Delhi District Court
Government Of Nct Of Delhi vs M/S Hindustant Steelworks ... on 6 June, 2022
IN THE COURT OF SH SACHIN JAIN, ADDL. DISTRICT
JUDGE - 02, SOUTH WEST DISTRICT, DWARKA
COURTS, DELHI
CSDJ ADJ No.15740/2016
CNR No. DLSW01-000825-2016
IN THE MATTER OF:
Government of NCT of Delhi
Through executive Engineer's
Building Project Division B-132
Public Works Department
Dabri Police station Complex
Dabri, New Delhi - 110045 ... Plaintiff
Versus
M/s Hindustant Steelworks Construction Ltd
2nd Floor, Core IC, Scope Minar
Laxmi Nagar District Centre
Laxmi Nagar
Delhi - 110092 ... Defendant
Date of institution of suit: 26.11.2010
Date of order reserved: 28.05.2022
Date of pronouncement of judgment: 06.06.2022
JUDGMENT
1. Plaintiff filed the present suit for recovery of Rs.31,67,944/- along with interest @18%per annum apart from the relief of cost of the suit.
CS DJ ADJ15740/16 Page No. 1/372. Briefly stated, it is the case of the plaintiff that defendant company is Government undertaking, duly incorporated under the Companies Act, having office at 8A, Vandana, 11 Tolstoy Marg, New Delhi.
3. It is the case of the plaintiff that the Division No.27 (now renamed as Building Project Division B-132), in the month of February, 2002 invited the tender for construction of Govt. Girls Senior Secondary School, Sector-3, Dwarka, New Delhi and the defendant being the lowest bidder was awarded with the contract vide plaintiff's letter no.54 (821)/PWD Div.27/A-2/1052 dated 10.05.2002.
4. It is further stated that in compliance of the aforesaid letter, the defendant executed the agreement and 18 months time was allowed for completion of the project w.e.f. 20.05.2002 till 19.11.2003. It is further submitted that as per clause 2 of the general terms and conditions of the contract, if the contractor fails to complete the work on or before the completion date or extended date, he shall pay compensation as per clause 2 of the agreement.
5. It is further stated that the defendant failed to complete the work within stipulated time period and the work was abnormally delayed by the defendant by 1006 days and could be completed only on 21.08.2006 and as the work was completed only on 21.08.2006, the defendant sought extension of time up to 21.08.2006 on various grounds vide letter dated 15.02.2007. It is stated that defendant applied for hindrance for about 4935 days CS DJ ADJ15740/16 Page No. 2/37 without considering any overlapping period, however, the work has been delayed by 1006 days from the stipulated date of completion.
6. It is further stated that after examining the extension request, it is found that the delay of 1006 days is not justified and therefore, on 21.07.2008 a show cause notice was issued to the defendant to show cause why the compensation be not levied in terms of clause 2 of the general terms and conditions of the contract, which was duly replied vide letter dated 30.07.2008 and on receipt of the reply from the defendant, the case was again re-examined and it was decided by the Superintendent Engineer "hereinafter referred as SE" (whose decision in writing is final and binding as per the terms and conditions of clause 2 of the agreement) vide letter dated 08.05.2009 and it was communicated the delay was justified up to 29.11.2005 (748 days) and compensation under clause 2 of the agreement was levied @10% of the tendered amount i.e. Rs.32,47,944/- for the delayed period from 30.11.2005 to 21.08.2006.
7. It is further stated that again vide letter dated 04.06.2009, the defendant was directed to pay a sum of Rs.31,67,944/- as compensation after deducting the amount of Rs.80,000/- which was lying with the plaintiff on behalf of the defendant. It is further stated that the letter was duly received by the defendant but the defendant failed to make the payment and thus the defendant is illegally withholding the amount and is liable to pay interest @18% per annum from 04.06.2009, hence the present suit.
CS DJ ADJ15740/16 Page No. 3/378. Summons for settlement of issues was issued to the defendant and the defendant filed its written statement and taken the preliminary objection that as per clause 25 of the agreement. It was agreed upon that in case of any dispute arising out of the contract awarded, it will be settled through arbitration but in the present case the plaintiff without following the agreed procedure has filed the present suit and thus the present suit is not maintainable and is liable to be dismissed on this ground itself.
9. It is further stated that the plaintiff has concealed/suppressed the material facts such as, the plaintiff has not disclosed that its Executive Engineer i.e. Engineer In charge of the contract (hereinafter referred as EE) vide recommendation dated 29.05.2007 had recommended the extension of time without levy of compensation and while recommending the same it was noted down by the EE that the department has not suffered any liquidated damages/losses on account of delay. It is further stated that it is the settled principle of law that in case of claiming the damages, one has to prove the actual losses suffered but in the present case the plaintiff has not placed on record any document to prove the amount of damages claimed in the captioned suit.
10. It is further claimed by the defendant that the plaintiff has falsely suggested that the delay in execution of contract is attributable to the answering defendant. It is submitted by the defendant that it is the plaintiff who failed to fulfill the contractual obligation like supply of drawings, approval of rates for deviated CS DJ ADJ15740/16 Page No. 4/37 quantities and extra items and delay in handing over of sites etc.
11. It is submitted by the defendant that the initial drawing was issued only on 19.08.2002 and the electrical drawings were directed to be issued on 03.05.2003 and the defendant vide letter dated 01.04.2003 informed the plaintiff regarding scarcity of reinforcement steel in the market which was duly acknowledged by the Superintending Engineer (herein after referred as SE) during site visit and he agreed to issue steel from the Central Store on cost recovery basis and accordingly the then AE-VI raised the indent to procure the steel from Central Store but the matter remained unresolved, this also delayed the execution of contract and further proved beyond reasonable doubt there was an actual and acute scarcity of steel in the market.
12. It is further claimed by the defendant that plaintiff even failed to supply the drawing for rain water harvesting tank, all the service drawings, aluminum section for doors and windows, staircase and corridor railings and details of external development works etc., which further cause delay in execution of the contract. It is further claimed that the plaintiff issued instructions on 17.07.2004 not to execute those works having deviation in quantities and it is pertinent to mention that the majority of works to be executed were having deviation in quantity.
13. It is further stated that all these acts and conducts of the plaintiffs clearly establish that the delay, if any, in execution of work were attributable to the plaintiff and not to the defendant CS DJ ADJ15740/16 Page No. 5/37 which is also evident from the facts that the plaintiff recommended extension of time from 20.11.2003 to 21.08.2006 without levy of any compensation mentioning therein that as due to delay in execution of the work, the plaintiff has not suffered any losses.
14. It is further stated by the defendant that after passing of nearly two years from the date of recommendations of the EE for grant of extension of time without levy of compensation, the SE granted extension of time up to 29.11.2005 without levy of compensation and from 30.11.2005 to 21.08.2006 inspite of recommendations levied compensation of Rs. 32.47 lakhs on the works executed for a value of Rs. 11.60 lakhs only during the period from 30.11.2005 to 21.08.2006. The compensation was levied on those works whose fronts were made available only on 21/06/2006 which is evident from plaintiff's records itself i.e. aluminum works and for those items whose quantities ran into deviations and decisions for executing the work item is annexed items were given in March 2006.
15. It is further the stand of the defendant that the SE without giving an opportunity of hearing, without assigning any reasons and without following the principles of natural justice, imposed the compensation at 10% of the total contract value amounting to ₹32,47,944/- which is contrary to the settled principle of law. Even as per the guidelines issued by CPWD for operation of the clauses of the contract, the SE has to give the notice to indicating his intention to levy any compensation. But in the present case no such CS DJ ADJ15740/16 Page No. 6/37 notice was issued by the SE to the answering defendant.
16. It is further the stand of the defendant that the plaint has not been signed by the competent authority as no authorization letter has been placed on the court file. Defendant further relied upon clause 5 of the contract agreement which deals with time an extension for delay and clause 5.2 deals with the reasons for delay and by relying upon the clause 5 of the agreement it is the stand of the defendant that the EE after considering all the facts and circumstances of the case as well as record and application for extension of time submitted by using defendant recommended extension of time up to 21/08/2006 without levy of compensation.
17. The defendant in his reply on merits admitted the execution of tender contract and also admitted that the contract was awarded to him for a total consideration of ₹ 3,24,79,455/-. He also admitted the contract period of 18 months was initially agreed between the parties for the completion of the work. However it is the stand of the defendant as reiterated by him in preliminary objections that delay in execution of the contract is completely attributable to the plaintiff itself as to their inability to supply the drawings in time and to fulfill contractual obligations on time there was delay in completion of work on the part of the plaintiff and therefore, clause No. 2 of the agreement will not be applicable in present case and the plaintiff cannot levy compensation taking the shelter of clause No. 2 of the agreement. The rest of the averments of the plaintiff in the plaint are denied by the defendant and he CS DJ ADJ15740/16 Page No. 7/37 reiterated the stand taken by him in the preliminary objections.
18. In replication to the written statement filed by the defendant, the plaintiff stated that levy of compensation is the governed by the clause 2 of the agreement which is out of view of arbitration clause 25 of the agreement. Action clauses are independent and same is glorified as per the documents filed by the defendant for the general guidance for operation of clause at para (4) P-88.
19. It is stated that the recommendations dated 29/05/2007 given by the EE, building project division B-132 to his higher authorities was internal matter of the Department. The defendant has nothing to do with the internal correspondence. The competent authority is not bound to accept the recommendations of his subordinate officers. The competent authority whose decision in writing is final and binding has decided extension of time as per power delegated to them. The competent the after considering all the hindrances had decided the case on merit basis.
20. It is further stated that the SE after considering all the hindrances causing delay as submitted to him by the EE in charge in writing were considered and accordingly the extension of time was granted without levy of composition up to 29/11/2005 and the compensation is levied only form the period starting from 30/11/2005 to 21/08/2006 as per clause 2 of the agreement i.e. 10% of the tender value of the work and not on the balance amount of work . It is further stated that the plea of the defendant that he was not given any opportunity of hearing is incorrect as it is evident CS DJ ADJ15740/16 Page No. 8/37 from their letter dated 30/07/2008 vide which the defendant had replied the show cause notice served by the plaintiff. It is further stated that EE, BPD-132 is the competent authority to sign the plaint as the work was handled by him as per section 35.19 of CPWD manual. Necessary authorization from the competent authority has already been obtained vide U.O. Note 23(9)/CE- B1/Dwarka School/798 dated 10.12.2009. The plaintiff denied rest of the averments of the defendant taken in the written statement.
21. On the basis of the giving of the parties the following issues were framed all 06.04.2015 :-
1) Whether the plaintiff is entitled to a decree of ₹ 3,167,944 on account of compensation under clause 2 of the agreement dated 10/05/2002? ...OPP
2) If issue No. 1 is decided in the favour of the plaintiff whether the plaintiff is entitled to claim interest on the aforesaid amount and if so, at what rate and for what period?
... OPP
3) Relief
22. It is also relevant to observe that at the stage of framing of issues the defendant conceded that clause 25 of the agreement does not include the dispute raised in the present suit, which amounts to waiver and therefore, in view of the statement made by the defendant before the court the issue to the effect whether the present suit of the plaintiff is not maintainable in terms of section 8 CS DJ ADJ15740/16 Page No. 9/37 of the Arbitration and Conciliation Act was not framed.
23. Plaintiff in order to prove his case examined four (4) witness.
24. Mr. Paras Ram, EE, Housing Project Division- I, appeared in the witness box as PW-1 and tendered his evidence by way of affidavit Ex.PW-1/A and also relied upon the following documents:
(i) Award Letter executed by the defendant - Ex P-1;
(ii) General conditions of contract for Central PWD work - Ex P- 2;
(iii) Index in respect of the description of tender - Ex P-3
(iv) Special conditions - Ex P-4
(v) Specification for work exhibition - Ex P-5
(vi) Schedule of quantity - Ex P-6
(vii) Letter dated 14.02.2002 - Ex P-7
(viii) Letter dated 17.04.2002 to the Engineer in Chief PWD - Ex P-8
(ix) Letter dated 10.05.2002 to the Hindustan Steel works - Ex P-9
(x) Letter dated 15.02.2007 - Ex P-10
(xi) Letter dated 30.07.2008 - Ex P-11
(xii) Letter dated 21.07.2008 - Ex P-12
(xiii) Letter dated 08.05.2009 - Ex P-13
(xiv) Letter dated 04.06.2009 - Ex P-14
(xv) Memorandum dated 20.06.2009 - Ex P-16 (sic)
25. Mr. Anil Kumar Kulshreshta, EE appeared in the witness CS DJ ADJ15740/16 Page No. 10/37 box and tendered his evidence by way of affidavit Ex PW2/A and relied upon the documents already exhibited as Ex P-1 to Ex P-15.
26. Mr. BB Dhar, Retired Chief Engineer PWD appeared in the witness box and tendered his evidence by way of affidavit Ex PW3/A and relied upon the following documents :-
(i) Plaintiff's Letter No. 54(821)/PWD Div 27/A-2/1052 dated 10.05.2002 - Ex PW 3/1;
(ii) Letter dated 15.02.2007 - Ex PW-3/2;
(iii)Letter dated 21.07.2008, 30.07.2008 and 08.05.2009 - Ex PW3/3 to Ex PW3/5;
(iv) letter dated 09.07.2008 - Ex PW3/6
(v) Letter dated 04.06.2009 - Ex PW3/7
(vi) Memorandum dated 20.06.2009 - Ex PW3/8 Documents put/ produced during the cross examination:-
(i) Ex PW3/PX-1 - detail of quantity of cement issued to defendant;
(ii) Ex PW3/PX-2 - chart prepared by PW-3;
(iii) Ex PW3/PX-3 - letter written by PW-3 seeking details of cement issued to defendant.
27. Mr. Jai Bhagwan, Executive Engineer (Retd) from PWD appeared in the witness box as PW-4 and tendered his evidence by way of affidavit Ex PW4/A and proved the following documents:-
(i) Plaintiff's letter No. 54(821)/PWD Div 27/A-2/1052 dated 10.05.2020 - Ex PW4/1;
(ii) Award Letter executed by the defendant - Ex PW4/2;
CS DJ ADJ15740/16 Page No. 11/37(iii) Letter dated 15.02.2007 - Ex PW4/3;
(iv)Letter dated 21.07.2008, 30.07.2008 and 08.05.2009 - Ex PW4/4 to Ex PW4/5 and Ex PW4/8
(v) Letter dated 04.06.2009 - Ex PW4/6
(vi) Memorandum dated 20.06.2009 - Ex PW4/7 Documents put/ produced during the cross examination:-
(i) Ex PW4/PX-1 - Recommendation for levy of compensation dated 08.04.2009 prepared by PW-4.
28. Defendant in order to prove his case examined one (1) witness.
29. Mr. Ashok Kumar Popli, Head (Projects) Incharge of defendant has appeared in witness box as DW-1 and tendered his evidence as Ex DW1/A and proved the following documents :-
(i) copy of letter No. 54(821) PWD Div. 27/A-2/ 1052 dated 10.05.2002, which is already admitted as Ex.P-9;
(ii) copy of initial drawing were issued to the contractor on 09.08.2002, 12.08.2002, 19.08.2002 and 23.06.2003, which are already exhibited as Ex.D-7;
(iii) Executive Engineer's recommendation of extension of time without compensation, which is already exhibited as Ex.D-2;
(iv) copy of letter dated 12.09.2005 , which is already exhibited as Ex.D-40;
(v) copy of letter dated 08.09.2006 , which is already exhibited as Ex.D-41;
(vi) copy of Hindrance Register , which is already exhibited as CS DJ ADJ15740/16 Page No. 12/37 Ex.D-44;
(vii) Copy of General Guidance for Operation of contract, which is already exhibited as Ex.D-49, and
(viii) copy of appeal to the Chief Engineer, which is already exhibited as Ex.D-48.
30. I have heard the arguments of Ld. Counsel for both the parties and gone through the record.
FINDING
31. Before adverting further it is important to reproduce the relevant clauses of the agreement and general guidance for operation of contract clauses which is relied upon by the parties. Clause 2 of the Contract agreement provides as follows:
Clause 2 If the contractor fails to maintain the required progress in terms of clause 5 or to complete the work and clear the site on or before the contract or extended date of completion, he shall without prejudice to any other right or remedy available under the law to the Government on account of such breach, pay as agreed compensation, the amount calculated at the rate stipulated below or such smaller amount as the Superintending Engineer (whose decision in writing shall be final and binding) may decide on the amount of tendered value of the work for every completed day/week (as applicable) that the Progress remains below that specified in Clause 5 or that the work remains incomplete. This will also apply to items or group or items for which a separate period of completion has been specified.CS DJ ADJ15740/16 Page No. 13/37
i) Completion period (as originally stipulated) not exceeding 3 months @ 1 % per day
ii) Completion period (as originally stipulated) Exceeding 3 months @ 1% per week Provided always that the total amount of compensation for delay to be paid under this condition shall not exceed 10% of the Tendered Value of work or of the tendered value of the item or group of items of work for which in separate period of completion is originally given.
CLAUSE-5 The time allowed for execution of the Works as specified in the Schedule 'F' or the extended time in accordance with these conditions shall be the essence of the Contract. The execution of the works shall commence from the 15th Day or such time period as mentioned in letter of Award after the date on which the Engineer-In-Charge issues written orders to commence the work or from the date of handing over of the site whichever is later. If the Contractor commits default in commencing the execution of the work as aforesaid Government shall without prejudice to any other right or remedy available in law, be at liberty to forfeit the earnest money absolutely.
5.1_______________________________ 5.2 If the work(s) be delayed by:
CS DJ ADJ15740/16 Page No. 14/37i. force majeure, or ii. abnormally bad weather, or iii. serious loss or damage by fire, or iv. civil commotion, local commotion of workmen, strike or lockout, affecting and the trades employed on the work, or. V. delay on the part of other contractors or tradesmen engaged by Engineer-in-Charge in executing work not forming part of the Contract, or vi. non-availability of stores, which are the responsibility of Government to supply or vii. non-availability or break down of tools and Plant to be supplied or supplied by Government or viii. any other cause which, in the absolute discretion of the authority mentioned in Schedule 'F' is beyond the Contractor's control.
Then upon the happening of any such event causing delay, the Contractor shall immediately give notice thereof in writing to the Engineer-in-Charge but shall nevertheless use constantly his best endeavors to prevent or make good the delay and shall do all that may be reasonably required to the satisfaction of the Engineer-in-Charge to proceed with the works.
5.3 Request for extension of time, to be eligible for consideration, shall be made by the Contractor in writing within fourteen days of the happening of the event causing CS DJ ADJ15740/16 Page No. 15/37 delay on the prescribed form. The Contractor may also, if practicable, indicate in such a request the period for which extension is desired.
5.4 In any such case the authority mentioned in Schedule 'F' may give a fair and reasonable extension of time for completion of work. Such extension shall be communicated to the Contractor by the Engineer-in Charge in writing, within 3 months of the date of receipt of such request. Non application by the contractor for extension of time shall not be a bar for giving a fair and reasonable extension by the Engineer-in-Charge and this shall be binding on the contractor.
Clause 32.1.1 of General Guidance for operation of contract clauses 32.1.1 Notice to the contractor Under these clauses, irrespective of the value of the contract, the SE alone is competent to levy compensation. The decision as to the quantum of compensation calculated on basis of rate given in clause, to be levied has therefore necessarily to be given in all cases by the SE.
The Superintending Engineer should give a registered notice to the contractor, of his intention to levy the compensation. A specimen notice is given in Annexure. Reply submitted by the contractor, if any should be taken while deciding the compensation.
32. From the pleadings of the parties it is observed that the present case is primarily based on documentary evidence rather CS DJ ADJ15740/16 Page No. 16/37 than oral evidence as both the departments involved in the present case are Government undertakings. There is no dispute between the parties with regard to the execution of tender agreement, the tender amount, time stipulated for the completion of project i.e. 18 months starting from 20.05.2002 to 19.11.2003, delay in completion of work, which is completed on 21.08.2006.Even it is not a disputed fact that there is delay of 1006 days without overlapping of period in the completion of the project.
33. For better understanding, it is relevant to lay down the chronology of events:
- 10.05.2002 - Tender was awarded to defendant vide letter no. 54(821)/PWD Div.27/A-2/1052.
- Time period of completion of tender was 18 months w.e.f. 20.05.2002 to 19.11.2003.
- 21.08.2006- Work completed with delay of 1006 days.
- 15.02.2007 - Extension of time (EOT) sought by the defendant on the ground of hindrances without overlapping period of 4935 days.
- 29.05.2007- EOT alongwith other relevant documents and recommendations was sent by the then Executive Engineer, PWD, Division-27 to Executive Engineer, Division M-123 for onward transmission to Superintending Engineer, M-12.
- 21.07.2008- Show cause notice as per clause 2 of the contract was issued to the defendant.
- 30.07.2008- Defendant sent reply to the show cause notice CS DJ ADJ15740/16 Page No. 17/37 and reiterated its stand as stated in letter of EOT sent on 15.02.2007.
- 08.04.2009 - Executive Engineer , Building Project Division, B-132 has sent his comments after taking into consideration the recommendations of EE dated 29.05.2007, reply of defendant dated 30.07.2008 and cross checking with the record available with office to Building Project Manager, B-13, Sector 9, Dwarka, New Delhi.
- 08.05.2009- Superintending Engineer (Building Project Manager, B-13) intimated to the defendant that out of 1006 days of delayed period, EOT upto 29.11.2005 granted and for delayed period w.e.f. 30.11.2005 to 21.08.2006, the defendant is liable to pay compensation @ 10% of the tender value i.e. Rs. 32,47,944/- as per the powers conferred on him by clause 2 of the agreement.
- 18.05.2009- The order dated 08.05.2009 of the SE was re- communicated by the then Engineer-in-charge (PW-4) to the defendant.
- 20.05.2009- Corrigendum issued by the office of Engineer- in-charge that the order of levy of compensation mentioned in communication letter dated 18.05.2009 was passed by the SE.
- 03.06.2009 - The defendant sent letter to Chief Engineer, B- 1, raising the grievance against the order dated 08.05.2009, 18.05.2009 and 20.05.2009 and requested for re-
CS DJ ADJ15740/16 Page No. 18/37consideration of the orders of the SE. which was excommunicated to
- 04.06.2009- Reminder notice sent to defendant to pay Rs. 31, 67,944/- after deduction of Rs. 80,000/- lying with the department as security of the defendant.
- 20.06.2009- Office Memorandum circulated to other divisions of PWD and CPWD to withhold the amount of defendant if any lying with them and to remit the same to the plaintiff department.
- 26.11.2010- The present suit for recovery filed on Original side before the Hon'ble High Court of Delhi, which was subsequently transferred to the District Court Dwarka and allocated to this court.
34. The moot point between the parties is (1) whether the plaintiff department has rightly arrived to the conclusion that out of delay of 1006 days, delay of 741 days is justified as the said delay was caused due to non-supply of drawings, material etc. by the plaintiff department or various unforeseen circumstances and the delay of remaining 265 is not justifiable as the said delay cannot be attributable to the plaintiff department and the same is caused by the defendant and therefore, the defendant is liable to pay the 10% compensation of the tender amount to the plaintiff department. (2) Even if the decision of the plaintiff department is found to be correct whether in absence of any proof of any loss or liquidated damages to the plaintiff department, can the defendant is CS DJ ADJ15740/16 Page No. 19/37 still liable to pay the compensation @ 10% of the tender value to the plaintiff department.
35. The Ld. Counsel for the plaintiff argued that the plaintiff is claiming the recovery amount on the ground that the delay in the completion of the project is partly justified upto 29.11.2005 (741 days) and the defendant is liable to pay the compensation @ 10 % of the contractual amount after deducting the security amount of Rs, 80,000/- for the delayed period from 30.11.2005 to 21.08.2006 (265 days) as per clause 2 of the agreement. The Ld. Counsel further argued that as per clause 2 of the agreement the decision of the SE for levy of compensation on the ground of delay is final and even the defendant never challenged the said decision of the SE before the competent Court of law and thus, the defendant has no right to challenge the validity of the decision of the SE in his defence in the present suit. It is further argued by the Ld. Counsel that the defendant in its written statement has not pleaded any other defence except challenging the validity of the order of the SE and therefore, the suit of the plaintiff is liable to be decreed.
36. Per Contra, the Ld. Counsel for the defendant argued that the defendant is very well in his right to challenge the validity of the orders of the SE and the Ld. Counsel further argued that the suit of the plaintiff is liable to be dismissed primarily on three grounds i.e. A. The Superintendent Engineer has not taken into consideration the recommendations of Executive Engineer CS DJ ADJ15740/16 Page No. 20/37 dated 29.05.2007 wherein he recommended extension of time upto 21.08.2006 is justifiable and as no loss or damage is caused to the department and therefore levy of compensation is not necessary.
B. As per clause 32.1.1 of General Guidance for operation of contract clauses (Ex. D-49), SE has not issued any registered notice to the defendant of his intention to levy the compensation.
C. Even if the stand taken by the defendant in clause A and B is decided against him, there is no finding of Superintendent Engineer that due to delay in the completion of the project, the plaintiff department has suffered any loss.
37. It is settled principle of law that once the claim of the plaintiff is denied by the defendant, the burden of proof is on the plaintiff to prove his case by leading affirmative evidence and he cannot take advantage of the pleas raised by the defendant.
38. In order to discharge the onus, Plaintiff examined four witnesses out of which three witnesses i.e. PW-1, PW-2 and PW-4 were official witnesses and in their chief examination by way of affidavit they reiterated the stand taken by the plaintiff department in the plaint which is not reproduced herein for sake of brevity and relied upon the documents which are already stand admitted by the parties at the time of admission and denial of the documents and in their respective cross examination which is more or less is on the CS DJ ADJ15740/16 Page No. 21/37 same lines, they admitted that they are deposing as per the official documents and they never been the incharge of the site in question. They deposed that they have no knowledge as to who was the incharge of the site at the time when the work was completed or finalized. They deposed that as per Ex. D-2 i.e. the recommendation dated 29.05.2007 of the Executive Engineer, there was justifying period of delay of 1028 days. They admitted as correct that in Ex.D-2, it is mentioned that school was functional from July 2005 and they also admitted as correct that it is also mentioned that the possession had been taken over by the education department of the school premises as mentioned in Ex. D-2 and the session of the School had commenced with effect from 01/07/2005. They also deposed that it is correct that as per Ex. D- 49, the SE alone is competent to issue notice to the defendant contractor before levying compensation. There is no show cause notice on the court file issued by the SE to the defendant before the levy of compensation in question. They further deposed that they have no personal knowledge about the subject matter in dispute and they are deposing in their official capacity and whatever is mentioned in the affidavit is based on the official records.
39. PW-4, additionally deposed that he had participated in the present case in his official capacity as executive engineer and he had recommended levy of compensation on the defendant and his recommendation is Ex. PW-4/PX-1, which bears his signature at point A and he further admitted that he had mentioned in Ex.PW-
CS DJ ADJ15740/16 Page No. 22/374/PX-1 between point A to A that the then executive engineer had mentioned that department has not suffered liquidated losses. He further deposed that on approval of SE, EE can also send the notice for levy of compensation. He admitted as correct that as per D-49, the SE alone is/was competent to issue notice to the defendant before levying compensation. Plaintiff department has not filed on record and the documents showing that the executive engineer can also serve the notice for levy of compensation with the approval of the SE. He does not know if the notice has been filed before the Court issued by the SE to the defendant before the levy of compensation. In Voluntary statement he deposed that there is a approval letter.
40. The evidence of the PW-3 namely Sh. B.B. Dhar, retired chief engineer PWD is relevant as he was the then Superintendent Engineer who recommended the levy of compensation vide letter dated 08/05/2009. In his chief examination by way of affidavit Ex. PW3/A he reiterated the stand taken in the plaint and relied upon documents that is Ex. PW-3/1 to PW-3/8. It is observed that in his entire examination in chief by way of affidavit, there is no whisper that due to the delay in completion of project the plaintiff department has suffered any loss of liquidated damages.
41. The entire cross examination of PW-3 is only about the roving enquiry that how he reached the conclusion that the entire period of hindrance upto 21/08/2006 as claimed by the defendant is not justifiable and under what circumstances and after appreciating CS DJ ADJ15740/16 Page No. 23/37 what material he arrived at the conclusion that the delay of only 741 days is justified and whether any loss was caused to the department for delay of 265 days in completion of the project and therefore, the levy of the compensation at the rate of 10% of the contractual amount on the defendant.
42. In cross-examination, in answer to the question to the witness with regard to his deposition at para 10 of the chief examination by way of affidavit that "the decision to levy the compensation for delay under clause 2 was taken after considering the facts and circumstances of the case as for records of the case", the witness deposed that the records mentioned in para 10 include the cement register, hindrance register, EOT form/extension letters sent by the defendant and recommendations sent by the concerned Executive Engineers and Assistance Engineers. He admitted that the Executive Engineer as per his recommendation dated 29/05/2017 (Ex. D-2), observed that the levy of compensation is not justifiable and time could be extended without levy of such compensation but he deposed that the of opinion of the executive engineer was overruled by him due to certain shortcomings including recommendations in paragraph 3, 8a, 8b, 8c and 11 of Ex. D-2 as improper weightage was given for the delay. In order to substantiate his stand the witness during cross examination placed on record two documents out of which one is Ex. PW3/PX 1, which as per the witness relates to the issuance of cement to the defendant during the period of hindrance in which 100% weightage CS DJ ADJ15740/16 Page No. 24/37 was given as if no work was progressive at the site. However, the witness admitted in cross examination it is not mentioned in the document that it relates to supply of cement to the defendant during the period when there was hindrance at the site and another is Ex. PW3/PX2 which is a summary of shortcomings prepared by the witness himself just for showing and justifying that how he arrived at the conclusion that the delay of only 741 days is justified, however, it was not part of official record. The witness admitted that the document PW3/PX2 does not bear signatures of anyone and in fact it is a typed document prepared by him. The attention of the witness was drawn to remarks earmarked in red colour as "A" to "B" and in answer to the question put to him that how much weightage he gave to the hindrance of the remark noting at Serial no.1, the witness deposed that the hindrance is regarding issue of initial drawing for foundation works. From the cement register it is seen that the cement for the foundation concrete was issued from 21.08.2002 and before laying the concrete in the foundation excavation of the earth is to be done. The EE has given 100% weightage from the date of the start of the work i.e. 20.05.2002 till 19.08.2002 as if no work was in progress during this period but the foundation excavation work was in progress during this period, then only the foundation concrete could be started from 21.08.2002. He further deposed that he do not remember the exact weightage given by him. He further deposed that he is not sure whether any document has been filed in the present case to show CS DJ ADJ15740/16 Page No. 25/37 the hindrance and number of days of delay, which was justified by the department. Similarly in answer to the question that how much weightage the witness had given to the hindrance at serial no.3 in PW3/PX2, the witness deposed that this delay is regarding issue of electrical drawings and only electrical work was effected. As per the cement register 2161 bags of cement were issued during this period which shows that civil work was in progress bit EE has given 100% weightage for this hindrance as if no work was in progress during this period.
43. The witness further deposed that the report dated 29/05/2007 was prepared by Mr. KP Singh then executive engineer and he was not in charge of work till August 2005 whereas the work has started from May 2002. His report was scrutinized in the office of the competent authority by senior technical gazetted officer and it was found that there are many errors in the report. In the present case, there is a report of another senior executive engineer Jai Bhagwan (PW-4) who has also recommended the levy. Reports of both executive engineers was scrutinized by experienced gazetted technical officer in the office of the competent authority and then it was put before me for final decision and as I was the final competent authority after clause 2 of Journal conditions of the contract (GCC) and schedule F of GCC. The reports of the executive engineers are internal documents of the Department and their reports were not conveyed to the defendant party officially as the executive engineers were not the competent authorities. He CS DJ ADJ15740/16 Page No. 26/37 further deposed that out of the 5 officers who had dealt with this case i.e. 2 executive engineers, 2 assistant engineers and myself, 4 officers had suggested levy of compensation and only one officer had recommended for non-levy of compensation and after due application of mind and considering all the reports, I decided that 741 days of delay was justified and not 1006 days of delay.
44. The witness further admitted that it is correct that he did not mention in his order dated 08/05/2019 Ex.P-13 as to why he did not agree with the reasons/recommendation of the executive engineer contained in Ex.D-2 dated 29/05/2007. In voluntary statement the witness deposed that he mentioned so in his noting file and he do not know whether the noting file has been placed on record in the present case or not since he has retired.
45. As far as issuance of prior notice to the defendant as per clause 32.1.1 of Ex. D 49 is concerned, the witness deposed that before passing the order dated 08/05/2009 (Ex. P-13) he had not issued any notice to the defendant. He further admitted that he had not mentioned in Ex.P-13 either that he had directed the executive engineer to issue show cause notice to the defendant or that the reply given by the defendant had been considered by him before passing the said order. The witness further deposed that the clauses of the manual exhibited D- 49 are only guidelines and not mandatory. The notice was issued under my directions dated 09/07/2008, which were issued to the executive engineer and show cause notice was issued by the executive engineer on 21/07/2008.
CS DJ ADJ15740/16 Page No. 27/37In his chief examination the witness exhibited the directions dated 09/07/2008 as Ex. PW3/6, the witness admitted that directions Ex. PW3/6 was issued by the Assistant Engineer working under him and not by the executive engineer. He further deposed that the Ex. PW3/6 is not signed by him. In Vol. statement he deposed that in last line it is clearly mentioned that this letter is issued under the directions of the project manager and I was the project manager at that point of time with regard to the project.
46. In answer to the question to the witness that when school was functional since July 2005, what was the need to impose maximum penalty on the defendant, the witness deposed that the date of completion of the work is 21/08/2006 which is not disputed by the defendant and the school had to be started from July 2005 because they work which was originally to be completed in 1 ½ years and it was completed in 4 years and 3 months. The PWD department had a commitment with the education department as the education Department wanted to start the school from 2005 to give educational facilities to the poor children in Dwarka and even though the works or under progress and there were chances of a mishap during the progress of such work. Keeping in view the circumstances and since uncovered delay was 38 weeks and as per agreement 1% of the tender amount, as compensation was to be levy for every week of delay. When the question was put to the witness whether he has mentioned above deliberation in his order Ex. P-13 dated 08/05/2009 the witness answered in negative and CS DJ ADJ15740/16 Page No. 28/37 stated it is in the record of PWD.
47. Even though PW-3, the then Superintendent Engineer, who levied the compensation vide letter dated 08.05.2009 on the defendant had retired from the plaintiff department in June 2015 but he has put his best of efforts to bring the relevant facts on record as visible from his letters issued to the custodian Ex.PW- 3/PX3, however, the relevant material was not brought on record by the plaintiff department.
48. As far as the argument of the Ld. Counsel for the plaintiff to the extent that the decision of the SE as per clause 2 is final and the Court have no jurisdiction to examine the validity of the decision of the SE is concerned the, Hon'ble Supreme Court of India in the matter titled as J.G. Engineers Limited v. Union of India -2011 (2) Arb. LR 84 (SC) has held that " what is final and conclusive by clause 2 is not the decision of any authority on the issue whether the contractor was responsible for the delay or department was responsible for the delay but what is made final is the decision on consequential issues relating to the quantification, if there is no dispute as to who was committed the breach."
49. The Apex Court in the case of J.G. Engineers Pvt. Ltd. vs UOI & Anr. (supra) had also held that the question whether the other party committed breach cannot be decided by the party alleging breach. A contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committed breach. That question can only be decided by only an CS DJ ADJ15740/16 Page No. 29/37 adjudicatory forum, that is, a Court or an Arbitral Tribunal. Reliance was placed upon the case of State of Karnataka vs Shree Rameshwara Rice Mills, (1987) 2 SCC 160, wherein Supreme Court had held that adjudication upon the issue relating to a breach of condition of contract and adjudication of assessing damages arising out of the breach are two different and distinct concepts and the right to assess damages arising out of a breach would not include a right to adjudicate upon as to whether there was any breach at all. The Hon`ble Court further held that one of the parties to an agreement cannot reserve to himself the power to adjudicate whether the other party has committed breach. It was also so held that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is not disputed.
50. Therefore, in view of the decision of Hon'ble Supreme Court reproduce above, the arbitrator/ the Court is well within jurisdiction to examine the validity of the decision of the SE to check whether , the SE has rightly arrived to the conclusion that there is delay on the part of the contractor or not.
51. In view of the legal position reiterated above, it is apposite to observe that the relevant material is not produced before the Court to ascertain whether the decision arrived at by the SE that only delay of 741 days is justified or not. It is equally true that the CS DJ ADJ15740/16 Page No. 30/37 recommendations of the executive engineer are not binding upon the Superintending Engineer and therefore, the plea of the defendant that the SE failed to take into consideration the recommendations of the EE dated 29.05.2017 is not sustainable reason being the EE namely Jai Bhagwan (PW-4) also made recommendation vide order dated 08.04.2009 Ex. PW-4/PX-1 after taking into consideration the recommendation dated 29.05.2017 of the earlier EE, the reply dated 30.07.2008 filed by the defendant to the show cause notice dated 21.07.2008 and after examining the office record. He recommended that out of the delay of 1006 days, there is justified delay of 916 days and compensation should be levied on the defendant for the delay of 90 days in completion of the project. Therefore, defendant cannot be allowed to rely upon the recommendation dated 29.05.2017 by the then executive engineer alone, merely on the ground that the same were in his favour. Further it is also apposite to observe that the said recommendations were never communicated to the defendant and it was inter-departmental correspondence and the defendant was never party to the said correspondence.
52. It is relevant to observe that in the recommendation of the EE dated 29.05.2017 Ex. D2 and recommendation of the EE (PW-
4) dated 08.04.2009 Ex. PW-4/PX-1, detailed reasons for arriving at such conclusion are given, but there is no such detailed reasons of SE are place on record to show that after taking into consideration which factors he differed from the recommendations CS DJ ADJ15740/16 Page No. 31/37 of both the Executive Engineers, as in the recommendation dated 29.05.2007 entire delay period of 1006 days was condoned whereas in recommendation dated 08.04.2009, only period of 916 days was condoned and levy of compensation was recommended for the delayed period of 90 days but the SE came to the conclusion that delay of only 741 days is justified, therefore, there are three different findings on record out of which two of them have been given by discussing in detail the reasons for arriving at such conclusion however, only the copy of the decision of the SE to levy compensation vide order dated 08.05.2009 is communicated to the defendant and the detailed reasons for arriving at such conclusion is neither supplied to the defendant nor produced before this court.
53. But one thing is common in the recommendations of both the EEs and the orders of the SE that due to delay in completion of project by the defendant the plaintiff department has not suffered any loss. In the recommendations dated 29.05.2007, it is specifically observed by the EE that no loss is caused to the plaintiff department for the delay in completion of the project by the defendant and similarly, in the subsequent recommendation dated 08.04.2009 sent by the PW-4 to the SE, there is no observation that due to delay caused by the defendant in completion of project the plaintiff department has suffered any loss and interestingly, no such observation is found mentioned in the orders of the SE dated 08.05.2009 that the plaintiff department has CS DJ ADJ15740/16 Page No. 32/37 suffered any loss.
54. In the case of Vishal Engineers & Builders vs Indian Oil Corporation Ltd., FAO (OS) 204 of 2010, decided by Hon'ble Delhi High Court on 30/11/2011, it was inter alia held that it was duty of the Court not to enforce penalty clause but only to award a reasonable compensation, which had been held to be statutorily imposed upon Courts by Section 74 of the Contract Act and Court had to adjudge in every case, reasonable compensation for breach of contract having regard to conditions which existed on date of breach.
55. It was further held therein that if there was absence of any loss, whatsoever, an aggrieved party could not claim that it was still entitled to liquidated damages without, at least, proving a semblance of loss.
56. The Hon'ble Supreme Court in the case of Kailash Nath Associates vs Delhi Development Authority, MANU/SC/0019/2015 had elicited the law on compensation for breach of contract under Section 74 as follows:-
"43. On a conspectus of the above authorities, the law on compensation for breach of contract Under Section 74 can be stated to be as follows:
1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and CS DJ ADJ15740/16 Page No. 33/37 found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated.
In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.
4. The Section applies whether a person is a Plaintiff or a Defendant in a suit.
5. The sum spoken of may already be paid or be payable in future.
6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.
57. Hon'ble Delhi High Court in the case of Essban Paints Pvt. Ltd. vs Union of India & Anr., MANU/DE/0648/2001 held that in CS DJ ADJ15740/16 Page No. 34/37 case the contract was not performed and there was breach thereof, it was for the aggrieved party to prove the loss suffered because of such breach and to forfeit the security only to the extent of loss.
58. Similarly in United Telecoms Limited vs Mahanagar Telephone Nigam Limited, MANU/DE/ 0969/2012 inter alia it was held that it is well established that in a contract on its breach, penalty can be levied on the defaulting party only if the other party had suffered and the same is proved.
59. Further, the Hon'ble High Court Delhi in Indian Oil Corporation vs Lloyds Steel Industries Ltd. dt. 31 August, 2017, pronounced as under:-
"Even in Fateh Chand (supra) the Apex Court observed in no uncertain terms that when the section says that an aggrieved party is entitled to compensation whether actual damage is proved to have been caused by the breach or not, it merely dispenses with the proof of 'actual loss or damage'. It does not justify the award of compensation whether a legal inquiry has resulted in consequence of the breach, because compensation is awarded to make good the loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach. If liquidated damages are awarded to the petitioner even when the petitioner has not suffered any loss, it would amount to 'unjust enrichment', which cannot be countenanced and has to be eschewed. 42. It is too preposterous on the part of the petitioner to submit that it should get the liquidated CS DJ ADJ15740/16 Page No. 35/37 damages stipulated in the contract even when no loss is suffered."
60. In the present case too, the plaintiff has not contended that he suffered any loss due to the stated delay. SE's order dated 08.05.09 also does not say that any loss was suffered due to the alleged delay. Even the recommendations of the EE does not mention that any loss is suffered for such delay rather in the first recommendation of EE dated 29.05.2017 it is specifically mentioned that "As the department has not suffered any liquidated losses/damages in this account of delay and the agency (defendant) has given an undertaking that they have not suffered any liquidated losses/damages on account of this delay and the firm (defendant) will not claim anything extra on account of this delay". The above remark also found mentioned in the subsequent recommendation of EE ( PW-4) dated 08.04.2009 Ex. PW-4/PX1 and he has not given any contrary remark to the first recommendation and simply mentioned that as the delay of 90 days is not justified hence, levy of compensation recommended without any finding of actual loss to the plaintiff department. Similarly, the order of the SE dated 08.05.2009 is absolutely silent about any loss or damage suffered by the plaintiff department and lastly, the entire plaint is also bereft of any such pleading of loss or damage suffered by the plaintiff department due to delay in completion of project by the defendant department.
61. Thus, one fact stands established that in fact no loss is suf- fered by the plaintiff due to delayed completion of the project by CS DJ ADJ15740/16 Page No. 36/37 the defendant and therefore, the suit of the plaintiff is liable to be dismissed on this ground alone.
Issue-wise finding:-
62. Issue Nos. 1 and 2 are inter connected and taken up together and in view of detailed discussion made above, once the plaintiff department failed to prove any loss or damage caused to it due to delay in completion of project by the defendant department, the issue Nos. 1 and 2 are accordingly, decided against the plaintiff and in favour of the defendant.
Relief:-
63. Resultantly, in the absence of any injury, the plaintiff cannot recover any compensation. The levy of compensation accordingly fails on this ground alone and accordingly, the suit of the plaintiff is hereby dismissed with no orders as to costs.
64. Decree sheet be drawn accordingly.
65. File be consigned to record room after due completion and compliance.
Pronounced in the open Court (Sachin Jain)
on 06.06.2022 Addl. District Judge-02
South West District
Dwarka Courts Complex, Delhi
CS DJ ADJ15740/16
Page No. 37/37