Delhi High Court
Rama Construction Company vs Municipal Corporation Of Delhi on 20 December, 2011
Author: V.K. Jain
Bench: V.K. Jain
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on: 05.12.2011
Judgment Pronounced on: 20.12.2011
+ CS(OS) 921/2005 & IA 5040/2005
RAMA CONSTRUCTION COMPANY ..... Plaintiff
Through: Mr. A.K.Trivedi, Adv.
versus
MUNICIPAL CORPORATION OF DELHI .... Defendant
Through: Ms. Mini Pushkarna, Adv.
CORAM:-
HON'BLE MR JUSTICE V.K. JAIN
V.K. JAIN, J
1. This is a suit for declaration, perpetual injunction
and mandatory injunction. The plaintiff was awarded work
for construction of live stock marketing for sheep, goat and
buffalo at Gazipur Dairy Farm, vide work order dated
18th March, 2003, which the plaintiff claims to have received
on 31st March, 2003. The work was to be completed within
fifteen months and the time allowed for carrying out the
work was to be reckoned from the tenth day of the work
order. Admittedly, the work was not completed within the
period of fifteen months stipulated in the order irrespective
of whether the period is reckoned from the tenth day of the
CS(OS)No.921.05 Page 1 of 50
issue of the order, i.e. 18th March, 2003 or it is reckoned
from tenth day of the date on which the plaintiff claims to
have received the work order.
Clause 2 of the agreement between the parties
provided that if the Contractor failed 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 pay, as agreed
compensation, at the rate of 1% per day or such smaller
amount as the Superintending Engineer may decide, on the
tendered value of the work, for every completed day, the
work remained incomplete or the progress remained below
that specified in clause 5 of the Contract. It provides that
the total amount of compensation for the delay would not
exceed 10% of the tendered value of the work. The decision
of the Superintending Engineer in this regard has been
made final and binding. Clause 5.1 of the Contract, to the
extent it is relevant provided that the Contractor shall
submit a time and progress chart and get it approved from
the department. It further provided that the Contractor
shall, in all cases in which the time allowed for any work
exceeds one month complete 1/8 th of the whole of work
CS(OS)No.921.05 Page 2 of 50
before 1/4th of the whole time allowed in the contract has
elapsed, 3/8th of the work before one-half of such time has
elapsed and 3/4th of the work before 3/4th of such time has
elapsed. A show-cause notice dated 11th March, 2004 was,
therefore, issued by the defendant to the plaintiff. The
defendant vide notice dated 11th March, 2004, intimated the
plaintiff that since the progress of the work was not
proportionate to the time that had elapsed, he had rendered
himself liable to pay compensation. He was, therefore,
asked to show-cause why the compensation be not levied.
The plaintiff replied to the show-cause notice, but the reply
was not found satisfactory. The defendant, vide
communication dated 4th March, 2005, informed the
plaintiff that the Competent Authority under clause 2 of the
agreement had determined that he was liable to pay
Rs.19,04,703/- as compensation. The aforesaid action of
the defendant has been challenged by the plaintiff primarily
on the grounds that (i) the compensation was levied after
the contract had already lapsed and (ii) the delay in
completion of the work was not attributable to him. This is
also the case of the plaintiff that it was the defendant which
had failed to provide lay-out plan and get the connect the
CS(OS)No.921.05 Page 3 of 50
electricity connection and further had also failed to remove
the hindrance created by legal people at the site where the
work was to be executed. The defendant has also taken
action under clause 3 of the agreement and published a
fresh tender for work to be executed at the risk and cost of
the plaintiff. The plaintiff has now sought a declaration that
the order levying compensation and taking action for re-
tender at the risk and cost of the plaintiff, is null and void.
The plaintiff has also sought an injunction restraining the
defendant from taking action for recovering the amount of
compensation and debarring or blacklisting him from the
department. The plaintiff has also sought mandatory
injunction directing the defendant not to circulate any letter
with respect to recovery of aforesaid amount to any other
divisioned branch.
2. In its written statement, the defendant has alleged
that the plaintiff had stopped the work right from the very
beginning on flimsy grounds and to hide his own short-
comings. He completed only 16% of the work during the
stipulated period of 15 months to complete the work,
though there was no hindrance in the execution of the work.
It is also alleged that six other agencies worked round the
CS(OS)No.921.05 Page 4 of 50
clock on the adjacent land completed the work of temporary
live stock market, construction of link road etc. without any
public resistance from June, 2003 to March, 2004. It is
claimed that the plaintiff raised bogus dispute on one
pretext or the other which not only caused delay but also
caused losses to the public exchequer. He accepted various
provisional extensions but did not complete the work. The
following table, according to the defendant, would clear the
picture:-
S.No./Item No. of the Quantity as per Quantity executed
schedule Schedule by the contractor
Item
Qty. % of Qty. % of
Total Total
work work
1/15 Brick work 1:6 547.24 3.34 629.66 M3 3.84
in foundation
2/16 Brick work 1:6 546.71 3.74 334.07 2.28
in super
structure
3/132 Random 306.31 M3 1.78 329.83 M3 1.92
Rubble
masonry
4/136 Washed stone 452.10 0.64 3243.53 4.63
grit plaster SQ.M.
5/13 Reinforcement 140800 Kg. 14.24 35861.53 3.63
6/36 Steelwork in 70000Kg 8.60 24691.12 3.03
grating
7/119 Supply and 7506 M3 1.67 341.91M3 0.07
stacking of
good earth
8/129 Ready mix 1879.61M3 16.91 334.00 M3 3.00
concrete
CS(OS)No.921.05 Page 5 of 50
It is alleged that items at serial No.1 to 4 were of
interest to the plaintiff and covered upto 9.5% of total cost
but the plaintiff went on to execute these item upto 12.67%
of the total cost of the contract. On the other hand, he was
not interested in items at serial No.5 to 8 which constituted
upto 41.42% of the total cost of the contract. The plaintiff,
however, executed these items only upto the extent of
9.73%. The following table, according to the defendant,
indicates the delay in progress of the work at the site:-
S.No. Running Date of Time % of the % work Cumulative
Account Bill elapsed total done Hindrance
Bill (gross work (actually
amount required at site)
upto date) to be
done (as
per
contract)
1 1st R.A. 30.6.0 3 month 20% 2.19% 19 days
Bill - 3
4,17,525/-
2 Upto 2nd 23.10. 7 month 46% 3.71% 27 days
R.A.Bill 03
2,89,830/-
It is also alleged that in fact this project was a loss-
making contract for the plaintiff on account of abnormally
low rates quoted by him and that is why he did not execute
the work in terms of his agreement with the defendant. It is
also alleged that the contract had not expired at the time
CS(OS)No.921.05 Page 6 of 50
compensation was levied, since MCD had granted two
extensions upto 27th April, 2005 and the plaintiff also
continued to work at the site till 14 th January, 2005.
The following table, according to the defendant
indicates the progress of work during the entire period of
execution of work:-
S.No. Running M.B.No./P Date of Gross % of Hindranc % of
Actt. Bill age billing Amount of work e work to
No. accepted bill done be done
1. 1st 415/88 30.06.03 4,17,525/- 2.19% 19 days 20%
Running
Account
Bill
2. 2nd 1817/6 23.10.03 2,89,830/- 3.71% 27 days 46%
Running
Account
Bill
3. 3rd 1817/73 31.7.04 23,31,698/- 15.95 27 days 100%
Running %
Account
Bill
1817/7
3
4. 4th 1817/87 27.8.04 14,50,504/- 23.57 27days 100%
Running %
Account
Bill
The defendant has justified the levy of
compensation on the ground that the plaintiff had failed to
complete the work even in the extended period of contract.
Regarding delay in dispatch of the work order, it is alleged
that the plaintiff despite being aware of the awarded work to
him and site having been shown to him did not collect the
turn over and despite it, it has been handed over to him on
CS(OS)No.921.05 Page 7 of 50
21st March, 2003.
It is also alleged that the approach to the site was
not available only for eight days starting from 11th August,
2003 as was duly recorded in the hindrance register but the
plaintiff did not complete the work despite site being
available free from all encumbrances and any hindrance.
Approach to the site, according to the plaintiff was provided
by creating another entry by filling up the drain passing in
front of the site. It is also alleged that after two provisional
extensions upto 24th April, 2005, the plaintiff was also given
another extension upto 27th June, 2005. It is alleged that
there was a total hindrance of 57 days which was duly
recorded in the hindrance register maintained at the site,
and the hindrance was not for 299 days from 11 th August,
2003 to 4th June, 2004, as is claimed by the plaintiff.
3. The following issues were framed on the pleadings
of the parties:-
1. Whether MCD was right in levying
compensation of Rs.19,04,703/- under
Clause 2 of the contract vide order dated
4th March, 2005? OPD.
2. Whether MCD was right in
rescinding the contract under clause 3 of
the Agreement by order dated 10th May,
2005?
CS(OS)No.921.05 Page 8 of 50
3. Whether MCD was right in
issuing Tender dated 13th May, 2005 at
the risk and cost of the plaintiff firm?
OPD.
4. Whether MCD was right in
issuing show-cause notice dated 19th
May, 2005? OPD.
5. Whether the hindrances existing
at site were such as to lead to non-
execution of the contract? OPP.
6. Whether the plaintiff is entitled to
decree of declaration and injunction?
OPP.
7. Relief."
Issues No.1 to 5:
These issues are inter-connected and can be
conveniently decided together.
4. In M/s J.G.Engineers Pvt. Ltd. v. Union of India
& Anr. AIR 2011 SC 2477, Supreme Court considering a
clause identical to clause 2 of the agreement between the
parties to this suit, inter alia held as under:
14. Thus what is made final and conclusive by
clauses (2) and (3) of the agreement is not the
decision of any authority on the issue whether
the contractor was responsible for the delay or
the department was responsible for the delay or
on the question whether termination/rescission
is valid or illegal. What is made final, is the
decisions on consequential issues relating to
CS(OS)No.921.05 Page 9 of 50
quantification, if there is no dispute as to who
committed breach. That is, if the contractor
admits that he is in breach, or if the Arbitrator
finds that the contractor is in breach by being
responsible for the delay, the decision of the
Superintending Engineer will be final in regard
to two issues. The first is the percentage
(whether it should be 1% or less) of the value of
the work that is to be levied as liquidated
damages per day. The second is the
determination of the actual excess cost in
getting the work completed through an
alternative agency. The decisions as to who is
responsible for the delay in execution and who
committed breach is not made subject to any
decision of the respondents or its officers, nor
excepted from arbitration under any provision of
the contract.
Supreme Court in this regard also referred to the
following view taken by it in Bharat Sanchar Nigam
Limited v. Motorola India Limited (2009) 2 SCC 337:
x x x The decision
contemplated under Clause 16.2 of the
agreement is the decision regarding the
quantification of the liquidated damages and
not any decision regarding the fixing of the
liability of the supplier. It is necessary as a
condition precedent to find that there has been
a delay on the part of the supplier in
discharging his obligation for delivery under the
agreement.
5. It would thus be seen that in the present case, it is
for this Court to decide whether delay in execution of the
work within the time stipulated in the agreement is
CS(OS)No.921.05 Page 10 of 50
attributable to the plaintiff or to the defendant. If the Court
finds that the delay is attributable solely to the defendant,
the decision of the Superintending Engineer levying
compensation on the plaintiff is liable to be held without
jurisdiction. On the other hand, if the Court finds that the
delay is attributable to the plaintiff, the decision of the
Superintending Engineer in respect of the quantum of
compensation to be levied on the plaintiff would be final and
binding on the parties and it would not be open to the Court
to review the decision of the Superintending Engineer with
respect to quantum of compensation and take a view
contrary to the view taken by the Superintending Engineer.
Similarly, if the Court finds that the Contractor failed to
maintain progress of the work in terms of clause 5 of the
agreement and the defendant was not responsible for the
failure of the plaintiff to maintain the required progress, it
would not be open to the Court to interfere with the amount
of compensation levied by the Superintending Engineer, his
decision with respect to quantification of the compensation
being final and binding on the parties.
6. The plaintiff has filed his own affidavit by way of
evidence and has examined one more witness Shri Harmir
CS(OS)No.921.05 Page 11 of 50
Singh from Police Station Kalyanpuri. The defendant has
examined one witness Mr. Alok Tiwari. In his affidavit by
way of evidence Mr. Alok Tiwari who was earlier working as
Assistant Engineer in Division 27 of MCD has stated that
there was hindrance at the site from 18th March, 2003 to 4th
April, 2003 as was noted in the hindrance register.
According to him, thereafter there was no obstruction on
the site upto 9th October, 2004 due to any public resistance.
He has alleged that the plaintiff had completed only 16% of
the work during the stipulated period of 15 months to
complete the work, despite there being no hindrance in
execution of the work. The plaintiff, according to him, was
from the very beginning trying to avoid execution of the
items which were loss making items for him. He wanted a
replacement of stone masonry, brick masonry on boundary
wall, Dholpur Stone finish on boundary wall with blue grit
stone finish and ready mix concrete by designs mix
concrete, in execution of the work. The defendant, though
not bound to do so, accorded replacement of the first two
items since the plaintiff promised to expedite the work and
complete it within the stipulated period. He was also
allowed to execute small concrete work using design mix at
CS(OS)No.921.05 Page 12 of 50
the site but permission to replace whole of ready mix
concrete by design mix concrete was denied since ready mix
concrete is rated highest grit concrete by everyone.
According to him, the plaintiff executed excess work in
respect of the items which are profitable to him but failed to
execute very little work in respect of the items which were
not profitable to him. He has claimed that the items which
were not profitable to the plaintiff constituted 41.42% of the
total cost of the contract but the plaintiff executed them
upto the extent of 9.73%. On the other hand, the items
which were profitable to him and constituted 9.5% total cost
of the work were executed upto 12.6% of the total cost of
the work. He has also claimed that the plaintiff was
provided police protection by approaching the police
whenever he made complaint though first such complaint
was made only on 9th September, 2004. He has alleged that
the progress of the work executed by the plaintiff never
commensurate with the time that had elapsed. The plaintiff
was required to execute 20% of the work in first three
months and 46% of the work in first seven months. As
against this, he executed only 2.19% of the work during
first three months and 31% during first seven months
CS(OS)No.921.05 Page 13 of 50
though the cumulative hindrance during this period was 90
days and 27 days respectively. He has alleged that
approach to the site was not available only for eight days
and another entry was provided to the plaintiff by filling up
the drain passing in front of the site and the plaintiff,
therefore, did not have any valid reason for slow progress of
the work. He has also alleged that the plaintiff himself
signed the cement register till 30th January, 2005 and the
cement was issued to him till 14th January, 2005, till he
demolished the cement godown and site office and removed
all the cement from the site, without knowledge of the
department.
7. The plaintiff, in his affidavit by way of evidence has
stated that the work order posted on 29th March, 2003 was
received by him by 31st March, 2003 and immediately
thereafter he had written a letter to the defendant
requesting that the date of start of work may be taken as
10th April, 2003 since the work order was received by him
only on 31st March, 2003. Referring to the correspondence
between the parties, he has stated that he had been writing
to the defendant to complete the work required to be done
on its part. According to him, he had also requested for
CS(OS)No.921.05 Page 14 of 50
replacement of coursed rubble stone masonry with brick
work since mining of stone was banned by Supreme Court.
He also stated that the defendant also failed to make
payment to him despite repeated requests from him. He
has alleged that the work was stopped by the residents from
the first day of September, 2004 and when the situation did
not come under control despite efforts made by him as well
as by officers of the defendant, the matter was reported to
the police, which was requested to remove the hindrances at
the site. He has stated that the Executive Engineer has
passed an order on behalf of the Commissioner
imposing/levy Rs. 19,04,703/- as compensation on him,
which was against the norms of clause 2 of the agreement
as well as the principles of natural justice. He has also
alleged that the defendant knowingly did not record the
hindrances which were beyond his control. He has claimed
that the defendant was not competent to rescind the
contract under clause 3 of the agreement since the contract
had already come to an end on 9 th July, 2004 whereas the
contract was repudiated vide letter dated 9th December,
2004.
8. Admittedly, the time stipulated in the Contract for
CS(OS)No.921.05 Page 15 of 50
completion of the work awarded to the plaintiff was
15 months. The case of the plaintiff is that since the work
order was received by him only on 30 th March, 2003, the
time for commencement of the work should be taken as 10 th
April, 2003. Computed from 10th April, 2003, the work
ought to have been completed by 9th July, 2004, which
admittedly has not been done. The case of the plaintiff is
that the work could not be completed by him on account of
hindrances at the site. The case of the defendant, as noted
earlier, is that the initial hindrance on the site was only
from18th March, 2003 to 4th April, 2003. There is no
credible evidence of any hindrance on the site between 10 th
April, 2003 and 9th July, 2004. It has come in the
testimony of DW-1 that for 8 days, an approach to the
site was not available and, therefore, another entry was
provided by them to the plaintiff by filling up the drain
passing in front of the site. Thus, the site was approachable
10th April, 2003 onwards and the plaintiff, therefore, had no
justification not to complete the work by 9th July, 2004.
It has come in evidence that the plaintiff wanted
replacement of stone masonry, brick masonry on boundary
wall, Dholpur Stone finish on boundary wall with blue grit
CS(OS)No.921.05 Page 16 of 50
stone finish and ready mix concrete by designs mix
concrete, in execution of the work. It is an admitted case
that though it was not bound to do so, the defendant
approved replacement of the two items. The plaintiff was
also allowed to execute small concrete work using design
mix at the site. It is true that permission to replace whole of
the ready mix concrete by design mix concrete was refused
to the plaintiff but, since ready mix concrete definitely is far
superior than a design mix and as stated by DW1, it is
considered as the highest grit concrete, the defendant was
well within its right in refusing to permit replacement of
whole of the ready mix concrete by design mix concrete.
Refusal of the defendant to permit replacement of the whole
of the RMC by DMC therefore did not justify delay in
completion of the work. There is no evidence of any
agitation by local people at its site, between 10 th April, 2003
and 9th July, 2004. The agitation started only in September,
2004 whereas the time to complete the construction had
expired much earlier. The plaintiff himself has stated in the
Court that the work was stopped by residents from first day
of September, 2004. This is not his claim that the local
residents had also stopped the work at any time between
CS(OS)No.921.05 Page 17 of 50
10th April, 2003 and 9th July, 2004. A perusal of the
complaint made by DW-1 Shri Alok Tiwari to the Police
(Ex.P-20) would show that the hindrance at this site started
only about ten days before this letter was written by him,
which would mean that it started on or before 30 th August,
2004. There is no evidence of any agitation at this site prior
to 30th August, 2004.Therefore, the agitation by local people
did not justify failure of the plaintiff to complete the work
within the time stipulated in the Contract. A perusal of the
letter dated 24th November, 2004 (Ex.P-29) and letter dated
9th December, 2004(Ex.P-30) would show that the plaintiff
was insisting on payment of price difference in terms of
clause 10cc of the Contract, in order to complete the
balance work. The alleged hindrance, therefore, was not the
true reason for the failure of the plaintiff to complete the
work within the stipulated period. In fact the letters dated
18th August, 2003(Ex.P-8), 27th October, 2003(Ex.P-9), 14th
November, 2003(Ex.P-10), 10th December, 2003(Ex.P-11)
and 6th September, 2004(Ex.P-19) written by the plaintiff to
the defendant indicate that the reason given by the plaintiff
for delay in completion of the work was non-payment of bills
and not any such hindrance which could have been
CS(OS)No.921.05 Page 18 of 50
prevented the execution of the work at this site. In fact, no
hindrance at all was claimed by the plaintiff in these letters.
Vide letter dated 2nd April, 2003, Ex.P-3, the
plaintiff had requested the defendant to make available (i)
lay-out plan of the project; (ii) location of hand pump/tube
well; (iii) letter to DVB for temporary electricity connection;
(iv) all architectural as well as structural designs. Vide
letter dated 3rd April, 2003(wrongly dated as 4th March,
2003) which is Ex.P-4 and is an admitted document, the
defendant informed the plaintiff that (i) lay-out plan can be
had from the office of the AE/JE concerned; (ii) location of
hand pump should be marked by him himself in the lay-
out, plan considering the building infrastructure; (iii) for
electricity connection, he should apply in a prescribed form
and his application should be forwarded to the concerned
Electric Engineer and (iv) all the architectural as well as
structural designs can be had from the office of Executive
Engineer(or concerned Assistant Engineer). Thus, the
defendant immediately responded to the requirement of the
plaintiff and this response was sent seven days before 10 th
April, 2003 which I am taking as the date for
commencement of work. In fact the defendant vide a
CS(OS)No.921.05 Page 19 of 50
separate letter dated 3rd April, 2003(Ex.P-4/A) which again
is an admitted document, requested the plaintiff to start the
work immediately since it was of great importance being
necessary, to implement an order passed by the Supreme
Court. A perusal of the documents would show that the
defendant had continuously been requesting the plaintiff to
speed up the work and complete it in time. The letters
whereby the plaintiff was requested to speed up the work
are dated 23rd July, 2003 (Ex.PW-1/6), 20th February,
2004(Ex.P-12), dated 25th February, 2004(Ex.PW-12/A),
dated 11th March, 2004(Ex.P-14), dated 27th September,
2004(Ex.P-25 & Ex.P-76), dated 14th January, 2005(Ex.P-
31), and dated 20th January, 2005(Ex.P-34).
I, therefore, have no hesitation in holding that the
plaintiff was squarely responsible for not completing the
work within the stipulated period of 15 months computed
from 10th April, 2003, and, thereby he rendered himself
liable to levy of compensation under clause 2 of the
Contract between the parties.
9. The work completed by the plaintiff in the first 15
months was to the extent of only 16%, which was wholly
unjustified and amounted to breach of the contract on the
CS(OS)No.921.05 Page 20 of 50
part of the plaintiff. As noted earlier, in terms of clause 5 of
the Contract, the plaintiff was required to execute 1/8th of
the work before 1/4th of the time allowed for completing the
work, 3/8th of the work before half of the time stipulated for
completing the work and 3/4th of the work before expiry of
3/4th of the stipulated time. As against this, the plaintiff
executed 2.19% of the work during first three months and
31% during first 7 months. In fact, this is not at all in
dispute as the plaintiff did not maintain progress of the
work in terms of his agreement with the defendant.
10. During the course of arguments, it was contended
by the learned counsel for the plaintiff that the defendant
was not competent either to levy compensation or to rescind
the Contract, after the Contract had already expired by
efflux of time. The case of the defendant, on the other hand,
is that the compensation can be levied even after the time
for execution of the work expired and in any case the time
was extended by the defendant first upto 27 th December,
2004 vide letter dated 28th June, 2004, then upto 27th April,
2005. Vide letter dated 24th December, 2004 and thereafter
after 27th June, 2005, vide letter dated 19th April, 2005. The
plaintiff has denied receipt of the letters dated 28 th June,
CS(OS)No.921.05 Page 21 of 50
2004, 24th December, 2004 from the defendant, though
receipt of the letter 19th April, 2005(Ex.D-11) has been
admitted by the plaintiff. A copy of this letter has also been
filed by the plaintiff as Ex.P-44. The plaintiff himself has
filed a copy of the letter dated 25th April, 2005 Ex.P-45 sent
to him by the defendant. Even in this letter, there is
reference to extension of time upto 27th June, 2005.
Ex.PW-1/D is the cement register which was
maintained at the site. A perusal of the document would
show that cement was regularly issued to the plaintiff even
after 27th June, 2004. The plaintiff took cement on
numerous dates, the last delivery having been taken by him
on 14th January, 2005. In fact the last seven deliveries of
cement were taken in January, 2005, whereas cement was
taken 17 times in December, 2004 and 18 times in
November, 2004. It had also been taken on a number of
dates in October, September, July and June, 2004. Had the
defendant not extended time beyond 27th June 2004 and
the plaintiff not accepted extension of work from time to
time, there would have been no occasion for him to take
delivery of cement from the site, after the initial date
stipulated for completion of the work had expired. Had the
CS(OS)No.921.05 Page 22 of 50
plaintiff not received the letter dated 28 th June, 2004
extending the time for completion of the work upto 27 th
December, 2004, he would not have taken delivery of
cement after June 2004. Similarly had he not received the
letter dated 24th December, 2004 extending the time upto
27th April, 2005, he would not have taken delivery of cement
after December, 2004. In his deposition, the plaintiff has
claimed that he stopped the work on the site on 31 st August,
2004 but, delivery of cement taken by him from time to
time, even after 31st August, 2004 clearly shows that his
statement in this regard is not correct. It would be
pertinent to note here that the plaintiff has admitted that
the cement which is stored at the godown at the site was
under joint custody of the parties and whenever it was
taken out from the godown, enty used to be made in cement
register before taking cement out of the godown. He has
also admitted the cement register (Ex.PW-1/DA) filed by the
defendant and has expressly admitted his signatures at
mark „A‟ to mark „G‟. Mark „G‟ shows the issue of cement in
December, 2004 and January, 2005, mark „F‟ shows
delivery of cement to the plaintiff between September, 2004
and December, 2004 and mark „E‟ shows delivery of cement
CS(OS)No.921.05 Page 23 of 50
to him between August, 2004 and September, 2004. The
conduct of the plaintiff in taking delivery of cement beyond
27th December, 2004, clearly indicates that the parties had
treated the contract as subsisting even beyond 27 th
December, 2004, and that is why the plaintiff got the
cement issued to him from the godown, and presumably to
carry out further work. The site register Ex.PW-1/DB has
also been admitted by the plaintiff. It bears signature of the
site Engineer of the plaintiff on 17th January, 2005 wherein
it is recorded that after demolishing the cement godown and
site office, the plaintiff had removed all the cement from the
site, without permission of the department. These
documents totally be lie the case set up by the plaintiff and
clearly show extension of time by the defendant.
11. Referring to various extensions of time granted to
the plaintiff for completing the work and the terms of the
contract providing for levy of compensation on account of
delay in execution of the work, it was contended by The
learned counsel for the plaintiff that since time was not the
essence of the contract, the defendant was not justified in
rescinding the contract and awarding the work for execution
by another agency at the risk and cost of the plaintiff. In
CS(OS)No.921.05 Page 24 of 50
support of his contention, the learned counsel for the
plaintiff has relied upon the decision of Supreme Court in
Hind Construction Contractors vs. State of Maharashtra
AIR 1979 Supreme Court 720. In the above-referred case,
the period for completion of the work was fixed as 12
months from the date of commencement of the work. The
plaintiff/appellant did not complete the work within the
stipulated time, whereupon the contract was rescinded by
the respondent and the security deposited by the appellant
was forfeited. The case of the appellant before Supreme
Court was that time was not the essence of the contract, the
completion of the work was delayed on account of reasons
beyond his control and though extension of time was
permissible under the contract, it was wrongfully refused by
the respondent, though his request for extension of time
made before expiry of the time stipulated for completion of
the work was pending with the respondent. The contention
was that the respondent/defendant ought to have granted
some reasonable time to the plaintiff/appellant for
completing the work undertaken by him and making the
time essence of the contract and only if the work was not
completed by him within that time, the contract could have
CS(OS)No.921.05 Page 25 of 50
been rescinded on the ground that the plaintiff/appellant
had committed breach of the contract. Dealing with the
contention Supreme Court, inter alia, observed as under:
"X X X It will be clear from the
aforesaid statement of law that even
where the parties have expressly provided
that time is of the essence of the contract
such a stipulation will have to be read
along with other provisions of the
contract and such other provisions may,
on construction of the contract, exclude
the inference that the completion of the
work by a particular date was intended to
be fundamental; for instance, if the
contract were to include clauses
providing for extension of time in certain
contingencies or for payment of fine or
penalty for every day or week the work
undertaken remains unfinished on the
expiry of the time provided in the contract
such clauses would be construed as
rendering ineffective the express
provision relating to the time being of the
essence of contract.
X X X If time was not of the essence
of the contract or if the stipulation as to
the time fixed for completion had, by
reason of the waiver, ceased to be
applicable then the only course open to
the respondent was to fix some time
making it the essence and if within the
time so fixed the appellant-plaintiff had
failed to complete the work, the
respondent-defendant could have
rescinded the contract.
X X X Long before the expiry of
the period of 12 months the appellant-
CS(OS)No.921.05 Page 26 of 50
plaintiff had by his letter dated June 6,
1956 (Ex. 68) requested for extension of
period of completion up to the end of
December, 1956; this request was
repeated by another letter dated June 23,
1956 (Ex. 69). May be the reasons or
grounds on which the request was made
may not have appealed to the
Superintending Engineer but some
reasonable time making it the essence
ought to have been granted. In this behalf
it may be stated that the S.D.O. by his
letter (Ex. 69) had recommended
extension up to December 1956 as
sought while by his letter dated June 23,
1956."
In the facts and circumstances of the case before this
Court, this judgment would be of no help to the plaintiff.
This is not the case of the plaintiff that he had asked for
extension of time to complete the work, but the defendant
had unjustifiably refused the same. It is rather the case of
the defendant that they had extended the time for
completion of the contract; firstly up to 27 th June, 2004,
then up to 27th December, 2004 and lastly up to 27th June,
2005. The plaintiff himself wrote letters to the defendant
stating therein that he was not interested in executing the
balance work. During his deposition in the Court, the
plaintiff claimed that he had stopped work at the site in
August, 2004. In his letter dated 09th December, 2004
CS(OS)No.921.05 Page 27 of 50
(Ex.P-30), the plaintiff alleged that he had never applied for
extension of time and in fact he was rescinding/repudiating
the contract w.e.f. 09th December, 2004. In his legal notice
dated 10th February, 2005, the plaintiff again referred to his
letter dated 09th December, 2004. In the legal notice dated
21st March, 2004 (Ex.P-37), the plaintiff again alleged that
he had vide letter dated 09th December, 2004, rescinded the
contract. This was again reiterated in his reply dated 04th
April, 2005 (Ex.P-42), representation dated 12th April, 2005
(Ex.P-43) and notice dated 25th May, 2005 (Ex.P-51). Since
the plaintiff abandoned the work, did not apply for
extension of time and even did not offer to complete the
work within the time, which was extended by the defendant
from time to time, the defendant, in my view, was justified
in rescinding the contract and awarding the work to another
agency to be executed at the risk and cost of the plaintiff.
In any case, even if I presume, despite my finding
to the contrary, that rescission of the contract was wrong in
law on account of time being not essence of the contract
that would have no bearing on the compensation levied
upon the plaintiff under clause 2 of the Contract.
CS(OS)No.921.05 Page 28 of 50
12. It was contended by the learned counsel for the
plaintiff that though under Clause 2 of the contract, the
compensation can be levied only by Superintending
Engineer, the levy of compensation to the plaintiff was
conveyed by the Executive Engineer and neither the
Superintending Engineer has been produced in the witness
box nor has any documentary evidence been produced by
the defendant to prove that the compensation was levied by
Superintending Engineer.
A perusal of Ex.P-36, which is the letter dated 04th
March, 2005, conveying levy of compensation to the
plaintiff, shows that the compensation was levied by the
Competent Authority. Though the letter does not indicate,
who the Competent Authority was, since the compensation
under Clause 2 of the Contract could be levied only by the
Superintending Engineer, the reference to the Competent
Authority in the letter dated 04th March, 2005, obviously,
would be only to the Superintending Engineer. Hence, it
cannot be said that the compensation was not levied by the
Superintending Engineer. In my view, since the letter dated
04th March, 2005 clearly conveyed that compensation was
levied by Competent Authority, it was not necessary for the
CS(OS)No.921.05 Page 29 of 50
defendant to produce the Superintending Engineer in the
witness-box to prove that the compensation was levied by
him.
13. Relying upon the decision of this Court in Delhi
Development Authority vs. Construction & Design
Services, UP Jal Nigam, 165 (2009) Delhi Law Times 208, it
was contended by the learned counsel for the plaintiff that
since the communication dated 04th March, 2005 did not
disclose any reason as to why maximum compensation was
levied on the plaintiff, the order levying compensation is
liable to be declared null and void. I, however, find no merit
in this contention. As noted earlier, Supreme Court, in M/s
J.G.Engineers Pvt. Ltd. (supra), and Bharat Sanchar
Nigam Limited (supra) has clearly held that decision of the
Superintending Engineer with respect to quantification of
the compensation is final and what has to be seen for
adjudication is only as to whether the contractor was
responsible for the delay or not. A purpose of requiring a
decision making authority to disclose the reasons for his
decision is that in the event of his decision being
challenged, the reviewing authority or the Court, as the case
may be, may scrutinize the reasons given by him, to decide
CS(OS)No.921.05 Page 30 of 50
whether the decision is based on cogent and germane
reasons or was influenced by extraneous considerations.
Since the decision of the Superintending Engineer with
respect to quantum of damage is final and binding on the
parties and, therefore, cannot be questioned in any
proceedings, including a civil suit, absence of reasons for
levying the maximum penalty cannot be a ground for
declaring the levy of compensation null and void.
14. It was also contended by the learned counsel for
the plaintiff that since the defendant has failed to prove the
actual damages, it is not entitled to recovery of any
compensation from the plaintiff. Again, he has relied upon
the decision of this Court in Construction & Design
Services, UP Jal Nigam (supra), where this Court was of
the view that the plaintiff before the Court having not
treated the time as essence of the contract, cannot fall back
on a presumptive condition to impose the maximum
compensation leviable; enforcement of such action would be
giving effect to a penalty clause. As regards reasonable
compensation, this Court observed that the plaintiff had not
shown even the basis for levying compensation which it did
in that case, despite its being aware of the extent to which
CS(OS)No.921.05 Page 31 of 50
the contract was performed as well as the exact extent of
loss in monetary terms, either by way of payment to another
contractor or the amount spent for completing the work.
15. In BSNL vs. Reliance Communication Ltd.
(2011) 1 SCC 394 and ONGC vs. Saw Pipes Ltd AIR 2003
SC 2629. In Saw Pipes Ltd (supra), the respondent offered
to supply casing pipes to the appellant, who accepted the
offer and issued a detailed order containing terms and
conditions of which the goods were to be supplied on or
before 14th November, 1996. The contract provided for
payment of liquidity damages to the appellant. After
referring to Sections 73 and 74 of the Contract Act,
Supreme Court, inter alia, observed as under:
"Under Section 73, when a contract has
been broken, the party who suffers by
such breach is entitled to receive
compensation for any loss caused to him
which the parties knew when they made
the contract to be likely to result from the
breach of it. This Section is to be read
with Section 74, which deals with penalty
stipulated in the contract, inter alia
[relevant for the present case] provides
that when a contract has been broken, if
a sum is named in the contract as the
amount to be paid in case of such
breach, the party complaining of breach
is entitled, whether or not actual loss is
proved to have been caused, thereby to
receive from the party who has broken
CS(OS)No.921.05 Page 32 of 50
the contract reasonable compensation
not exceeding the amount so named.
Section 74 emphasizes that in case of
breach of contract, the party complaining
of the breach is entitled to receive
reasonable compensation whether or not
actual loss is proved to have been caused
by such breach. Therefore, the emphasis
is on reasonable compensation. If the
compensation named in the contract is
by way of penalty, consideration would be
different and the party is only entitled to
reasonable compensation for the loss
suffered. But if the compensation named
in the contract for such breach is genuine
pre-estimate of loss which the parties
knew when they made the contract to be
likely to result from the breach of it, there
is no question of proving such loss or
such party is not required to lead
evidence to prove actual loss suffered by
him. Burden is on the other party to lead
evidence for proving that no loss is likely
to occur by such breach. Take for
illustration: if the parties have agreed to
purchase cotton bales and the same were
only to be kept as a stock-in-trade. Such
bales are not delivered on the due date
and thereafter the bales are delivered
beyond the stipulated time, hence there
is breach of the contract. Question which
would arise for consideration is--whether
by such breach party has suffered any
loss. If the price of cotton bales fluctuated
during that time, loss or gain could easily
be proved. But if cotton bales are to be
purchased for manufacturing yarn,
consideration would be different
(emphasis supplied)
....Take for illustration construction of a
CS(OS)No.921.05 Page 33 of 50
road or a bridge. If there is delay in
completing the construction of road or
bridge within stipulated time, then it
would be difficult to prove how much loss
is suffered by the Society/State. Similarly
in the present case, delay took place in
deployment of rigs and on that basis
actual production of gas from platform B-
121 had to be changed. It is undoubtedly
true that the witness has stated that
redeployment plan was made keeping in
mind several constraints including
shortage of casing pipes. Arbitral
Tribunal, therefore, took into
consideration the aforesaid statement
volunteered by the witness that shortage
of casing pipes was only one of the
several reasons and not the only reason
which led to change in deployment of
plan or redeployment of rigs Trident-II
platform B-121. In our view, in such a
contract, it would be difficult to prove
exact loss or damage which the parties
suffer because of the breach thereof. In
such a situation, if the parties have pre-
estimated such loss after clear
understanding, it would be totally
unjustified to arrive at the conclusion
that party who has committed breach of
the contract is not liable to pay
compensation. It would be against the
specific provisions of Section 73 and 74 of
the Indian Contract Act. There was
nothing on record that compensation
contemplated by the parties was in any
way unreasonable."
In para 69 of the judgment, the Court, inter alia,
concluded as under:
"(1) Terms of the contract are required to
CS(OS)No.921.05 Page 34 of 50
be taken into consideration before
arriving at the conclusion whether the
party claiming damages is entitled to the
same;
(2) If the terms are clear and
unambiguous stipulating the liquidated
damages in case of the breach of the
contract unless it is held that such
estimate of damages/compensation is
unreasonable or is by way of penalty,
party who has committed the breach is
required to pay such compensation and
that is what is provided in Section 73 of
the Contract Act.
(3) Section 74 is to be read along with
Section 73 and, therefore, in every case of
breach of contract, the person aggrieved
by the breach is not required to prove
actual loss or damage suffered by him
before he can claim a decree. The Court
is competent to award reasonable
compensation in case of breach even if no
actual damage is proved to have been
suffered in consequence of the breach of
a contract.
(4) In some contracts, it would be
impossible for the Court to assess the
compensation arising from breach and if
the compensation contemplated is not by
way of penalty or unreasonable, Court
can award the same if it is genuine pre-
estimate by the parties as the measure of
reasonable compensation."
In BSNL (supra), the contract between the parties
provided for payment of liquidity damages to the appellant.
On the question as to whether a sum named in the contract
CS(OS)No.921.05 Page 35 of 50
is a pre-estimate of reasonable compensation for the loss or
by way of penalty, Supreme Court referred to the following
extract from Law of Contract (10th Edn.):
"a payment stipulated as in terrorem of
the offending party to force him to
perform the contract. If, on the other
hand, the clause is an attempt to
estimate in advance the loss which will
result from the breach, it is a liquidated
damages clause. The question whether a
clause is penal or pre-estimate of
damages depends on its construction and
on the surrounding circumstances at the
time of entering into the contract".
As regards the liquidity damages, the Court
observed as under:
"Lastly, it may be noted that liquidated
damages serve the useful purpose of
avoiding litigation and promoting
commercial certainty and, therefore, the
court should not be astute to categorize
as penalties the clauses described as
liquidated damages. This principle is
relevant to regulatory regimes. It is
important to bear in mind that while
categorizing damages as "penal" or
"liquidated 68 damages", one must keep
in mind the concept of pricing of these
contracts and the level playing field
provided to the operators because it is on
costing and pricing that the loss to BSNL
is measured and, therefore, all calls
CS(OS)No.921.05 Page 36 of 50
during the relevant period have to be
seen."
In case of Saw Pipes Ltd (supra) the contract
pertained to supply of pipes required for deployment of rigs
which were to be used for production of gas and the plan for
redeployment and a revised plan had to be made for
deployment of rigs on account of various constraints
including shortage of casing pipes which were to be
supplied by Saw Pipes Ltd. and shortage of casing pipes
being only one of the several reasons leading to delay in
deployment of rigs, the actual damages on account of delay
in supply of casing pipes could not have been ascertained
by the Court. In case of BSNL vs. Reliance
Communication Ltd. (supra), there was an interconnection
agreement between the parties which provided for payment
of liquidated damages and considering that the telecom
services in India are operating under regulatory regime
where all service providers are to be afforded level playing
field. The Court was of the view that the compensation
claimed by BSNL was pre-estimate of damages and was not
penal in nature.
CS(OS)No.921.05 Page 37 of 50
In Shiva Jute Baling Ltd vs. Hindley and
Company Ltd, AIR 1959 SC 1357, the appellant company
entered into a contract with the respondent company for
supply of 500 bales of jute. The contract proved that in the
event of default of tender or delivery, the seller shall pay to
the buyer as and for liquidated damages, Rs 10 per ton plus
the excess (if any) of the market value over the contract
price, the market value being that of jute contracted for on
the day following the date of default. On the appellant
taking the stand that the contract had stood cancelled, the
respondent claimed default on the part of the appellant and
the matter was referred for arbitration. Upholding the
compensation awarded by the Arbitrator in terms of the
contract between the parties, Supreme Court, inter alia,
observed as under:-
"The argument under this head is that
the liquidated damages provided under
clause (12) of the contract include not
only the difference between the contract
price and the market price on the date of
default but also a further sum of 10s. per
ton. Reference in this connection is made
to Sections 73 and 74 of the Indian
Contract Act, and it is said that the extra
amount of 10s. per ton included in the
sum of liquidated damages is against the
provision of these section and therefore
the award being against the law of India
CS(OS)No.921.05 Page 38 of 50
is bad on the face of it and should not be
enforced in India. Section 73 provides for
compensation for loss or damage caused
by breach of contract. It lays down that
when a contract has been broken, the
party who suffers by such breach is
entitled to receive from the party who has
broken the contract, compensation for
any loss or damage caused to him
thereby, which naturally arose in the
usual course of things from such breach,
or which the parties knew, when they
made the contract, to be likely to result
from the breach of it. Section 74 provides
for breach of contract where penalty is
stipulated for or a sum is named and lays
down that when a contract has been
broken, if a sum is named in the contract
as the amount to be paid in case of such
breach, or if the contract contains any
other stipulation by way of penalty, the
party complaining of the breach is
entitled, whether or not actual damage or
loss is proved to have been caused
thereby, to receive from the party who
has broken the contract reasonable
compensation not exceeding the amount
so named or, as the case may be, the
penalty stipulated for. What clause (12) of
the contract provides in this case is the
measure of liquidated damages and that
consists of two things, namely, (i) the
difference between the contract price and
the market price on the date default and
(ii) an addition of 10s. per ton above that.
There is nothing in s. 73 or s. 74 of the
contract Act, which makes the award of
such liquidated damages illegal.
Assuming that the case is covered by s.
74, it is provided therein that reasonable
compensation may be awarded for breach
of contract subject to the maximum
amount named in the contract. What the
CS(OS)No.921.05 Page 39 of 50
arbitrators have done is to award the
maximum amount named in the contract.
If the appellant wanted to challenge the
reasonableness of that provision in clause
(12) it should have appeared before the
arbitrators and represented its case. It
cannot now be heard to say that simply
because clause (12) provided for a further
sum of 10s. per ton over and above the
difference between the contract price and
the market price on the date of the
default, this was per se unreasonable and
was therefore bad accordingly to the law
of India as laid down in Sections 73 and 74
of the Contract Act. Both these sections
provide for reasonable compensation and
s. 74 contemplates that the maximum
reasonable compensation may be the
amount which may be named in the
contract. In this case the arbitrators have
awarded the maximum amount so named
and nothing more. Their award in the
circumstances cannot be said to be bad
on the face of it, nor can it be said to be
against the law of India as contained in
these sections of the Contract Act."
16. The propositions of law which emerge from the
statutory provisions contained in Section 73 & 74 of the
Indian Contract Act when examined in the light of a
cumulative reading of aforesaid decisions of Supreme Court
can be summarized as under:
a) If a party to the contract commits breach of the
contract, the party who suffers loss/damage on
account of such breach is entitled to receive such
CS(OS)No.921.05 Page 40 of 50
compensation from the party in breach of the contract
which naturally arose in usual course of business, on
account of such breach or which the parties to the
contract knew, at the time of making the contract, to
be likely to result on account of its breach. However,
the party suffering on account of the breach is entitled
to recover only such loss or damage which arose
directly and is not entitled to damages which can be
said to be remote.
b) In case the agreement between the parties provides for
payment of liquidated damages, the party suffering on
account of breach of the contract even if it does not
prove the actual loss/damage suffered by it, is entitled
to reasonable damages unless it is proved that no loss
or damage was caused on account of breach of the
contract. In such a case, the amount of reasonable
damages cannot exceed the amount of liquidated
damages stipulated in the contract.
Any other interpretation would render the words
"whether or not actual damage or loss is proved to
have been caused thereby" appearing in Section 74 of
the Indian Contract Act absolutely redundant and
CS(OS)No.921.05 Page 41 of 50
therefore the Court needs to eschew such an
interpretation.
c) If the amount stipulated in the contract, for payment
by party in breach of the contract, to the party
suffering on account of breach of the contract is shown
to be by way of penalty, the party suffering on account
of the breach is entitled only to a reasonable
compensation and not the amount stipulated in the
contract. If it is shown by the party in breach of the
contract that no loss or damage was suffered by the
other party on account of breach of the contract, the
party in breach of the contract is not liable to pay any
amount as compensation to the other party.
d) If the nature of the contract between the parties is
such that it is not reasonably possibly to assess the
damages suffered on account of breach of the contract,
the amount stipulated in the contract, for payment by
the party in breach should normally be accepted as a
fair and reasonable pre-estimate of damages likely to
be suffered on account of breach of the contract and
should be awarded.
CS(OS)No.921.05 Page 42 of 50
17. In FAO(OS) No. 06/2008 & FAO(OS) No.07/2008
Oil & Natural Gas Corporation Ltd. v. Mitra Guha Builder
(India) Company decided on 16th February, 2009 damages
were levied in exercise of power conferred on the
Superintending Engineer under an identical clause. The
Arbitrator however, concluded that the clause permitting
levy of penalty was impermissible in law and it was not a
clause levying liquidated damages being a pre-estimate of
damages. The view taken by the Arbitrator was upheld by
the learned Single Judge noticing that the petitioner cannot
deny liability to make payment by adjusting admitted
amount against the damages/penalty when a substantive
part of delay (367 days) was attributable to the petitioner
and there was a smaller part of delay (273 days), which was
attributable to the respondent. The Division Bench of this
Court held that the view taken by the Arbitrator was not
correct since mere absence of a recital in the clause of the
agreement to the effect that the parties agree that the
liquidated damages are genuine pre-estimate, would not
lead to the conclusion that the parties had provided for levy
of penalty and not liquidated damages. The Court was of
the view that the reasoning adopted by the Supreme Court
CS(OS)No.921.05 Page 43 of 50
in ONGC v. SAW Pipes (supra) was applicable and the
learned Single Judge had disregarded the same.
In Pure Pharma Limited v. Union of India,
2008(3) Arb. L.R. 57 (Delhi), the agreement between the
parties contained an identical clause. One of the grounds
taken by the petitioner in that case was that the clause
pertaining to liquidated damages could not be invoked
unless and until the exact extent of loss was proved. It was
also contended that the aforesaid clause did not reflect the
genuine pre-estimate of damages but was in the nature of a
penalty and therefore it was incumbent upon the
respondent to prove the loss incurred by it on account of the
alleged breach. The petitioner before the Court relied upon
the decision of Supreme Court in ONGC v. SAW Pipes
(supra) as well as the decision in Haryana Telecom Ltd. v.
Union of India 2006 (2) Arb.L.R. 293. After considering the
decisions relied upon by the learned Counsel for the
petitioner, this Court noted that the Arbitrator had
interpreted the aforesaid clause to be a genuine pre-
estimate of the loss which was likely to occur on account of
delayed supplies and also held that the compensation
provided in the said clause was not unreasonable since no
CS(OS)No.921.05 Page 44 of 50
evidence had been led by the claimant to establish that the
stipulated condition was by way of penalty. It was also
observed that the claimant was not able to demonstrate
either before the Arbitrator or before the Court that on
account of delay in the supply of goods no legal injury was
or would be suffered by the respondent or no loss was likely
to occur on account of the delayed supplies. The petition
challenging the award was therefore dismissed.
18. A Division Bench of this Court having held in
Mitra Guha Builder (India) Company (supra) that such a
levy was by way of liquidated damages and similar view
having been taken in Pure Pharma Limited (supra), I am
unable to accept the contention that the levy of
compensation under Clause 2 of the Contract was not by
way of liquidated damages envisaged in Section 74 of the
Act. In Sudhir Genset Limited vs. Indian Oil Corporation
Ltd. 177 (2011) DLT 438, this Court, dealing with a clause
which provided for payment by the vendor to the defendant
by way of liquidated damages, an amount equal to ½ per
cent of arterial, delayed by the vendor for each week or part
thereof subject to a maximum of 10% of the price, rejected
the contention that in order to claim damages, the
CS(OS)No.921.05 Page 45 of 50
respondent was required to prove the actual loss suffered by
it. In taking this view, this Court, particularly relied upon
the decision of Supreme Court in the ONGC (supra). The
Court was of the view that when the parties had agreed to
fix liability in terms of Clause 13 for payment of damages as
per the formula contained in that clause, it was not a case
of penalty but what was recovered is the amount of damages
pre-fixed by the parties with regard to loss suffered by the
respondent on account of delay in supplying the equipment.
In such circumstances, it was not necessary for the
respondent to prove actual damages.
19. The learned counsel for the plaintiff has also
submitted copies of the decisions in Vishwanath Sood vs.
Union of India, AIR 1989 SC 952, B.W.L. Ltd. vs. MTNL
and Others 2000 Arb. W.L.J. 450, J.S. Chaudhary vs.
Vice-Chairman, DDA and Anr. 183 (2011) Delhi Law Times
723.
I have perused these judgments and none of them
is of any help to the plaintiff. In the case of Vishwanath
Sood (supra), Supreme Court held that levy of
compensation was conditioned on some default or
negligence on the part of the contractor and the relevant
CS(OS)No.921.05 Page 46 of 50
clause in the Court provides for discretion to the
Superintending Engineer to reduce the rate of penalty from
one per cent. It was observed that nay moderation which
may be done by the Superintending Engineer would depend
on the circumstances, the nature, the period of default and
the degree of negligence or default that could be attributed
to the contractor. It was also observed that the decision of
Superintending Engineer was in the nature of a considered
decision which he has arrived at after considering the
various mitigating circumstances that may be pleaded by
the contractor and the question regarding amount of
compensation has to be decided only by the Superintending
Engineer and no one else.
However, in the case before this Court, it has been
proved that it was the plaintiff who was responsible for
delay in execution of the work and in fact he abundant the
work despite various extensions of time granted by the
defendant. A show-cause notice dated 11th March, 2004
(Ex.P-13) was admittedly issued to the plaintiff and was also
replied by him vide letter dated 19th March, 2004 (Ex.P-16).
However, since he has failed to complete the work,
compensation was levied on him and conveyed vide letter
CS(OS)No.921.05 Page 47 of 50
dated 04th March, 2005. The presumption is that while
levying the compensation, the Superintending Engineer had
considered all the facts and circumstances of the case,
including the reply submitted by the plaintiff to the show-
cause notice. As noted earlier, since the decision of the
Superintending Engineer with respect to quantification of
the compensation is final and binding on the parties, it was
not necessary for the Superintending Engineer to pass a
speaking order dealing with each and every plea taken by
the plaintiff in his reply to the show cause notice.
In B.W.L. Ltd. (supra), this Court held that before
levying the liquidated damages, it was necessary to prove
that there was delay by the supplier in performance of its
obligations the agreement did not clothe the respondent
with the power to arrive at a unilateral finding in this regard
and that even independent of Section 74 of the Contract
Act, it was necessary that adjudication takes place on the
question who was responsible and liable for the delay. This
judgment does not help the plaintiff since this Court has
gone into this aspect and has come to the conclusion that
the plaintiff was squarely responsible for the delay in
execution of the work. This Court was also of the view that
CS(OS)No.921.05 Page 48 of 50
the respondent could not take a decision with respect to
levy of compensation in violation of the rule of audi alteram
partem. Again, this judgment does not help the plaintiff
since a show-cause notice was duly given to the plaintiff
before levying the compensation.
In J.S. Chaudhary (supra), the plaintiff had file a
suit claiming certain amounts from DDA. I do not find any
such proposition of law in this judgment which can be
applied to the case before this Court.
The learned counsel for the plaintiff has also relied
upon clauses 28.1 to 28.8.3 and clause 32.1 of CPWD
Works Manual, but I find nothing in the above-referred
provisions of the Manual, which would be of any help to the
plaintiff.
20. In the case before this Court, there is nothing on
record to indicate that the compensation contemplated by
the parties under clause 2 of the Contract was in any way
unreasonable. No evidence has been led by the plaintiff to
establish that levy of compensation envisaged in clause 2 of
the Contract was by way of penalty or that the
compensation contemplated therein was unreasonable. No
evidence has been led by the plaintiff to prove that there
CS(OS)No.921.05 Page 49 of 50
was no legal injury to the defendant on account of his
failure to complete the contract. The challenge to levy of
compensation, therefore, must fail. The issues are decided
against the plaintiff and in favour of the defendant.
Issues No.6 & 7
21. In view of my findings on issues No.1 to 5, the
plaintiff is not entitled to the declaration or injunction
sought by him.
ORDER
In view of my findings on issues, the suit is dismissed with costs.
Decree sheet be drawn accordingly.
(V.K. JAIN) JUDGE DECEMBER 20, 2011 'sn'/vn/bg CS(OS)No.921.05 Page 50 of 50