 O.S. No.2692/1986 C/w. O.S. No.4173/1987 payment of increased costs for works executed post 30.11.1974, payment of rates granting of incentives and other works etc.
77. Ex.D.1 is a letter written by the plaintiff company to the defendant wherein which it refers to the power of attorney executed in favour of Mr. N.K.Pal and it is stated that the said employee N.K.Pal is authorised to sign all the work bills of the plaintiff and MB books in connection with their contract that is tunnel surge tank. So, this document makes it clear that the said N.K. Pal is authorised to sign the work bills and the measurement books and it nowhere shows he has been authorised to enter into any agreement on behalf of the plaintiff. Ex.P.46 is the letter addressed by the defendant to the plaintiff company regarding cancellation of supplemental agreement and it is stated that the authorized representative of the plaintiff company, Mr. N.K.Pal, after number of references has 106 O.S. No.2692/1986 C/w. O.S. No.4173/1987 signed the agreements as usual practice and hence it is not correct to say that the agreements are signed without prior intimation and is invalid and the contention of the plaintiff to cancel the supplementary agreements cannot be accepted. Ex.P.47 is a letter dated 14.03.1984 addressed to the defendant company regarding supplemental agreements dated 30.09.1983 which shows the plaintiff company has strongly repudiated the contents of the agreement and it is stated that the purported supplemental agreements are no better than the mere scraps of paper, totally void in law and not binding upon the plaintiff. Ex.P.48 shows that a letter is addressed by the defendant to the plaintiff on 22.03.1984 by referring to the earlier letters of the plaintiff company wherein it is stated that the legal representatives of the plaintiff company stationed near project areas have entered into agreements on the works of similar nature of subject matter of work and they are duly receiving payments in all such cases. Hence the business carried out by your representative 107 O.S. No.2692/1986 C/w. O.S. No.4173/1987 that is N.K.Pal as per the terms and conditions of the power of attorney are in order.
78. So, relying on these documents and the letter correspondences, it is contended by learned counsel for the defendants that the authorised representative of the plaintiff company has entered into the supplemental agreements and the plaintiff has derived substantial benefits from the implementation of these agreements and now they deny the legitimacy of reductions made under these agreements and hence, they cannot deny the execution of supplemental agreements. On the contrary, the plaintiff has seriously disputed the authority of Mr. N.K.Pal to enter into agreements Ex.D.6 and Ex.D.7.
79. No doubt the evidence of P.W.1 shows that he has admitted the signatures of the Sri. N.K.Pal on Ex.D.6 and Ex.D.7 and has also acknowledged the signatures on stamps affixed on the documents and 108 O.S. No.2692/1986 C/w. O.S. No.4173/1987 they were marked as Ex.D.6(a) and Ex.D.7(a) and these agreements were taken on record only for the purpose of identification. It is necessary to note that mere admission of a signature on the stamp paper do not by itself amount to admission of due execution of the document. So, when the plaintiffs have seriously denied the execution of the agreements, the burden of proof lies on the defendant asserting the execution of the document. In this context, P.W.1 has relied upon Ex.P.49 which is the notarial certificate issued dated 12.10.1981 and Ex.P.50 is the original GPA executed by the plaintiff company which shows that the plaintiff company has appointed and nominated Mr. M.K. Pal to be the true and lawful attorney of the company in its name on its behalf and he is empowered to do all or any of the acts, deeds and it is specifically mentioned that the power of attorney is empowered to sign bills, measurement books and work bills, in connection with the contract of the plaintiff's company with the defendant company and the company agrees and 109 O.S. No.2692/1986 C/w. O.S. No.4173/1987 undertakes to ratify and confirm all and whatsoever the said attorney shall lawfully do or cause to be done in the premises by virtue of this presence. So, this shows Mr. N.K.Pal was only authorised to sign the measurement books and work bills in connection with the contract and there is nothing empowering him to enter into the alleged supplemental agreements.
80. In the absence of any contradictory evidence, the power of attorney marked as Ex.P.50 has to be considered that it was executed authorizing N.K.Pal only to sign measurement books and bills. Consequently, the defendant has failed to demonstrate that N.K.Pal had the authority to enter into supplemental agreements in question so as to bind the plaintiff.
81. Another factor that needs to be taken into consideration is that the plaintiff has seriously questioned the authority or the necessity for the 110 O.S. No.2692/1986 C/w. O.S. No.4173/1987 purpose of executing such agreements. No doubt the said supplemental agreements are entered into after a long time of cessation of work. So, in this background, the alleged execution of two supplemental agreements in the late 1983, more than 4 years after completion of the work, seems to be doubtful. Further, D.W.1 in his cross examination has admitted that he was neither involved in the preparation nor the execution of supplemental agreements and he states these agreements were proposed by the then Executive Engineer Mr. Sankappa Shetty and he was not present at the time of execution and he has no personal knowledge of the circumstances, surrounding the execution of the documents. But the defendant has not chosen to examine Sri Sankappa Shetty as a witness. So, when there is a serious dispute as to the due execution of the supplementary agreements and when the document produced by the plaintiff establishes that the authorized representative N.K.Pal was only authorized to sign the measurement books and the 111 O.S. No.2692/1986 C/w. O.S. No.4173/1987 work bills and he had no authority to enter into supplementary agreements, the burden was upon the defendant to prove the due execution of the agreements and the failure on the part of the defendant to examine the witness to the said agreements, that is Sri Sankappa Shetty shows that the defendants have failed to prove the due execution of the two supplemental agreements dated 30.09.1983. So thus, the defendant's failure to examine key witness leads to an inference that the due execution of the agreements has not been established. Under such circumstances it cannot be said that the agreements i.e. Ex.D.5 and Ex.D.6 are legally binding upon the plaintiff and hence, this issue is answered in the Negative.
82. ISSUES NO.2 AND 3 IN O.S. NO.2692/1986 :: Both these issues are taken up collectively for common discussion to avoid repetition of the facts.
112 O.S. No.2692/1986
C/w. O.S. No.4173/1987 It is the case of the plaintiff that on receipt of the final bill, the plaintiff noticed that, the defendant issued a minus bill i.e. a bill showing the payments and recoveries were more than the value of the work done. The plaintiff found that various unauthorised and illegal debits had been made and some items for which payment was due had been either omitted or given credit belatedly. It was also found that in order to make a nil- bill, defendant had also adjusted various sums from out of the amounts payable to the plaintiff with regard to another contract, that is relating to surge tank and pressure shafts in the month of March and November 1984. According to the plaintiff, the errors in the final bill are as hereunder:
83. Firstly, omission of work relating to plugging of adits in the list of work executed, the value of such work being Rs.4,04,167/-. Secondly, recovery of national transportation charges for the distance between Dandeli Stores and Ambikanagar Depot with 113 O.S. No.2692/1986 C/w. O.S. No.4173/1987 regard to cement supplied to the plaintiff from Ambikanagar depot of Rs.4,22,537.14. Thirdly, recovery back of the amounts paid to the plaintiff towards escalation in the price of new indigenous capital equipments used for extra items of work of Rs.9,11,868.35. Fourthly, recovery back of amounts paid to the plaintiff towards increase in the electricity tariff with regard to extra items and which has already been admitted and paid to the plaintiff but is sought to be recovered in the final bill of Rs.5,19,341.03. Fifthly, deduction of 2% rebate, on the amounts paid towards escalations in electricity charges and in the cost of indigenous capital equipment of Rs.1,65,980.55. Sixthly, recovery back of amounts paid by defendant towards proportionate cost of workmen's compensation and gratuity on the extra item component of the work which is sought to be recovered of Rs.36,352.05 and lastly, recoveries made towards sales tax and surcharge thereon and other taxes of Rs.34,448.56 and it is the contention of the plaintiff that if the credited 114 O.S. No.2692/1986 C/w. O.S. No.4173/1987 amount had been properly adjusted, the interest liability of Rs.2,39,741.51 could have been avoided and thus in all a total sum of Rs.27,34,406.20 is sought to be recovered from the plaintiff. According to the plaintiff, each of the said omissions or recoveries is erroneous, unauthorised and illegal.
84. Since there is a serious dispute about the debits and the recoveries reflected in the final bill under various heads, it becomes imperative upon the Court to examine each of the different heads separately in order to determine as to whether each of the Debit or recovery is erroneous or as to whether the deductions are justified.
85. The first and foremost omission raised by the plaintiff is about the omission of the work relating to Plugging of Adits:
86. Learned Senior counsel for plaintiff in his argument submits that in order to ensure expeditious execution of tunnel excavation work, the plaintiff was 115 O.S. No.2692/1986 C/w. O.S. No.4173/1987 required to undertake operations simultaneously at multiple work phases and for this purpose the plaintiff was permitted to sink vertical shafts or drive horizontal adits. Upon completion of tunnel excavation works, these shafts and adits were duly plugged with concrete as required under the project specifications. It is submitted that initially the tender documents issued by the defendant contained a stipulation that the plaintiff would not be separately compensated for construction of these adits or for the plugging thereof. It was specified that the quoted unit rates for such excavation and concreting were to be deemed inclusive of such works vide clause 2.06 of the detailed specifications and clause 10 of the general conditions of the contract. However, the plaintiff objected to several items contained in the original tender vide its letter dated 26.07.1971. Although it had been agreed that the plaintiffs three letters would form an integral part of the contract, the parties subsequently entered into detailed discussions and negotiations wherein it was mutually 116 O.S. No.2692/1986 C/w. O.S. No.4173/1987 agreed about the modification of several terms originally contained in the tender documents. These negotiations led to the amendment of general conditions, detailed specifications and other contractual obligations. As a result, clause 6.29 was introduced as an additional paragraph to the detailed specifications. This newly added paragraph clarified the agreement regarding payment for the plugging of adits. It is stated that the concrete used for plugging the adits would be payable at the same unit rates applicable to tunnel lining. Pursuant to the express provisions of the contract, particularly 6.29, payments were made without any objection or reservation. However, by communication dated 04.11.1984, the defendant for the first time asserted that the cost of plugging the adits was deemed to be included within the unit rates quoted for excavation and lining. The plaintiff has strongly objected to this unilateral and retrospective interpretation of the contract terms. The plaintiff therefore rejected the debit of Rs.4,04,167/- raised in 117 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the final bill on this account and maintained that the said amount was wrongly withheld. It is admitted that the work of plugging the addicts constituted a separate and compensable item under the final contract and demanded that the said amount be included in the final bill and released accordingly.
87. On the contrary, the counsel for the defendant in his argument submits that as per the HRT contract, the cost of plugging the adits was not to be borne by the defendant, but was required to be undertaken by plaintiff. The action of the defendant to delete the said work from the final bills is in accordance with the provisions of the contract, the letters and the supplementary agreements. Learned senior counsel for plaintiff relying upon clause 2.02(e) of General Conditions, clause 10 of General Conditions and clause 2.06 of the detailed specifications of the HRT contract, clause 6.29 of the detailed specifications, submits that these clauses makes it clear that payment made by the 118 O.S. No.2692/1986 C/w. O.S. No.4173/1987 defendant in respect of plugging of the adits during the course of work was only treated as an advance in order to facilitate the plaintiff to meet its labour expenses. Further, as per the clarifications issued by the plaintiff, the unit rates quoted for excavation and concreting as per Schedule B of the HRT contract are inclusive of the cost of making adits and their plugging back. Therefore, the defendant is entitled to recover the payment made towards the plugging of adits. Further, counsel for the defendant relying upon Section 62 of the Indian Contract Act submits that clause 6.29 is not amended, rather a stipulation by way of clause 9(b) is included to the existing clause 6.29. Therefore, stipulation as provided under clause 10 and clause 2.06 of the HRT contract and clause 9B of the letters dated 26.07.1971 and 06.09.1971 when read harmoniously with clause 6.29 makes it clear that recovery made by the defendant for the plugging of adits is binding on the plaintiff and it is not entitled to claim the cost of plugging of adits.
119 O.S. No.2692/1986
C/w. O.S. No.4173/1987
88. Having heard the arguments put forth by both the counsels, this Court proceeds to adjudicate as to whether clause 6.29 created an enforceable right to separate payment for the plugging of adits and thereby superseded the earlier tender documents.
89. In order to establish that the omission of the work relating to plugging of adits is illegal and erroneous, P.W.1 has in his evidence deposed that the work of the plaintiff's company is to excavate the earth for the purpose of constructing tunnel. For this purpose the plaintiff had to open certain places to enter the tunnel to remove the muck and earth and for ventilation purpose. The length of the tunnel is 6 miles. To speed up the work and finish it expeditiously, they had to make these openings which are called as adits or shaft. When once tunnel is completed and concreted, these adits had to be closed by concrete and plug so that the water flows without any obstruction. As per the original tender documents, the opening and closing of adits was 120 O.S. No.2692/1986 C/w. O.S. No.4173/1987 not payable by the defendants. Subsequently there was exchange of letters and after negotiations the defendant agreed to pay the charges for opening and closing the adits. It was incorporated in the agreement and the corresponding letters formed part of the agreement. In the contract, the payment for plugging the adits has been incorporated. As per clause 6.29 of the contract, which is inserted in the tender documents, superseded the original document. During the course of work, 9 adits were done. The defendant has not paid any amount for adits, but paid amounts as per the running bills. They have not paid any advance for plugging the adits. It is stated that there is a term regarding payment of advance as per the contract. But there is no term regarding payment of advance to adits. Five years after handing over the tunnel, the defendant sought to recover the amount paid for plugging the adits. The defendant received letter informing to recover this amount from the final bill to which the plaintiff has issued reply. The defendant is not entitled 121 O.S. No.2692/1986 C/w. O.S. No.4173/1987 to recover the amount as per the contract. Hence the amount sought to be recovered after 5 years of completing the work is erroneous and unauthorised.
90. In support of his evidence, P.W.1 has relied upon Ex.P.14 to Ex.P.16 and Ex.P.46 to Ex.P.56. These documents establish that clause 6.29 of the detailed specifications was negotiated and incorporated into the final contract, conferring a clear entitlement for separate payment for the plugging of adits, at the unit rates applicable to tunnel lining.
91. At this juncture, it is considered worth to refer to the clauses enumerated under the general conditions, detailed specifications and also the letters of the plaintiff for the purpose of having clear clarifications as to the terms of contract between the parties.
Clause 2.02(e) of General Conditions of the HRT Contract reads thus: "Payment for making adits and shafts will be made by the corporation on the basis of actual tunnelling rates treating this entire payment for making these adits and shafts as an advance," 122 O.S. No.2692/1986
C/w. O.S. No.4173/1987 Clause 10 of the General Conditions of the HRT Contract which is related to shafts and adits is as follows: The proposed shafts and adits are shown on the drawing for guidance. It will be the responsibility of the contractor to select the number and location of adits and/or shafts so as to complete the work in schedule time. However, the contractor shall excavate the tunnel on not less than four faces simultaneously. No extra payments will be made for the shafts an / or adits. The contractor should intimate the Engineer in charge of the method he is going to adopt for tunneling and the location and number of adits and/or shafts he proposes and obtain his approval for the same before commencing the work. The shafts and/or adits shall be plugged with concrete at his own cost as directed by the Engineer in charge."
Clause 2.06 of the Detailed Specifications of the HRT Contract deals with - "EXCAVATION: The excavation of the tunnel should be done from not less than four faces simultaneously so as to complete the work within the time specified. Should the Contractor find it necessary either for purpose of ventilation or to attain necessary speed of work or for the disposal of muck to sink any shafts, to drive any adits, he may be allowed to do so after obtaining prior approval of the Engineer in charge. The cost of providing such shafts 123 O.S. No.2692/1986 C/w. O.S. No.4173/1987 or adits shall not be paid for by the Corporation and the Contractor shall have to plug these back with such materials and in such a manner as may be directed by the Engineer in charge and at the Contractor's own risk and cost."
Clause 6.29 of the Detailed Specifications of the HRT Contract reads thus: "MEASUREMENT: Concrete for plugging back the adit points will be payable at the unit rates of lining. Plugging shall be done as directed by the Engineer in Chief (Civil)."
Para 9(b) of the plaintiff's original offer dated 26.07.1971 shows as follows: "Our unit rate for excavation and concreting includes the cost of making adits and their plugging back also. However, during the making of these adits we shall be paid at, on a percentage basis for the excavation etc., involved in these adits and this amount can be adjusted from our overall price for the tunnel. This will enable us to meet our labour expenses during the excavation of these adits. We receive the rights to make any number of adits but they will not be less than 2 in numbers for each reach of the tunnel."
The subsequent clarifications given by the plaintiff at para 9(b) vide letter dated 06.09.1971 shows that "Payment for making the adits may be made (presently these adits assumed at 4 Nos. but changeable later on 124 O.S. No.2692/1986 C/w. O.S. No.4173/1987 to the No. required to suit site conditions) on the basis of actual tunnelling rates, treating this entire payment for making of these adits as an advance. This advance can be recovered from our running bills on pro-rata basis. However, this advance will not be covered by a bank guarantee from our side."
92. Relying on these clauses, it is submitted by L/c. for the defendant that the payment made by the defendant in respect of the plugging of the adits during the course of work was only treated as an advance in order to facilitate the plaintiff to meet its labour expenses as per the request vide its Letter dated 26.07.1971. Further, as per the clarifications issued by the plaintiff in its letter dated 26.07.1971, the unit rates quoted for excavation and concreting as per Schedule B of the HRT Contract are inclusive of the cost of making adits and their plugging back also. Therefore, defendant is entitled to recover the payment made towards the plugging of adits.
93. D.W.1 has in its evidence deposed that the rates quoted by the plaintiff was inclusive of the cost of 125 O.S. No.2692/1986 C/w. O.S. No.4173/1987 making adits and plugging them back with concrete. As such by the terms of contract the defendant was under
no obligation to pay any extra amount towards plugging of adits. The agreement provides that the plaintiff shall execute the work relating to the tunnel, from not less than 4 faces simultaneously. Further the contract at clause 2.06 of detailed specification contemplated that if the plaintiff so chose they could drive additional adits and no extra payments will be made by the defendant towards making of any adits and the plaintiff was duty bound to plug them back without any additional cost. Further, the contract made explicitly clear that it was entirely the responsibility of the plaintiff to select the number of locations of as many adits as may be essential to complete the work in time. Further by letters dated 26.07.1971 and 06.09.1971 the contractor has sought for advances from the defendant towards effecting works relating to adits and these amounts were agreed to be deductable from and out of the running bills from the plaintiff on a pro-rata basis. Thus 126 O.S. No.2692/1986 C/w. O.S. No.4173/1987 D.W.1 has deposed that since the unit rates for excavation and concreting were inclusive of the cost of making adits and plugging them back also the payments made to the contractor by the interim bills have been deleted from the final bill. The deleting of additional payments made to the contractor towards the plugging back of added payments are entirely justified and the claim of the plaintiff in this regard is without any merit and is liable to be rejected.
94. It is necessary to take note of the fact that P.W.1 in his cross examination admits that the plaintiff's vide letter dated 26.07.1971 agreed that it formed part of the tender documents and the unit rates quoted in the tender included the cost of excavation and concreting of adits and he also admits that the plaintiff had requested advances from the defendant corporation and with such advances intended to adjust against the overall cost of the tunnel construction. P.W.1 also admits that the term set out in the letter of 127 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the plaintiff superseded the corresponding original agreement. During cross-examination of P.W.1, no suggestions are put forth regarding clause 6.29 of the conditions of the contract, which was inserted at a later stage following negotiations between the parties. On the other hand during cross-examination of D.W.1, he has admitted clause 6.29 of the contract and has acknowledged that the clause was introduced after considering the three letters submitted by the plaintiff which are marked as Ex.D.40 to Ex.D.40D. So this admission of D.W.1 coupled with clause 6.29 and Ex.D.40 shows that the said clause was incorporated into the final contract and it superceded the earlier contract. Added to this Ex.P.55 and Ex.P.56 corroborates the claim of the plaintiff. It shows that the defendants have acknowledged that paragraph 2 of clause 6.29 was introduced at the time of finalising the contract by the defendant and the clause was introduced to supercede all the provisions of the original agreement relating to plugging of adits and as 128 O.S. No.2692/1986 C/w. O.S. No.4173/1987 such the said clause is binding term between the plaintiff and the defendant.
95. The evidence on record clearly establishes that, clause 6.29 was not part of the original tender but was subsequently incorporated into the final contract following discussions between the plaintiffs and the defendant and in consideration of the letters of the plaintiff and it was intended to facilitate payments. Further the letters Ex.P.55 and Ex.P.56 confirm that clause 6.29 was introduced with a clear understanding that it would override previous conditions relating to plugging of adits. Hence, the claim of plaintiff for payment of plugging of adits as per clause 6.29 is justified and the recovery of the same by the defendant in the final bill is held to be erroneous.
96. Now so far as recovery of notional transportation charges for the distance between Dandeli Stores and Ambikanagar is concerned, learned Senior counsel for the plaintiff in his arguments submits 129 O.S. No.2692/1986 C/w. O.S. No.4173/1987 that under the terms of the contract dated 27.06.1972, the defendant was contractually obliged to supply certain materials at predetermined rates. Cement was one such item agreed to be supplied by the defendant at the fixed rate of Rs.235/- per metric ton with the designated place of delivery being the stores at Dandeli. Accordingly, cement was initially issued from Dandeli stores. Subsequently in the year 1974, a new depot for cement was established at Ambika Nagar within the Dandeli region. From that point onwards the majority of cement required for the contract works was supplied from this new depot. Cement supply to the plaintiff continued until the completion of the works in 1975. The defendant consistently charged contractual rate of Rs.235/- per metric tonne and made recoveries accordingly from the running bills. But the defendant issued letters for the first time stating that the plaintiff should bear the national transportation cost of moving cement from Dandeli Stores to Ambika Nagar which was challenged by the plaintiff, by submitting detailed 130 O.S. No.2692/1986 C/w. O.S. No.4173/1987 correspondence letters and rejected the defendants' claim. But these amounts were ultimately recovered in the final bill, which is unauthorised and illegal. It is submitted that the internal arrangements of the defendant for transportation of cement whether from Dandeli to Ambikanagar or elsewhere were irrelevant and outside the scope of the liability of the plaintiff. The change in the point of issue from Dandeli to Ambikanagar was effected unilaterally by the defendant without prior notice or consent from the plaintiff. Moreover, the new delivery location, Ambika Nagar was situated within the boundaries of Dandeli area at the time of contract. Thus, mere shifting of delivery point within the same locality could not form the basis for any additional financial liability on the plaintiff. Further, no additional transportation cost is incurred by the defendant. The defendant was in fact procuring cement directly from its suppliers to the Ambika Nagar depot. There was no actual transportation of cement from Dandeli to Ambika Nagar, negating the basis for any 131 O.S. No.2692/1986 C/w. O.S. No.4173/1987 notion of recovery. It is further submitted that there was no contractual provision for recovery of transportation charges from the plaintiff.
97. It is further submitted that the plaintiff had another contract with the defendant involving surge tank and pressure shaft works, where the defendant supplied cement at Rs.235/- per metric ton without differentiating between Dandeli and Ambika Nagar as the place of issue. The defendant has failed to prove the actual transportation charges warranting recovery and there is no contractual basis in the original agreement and the supplemental agreements dated 30.09.1983 are not binding and the conduct of the defendant indicates a post completion attempt to rationalise unauthorised deductions.
98. On the contrary Learned counsel for the defendants in his arguments submits that at the time of inviting tender, Dandeli stores were shown as a place for issue of cement. As a result of change in the 132 O.S. No.2692/1986 C/w. O.S. No.4173/1987 location of the cement stores from Dandeli to Ambika Nagar being 18 kilometers closer to the work site, there was a proportionate reduction in the rates initially quoted towards lead charges from Dandeli stores to the work spot. Since the defendant incurred extra expenditure for the transportation of the cement from Dandeli to Ambika Nagar, the same is recovered as per the actuals in the final bill. Further, the Schedule A of the HRT contract specifies rate of Rs.235/- per metric ton of cement is based on the schedule of rate for that period. Supplementary agreements states that difference in cost towards transportation of cement between Ambevadi and Ambika Nagar. and the actual extra cost incurred by defendant for transportation of cement to Ambikanagar stores instead of Ambevadi stores may be recovered from the contractor. Further relying upon clause 4 of the Supplementary Agreement dated 30.09.1983, it is stated that the said contract clearly indicates that transportation charges from the defendant's stores to work sites shall be owned by the 133 O.S. No.2692/1986 C/w. O.S. No.4173/1987 plaintiff and the plaintiff has also agreed for the proportionate recovery of actual extra costs incurred by the defendant for transportation of cement from Dandeli to Ambika Nagar. Under such circumstances, plaintiff is not entitled to refund of the amount rightly recovered by the defendant based on actuals.
99. Having heard the arguments of both the counsel, the point that needs to be adjudicated is as to whether the recovery of the Notional cost of transportation charges for the distance between Dandeli Stores and Ambikanagar Depot with regard to cement supplied to the plaintiff, by the defendant in the final bill is in accordance with the terms of contract. In order to substantiate that the said recovery is illegal, P.W.1 has in his evidence deposed that, after the contract, the defendant had to supply the cement from godown at Dandeli. The plaintiff used to send lorry and collect the cement 2 years after the work started, they shifted the godown from Dandeli to Ambika Nagar, 134 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Ambika Nagar is also in Dandeli area. The Ambikanagar godown is 18 kilometers from Dandeli and Dandeli to the work spot is 22 kilometers. The defendants used to receive cement directly to their godown at Ambikanagar from the factory. They have not incurred any extra expenses for cement being supplied at Ambikanagar godown. The defendant's construction of godown at Ambika Nagar was not at the request of the plaintiff and they did not intimate to the plaintiff and the plaintiff never refused to receive cement at Dandeli godown. The defendant also did not intimate the plaintiff about the extra expenses incurred for delivering cement at Ambika Nagar stores. Only at the time of preparing final bill, the defendant informed that they have incurred extra expenses in this regard and wanted to deduct the same from the bill and they have debited Rs.4,22,000/- with regard to transportation and they are not entitled for such deduction and the recovery sought to be made in the bill is not valid and justifiable.
135 O.S. No.2692/1986
C/w. O.S. No.4173/1987
100. Per contra, D.W.1 has in his evidence deposed that the contract contemplated that defendant would supply cement to the plaintiff from its Dandeli stores. During the execution of the works, the defendant opened a second cement godown at Ambika Nagar which reduced the distance to be travelled from Dandeli stores to the worksite by more than 18 kilometers, Ambikanagara depot was much closer to the work spot and enabled speedy execution of work. At the time of inviting tenders, Dandeli stores was shown as the place for issuance of cement. The plaintiff quoted its rates including therein the lead charges from Dandeli stores to the work spot. As such, the plaintiff saved on the cost of transportation and for the said lead distance of 18 kilometers, while defendant incurred an additional expense of transportation of cement with a godown at Ambika Nagar. It is stated that the rate stipulated in the schedule of rates was much higher than the cost actually incurred by the defendant and 136 O.S. No.2692/1986 C/w. O.S. No.4173/1987 hence the defendant decided to deduct, only the actual costs incurred by the defendant and it was recovered in the final bill. It is stated that the plaintiff is bound by the agreement dated 30.09.1983 whereby they have agreed for a proportionate recovery of the actual extra costs incurred by the defendant for transportation of cement from Dandeli to Ambika Nagar. The defendant at no point of time either instructed the contractor to take supplies from Ambika Nagar or not to take deliveries from Dandeli depot. In view of clear reduction of 18 kilometers in the distance of transportation, the plaintiff expenditure is reduced and the defendant has incurred additional expenditure and hence, the plaintiff is not entitled for refund of transportation charges to the extent of proportionate reduction in the lead and the claim made by the plaintiff for the refund of the entire cost of transportation as if the cement had been supplied at Dandeli stores is wholly unjustifiable and is liable to be dismissed.
137 O.S. No.2692/1986
C/w. O.S. No.4173/1987
101. On perusal of the documents placed on record, no doubt, as per the terms of the original contract dated 27.06.1972, the defendant was under
the contractual obligation to supply cement from the Dandeli Stores at the rate of Rs.235/- per metric ton and accordingly the defendant has supplied cement from Dandeli Stores from the year 1972. It is also evident from the records that in the year 1974 the defendant established a new depot at Ambika Nagar within the Dandeli region and majority of the cement was supplied from this Ambika Nagar depot to the work spot upto the year 1979. It is also not in dispute that the defendant has initially charged contractual rate of Rs.235/- per meter ton and made recoveries accordingly from the running bills. But subsequently the defendant has charged notional transportation cost of moving cement from Dandeli Stores to Ambikanagar.
102. At this point of time it is necessary to note that, the change in the point of issue was neither 138 O.S. No.2692/1986 C/w. O.S. No.4173/1987 brought to the notice of the plaintiff and the consent of the plaintiff was also not obtained and since it is internal arrangement of the defendant, It was immaterial for the plaintiff to consider whether the cement was supplied from Dandeli or Ambika Nagar. Further, as stated earlier, as per my findings on the aforesaid issue No.1 in O.S. No.4173/1987, the supplementary agreements dated 30.09.1983 is held to be not binding on the plaintiff. So the defendants claim that debiting Rs.4,22,537.14 in the final bill based on the terms of supplementary agreements dated 30.09.1993 is not justifiable. Further, the defendant has not produced any document to show the actual transportation costs incurred by the defendant due to change of place. Further D.W.1 in his cross examination states that the defendant has accounts relating to transportation expenditure from Dandeli to Ambikanagar. But no document is produced before the Court to substantiate the same and he also admitted the existence of document indicating the actual costs incurred but the 139 O.S. No.2692/1986 C/w. O.S. No.4173/1987 same is not produced. Whereas there is no contractual obligation for recovery of transportation charges from the plaintiff and this fact is also admitted by D.W.1 in his cross-examination. So the supplementary agreements are not binding on the plaintiff and the defendant has not produced any document to show the actual transportation costs incurred and also there is no document to show the plaintiff was bound under the terms of contract to pay the additional cost of transportation and hence the deduction of Rs.4,22,537/- from the final bill towards additional transportation charges is unjustified and the plaintiff is entitled for refund of the same.
103. Now, so far as recovery of the amount paid to plaintiff towards escalation in the price of new indigenous capital equipment used for extra items of work is concerned, it is the case of the plaintiff that while constructing the head race tunnel, the plaintiff was responsible for dewatering and pumping seepage 140 O.S. No.2692/1986 C/w. O.S. No.4173/1987 water. According to Note 2 of Schedule B, they were entitled for payment of dewatering exceeding Rs.1,00,000/- per downstream working phase at Rs.1,00,000/- per GPM per day. During execution, the actual dewatering and pumping required was far greater than initially anticipated. Acknowledging the excess work, the defendant, vide letter No.9977, agreed to compensate the plaintiff at Rs.1.95 per KWH for the energy used beyond the specified limits. The plaintiff purchased various indigenous capital equipment for the project including machinery used for dewatering, pumping and other work. Clause 2 of the supplemental agreement dated 08.10.1975 states that the plaintiff would be reimbursed a proportion of the increase in the price of such equipment. The reimbursement would be based on the extent of the use of the equipment in the project. Related to its expected lifespan, with the price increase calculated over the base prices available to the plaintiff as of the tender notification date or later.
141 O.S. No.2692/1986
C/w. O.S. No.4173/1987
104. Now the dispute is that according to the plaintiff, the defendant paid the plaintiff the proportionate increase in the cost of new indigenous capital equipment used for dewatering and pumping in accordance with clause 2 of the Supplemental Agreement. Later the defendant contended that dewatering and pumping constituted extra items of work and the agreed rate of Rs.1.95 per KWH was inclusive of all associated costs. On this basis the defendant claimed that the escalation clause should not apply and deducted a sum of Rs.9,11,868.35. From the final bill. It is stated that the actual amount paid towards equipment costs was only Rs.4,94,285.40 and not Rs.9,11,868.35 as claimed by the defendant and hence the recovery of Rs.9,11,868.35 is false and untenable.
105. On the contrary, learned counsel for the defendant in his arguments submits that the plaintiff purchased and used various indigenous machinery for the extra items of work. Certain items of work which 142 O.S. No.2692/1986 C/w. O.S. No.4173/1987 was originally covered with the original scope of works were agreed to be treated as extra items including the work relating to dewatering and pumping. The rates of these extra items were agreed upon in the agreements dated 30.09.1983. Learned counsel for the defendant relying upon clause 2 of supplementary agreement dated 08.10.1975 and clause 2 and 3 of supplementary agreements dated 30.09.1983, submits that the defendant has specifically treated the excess dewatering and pumping as an extra item which is also evident from the letter marked as Ex.D.5 and the defendant has specifically accepted to treat the component of dewatering and pumping as an extra item and the plaintiff has agreed for recovery of the proportionate escalations in the supplementary agreement dated 30.09.1983. The defendant had agreed to Rs.1/- per GPM per day. During the execution of the work, it was found that the seepage was more than anticipated. Therefore, after considering the full implications of dewatering component, the said 143 O.S. No.2692/1986 C/w. O.S. No.4173/1987 item was treated as an extra item and a rate of Rs.1.95 per KWH was fixed and payments were made. The rate offered is an exclusive rate and the rebate offered by the plaintiff was also refunded. The plaintiff has received money towards escalation of indigenous equipment. The defendant has only deducted Rs.5,33,661.87 under this account. The original amount was modified as it was observed that some of the equipment which were not related to dewatering were also included earlier while assessing the proportionate cost of indigenous equipment allocable for said item of work. The rates for extra items of work were fixed keeping in mind the prevalent rates, components of escalation etc. and the contention of the plaintiff that there has been a wrongful debit towards proportionate increase paid in respect of indigenous capital used in the work of dewatering and pumping and extra works. is not justifiable.
144 O.S. No.2692/1986
C/w. O.S. No.4173/1987
106. In order to substantiate the same, P.W.1 has in its evidence deposed that, during the construction of Head Race Tunnel Work, dewatering and pumping work was part of the contract. The rate for dewatering and pumping work was fixed as per contract agreement dated 27.06.1972. The rate agreed to be paid in regard to the pumping water from Tunnel in excess of 50 GPM and in regard to the dewatering in excess of one cusec per down stream working face, contractor will be paid at the rate of Rs.1/- per GPM per day. During the execution of work it was found that the seepage was more than that of anticipated at the tendering stage. Hence KPC Ltd. vide their letter dated 09.09.1977 agreed to make payment @ Rs.1.95 per KWH. for the energy consumed for dewatering and pumping against the claim of Rs.3.65 per KWH. of contractor and therefore the rates were enhanced. Therefore, it was necessary to purchase the indigenous machinery for the work. Some of the indigenous machinery were purchased and used for dewatering and pumping only. 145 O.S. No.2692/1986
C/w. O.S. No.4173/1987 Some were purchased and used for other works connected with the contract and some machinery were purchased and used for dewatering and pumping work as also other works.
107. He has deposed that Clauses 2 of the Supplemental Agreement dated 08.10.1975 entered into between defendant and plaintiff provided that plaintiff shall be paid with proportion of the increase in the prices of new indigenous capital equipment purchased by them as their usage for the project base to the expected life of the equipment, the increase being reckoned over the base price obtained by the plaintiff on the date of tender notification or later. Accordingly, the defendant paid Rs.55,79,704.21 towards the proportionate increase in the price of the new indigenous capital equipment purchased by the plaintiff and used in the project, including the work of dewatering and pumping. Later defendant tried to 146 O.S. No.2692/1986 C/w. O.S. No.4173/1987 contend that the work of dewatering and pumping is an extra item of work and the rate of Rs.1.95 paid per KWH of electricity consumed would hold good till the completion of the work and thereafter clause 2 of the supplemental agreement providing for payment of proportionate increase in the price of new indigenous capital equipment would not apply. Similarly in regard to the indigenous capital equipment used for further extra items of work also like construction of generator shed, free concreting for permanent supports etc., the defendant contended that the plaintiff is not entitled for escalation for cost of such indigenous capital equipment and the defendant has debited a sum of Rs.9,11,868.35 in the final bill prepared to recover back the proportionate increase paid in regard to the new indigenous capital equipment used in the work of dewatering and pumping and other extra items of work. This debit is unjustified and contrary to the terms of the contract. Therefore, the plaintiff is entitled to the said amount.
147 O.S. No.2692/1986
C/w. O.S. No.4173/1987
108. On the contrary D.W.1 has in his evidence deposed that certain items of work which were originally covered within the scope of work was agreed to be treated as extra items of work including the work relating to dewatering and pumping. The rates for these extra items were agreed upon the agreements dated 30.09.1983. The rates for these extra items of work were true rates in the sense they were intended to be fixed for the execution of that particular item of work. No escalation or any other variation of rates, which were applicable to Schedule B items in the contract, were not applicable to these extra items of work and this is very clearly reflected in clause 2 and 3 of Supplemental Agreement dated 30.09.1983. It is stated that the plaintiff during the progress of the work received money towards escalation of indigenous equipment used in respect of pumping and dewatering work. The defendant has not deducted Rs.9,11,868.35 as contented by the plaintiff and on the other hand it has only deducted Rs.5,33,661.87. It is stated that 148 O.S. No.2692/1986 C/w. O.S. No.4173/1987 initially the bills prepared a sum of Rs.9,11,868.35 was determined as being deductible. However upon examining the same it was found that some of the equipments which were not related to dewatering and pumping were included. Therefore the cost of the same was bifurcated. It is stated that the proportionate cost of indigenous escalation for dewatering and pumping and extra items was Rs.5,33,661.87.
109. At this point of time it is considered worth to refer to clause 2 of the Supplemental Agreement dated 08.10.1975 and it reads as follows:
Clause 2: The contractor shall be paid that proportionate of the increase in the prices of new indigenous capital equipment purchased by him as their usage in the project bears to the expected life of the equipments, the increase being reckoned over the base prices obtained by the contractor on the date of tender notification or later and duly supported by original quotations and (2) foreign exchange rate, customs and other duties prevailing on the tender date.
110. It is evident from the record that the work of dewatering and pumping was an integral part of the 149 O.S. No.2692/1986 C/w. O.S. No.4173/1987 construction of head race tunnel and it was not a separate or additional item outside the scope of the contract, but it is an activity that has to be necessarily carried out for the execution of the work. Without the work of dewatering and pumping, the work could not have progressed and therefore, dewatering and pumping forms part of the overall contractual work. It is the contention of the plaintiff that the classification of this work as extra work imply that it was beyond the scope of the contract. But under Schedule B of the contract, for the purpose of payment it was considered as extra item. It is also an admitted fact that the plaintiff was initially made payment under the running account bills and the subsequent attempts are made to recover those amounts through deductions in the final bill. So if at all the defendant had knowledge that such payments were not due under the contract, it would not have made payment at the first instance. The work of dewatering and pumping was an integral part of the contractual work and they are governed by the terms of 150 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the contract, more particularly clause 2 of the supplemental agreement and as such the plaintiff is entitled for recovery of the escalation in the cost of indigenous capital equipment used in connection with the work. It is admitted by the defendant that the proportionate cost of indigenous escalation for dewatering and pumping and extra items was Rs.5,33,661.87 and not Rs.9,11,868.35. Hence the said deduction of Rs.5,33,661.87 from the final bill towards recovery of escalation is not justified and hence the plaintiff is entitled for recovery of Rs.5,33,661.87 as against the amount of Rs.9,11,868.35 sought in the plaint.
111. Now, so far as recovery of the amounts paid to plaintiff towards increase in electricity tariff with regard to extra items which has already been admitted and paid to the plaintiff and is recovered in the final bill is concerned, P.W.1 has in his evidence deposed that, the defendant has debited a sum of Rs.5,19,341.03 151 O.S. No.2692/1986 C/w. O.S. No.4173/1987 towards the electricity escalations in the final bill to recover back the amount paid to the plaintiff on account of increase in electricity tariff for electricity consumed for dewatering and pumping work. It is stated that the difference between the increased rate and the base rate of electricity tariff is payable to the plaintiff.
Electricity escalation payment will be paid by the defendant after production of payment vouchers of KEB Dandeli. It is stated that the defendant treated dewatering and pumping as an extra item, even though so many times it was pointed out that dewatering and pumping work is not an extra item and there is nothing in both agreements which prohibits application of all clauses including escalation clauses for dewatering and pumping work. It is stated that dewatering and pumping is part of Schedule of quantities and included in Schedule B of original agreement and the rate of Rs.1/- per GPM per day was substituted by Rs.1.95 per KWH and all their terms and conditions of original agreement and supplemental agreement remained unaltered. It is 152 O.S. No.2692/1986 C/w. O.S. No.4173/1987 stated that the defendant did the dewatering and pumping work in Schedule B items and released the payment time to time through running bills and it has approved the payment of Rs.1.95 per KWH during September 1977. Thereafter, in the year 1978 there was hike in the electricity tariff. Even though there was hike in the tariff, the defendant did not consider the payment since the rate approved earlier 1977 was applicable till completion of work. Therefore, the defendant did not want to recover electricity escalation already reimbursed to the plaintiff. Hence, the recovery made in the final bill without the knowledge of the plaintiff is disputed by the plaintiff.
112. On the contrary, D.W.1 has in his evidence deposed that no escalation was payable in respect of electricity used in the work of dewatering and pumping, which is an extra items of work. The contract provided that the plaintiff would be paid Rs.1/- per GPM per day if the dewatering is in excess of 1 cusec per working 153 O.S. No.2692/1986 C/w. O.S. No.4173/1987 phase and for pumping in excess of 50 GPM in the tunnel for excavation. The de-watering of quantity below 1 cusec working phase and pumping below 50 GPM in the tunnel for excavation was already included in the tender rate. However, as a concession to the plaintiff, the defendant had agreed to pay a rate of Rs.1.95 per KWH on dewatering and pumping. It is stated that a proportionate share of escalation in electricity towards extra item of works is Rs.5,19,341.03. This understanding is recorded in clause number 2 of the supplemental agreement dated 30.09.1983 and hence the deductions are fully justified and proper.
113. On analysis of the evidence placed on record, it is evident that the defendant has effected a debit of Rs.5,19,341.03 towards recovery of amounts paid to the plaintiff on account of the increase in electricity tariff. According to the plaintiff, this recovery is entirely unjustified and contrary to the agreed terms 154 O.S. No.2692/1986 C/w. O.S. No.4173/1987 of contract. Learned Senior counsel for plaintiff in his arguments submits that, the defendant had expressly agreed to compensate the plaintiff at the rate of Rs.1.95 per KWH for energy consumed in connection with dewatering and pumping operations and only in the year 1981, the defendant took a divergent and untenable view that the agreed rate of Rs.1.95 per KWH fixed for the excess dewatering and pumping work was to be treated as a composite and final rate that consumed all components. On this basis, the defendant sought to deny the plaintiff reimbursement of the tariff escalation and debited the said amount from the final bill. It is submitted that the claim relating to escalation in electricity charges must be adjudicated in the light of Note 3(b)(i) of the Supplemental Agreement dated 08.10.1975, which provides for compensation to the plaintiff for any statutory increase in electricity tariff. It is further submitted that the said clause does not draw any distinction between Schedule B items of work and extra items of work and it encompasses all 155 O.S. No.2692/1986 C/w. O.S. No.4173/1987 categories of work executed under the contract. It is further submitted that dewatering and pumping operations are not optional or ancillary, but integral to the plaintiff's ability to perform its contractual obligations and they cannot be termed as extra works and the defendants have later designated it as extra items for the limited purpose of valuation. Therefore, the debit of the amount in the final bill is unjustified and contrary to the terms of contract.
114. On the contrary, learned counsel for defendant relying upon clause 2 and 3 of the supplementary agreements dated 30.09.1983 and also referring to Ex.D.5, it is submitted that, the plaintiff has specifically accepted to treat the component of dewatering and pumping as an extra item under the supplementary agreements dated 30.09.1983 and agreed for the recovery of the proportionate escalations. So considering the total cost of pumping, electricity consumption, operation, it was treated as an 156 O.S. No.2692/1986 C/w. O.S. No.4173/1987 extra item and rate was fixed at Rs.1.95 per KWH. The rates for the extra items of work were fixed and the plaintiff had received money towards escalation of indigenous equipment used in pumping and dewatering works and hence the recovery is justifiable.
115. At this point of time it is necessary to note that as per my findings on the aforesaid issue it is established that the supplementary agreements dated 30.09.1983 is not binding on the plaintiff and hence the claim of defendant relying on the clauses stipulated in these agreements is not sustainable. It is necessary to take note of the fact that the issue regarding escalation in electricity charges is incorporated in Note 3(b)(i) of the Supplemental Agreement dated 08.10.1975 and this clause unequivocally provides for compensation to the plaintiff for any statutory increase in electricity tariff. The said clause does not draw any distinction between Schedule B items of work and extra items of work. D.W.1 in his cross examination acknowledges that only 157 O.S. No.2692/1986 C/w. O.S. No.4173/1987 after issuance of letter as per Ex.P.31 dated 26.04.1985 it was informed to the plaintiff for the first time that escalation in relation to the work of dewatering and pumping would not be payable and prior to that there had been no express communication from the defendant disputing the entitlement of the plaintiff for escalation for dewatering and pumping. After completion of work in 1979 for the first time in the year 1985, a belated communication is made for recovery of the escalation paid on dewatering and pumping and this is without any basis as there is no such terms under the original terms of contract. Hence, the recovery of Rs.5,19,341.03 is contrary to the terms of the agreement and therefore the plaintiff is entitled for reimbursement of the same.
116. So far as recovery of rebate at 2% on the amounts paid on account of escalation towards electricity charges and cost of indigenous capital equipments is concerned, it is the case of the plaintiff 158 O.S. No.2692/1986 C/w. O.S. No.4173/1987 that the defendant has debited a sum of Rs.61,183.65 as 2.25% rebate on the amount paid towards escalation on electricity tariff. Similarly, a sum of Rs.1,11,594.08 has been debited as 2% rebate on the amount paid towards escalation due to increase in cost of new indigenous capital equipments. It is the contention of the plaintiff that the escalations in electricity tariff and cost of new indigenous capital equipments were given to plaintiff in pursuance of specific provisions of the contract and hence the defendant is not entitled to claim to per se rebate on the said escalation amounts and the said debit is untenable, illegal and unauthorised.
117. In order to establish the scene, P.W.1 has in his evidence deposed that, the defendant has debited a sum of Rs.61,183.65 in the final bill as 2.25% rebate on the amounts paid towards escalation on electricity tariff and has debited a sum of Rs.1,11,594.08 as 2% rebate on the amounts paid towards escalation on due to 159 O.S. No.2692/1986 C/w. O.S. No.4173/1987 increase in the cost of new indigenous capital equipment. It is stated that the plaintiff, vide letters dated 26.07.1991 and 06.09.1971 agreed to give rebate of 2% if both Reach I and Reach II of the tunnel were avoided and not on any escalations. Apart from the two escalations, Labor material, machinery and POL escalation and escalation due to increase in cost of drill steel were reimbursed by the defendant. The corporation has not proportionately recovered the labor, material and machinery and POL escalation on pumping and dewatering work and at the end of the contract, the defendant is treating the dewatering and pumping work as an extra item work, even though it is an internal part of the work. It is stated that the recovery of 2% of rebate made in the final bill was without the knowledge of the plaintiff and hence it is illegal.
118. On the contrary, D.W.1 has in his evidence deposed that the said rebate offered pertains to all works within the scope of original contract. Since 2% 160 O.S. No.2692/1986 C/w. O.S. No.4173/1987 rebate was not deducted on certain items, the said rebate was recovered in the final bill in terms of provisions of the contract. The escalation payable under the contract were to be calculated on the basis of the quoted price for the work in Schedule B. The defendant has in the matter of deducting the said 2% rebate in respect of computation of escalation by taking 98% of the value quoted. The rebate having been so recovered, no further rebate has been recovered from the contractor in respect of escalation. It is stated that in respect of two items of work i.e. electricity and amount paid towards proportionate cost of indigenous equipment excavation, rebate of 2% towards indigenous equipment and 2¼% towards electricity has been deducted from and out of the amount found to be due and the rebates were not considered in the matter of computation or escalation of these kinds of work.
119. Admittedly the final bill placed on record shows that a sum of Rs.61,183.65 as 2.25% rebate on 161 O.S. No.2692/1986 C/w. O.S. No.4173/1987 escalation granted due to increase in electricity tariff is deducted and likewise a sum of Rs.1,11,594.08 as a 2% rebate on escalation granted, due to increase in the cost of indigenous capital, equipment is deducted. In this regard, learned Senior Counsel for the plaintiff submits that the assertions of the defendant that they have justified in effecting these recoveries as per Note 16 to Schedule B and clause 9 and the internal decision dated 22.08.1975 is inconsistent with the express terms of the agreement dated 27.06.1972 and the supplementary agreement dated 08.10.1975 and hence in the light of the said clauses of the agreement, the recoverance affected is wholly unattainable and liable to be reversed.
120. On the contrary, learned counsel for the defendant submits that the rebate pertains to all works in the scope of HRT contract. The said rebate was not deducted on the following items and it was recovered in the final bill in terms of provisions of HRT contract and 162 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the items of work in the respect of which the rebate was not deducted are escalations on labour due to cost of living index, Escalations on labour due to increase in minimum wages, social security benefits on items, escalations in the cost of machinery parts, spares and all consumable stores, escalations due to increase of cost of POL, escalation due to increase in cost of drill steel. The rebate having been so recovered, no further rebate has been recovered from the plaintiff.
121. Hence at this point of time, this Court has referred to the terms of the agreement dated 27.06.1972 and supplementary agreement dated 08.10.1975. The plaintiff in Letter dated 26.07.1971 and 15.09.1981 had agreed to offer a 2% rebate on the rates quoted, but this offer was clearly contingent upon both Reach I and Reach II of the tunnel project being awarded to them. For that, the said rebate was expressly restricted to the quoted Schedule B rates and not applicable to escalation components. 3(b)(i) of Note 163 O.S. No.2692/1986 C/w. O.S. No.4173/1987 2 Schedule B provides for reimbursement of increases in electricity tariffs beyond those prevailing in November 1971. Further clause 2 of Supplemental Agreement dated 08.10.1975 specifically provides for reimbursement of escalation in the cost of new indigenous capital equipment, proportionate to its usage in the project. Further clause 12 of the Supplemental Agreement dated 08.10.1975 provides that several clauses of the original agreement stand substituted or superseded by the Supplemental Agreement. So neither the original agreement nor the supplemental agreement dated 08.10.1975 contains any provision applying 2% rebate to escalation amounts and hence this Court is of opinion that the deduction of 2% rebate on the escalation amounts is without any basis and the same is liable to be reversed.
122. Similarly, clause 3(b)(i) of Schedule B provides that the plaintiff shall be compensated for statutory increases in electricity tariffs prevailing after 164 O.S. No.2692/1986 C/w. O.S. No.4173/1987 November 1971 and these payments are expressly treated as separate from Schedule B quoted rates and hence the rebate offered on the quoted rates cannot be extended to escalation reimbursements. Hence the recovery in the final bill of Rs.54,386.47 towards escalation in electricity charges and Rs.1,11,594.08 towards escalation in the cost of indigenous capital equipment is not sustainable and the plaintiff is entitled fore reimbursement of Rs.1,65,980/-.
123. Now, so far as recovery of proportionate cost of workman's compensation and gratuity on extra items and 11% on over breaks is concerned, P.W.1 has in his evidence deposed that a sum of Rs.32,108.30 has been debited in the final bill towards recovery of workman's compensation and gratuity paid to plaintiff, attributable proportionately for extra items. Similarly a sum of Rs.4,243.75 is debited towards workmen's compensation and gratuity allowable to the 11% over break not payable. These debits are untenable and 165 O.S. No.2692/1986 C/w. O.S. No.4173/1987 contrary to the terms of contract and illegal. It is stated that the defendant is treating the work of dewatering and pumping as an extra work, even though it is part of work. Therefore the defendant could not recover the proportionate cost of workmen's compensation and gratuity on extra work and 11% on over breaks. It is stated that workmen compensation amount is reimbursed to employees, staff or workmen when they met with accident and amount will be paid as per medical board certificate and gratuity amount is paid to staff, employees and workmen, who were working on company. It is further stated that as per law there is provision to pay the workmen's compensation and gratuity amount paid by the plaintiff to their employees and staff. The over break is not an extra item work. Over breaks occur due to bad rock and adverse geological conditions and hence the recovery is made illegal.
166 O.S. No.2692/1986
C/w. O.S. No.4173/1987
124. On the contrary, D.W.I has in his evidence deposed that the payment of gratuity to the employees of the plaintiff is wholly beyond the responsibility of the defendant. However, the defendant agreed to consider them upon the plaintiff furnishing proof of payment of the same to its workmen. The said payment however has to be restricted to the period, during which the particular workmen were employed in the work of the said project and on the same lines, the supplementary agreements dated 30.09.1983 were executed, which provided that the contractors' claim for payment of additional cost of workmen's compensation would also be considered by defendant. The payment of workmen's compensation was wholly beyond the scope of defendant's responsibilities under the contract. The defendant has deducted that proportion of the workmen's compensation and gratuity, which was allowable only to the extra items of work. Further, the plaintiff is already paid the amount in the running account bills towards gratuity and the enhanced cost of 167 O.S. No.2692/1986 C/w. O.S. No.4173/1987 compensation even in respect of these extra items of work and this would be a case of unjust enrichment if these extra payments were deducted from and out of the amount payable to the defendant in the final bill.
125. Further D.W.1 has deposed that the plaintiff would be paid towards excavation upto the pay lines as determined in the working drawings. Clause 2.15 of the agreement specifically contemplated that plaintiff will not be paid for extra excavation beyond pay lines and in the event the plaintiff excavate beyond the pay lines, then the contract also provided that plaintiff would at its expense fill it back with cement concrete used for lining of the tunnel. The contract provided that extra excavation beyond pay lines would be paid by defendant if it was brought about due to bad rock or adverse geological condition and if it extends more than 200 millimeters beyond the pay line. In such an event, the contract contemplated that a new pay line would be established and the payment would be paid for the 168 O.S. No.2692/1986 C/w. O.S. No.4173/1987 work of excavation at 3/4 of the rate quoted for excavation works. It is stated that the plaintiff and the defendant had during joint measurement recorded the actual excavation done and also the instances of excavation exceeding the pay line and whether or not they were attributable to plaintiff or to adverse geological conditions. Upon joint evaluation it was found that from and out of the claims made by plaintiff, 89% of the claim towards over breakages was permissible while 11% was not and this 11% of over breakages were caused by the negligence attributable to the plaintiff and accordingly the cost of rectifying the 11% over breakages was entirely to be borne by the plaintiff. Since 11% over breakages were attributable to the plaintiff, the proportionate cost of gratuity and workmen compensation paid to labourers have been deducted from and out of the payment already made to the plaintiff along with the payment towards running account bills.
169 O.S. No.2692/1986
C/w. O.S. No.4173/1987
126. So from the evidence it is evident that the plaintiff is challenging the legitimacy of the recoveries of Rs.32,108.30 and Rs.4,243.75 committed towards recovery of workmen's compensation and gratuity pay relating to extra items of work and to the 11% of Over break which was disallowed by the defendant.
127. Learned Senior counsel for the plaintiff in his arguments submits that the payment made towards gratuity and workmen's compensation were incurred in the course of execution of the work and were reimbursed by the defendant upon production of proof as per the contractual stipulations. Specifically, the defendant through letter dated 04.09.1982 approved the reimbursement of these payments. The subsequent unilateral classification of these payments as not reimbursable in relation to extra items or over breaks and the corresponding recoveries affected in the final bill are without contractual basis and constitute breach of the agreed terms.
170 O.S. No.2692/1986
C/w. O.S. No.4173/1987
128. On the contrary, the learned counsel for the defendant relying upon clause 8 of Supplementary Agreement dated 30.09.1983 and Ex.D.5 and Ex.D.6, submits that the work of dewatering and pumping was treated as an extra item and therefore the rates fixed and paid by defendant for extra items are inclusive of element of escalation, payable to the contractor on account of gratuity and workman's compensation and the same was legally recovered in the final bills. Further relying upon clause 2.15 of the detailed specifications and Ex.D.40D which is the letter dated 25.09.1971 and clause 7 of the supplementary agreement Ex.D.7, it is submitted that due to the fault of plaintiff, the 11% over breaks have been decided as not payable. Therefore in terms of the clauses extracted in the said agreements, the proportionate cost of excavation, lining and corresponding excavation and compensation are also not payable to the plaintiff.
171 O.S. No.2692/1986
C/w. O.S. No.4173/1987
129. On perusal of Ex.D.10 and Ex.D.22 which are the communications by the defendant shows that the defendant had agreed to reimburse actual payments made by the plaintiff towards gratuity and workmen's compensation. Further there is no distinction in these documents relating to scheduled items and extra items. Hence the claim of the defendant that the payments for extra items due to inclusion of escalation in the fixed rates are not reimbursable is not evident from the any terms of the contract or the supplementary agreement. Further D.W.1 in his cross-examination has admitted that the payment of workmen's compensation and gratuity is an integral component of the contract agreement and not an extra item. Further there is no document forthcoming to show that the compensation was paid not only in respect of Schedule B items of work, but also in relation to extra items executed during the course of the project and this fact is admitted by D.W.1 in his cross examination. So when the workers have rendered services that incidentally contributed to 172 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the over break, then in the absence of any specific clause in the contract, the deduction of Rs.36,352/- is not justified.
130. Now so far as recoveries of sales tax, surcharge on sales tax, forest development tax and turnover tax is concerned, P.W.1 has in his evidence deposed that, the defendant has debited a sum of Rs.15,229.90 towards sales tax and a sum of Rs.19,156.13 towards Forest Development Tax and Rs.6,253/- towards turnover tax on royalty of sand and aggregates used by the plaintiff in the work and in all a sum of Rs.34,448.56 has been debited. It is stated the detail specification provides that plaintiff should pay royalty charges of sand and aggregates as per the terms of the contract. Further if any new law or levy is made having a financial bearing on the plaintiff, the defendant should make extra payment to cover the increase in prices as a consequence of such levies. This was also provided in clause 26 of the plaintiff's 173 O.S. No.2692/1986 C/w. O.S. No.4173/1987 letter dated 06.09.1971. Thus it is the defendant who should bear the same or reimburse the same to the plaintiff. Hence, the debits made are unauthorised, illegal and contrary to the terms of contract.
131. D.W.1 has in his evidence deposed that the rates quoted by the plaintiff is inclusive of all taxes and other levies. The contract provided that the rates quoted takes into account all such laws that have been enacted and its bearing on the work to be executed by the plaintiff as on 30.11.1971. However, levy towards Forest Development Tax, Sales Tax and turnover tax on royalty were not due to the enactment of any new laws. The terms of the agreement dated 30.09.1983, the plaintiffs has agreed that no refund is payable towards forest development tax, sales tax and turnover tax on royalty. As the said tax has been made, the plaintiff is not entitled for refund of the amount of Rs.34,448.56, as the recovery is made as per clause number 7 of the Agreement dated 30.09.1983.
174 O.S. No.2692/1986
C/w. O.S. No.4173/1987
132. But it is necessary to note, it is established that the supplementary agreement dated 30.09.1983 is not binding on the plaintiff and under such circumstances, the defendants claim relying on the supplementary agreements that the plaintiff is not entitled for the reimbursement is not tenable. Further, clause 26 of the letter dated 06.05.1971 shows the plaintiff had expressly sought for reimbursement of new levies introduced after the contract which would have a financial impact on the execution of the works. Further, the letters Ex.P.32 and Ex.P.33 also corroborates the contention of the plaintiff that subsequent to formation of the contract, the statutory levies which were never within the contemplation of the parties at the time of execution of the agreement. In Ex.P.32, the plaintiff has sought for refund of sales tax and forest development tax recovered by the defendant on royalty. Further, as stated earlier, when the supplementary agreements dated 30.09.1983 are not binding upon the plaintiff, the defendant's reliance on the said supplementary 175 O.S. No.2692/1986 C/w. O.S. No.4173/1987 agreements for effecting such recovery is not sustainable and hence the plaintiff is entitled for refund of the said amount and the deduction of Rs.34,448.56 in the final bill on this head is unjustified.
133. Now so far as delay in giving credit for excess interest and rebate and recovery of interest on machinery advance after 29.07.1979 is concerned, it is evident from the records that a sum of Rs.38,408.83 towards rebate at 25% and Rs.1,22,298/- towards interest were recovered in the running bills as on 1979. The defendant has now given credit of the said sum which was deducted in excess. As rightly contented by the plaintiff, if the credit was given with effect from the dates of recoveries, the plaintiff would have saved interest on the amount which the plaintiff was due to the defendant at that time and by giving credit to these amounts only on 21.09.1984, the plaintiff is entitled to recover interest of Rs.2,39,741.54 on the amount due to them and hence the debit of Rs.2,39,741.54 as 176 O.S. No.2692/1986 C/w. O.S. No.4173/1987 interest on the machinery advance after 29.07.1979 upto 22.09.1984 is not justifiable.
134. Thus in view of the aforesaid reasonings this Court is of the opinion that the plaintiff has established that the debits in the final bill is unauthorised and illegal. Thus, the plaintiff has succeeded in establishing that deduction of Rs.4,04,167/- towards omission of work relating to plugging of adits, deduction of Rs.4,22,537.14 towards notional transportation of cement charges, deduction of Rs.5,33,661.87 towards escalation in the price of Indigenous capital equipment, recovery of Rs.5,19,341.03 towards in increase in electricity tariff, deduction of Rs.1,65,980.55 towards 2% rebate in electricity charges and in the cost of Indigenous capital equipment, Rs.36,352.05 towards cost of workmens compensation and graduity and 11% over bricks and recovery of Rs.34,448.56 towards sales tax and surcharge are illegal and unauthorized and plaintiff is 177 O.S. No.2692/1986 C/w. O.S. No.4173/1987 entitled for recovery of the same. Thus, the plaintiff is entitled for Rs.21,16,488 and by including interest of Rs.2,39,741.54, the plaintiff is entitled for recovery of Rs.23,56,229/-. Accordingly, this Court proceeds to answered the aforesaid issues No.2 and 3 Partly in the Affirmative.
135. ISSUE NO.4 IN O.S. NO.2692/1986 :: In the instant suit, the plaintiff is seeking for recovery of Rs.40,74,265.10 with interest at the rate of 18% per annum from the date of suit till its realisation in accordance with Section 34 of C.P.C. Learned Senior counsel for plaintiff relying upon the said provision and also the judgment of Hon'ble Apex Court reported in South Eastern Coalfields Ltd V/s. State of M.P. and others reported in (2003) 8 SCC 648 and in case of I.K.Merchants Pvt. Ltd. and Anr V/s. State of Rajasthan and Ors reported in 2025 INSC 418, it is submitted that the Interest is granted to compensate for the denial of use of money lawfully and the courts have discretion to 178 O.S. No.2692/1986 C/w. O.S. No.4173/1987 award interest exceeding 6% per annum in case of commercial transactions. On the contrary, the counsel for defendant in his argument submits that since the plaintiff is not entitled for any amounts claimed in the suit, the question of awarding interest does not arise for consideration.
136. It is necessary to note that as per the findings given by this court on the aforesaid issues issues, it is established that the plaintiff is entitled for recovery of Rs.23,56,229/-. Now so far as the quantum of interest to which the plaintiff is entitled is concerned, it is undisputed that the contract entered into between the plaintiff and defendant was commercial in nature. Further due to the inaction of the defendant the plaintiff was deprived of utilising the money and by this it has resulted in substantial financial loss to the plaintiff. In the light of commercial nature of the transaction and in view of the defendant's failure to settle the amount within time, the plaintiff is legally entitled for interest at 179 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the rate of 9% per annum from 29.01.1981 till its realisation on the sum of Rs.23,56,229/-. Accordingly, this issue is answered Partly in the Affirmative.
137. ISSUE NO.6 IN O.S. NO.2692/1986 AND ISSUE NO.6 IN O.S. NO.4173/1987 :: The plaintiff by way of relief of permanent injunction is seeking to restrain the defendant from enforcing the bank guarantees. It is evident from the records that as per the terms and conditions of the contract the plaintiff furnished two bank guarantees bearing No.56/72 and 57/72, both dated 02.08.1972, each for a sum of Rs.3,33,333.33. The counsels appearing for the plaintiff and the defendant have in their arguments submitted that the bank guarantees dated 02.08.1975 has not been extended and hence they are no longer in force. It evident from the records that based on the letter issued by the defendant dated 26.05.1986, the validity of the bank guarantee was extended upto 31.12.1986. There is no material on record to show that there has been 180 O.S. No.2692/1986 C/w. O.S. No.4173/1987 further extension of the bank guarantees after its expiry on 31.12.1986. So by this the bank guarantees stood lapsed with effect from 31.12.1986 and hence there is no question of enforcement of the bank guarantee. Hence, these issues does not survive for consideration and are answered accordingly.
138. ISSUE NO.2 IN O.S. NO.4173/1987 : The present suit is filed by the defendant as against the plaintiff for the recovery of Rs.28,82,614.19 with future interest from the date of suit till its realisation and to direct the defendant No.2 to pay to the plaintiff a sum of Rs.6,66,66.66 covered by the bank guarantee. It is an undisputed fact that the defendant herein had filed O.S. No.3343/1986 filed as against the plaintiff for recovery of a sum of Rs.1,64,74,147/- with interest at 18% per annum and for consequential relief of permanent injunction in relation to the surge tank and pressure shafts. It is also the admitted fact that the present two suits and the said O.S. No.3343/1986 were heard 181 O.S. No.2692/1986 C/w. O.S. No.4173/1987 together. By virtue of the enactment of Commercial Courts Act, 2015, the said suit was transferred to the Commercial Court and the suit came to be decreed in favour of plaintiff as per the Judgment and Decree dated 21.12.2019 and the defendant herein was directed to pay a sum of Rs.53,59,711.31 with interest at 12% per annum from the date of suit till its realisation. Being aggrieved by the judgment and decree passed, the defendant herein preferred Commercial Appeal No.59/2021 and the Division Bench of Hon'ble High Court vide judgment and decree dated 16.07.2021 dismissed the plea of the defendant seeking for set off, holding that such adjustment of amounts under different contracts was impermissible. However, the Hon'ble High Court modified the interest from 12% to 9% per annum. In view of the same the said judgment has attained finality and the defendant herein has complied with the decree by remitting the amount due to the defendant. So in view of the judgment passed by Hon'ble High Court in Commercial 182 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Appeal No.59/2021, the alleged amount payable by the plaintiff to the defendant under HRT contract cannot be adjusted with the project of surge tank and pressure shaft. Hence, this issue is answered in the Negative.
139. ISSUES NO.3 AND 4 IN O.S. NO.4173/1987 & ISSUE NO.5 IN O.S. NO.2692/1986:
The defendant has raised claim for recovery of Rs.32,65,522.67 under various distinct heads. It is evident from the records that the plaintiff has disputed the recovery of the said amount and the defendant has seriously disputed the liability to pay the said amount. The evidence of D.W.1 makes it clear that the defendant is claiming Rs.32,65,522.67 under various heads. Hence this Court proceeds to deal with each head distinctively.
140. Now so far as the first head, cost of steel and explosives supplied to the plaintiff is concerned, the defendant is seeking for recovery of Rs.11,261.43. He has in his evidence deposed that the defendant 183 O.S. No.2692/1986 C/w. O.S. No.4173/1987 during the execution of the work issued material that was required for use in the project. The contract provided that Schedule A items would be issued by defendant. In respect of the items which were not covered by Schedule A of the contract, the contract provided that the plaintiff could be issued, if available and if the same could be spared. The contract further provided that the cost of such materials shall be the current market value of the item of issue together with 11% towards transportation, storage and handling charges. This was also in practice in the department for the issue of items at the instance of the contractor, which the defendant was not obliged to supply. D.W.1 has stated that the plaintiff has taken delivery of many such non schedule items from the stores. However in the running bills the plaintiff was charged only at the stores issue rate which was lower than the prevailing market value. The debit balance of Rs.11,261.43 is claimed, as difference between the issue rate and market rate of steel, jelly mix and formadine issued to 184 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the plaintiff, which items the defendant was not obliged to issue under Schedule A of the agreement.
141. At this point of time it is necessary to note that clause 4 of Section 7 provides that if the plaintiff obtains materials other than those listed in Schedule A from the defendant, the price for such materials shall be based on the current market rates at the time of issue, Plus 11% of transportation and storage. But it is necessary to note that the said clause was modified later and as per the said modifications, it is agreed by both the parties that the defendant was not bound to issue and the plaintiff was not bound to accept any materials not included in Schedule A. Further, it was agreed that if such materials were in fact issued and accepted, the pricing would be governed by the departmental rules and rates applicable at the time of such releases. So, the parties have mutually agreed that the departmental rules and practice of the defendant with regard to the materials that are not 185 O.S. No.2692/1986 C/w. O.S. No.4173/1987 covered under Schedule A and supplied to the contractors would be charged at book value together with 11% storage charges. It is an undisputed fact that, the contract provides that in the event of any ambiguity in any clause, the clarifications provided in the letters dated 26.07.1971, 06.09.1971 and 25.09.1971 would prevail and would be deemed to be authoritative. So in view of the same, the clarification provided by in the letter dated 06.09.1971 should prevail and accordingly, the supplied materials is at the agreed book value and the plaintiff is now estopped from claiming any additional amount based on a subsequently adopted internal policy. Further, apart from producing Ex.D.33, the defendant has not produced any material to show the market rates prevailing at the time of issue of materials. This fact is also admitted by D.W.1 in his cross-examination that he has not produced any documents showing the issue rate and market rate. When the plaintiff has denied the correctness and accuracy of the market rates, It was incumbent upon 186 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the defendant to produce cogent document, to substantiate the alleged market rates. Hence in the absence of any documents to prove the market rates, it can be held that the defendant is not entitled to recover Rs.11,261.43 from the plaintiff towards cost of steel and explosives supplied to the defendant.
142. Now, so far as cost of unadjusted portion of explosives is concerned, D.W.1 has in his evidence deposed that during the execution of the work, the plaintiff found that the gelatin 90% which was not an item that defendant was obliged to issue under Schedule A was more convenient than gelatin 80%, which Schedule A required by the defendant to supply. However the plaintiff used gelatin 90% for the execution of the works. Prior to 1975-76 the plaintiff had drawn 32,600 kgs of gelatin 90% from different stores. Accordingly a sum of Rs.4,92,369.38 was recovered towards gelatin 90% and super dyne which were so supplied on the basis of market rate plus 11% towards 187 O.S. No.2692/1986 C/w. O.S. No.4173/1987 transportation, storage and handling charges. It is stated that gelatin 90% should be considered as a Schedule A item along with Super Dine. The request of plaintiff was considered and it was agreed that the charge will be on the market rate prevailing as on the date of tender. It is stated that the computed rate of gelatin at Rs.5.90 per kg and Rs.5.55 per kg of Super Dine was worked out to Rs.3,72,437.50, as on the date of tender. Upon such computation the balance of Rs.1,19,931.88 was refunded to plaintiff on the basis of an indemnity bond. In the said indemnity bond the plaintiff had undertaken to keep the defendant indemnified for any difference in rate that may be found upon ascertaining the actual prevalent rent market rate as on the date of tender. D.W.1 has deposed that upon having ascertained the market rate, it was found that cost of gelatin 90% as on the date of tender was actually Rs.5.95 per kg instead of Rs.5.90 per kg. On a computation, the difference of Rs.1,630/- has become recoverable from plaintiff.
188 O.S. No.2692/1986
C/w. O.S. No.4173/1987
143. On the contrary, P.W.1 has in his evidence deposed that the plaintiff at the time of execution of the work found that gelatin 90% was not contractually obliged to supply under Schedule A of the Agreement dated 27.06.1972 as it was more effective than gelatin 80% and hence, the defendant was required to supply under the same schedule. Consequently the plaintiff utilised gelatin 90% for the execution of the work. The plaintiff drew a total of 32,600 kgs of gelatin 90% from the plaintiff's stores, which was obliged to be supplied by the defendant under Schedule A. The plaintiff subsequently requested that gelatin 90% be treated as Schedule A item and this request was accepted by the defendant. It is stated that following this understanding, the defendant recovered an amount of Rs.4,92,368.38 from the running bill of the printer by computing the cost of gelatin 90% at Rs.5.90 per kg and Super Dine at Rs.5.55 per kg. However it was later found that the correct amount recoverable was Rs.3,72,437/-. As a result the excess amount was refunded to the plaintiff in 189 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the month of November 1975. Now the defendant contends that the market rate of gelatin 90% was Rs.5.95 per kg on the relevant day and based on this computation is seeking for recovery of Rs.1,630/- from the plaintiff for 32,600 kgs of gelatin 90% drawn.
144. At this point of time, it is necessary to note that in order to establish the market rate of gelatin 90% as on the date of tender the defendant has not produced contemporaneous document to establish the market rate. But except the self-serving statement the defendant has not produced any admissible evidence establishing the market rate of gelatin 90% as on the date of tender and this fact is also admitted by D.W.1 in his cross-examination. So in the absence of any convincing documentary evidence to show the market rate of gelatin 90% as Rs.5.95 per kg, the claim of the defendant for recovery of the amount under this head is not sustainable.
190 O.S. No.2692/1986
C/w. O.S. No.4173/1987
145. Now, so far as cost of machinery spares being the difference between the store's issue rate and market rate is concerned, D.W.1 has in his evidence deposed that initially the cost of spares was computed on the basis of store issue rate in the running bills. The cost of these spares was recoverable at the prevailing market rate plus 11%. transportation costs, Handling and storage charges as on the date of supply of the spares to the plaintiff, which is also evident from clause 4 of Annexure 7 of the Agreement dated 27.06.1972. It is stated that the defendant could not ascertain the market rates despite of their best efforts and hence it had to be worked out by updating the procurement costs, with reference to RBI Index for machinery spares, the difference so worked out is Rs.5,96,549.78 which is payable by the plaintiff to the defendant as per the statement produced by the defendant. But in this regard, it is necessary to note that as per the supplemental agreement dated 08.10.1975 which amended, Clause 4 of Schedule I of the agreement 191 O.S. No.2692/1986 C/w. O.S. No.4173/1987 governs the items relating to issuance of machinery spares by the defendant and it provides that in the event the defendant issues any spares in connection with the hired machinery, the issue price shall be the cost of the spares. Accordingly Annexure 7 to the original agreement including clause 4 stands modified and superseded by the terms of supplemental agreement dated 08.10.1975. Hence the defendant cannot now rely on the original agreement after 6 years of completion of works and to recover the additional amount. Hence the recovery sought by the defendant in this regard is not tenable. Further, D.W.1 in his evidence has clearly admitted that he has not produced any documents to establish the actual procurement cost or the incurred incidental charges. So in the absence of any such supporting documents, the claim of defendant is unsustainable in law.
146. Now, so far as the recovery of interest accrued on advance towards 60 IB rails at 9% per 192 O.S. No.2692/1986 C/w. O.S. No.4173/1987 annum is concerned, D.W.1 has stated that at the request of plaintiff, vide letter dated 22.03.1976, the defendant paid an advance of Rs.9,73,637.6 for the purpose of procurement of rails. The plaintiff had agreed that this advance could be treated as adhoc advance for the purchase of equipments. The said amount has been recovered from the running bills. However interest of 9% which is payable on ad hoc advances has not been deducted and hence it is liable to recover Rs.1,74,779.00 which is the interest at the rate of 9%, for the advance towards procurement of 60 IB rates at 9% per annum. It is evident from the evidence placed on record that an amount of Rs.9,73,637.63 was treated as an adhoc advance to be recovered from the plaintiff. There was no agreement or stipulation between the parties that such adhoc advance would carry interest. The defendant has not produced any document to show that there has been a contract between the parties evidencing rate of interest agreed to be paid by the plaintiff. Further, the defendant 193 O.S. No.2692/1986 C/w. O.S. No.4173/1987 has recovered the entire principal amount from the running account bills and no interest was charged at the time of adjustment. So the fact that the defendant did not seek to recover any interest at the relevant time and remained silent for a considerable period clearly suggests that there was no intention to treat the advance as interest bearing amount. Further there is absolutely no document placed on record to show that there was an agreement between the parties at the time of advancement of funds for the purchase of 60 IB rails that interest would be charged. Further, the silence of the defendant over several years and in the absence of any communication indicating that the parties have agreed to for the interest on the adhoc advance amount, the defendant is now estopped from asserting a claim for interest over the advance towards 60 LB rates at 9% per annum. Further, D.W.1 has though in its evidence deposed that the said recovery of interest at 9% arises out of an indemnity bond executed by the defendant at the time of availing the advance amount, 194 O.S. No.2692/1986 C/w. O.S. No.4173/1987 the plaintiff has not produced the said indemnity bond gives rise to an adverse presumption. Hence, the defendant is not entitled for recovery of Rs.1,74,799/- as interest on the advance of Rs.9,73,637.63.
147. Now, so far as cost of 4,358.372 metric tons of cement not accounted by the plaintiff, which is recoverable under clause 1B of Schedule of the Agreement is concerned, D.W.1 has in his evidence deposed that the plaintiff was required to account for the cement so issued to them in terms of the contract between the parties. The defendant has issued 99,232.60 metric tons of cement to the plaintiff against its indent for the HRT work. The plaintiff has failed to furnish cement reconciliation account. The plaintiff has drawn 6,176.198 metric tonnes of cement in excess. After finalisation of recoveries it has been found that a further quantity of 4,358.372 metric tonnes of cement has been unaccounted and that this was drawn in excess of the actual requirement of the work. As per 195 O.S. No.2692/1986 C/w. O.S. No.4173/1987 terms of clause 1B of the agreement and clause 6 of the supplemental agreement dated 30.09.1983, the defendant is entitled to recover the cost of excess cement so drawn by it. The cost at Rs.235/- per metric ton of cement along with storage, handling and taxes is Rs.12,08,069.15. and hence the plaintiff is liable to pay the said amount. In support of his evidence, D.W.1 has produced Ex.D.36, which is the statement of account.
148. On the contrary, it is the contention of the plaintiff that The defendant had debited and recovered Rs.4,53,923.13 from the final bill in accordance with Schedule A of the Agreement dated 27.06.1972. As such the issue of unaccounted cement was conclusively settled and no further claim is maintainable under this head. At this point of time, it is necessary to note that the defendant has relied upon the The supplementary agreement dated 30.09.1983 and this Court as per the findings on the aforesaid issue has held that the said agreement is not binding upon the 196 O.S. No.2692/1986 C/w. O.S. No.4173/1987 plaintiff. Further, apart from Ex.D.36 which is the statement of the defendant, he has not produced any documentary evidence to substantiate its claim regarding the alleged excess quantities. The defendant has not produced the registers or any other document which would demonstrate as to the excess cement used by the plaintiff. This fact is also admitted by D.W.1 that he has not produced any document to this effect. Further D.W.1 in his cross examination admits that he is the custody of indents and delivery challenge for the cement allegedly issued. But no such document is produced on record. So the lack of primary records and non-examination of the concerned official and failure to produce supporting documents, render the case of the defendant as devoid and the claim of the defendant for recovery of Rs.12,08,069.15 towards unaccounted cement is legally not tenable.
149. Now, so far as the claim of the defendant regarding the steel not accounted by the plaintiff is 197 O.S. No.2692/1986 C/w. O.S. No.4173/1987 concerned, D.W.1 has deposed that the plaintiff failed to account for steel drawn by them for the execution of the work. The defendant having evaluated the works, it was found that the plaintiff has not accounted for the quantities of the steel supplied to them. MS rods of different sizes valued at Rs.18,818.44 and RTS rods of different sizes valued at Rs.6,117.84 is drawn by the plaintiff and it has remained unaccounted. This quantity drawn is in excess of what was required for the execution of the work and hence the plaintiff is liable to pay the same. But it is necessary to note that apart from the self-serving testimony and Ex.D.37 and Ex.D.38 produced by the defendant, he has not produced any contemporaneous records such as steel issue registers, statements or site utilization logs to demonstrate that the quantities in question were not accounted by the plaintiff during finalization of accounts. Hence in the absence of such corroborative documents, the defendant's claim for recovery of Rs.24,936.28 towards unaccounted steel is not tenable. 198 O.S. No.2692/1986
C/w. O.S. No.4173/1987
150. So far as interest accrued on excess payments made in RA bills at 6% per annum is concerned, D.W.1 has in his evidence deposed that as per the Government Order dated 13.12.1976, all the Government Companies have to levy interest at 6% per annum on all payments made that are made in excess of what was due to the contractor. The plaintiff has drawn a sum of Rs.16,68,644.09 under various running account bills. Hence in terms of the government order the plaintiff is liable to pay interest at the rate of 6% per annum which comes to Rs.5,85,333/- and hence the plaintiff is liable to pay the same. But it is necessary to note that, as stated earlier there is no contractual obligation on the part of the plaintiff to pay interest on the outstanding dues liable to be paid by the plaintiff. Further there is no contract between the parties or provision authorizing the defendant to levy or recover interest on any excess payments made under the running account bills. Further, Ex.D.31 nowhere shows 199 O.S. No.2692/1986 C/w. O.S. No.4173/1987 that the recoveries were effected towards the excess of payment from any of the running accounts for the period over 8 years. As rightly contented by the plaintiff counsel, if any excess payment was made, it was made unilaterally by the defendant in the course of their own billing process and hence the plaintiff cannot be held liable to pay interest on the excess payment made. As further, the said government order was neither incorporated in any of the agreements nor the parties have entered into such a mutual understanding in any supplemental agreements. Hence the parties being governed under the rights and obligations under the contract, they cannot unilaterally alter the terms of concluded contract and hence the claim of defendant that the plaintiff is liable to pay interest at the rate of 6% per annum on the excess payment made under the running bills is not tenable. Further there is no document on record to show there is any either excess payment made or that there is contractual obligation on the part of the plaintiff to pay interest on the excess 200 O.S. No.2692/1986 C/w. O.S. No.4173/1987 amount. Hence, the claim of defendant for recovery of interest of Rs.5,85,333/- is not sustainable.
151. Now so far as the centage charges and machinery and equipments sold to the plaintiff and interest accrued thereon at 5% is concerned, D.W.1 in his evidence has deposed that various machinery and equipment were purchased for the purpose of the project and at the request of the plaintiff it was sold to them. At the time of sale of the said machinery, the plaintiff was only debited with the book value of the machinery. It is stated that these equipment and machinery were purchased by the plaintiff from the defendant's stores in terms of clause 4 of Section 7 of Agreement dated 27.06.1972 and the plaintiff ought to have paid 11% of the book value as centage charges in addition to the book value of the equipment. The centage charges so payable was Rs.2,96,608.11. The plaintiff retained the said benefit and hence they are liable to pay interest on the said unpaid centage 201 O.S. No.2692/1986 C/w. O.S. No.4173/1987 charges as was applicable to all machinery at the rate of 5% on all machinery advances and hence the plaintiff is liable to pay Rs.66,290.80 at the rate of 5% per annum as per clause 4 of Supplemental Agreement dated 08.10.1975 and thus the plaintiff is liable to pay Rs.3,62,892.91. D.W.1 has produced Ex.D.32, which is the statement showing the computation of centage charges and the interest recoverable from the plaintiff. It is necessary to note that the sale of machinery was an independent transaction between the plaintiff and the defendant and it did not form the part of HRT Agreement dated 27.06.1972. The terms of the original agreement provided for hiring of the machinery and equipment and there is no clause for sale of such items. Thereafter, the sale price was separately negotiated and both parties mutually agreed and the machinery equipment was re-transferred to the plaintiff. So under such circumstances, the defendant's claim is not sustainable.. The defendant has received the full agreed price and did not raise any demand at the time 202 O.S. No.2692/1986 C/w. O.S. No.4173/1987 of sale. The contract nowhere empowers the defendant to lease and take charges on the sale value of the machinery. So in the absence of any specific contractual provision, the claim of defendant for recovery of amount under this head has no legal basis.
152. So far as difference in the issue rates and market rates of non schedule A items is concerned, D.W.1 has stated that during the period of execution of HRT work the defendant had drawn a number of non schedule A items from the defendant stores. The cost of these materials were recovered from the running account bills of the plaintiff at issue rates. Hence the defendant is entitled to recover the cost of these materials at their market rates. It is stated that since the market rates were not available, the defendant has derived the rates by updating the procurement cost of these materials on the basis of the RBI Index. On the basis of the rates so determined, the plaintiff is found to be due in a sum of Rs.2,99,465.12 to the defendant, 203 O.S. No.2692/1986 C/w. O.S. No.4173/1987 being the difference between the market rates and issue rates of non-schedule A items drawn by plaintiff. Hence, the plaintiff is due to the defendant a sum of Rs.28,82,614.19.
153. So now the defendant is asserting to recover the cost of the materials at the prevailing market rates and not at the issue rates on the ground that the materials supplied were non schedule items not covered under the original contract. Further it is necessary to note that, the defendant has solely relied upon the terms of the agreement more particularly clause 4 of Section 7 to support the claim for recovery at market rates. But it is necessary to note that as per the terms set out in clause 24B of the letter dated 06.09.1971, the terms in the earlier contract has been superseded by the said letter and it has been accepted and incorporated into the final contractual agreement as the letter forms an integral part of the contract which is mutually agreed between the parties. It is necessary 204 O.S. No.2692/1986 C/w. O.S. No.4173/1987 to note that the claim of the plaintiff for recovery of the amount under the present head at market prices is not supported by any document, quotation or any document to prove the prevailing market prices. Hence the claim for the said amount is not tenable. Thus in view of the aforesaid reasonings this Court is of opinion that the defendant has failed to establish its entitlement for recovery of the amount from the plaintiff and hence it is estopped from asserting the claims made in the present suit. Accordingly, Issue No.3 in O.S. No.4173/1987 is answered in the Negative and issue No.4 in O.S. No.4173/1987 is answered in the Affirmative & issue No.5 in O.S. No.2692/1986 is answered in the Negative.
154. ISSUE NO.7 IN O.S. NO .4173/1987 : The plaintiff has raised the specific contention that the present suit O.S. No.4173/1987 filed by the defendant is barred by law of limitation. It is evident from the records that, the present suit was filed by the defendant 205 O.S. No.2692/1986 C/w. O.S. No.4173/1987 on 21.09.1987 for recovery of certain amounts due from the plaintiff. So as per Article 113 of Limitation Act, 1963, a suit for recovery of money based on a contract must be instituted within 3 years from the date when the right to sue accrues. Learned counsel for the defendant in his arguments submits that the liability to pay arises only after computation of final bill since the amounts under various heads and accounts have to be adjusted before computing the final amount and it is submitted that the final computation depicts a debit balance and hence, the defendant is seeking to recover the amount from plaintiff under the HRT contract. It is submitted that since the final bill was prepared on 22.09.1984 the instant suit filed on 21.09.1987 is well within the period of limitation. On the contrary, the learned Senior counsel for the plaintiff in his arguments submits that the work was completed on 29.07.1979 and despite the completion of the work the defendant did not raise any formal or legal demand for payment of the sums claimed in the suit within the reasonable time 206 O.S. No.2692/1986 C/w. O.S. No.4173/1987 and the defendant has relied upon the final bill dated 21.09.1984 as the starting point for limitation. But mere preparing a final bill by the defendant without acceptance or acknowledge by the plaintiff cannot extend the limitation period. Further even if the Bill was admitted on 22.09.1984 there is no acknowledgment of liability from the defendant in writing or otherwise, as contemplated under Sec.18 of the Limitation Act to extend the limitation period and therefore, if the period of limitation is computed from the date of completion of work on 29.07.1979 or even from the date of final bill i.e. 21.09.1984 the suit filed on 21.09.1987 is barred by limitation.
155. The present suit is one for recovery of amount due under the contract for construction of head race tunnel. So as per Article 113 of Limitation Act where a suit is one for recovery of money based on a contract, the suit has to be instituted within 3 years from the date when the right to sue accrues. It is an 207 O.S. No.2692/1986 C/w. O.S. No.4173/1987 undisputed fact that, the work was completed on 29.07.1979 and though there is dispute about the computation and the recoveries done in the final bill, it is evident from the records that, the final bill was prepared on 21.09.1984. So the right to sue accrued to the defendant on 21.09.1984 and the right to sue accrued to the defendant to file the suit since the various omissions and recoveries were disputed by the plaintiff on the date of preparing the final bill which was admitted on 22.09.1984. So this itself shows that when the final bill is prepared on 21.09.1984 the suit ought to have been filed within 3 years i.e. on or before 21.09.1986, but the present suit is filed on 21.09.1987 which is beyond the period of 3 years limitation prescribed for recovery of money. Further as rightly contended by learned senior counsel for plaintiff there is no acknowledgment executed by the defendant within the period of limitation as contemplated under Sec.18 of the Limitation Act and so the limitation period is not extended. So this shows the suit is barred by law 208 O.S. No.2692/1986 C/w. O.S. No.4173/1987 of limitation and even on this count, the defendant is not entitled for the relief claimed. Hence, this issue is answered in the Affirmative.
156. ISSUES NO.8 AND 9 IN O.S. NO.
4173/1987 :: In view of the findings given on aforesaid issues, since the defendant has failed to establish its claim, the defendant is not entitled for the reliefs claimed in the present suit and hence, this Court proceeds to answered issues No.8 in the Negative and issue No.9 is answered as per final order.
157. ISSUES NO.7 IN O.S. NO. 2692/1986 AND ISSUE NO.9 IN O.S. NO.4173/1987 :: As per my findings given on the aforesaid issues, the plaintiff is entitled for recovery of Rs.23,56,229/- with interest at the rate of 9% per annum from 29.01.1981 till its realisation and this issue is answered accordingly.
ORDER The suit bearing O.S. No.2692/1986 is decreed in part with costs.
209 O.S. No.2692/1986
C/w. O.S. No.4173/1987 The plaintiff in O.S. No.2692/1986 is entitled for recovery of Rs.23,56,229/- with interest at the rate of 9% per annum from 29.01.1981 till its realisation.
The suit bearing O.S. No.4173/1987 is dismissed.
Defendant shall bear the cost of the said suit.
Draw decree accordingly.
(Dictated to the Stenographer, transcribed by her, transcription corrected and then pronounced by me in the open Court on this the 01st day of December, 2025).
(Keep the original judgment in O.S. No.2692/1986 and copy of the same in O.S. No.4173/1987).
(VEENA N.) XL Addl. City Civil & Sessions Judge, Bengaluru City.
ANNEXURES IN BOTH THE SUITS I. LIST OF WITNESSES EXAMINED ON BEHALF OF :
(A) PLAINTIFF'S SIDE ::
P.W.1 :: Amarnath Vhavale
(B) DEFENDANTS SIDE ::
D.W.1 :: C.K.Hegde
210 O.S. No.2692/1986
C/w. O.S. No.4173/1987
II. LIST OF DOCUMENTS EXHIBITED ON BEHALF OF:
(A) PLAINTIFF'S SIDE ::
Ex.P.1 & :: Original agreements entered into between Ex.P.2 defendant and M/s. TICIL dated 27.06.1972 Ex.P.1A & :: Copies of Ex.P.1 and page No.2 to 158 of Ex.P.1B Ex.D.40 Ex.P.3 :: Certified copy of the order passed the Hon'ble High Court of Calcutta in C.P. No.506/1983 Ex.P.4 & :: True copies of letter from TICIL to Ex.P.5 defendant dated 10.02.1981 and 29.04.1981 Ex.P.6 to :: Copies of letter correspondence between Ex.P.13 TICIL and defendant which are 8 in number and subject to objections as submitted by learned counsel for defendant these copies of letters Ex.P.14 to :: 3 letters communicated between TICIL Ex.P.16 and defendant Ex.P.17 to :: 3 more letters correspondence between Ex.P.19 the plaintiff and defendant regarding cement transportation Ex.P.20 to :: 4 Letters correspondence between the Ex.P.23 plaintiff and defendant dated 18.08.1980, 10.04.1981, 09.05.1982 & 27.07.1978 Ex.P.24 to :: 8 copies of letters correspondence Ex.P.31 between the plaintiff and defendant during the period from 23.11.1981 to 26.04.1985 Ex.P.30(a) :: Letter 211 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Ex.P.32 & :: 2 letters correspondence from plaintiff to Ex.P.33 defendant dated 04.12.1980 & 12.11.1984 Ex.P.34 :: Copy of notice Ex.P.34(a) to :: Postal acknowledgments Ex.P.34(f) Ex.P.35 to :: Bank guarantees No.56/72 & 57/72 Ex.P.42 Ex.P.43 :: Copy of letter from plaintiff to defendant Ex.P.44 :: Letter from defendant to oriental bank of commerce Ex.P.45 :: Letter from defendant to plaintiff dated 26.05.1985 Ex.P.46 :: Letter dated 28.02.1984/ 01.03.1984 Ex.P.47 :: Copy of letter dated 14.03.1984 Ex.P.48 :: Another letter dated 22.03.1984 Ex.P.49 & :: The notarial certificate along with the Ex.P.50 Power of Attorney dated 12.10.1981 Ex.P.51 & :: Copies of two letters dated 27.06.1972 & Ex.P.52 28.06.1972 Ex.P.53 & :: Copies of the final bills Ex.P.54 Ex.P.53A & :: Signatures of accountant Ex.P.53B Ex.P.55 :: Letter dated 14.07.1984 Ex.P.56 :: Letter dated 19.11.1984 212 O.S. No.2692/1986 C/w. O.S. No.4173/1987 (B) DEFENDANTS SIDE ::
Ex.D.1 :: Letter in F/2 9504/81 dated 30.10.1981 Ex.D.2 :: Letter of plaintiff company in Ref. No.NPC/ 3/3263/75 dated 26.03.1975 Ex.D.3 :: Extract of a Notarial certificate dated 12.10.1981 Ex.D.3(a) :: Signature of Mr. Pramod Chopra Ex.D.4 & :: Letter dated 27.07.1972 & A Board Ex.D.4(a) & Resolution along with annexures issued
(b) from P.W.1 company Ex.D.5 :: Letter of KPCL dated 09.09.1977 Ex.D.6 :: Original supplementary agreement dated
30.09.1983 Ex.D.6(a) :: Stamp Seal Ex.D.7 :: Original supplementary agreement dated 30.09.1983 Ex.D.8 :: Authorization letter dated 04.12.2004 Ex.D.9 :: Letter dated 09.09.1977 Ex.D.10 :: Letter dated 09.09.1977 Ex.D.11 :: Letter dated 22.04.1983 Ex.D.12 :: Letter dated 27.03.1976 Ex.D.13 :: Letter dated 06.10.1983 Ex.D.14 :: Office copy of letter dated 17.05.1983 Ex.D.15 :: Letter dated 26.02.1982 Ex.D.16 :: Inter-office letter dated 16.10.1984 Ex.D.17 :: Work completion report Ex.D.18 :: Office copy of letter dated 29.04.1983 Ex.D.19 :: Certified copy of the original Minutes of 135th Meeting of the Civil Committee of Board of Directors of KPCL Ex.D.20 :: Final bill copy of HRT 213 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Ex.D.20A & :: The abstracts of the final bill Ex.D.20B Ex.D.21 :: Objection of the plaintiff's side Ex.D.22 :: Office copy of the letter dated 04.09.1982 Ex.D.23 :: Office copy of the letter dated 19/20.09.1983 Ex.D.24 :: Office copy of the letter of KPCL dated 10.11.1983 Ex.D.25 :: Office of the letter of KPCL dated 07.04.1984 Ex.D.26 :: Office copy of the letter of KPCL dated 12.07.1984 Ex.D.27 :: Copy of the Inter office letter dated 19.03.1986 Ex.D.28 :: Copy of the Inter office letter dated 12/14.03.1986 Ex.D.29 :: Copy of the inter office letter dated 22/24.03.1986 Ex.D.30 :: Copy of the Inter office letter dated 03.05.1986 Ex.D.31 :: Interest calculation statement as annexure-
8(a) prepared by KPCL Ex.D.32 :: Statement of calculation of interest on Dumpers and Tippers sold Ex.D.33 :: Details of J.E. No.1382 for Rs.11,00,261.43 Ex.D.34 :: Statement of showing the different cost of machineries issued to M/s. TICIL Ex.D.35 :: Statement showing the calculation of interest at 9% p.a. Ex.D.36 :: Statement showing the details of excess quantity cement drawn Ex.D.37 :: Statement showing the difference in cost of RTS rods for wastage in final bill of HRT 214 O.S. No.2692/1986 C/w. O.S. No.4173/1987 Ex.D.38 :: Statement showing the difference in cost of MS rods for wastage in final bill of HRT Ex.D.39 :: Extra item final bill of HRT Ex.D.39A & :: Signatures of D.W.1 Ex.D.39B Ex.D.40 :: Agreement for construction headrace tunnel from Bommanahalli Lake to surge point Ex.D.40A :: The document referred as agreement at Sl.
No.1 in Ex.P.1
Ex.D.40B :: Pages No.119 to 141 in Ex.D.40
Ex.D.40C :: Pages No.142 to 151 in Ex.D.40
Ex.D.40D :: Pages No.152 to 157 in Ex.D.40
Ex.D.40E :: Pages No.158 in Ex.D.40
Ex.D.40F :: Pages No.159 to 170 in Ex.D.40
(VEENA N.)
XL Addl. City Civil & Sessions Judge,
Bengaluru City.