Gujarat High Court
State vs Vithalbhai on 8 February, 2012
Author: J.B.Pardiwala
Bench: Bhaskar Bhattacharya, J.B.Pardiwala
Gujarat High Court Case Information System
Print
FA/23/1992 23/ 23 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
FIRST
APPEAL No. 23 of 1992
For
Approval and Signature:
HONOURABLE
THE ACTING CHIEF JUSTICE MR.BHASKAR BHATTACHARYA
HONOURABLE
MR.JUSTICE J.B.PARDIWALA
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
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STATE
OF GUJARAT - Appellant(s)
Versus
VITHALBHAI
DAHYABHAI PATEL & CO.@ V D PATEL & CO. - Defendant(s)
========================================================
Appearance
:
GOVERNMENT
PLEADER for
Appellant(s) : 1,
MS MAYA N BHAVNANI for Defendant(s) :
1,
========================================================
CORAM
:
HONOURABLE
THE ACTING CHIEF JUSTICE MR.BHASKAR BHATTACHARYA
and
HONOURABLE
MR.JUSTICE J.B.PARDIWALA
Date
: 08/02/2012
CAV
ORDER
(Per : HONOURABLE MR.JUSTICE J.B.PARDIWALA) This appeal under Section 96 of the Civil Procedure Code is at the instance of State of Gujarat-Original defendant and is directed against the judgment and decree passed by the learned Civil Judge (Senior Division), Panchmahals at Godhara dated 26.04.1991, whereby learned Civil Judge has partly allowed the Special Civil Suit No.44/84 filed by the plaintiff and directed the appellant (original defendant) to pay an amount of Rs.17,24,430.34 ps. from the properties of defendant with proportionate costs and running interest at the rate of 9% from the date of the suit till its realization by way of damages for breach of contract.
The case of the original plaintiff:-
(A) The plaintiff, a registered partnership firm duly registered under the Indian Partnership Act, 1872, is engaged in the business of construction as Engineers and Contractors in the State of Gujarat. In the year 1978-79, the defendant-State of Gujarat through its Executive Engineer, Irrigation Project Division No.1, Diwada Colony invited tenders for the works of construction of Masonary Dam including spillway, head regulator, drilling and grouting and other ancillary works of Umaria Irrigation Scheme. The said tender was invited publicly in B-2 form.
(B) The estimated cost of the work was to the tune of Rs.47,53,338/- and the accepted cost of the tender was to the tune of Rs.66,02,715/-. The plaintiff submitted the tender by quoting his rates as per the items of Schedule-B of the tender, which is at Exhibit.37. The plaintiff's tender was found lowest and the same was accepted by the Government vide letter dated 28.10.1978. Thereafter, the plaintiff was called upon to pay up the amount of security deposit and accordingly plaintiff deposited a sum of Rs.95,067/- as security by way of an FDR and the remaining amount of Rs.95,067/- was to be deducted from the R.A.Bills. This amount of security deposit was to remain with the Department till the completion of the work and was to be returned to the plaintiff as per conditions enumerated under Clause-1 of the tender agreement Exhibit.37. After paying the amount of security deposit, the plaintiff was called upon to enter into contract agreement and accordingly plaintiff entered into contract agreement, which bears No.B-2/2 of 1978-79 which is at Exhibit.37. The written contract between the parties contains various conditions and stipulations creating mutual bilateral and reciprocal contractual obligations to be performed by both the parties. In short, the plaintiff was required to construct masonary dam, which included construction of spillway, head regulator, drilling and grouting and other ancillary works for the project known as Umaria Irrigation Scheme. There are in all 23 items, which are specifically mentioned in Schedule-B of the tender Exhibit.37. The tender Exhibit.37 has been signed by the parties i.e. Mr.Vitthalbhai Patel, one of the partner of the plaintiff firm and by the Executive Engineer on behalf of the State.
(C) The work of contract consisting of items of Schedule-B was required to be completed within stipulated period of two years. This period of two years was to be reckoned from the date of work order i.e. December-6, 1978 and was to be completed on or before December-5,1980. After having entered into the agreement at Exhibit.37, the plaintiff was asked to start the work as per the work-order dated December-6,1978 at Exhibit.38. The plaintiff commenced with the work, but work could not be completed for the reasons which have been stated in Paragraph-5 of the plaint, which in short are that the Department could not give line out and also could not supply the drawings and designs and further there was a last minute change in the drawings and designs of the spillway. Coupled with these facts, the Department also committed breach of contract on account of failure in making the payment regularly in respect of tendered items and also in respect of extra work. Ultimately, for no fault on the part of the plaintiff, the defendant terminated the contract as a result of which the plaintiff was deprived of executing and completing the work in entirety.
(D) The plaintiff was, therefore, compelled to issue statutory notice dated 26.07.1982 under Section 80 of the Code of Civil Procedure, which is produced at Exhibit.53, and thereafter, plaintiff preferred the suit for recovery of Rs.22,86,364/- at the rate of 18% interest towards damages caused on account of illegal termination of the contract.
Case of the Defendant (Appellant) (A) The State of Gujarat appeared by filing written-Statement at Exhibit.25. The State has admitted the fact of having awarded the work in question to the plaintiff and also admitted the written contract between the parties. In the written-statement, defendant took the stand that it is not true that the Department failed to perform its reciprocal contractual obligation by not giving the plaintiff the line out. The defendant also denied the fact that the drawings were being supplied to the plaintiffs. The defendant also denied the fact that the payments were not made to the plaintiff regularly. According to the defendant, the line-out was given nearly as on 08.12.1978 by the In-charge Deputy Engineer Irrigation Project. In the written statement the defendant has given details about the payments, which were made on different dates. The entire case of the plaintiff was denied by the defendant in its written-statement. The trial Court proceeded to frame the issues at Exhibit.18. The issues framed by the trial Court are reproduced as under:-
"(1) Whether the plaintiff firm is registered under the Indian Partnership Act?
(2) Whether Plaintiff proves that defendant has wrongly terminated the contract?
(3) Whether the plaintiff proves that defendant i.e. Government officers has committed breach of the contract agreement dated 02.02.1978-79?
(4) Whether the plaintiff proves that he is entitled to recover the amount of Rs.22,86,364.06 as shown in Para-10 of the plaint?
(5) Whether the suit is time barred?
(6) What order and decree?"
(B) On behalf of plaintiff, Shri.Vitthalbhai Patel, one of the partners of the plaintiff firm examined himself at Exhibit.35. On behalf of defendant-State, three witnesses were examined i.e. (1) Shri.A.K.Soni, Deputy Executive Engineer examined at Exhibit.129, (2) Shri.Ramahbhai Bhikhabhai Dalwadi, Executive Engineer was examined at Exhibit.144 and (3) Shri.Hiralal Dalsukhbhai Gandhi, Executive Engineer was examined at Exhibit.147.
(C) On appreciation and evaluation of the oral evidence as well as documentary evidence, the trial Court answered the issues accordingly:-
"(1) In the affirmative.
(2) In the affirmative.
(3) In the affirmative.
(4) In the affirmative, but, partly as per final order.
(5) In the negative.
(6) As per final order."
(E) Ultimately, learned Civil Judge partly allowed the suit of the plaintiff and directed the appellant (original defendant) to pay an amount of Rs.17,24,430.34 ps. from the properties of defendant with proportionate costs and running interest at the rate of 9% from the date of the suit till its realization by way of damages for breach of contract.
(F) Being aggrieved by the judgment and decree passed by the learned Civil Judge, original defendant-State of Gujarat has come up in appeal.
Contentions on behalf of the Appellant-State-original defendant:-
(A) Learned Assistant Government Pleader appearing for the State vehemently contended that the work commenced from 08.12.1978 i.e. after the issuance of the work-order on 06.12.1978 and as per the terms of the agreement plaintiff was obliged to complete the same within 24 months i.e. on or before 5th December,1980. He submitted that the plaintiff worked very slowly right from the beginning and had failed in respect of showing reasonable progress despite full cooperation from the Department. He submitted that the plaintiff had met Chief Engineer of the defendant on or about 13.01.1981 and had given an undertaking that he would execute the work of Rs.4 Lac to Rs.5 Lac every month and upon such assurance being given to the defendant, plaintiff was allowed to execute the work even after the expiry of the period upon his own request. To substantiate this, learned Assistant Government Pleader relied upon letter Exhibit.46 of the plaintiff dated 13.01.1981. He submitted that it is established that since 20th August,1981, the plaintiff had abandoned the contract work.
(B) He further contended that the plaintiff had attributed the breach of the contract to the Department showing that Department failed in giving line out, drawings, change in the spillway and not making the payments regularly, but the plaintiff is silent insofar as his own admissions are concerned, which is evident from his letters to the defendant as well as his oral deposition at Exhibit.35. Learned Assistant Government Pleader contended that it is true that in Exhibit.38, which is a letter addressed to the plaintiff by the Executive Engineer, it is stated that certified copies of accepted tender documents will be sent separately, but it does not mean that the same were not supplied to him. He further submitted that the plaintiff's inability and inefficiency is apparent from various facts on the record of the case. The length of spillway had to be reduced from 110 Mtrs. to 70 Mtrs. as it was found necessary because of non-availability of rocky foundation upto a certain depth.
Cross-examination of the plaintiff in Para-16 establishes and corroborates the say of the defendant so far as reduction of spillway from 110 Mtrs. to 70 Mtrs. is concerned.
(C) He submitted that the say of the plaintiff that because of the change proposed for reduction of spillway length, he could not ensure timely completion of the contract is absolutely false. Learned Assistant Government Pleader relied on the oral evidence of Shri A.K.Soni the then Deputy Engineer, examined at Exhibit.129 and submitted that necessary details pertaining to the work were being supplied to the plaintiff. He submitted that the work of the plaintiff was not satisfactory and whatever little work he could complete was also at a very slow pace and no efforts were made by the plaintiff to accelerate the progress of the work. He submitted that no responsible person from plaintiff's side attended the work during the whole course of work and plaintiff was short of machinery to achieve the desired results of de-watering and the men and machineries, which were being deployed by the plaintiff were insufficient and inadequate. He submitted that the various claims under ten different heads have been dealt with at length in written-statement Exhibit.35. He submitted that there are no wrongful deductions amounting to Rs.20,000/- of P.A.Bills of Machhan Nala Contract of the plaintiff. On the contrary, according to the learned Assistant Government Pleader plaintiff had himself written to the defendant on 15.01.1979 about giving consent and writing for the same.
(D) Learned Assistant Government Pleader invited our attention to the terms of the agreement Exhibit.37. He relied on Clause-3, Clause-14, Clause-15, Clause-15(A) of the agreement, which are quoted herein below:-
"Clause-3:- In any case in which under any clause or clauses of this contract the contractor shall have rendered himself liable to pay compensation on amounting to the whole of his security deposit (whether paid in one sum or deducted by installments) or in the case of abandonment of the work owing to serious illness or death of the contractor or any other cause, the Executive Engineer, on behalf of the Government of Gujarat, shall have power:-
(a) To rescind the contract (of which rescission-notice in writing to the Contractor under the hand of the Executive Engineer shall be conclusive evidence) and in that case the security deposit of the Contractor shall stand forfeited and be absolutely at the disposal of Government.
(b) To employ labour paid by the Irrigation Department and to supply materials to carry out the work, or any part of the works, debiting the Contractor with the cost of the labour and the price of the materials (as to the correctness of which cost and price, the certificate of the Executive Magistrate shall be final and conclusive against the Contractor) and crediting him with the value of the work done in all respects in the same manner and at the same rates as if it had been carried out by the Contractor under the terms of this contract and in that case the certificate of Executive Engineer as to the value of the work done shall be final and conclusive against the Contractor.
(c) To order that the work of the Contractor be measured up and to take such part thereof as shall be unexecuted out of his hands, and to give it to another Contractor to complete, in which case any expenses, which may be incurred in excess of the sum which would have been paid to the original Contractor, if the whole work had been executed by him (as to the amount of which excess expenses the certificate in writing of the Execute Engineer shall be final and conclusive) shall be borne and paid by the original Contractor and shall be deducted from any money due to him by Government under the contract or otherwise or from his security deposit or the proceeds of sale thereof or a sufficient part thereof.
In the event of any of the above course being adopted by the Executive Engineer, the Contractor shall have no claim to compensation for any loss sustained by him by reason of his having purchased, or procured any materials, or entered into any engagements, or made any advances on account of or with a view to the execution of the work of the performance of the contract. And in case the contract shall be rescinded under the provision aforesaid, the Contractor shall not be entitled to recover or be paid any sum for any work thereof actually performed by him under this contract unless and until the Executive Engineer shall have certified in writing the performance of such work and the amount payable in respect thereof and he shall only be entitled to be paid the amount so certified.
Clause-14:- The Engineer in charge shall have power to make any alterations in or additions to the original specifications, drawings, designs and instructions that may appear to him to be necessary or advisable during the progress of work and the contractor shall be bound to carry out the work in accordance with any instructions in this connection which may be given to him in writing signed by the Engineer-in-charge and such alteration shall not invalidate the contract and any additional work, which the contractor may be directed to do in the manner above specified as part of the work, shall be carried out by the Contractor on the same conditions in all respects on which the agreed to do the main work, and at the same rates as are specified in the tender for the main work.
Except that in the case of B.2 tender when the quantity of any item exceeds the quantity as in the tender by more than 30%, the Contractor will be paid at the rate entered in the sanctioned estimate increased or decreased by the percentage by which the tender is above or below the amount arrived at the estimated rates, for such quantity in excess of 30%.
If the additional of altered work includes any class of work for which no rates is specified in this contract then such class of work shall be carried out.
i. At the rate derived from item within the contract which is comparable to the one involving additional or altered class of work where there are more than one comparable items, the item of the contract which is nearest in comparison with regard to class or classes of the work involved shall be selected and the decision of the Superintending Engineer, as to the nearest comparable item, shall be final and binding to the Contractor.
ii. If the rate cannot be derived in accordance with (i) above since class of work shall be carried out at the rate entered in the schedule of the division for the year in which the tender was received increased or decreased by the percentage by which the tender amount is more or less as compared to the amount arrived at the rates in the schedule of rate of the division in the year in which the tender was received. If the schedule of rate of the division does not contain all the items, the percentage increases or decreases of the tender amount shall be calculated considering such items which are included in the schedule of rate of the division for that year.
(iii) If it is not possible to arrive at the rate from (i) and (ii) above such class of work shall be carried out at the rate decided by the competent authority on the basis of detailed rate analysis after hearing the contractor before a committee of two Superintending Engineer, stationed at the same place or the nearest place.
If the additional or altered work, for which no rate is entered. In the schedule of rates of the division is ordered to be carried out before the rate is agreed upon, the Contractor shall within seven days of the date of receipt by him of order to carry out the work, inform the Engineer-in-charge of the rate which it is his intention to charge for such class of work, and if the Engineer-in-Charge does not agree to this rate, he shall by notice in writing be at liberty to cancel his order to carry out such class of work and arrange to carry it out in such manner as he may consider it advisable, provided always that if the contractor shall commences work or incur any expenditure in regard thereof before rates shall have been determined as lastly herein before mentioned then in such cases he shall only be entitled to be paid in respect of the work carried out or expenditure incurred by him prior to the date of the determination of the rates as aforesaid according to such rate or rates as shall be fixed by the Engineer-in-charge. In the event of the dispute, the decision of the Superintending Engineer of the circle shall be final.
Where, however, the work is to be executed according to the designs, drawing and specifications recommended by the contractor and accepted by the competent authority the alterations above referred to shall be within the scope of such design, drawings and specifications appended to the tenders.
The time limit for the completion of the work shall be extended in the proportion that the increase in the cost occasioned, by alteration or additions bears to the cost of the original contract work and the certificate of the Engineer-in-charge as to such proportion shall be final and conclusive.
Clause:15:- If at any time after the execution of the contract, documents, the Engineer-in-charge shall, for any reason whatsoever, require the whole or any part of the work, as specified in the tender, to be stopped for any period or shall not require the whole or part of the work to be carried out at all or to be carried out by the Contractor, he shall give notice in writing of the fact to the Contractor, he shall give notice in writing of the fact to the Contractor who shall thereupon suspend or stop the work totally or partially, as the case may be. In such case, except as provided hereunder, the Contractor shall have no claim to any payment of compensation whatsoever on account of any profit or advantage which he might have derived from the execution of the work in full but which he did not so derive in.
Consequence of the full amount of the work not having been carried out or on account of any loss that he may be put to on account of materials purchased or agreed to be purchased or for unemployment of labour recruited by him. He shall not have also any claim for compensation by reason of any alterations having been made in the original specifications, drawings, designs and instructions which may involve any curtailment of the work as originally contemplated. Where however, materials have already been purchased or agreed to be purchased by the Contractor before receipt by him of the said notice, the Contractor shall be paid for such materials at the rates determined by the Engineer-in-charge provided they are not in excess of requirements and are of approved quality and/or shall be compensated for the loss, if any that he may be put to, in respect of materials agreed to be purchased by him, the amount of such compensation to be determined by the Engineer-in-charge whose decision shall be final. If the Contractor suffers any loss on account of his having to pay labour charges during the period during which the stoppage of work has been ordered. Under this clause, the contractor shall, on application be entitled to such compensation on account of labour charges as the Engineer-in-charge, whose decision shall be final, may consider reasonable. Provided that the Contractor shall not be entitled to any compensation on account of labour charges if, in the opinion of the Engineer-in-charge, the labour could have been employed by the Contractor elsewhere for the whole or part of the period during which the stoppage of the work has been ordered as aforesaid.
CLAUSE-15 A:- The Contractor shall not be entitled to claim any compensation from Government for the loss suffered by him on account of delay by Government in the supply of materials entered in Schedule 'A' where such delay is caused by -
(i) Difficulties relating to the supply of railway wagons.
(ii) Force Majeure.
(iii)Act of God.
(iv) Act of the country's enemies or any other reasonable cause beyond the control of Government.
In the case of such delay in the supply of materials, Government shall grant such extension of time for completion of the works as shall appear to the Executive Engineer to be reasonable in accordance with the circumstances of the case. The decision of the Executive Engineer as to the extension to time shall be accepted as final by the Contractor.
Contentions on behalf of respondent-original plaintiff decree holder:-
(A) Mr.Dayani, learned advocate appearing for the plaintiff submitted that Issue Nos.2, 3 and 4 framed by Civil Court are main issues which relate to breach of contract and termination of contract by the Government. According to him issues are answered in favour of the plaintiff- contractor. He submitted that Civil Judge on proper appreciation of oral as well as documentary evidence has rightly held that breach of contract is committed by the Government because after work-order, the department changed the drawings and designs of spillway from 110 Mtrs. to 71 Mtrs. He submitted that the earthen dam was introduced, which was not contemplated in the original contract. He also submitted that new drawings and designs could not be finalized, and therefore, could not be given until the order of termination was served upon the plaintiff contractor, which resulted into the slow progress as due to change in length of spillway, various allied components of the dam also got affected in its location, number and designs etc. (B) He submitted that the Department failed to supply schedule "A" materials like copper, plates and gelatin. The department failed to prepare item-wise programme. Clear site and line out was not given. He also submitted that due to the aforesaid reasons, the progress of the work could not be achieved within the time limit, which expired on 05.12.1980.
He submitted that the plaintiff had applied for extension of time vide Exhibit.59,62 and 66, but, the same was rejected and the contract was terminated on 17.12.1981 without making the time essence of the contract.
(C) He submitted that slow progress is, therefore, held to be attributable to the department and the termination of the contract has been rightly held by the Civil Court as wrong and illegal.
(D) He submitted that no error has been committed by the Court below in passing the decree warranting any interference at our hand in this appeal.
(E) On hearing learned Counsel for the respective parties and considering the materials on record, we shall now proceed to examine the contentions of the respective parties upon re-appreciation of evidence on record.
Analysis:-
(A) The only question which is necessary for us to examine in this appeal is as to whether the appellant-State was justified in terminating the agreement on account of plaintiff's negligence and incapability to perform the work as per the contract or whether the plaintiff is justified and has been able to prove that due to non-cooperation on the part of the State Government in supplying the drawings etc., he was unable to carry out the work efficiently and within the prescribed time limit as per the agreement. It is evident from the evidence on record more particularly the oral evidence that it was necessary for the plaintiff to do excavation of foundation work pertaining to original tender drawings where the length of the dam was shown as 110 Mtrs. However, while the work of excavation was in progress, it was found in some portion of the land that the strata as envisaged in the original design was not available, and therefore, the department had to consider changes in the design of the spillway section as also some portion of the dam. There is admission on the part of the three witnesses examined by the defendant that the Executive Engineer and the Superintendent Engineer visited the site of the dam and instructed the plaintiff to restrict the work of the spillway upto 70 Mtrs. and assured that the design of the spillway would be supplied after finalization with the Central Organization of the Department.
(B) We find substance in the say of the plaintiff that in view of this, the construction work of the spillway section and consequently the concrete bucket and the right bank H.R. were suspended and could not be carried out. The moot question is as to whether the necessary drawings, designs etc. were actually supplied to the plaintiff, more particularly after last minute changes in the designs or not?
According to the plaintiff, department failed in supplying the same whereas according to the defendant it is nothing but non execution of work on the part of the plaintiff. In this regard, we have noticed that the plaintiff had served a notice upon the defendant for production of documents. The said notice has been produced at Exhibit.143. The said notice is admitted by the defendant as the same has been endorsed. The contents of this notice have been referred to in the cross-examination of the defendant-witnesses and it was pointed out that the State should produce the documents which are mainly original record relating to proposal suggesting the original drawing of the spillway. However, it is apparent that the same has not been produced. The most important thing in the notice is with respect to final drawings and designs approved by the design unit. In cross-examination of the defendant witnesses, it has been admitted that final drawings and designs are ultimately approved by the design unit. However, none of the witnesses has any idea as to whether the drawings/designs have been produced or not? Most importantly, the witnesses have deposed that they have no idea about the same. These admissions on the part of the three witnesses examined on behalf of the defendant lends credence to the say of the plaintiff that the necessary drawings/designs were not given to the plaintiff till the termination of the contract. If it is the case of the department that the necessary designs/drawings were finalized and were handed over to the plaintiff then burden is on the defendant to produce the same, but, they have failed to produce such evidence. We can draw an adverse inference that such drawings/designs were not prepared or finalized and that is the reason why the Department has not been able to adduce necessary evidence in this regard.
(C) One another important document, which lends credence to the say of the plaintiff that as there were last minute substantial and vital changes in the designs proposed during the course of execution of work, is Exhibit.40. This is a letter by the plaintiff to the Department dated 06.01.1979 in reply to the department's letter dated 26.12.1978 whereby the Department had asked the plaintiff to give his report of progress to be achieved within stipulated time as per Clause-12 of the general conditions of the tender agreement Exhibit.37. In this regard, the plaintiff vide his letter made clear to the Department that if the Department is proposing the change which is going to vitally affect the location of the spillway concrete bucket and position of the HR and other allied components, it would not be possible for the plaintiff to give any realistic programme of progress without finalization of the designs and drawings by the department. At this stage, we may also refer to Exhibit.41. It is a letter of Deputy Engineer dated 16.01.1979 in which the Deputy Engineer indirectly has admitted that the designs of all components will have to be reviewed according to the site conditions and other relevant factors. We have also noticed that the appellant-State started recovering various amounts from the R.A.Bills of the plaintiff on the ground that some amount is to be recovered from the plaintiff in connection with some other contracts. As per general conditions of the contract, appellant-State cannot deduct any amount from the R.A.Bills on the premise that in connection with other contracts requisite amount is to be recovered from the contractor. It is practically an admitted position that the appellant-State started making recoveries from the R.A.Bills which were being prepared in respect of Umeriya Irrigation Scheme on the ground that the plaintiff owed some amount to the Government in connection with the work of Machhannala, which was a contract under separate agreement. Admittedly there are two different contracts under two different agreements.
(D) The reliance, which has been placed on various clauses of the agreement also does not save the situation for the appellant-State. Clause 15, which has been reproduced in the earlier part of the judgment is with regard to compensation if the execution of contract, for any reason, is required to be stopped for any period. Clause-15 is altogether different. Clause-15 says that if at any time after the execution of the contract, documents, the Engineer-in-charge shall, for any reason whatsoever, require the whole or any part of the work, as specified in the tender, to be stopped for any period or shall not require the whole or part of the work to be carried out at all or to be carried out by the contractor, he shall give notice in writing of the fact to the contractor who shall thereupon suspend or stop the work totally or partially, as the case may be. In any such case, except as provided hereunder, the contractor shall have no claim to any payment of compensation whatsoever on account of any profit or advantage which he might have derived from the execution of the work in full but which he did not so derive in. In the present case, if Clause-15 in its entirety is closely read, it will not apply if there is last minute change or alteration in drawings/designs and without furnishing the fresh drawings/designs if the agreement is terminated for no fault on the part of the contractor.
(E) Clause 15(A), which has been relied upon also does not save the situation for the appellant-State. Clause 15(A) provides that the contractor shall not be entitled to claim any compensation from the Government for the loss suffered by him on account of delay by Government in the supply of materials entered in schedule 'A" where such delay is cause by-
(i) Difficulties relating to the supply of railway wagons.
(ii) Force Majeure.
(iii) Act of God.
(iv) Act of the country's enemies or any other reasonable cause beyound the control of Government.
In the present case, none of the contingencies in Clause-15(A) has been put forward by the appellant-State in their defence.
In case of Dwarka Das Vs. State of Madhyapradesh, reported in AIR 1999 SC 1031, the Hon'ble Supreme Court disapproving the view of the High Court that since the contractor failed to place the material on record to show that he had actually suffered any loss on account of breach of contract, he was not entitled to damages held as under:-
"This Court in A.T.Brij Pal Singh Vs. State of Gujarat, (1984) 4 SCC 59 (AIR 1984 SC 1703), while interpreting the provisions of Section 73 of the Contract Act, has held that damages can be claimed by a contractor where the government is proved to have committed breach by improperly rescinding the contract and for estimating the amount of damages Court should make a broad evaluation instead of going into minute details. It was specifically held that where in the works contract, the party entrusting the work committed breach of contract, the contractor is entitled to claim the damages for loss of profit which he expected to earn by undertaking the works contract. Claim of expected profits is legally admissible on proof of the breach of contract by the erring party. It was observed (at P.1707 of AIR):
"What would be the measure of profit would depend upon the facts and circumstances of each case. But that there shall be a reasonable expectation of profit is implicit in a works contract and its loss has to be compensated by way of damages if the other party to the contract is guilty of breach of contract cannot be gainsaid. In this case we have the additional reason for rejecting the contention that for the same type of work, the work site being in the vicinity of each other and for identical type of works between the same parties, a Division Bench of the same High Court has accepted 15 percent of the value of the balance of the works contract would not be an unreasonable measure of damages for loss of profit.
Now if it is well-established that the respondent was guilty of breach of contract inasmuch as the rescission of contract by the respondent is held to be unjustified, and the plaintiff-contractor had executed a part of the works contract, the contractor would be entitled to damages by way of loss of profit. Adopting the measure accepted by the High Court in the facts and circumstances of the case between the same parties and for the same type of work at 15 percent of the value of the remaining parts of the work contract, the damages for loss of profit can be measured"
To the same effect is the judgment in Mohd. Salamatullah Vs. Government of Andhrapradesh, AIR 1977 SC 1481. After approving the grant of damages in case of breach of contract, the Court further held that the appellate Court was not justified to interfere with finding of fact given by the trial Court regarding quantification of the damages even if it was based upon guess work. In both the cases referred to hereinabove. 15% of the contract price was granted as damages to the contractor. In the instant case however the trial Court had granted only 10% of the contract price, which we feel was reasonable and permissible, particularly when the High Court had concurred with the finding of the trial Court regarding breach of contract by specifically holding that "we therefore see no reason to interfere with the finding recorded by the trial Court that the defendants by rescinding the agreement committed breach of contract." It follows therefore as and when the breach of contract is held to have been proved being contrary to law and terms of the agreement, the erring party is legally bound to compensate the other party to the agreement. The appellate Court was, therefore, not justified in disallowing the claim of the appellant for Rs.20,000/- on account of damages as expected profit out of the contract which was found to have been illegally rescinded."
In case of Fateh Chand Vs. Balkishan Das, reported in AIR 1963 SC 1405, Hon'ble Supreme Court has explained the implications of Section 74 observing that:-
"The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated ; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. The section un-undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract whether or not actual damage or loss is proved to have been caused by the breach. "
(Emphasis is mine) At P.1412 it is also observed:-
"The Court has to adjudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract . Such compensation has to be ascertained having regard to the conditions existing on the date of the breach."
In case of Maula Bux Vs. Union of India, reported in AIR 1970 SC 1955 at Pg.No.1959), the Hon'ble Supreme Court has held as under:-
"It is true that 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 and 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 contract. But the expression "whether or not actual damage or loss is proved to have been caused thereby"
is intended to cover different classes it may be possible for the Court to assess compensation arising from breach, while in other cases compensation can be calculated in accordance with established rules. Where the Court is unable to assess the compensation, the sum named by the parties if it be regarded as a genuine pre-estimate may be taken into consideration as the measure of reasonable compensation, but not if the sum named is in the nature of a can be determined, the party claiming compensation must prove the loss suffered by him."
On over all re-appreciation and re-evaluation of the entire evidence oral as well as documentary on record, we are convinced that the learned trial Court is justified in granting the decree in favour of the plaintiff and no error can be said to have been committed by the Court below in partly allowing the suit of the original plaintiff.
In this view of the matter, the appeal fails and the same is hereby dismissed with no order as to costs.
(BHASKAR BHATTACHARYA, ACTING C.J.) (J.B.PARDIWALA,J.) FURTHER ORDER On judgment being pronounced today, learned advocate Mr.G.T.Dayani appearing for the respondent informed the Court that at the time of admission of the appeal, the appellant i.e. State Government had deposited the entire decreetal amount with costs and interest i.e. Rs.31,99,305.44 ps. and on such condition of deposit the money decree was stayed from its operation, implementation and execution.
He further informed that the respondent decree holder was permitted to withdraw the entire amount, which was deposited by the appellant at the time of admission of the appeal on furnishing bank guarantee i.e. Rs. 32 Lacs, which is continues even as on today. This bank guarantee is issued by the Union Bank of India, Nadiad Branch and the same is in custody of the Registry of this Court. He, therefore, submitted that in light of the fact that this Court has dismissed the appeal, necessary orders be passed so far as the bank guarantee is concerned. Taking into consideration the fact that we have dismissed the appeal of the State Government confirming judgment and decree passed by the Trial Court, the bank guarantee of Rs.32 Lacs, which was furnished by the respondent, stands discharged.
(BHASKAR BHATTACHARYA, ACTING C.J.) (J.B.PARDIWALA,J.) Girish Top