Delhi District Court
M/S R. K. Constructions vs Union Of India on 30 April, 2012
IN THE COURT OF MS. NEELAM SINGH,
ADJ02 (SOUTH) SAKET COURT COMPLEX, NEW DELHI.
CS No. 134/2011
Unique Case ID No. 02403C0120662010
M/s R. K. Constructions
Through Mr. Rakesh Dua
Sole Proprietor
57/2, Old Rajinder Nagar,
New Delhi110060.
...Plaintiff
Versus
1. Union of India
Through the Secretary,
M/o Urban Development,
Nirman Bhawan, New Delhi.
2. The Execution Engineer
AIIMS Project Division,
CPWD A. V. Nagar,
New Delhi110049.
3. The Superintending Engineer,
Delhi Central Circle8, CPWD,
Sewa Bhawan, R. K. Puram,
New Delhi.
...Defendants
Suit presented on : 15.04.2010
Arguments heard on : 26.04.2012
Judgment on : 30.04.2012
CS No. 134/2011 Page No. 1 of 32
SUIT FOR DECLARATION AND PERMANENT &
MANDATORY INJUNCTION
J U D G M E N T
1. Vide this order I shall dispose off suit for declaration and permanent injunction filed by the plaintiff.
2. It is the case of the plaintiff that plaintiff is sole proprietorship firm and the proprietor is Mr. Rakesh Dua. The firm is registered as Class II Contractors of CPWD and accordingly executing works of various Government Departments in the name and style of M/s R. K. Constructions.
3. It is further submitted that the work of providing and installation of additional 8 lifts at the location at ward block, private ward block and OPD building block at AIIMS New Delhi is awarded to the plaintiff by CPWD vide letter no. 23(1)/AIIMS PD/200809/13 dated 09.05.2008 for a tendered amount of Rs.2,06,06,052/. Subsequent to the award of the work, both the parties entered into a formal agreement vide agreement no. 01/EE/AIIMS PD/200809.
4. It is further submitted that as per agreement, the entire work was to be completed within a period of twelve months starting from 01.06.2008, accordingly stipulated date of completion was 31.05.2009. It is further submitted that immediately on award of work the plaintiff CS No. 134/2011 Page No. 2 of 32 made all necessary and adequate arrangements of labour, machineries, tools & plants, materials and supervisory staff. But due to various hindrances all attributable to the defendants, required speed of progress could not be achieved and the programme chalked out to complete the work within the stipulated period could not be adhered to.
5. Brief details of hindrances mentioned by the plaintiff are as under:
(i) While inviting tenders, it was clearly stipulated in the Notice inviting Tender (NIT) that site is available but this stimulation was found to be false. The side of 3rd lift pit of two lifts was made available on 19.06.2009 where as stipulated period of completion has already expired on 31.05.2009. Consequently the plaintiff was not under contractual obligation to execute the work of 3rd lift pit as the site of the same was handed over after expiry of stipulated period of completion.
(ii)Even the work of 1st lift pit and 2nd list pit could not be proceeded with required speed due to various hindrances and breaches committed by the defendants. Plaintiff's work force remained idle or under utilized and plaintiff suffered huge CS No. 134/2011 Page No. 3 of 32 financial losses. Plaintiff even served notice under Section 55 of The Contract Act to claim compensation.
(iii)Running bills were not paid in time.
(iv)While paying the bills huge amount was kept in part rates without any rhyme and reason.
(v) The defendants did not make due payment on account of scaffolding and using 50 kg extra cement in R.M.C. and Tie bolts. Amount due on these accounts works out to Rs.40 lacs.
(vi)Due payment for doing work under foul conditions and bailing out sewer water not released. Even due payment for extra height over 3.50 meter for centering shuttering not made.
It is further submitted that hindrances were communicated to the defendants by the plaintiff from time to time.
6. It is further submitted that instead of removing hurdles and hindrances, the defendant Executive Engineer issued a show cause notice under clause 3(b) merely to hide their lapses and breaches vide his letter dated 17.08.2009. The show cause notice was replied by the plaintiff vide his letter dated 27.08.2009.
7. It is further submitted that just after a month from the date of receipt of plaintiff's reply dated 27.08.2008 of earlier show cause CS No. 134/2011 Page No. 4 of 32 notice dated 17.08.2009, the defendant Executive Engineer again issued a show cause notice dated 03.10.2009. This show cause notice was replied by the plaintiff vide his letter dated 08.10.2009. Ignoring the facts mentioned in the reply, the defendant rescinded the contract wrongly and illegally vide letter dated 14.10.2009. It is submitted that it is worth noting that show cause notice was issued under clause 3(b) whereas the contract was rescinded under clause 3(a) & (b) which apparently is wrong and illegal.
8. It is further submitted that vide his letter dated 14.11.2009, the plaintiff clearly stated that after rescission of the contract, no contract clause survives except clause 25 which is arbitration clause (agreement) and it is independent of main contract in which it is contained. It is stated that any liability on the plaintiff and consequently forfeiture of security deposit including earnest money and performance guarantee amount is wrong and illegal.
9. It is further submitted that two months after the rescission of the contract on 14.10.2009, the Superintending Engineer issued a show cause notice vide his letter dated 10.12.2009 that why compensation under clause 2 should not be levied. It is worth noting that the day show cause notice was issued clause 2 was not in existence as the contract has already been rescinded on 14.10.2009. CS No. 134/2011 Page No. 5 of 32
10. It is further submitted that ignoring the fact and law the Superintending Engineer vide his letter dated 22.01.2010 levied compensation wrongly and illegally under clause 2 of the agreement amounting to Rs.7,88,181/. Hence the present suit.
11. Notice was issued to defendants.
12. The defendants filed written statement to the suit of the plaintiff. Is is submitted that the time for completion of work was further extended on the request of the plaintiff upto 30.09.2009.
13. It is further submitted that the required speed of work could not be picked up by the contractor due to his own inefficiency and mismanagement. The defendants had made all the arrangements due on their part for smooth working on the site.
14. It is further submitted that all the three sites on which lifts had to be installed were made available to the contractor on 02.06.2008 through the site order book. After some time the work at site of 3 rd lift pit of two lifts had to be deferred due to the intervention of the authorities of AIIMS.
15. It is further submitted that the plaintiffs were being continuously informed about the slow progress and requested to speed up the work vide defendant's letters dated 05.08.2008, 12.08.2008, 20.09.2008, 15.11.2008, 25.11.2008, 18.12.2008, 22.12.2008, CS No. 134/2011 Page No. 6 of 32 20.04.2009, 15.05.2009 and 02.07.2009.
16. It is further submitted that the contractor failed to achieve targets as per time schedule due to delay in execution which was the result of nonplanning of the work in systemic manner, deploying insufficient labour and unskilled workers which was communicated to him vide letter dated 03.09.2009. The delay was caused because of the mismanagement on the part of the plaintiff.
17. It is further submitted that the plaintiff has so far been paid more than Rs.80 lacs which forms about 40 percent of sanctioned work which has resulted into huge loss to the government in terms of money and public welfare because the plaintiff failed to comply with the terms and conditions of the agreement.
18. Vide order dated 21.05.2009, on deposition of an amount of Rs.8 lacs by the plaintiff in the court, the defendants were restrained from recovering the amount from the plaintiff till the pendency of the suit.
19. From the pleadings of the parties following issues were framed:
1. Whether the plaintiff is entitled to a decree for declaration in favour of the plaintiff that levying compensation and demanding the same is illegal and CS No. 134/2011 Page No. 7 of 32 ultravires? OPP
2. Whether the defendants be restrained permanently from withholding a sum of Rs. 7,88,181/ or any amount in this account? OPP
3. Relief.
20. The plaintiff led his evidence by way of affidavit and examined himself reiterating the facts of the case. The relevant extract of the cross examination of the plaintiff (PW1) is as under:
"...I am the proprietor of the firm, however, I have not brought any document today to show the same. I am an income tax payee. I have not brought any document for the same, however, I may produce the same. Witness has brought original office order dated 27.02.2008 by Govt. of India, CPWD wherein he has been recorded as sole proprietor of M/s R.K. Constructions...."
"...I am a contractor to the last 20 years. I started as ClassV contractor initially. For the last 10 years, I am in ClassB category. I have not done the work of the same nature earlier. I was handed over the first two CS No. 134/2011 Page No. 8 of 32 sites at time, however, the third was handed over very late even when the completion period have expired. I am not aware about the exact dates as to when I was handed over the sites. I was handed over the possession of third site probably on 19.06.2009. It is correct that initially the possession of all the sites were handed over on 02.06.2008 but later on the work was suspended by AIIMS within a week from the date of handing over. The only work done during one week was excavation of the foundation and I have received the payment for the same. I have received a letter from the department for the suspension of work after one week as the work was stopped by OPD Department of AIIMS. It is wrong to suggest that work was suspended after many weeks from the date of handing over the possession. There was a correspondence between AIIMS and CPWD regarding the suspension of work Vol. I have also written letters to the department and I can produce the same. I am not aware about the exact date as to when I wrote first letter to CPWD regarding suspension of work. I don't CS No. 134/2011 Page No. 9 of 32 even remember the month. Before this contract I was awarded various other contracts like roads, swimming pools, foot over bridges and tanks etc. by CPWD and PWD. I am a graduate in Commerce. My employees are engineer who used to look after the technical works. I had 6 to 7 supervisors and two engineers by the name of Mr. M.N. Motwani and Sh. Rajesh Mahajan. They are graduates in civil engineering (BTech) and working with me for the last 7 years. I am maintaining the accounts and paying the salary of Rs. 20,000/ each. I am paying the income tax as per rule. I used to write my letters and other communications myself..."
"...I received the running bills late by approximately by two months. I have not brought on record any correspondence about these late bills, however, I have submitted the bill on time. It is correct that the contractor is to submit the bill to the department concerned and I did the same..."
"...I can produce/show that accounts regarding the maintenance of my staff. I have received the award CS No. 134/2011 Page No. 10 of 32 regarding eight lifts and I was supposed to do combined work for these eight lifts. I had sufficient manpower for the construction of eight lifts. All the building materials for the construction of the above said lifts belong to me and were placed at the site. I have completed the work as per record. I have knowledge regarding the rules and regulations pertaining to penalty clause imposed by Superintendent Engineer. It is wrong to suggest that I was not having sufficient manpower/building material for the execution of the above said contract. However, I can not produce documentary evidence regarding the same. It is correct that it was my first experience in the field of construction of lifts Vol. although I have experienced for the RCC work. It is wrong to suggest that the core of lift was not vertical and the same was demolished. It is wrong to suggest that since I was not having a qualified engineer so I could not examined the defect in the lift. It is further wrong to suggest that I am not able to execute the work despite several reminders. It is further wrong to suggest that the said work is CS No. 134/2011 Page No. 11 of 32 further executed as I was not able to execute the same. It is further wrong to suggest that Govt. has suffered loss because of me. It is further wrong to suggest that I have filed the false case. It is further wrong to suggest that I had no experience for the execution of the said work. It is further wrong to suggest that the penalties imposed upon me by the order of Superintendent Engineer are genuine. It is wrong to suggest that I am deposing falsely."
Thereafter, PE was closed.
21. Defendants also led their evidence by way of affidavit and examined Sh. K. P. Singh, Executive Engineer, AIIMS Project Division. The extract of the cross examination of defendant (DW1) is as under:
"It is correct that contract period was extended for 4 months. Vol. it was extended on the request of plaintiff. It is correct that defendant was convinced about the delay caused in the project before extending the same. It is correct that all the three sites were handed over to the contractor and the work was started thereafter on CS No. 134/2011 Page No. 12 of 32 two sites. It is wrong to suggest that the work was started by the contractor only on two sites. It is further wrong to suggest that the work was started on all the three sites and the work has been executed and paid. Vol. the payment was made according to the work done by the contractor. It is not correct that the work/ third site was withdrawn from the contractor. Vol. because of some difficulties in executing the work on the third site and as per the requirement of AIIMS the work was stopped. It is correct that the third site was handed over to the contractor on 19.06.2009 whereas the contract period was expired on 31.05.2009. It is incorrect to suggest that work never suffered because of mismanagement, less labour or any other deficit on part of the contractor. It is incorrect to suggest that the payments were always delayed to the contractor. It is not correct that huge amounts were kept in part rates. It is incorrect to suggest that because of negligence or delay on the part of the contractor government did not suffer. Vol. government suffered to the tune of Rs. 80 CS No. 134/2011 Page No. 13 of 32 lakhs approximately.
It is incorrect to suggest that plaintiff was having sufficient staff/ labour/ supervisory staff to conduct the work. The extension of the project and extension was granted upon 19.06.2009 is a matter of record. It is incorrect to suggest that recession of the contract is a wrong decision. It is correct that 50 Kg of extra cement was used in the project but the amount is not payable as per the terms of the contract. It is wrong to suggest that extra payment has been paid for the extra height of 3.5 cm. vol. the same was paid in the final bill. It is correct that the show cause notice on 17.08.2009 to the contractor and the action taken thereafter is matter of record. It is correct that the compensation has been levied after recession of the contract."
Thereafter, DE was closed.
22. Arguments heard. Record perused carefully. Since both the issues are interconnected, hence taken together. ISSUE NO. 1
Whether the plaintiff is entitled to a decree for declaration in favour of the plaintiff that levying compensation and CS No. 134/2011 Page No. 14 of 32 demanding the same is illegal and ultravires? OPP and ISSUE NO. 2 Whether the defendants be restrained permanently from withholding a sum of Rs. 7,88,181/ or any amount in this account? OPP
23. It is not disputed by the defendant that the contract was awarded to the plaintiff and work was to be completed on or before 31.05.2009. It is also not in dispute that third site of work in question was handed over to the contractor / plaintiff on 29.06.2009 and the contract period was extended for another four months by the defendant on the request of the plaintiff. It is also not disputed that the contract was rescind on 14.10.2009. It is also not disputed that Superintending Engineer issued a show cause notice on 10.12.2009 for charging compensation under clause 2 of the contract. The Superintending Engineer levied compensation upon the plaintiff vide letter dated 22.01.2010 as per clause 2 of the contract. Now the question arises that when the contract was rescind on 14.10.2009, then whether the Superintending Engineer was empowered to issue show cause notice dated 10.12.2009 and to levy compensation on the plaintiff on 22.01.2010? It is argued by learned counsel for plaintiff that when the contract came to an end then all the clauses in the contract also CS No. 134/2011 Page No. 15 of 32 automatically comes to an end and it is only the arbitration clause that becomes active. It is argued by the counsel for plaintiff that since the contract was not alive so the show cause notice issued by Superintending Engineer on 10.12.2009 and the compensation levied vide letter dated 22.01.2010 was illegal and the same cannot sustain in the eyes of law being ultravires. It is further submitted by learned counsel for plaintiff that it is the illegal act of the Superintending Engineer and while levying compensation he acted illegally and not in accordance with the provisions of law and hence the compensation levied by the Superintending Engineer and the issuance of show cause notice dated 10.12.2009 be declared as illegal and ultravires.
24. It is further argued by learned counsel for plaintiff that after the contract came into end, the Superintending Engineer cannot exercise his power under law and cannot issue any show cause notice and also cannot levy any compensation. It is further argued that the only remedy available with the defendant is to initiate appropriate proceedings before the court of law and not to act arbitrarily. It is further argued by counsel for plaintiff that time is essence of the contract the contract expires after expiry of the time and once contract is expired, the defendant has no power to impose any damages / compensation on the plaintiff as the defendant cannot act as an CS No. 134/2011 Page No. 16 of 32 arbitrator of his own case. It is further submitted by counsel for plaintiff that interest of justice and equity requires that where a party to a contract disputes the committing of any breach of condition, the adjudication should be made by an independent person or before the court. It is further submitted that it is only in those situations where the breach of conditions are admitted by one party then second party may assess damages. It is argued out that in the case in hand since from the beginning of the contract, plaintiff had written a number of letters on the account that the work site was not made available to the plaintiff for carrying out the work in question and the delay was caused. It is further submitted that in no manner it is the fault of the plaintiff that the work could not be executed on time.
25. On the other hand, it is argued by counsel for defendant that it was within the power of the Superintending Engineer to issue show cause notice dated 10.12.2009 and also to levy compensation upon the plaintiff vide letter dated 22.01.2010. It is argued by learned counsel for defendant that clause 2 will come in operation only when there is a default or the contractor failed to maintain the required progress in terms of clause 5 or failed to complete work and clear the site or failed to perform the contract on or before the date or on or before the extended date of completion. It is further argued out by learned CS No. 134/2011 Page No. 17 of 32 counsel for defendant that as per clause 2 of the agreement if contractor fails then the compensation may be levied at the rate specified in clause 2 and i.e. 1.5% per month of delay to be computed on per day basis. However, the total amount of compensation for delay to be paid under this conditions shall not exceed 10% of the tendered value of work. It is further argued out that in terms of clause 2 of the agreement, the amount of compensation may be adjusted or set off against any sum payable to the contractor under this contract or any other contract of the plaintiff with the Government. It is further argued out by learned counsel for defendant that as per clause 5 if the contractor commits default in commencing the execution of the work in the scheduled time, then the Government has a right and is empowered to forfeit the earnest money and also to levy compensation.
26. On the other hand, learned counsel for plaintiff has taken me to document Ex.P11 and Ex.P13 which are duly admitted by both the parties. Ex.P11 is a letter / show cause notice dated 10.12.2009 written by the Superintending Engineer on behalf of the Government to the contractor M/s R. K. Constructions wherein it is submitted that the contract work in question was to be completed by the contractor on 31.05.2009 and because the work was not completed on 31.05.2009 CS No. 134/2011 Page No. 18 of 32 hence the contract was rescind on 14.10.2009. This letter / show cause notice was replied by the plaintiff by submitting that the execution of work got delayed on account of defendant as a number of hindrances caused delay in completion of the work and these were reported frequently to the defendant vide letter dated 27.06.208, 08.07.2008, 05.08.2008, 01.12.2008 and 29.07.2009. It is further written in the letter (Ex.P12), which is duly admitted by the defendant, that the contract was rescind on 14.10.2009 and on recession of the contract, all the contract clauses perished except clause 25 which is an arbitration clause. It is further written that if clause 2 does not exist now, then this show cause notice dated 10.12.2009 is of no consequence. However, another letter was written to the Superintending Engineer on 22.01.2010 by mentioning the fact that as per the contract no. 01/EE/AIIMS PD/200809, the contract work was to be completed by 31.05.2009 but the same was rescind on 14.10.2009 and as per clause 2 of the agreement, a compensation of Rs.7,88,181/ is levied on the plaintiff and this amount is to be deposited within 15 days with the Government of India failing which the same can be recovered from the account / other contract of the plaintiff with the Government of India. A reminder was again sent on 15.03.2010 by the Executive Engineer to the plaintiff for deposition of CS No. 134/2011 Page No. 19 of 32 the same and this reminder was replied by the plaintiff vide letter dated 01.02.2010. This letter is also duly admitted by the defendant reiterating the same stand that the Government has no power to levy the compensation under clause 2 as the contract has already been rescind by the defendant and after the recession of the contract all clauses of the contract perished except clause 25 which is arbitration clause.
27. Upon the abovesaid arguments a legal question arises that if a contract is rescind, whether the defendant can levy or impose damages / compensation on the plaintiff or the remedy to the defendant is either to come to the court of law or to the arbitrator for damages? It is argued by learned counsel for plaintiff that in case of breach of contract the only remedy available with the defendant is to approach the court of law or the arbitrator to adjudicate upon the matter and in this case if a compensation is levied by the defendant, the same is illegal and it is not upon the Government to be a party in a case and to also a judge of its own case.
28. Learned counsel for plaintiff placed reliance on following judgments:
1. Arosan Enterprises Ltd. v. Union of India and Another CS No. 134/2011 Page No. 20 of 32 1999(3) Arb. LR 310 (S.C.). In para no. 14 of the judgment, it is held by Hon'ble Supreme Court and is reproduced as under:
"14. Incidentally the law is well settled on this score on which no further dilation is required in this judgment to the effect that when the contract itself provides for extension of time, the same cannot be termed to be the essence of the contract and default however, in such a case does not make the contract voidable either. It becomes voidable provided the matter in issue can be brought within the ambit of the first paragraph of Section 55 and it is only in that event that the Government would be entitled to claim damages and not otherwise."
2. State of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli; State of Karnataka v. K. Krishnappa Naidu and Co. and The Executive Engineer, Thungabhadra Reservoir Division, Munirabad and Anr. v. S. Thippa Reddy AIR 1987 Supreme Court 1359. Para no. 7 and 8 are reproduced hereunder:
CS No. 134/2011 Page No. 21 of 32
"7. On a consideration of the matter we find ourselves unable to accept the contentions of Mr. Iyengar. The terms of Clause 12 do not afford scope for a liberal construction being made regarding the powers of the Deputy Commissioner to adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. The crucial words in clause 12 are "and for any breach of conditions set forth hereinbefore, the first party shall be liable to pay damages to the second party as may be assessed by the second party". On a plain reading of the words it is clear that the right of the second party to assess damages would arise only if the breach of conditions is admitted or if no issue is made of it. If it was the intention of the parties that the officer acting on behalf of the State was also entitled to adjudicate upon a dispute regarding the breach of conditions the wording of clause 12 would have been entirely different. It cannot also be argued that a right to adjudicate upon an issue relating to a breach of conditions of the CS No. 134/2011 Page No. 22 of 32 contract would flow from or is inhered in the right conferred to assess the damages arising from a breach of conditions. The power to assess damages, as pointed out by the Full Bench, is a subsidiary and consequential power and not the primary power. Even assuming for arguments sake that the terms of clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the Officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a CS No. 134/2011 Page No. 23 of 32 case the Officer of the State even his rights in assessing the damages occasioned by the breach in view of the specific terms of clause 12.
8. We are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is not disputed."
3. Learned counsel for plaintiff has also placed reliance on judgment Vakil Chand Bindal v. Delhi Development Authority 1999(2) Arb. LR 553 (Delhi). Para no. 5 of the judgment is reproduced hereunder:
"5. Learned Counsel for D.D.A. submitted that as per Clause 2 of the agreement time was the essence of the contract and as the contractor had failed to start work within the stipulated period, respondent was justified in forfeiting the earnest money on the ground of breach of the contract. According to the learned Counsel, the CS No. 134/2011 Page No. 24 of 32 Arbitrator has committed a patent illegality in holding that Clause 2 of the agreement was not applicable as the time was not the essence of the contract. He further contended that the finding recorded by the Arbitrator on the question of breach of contract by the respondent D.D.A. is also erroneous and so award given by the Arbitrator on the Claim No. 1 is not sustainable in law. In my opinion, the submissions of the learned Counsel deserve to be repelled as I do not find that the contractor had committed breach of the contract. It was stated in para No. 2(iv) of the objections filed against the award that clear site for work was made available to the contractor on 23.12.1987 and the drawings for the work were supplied to him on 26.12.1987. This clearly shows that the time was not the essence of the contract as the D.D.A. could not make available the clear site and the drawings to the contractor in terms of the contract. In view of these facts Clause 2 of the agreement became inoperative. Clause 2 would be applicable only when the time was CS No. 134/2011 Page No. 25 of 32 the essence of the contract. In the instant case, since the clear site and the drawings of the construction were not made available to the contractor in terms of the contract, the question of executing the work by the contractor within the stipulated period did not arise. The Arbitrator has, therefore rightly held that the work awarded to the contractor could not be executed within the stipulated period because of nonfulfillment of obligations in respect of making available the clear site and drawings of the construction by the D.D.A. The D.D.A. cannot take advantage of its own wrong when itself was instrumental by its conduct in delaying the execution of work. It is relevant to mention that the furnishing of security for due performance of the contract is a part of the contract. When security forms part of the contract, the party committing breach of the contract cannot demand performance thereof by the other party, and consequently cannot retain or forfeit the security money, deposited for performance of the contract. I find from the award that the Arbitrator had CS No. 134/2011 Page No. 26 of 32 duly considered this aspect in the light of material placed before him and his award on the Claim No. 1 and the counter claim does not suffer from any legal infirmity."
4. K. C. Goyal v. Delhi Development Authority of Delhi High Court. Para no. 15 and 16 are reproduced hereunder:
"15. I have given my thoughtful consideration to the submissions made by the learned Counsel for the parties and I find that in the present case time was not the essence of the contract as D.D.A. could not make available the entire quantity of 7000 M.T. Bitomen to the contractor for carting within the stipulated period and further D.D.A. unilaterally extended the period. In view of these facts Clause 2 of the contract became inoperative. Clause 2 would be applicable only when time was the essence of the contract. In the present case since total quantity of 700 M.T. of the Bitomen was not made available for carting within the stipulated period did not arise. In view of these facts, I do not find any fault with the reasons given by the CS No. 134/2011 Page No. 27 of 32 Arbitrator.
16. The judgments cited by the learned Counsel for the D.D.A. are not relevant to the facts of the present case as in all those cases Clause 2 of the contract was applicable whereas in the present case, as stated hereinabove Clause 2 of the contract was not applicable. The view I have taken is supported by an another judgment of this court in the case of G.D. Rathi Steels Pvt. Ltd. v. D.D.A. In that case also time was not maintained as of the essence of the contract and Clause 2 was, therefore, held to be not applicable. The objections in respect of counter claim No. 2 are, therefore, dismissed."
5. Reliance has also been placed on judgment M/s Hind Construction Contractors by its sole proprietor Bhikamchand Mulchand Jain (Dead) by LR's v. State of Maharashtra AIR 1979 Supreme Court 720. The relevant portion is reproduced hereunder:
"Where time is of the essence of the contract. The expression time is of the essence means that a breach CS No. 134/2011 Page No. 28 of 32 of the condition as to the time for performance will entitle the innocent party to consider the breach as a repudiation of the contract. Exceptionally, the completion of the work by a specified date may be a condition precedent to the contractor's right to claim payment. The parties may expressly provide that time is of the essence of the contract and where there is power to determine the contract on a failure to complete by the specified date, the stipulation as to time will be fundamental. Other provisions of the contract may, on the construction of the contract, exclude an inference that the completion of the works by a particular date is fundamental, time is not of the essence where a sum is payable for each week that the work remains incomplete after the date fixed, nor where the parties contemplate a postponement of completion. Where time has not been made of the essence of the contract or, by reason of waiver, the time fixed has ceased to be applicable, the employer may by notice fix a reasonable time for the completion of the work and CS No. 134/2011 Page No. 29 of 32 dismiss the contractor on a failure to complete by the date so fixed."
6. Learned counsel for plaintiff has also placed reliance on judgment B.W.L. Ltd. v. M.T.N.L. and Others 2000(2) Arb. LR 190 (Delhi). The relevant portion is reproduced hereunder:
"In my opinion it would not be true to say that a person who commits a breach of the contract incurs any pecuniary liability, nor would it be true to say that the other party to the contract who complains of the breach has any amount due to him from the other party. As already stated, the only right, which he has is the right to go to a Court of law and recover damages. Now, damages are the compensation which the Court of law gives to a party for the injury which he does not get damages or compensation by reason of any existing obligation on the part of the person who has committed the breach. He gets compensation as a result of the fiat of the Court has determined that the party complaining of the breach is entitled to damages. Therefore, when CS No. 134/2011 Page No. 30 of 32 damages are assessed, it would not be true to say that what the Court is doing is ascertaining a pecuniary liability which already existed. The Court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till determination there is no liability at all upon the defendant."
29. On the basis of above discussion, I am of this opinion that the defendants were not empowered to levy the compensation on its own after recession of the contract. Issue no. 1 is decided in favour of the plaintiff and against the defendants.
30. Since issue no. 1 is decided in favour of the plaintiff and against the defendants, hence automatically issue no. 2 is also decided in favour of the plaintiff and against the defendants.
RELIEF:
31. The plaintiff is entitled for grant of a decree of declaration in his favour that levying compensation vide letter dated 22.01.2010 by the defendant is not in accordance with the provisions of law and is illegal. Defendants are hereby restrained from withholding a sum of Rs.7,88,181/.
CS No. 134/2011 Page No. 31 of 32
32. However, the defendants have liberty to take any action against the plaintiff for damages arising out of the contract in question as per law. The suit is disposed off in terms of above.
33. Decree Sheet be drawn accordingly.
34. File be consigned to record room after necessary compliance.
Announced in the open Court.
(NEELAM SINGH) ADJ02, SOUTH, SAKET, NEW DELHI 30.04.2012/TP CS No. 134/2011 Page No. 32 of 32 CS/134/2011 M/s R. K. Constructions v. Union of India & Ors.
30.04.2012 Present: Parties in person.
Vide separate judgment of even date, the suit filed by the plaintiff is decreed in the manner indicated therein.
Decree Sheet be drawn accordingly. File be consigned to record room after necessary compliance.
(NEELAM SINGH) ADJ02, SOUTH, SAKET, NEW DELHI 30.04.2012/TP CS No. 134/2011 Page No. 33 of 32 The suit is coming up for disposal on 30.04.2012 in the presence of both the parties. Upon hearing, the suit is decreed in favour of plaintiff and against the defendants. A decree of declaration is passed in favour of the plaintiff and against the defendants that defendants acted illegally in levying compensation against the plaintiff for Rs.7,88,181/ after recession of contract. Defendants are restrained from withholding a sum of Rs.7,88,181/ of the plaintiff.
CS No. 134/2011 Page No. 34 of 32