Delhi District Court
Ms Satish Builders vs Union Of India Ors on 10 November, 2023
Suit No.16744/16 Page No. 1 of 84
IN THE COURT OF SH. DIVYANG THAKUR
ADDL. DISTRICT JUDGE:03:
SOUTH WEST DISTRICT: DWARKA COURTS:NEW
DELHI
Civil Suit No. 16744/16
CNR No. DLSW01-000449-2013
In the matter of :
1. M/s Satish Builders,
Through: Sh. Satish Mittal,
One of the partners and Attorney
11/390, Sunder Vihar,
Outer Ring Road, New Delhi-110087.
....Plaintiff
Versus
1. Union of India,
Through the Secretary,
Ministry of Urban Development,
Nirman Bhawan, New Delhi.
2. Director General,
C.P.W.D. Nirman Bhawan,
New Delhi.
3. The Superintending Engineer,
Delhi Central Circle V CPWD,
East Block-IV, Level-IV,
R.K. Puram, New Delhi.
4. The Executive Engineer,
Gurgaon Central Division-II,
CPWD, Kadirpur, Gurgaon .... Defendants
M/s Satish Builders vs Union of India
Suit No.16744/16 Page No. 2 of 84
Date of institution of the suit : 23.01.2013
Final Arguments Heard on : 04.01.2023
Date of Judgment : 10.11.2023
Decision : DECREED
SUIT FOR DECLARATION
JUDGMENT :
1. This is a suit for declaration filed by the plaintiff against the defendants i.e. the Union of India and its instrumentalities.
2. The brief facts as mentioned in the plaint are as follows :
(i) The plaintiff M/s Satish Builders is a partnership firm registered as Class-I contractors in CPWD and accordingly executing works of various Government Departments in the name and style of M/s Satish Builders. Mr. Satish Mittal is one of the partners of the firm and also attorney and hence is competent and authorized to file this suit. The firm is also registered with Registrar of Firms Delhi vide registration No.2255/91. The plaintiff was awarded the work of construction of 62 Nos. family quarters for CRPF Academy at Kadirpur, Gurgaon by the concerned Executive Engineer on 24.5.2003 for a tendered amount of Rs.2,04,14,910/-. As per agreement, the M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 3 of 84 entire work was to be completed within fifteen months starting from 03.6.2003. Accordingly, stipulated date of completion was 02.9.2004. To complete the work within the stipulated period of completion, the plaintiff made all necessary arrangements for labour, required materials, machineries, tools and plants, and establishment including supervisory staff for supervision of the work. but the desired progress of the work could not be achieved due to hindrances and breaches committed by the defendants.
Few hindrances are recorded here as under:
(a) Copy of layout plan not given in time.
(b) Almost 50% site was occupied by labour hutments of other agencies which was cleared on 4.8.2003.
(c) Site for type II quarters was changed.
(d) Site for type III quarters was not given at the time of award of work.
(e) Drawings for type II quarters were given on 23.7.2003.
(f) Plinth level of type III quarters was raised about 1.5 M.
(g) Work got delayed due to errors in structural drawings of type III quarters.
(h)Frequent change of decisions.
(i) Structural drawings were not issued in time.
M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 4 of 84
(j) Delay in payment of running bills.
(ii) The plaintiff continuously brought the hindrances and breaches to the notice of the concerned Executive Engineer verbally as well as in writing, details of which are as under:
(a) Letter dated 17.6.2003 Annexure P-5
(b) Letter dated 28.6.2003 Annexure P-6
(c) Letter dated 14.7.2003 Annexure P-7
(d) Letter dated 17.07.2003 Annexure P-8
(e) Letter dated 14.08.2003 Annexure P-9
(f) Letter dated 09.09.2003 Annexure P-10
(g) Letter dated 03.12.2004 Annexure P-11
(h) Letter dated 23.02.2004 Annexure P-12
(i) Letter dated 04.03.2004 Annexure P-13
(j) Letter dated 03.04.2004 Annexure P-14
(k) Letter dated 20.05.2004 Annexure P-15
(l) Letter dated 21.05.2004 Annexure P-16
(m) Letter dated 28.06.2004 Annexure P-17
(n) Letter dated 30.07.2004 Annexure P-18
(o) Letter dated 11.09.2004 Annexure P-19
(p) Letter dated 15.12.2004 Annexure P-20
(q) Letter dated 03.02.2005 Annexure P-21 M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 5 of 84
(r) Letter dated 03.02.2005 Annexure P-22
(s) Letter dated 03.02.2005 Annexure P-23
(t) Letter dated 04.02.2005 Annexure P-24 (u) Letter dated 18.02.2005 Annexure P-25
(v) Letter dated 04.03.2005 Annexure P-26 (w) Letter dated 09.03.2005 Annexure P-27
(x) Letter dated 23.03.2005 Annexure P-28
(iii) The Defendants failed to remove the hindrances and simply extended the contract period unilaterally as under:
(a) Vide letter dated 24.3.2005 extended upto 30.6.2005.
(b) Vide letter dated 10.6.2005 extended upto 15.8.2005.
(c) Vide letter dated 8.8.2005 extended upto 31.12.2005.
(iv) When the Defendants could not remove the hindrances in spite of repeated requests, the plaintiff served a show cause notice upon the concerned Executive Engineer stating clearly that why the contract should not be repudiated. The Defendant Executive Engineer failed to reply the show cause notice and finally the plaintiff repudiated the contract vide letter dated 10.3.2005. After the repudiation of the contract by the Plaintiff on 10.3.2005, the Defendant No.4 rescinded the contract vide letter dated 24.9.2005. On rescission of or closure of the contract M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 6 of 84 all the clauses of the contract perished except clause 25 which is an arbitration clause, a separate agreement.
(v) Due to various hindrances and breaches committed by the Defendants many disputes arose between the parties and finally the concerned Chief Engineer appointed Mr. Chandra Pal as an arbitrator who has already made and published his award on 22.02.2011 wherein the Learned Arbitrator rejected all the counter claims of the Defendants. The Learned Arbitrator admitted that under the facts and circumstances the contract can be taken as closed with effect from 24.9.2005 and it is not the rescission of the contract as termed by the Defendants. On closure of contract no clause of the contract survived, except arbitration clause which is a clause for resolution of disputes.
(vi) The concerned Superintending Engineer (Defendant No.3 herein), issued a show-cause notice under clause 2 of the agreement vide his letter dated 7.12.2011 almost after six years from the rescission/closure of the contract stating therein why compensation should not be levied under clause 2 of the agreement. Clause 2 of the agreement had already expired on rescission/closure of the contract on 24.9.2005 itself. Even otherwise, during the currency of the contract period due to M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 7 of 84 repeated unilateral extension of time, time was set at large and time did not remain essence of the contract. As per law repeatedly laid down by the Hon'ble High Courts if the time is not essence of the contract, clause 2 of the contract becomes inoperative even otherwise as per law, compensation can be claimed only within 3 years of limitation period from the date of cause of action.
(vii) The aforesaid show cause notice was replied by the Plaintiff vide his letter dated 17.12.2011. After the reply, the Defendant No.3 did not take any action and suddenly after eight months levied compensation amounting to Rs.14,13,184/- vide his letter dated 24.8.2012 and further directed the plaintiff to pay the said amount within 15 days, failing which the said amount shall be adjusted or set off against any sum payable to him under this or any other contract with the Government. The levy of compensation by the Defendant No.3 vide his letter dated 24.8.2012 was protested by the plaintiff vide letter dated 07.9.2012.
(viii) That when the Defendant No.3 did not withdraw the levied compensation a notice under Section 80 CPC was served upon the Union of India and others M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 8 of 84
(ix) As per law laid down by the Hon'ble Supreme Court determination of compensation under clause 2 of the agreement is an excepted matter which is not arbitrable. It is an unsettled recovery which the Defendants are trying to recover. The said amount can not be recovered unless and until the recovery is settled/established by a competent court.
(x) If the plaintiff did not approach this Hon'ble Court the Defendants would recover the said amount. Hence, the plaintiff was left with no other option but to file the present suit for decree of declaration against the defendants thereby declaring the impugned order dated 24.08.2012 levying compensation amounting to Rs.14,13,184/- .
3. The suit was instituted on 23.01.2013 and summons for settlement of issues and notice of the interim application was issued to the defendants which was duly served. On 15.02.2013, the defendants entered appearance through their counsel and the matter was adjourned for filing Written Statement. On 05.03.2013, Written Statement was filed on behalf of the defendants. On 07.05.2013, Ld. counsel for the plaintiff submitted that no annexures were filed with the Written Statement by the defendants. On 17.07.2013, ld. Counsel for M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 9 of 84 defendants sought one opportunity to file documents which could not be filed along with the Written Statement. On 19.08.2023, defendants sought opportunity to file reply to the application u/o XXXIX R 1 and 2 CPC and the matter was fixed for reply to the application as well as replication to the Written Statement filed by the defendants. On 16.09.2013, reply to the application u/o XXXIX R 1 and 2 CPC was filed. On 17.01.2014, ld. Counsel for defendants filed an application u/o VI R 17 CPC. On 04.08.2017, ld. Counsel for defendant filed amended application u/o VI R 17 CPC along with reply to application u/o XXXIX R 1 and 2 CPC. On 25.11.2014, arguments on the application u/o VI R 17 CPC were heard and it was allowed and the defendant filed amended Written Statement on 17.09.2015.
WRITTEN STATEMENT
4. In the amended Written Statement, the defendant has averred that the present suit is false, frivolous and misuse of the process of law and as such, the same is not maintainable and is liable to be dismissed. It is further averred that the work for C/o 62 nos. Family quarter for CRPF, Academy at Kadarpur, Gurgaon, Haryana C/o 45 nos Type II quarters adn 14 Nos Type M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 10 of 84 III quarters including internal water supply, sanitary installations and electrifications was awarded to the plaintiff vide defendants letter no.54(275)/GCD-II/2002-03/167 dated 24.05.2003. It is further averred that the progress of work was not commensurated with the required pace of progress for its completion within the stipulated time as per the agreement due to mismanagement of the plaintiff. The defendants had communicated the fact to the plaintiff vide letter dated 23.06.2003 and 16.06.2003. It is further averred that neither of the representatives of plaintniff are partners in the firm as per copy of partnership deed submitted by the plaintiff and only plaintiff's authorized representatives were available at the work site and they failed to manage the work. The gross mismanagement of work eventually resulted in rescission of the work. It is further averred that all the necessary drawings were handed over to the plaintiff vide Drawing Register. It is further averred that the site for all blocks for Type II and III qtrs. was handed over to the plaintiff on 03.06.2003. Only the site for one block of type III (14 nos) was handed over to the plaintiff subsequently on 25.08.2003. It is further averred that the plaintiff took about 16 months to execute the work up to the M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 11 of 84 level of plinth beam for Type-III block, when there was no hinderance for the same. It is further averred that the plaintiff had started construction of columns only on 05.02.2004, thus any change in the plinth level had no adverse effect on the progress of the work as alleged by the plaintiff. It is further alleged that no change was noticed in structural drawings as alleged by the plaintiff and only the orientation of some of the columns differed with reference to the architectural drawings, which was immediately corrected. It is further averred that the defendant had made all the due payments to the plaintiff on due time.
ADMISSION- DENIAL AND FRAMING OF ISSUES
5. On 21.12.2015, on the basis of pleadings, the following issues were framed.
(i) Whether levy of compensation of Rs.14,13,184/- under Clause 2 of the agreement / contract no.03/EE/GCD- II/2003-2004 imposed upon the plaintiff is illegal? OPP
(ii) Whether the said compensation of Rs.14,13,184/- can not be recovered by M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 12 of 84 defendant from the plaintiff? OPP.
(iii) Whether defendant could not have extended the contract period unilaterally? OPP.
(iv) Relief.
Thereafter, the matter was adjourned for plaintiff's evidence. EVIDENCE
6. On 11.07.2016, Sh. Satish Mittal was examined as PW-1. He tendered his evidence by way of affidavit Ex. PW1/A. He also relied upon the following documents :
(i) Copy of Partnership Deed is Mark A
(ii) General Power of Attorney is Mark B
(iii) Certificate of Registration with Registrar of Firms is Mark C.
(iv) Copy of award letter is Ex.PW-1/4
(v) Letter dated 17.06.2003 is Ex.PW-1/5
(vi) Letter dated 28.06.2003 is Ex.PW-1/6
(vii) Letter dated 14.07.2003 is Ex.PW-1/7
(viii) Letter dated 17.07.2003 is Ex.PW-1/8
(ix) Letter dated 14.08.2003 is Ex.PW-1/9
(x) Letter dated 09.09.2003 is Ex.PW-1/10 M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 13 of 84
(xi) Letter dated 03.12.2004 is Ex.PW-1/11
(xii) Letter dated 23.02.2004 is Ex.PW-1/12
(xiii) Letter dated 04.03.2004 is Ex.PW-1/13
(xiv) Letter dated 03.04.2004 is Ex.PW-1/14
(xv) Letter dated 20.05.2004 is Ex.PW-1/15 (xvi) Letter dated 21.05.2004 is Ex.PW-1/16 (xvii) Letter dated 28.06.2004 is Ex.PW-1/17 (xviii) Letter dated 30.07.2004 is Ex.PW-1/18 (xix) Letter dated 11.09.2004 is Ex.PW-1/19 (xx) Letter dated 15.12.2004 is Ex.PW-1/20 (xxi) Letter dated 03.02.2005 is Ex.PW-1/21 (xxii) Letter dated 03.02.2005 is Ex.PW-1/22 (xxiii) Letter dated 03.02.2005 is Ex.PW-1/23 (xxiv) Letter dated 04.02.2005 is Ex.PW-1/24 (xxv) Letter dated 18.02.2005 is Ex.PW-1/25 (xxvi) Letter dated 04.03.2005 is Ex.PW-1/26 (xxvii)Letter dated 09.03.2005 is Ex.PW-1/27 (xxviii) Letter dated 23.03.2005 is Ex.PW-1/28 (xxix) Letter dated 24.03.2005 is Ex.PW-1/29 (xxx) Letter dated 10.06.2005 is Ex.PW-1/30 (xxxi) Letter dated 08.08.2005 is Ex.PW-1/31 M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 14 of 84 (xxxii) Copy of show cause notice dated 31.12.2004 is Ex.PW-
1/32.
(xxxiii) Letter dated 10.03.2005 is Ex.PW-1/33. (xxxiv) Letter dated 24.09.2005 is Ex.PW-1/34 (xxxv) Copy of Arbitration Clause is Ex.PW-1/35 (xxxvi) Copy of show cause notice dated 07.12.2011 is Ex.PW- 1/36 (xxxvii) Copy of reply to show cause notice is Ex.PW-1/37 (xxxviii) Letter dated 24.08.2012 is Ex.PW-1/38 (xxxix) Letter dated 07.09.2012 is Ex.PW-1/39 (xl) Copy of Notice is Ex.PW-1/40 (xli) Copy of the letter dated 20.09.2012 is Ex.PW-1/41
7. On 24.07.2018, PW-1 was cross examined. In his cross examination, he deposed that Plaintiff has filed the present suit for relief against the compensation levied under clause 2 of the Contract/ agreement Ex. PW1/DX1. He has further deposed that the respondent levied compensation after six years wrongly and illegally whereas plaintiff repudiate the contract in March 2005 and after repudiation of contract, no clause survives except clause 25 which is for the arbitration among the parties. He has denied that the penalty / compensation was levied on the plaintiff M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 15 of 84 due to non-completion / default of the plaintiff. He further deposed that he made all necessary arrangement tools and plants labour, supervisor, etc. to complete the work in time but the work could not be completed due to all hindrances attributable to the respondents. He further deposed that the work was not completed due to hindrances on part of respondents/ department and after that, he wrote various letters to the respondent for removal of hindrances. He has further denied that the department has extended the contract period when plaintiff failed to complete the contract within time. He further deposed that the department extended the contract period unilaterally for their own benefit and gain. He further deposed that an Arbitrator namely Sh. Chandra Pol was appointed to decide the various dispute/ claims of parties. He further deposed that the arbitrator declare wrong rescission of contract on the part of respondent and repudiation of contract was held as legal. He further denied that Executive Engineer of respondent has power to impose penalty / compensation under Clause 2 of the agreement and the penalty compensation levied by the department on the plaintiff is correct due to delay on the part of plaintiff.
8. On 07.03.2017, PW Shri Sanjeet Kumar, Junior M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 16 of 84 Judicial Assistant, Record Room Sessions, Tis Hazari Courts, Delhi was examined as PW-2. He brought the summoned record bearing Goshwara no. 1314/D, suit no.173/2014 titled as M/s Satish Builders Vs. Union of India & Ors. which was disposed of by Shri Kuldeep Narayan, Ld. ADJ, Tis Hazari Courts, Delhi vide judgment and decree dated 26.07.2014. He further deposed that the photocopy of Partnership Deed which is already Mark A in the testimony of PW-1 is exhibited as Ex.PW-2/1 (OSR). The photocopy of General Power of Attorney, which is already Mark B in the testimony of PW-1 is Ex. PW - 2/2 (OSR). The photocopy of Registration Certificate of Partnership Firm M/s Satish Builders, which is already Mark C in the testimony of PW-1 is Ex.PW-2/3 (OSR). The certified copies of documents filed in suit no.173/2014 titled as M / s Satish Builders Vs. Union of India & Ors. earlier are exhibited as under:
(i) Letter dated 17.06.2003 is Ex.PW-2/4
(ii) Letter dated 28.06.2003 as Ex.PW-2/5A
(iii) Certified copy of UPC dated 28.06.2003 is Ex.PW-2/5B (OSR).
(iv) Letter dated 14.07.2003 as Ex.PW-2/6
(v) Letter dated 17.07.2003 as Ex.PW-2/7 M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 17 of 84
(vi) Letter dated 14.08.2003 as Ex.PW-2/8A
(vii) UPC dated 14.08.2003 as Ex.PW-2/8B (OSR)
(viii) Letter dated 09.09.2003 as Ex.PW-2/9 (OSR)
(ix) UPC dated 10.09.2003 as Ex.PW-2/10(OSR)
(x) Letter dated 03.12.2003 as Ex.PW-2/11
(xi) Letter dated 23.02.2004 as Ex.PW-2/12
(xii) Letter dated 04.03.2004 as Ex.PW-2/13A
(xiii) Speed post dated 04.03.2004 is Ex.PW-2/138 (OSR)
(xiv) Letter dated 03.04.2004 as Ex.PW-2/14
(xv) Letter dated 20.05.2004 as Ex.PW-2/15A (xvi) Certified copy of receipt of speed post dated 22.05.2004 is Ex.PW- 2/15B (OSR);
(xvii) Letter dated 21.05.2004 as Ex.PW-2/16A (xviii)UPC Dated 21.05.2004 is Ex.PW-2/16B (OSR) (xix) Letter dated 28.06.2004 as Ex.PW-2/17A (xx) Certified copy of receipt of speed post dated 15.07.2004 is encircled Ex.PW-2/17B (OSR) (xxi) Letter dated 30.07.2004 as Ex.PW-2/18A (xxii) Certified copy of receipt of speed post dated 30.07.2004 is encircled as Ex.PW-2/188 (OSR) (xxiii) Certified copy of receipt of speed post dated 30.07.2004 M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 18 of 84 is encircled as Ex.PW-2/18C (OSR) (xxiv) Letter dated 11.09.2004 as Ex.PW-2/19A (xxv) Certified copy of receipt of speed post dated 13.09.2004 is encircled as Ex.PW-2/19B (OSR) (xxvi) Letter dated 15.12.2004 as Ex.PW-2/20 (xxv) Certified copy of letter dated 03.02.2005 as Ex.PW-2/21A (OSR) (xxvi) Certified copy of receipt of speed post dated 05.02.2005 is encircled as Ex.PW-2/21B (OSR) (xxvii) Certified copy of Letter dated 03.02.2005 as Ex.PW-
2/22A (OSR) (xxviii) Certified copy of receipt of speed post dated 05.02.2005 is encircled as Ex.PW-2/22B (OSR) (xxix) Letter dated 10.03.2005 as Ex.PW-2/23A (xxx) Certified copy of receipt of speed post dated 10.03.2005 is encircled as Ex.PW-2/23B (OSR) (xxxi) Letter dated 23.03.2005 as Ex.PW-2/24 (xxxii) Showcause notice dated 31.12.2004 is Ex.PW-2/25A (OSR) (xxxiii) Certified copy of receipt of speed post dated 01.01.2005 is encircled as Ex.PW-2/25B (OSR) M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 19 of 84 (xxxiv) Certified copy of Judgement dated 26.07.2014 passed in suit no. 173/14, titled as M/s Satish Builders Vs. Union of India & Ors. is Ex.PW-2/26 (xxxv) Certified copy of Decree passed in suit no. 173/14, titled as M/s Satish Builders Vs. Union of India & Ors. is Ex.PW-2/27. His cross examination was recorded as NIL.
9. On 24.07.2018, since no other PW remained to be examined, vide separate statement of plaintiff, PE was closed and the matter was fixed for DE.
10. On 22.07.2019, DW Sh. Ashok Kumar Suneja, Executive Engineer, Gurgaon Central Division, CPWD, CRPF Camp, Kadarpur Gurgaon, Haryana was examined as DW-1. He tendered his evidence by way of affidavit Ex.DW1/A. He also relied upon following documents:
(i) Copy of letter dt. 24.05.2003 is Ex.DW1/R1 (OSR).
(ii) Copy of letter dt. 23.06.2003 is Ex.DW1/R2 (OSR).
(iii) Copy of letter dt. 16.06.2003 is Ex.DW1/R3 (OSR).
(iv) Copy of details of drawing register is Ex.DW1/R4 (2 pages) (OSR).
(v) Copy of letter dt. 04.08.2003 is Ex.DW1/R5 (OSR).
(vi) Copy of area for type III Block is Ex.DW1/R6 (OSR).
M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 20 of 84
(vii) Copy of letter dt. 26.05.2004 is Ex.DW1/R7 (5 pages) (OSR).
(viii) Copy of clauses of contract is Ex.DW1/R8(2 pages) (OSR).
(ix) Photocopy of sanction deviation, extra and substitute item statements is Mark R-9 (12 pages).
(x) Copy of running account bill details is Ex.DW1/R10 (OSR).
(xi) Copy of cement register is Ex.DW1/R11(7 pages) (OSR).
(xii) Copy of site order is Ex.DW1/R12 (2 pages) (OSR).
(xiii) Copy of measurement of item no. 2.1 is Ex.DW1/R13 (OSR).
(xiv) Copy of measurement is Ex.DW1/R14 (OSR).
(xv) Copy of measurement is Ex.DW1/R15 (OSR). (xvi) Copy of letter dt. 04.08.03 is Ex.DW1/R16 (OSR). (xvii) Copy of letter No. 54(275)/GCD-11/2003-04/496 dt.
15.11.2003 is Ex.DW1/R17 (OSR) (xviii)Copy of measurement is ExDW1/R18 (OSR). (xix) Copy of measurement is ExDW1/R19 (OSR). (xx) Copy of contractor letter dt. 08.10.2003 is ExDW1/R20 (OSR).
M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 21 of 84 (xxi) Copy of site order book is ExDW1/R21 (2 pages) (OSR). (xxii) Copy of fly leaf No. 4 for clause 2 and fly leaf No. 5, for clause 5. page 43 of the agreement is ExDW1/R22(OSR). (xxiii)Copy of letter dt. 31.03.2004 is ExDW1/R23(OSR). (xxiv) Copy of letter dt. 15.04.2004 is mark R24. (xxv) Copy of letter dt. 20.04.2004 is ExDW1/R25. (xxvi) Copy of letter dt. 10.04.2006 is Mark R26. (xxvii) Copy of letter dt. 4.4.2005 is ExDW1/R27(OSR). (xxviii) Copy of letter No. 54 (275)/GCD-11 2004-05/282 dt. 04.04.2005 is ExDW1/R28 (pages 5)(OSR). (xxix) Copy of measurements is ExDW1/R29(OSR). (xxx) Copy of register of material at site accounts is ExDW1/R30 (6 pages) (OSR).
(xxxi) Copy of letter dt.2.6.2004 is ExDW1/R31 (2 pages) (OSR).
(xxxii) Copy of letter dt 26.5.2004 is already exhibited as ExDW1/R7(OSR) (xxxiii) Copy of letter dt. 28.1.2004 is ExDW1/R33(OSR). (xxxiv) Copy of letter dt. 6.4.2004 isExDW1/R34(OSR). (xxxv) Copy of letter dt. 24.6.2004 is ExDW1/R35(OSR). (xxxvi) Copy of letter dt. 4.4.2005 is ExDW1/R36(OSR). M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 22 of 84 (xxxvii) Copy of letter dt. 28.05.2005 is ExDW1/R37 (2 pages) (OSR).
(xxxviii) Copy of letter dt. 03.09.005 is ExDW1/R38(OSR). (xxxix) Copy of letter dt. 29.1.2005 is Mark R39.
Thereafter, his examination was deferred. On 22.09.2021, he was recalled for further examination in chief and he relied upon the following documents:
xl) Ex.DW1/R40 i.e. Copy of Letter No. 54(275)/GCD-
II/2004-05/206-E dated 04.11.2005. (xli) Ex.DW1/R41 i.e. Copy of letter No. 54(275)/GCD- II/2003-04/237-E dated 25.04.2005. (xlii) Ex.DW1/R42 i.e. Copy of letter No. 54(275)/GCD- II/2005-06/290-E dated 28.05.2005. (xliii) Ex.DW1/R43 i.e. Copy of letter No. 54(275)/GCD-
II/2003-04/325-E dated 10.06.2005. (xliv) Ex.DW1/R44 i.e. Copy of letter No. 54(275)/GCD-
II/2005-06/456-E dated 08.08.2005. (xlv) Ex.DW1/R45 i.e. Copy of letter No. 54(275)/GCD-
II/2005-06/249-E dated 29.04.2005. (xlvi) Ex.DW1/R46 i.e. Copy of letter dated 31.12.2004 (OSR). (xlvii)Ex.DW1/R47 i.c. Copy of letter No. 54(275)/GCD- M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 23 of 84 II/2004-05/164-E dated 17.03.2005. (xlviii) Ex.DW1/R48 i.e. Copy of letter dated 10.03.2005. (xlix) Ex.DW1/R49 i.e. Copy of letter No. 54(275)/GCD-
II/2005-06/528-E dated 19.09.2005.
(l) Ex.DWI/R50 i.e. Copy of letter No. 54(275)/GCD-
11/2005-06/546-E dated 24.09.2005. (li) Ex.DW1/R51 i.e. Copy of Arbitration Award dated 22.02.2011 passed by Sh.Chanderpal, Ld. Sole Arbitrator (lii) Ex.DWI/R52 i.e. Copy of letter No. 28(100)/DCC-V/W-
V/182 dated 07.12.2011.
(liii) Ex.DW1/R53 i.e. Copy of letter No. 28(100)/DCC-V/W-
V/127-E dated 24.08.2012 (one page). (liv) Ex.DW1/R54 i.e. Copy of letter dated 20.09.2012. (lv) Ex.DW1/R55 i.c. Copy of site order book dated 05.01.2004 (one page).
(lvi) Ex.DW1/R56 i.e. Copy of letter No.54(275)/GCD- II/2004-05/763-E dated 29.10.2004.
His cross examination was deferred.
11. On 07.12.2021, he was cross examined. In his cross examination, he had denied that the department/defendants have removed the hindrances notified to them by the plaintiff and M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 24 of 84 were making vague allegations on the plaintiff himself instead of removing the said hindrances. He has further deposed that extension time was granted to give opportunity to the agency to complete the work and with the right to take action by the department under clause 2 of the agreement. He further admitted that all the provisional extension of the contract (EOT) were given unilaterally by the department in order to extend the time of performance and in the agreement, time is essence to the contract as per clause 5 of the agreement. He further deposed that letter regarding repudiation of contract was given by the plaintiff with date of 31.12.2004 received in January, 2005 which was not signed by the agency/plaintiff so no action was taken. He further admitted that show cause notice dated 07.12.2011 was given to the plaintiff after six years from the determination of the contract by the department and later on, both the parties agreed that the counter- claim cannot be decided by the Ld. Arbitrator and agreed to withdraw and after the decision of the Ld. Arbitrator, the notice was served as per terms and conditions of the agreement by th competent authority. He further deposed that some of the claims were accepted by the Ld. Arbitrator and some claims were rejected and in counter claims, M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 25 of 84 one counter claim was subjudice and other counter claim was withdrawn.
12. Thereafter, since no other DW remained to be examined, vide separate statement of ld. Counsel for defendant, DE was closed and the matter was fixed for final arguments.
13. During the course of arguments, ld. Counsels for both the parties filed written submissions and various judgments in support of their arguments.
CONTENTIONS OF THE PARTIES
14. Final arguments were heard. Learned Counsel for plaintiff submitted that the suit of the plaintiff was entitled to be decreed as the order of the defendant issuing penalty notice under Clause 2 of the Agreement was a complete nullity in law, the same being time barred and also against the settled principle that one of the parties cannot be a judge in their own cause and that the damages can only be decided by an Arbitral Tribunal or a Court of Law and not by one of the parties unilaterally. On the other hand, Ld Counsel for the Defendants submitted that the action of the defendants was within the four corners of the law and that the relevant provisions of the Agreement allowed the Defendants to decide the penalty to be levied. Written M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 26 of 84 Submissions were filed by both the parties, and for the sake of convenience the relevant portions of the same are extracted herein :-
WRITTEN SUBMISSIONS ON BEHALF OF THE PLAINTIFF
15. As the ld. Counsel relied heavily upon his written submissions as well as upon the judgments which have been mentioned therein, the important portions of the written submissions are extracted herein for convenience and context :
"............Issue wise arguments on behalf of the plaintiff are given hereunder:
1. NO LEVY OF COMPENSATION IF TIME DID NOT REMAIN THE ESSENCE OF CONTRACT. -
In the present case time was set at large and hence it did not remain essence of contract. Clause 2 become inoperative. Extension was granted unilaterally.
Relying on Union of India versus Tejinder Kumar Dua (Delhi), (200) DLT 60: 2013 (5) M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 27 of 84 R.A.J. 757 (Para 10) and detailed discussion of law in para 9 to 14.
2. EMPLOYER CANNOT RECOVER LIQUIDATED DAMAGE LEVY COMPENSATION WITHOUT DETERMINATION BY ARBITRATOR / COURT.
a. In the present case neither the Ld. arbitrator nor the courts held that the defendants are entitled for any compensation/levy of compensation/damages /penalty.
b. It is now settled law that the levy/compensation imposed is form of damage and is not a debt and, therefore, it cannot be straight away without adjudication by court or arbitral Tribunal as the case may be.
3. A PARTY TO THE DISPUTE CANNOT BE ARBITER IN HIS OWN CAUSE.
a. In the present case the plaintiff has never M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 28 of 84 admitted his default or breach that he is responsible for any breach of the contract and it was a disputed question as to who was responsible for the delay.
b. In Rambal Company Versus Kerala State Science and Technology Museum, 2000 AIR (KERALA) 296; 2000(30 R.A.J. 495, it was held that the employer can only proceed to recover the amount by way of liquidated damages on account of breach of condition of contract if the contractor admits his breach but not when he disputes it.
c. It was further held that where the power of the State or its instrumentalities under the agreement entered into with an individual expressly provided for assessment of damages, that power cannot be exercised by the state or its instrumentalities by its own officer, if the contractor disputes the allegation of breach of contract, because none of the parties to the agreement can be M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 29 of 84 arbiter in its cause. The aforesaid verdict of the court was based upon the rule of law laid down by the Supreme Court in State of Karnataka Versus Shree Rameshwara Rice Mills Thirthahalli, 1987 AIR (SC) 1359 1987(2) SCC 160. The Apex court held that is right to adjudice upon an issue relating to a breach of contract cannot be said to flow from or is inherent in the right conferred to assess the damages arising from a breach of conditions. The power to assess damages is a subsidiary and consequential power and not the primary power. Even assuming that the terms of the relevant clause afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as quantum of damages, the adjudication by the officer of the State Government regarding the breach of the contract cannot be sustained under the law because a party to the agreement M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 30 of 84 cannot be an arbiter in his own cause. Interest of justice and equity require that where a party to a contract disputes the commission of any breach of contract, the adjudication should be by an independent person or body and not by the other party to the contract.
d. A Full Bench of the Kerala High Court in Abdul Rahiman Vs Divisional Forest Officer AIR 1989 Ker 1, held that when a dispute arises as to whether the contract has been broken or not, that dispute cannot be settled by one of the parties to the contract. The dispute may have to be referred to the arbitrator or the matter has to be settled in a Court of law. This principle also applies to the Government when it is a party to the contract.
e. In another decision in Latiheef Vs Superintending Engineer, ILR 1993(2) Kerala 426, it was laid down that an order M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 31 of 84 entailing civil consequences to an individual should be passed strictly in accordance with the principles of natural justice. The State should not spring orders of this nature like a magician pulling rabbits out of his hat. A citizen cannot be suddenly confronted by its own officer, if the contractor disputes the allegation of breach of contract, because none of the parties to the agreement can be arbiter in its cause. The final verdict of the court was based upon the rule of law laid down by the Supreme Court in State of Karnataka Versus Shree Rameshwara Rice Mills Thirthahalli, 1987 AIR (SC) 1359 1987(2) SCC 160. The Apex court held that is right to adjudice upon an issue relating to a breach of contract cannot be said to flow from or is inherent in the right conferred to assess the damages arising from a breach of conditions. The power to assess damages is a subsidiary and consequential power and M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 32 of 84 not the primary power. Even assuming that the terms of the relevant clause afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as quantum of damages, the adjudication by the officer of the State Government regarding the breach of the contract cannot be sustained under the law because a party to the agreement cannot be an arbiter in his own cause. Interest of justice and equity require that where a party to a contract disputes the commission of any breach of contract, the adjudication should be by an independent person or body and not by the other party to the contract.
d. A Full Bench of the Kerala High Court in Abdul Rahiman Vs Divisional Forest Officer AIR 1989 Ker 1, held that when a dispute arises as to whether the contract has been broken or not, that dispute cannot be M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 33 of 84 settled by one of the parties to the contract. The dispute may have to be referred to the arbitrator or the matter has to be settled in a Court of law. This principle also applies to the Government when it is a party to the contract.
e. In another decision in Latiheef Vs Superintending Engineer, ILR 1993(2) Kerala 426, it was laid down that an order entailing civil consequences to an individual should be passed strictly in accordance with the principles of natural justice. The State should not spring orders of this nature like a magician pulling rabbits out of his hat. A citizen cannot be suddenly confronted with a demand notice without there being a prior adjudication by a competent authority in accordance with the principles of natural justice and fair play, both of which are intrinsic in the concept of equality before the law enshrined under Article 14 of the M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 34 of 84 Constitution. To satisfy the fundamentals of fair play in action the individual concerned should be given an opportunity of presenting his case before he is made liable and the adjudication in question has to be at the hands of an independent authority totally unconnected with the bargain. The question whether there is a breach, and if so, what is the quantum of damages etc. are all matters which are left to be adjudicated upon by a Court or Tribunal and not by one of the contracting parties. Adjudication of liability by one of the contracting parties as against the other contracting party and, that too, without proper notice and hearing resulting in heavy pecuniary liability to the latter is abhorrent to all notions of fair play and justice and has been frowned upon by Courts.
4. LIQUIDATED DAMAGES NOT RECOVERABLE UNLESS LOSS OR M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 35 of 84 INJURY IS PROVED
(a) There is absolutely no evidence on the part of the defendants in the present case to show that any loss or injury was suffered or caused to the defendants on account of delay attributable only to plaintiff / contractors
(b) It is well settled that for affecting the recovery or levying compensation under Clause 2 of the agreement, the loss must be proved as held by the Hon'ble Supreme Court of India in the case of Maula Bux vs Union of India, AIR 1970 SC 1955. In the present case there is absolutely no evidence on record to show that any loss or injury was caused to the defendant on account of delay. It is also well settled that Courts will give damages for breach of contract only by way of compensation for loss suffered and not by way of punishment. (Dhulipadi Namayya Vs. Union of India (Andhra M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 36 of 84 Pradesh High Court), 1958 AIR (A.P.) 533.
(c) The Defendant No.3/ concerned Superintendent Engineer SE letter dated 07.12.2011 (Ex.PW1/36 and also Ex.
DW1/52) and letter/order dated 24.08.2012 Ex. PW1/38 (OSR) same as also Ex.
DW1/R53, imposing levy of compensation amounting to Rs.14,13,184/- does not speak of any loss suffered by the department /defendants on account of defaults on the part of plaintiff, even in the arbitration case the defendant failed to establish any loss suffered by them against which this compensation has been levied and all counter claims of the defendants were rejected by the Ld. Arbitrator and even Section 34 petition under Arbitration and Conciliation Act, 1996 of the defendants was dismissed by the Hon'ble High Court of Delhi. When there is no Sufferance of loss, there is no question of levy of any M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 37 of 84 compensation, and thus, the acts of the defendant levying compensation upon the plaintiff herein is unlawful and invalid.
(d) Thus as stated above the defendant cannot be an arbiter in his own cause and therefore cannot decide the breach as well as damages, no loss is suffered by the defendants as first the loss suffered must be proved by the defendants, further one of the contracting parties cannot adjudicate upon a disputed question of breach as well as to assess the damages arising from breach and only court or tribunal can adjudicate and not the parties to the agreement, inter alia other legal aspects and settled law as held by various judgment of Hon'ble Supreme Court and High Courts.
5. ORDER DATED 24.08.2012 OF DEFENDANTS LEVYING COMPENSATION IS BEYOND THE LIMITATION PERIOD AND THE M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 38 of 84 SUPERINTENDING ENGINEER/DEFENDANT NO. 3 LEVYING COMPENSATION HAD ALREADY BECOME FUNCTUS OFFICIO The defendants have no right levy compensation after the 6 years of recission of contract, which is even beyond the period of limitation.
(b) In the present case the plaintiff repudiated the contract on 10.03.2005, (Ex. PW1/33 & Ex PW2/23A), and after Six Months the defendant No.4/ Executive Engineer concerned rescinded, the contract vide letter dated 24.09.2005 (Ex.PW1/34 and Ex. DWI/R50) Superintendent Engineer S.E. issued a show cause notice to the but the Defendant No.3 concerned plaintiff under Clause 2 of agreement vide its letter dated 07.12.2011 (Ex.PW1/36 and also Ex. DW1/52) after six years from closure of contract, to which the plaintiff replied vide M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 39 of 84 letter dated 17.12.2011 (Ex. PW1/37). The defendant No 3 did not take any action and suddenly letter/order dated 24.08.2012 Ex. PW1/38 (OSR) compensation amounting to Rs.14,13,184/- directing the plaintiff to pay the same as also Ex. DW1/R53, levied amount vide letter dated 20.09.2012 and reply of the plaintiff categorically termed the same as illegal (Ex. PW1/39). There is no mention of any loss having been suffered by the defendants, in any of the aforesaid order /letter of the defendants.
(c) After the determination of contract on 24.09.2005, the contract was no longer in force and the Defendant No.3/Superintending Engineer had become "Functus Officio". Therefore, show cause notice dated dated 07.12.2011 and Order dated 24.08.2012 and demanding the compensation amount vide letter dated 20.09.2012 are thus without any authority. M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 40 of 84
(d) In State of Rajasthan Vs. Chandra Mohan Chopra 1971 AIR (Rajasthan) 229:1971 RLW 194 Para 10, when the Chief Engineer who was as per agreement empowered to determine the compensation, did not determine the compensation soon after or within reasonable time from the breach on the part of the contractor, it is held he did not remain entitled to so thereafter.
"Chief Engineer was the person to determine the compensation in writing obviously he did not do so. It would amount to a waiver of his right to fix the compensation and to recover the same from the Plaintiff."
(e) The question is from which date the period would start running against the employer for levying liquidated damages on the contractor, the right to levy liquidated damages (Clause 2- Compensation for M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 41 of 84 delay) accrues to the employer only when the contractor commits breach of the contract during the original period or during the mutually extended period of the contract.
(f) A perusal of clause 5 would leave no manner of doubt that it operates independently and separately of the liquidated damages clause. While clause 2 of the CPWD agreements speaks of the progress that a contractor must achieve within the time fixed under the contract, it does not speak of the proportionate progress which the contractor must attain during the extended period of time. No reference whatsoever of extension of time clause is impliedly or expressly made in the liquidated damages clause. Obviously, therefore, the guiding factor for determining the period of limitation would be calculated keeping in view the stipulation of the M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 42 of 84 liquidated damages clause. Even though the cause of action for levying liquidated damages accrues to the employer at the intermediate stages defined in the contract, but the last cause of action accrues at the time when the original period under the contract expires. Thus, both in cases of termination of contracts as also and in case of failure on the part of the contractor in completing the work in the original period of contract, right to levy liquidated damages can be exercised within a period of 3 years from the date when the contract was terminated or the stipulated date of completion, as the case may be. It can be argued that if reminders cannot keep the cause of action alive beyond a period of three years, so also the act of extending the time, from time to time, cannot keep the cause of action alive for more than 3 years beyond the stipulated date of M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 43 of 84 completion. However, if extension of time clause is made a part of liquidated damages clause and rate of progress during the extended time is also specified, then the period of limitation of 3 years would be computed from the date when the last extension of time granted to the contractor expires. Thus, the actions of the defendant of imposing levy of compensation under clause 2 are beyond the limitation as prescribed in Limitation Act, 1963.
.................Thus, as the actions of the defendants of unilateral extension of time was illegal and void as per the settled law similarly as imposing levy of compensation, after six years of closure of contract, are illegally and arbitrary and void as they trying to impose what they cannot claim even seek by filing a suit as the same is beyond the limitation period as prescribed under the law.
M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 44 of 84
6. LIQUIDATED DAMAGES NOT LEVIABLE IF EXTRA WORK ORDERED
(a) The plaintiff has executed various extra items and additional and substituted items, please refer letter demanding payments of extra items Ex.PW1/26 and Ex. PW1/28 and therefore the defendants are not entitled to levy any compensation as the stipulated date of completion is accordingly need to be shifted and time accordingly time did not remain the essence of the contract.
(b) When the contractor offers his tender, he does so on the premise that the quantities exhibited in the Bills of Quantities would be required to be executed in the stipulated period of the contract. He also presumes that the employer shall permit him to execute the work in a most economical manner and according to his programming and planning so as to achieve completion within the period fixed under the contract. If M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 45 of 84 the contractor is required to undertake extra and additional works it would certainly stand the way of achieving completion within the original time. The contractor, therefore, cannot be subjected to financial liability in the form of liquidated damages if additional/extra work is required to be undertaken at site.
(c) Chitty on Contracts 28th Edition (para 23.037, page 1157) states:
"Where, in a contract for the execution of specified works, it is provided that they shall be completed by a certain date, and that liquidated damages shall be payable by the contractor for non-completion to time, the general rule is that the employer will be unable to recover such liquidated damages if he orders extra work to be done which necessarily delays completion of the work. However, the wording of the contract may be such that the original contract period M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 46 of 84 continues to apply to the completion of the works even though additional work is ordered. Alternatively, the contract may provide that the agreed date for completion of the work shall be extended in the event that delay is caused by the additional work, in each case liquidated damages will be payable from the extended date if the works are not then completed."
(d) In clause 12 of CPWD contracts, it is specified that if employer orders additional work over and above the scope of contract, time shall be extended in proportion to the quantum of extra work plus another extra period of 25% shall be added to such calculated time. It is thus, obvious that if the liquidated damages clause is to be operated upon by the employer, it can only be done when original time is extended by adding the time allowed for execution of the said extra work. In that view of the matter, unless M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 47 of 84 the original time is displaced by a new date, the employer has no right whatsoever to levy liquidated damages.
(e) where completion is not achieved within the stipulated time may be when the delay is attributable both to the employer as well as to the contractor- the former not fulfilling its obligation by denying access to the whole or part of the site; failure to provide designs and drawings at the stage when these were required by the contractor; delay in giving timely instructions; failure to supply stipulated materials at the appropriate time; refusal or denial to pay due and legitimate payments; holding up huge amounts on account of non-sanctioning of rates of extra/substituted items or of rates of non- schedule items; failure to abide by the contractual duties etc. In such a situation, the employer loses the right to recover any amount by way of liquidated damages. If the M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 48 of 84 delay is caused due to various acts of omission and commission on the part of the contractor coupled with factors causing incapacitation and impossibility by the employer to proceed in the manner programmed and planned by the contractor, then it is doubtful if the employer can justify its act of levying liquidated damages on the contractor when the matter comes up before the arbitral tribunal/court.
(f) In present case the defendant failed in their reciprocal contractual obligation as mentioned in Ex. PW1/5 to ExPW1/28 due to which ultimately the plaintiff was compelled to repudiate the contract in the facts and circumstances the levy of compensation under clause 2 after years of rescission/closure of contract is illegal and void."
M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 49 of 84 WRITTEN SUBMISSIONS ON BEHALF OF THE DEFENDANTS)
16. The relevant portions of the Written Submissions on behalf of the defendants are extracted herein below :-
"(1) That the composite tender (Civil & Electrical) of Plaintiff for the work "Construction of 62 Nos. Family Quarters for CRPF Academy at Kadipur, Gurgaon (Haryana) SH: C/o 45 Nos. Type-II Quarters and 14 Nos. Type-lll Quarters including Urinal Water Supply. Sanitary installation & Electrifications" was accepted by the Defendants vide letter dated 24.05.2003 (DW- 1/R-1) at their negotiated tendered amount of Rs.2,04,14,910.00 against the estimated cost of Rs.2,10,29,553.00 (modified) with stipulated time for completion of work 15 (Fifteen) Months. Stipulated date of start as 03.06.2003 and completion as 02.09.2004.
(ii) That the Plaintiff failed to achieve the M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 50 of 84 Milestone/Progress as envisaged in the Clause-5 of the Agreement despite repeated requests made vide numerous Letters/Notices issued from time to time (dated 23.06.2003 (DW-1/R-2), dated 16.06.2003 (DW- 1/R-3), dated 04.08.2003 (DW-1/R-5), dated 26.05.2004 (DW- 1/R-7), dated 04.08.2003 (DW-1/R-16), dated 15.11.2003 (Show Cause Notice under Clause-3) (DW-1/R-17), dated 31.03.2004 (Show Cause Notice) (DW-1/R-23), dated 15.04.2004 (DW-1/R-24), dated 20.04.2004 (DW-1/R-25), dated 10.04.2006 (DW-1/R-
26), dated 04.04.2005 (Show Cause Notice under Clause-3) (DW-1/R-27), dated 04.04.2005 (DW- 1/R-28), dated 02.06.2004 (DW-1/R-31), dated 26.05.2004 (DW-1/R-
32). dated 28.01.2004 (DW-1/R-33), dated 06.04.2004 (Show Cause Notice under Clause-3 (DW-1/R-34). dated 24.06.2004 (Show Cause Notice under Clause-3) (DW-
M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 51 of 84 1/R-35), dated 28.05.2005 (DW-1/R-37), dated 03.09.2005 (DW-1/R-38), dated 29.01.2005 (DW-1/R-39), dated 04.04.2005 (DW-1/R-40), dated 25.04.2005 (DW-1/R-
41). dated 28.05.2005 (DW-1/R-42), dated 10.06.2005 (DW-1/R- 43). (Provisional Extension of Time (EOT) upto 15.08.2005 subject to recover liquidated damages under Clause-2 of the Agreement) (DW-1/R-44), dated 08.08.2005 (Provisional Extension of Time (EOT) upto 31.12.2005 subject to recover liquidated damages under Clause-2 of the Agreement) (DW- 1/R-44), dated 29.04.2005 (DW-1/R-45), dated 19.09.2005 (DW-1/R-49), dated 24.09.2005 (Contract determined/ terminated under Clause-3 of the Agreement) (DW-1/R-50), dated 07.12.2011 (Show Cause Notice under Clause-2 of the Agreement) (DW-1/R-52), dated 24.08.2012 (Levy of Compensation under Clause-2 of the Agreement) (DW-1/R- M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 52 of 84
53).
iii) That on failure to resume/complete the work by the extended date of completion, the Defendants/Department was left no other option except to determine/rescind the Contract under Clause-3 and Sub Clauses thereunder of the Agreement and it was done by the Defendant/Department vide letter dated 24.09.2005 (DW- 1/R-50), (ie.
within extended time granted upto 31.12.2005 under Clause-5 vide letter dated 08.08.2005 (DW-1/R-44) subject to recover the liquidated damages under Clause-2 of the Agreement after issuing Show Cause Notice by Defendant vide letter dated 04.04.2005 (DW-27/R-24) and dated 07.09.2005 (DW-1/R-40), against which no reply to satisfaction of the Engineer-in- Charge was given by the Petitioner.
iv) That the determination/rescission of the Contract was made correctly/legally in M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 53 of 84 accordance with the provision laid down in Clause-3 and Sub Clauses thereunder of the Agreement.
(v) That a Show Cause Notice under Clause- 2 of the Agreement for wrongful delay/suspension of work was issued by the Competent Authority (i.e. Superintending Engineer, DCC-V, CPWD, New Delhi) vide letter dated 07.12.2011 (DW-1/R-52) and non- satisfactorily reply of Plaintiff in response Show Cause Notice, the Competent Authority granted the time extension with imposing levy of compensation for Rs.
14,13,184.00 under the proper delegated/provision laid down in Clause-2 of the Agreement vide letter dated 24.08.2012 (DW-1/R-53) after giving full opportunities after issuing Show Cause Notice vide letter dated 07.12.2011 (DW- 1/R-52). Further the Plaintiff did not apply EOT Application in the prescribed proforma M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 54 of 84 and he did not quantify the days delays except mentioned the hindrances in his reply to the Show Cause Notice.
(vi) That the action of the Defendant/Competent Authority was legally correct and in accordance with the Power Delegated/Provision laid down in Clause-2 of the Agreement Further as stipulated in Clause-2 of the Agreement, the decision of the Competent Authority i.e. Superintending Engineer, DCC-V, CPWD, New Delhi shall be Final & Binding on the Plaintiff/Contractor.
(vii) That the certain disputes arose between the parties (Plaintiff and Defendants, the Plaintiff invoked the Arbitrator Clause-25 of the Agreement the Appointing Authority (ie. Chief Engineer, NDZ-IV CPWD, New Delhi) appointed the Sole Arbitrator Sh. Chandra Pal for adjudication of the disputes/claims of the Plaintiff and Counter Claims of the M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 55 of 84 Defendants and the Sole Arbitrator passed & published the Award on 22.02.2011 (DW-
1/R-51). (In Arbitration Case No.ARB/CP/WB/2006).
(viii) That the Sole Arbitrator after heard both parties (Plaintiff Defendants) has made and published the Award for Rs.22,22,990.00 plus Interest calculated for Rs.26,76,575.00 upto 24.07.2020 = totaling Rs.48,99,565.00 had already been paid to the Plaintiff on 24.07.2020.
..........(xi) That in view of the above submissions/facts, the Civil Suit filed by the Plaintiff against the levy of compensation imposed for Rs. 14,13,184.00 under Clause- 2 of the Agreement may kindly be dismissed and passed the Award in favour of the Defendant/Union of India."
FINDINGS AND CONCLUSIONS
17. On basis of the record and the arguments of the parties, I draw the following conclusions :-
M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 56 of 84 (1) It may be said here that all the documents produced by the parties have not been disputed as between them and the same are admitted to be genuine. The issue lies with the interpretation and implications. The sole prayer in the suit is worded thus :- "pass a decree of declaration in favour of the plaintiff and against the defendant thereby declaring the impugned order dated 24.08.2012 levying compensation and demanding the same (Annexure P-38) issued by the Defendant no 3 as illegal, ultravires, void ab intio and not binding on the plaintiff in any manner whatsoever and as a consequential relief, the defendants be restrained permanently from with holding or recovering the said amount or any amount on this account in pursuance of the office order dated 24.08.2012...". The crux of the dispute lies with the issuance of the afore said order which was proved as Ex PW1/38, the contents of which may be noticed herein :-
"Subject : Intimation regarding levy of compensation under clause 2 Name of work : C/o 62 Nos. Family quarters for CRPF Academy at Kadipur, Gurgaon, Haryana.
SH: C/o 45 Nos. Type-II quarters and 14 M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 57 of 84 Nos.Type-III quarters including internal water supply, sanitary installations and electrifications.
Agreement No : 3/EE/GCD-II/2003-04 Dear Sir, The date of completion for the above mentioned work was 02.09.2004 as stipulated in the agreement number 3/EE/GCD-II/2003-04 for the work of C/o 62 Nos. Family quarters for CRPF Academy at Kadirpur, Gurgaon, Haryana. SH: C/o 45 Nos. Type-II quarters and 14 Nos. Type-III quarters including internal water supply, sanitary installations and electrifications. Extension of time for completion of the above mentioned work was extended by the Engineer-in-Charge vide his letter No.54(275)/GCD-II/2005-06/456-E dated 08.08.2005 upto 31.12.2005 under clause 5 of the said agreement without prejudice M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 58 of 84 to the right of the Government to recover compensation in accordance with the provisions of Clause 2 of the said agreement.
The work has been determined on 24.09.2005. You were issued show cause vide this office letter no.28(100)/DCC- V/W-V/182 dated 07.12.2005 to explain why compensation should not be imposed upon you under the provisions of clause 2 of the said agreement.
Your reply vide letter No. Nil dated 07.12.2011 received in response to show cause has been considered carefully. After taking into consideration all the facts and circumstances, I have come to the conclusion that you are solely responsible for delay of 142 days. (emphasis supplied) In exercise of the powers conferred on me under Clause 2 of the agreement, I, M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 59 of 84 R.K.Gupta, the Superintending Engineer, Delhi Central Circle - V decide and determine that you are liable to pay Rs.14,13,184/- as and by way of compensation as stipulated in Clause 2 of the agreement. The said amount of compensation is hereby levied on you for the period of 142 days and at the rate of Rs9,952/- per day of delay as determined by me on the tendered amount of work shown in the agreement and you are hereby called upon to pay the same to the Government within 15 days failing which the said amount shall be adjusted or set- off against any sum payable to you under this or any other contract with the Government.
Yours faithfully (R.K.Gupta) Superintending Engineer DCC-V, CPWD,New Delhi"
M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 60 of 84 (2) A perusal of the above order which is the subject matter of the present suit for declaration would show that the order explicitly refers to the provisions of Clause 2 of the Agreement executed between the parties. At this stage it would be pertinent to note the provisions of the same agreement Ex.PW-1/DX1 (Colly) :
"Clause 2 If the contractor fails to maintain the required progress in terms of clause 5 or to complete the work and clear the site on or before the contract or extended date of completion, he shall, without prejudice to any other right or remedy available under the law to the Government on account of such breach, pay as agreed compensation the amount calculated at the rates stipulated below or such smaller amount as the Superintending Engineer (whose decision in writing shall be final and binding) may decide on the amount of tendered value of M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 61 of 84 the work for every completed day/week (as applicable) that the progress remains below that specified in Clause 5 or that the work remains incomplete.
This will also apply to items or group of items for which a separate period of completion has been specified.
i) Completion period (as originally stipulated) not exceeding 3 months @1% per day
ii) Completion period (as originally stipulated) exceeding 3 months @1% per week Provided always that the total amount of compensation for delay to be paid under this Condition shall not exceed 10% of the Tendered Value of work or of the Tendered Value of the item or group of items of work for which a separate period of completion is originally given.
The amount of compensation may be M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 62 of 84 adjusted or set-off against any sum payable to the Contractor under this or any other contract with the Government."
Therefore it appears that the Defendants have used their ostensible powers under Clause 2 of the said Agreement to unilaterally determine the penalty to be imposed on the plaintiff. It has also been determined by them that the cause of delay was solely the fault of the plaintiff.
(3) It is a matter of record that due to the disputes between the parties, the plaintiff invoked the arbitration clause in which the defendants preferred a counter-claim. In the Counter Claim, a certain amount was claimed by the defendants by way of compensation under Clause 2 of the Agreement. The Said Counter Claim was numbered as Counter Claim no 2 which was disposed off by the Arbitral Tribunal in the following manner vide Arbitration Award dated 22.02.2011 Ex.DW-1/R51 :-
"Counter Claim No.2: Claim on account of levy of compensation. Rs.20,41,491/- In the Statement of Counter Claims, Respondent has stated that contract was rescinded under clause 3 (a), (b) and (c). M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 63 of 84 Accordingly, levy of compensation under Agreement clause 2 is being imposed by the competent authority, i.e. Superintending Engineer, DCC-V. In the Rejoinder to CSF and Reply to Counter Claim, Claimant has stated that this Counter Claim is excepted matter which is not arbitrable and cannot be raised in arbitration. If the Respondents want to recover compensation amount, they have to go to competent court through a recovery suit.
In hearing on 17.04.2010, both parties agreed that Clause 2 is not arbitrable, being excepted matter.
In hearing on 27.11.2010, Claimant said that no action was taken by Respondents under clause 2 to recovery L.D. if they have suffered and Claimant was responsible. Since no action has been taken under Clause 2, it is proved that Respondent is M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 64 of 84 responsible for delays. Rs.20,41,491/- was withheld in Final Bill. Contractor is entitled to claim damages.
The matter has been examined. Since both parties have agreed that the matter is subjudice, it is outside the purview of arbitration. As such, no award is made against this Counter Claim."
(4) The said finding was challenged by the Defendants u/s 34 of the Arbitration and Conciliation Act, 1996 before the Hon'ble High Court of Delhi and the same came to be disposed off by the Hon'ble High Court in O.M.P.(COMM) 156/2017 titled as Union of India vs M/s Satish Builders which dealt with the afore said Counter Claim no 2 in the following manner :-
"26. As far as counter claim No.2 is concerned, although the prayers in the petition include a challenge to the rejection of the said counter claim, the same was neither urged in oral arguments nor pressed in written submissions. It is also recorded in the impugned award that, at the hearing on M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 65 of 84 17.04.2010, both parties had agreed that levy of compensation under clause 2 of the agreement is non-arbitrable. The grounds in the petition, in so far as they relate to counter claim no.2, do not challenge this recording in the impugned award. The impugned award on this ground, therefore, does not call for interference."
(5) The present is a suit for declarations which are granted under the provisions of Section 34 of the Specific Relief Act, 1963 :
Section 34 of Specific Relief Act, 1963 :
"34. Discretion of court as to declaration of status or right Any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or right, and the court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 66 of 84 such suit ask for any further relief: PROVIDED that no court shall make any such declaration where the plaintiff, being able to seek further relief than a mere declaration of title, omits to do so. Explanation : A trustee of property is a "person interested to deny" a title adverse to the title of someone who is not in existence, and for whom, if in existence, he would be a trustee."
Therefore an aggrieved party can seek declaration that would determine his legal status vis-a-vis the contracting party with regard to an action taken by such contracting party. I find that the authorities relied upon by the plaintiff to aver that the defendants could not have in the present case unilaterally issued the order dated 24.08.2012 imposing the penalty upon the plaintiff for delay in executing their part of the contract, because the defendants have not shown that the plaintiffs had admitted that there was any delay on their part; the arbitrator has already given his findings on the aspect of delay. M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 67 of 84 (6) The Hon'ble High Court of Delhi in Union of India vs Tejinder Kumar Dua (2013 SCC OnLine Del 1269) while dealing with a similar clause has taken note of the relevant authorities on the subject thus :
"d) As per law, entitlement of recovery of any compensation under clause 2 is to be decided by the learned Arbitrator. Once the entitlement is decided and found that the petitioner was entitled to recover compensation under clause 2 of the agreement, the concerned Superintending Engineer can decide the quantum of compensation and this action of the Superintending Engineer is an excepted matter and it can not be questioned in arbitration. In the present case the learned Arbitrator came to the conclusion that all delays are attributable to the petitioner and hence the petitioner is not entitled to recover any compensation. As per own admission, by the concerned Superintending Engineer the M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 68 of 84 respondent was not responsible for any delay.
i) In State of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli And State of Karnataka v. K. Krishnappa Naidu and Co. And The Executive Engineer, Thungabhadra Reservoir Division, Munirabad v. S. Thippa Reddy; AIR 1987 Supreme Court 1359. It was held as under:
"7. On a consideration of the matter we find ourselves unable to accept the contentions of Mr. Iyenger. The terms of Clause 12 do not afford scope for a liberal construction being made regarding the power 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 M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 69 of 84 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 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 argument's sake that the terms of Clause 12 afford scope for being construed as empowering the officer of M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 70 of 84 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 or 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 case the Officer of the State, even though a party to the contract will be well within his rights in assessing the damages occasioned by the breach in view of the specific terms of Clause 12.
M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 71 of 84
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."
ii) Rambal Company v. Kerala State Science and Technology Museum, 2000 (3) Arb. LR 212 (Kerala). Relevant para reads as under:
"5. On a consideration of Ext. R l(c) and Ext. P3, we are of opinion that the petitioner cannot be said to have admitted breach of contract on its part. Even where the power of the State or its instrumentality under an agreement entered into by it with a private Individual expressly provided for assessment of damages for breach of conditions of the M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 72 of 84 agreement and recovery of damages, that power can be exercised only in cases where the breach of conditions is admitted or is not disputed. It is, by now, well settled that one of the contracting parties cannot adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. As already noticed, the petitioner has alleged in Ext. P3 reply notice that they have not committed breach of contract and the delay was due to lapses on the part of the first respondent against whom the petitioner had made counter claims. Even assuming that clause in an agreement empowers the instrumentality of the State to adjudicate the question of breach as well as the quantum of damages, the adjudication by an officer of the State instrumentality regarding the breach of contract and assessment of damages cannot be sustained in law because the parties to an agreement cannot be an M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 73 of 84 arbiter in his own cause. The question as to whether there is a breach of contract and if so, what is the quantum of damages, are all matters which are best left to be adjudicated upon by a Court or Tribunal and not by one of the contracting parties. The view, we are taking, finds support in the decision of the Supreme Court reported in State of Karnataka v. Rameshwara Rice Mills Thirthahalli, AIR 1987 SC 1359. There, it was contended that when the State is one of the contracting parties and seeks to recover damages for breach of that contract, the State cannot be a Judge in its own cause and cannot be its own arbiter to determine the liability and quantum of damages. Upholding the contention, the Apex Court held as follows at pages 1361-1362 : of AIR:
"The terms of Clause 12 to do not afford scope for a liberal construction being made regarding the powers of the Deputy M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 74 of 84 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 herein before, 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 word, 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 in 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 contract would flow from or is inhered in the right conferred to assess the damages M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 75 of 84 arising from a breach of conditions. The power to assess damages, as pointed out by the Full Bench, is subsidiary and consequential power and not the primary power. Even assuming for argument's 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 M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 76 of 84 between the contracting parties regarding the breach of conditions. In such a case, the Officer of the State, even though a party to the contract will be well within his rights in assessing the damages occasioned by the breach in view of the specific terms of Clause 12.
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."
Following the aforesaid decision, a Full Bench of this Court in Abdul Rahiman v. Divisional Forest Officer, held as follows at pages 4-5, of AIR:
"When a contract is broken, the party who M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 77 of 84 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. This principle of Section 73 of the Contract Act equally applies where one of the contesting parties is the Government. It is the breach of the contract that gives rise to the cause for damages. The primary duty therefore is to fix the liability for the breach. Assessment of damages is only an incidental or subsidiary function. The liability to pay damages is thus fastened where there is breach of contract. However, when a dispute arises as to whether the contract has been broken or not. that dispute cannot be settled by one of parties to the contract for, he cannot be an arbiter in his own cause. The dispute may have to be referred to an arbitrator or the matter has to be settled in a Court of law. This principle applies to the Government M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 78 of 84 also as a party to the contract.
Where the breach of the contract is admitted i.e. where there is no dispute that the contract has been broken by one of the parties, the Government as the party entitled to claim compensation for the breach need not wait for a determination by any outside agency as to whether there was any breach of contract. In that event, the question of damages alone remains to be considered. A sum can be named in the contract as the amount to be paid in case of breach, an amount in liquidation of the claim for compensation. The contract can thus provide for liquidated damages in the event of breach and the Government claiming that amount as compensation for the admitted breach committed by the other party to the contract, need not seek the aid of Court or any outside agency for the fixation of the quantum of damages. Similarly, if the M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 79 of 84 contract itself provides that "that one party shall be liable to pay damages to the second party as may be assessed by the second party", the assessment by the second party, in case the breach is admitted, is binding on the first party and there is no more any necessity for a further quantification of the damages by any outside agency. The party assessing the damage can straightway seek to recover the amount and if that party is the Government, it can have recourse to the remedy available under the Kerala Revenue Recovery Act."
The same position has also been held in judgment of Hon'ble Supreme Court of India titled as State of Karnataka vs Shree Rameshwara Rice Mills, Thirthahalli 1987(2) SCC 160 :
"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 M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 80 of 84 will stand confined only to those cases where the breach of conditions is admitted or it is not disputed."
In the present case, it was the Arbitrator who had already concluded in the Award about the causes of delay, and had treated the contract as closed and decided the rights and liabilities of the parties. The said findings were upheld by the Hon'ble High Court of Delhi. Therefore, the Defendants could not unilaterally come to a finding that it was the plaintiff who was solely responsible for the delay of "142 days" when the said claim was delay already stood adjudicated upon. (7) Even if the finding of the Arbitral Tribunal, that the parties had admitted and agreed that the claim under Clause 2 was to be excepted from the arbitration is taken as is, it was for the defendants to file a recovery suit before the appropriate court for recovery of their claim under Clause 2 and to seek a finding of the Court as to whether they could claim the sum of Rs 14,13,184 as damages for breach of contract from the plaintiff. The same cannot be done on the basis of a unilateral decision by one of the contracting party itself by proclaiming a delay of 142 days as solely attributable to the Plaintiff, especially when such M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 81 of 84 delay was disputed and also it had been found by the Arbitrator that some of the delay was attributable to the defendants. (8) Moreover, as held by the Hon'ble High Court in Tejinder Dua (supra), it was for the Arbitrator to decide the entitlement of the defendants for compensation under Clause 2, but for reasons best known to the Defendants neither the said issue was pressed before the Arbitrator, nor was the finding of the Arbitrator challenged before the Hon'ble High Court. Once the defendants gave up their claim under Clause 2, the entitlement wherein was only to be decided by the Arbitrator and not by the Superintending Engineer, then they could not have issued the impugned order dated 24.08.2012. No doubt that the said Engineer under Clause 2 can decide the quantum but the condition precedent for the same was the decision of the Arbitrator on the entitlement of the Defendant for compensation for delay. Once the same was not pressed, the only alternative for the Defendants was to file the recovery suit for adjudication of the alleged delay and entitlement by the Concerned Court. In absence of any finding of the Arbitrator or Court of Law with regard to the entitlement of the Defendants for compensation, the concerned authority was in no position to quantify compensation M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 82 of 84 under Clause 2.
(9) It is the admitted position moreover, that the contract was determined on 24.09.2005, which fact is also mentioned explicitly in the impugned order of 24.08.2012. The period of three years therefore (under Article 55 of the Schedule of the Limitation Act) had long since elapsed by the time the Defendants made a claim of compensation/penalty of Rs 14,13,184 vide the impugned order of 24.08.2012. (10) It is the admitted position that the time for performing the contract was extended unilaterally by the defendants vide the letter dated 08.08.2005 (Ex DW-1/R44). When the time for performing the contract is extended unilaterally, then it is presumed that the time is set at large and it ceases to be the essence of the contract. In such cases Clause 2 will become inoperative. This is what was also held by the Hon'ble High Court of Delhi in Tejinder Dua (supra) where it was observed that "In the present case, time was set at large and hence it did not remain essence of the contract. Clause 2 of the agreement became inoperative. Extension was granted unilaterally, when the petitioner found that delays are attributable to the petitioner M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 83 of 84 only, Engineer Incharge recommended the case of extension of time stating clearly that extension be granted without levy of compensation"
18. Therefore, the impugned order dated 24.08.2012 has to be declared as void as the same is contrary to the well- established principles of law qua the operation of Clause 2 of the agreement between the parties that the defendants can not unilaterally decide the reasons for delay as being attributable to the plaintiff before quantifying the compensation when the causes of delay are disputed and have been, in fact, the subject matter of adjudication before the Arbitrator, whose findings were also affirmed by the Hon'ble High Court. Furthermore, the claim of penalty under the impugned order was also time-barred and as the time was not of essence due to the unilateral extension of time by the defendants, the Clause 2 became inoperative.
19. Therefore, all the issues are decided against the defendants and in favour of the plaintiffs. RELIEF
20. Suit of the plaintiff is decreed for the following reliefs :-
(a) a decree of declaration that the impugned order dated M/s Satish Builders vs Union of India Suit No.16744/16 Page No. 84 of 84 24.08.2012 being marked as Ex PW1/38 as void and not binding on the plaintiff;
(b) a decree of injunction restraining the defendants from recovering any amount in pursuance of the order Ex PW 1/38 from the plaintiffs in any manner whatsoever. Parties to bear their own costs. Decree Sheet be drawn up accordingly.
21. File be consigned to record room after due compliance. Digitally signed by DIVYANG DIVYANG THAKUR THAKUR Date:
Announced in the open court 2023.11.10 14:38:25 On 10.11.2023 +0530 (Divyang Thakur) ADJ-03/South West Dwarka / New Delhi 10.11.2023 M/s Satish Builders vs Union of India