Madhya Pradesh High Court
P.C. Rajput vs State Govt. Of Madhya Pradesh And Ors. on 22 July, 1992
Equivalent citations: AIR1993MP107, 1994(0)MPLJ387, AIR 1993 MADHYA PRADESH 107, (1993) JAB LJ 423 (1994) MPLJ 387, (1994) MPLJ 387
Author: D.M. Dharmadhikari
Bench: D.M. Dharmadhikari
JUDGMENT M.V. Tamaskar, J.
1. This revision shall also govern the disposal of Civil Revision No. 481 of 1988 (State Govt. of Madhya Pradesh v. P. C. Rajput).
2-3. The applicant/claimant had entered into a contract with the State Govt. of Madhya Pradesh on 26-10-1983 for construction of masonry structures on the right bank of the main cannal of Kolar Project in (Cms. 6 to 11 including the gap filling in masonry structure. The work also included construction of five road bridge Section The work was to be completed by 26-10-1984. The period of contract was 12 months.
4. The work order was issued on 27-10-1983. After the completion of twelve months i.e. 26-10-1984 the same was extended on request of the claimant/applicant and remained in operation till 29 months up to 28-6-86. However, the contract was terminated on 28-3-86 on the refusal of the applicant/contractor to execute the work vide Ex. P-3. The construction cost of masonry structure of B.B.M.C. of Kolar Project in Kms. 6 to 11 including the gap filling was estimated at Rs. 6.20 lakhs and cost of construction of earth work of B.B.M.C. Kolar Project Kms. 11 to 16 was estimated at Rs. 7.93 lakhs.
5. The claimant raised the following disputes in reference petition :
(1) The respondents did not fulfil the reciprocal promises which were stipulated as per the terms of the contract/ agreement. The work as such could not be started by the applicant for about six months.
(2) The complete work site was not handed over.
(3) The quarries for store and sand were not made available.
(4) Steel and cement were not supplied regularly at work site.
(5) Revised drawings and designs were not given in time.
(6) Payment of running bills and grant of secured advances were not prompt.
(7) Difficulties and problems which cropped up from time to time in the execution of the work were not resolved by the respondents, taking active steps.
(8) The user of canal road was obstructed.
(9) Approach roads were not built promptly.
(10) Rates for extra items were not settled and (11) Various hinderances and bottlenecks were placed by the department.
As such on the following seven counts the claim was filed before the Arbitration Tribunal at Bhopal.
(1) Overhead expenses and loss 3,62,500-00 of profit.
(2) Escalation in wages, costs of 40,000-00 malerial etc. (3) Idling of labour etc. 38,450-00 (4) Excess recovery of interest 6,650-00 on mobilisation advances. (5) Final bill amounting to : 1,55,000-00 (6) Refund of security depo- 23,976-00 sits & other amounts with held, and (7) Interest antelite. 23,424-00 Total Rs. 6,50,000-00
The department on the other hand submitted that the department was not responsible for any breach of reciprocal promises. That contractor right from the beginning acted in a careless, negligent and unbusiness like manner. He had neither an engineer nor a site officer nor did he care to attend the pre-tender conference nor did he take any steps to make an inspection of sites before start of work. It was obligatory on the part of the contractor to make himself aware of the contract conditions and existing quarries, sites, roads, culverts etc.
6. It was also submitted by the department that the applicant did not submit construction programme nor he adhered to any systematic work plan in order to give positive results in respect of the execution of the contract in question. He was paid running bills regularly. He did not make any indents for steel. The applicant even though responsible for construction of the approach roads, did not take any steps in the matter. Despite several reminders the applicant did not resume the work and as such the contract had to be terminated vide Ex. P-3 dated 28-3-86 and a recovery of Rs. 1,13,568-96 ordered.
7. The Tribunal after recording the evidence and hearing both the parties returned the following findings:
(1) That the entire work site was in black cotton area in which no work of excavation etc. was possible during four months of rainy season.
(2) The work site was admittedly 55 kms. away from Obcdullagunj and 47 kms. from Hoshangabad approachable up to Rehnti only by tar road and by a fair weather road 13 kms. from Rehnti to Barrage site which was located at Bhuliapur.
(3) That the approach road up to Barrage could not be completed by the department by constructing intervening culverts etc. It could not be expected from the contractor to construct approach roads through private lands.
(4) The work could not be started until the crop was harvested and forest cleared.
(5) There were private lands intervening and in absence of any acquisition the work could not profitably be executed during the entire spells of rainy season.
(6) Further that the structure at R.D. 10320 was overflooded due to stoppage of water on account of a road having been constructed by the department, and (7) Lastly, the work of dewatering and diversion of nallas to nearby valleys had to be done by the department and the same was not done timely.
On the basis of the above reasoning the Tribunal held that looking to the local conditions, attending defaults of the department, it was impossible for the contractor to have continued to carry on construction during four months of rains but the contract had not become impossible of performance in remaining eight months, moreover, when the agreement contemplated extension of period which were admittedly granted to the contractor on his requests. The contract was not void under Section 56 of the Contract Act.
8. The Tribunal recorded a finding in para 13 as under:
(a) The action of the department, obviously, amounts to breach inasmuch as the site in question was not given by the department till the end of stipulated period of contract, and
(b) In para 17 going to the root of the matter is in not making available the whole site including quarries within reasonable time as quarries are also included in the site.
9. The Tribunal also held that (i) some of the claims were not made before the authorities and in absence of any decision by the departmental hierarchy as contemplated under the agreement the Tribunal could not entertain the claim.
(ii) As against the claims No. 1 the Arbitration Tribunal did not award any amount (see para 27). No claim was made as required under Clause-51 of the G.C. 33.
(iii) As regards the claim No. 3 a total sum of Rs. 18,161-05 was awarded (see para33).
(iv) As regards the claim No. 3 no claim was awarded (see para 38).
(v) As regards the claim No. 4 no claim was awarded (see para 45).
(vi) As regards the claim No. 5 a sum of Rs. 5,900/- has been allowed (see para 52 of the award).
(vii) As regards the claim No. 6 the Tribunal held that the applicant/claimant is entitled to Rs. 23,976/- (sec para 54), and
(viii) As regards the claim No. 7 interest at the rate of 18 per cent per annum from 1-1-87 to 30-6-87 has been disallowed vide para 57 of the award.
10. The applicant has preferred this revision petition against the rejection of his claim and the State Govt. of Madhya Pradesh have also preferred revision petition against the claims awarded by the Tribunal.
11. It is urged by the applicant/claimant that under clause 2(d) of the M. P. Madhyas-tham Adhikaran Adhiniyam, 1983 (hereinafter referred to as the Act) a dispute is a claim of ascertained money value of Rs. 50,000/- or more relating to any difference arising out of execution or non-execution of a works contract or a part thereof. Therefore, no sooner a claim is made in respect of the contract of the value of more than Rs. 50,000/- a dispute arises and the Tribunal has to accept the said dispute for determination as provided under Section 7 of the Act.
12. It is also urged that the Arbitration under the Act is statutory.
13. The submission of the learned Counsel for the applicant/claimant is that there were fundamental breaches committed by the department as such the claimant was entitled to receive the amount as claimed. It was also urged that the applicant was entitled to get damages or compensation towards escalation of prices of various items under the contract.
14. As against the said submission of the learned Counsel for the applicant learned Additional Advocate General submitted that the findings as regards the fundamental breaches returned by the Tribunal are contrary to the provisions of the contract/ agreement and also against the documentary evidence on record. It was urged that even the claims which have been awarded should not have been awarded. As regards the escalation, clause having been deleted from the original agreement there was no question of granting any compensation for escalation of prices due to continuance of the contract beyond the stipulated period. It was also urged that Clause 51 of the agreement was obligatory in the sense that the State has spoken through the various clauses of the agreement in respect of determination of the dispute arising out of the contract and even though the agreement is executed by the Executive Engineer on behalf of the State Government, refusal of claim by the Executive Engineer could not entitle the claimant to rush to the Arbitration Tribunal unless he exhausts all the steps available under the clause 51 of the contract and that this being the consistent view of the Tribunal it should not be disturbed and lastly it was urged that the applicant himself being guilty of various breaches he was not entitled to any of the claims in dispute.
15. Having narrated the submissions of both the parties it is necessary to look into the contract document. Relevant clauses of the contract are as under:
TN-4 clause-5 relates to status of the project and the existing position of the project is narrated stating that the construction of Approach Road to Barrage site and construction of Project Building are nearing completion.
TN-7 Clause-11 is in relation to a pretender conference open to all prospective tenderers were to get an opportunity to obtain clarifications regarding the work and tender conditions. In the same connection a further clause is. Information and Instructions of tenders it is stated as under:-
"Upon receipt of the tender documents all tenderers are urged to submit a written request on matters where clarification or additional information is desired."
II-3 Clause-3 : Status of the Project: Construction of approach road to barrage site and construction of project buildings are near completion, barrage work is also in progress. North work of LBG from Kms. 6 to Tail and Bari Distributory is in progress.
GC-I Clause l(f) relates to drawings referred to the specifications. Notification of such drawings approved in writing by the Executive Engineer/Superintending Engineer etc., etc. GC-2 Clause (I) relates to site which means the lands and other places on, under in or through which the works are to be executed or carried out and any other lands provided by the owner for the purpose of contract together with such other places as may be specifically designated in the contract or subsequently approved as forming part of site.
GC-7 Clause-10; The contract drawings read together with the contract specifications are intended to show and explain the manner of executing the work and to indicate the type and class of materials to be used etc. Clause-11 speaks about modifications.
GC-8 Clause-12 speaks about signed drawing unless they are sent to the contractor by the Executive Engineer with a covering letter confirming that the drawing is an authority for work in the contract.
GC-S Clause-15 speaks about construction programme wherein detailed ycarwise construction programme including quarterly requirements of materials to be supplied by Government within 14 days of the date of notice to proceed with the work which may be reviewed and revised every year at the beginning of the working season.
GC-9 Clause-17 speaks about supply of material by the Government.
GC-15 Clause-20 speaks about use and care of site and clause 22 speaks about local roads.
A particular reference is made to this clause which was a subject matter of debate during the arguments.
"22. Local Roads: The Existing Public Roads near the site of work and the roads constructed by the Government in the works area are available for use by the contractor. The Contractor may construct and Maintain Additional roads as required at his own expenses.
GC-20 Clause-32 speaks about extra items of work shall not vitiate the contract etc. GC-21 Clause 32 A is in respect of price adjustment (in fact it was a escalation clause in respect of increase or decrease of price of the labour material and POL). This clause has been deleted from the agreement at GC pages 21 and 22 which is signed by the contractor.
GC-30 Clause 45 speaks about defaults by contractor which permit the Engineer-in-charge to take possession of the whole or the part of the works, site, plant, equipment etc. GC -31 Clause-46 speaks about liquidated damages if the contractor fails to complete the work or a work or a designated part thereof as per construction programme etc. GC-32 Clause-50 speaks about extension of time. This is an importent clause dealing with the grant of extension on request made by the contractor.
GC-33 Clause-51 speaks about settlement of disputes and is an important clause for which serious debate was made before the Court stating that clause-51 is contrary to clause-7 of the Madhyasthan Adhikaran Adhiniyam, 1983, and should be ignored for the purpose of entertaining the disputes under the Act.
GC-34 Clause-52 is an arbitration clause but in view of the fact that by the statute all matters relating to works contract of value of Rs. 50,000 or more have been made subject-matter of arbitration by the Tribunal appointed by the State Government under the Act. The present clause has lost all its significance. The other clauses which require mention are as SP-1 regarding the location.
"3. Location:
3.1. The Canal reach Km. 6 to 11 starts from village Jhollapur and ends near village Amajhir of Nasrullaganj tehsil of Sehore District. The works site is about 55 Km. from Obaidullaganj and 47 Km. from Hoshanga-bad and is approachable through a tar road up to Rohti and a fair weather road 15 Km. from Rohti to Barrage site."
Special instructions contained in various clauses regarding the nature of work, soil, the cost involved measurement etc., etc.
16. Having considered the various contract clauses we are of the opinion that the contract clauses speak out the existing state of affairs and the obligations which are known to each of the parties i.e. executing party, the State and the contracting party, the contractor. The contract clauses speak only about the actual state of affairs in relation to conditions of the road as they exist on the date of the contract, the location of the site, availability of the quarries, requirement of submitting construction programme and the execution of the work in a business like manner. It must be remembered that a contract is a commercial document between the parties and it must be interpreted in such a manner as to give efficiency to the contract.
17. It must be noted that arbitration by a private negotiations or through a statutory tribunal have long been in vogue and disputes and differences arising in relation to a contract are a known connotation. It will be useful to refer, Russoll on Arbitration (Nineteeth Edition) page 55 to find out the true meaning of word Differences':
"Differences: To constitute a submission proper there must be a difference. If there is no difference there is nothing for an arbitrator to arbitrate about, and in the case of an agreement to refer further disputes to arbitration, the arbitrator's jurisdiction does not arise until a dispute has arisen."
18. Further the same Author at page 66 points out that it is a well recognised situation that one law may govern the contract and another the arbitration procedure. Thus, as far as the execution of the contract is concerned, various contract clauses are binding and which are governed by the Contract Act, whereas determination of disputes/differences arising out of the execution of the contract are to be governed by the arbitration procedure as laid down by the Act.
19. In the instant case, what is required to be seen is, that, whether there has been any assertion of a claim and denial of the same by the other side. It is the assertion of the claim and denial by the other side that gives rise to the dispute. The definition of the word dispute in Section 2(d) is a claim of ascertained money valued at Rs. 50.000/- or more relating to a difference arising out of the execution or non-execution. Word difference arising out of must receive the meaning as understood in Arbitration Jurisprudence under Section 2(2) of the Act.
20. Now coming to Clause-51 of GC-33 the claimant should file his grievance stating the particular breach and nature of dispute arising out of the contract and shall promptly approach the Engineer-in-charge in writing. The Engineer-in-charge shall then give his written instructions and a decision within 30 days. Thereafter if the decision of the Engineer-in-chief is against the contractor, he is required to proceed with the work without delay and comply with such instructions or decision. Further, he may within 30 days after receiving the instructions or decision appeal to the Superintending Engineer, who in turn will give an opportunity to the contractor to be heard and the matter should be decided within 60 days and thereafter if the contractor is dissatisfied, he may within 30 days from the receipt of the decision indicate his intention to refer the dispute to arbitration, failing which the said decision shall be final and conclusive.
21. Question of questions is whether Clause-51 completely shuts out the approach to the arbitration tribunal, pausing here for a moment in order to find out whether a dispute has arisen it is necessary to see that any claim has been made and there is a denial or refusal by the other side. This is the basic theory of the arbitration which has been accepted all along. How the situation arising because of the statutory provision conferring jurisdiction to the Arbitration Tribunal under Section 7 of the Act in respect of the works contract of the value of more than Rs. 50,000/- does it mean that a contractor can come straightway to the Arbitration Tribunal without making any demand or decision on the claim made by him. There may be matters which may be settled under clause 51 and the contractor may well accept the same and there may not arise any occasion for referring the matter to the Arbitration, yet, there may be another situation when ever after making a demand raising a dispute the officers stated in the said clause may not take any steps and sit over the matter whether in such a situation can it be said that a dispute has arisen may be that a long delay in taking a decision by the executing party may itself turn it into a dispute for the purposes of reference to the Arbitration Tribunal.
22. In the instant case, the limitation prescribed under the agreement clause is 60 days after the differences have arisen. As soon as the contractor makes a claim and there is no decision for a period of sixty days, it will be presumed that a dispute has arisen and a reference can be made to the Arbitration Tribunal.
23. Section 7 of the Act gives a right to either party to a works contract irrespectives of the fact whether the agreement contains the clause or not refer in writing the dispute to the Tribunal i.e. to say what is required to be found out is that the dispute is in respect of a works contract as defined in Section 2(1) and falls within the clause 2(d) in respect of ascertained money value of Rs. 50,000/- or more relating to any difference arising out of the execution or non-execution of a works contract or part thereof.
24. The Tribunal has taken a consistent view in the matter of Jaiswal Construction v. M.P. Rajya Seby Nirman Nigam Ltd. and two others (Award dt. 23-7-1988 in Reference No. 84 of 1987) that unless the claims are made as required under the agreement, the Tribunal has no jurisdiction to entertain the claim.
25. As pointed by us, there may be different circumstances and even if a dispute has been raised, there may not be denial or refusal. In such circumstances, the view of the Tribunal cannot be accepted that it cannot entertain the dispute at all. If the Tribunal entertains a dispute then it cannot shut out the claimant on the ground that it has not approached the authorities and, therefore, the claim is not entertainable. The Tribunal may well consider whether to entertain the reference petition in respect of such cases and decide at the threshold the question and direct the claimant to approach the authorities under the agreement but cannot throw the claim altogether. True it is that the dispute arises only when there is assertion and denial as understood under the arbitration proceedings. Absence of denial when there has been an approach should be presumed to raise a dispute entertainable by the Tribunal.
26. Learned Additional Advocate General argued that the state has expressed its intention in regard to differences that may arise and the dispute that may be covered under the contract-agreement. Executive Engineer is only an authority empowered to sign the contract document that the State Government expresses itself only in the manner as provided in Clause GC-5I and unless that is followed, the Arbitration Tribunal has no jurisdiction.
27. Learned counsel for the applicant did not invite our attention to the amendments made in the Madhyasthan Adhikaran Adhiniyam, 1983, by Amendment Act No. 9 of 1990 by which Sections 7-A and 7-B were inserted. Section 7-A speaks about the inclusion of whole claims on the date of making a reference petition, while Section 7-B is of great importance to construe the meaning of the word 'dispute'. Section 7-B of the Act states that the decision in respect of a dispute under the terms of agreement for the works contract by the final authority under the agreement has to be given and from the date of his decision the reference is to be made within one year from the date of communication. Under Clause (b) of Section 7-B a further limitation has been prescribed in respect of the dispute referred to the final authority under the agreement and if such authority fails to decide it within a period of six months from the date of the reference to it unless the reference petition is made within one year from the date of expiry of the said period of six months. Clause (2) of Section 7-B speaks about the presentation of reference petition within one year from the date of commencement of the amendment Act No. 9 of 1990 in respect of cases where no proceedings have been commenced before any Court.
28. The scheme of the Act is, therefore, clear that the dispute has to be raised under the scheme of the agreement as envisaged. It does not negative the right of the party to approach the Arbitration Tribunal under Section 7 and as such it cannot be said that it is against the legislative intent or that the parties have contracted out against the provisions of statutes.
29. It has been a settled view that unless there is a difference there cannot be any dispute. In this connection we may refer to Dilip Construction Company Baroda v. Hindustan Steel Ltd., Ranchi, 1973 Jab LJ 696 : (AIR 1973 Madh Pra 261). Relevant portion is reproduced below :
"The existence of a dispute is an essential condition for the jurisdiction of an arbitrator. If there is no dispute, there can be no legal right to demand arbitration at all. Failure to pay does not necessarily constitute a difference or dispute. A dispute implies an ascertion of right by one party and repudiation thereof by another. The jurisdiction of an arbitrator depends not upon the existence of a claim or the accrual of a cause of action, but upon the existence of a dispute.
The said authority has been consistently followed by this Court. The first contention, therefore, raised by the applicant-claimant that Clause 51 of the agreement is per se illegal being in conflict with the provisions of Section 7 of the Act fails. The Machinery provided under Clause 51 is to prevent or to reduce unnecessary litigation.
30. The view taken by the Arbitration Tribunal in Jaiswal Construction (supra) is consistent and in line with the accepted principles of arbitration jurisprudence. The view of the Tribunal finds legislative sanction by incorporating them in Sections 7-A and 7-B.
31. Now coming to the next question regarding the fundamental brach committed by the State as found by the Tribunal whether it stands to the scrutiny of the evidence on record both documentary and the legal test laid down for the said purpose. A fundamental breach as stated in Anson's Law of Contract, Twenty-third Edition at page 163, is quoted below:
"The rules of construction so far referred to are of limited utility for it will be obvious that the skill of the draftsman can prevail over the natural reluctance of the Courts to uphold an abuse of contractual freedom. Very gradually, however, there developed a new doctrine which seemed to offer some escape from even the most carefully drafted exemption clauses. This was the doctrine of the 'breach of a fundamental term' or of 'fundamental breach'.
There were it was said, in every contract certain terms which were fundamental, the breach of which amounted to a complete non-performance of the contract. A fundamental term was conceived to be something more basic than a warranty or even a condition. It formed the 'core' of the contract, and therefore could not be affected by any exemption clause."
At page 154 ;
The two principles were in many cases used interchangeably; but they appeared to establish that, however extensive an exemption clause might be, it could not exclude liability in (respect of the breach, of a fundamental term or of a fundamental breach. Expressed in this way, the doctrine constituted a substantive rule of law which would operate irrespective of the intention of the parties. Their freedom of contract was festered by this limitation.
More recently, however, the operation of the doctrine has been the subject of a complete reappraisal by the Courts. The movement began in U.G.S. Finance. Ltd. v. National Mortgage Bank of Greece (1964) 1 Lloyd's Rep. 446 at p, 450, where Pearson I.J. expressed the opinion that the application of an exemption clause to a fundamental breach of contract was a matter of constraction only) :
As to the question of 'fundamental breach' 1 think there is a rule of construction that normally an exception or exclusion clause or similar provision in a contract should be construed as not applying to a situation created by a fundamental breach of contract. This is not an independent rule of law imposed by the Court on the parties willy-nilly in disregard of their contractual intention. On the contrary it is a rule of construction based on the intention of the contracting parties. This opinion was subsequently endorsed by the House of Lords in Suisse Atlantique Societed 'D' Armomenl Maritime Section A. v. N. V. Rotterdamsche Kolen Centrale (1967) 1 AC 361, where the statement of Pearson L.J. was unanimously approved."
At page 155:
A 'fundamental term' seems now to be merely an alternative way of referring to a condition i.e. a term which goes to the root of the contract so that any breach of it entitles the innocent party to treat the contract as repudiated (sec Ante, p. 121), and a 'fundamental breach merely a breach of sufficient gravity to entitle the innocent party to do likewise, (see Post, p. 494), Swisse Atlantique case (supra). In Cheshire and Fifoot's Law of Contact (Ninth Edition) the question of fundamental breach again has been stated thus:
SECTION II. THE EFFECT OF BREACH "It must be observed that, even if one of the parties wrongfully repudiates all further liability or has been guilty of a fundamental breach, the contract will not automatically come to an end. Since its termination is the converse of its creation, principle demands that it should not be recognised unless this is what both parties intend. The familiar test of offer and acceptance serves to determine their common intention. Where A and B are parties to an executory contract and A indicates that he is no longer able or willing to perform his outstanding obligations, he in effect makes un offer to B that the contract shall be dischargcd. Therefore, B is presented with an option. He may either refuse or accept the offer. More precisely, he may either affirm the contract by treating it as still in force, or on the other hand he may treat it as finally and conclusively discharged. The consequences vary according to the choice that he perform.
If the innocent party chooses the first option and with lull knowledge of the facts, makes it clear by words or acts, or even by silence, that he refuses to accept the breach as a discharge of the contract, the effect is that the status quo ante ib preserved intact. The contract remains in being for the future on both sides. Each (party) has a right to sue for damages for past or future breaches." Thus, for instance, a seller of goods who refuses to treat a fundamental breach as a discharge of the conduct remains liable for delivery of possession to the defaulting buyer, while the latter remains correspondingly liable to accept delivery and to pay the contractual price, The significance of the rule that the contract in existence is well illustrated by the case where a party has repudiated his obligations.
"In that case he keeps the contract alive for the benefit of the other party as well as his own; he remains subject to all his own obligations and liabilities under it, and enables the other party not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, about also to take advantage of any supervening circumstances which would justify him in declining to complete it,"
In Butt on Contract 7th Ed. at page 67 it has been stated thus:
"It is not easy to define fundamental breach of a contract. Breaches of contract can vary almost infinitely in seriousness. Relatively slight breaches give rise to a claim for damages only and more serious breaches give rise to a right to put an end to the contract."
The fundamental breach as pointed out by the Tribunal is stated to be in respect of handing over the site and as per the definition of 'site' the quarries also.
32. In (1976) 1 All ER 225 it has been clearly stated that if the party refuses to accept the breach as discharge of the contract, it is intact and the contract remains in being for the future for both sides. Each party has a right to sue for the future or damages for post.
33. Now we examine the documentary evidence on record. We have also examined the contract clauses in this behalf. The findings recorded by the Tribunal in paras 13 and 17 do not take into consideration the clauses of contract in respect of extension of time. The initial period of contract was for twelve months but the same was extended on the request of the contractor and the span of the contract was extended for a period of 29 months. The applicant-claimant having accepted the extension and the State having openly stated that the extension is granted subject to the right of the State to impose penalty clearly means that the contractor very well knew the nature of the order passed and should not have been any doubt that the State had in any way admitted the defaults. On the other hand, the action of the contractor in accepting the extensions amounts to waiver and the fundamental breach prescribed to the State become meaningless as the Court did not consider the effect of the extensions granted under the agreement. When the contract-agreement provides for extension, the time limit provided for completion of 12 months is not essence of the contract. In such executory contracts the work is bound to spill over due to various contingencies and as such the agreement itself provides for extension. The contractor having accepted the extentions his grievance that he could not give a progress during the rainy season and as such the State should be held responsible for the defaults cannot be accepted. Nor it is correct to say that the site or whole site was not handed over.
34. It may not be out of place to mention here that the contractor was aware of the conditions of the road as existing and his responsibility to make approach roads wherever necessary was a clause agreed to by the contractor himself. Reference to Ex. P/6, Ex. P/17 and Ex. P/19 stating that during the rainy season location was not approachable is neither here nor there. The claimant was also aware of Chapter V, SP-I and GC-15 Clause 22 that canal roads were not meant for general use." The finding recorded in para 7 that the contractor was not expected to construct a road of such a length does not take into consideration that neither the contractor nor the State was expected to provide a black tar road. In all such contract during the rainy season alone that some difficulty arises otherwise there is always approach to reach the work site from the available approaches.
35. We may here refer to one of the letters in order to find out the contractor was responsible due to his lack of experience, nonavailability of resources, not having any engineer to assist him, nor having any office on the work site, for non-execution of the contract and the applicant-contractor was just making out excuses in order to abandon the contract and foist the blame on the other side in order to claim damages. Particular reference is made to Ex. P-18 dated 30-11-84 wherein it has been specifically pointed out that the work of masonry structure have been started but the progress of the work was very slow and does not match with the construction programme submitted by the contractor. The labour report is not submitted and the work was incomplete and he was directed to increase the progress of the work. Reference is also made to Ex. P/20 wherein certain excuses were put forth but total reading of the said grievances do point out one factor that despite the construction programme submitted by him on 15-11-84 he was not proceeding with the work without any just cause.
36. The reply of the State in this regard is Ex. P/ 21. Though the grievance was made in Ex. P/23 regarding the accumulation of water, in fact, there was only a nominal water which did not hinder the progress of the work and had the proper steps been taken, there could have been a good progress of the work. Though the dewatering was done by the department, the applicant did not take any steps to engage his labourers. All the contentions raised by the claimant were replied to by this letter dated 15-2-1985 and it was brought to his notice that there was no change in the designs. He had not given progress of the work in the earlier year, nor he has started the structural work and the letters addressed to him were returned unserved as he had no site officer. It was also pointed out that steel was supplied to him but he did not make use of it as he had not undertaken structural work and the steel had to be brought back to the department stores for safety. The applicant had no centring materials and as such he could not do any work of slab even in respect of Village Road Bridge (VRB) R.D. 9870 which had come up to slab level. As such to say that the site was not handed over, amounting to fundamental breach is against the evidence on record. There was no hin-derance by the cultivators. The applicant did not even have implements for digging. It was very difficult to understand that he was in any way prepared for any work of the nature undertaken by him. Neither he had mixtures, nor machinery without which any concrete work could be done. Despite all these short- comings the department recommended extension to the applicant, which were accepted without demur.
37. It is not necessaryy to refer to many other documents. From the application of the claimant/applicant (Ex. P/33) for extension it is clear that he had no labourers as they have gone away. He was also ill and was not able to give more time to work, yet the extension to vide letter (Ex. P/36) and it was pointed out that all the pleas laid by him were just lame excuses. It was not tenable in view of the fact that Clause 32-A was deleted from the agreement. A perusal of Ex. P-37 discloses that he had admitted that the work was restricted to masonry structures only and no progress was done. The area over which the construction was to be done was handed over to him. It was his responsibility to make a lay out yet in absence of any exptertise he was unable to take up the same.
38. Particular attention is invited to Ex. P/51 dated 11-12-1984 wherein the extension was granted up to 30-6-85 reserving the right of the department to take penal action. Vide Ex. P/52 further extension was asked for till 30-6-86 which was recommended by the department and granted vide Ex. P/53. It may be useful to refer to Ex. P/ 55 which is an inspection note prepared in the month of November, 1984 by Shri N. V. Kute, Superintending Engineer, Central Narmada Circle, Hoshangabad (M.P.). It is not necessary to refer to all the defaults pointed out but it is apparent that the contractor was acting willy-nilly trying to find out one or the other excuse.
39. The learned Addl. Advocate-General has also invited attention to various documents filed on behalf of the department. It was pointed out that the contractor had started the work yet he did not take up the work in business like manner. It has been pointed out in Ex. P/22 that there was no engineer on the spot, there were no labourer to cure the masonry structures by watering. The progress of the work was absolutely slow and there were many other factors referred to the earlier paragraphs.
40. In view of the evidence on record, findings recorded by the Tribunal that there were fundamental breaches committed by the Department does not stand to scrutiny of evidence and the record.
41. The claim of the applicant-claimant in respect of escalation is also baseless. The applicant was well aware that the said clause was scored out and the said scoring out bears the signature of the applicant. Hence, his insistence for escalation cannot be accepted. Ex. P 18, Ex. P 20 and Ex. P, 36 clearly negative the claim of the applicant for any escalation. The very first letter i.e. Ex. P 21. the claim of the applicant for escalation was negatived and even thereafter he asked for extensions.
42. The applicant cannot get the escalation merely on the ground that the contract was extended. In view of the specific clauses of the agreement he was not entitled to get any escalation on any ground whatsoever. The parties who enter into executory contract are supposed to abide by and mere turn of events do not entitle them to get escalation. We may refer to the decision of the Supreme Court in Continental Construction Co. Ltd. v. State of Madhya Pradesh, AIR 1988 SC 1166: (1988) 3 SCC 82. In para 8 of the judgment it has been pointed out that vide Cls. 2.16 and 2.4 the contractor had to complete the work irrespective of rise in price of materials and also rise in labour charges at the rates stipulated in the contract. It was pointed out in view of the specific contract clauses that the claimant was not entitled to any extra claim on account of escalation. Same is the situation in the present case where there was specific deletion of the contract Clause 32-A no escalation could be granted to the claimant.
43. Having come to the finding that the claims had to be raised before the authority as contemplated under C1ause 51 of the contract agreement. that there were no fundamental breaches and that the claimant was not entitled to any escalation as per the contract-agreement, the award of the Tribunal in respect of the claims made in para 9 and rejection of the claim is upheld. The claim No. 2 for Rupees 18,161.05 is set aside as no esclartion could be granted under the specific terms of the contract. In view of the finding arrived at by us the applicant is also not entitled to any general damages due to loss of profit and as such his argument regarding the formula to be adopted need not be considered. The Tribunal has given a finding in para 26 that rescinding the contract was not wrongful. In this view the claimant is not entitled to refund of security deposit or interest antclite. The applicant is however, entitled to the claim for return of material left by him and the said claim is upheld. All other claims are dismissed.
44. The revision filed by the State Govt. of Madhya Pradesh and two others in respect of the claim for escalation is allowed and the award is set aside to the extent stated above. There shall be no order as to costs.