Karnataka High Court
M/S Kwality Constrution vs Union Of India on 6 March, 2020
Author: John Michael Cunha
Bench: John Michael Cunha
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 06TH DAY OF MARCH 2020
BEFORE
THE HON'BLE MR. JUSTICE JOHN MICHAEL CUNHA
R.F.A NO.831 OF 2015
BETWEEN:
1. M/S KWALITY CONSTRUTION
ENGINEERS,
PARTNERSHIP FIRM
NO.7-1-67/10, AMEER PET
HYDERABAD-500016
REP. BY ITS MANAGING PARTNER
SRI.V.NEELAKANTA RAO
2. SRI.V.SUDHAKAR
S/O V.NEELAKANTA RAO
AGED ABOUT 50 YEARS
PARTNER OF M/S. KWALITY
CONSTRUCTION ENGINEER
3. SRI.P.KRISHNA MURTHY
S/O LATE P.NARAYANA RAO
AGED ABOUT 71 YEARS
PARTNER OF M/S. KWALITY
CONSTRUCTION ENGINEER
4. SRI.V.V.SESHAGIRI RAO
S/O V.KRISHNAMURTHY
AGED ABOUT 51 YEARS
PARTNER OF M/S. KWALITY
CONSTRUCTION ENGINEER
5. SMT.V.SARVANI
W/O SRI.V.SUDHAKAR
AGED ABOUT 48 YEARS
PARTNER OF M/S. KWALITY
CONSTRUCTION ENGINEER
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6. SMT.P.HYMAVATHY
W/O P.KRISHNAMURTHY
AGED ABOUT 66 YEARS
PARTNER OF M/S. KWALITY
CONSTRUCTION ENGINEER
7. SMT.V.SEETHAMMA
W/O V.V. SHESHAGIRI RAO
AGED ABOUT 47 YEARS
PARTNER OF M/S. KWALITY
CONSTRUCTION ENGINEER
8. SMT.HARIPRIYA
W/O SRI.V.V.SUBBA RAO
AGED ABOUT 45 YEARS
PARTNER OF M/S. KWALITY
CONSTRUCTION ENGINEER
APPELLANT NOS. 1 TO 8 ARE AT
NO.7-1-67/10, AMEER PET
HYDERABAD-500016 ... APPELLANTS
(BY SRI:MADHUSUDHANA RAO.A., ADVOCATE)
AND:
UNION OF INDIA
REP. OF EXECUTIVE ENGINEER
C.P.W.D. BENGALURU CENTRAL
DIVISION, NO.1, 3RD FLOOR
A WING, KENDRIYA SADAN
17TH MAIN, 2ND BLOCK
KORAMANGALA
BANGALORE-560 034 ... RESPONDENT
(BY SMT: ANITHA H R, CGSC)
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THIS RFA IS FILED UNDER ORDER 41 RULE 1 R/W SECTION
96 OF CPC., AGAINST THE JUDGMENT AND DECREE DATED
28.02.2015 PASSED IN OS.NO.4357/2004 ON THE FILE OF THE XL
ADDITIONAL CITY CIVIL & SESSIONS JUDGE, BENGALURU (CCH
41), DECREEING THE SUIT FOR MONEY.
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THIS RFA COMING ON FOR HEARING THIS DAY, THE COURT
DELIVERED THE FOLLOWING:-
JUDGMENT
Feeling aggrieved by the judgment and decree passed by the XL Addl. City Civil and Sessions Judge, Bengaluru, in O.S.No.4357/2004 dated 28.02.2015 directing the defendants to pay compensation of Rs.3,13,443/- to the plaintiff with interest at 6% per annum from the date of decree till realization, defendants have preferred this appeal under Order 41 Rule 1 read with section 96 of the Code of Civil Procedure.
For the sake of convenience, the parties shall be referred to in this judgment in the same ranking as in the original suit.
2. Plaintiff is the Union of India, represented by its Executive Engineer. Plaintiff entrusted the construction of a hospital building at Somanahalli facility, Bengaluru to the appellants/defendants vide agreement dated 25.10.1991 (Ex.P.4). As per the terms of the agreement, the defendants were required to complete the construction, in all respects, on 4 or before 03.12.1992. The defendants having failed to abide by the terms of the agreement, the time for completion of the construction was extended from time to time and finally, the contract was rescinded vide letter dated 21.06.1996 due to non-completion of the stipulated work within the stipulated time. By invoking clause (2) of the aforesaid agreement, the plaintiff called upon the defendants to pay compensation of Rs.3,13,443/- on account of the delay in completion of the work. The defendants having failed to comply with this demand, the plaintiff instituted the above suit for recovery of compensation of Rs.3,13,443/-.
3. The defendant No.1 in the written statement took up a plea that the delay in the construction was due to the plaintiff failing to provide approach road, structural drawings, fixing the plinth levels and supply of water etc. The extension was granted from time to time and the construction was completed within the extended time granted by the plaintiff, as such, there was no breach of terms of the agreement. Defendant No.1 took up a specific plea that except mentioning 5 in the communication dated 18.04.2001 (Ex.P6), that the contract in question was rescinded there was no termination of the contract, as such the plaintiff was not entitled to claim compensation. Further defendant No.1 contended that the claim made by the plaintiff was hopelessly barred by time and thus sought to dismiss the suit.
4. Based on these pleadings, the Trial Court framed the following issues:-
1. Whether the plaintiff proves that the defendants have failed to complete the contract work within the stipulated period and as such the contract was rescinded on 21.06.1996 as alleged?
2. Whether the plaintiff further proves that the balance work was got done by CPWD by spending additional amount as alleged?
3. Whether the plaintiff further proves that due to breach of contract defendants are liable to pay compensation of Rs.3,13,443/- as alleged?
4. Issue No.4 was deleted vide Court order dated 25.09.2010.
(Whether the plaintiff further proves that the dispute was referred to the arbitrator who has 6 awarded compensation of Rs.3,13,443/- against the defendants as alleged?)
5. Whether the defendant No.1 proves that the suit is barred by Limitation as alleged?
6. Whether the plaintiff is entitled to recover suit claim of Rs.3,13,443/- with interest at 12% p.a. from the defendants as prayed?
7. To what reliefs, if any, the parties are entitled.
5. One of the officials of the plaintiff was examined as PW.1 and 10 documents were exhibited on behalf of the plaintiff. The agreement entered into between the parties was marked as Ex.P4 and copies of the letters dated 18.04.2001, 25.09.2001 written by the Superintendent Engineer to the defendant No.1 were marked as Ex.P6 and Ex.P7 and copy of the letter dated 22.12.2001 written by the Executive Engineer to defendant No.1 was marked as Ex.P8 and certified copy of arbitration award was marked as Ex.P9.
Defendant No.2 was examined as DW.1 and 10 documents were marked on behalf of the defendants. 7
6. Considering the above material, the Trial Court answered issue Nos.1 to 3 in the affirmative, issue No.5 in the negative and by the final order, decreed the suit and directed the defendants to pay the compensation of Rs.3,13,443/- with interest at 6% per annum from the date of decree till realization.
7. Learned counsel appearing for the appellants contends that PW.1 examined by the plaintiff had no personal knowledge about the alleged breach of the contract. The circumstances brought out in the evidence of PW.1 indicate that the delay in constructing the building was attributable to the plaintiff. The Trial Court failed to answer issue Nos.1 to 3 individually, instead it clubbed all the three issues together and without recording any specific finding on issue No.1 and issue No.2, proceeded to decree the suit. The reasoning assigned by the Trial Court on issue No.5 is contrary to Article 27 of the Schedule - Part II of the Limitation Act. The finding recorded by the Arbitrator did not enlarge the time for institution of the suit. The failure to consider these essential 8 aspects has vitiated the findings recorded by the Trial Court and thus, sought to set-aside the impugned judgment and dismiss the suit filed by the plaintiff.
8. Learned Central Government Standing Counsel appearing for the respondent/plaintiff argued in support of the impugned judgment contending that extension of time was granted to the appellants/defendants to complete construction by 1995. No penalty has been imposed for the said period. It is only on account of the failure of the defendants to complete the construction, clause No.(2) of the agreement has been enforced. Defendant No.1 - Company itself has admitted that the work was completed only on 21.06.1996; whereas as per the terms of the agreement, work was required to be completed by 03.12.1992, as such, there being clear breach of the terms of the agreement, Trial Court was justified in decreeing the suit.
9. I have bestowed my careful thought to the submissions made at the Bar and have carefully scrutinized the material on record.
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10. In the light of the contentions urged by the parties, the points that arise for consideration are, (1) Whether the appellants/defendants have committed breach of clause No.(2) of the agreement dated 25.10.1991 (Ex.P4)?
(2) Whether the claim made by the plaintiff is barred by limitation?
11. There is no dispute as to the execution of the agreement dated 25.10.1991 (Ex.P4) between the plaintiff and the defendants whereupon the defendants were entrusted with the work of construction of hospital building. Clause (2) of the aforesaid agreement reads as under:-
Clause 2. The time allowed for carrying out the work as entered in the tender shall be strictly observed by the contractor and shall be deemed to be of the essence of the contract on the part of the contractor and shall be reckoned from the fifteenth day after the date on which the order to commence the work is issued to the contractor. The work shall throughout the stipulated period of the contract be proceeded with all due diligence and the contractor shall pay as compensation an amount equal to one 10 percent or such smaller amount as the Superintending Engineer (whose decision in writing shall be final) may decide on the amount of the estimated cost of the whole work as shown in the tender, for every day that the work remains uncommenced or unfinished after the proper dates. And further to ensure good progress during the execution of the work, the contractor shall be bound in all cases in which the time allowed for any work exceeds, one month (say for special jobs) to complete one- eight of the whole of the work before one- fourth of the whole time allowed under the contract has elapsed; three-eights of the work, before one-half of such time has elapsed, and three fourths, of the work, before three-fourths of such time has elapsed. However for special jobs if a time-schedule has been submitted by the Contractor, and the same has been accepted by the Engineer-in-Charge, the contractor shall comply with the said time- schedule. In the event of the contract or failing to comply with this condition, he shall be liable to pay as compensation an amount equal to one per cent or such smaller amount as the Superintending Engineer (whose decision in writing shall be final) may decide on the said estimated cost of the whole work for every day that the due quantity of work remains 11 incomplete. Provided always that the entire amount of compensation to be paid under the Provisions of this Clause shall not exceed ten per cent on the estimated cost of the work as shown in the tender.
12. A plain reading of the aforesaid clause indicates that time was essence of the contract, failure of which rendered the defendant No.1 liable to pay compensation equal to 1% or such similar amount as the Superintending Engineer may decide. In this context, it may be relevant to refer to Ex.P6 produced by the plaintiff which reads as under:-
No. 54(446)(6)/BCC/WI/2001 Dt:18.04.2001 To:
M/s Kwality Construction Engineers, Registered Class I Contractor, 7-1-67/10 Ameerpet, Hyderbad-16.
Sub: Construction of Hostel Building for HLTC at Somanahalli, Bangalore.
Agreement No.40/CE/BCDI/91-92.
Sir, The stipulated date of completion for the above work was 03.12.1992 as per Agreement No.40/CE/BCD I/91-92 whereas, the work was completed on 21.06.1996 (rescind).
On careful consideration of the Hindrance indicated in your application for extension of time, it is held that you have rendered yourselves liable for compensation for the delay in completion of the work in terms of clause [2] of the said agreement.12
You are, therefore, requested to show cause within a fortnight of the date of issue of this letter as to why compensation should not be levied for the non-completion of the work as stipulated in clause [2] of the conditions of the contract of the said agreement.
If no satisfactory reply is received within the aforesaid period, it would be presumed that you have nothing further to state in the matter and further action will be taken accordingly.
Yours faithfully, Sd/-
[S.C. Padhi] Superintending Engineer, Bangalore Central Circle, Central P.W.D., Bangalore-560034.
13. A plain reading of the above letter indicates that according to the plaintiff, the work was completed on 21.06.1996. By the said letter, the request made by the defendants for extension of time was rejected and the defendants were informed about their liability to pay the compensation in terms of the aforesaid agreement. If this date is reckoned for computation of limitation, the plaintiff was required to enforce the terms of the aforesaid agreement within three years from 21.06.1996.
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14. Article 27 of Schedule - Part II of the Limitation Act deals with the recovery of compensation for breach of promise to do anything at a specified time or upon happening of specified contingency. It provides for a period of three years to institute the suit when the time specified arrives or contingency happens.
15. In the instant case, the very document produced by the plaintiff at Ex.P6 indicates that the work was completed on 21.06.1996 and the defendant No.1 was called upon to pay the compensation for the breach of clause No.(2) of the said agreement under the said letter. Though this letter is issued in the month of April 2001 apparently on account of the dispute raised by the defendants in finalizing the bill, yet the facts remains that the defendants did not carry on any construction work subsequent to 1996. Therefore in the absence of any evidence to show that the time for enforcement of the clause (2) of the agreement was extended, the claim made by the plaintiff beyond the period 14 prescribed under Article 27 of the Limitation Act has to be held as barred by time.
16. Though in the course of the trial, an attempt has been made by the plaintiff to show that on account of the breach committed by the defendant No.1, the dispute was referred to the resolution of the Arbitrator, yet, the records indicate that the Arbitrator entered into reference only on 20.04.2001 and the award was made on 23.04.2003. By the time the Arbitrator entered into reference, the limitation prescribed under Article 27 of Schedule to Limitation Act had already expired. The letter Ex.P6 was not intended to extend the period of limitation, as such, the suit filed by the plaintiff ought to have been dismissed as barred by time.
17. The trial Court has proceeded on the premise that the bill was finalized only during 2001 and the same was intimated to the defendants vide letter dated 22.11.2001 and the defendants having sought reference of the dispute to the Arbitrator, the suit was well within the time. This reasoning in my view, is opposed to the very case set up by the plaintiff 15 and contrary to the documents produced before the Court. As already stated above, under Ex.P6 letter dated 18.04.2001, the Superintending Engineer called upon the defendants to show cause as to why compensation should not be levied as stipulated in clause (2) of the conditions of the contract of the said agreement. In the said letter, the Superintending Engineer in unequivocal terms, has admitted that the work was completed on 21.06.1996 and the contract itself was rescinded. The Trial Court has misread this document to mean that only after raising a final bill on 25.09.2001, the cause of action had arisen for the plaintiff to enforce clause No.2 of the contract. As the circumstances proved in evidence clearly establish that the work was completed or rescinded on 21.06.1996, the claim for compensation beyond the period of limitation prescribed under the Act being legally untenable, the trial Court has committed an error in decreeing the suit. For the reasons discussed above, the impugned judgment and decree cannot be sustained.
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As a result, appeal is allowed. The impugned judgment and decree dated 28.02.2015 passed by the XL Addl. City Civil & Sessions Judge, Bengaluru in O.S.No.4357/2004 is set- aside. In the circumstances of the case, there shall be no order as to costs.
The amount deposited by the appellants pursuant to the order dated 18.11.2015 shall be refunded to the appellants, on proper identification.
Sd/-
JUDGE Bss