Andhra HC (Pre-Telangana)
State Of Andhra Pradesh And Ors. vs Pioneer Builders on 3 March, 1999
Equivalent citations: 1999(3)ALT1
JUDGMENT N.Y. Hanumanthappa, J.
1. Aggrieved by the judgment and decree dt. 3-4-1996 made in O.S. No. 4/92 by the learned Subordinate Judge, Nandyal, allowing the suit claim in part. A.S. No. 2207/96 has been filed by the defendants. A.S. No. 237/98 has been filed by the plaintiff aggrieved by the judgment and decree dt. 3-4-1996 passed by the Subordinate Judge, Nandyal in O.S. No. 4/92 dismissing the suit against certain claims. Hence, both the appeals are clubbed together and disposed of by this common judgment. The rank of the parties is reported as in the trial Court.
2. The brief facts for disposal of these appeals are as follows:-
The case of the plaintiff is that it entered into an agreement bearing No. 19/SE/88-89, dated 28-2-1988 with the 2nd defendant to execute the work pertaining to earth work, excavation, lining and construction of structures of S.R.B.C. from 10.000/10.220 K.M. to 10.000/17.056 K.M. for a sum of Rs. 6,40,32,961/-. The site in question was handed over to the plaintiff on 12-2-1989. The contract period to complete the work was 36 months. Pursuant to the agreement, the plaintiff proceeded to the site with full mobilisation of labour and machinery and commenced the work with an intention to complete the work within the time stipulated. While the work was in progress, the plaintiff had to complain various commissions and omissions on the part of the defendants including delays and defaults occasioned by the 2nd defendant. 11 is averred in the plaint that the defendants did not hand over the site free from obstacles to execute the work inspite of his letters to the defendants on different dates, namely 12-2-1989, 20-3-1989, 5-4-1989, 13-5-1989, 29-5-1989, 22-7-1989 and 13-12-1989. When the plaintiff was proceeding to carry out the work there was resistence from the land owners on the ground that there was standing crop etc. This resistence was admitted by the 3rd defendant and he informed the plaintiff that he would ensure clearance of the site, vide his letter dated 24-5-1989, but the same was not complied with. The residents of Vanala village prevented the plaintiff in executing the work falling within the limits of Vanala village between K.M. 12.356 and K.M. 13.622, which costs about Rs. 138.5 lakhs, which works out to 21.6% of contract value. The same was brought to the notice of the defendants by the plaintiff in his several letters dt. 12-6-1989, 5-7-1989, 27-7-1989, 13-9-1989, 3-11-1989, 21-2-1990, 3-4-1990, 12-5-1990, 13-6-1990, 28-6-1990, 29-7-1990 and 1-104990. The defendants committed delay in shifting the telephone and power lines which were interfering with the excavation of canal. In spite of several letters written by the plaintiff on different dates namely 7-5-1989, 30-6-1989,27-9-1989, 6-1-1990, 13-2-1990, 28-6-1990, 29-7-1990 and 1-10-1990 in this regard, the defendants failed to remove the obstruction of telephone and power lines within time. The quartzite stone of sufficient quantity and size of hand picking from excavation of package V was not adhered to by the defendants, though the same was informed to the defendants, in his several letters dt. 20-1-1990, 7-54990, 28-64990, 29-7-1990, 1-10-1990 and 29-5-1990. The plaintiff in his letters dt. 28-6-1990, and 29-7-1990 brought to the notice of the defendants that the approved designs appended to the contract in connection with lining work was unsound and contrary to the technical stability. There was unanticipated rate of underground seepage into excavation owing to the unforeseen change in hydrological and sub-surface conditions of the ground with the release of Srisailam water into K.C. canal by the Irrigation department. Adverse climatic conditions prevented the plaintiff to slow progress in the work, The same was informed to the defendants by the plaintiff in his letters 13-2-1990, 3-44990 and 25-4-1990. The defendants failed to arrange payments. If payments arranged, they were only with abnormal delay. Instead of making payments, the defendants tried to evade the same on the plea that the said item was covered by to spoil removal. Payments towards haulage quantities were made on ad hoc basis. Payment for dewatering of excess quantities was not made.
The price adjustment clause was not adhered to by the defendants. The defendants failed to comply with the revision in minimum wages of labour and steel prices. The defendants recovered from the plaintiff the mobilisation advance more than what is stipulated in the contract. The effect of gulf war including scarcity of fuel supply in the market which resulted in unanticipated increase in prices affected the mechanised excavation and other working. Devaluation of rupee affected the prices. The delays and defaults mentioned above are attributable to the defendants.
3. As far as the terms of the contract, as per clause 3.2.6. of Vol. II, the payment of 'Overhaul' has to be made for the quantities of excavated materials by measuring the volume of overhauled material. Butthedefendants arranged payments on ad hoc basis without taking the measurements. The plaintiffs request in this connection was rejected by the 3rd defendant in his letter dt. 26-11-1990 on the ground that the payments were made as per the agreement. The same was confirmed by the appellate authority in his order dt. 4-3-1991. As such the plaintiff is entitled for an additional amount of Rs. 8,89,739 /- towards overhaul charges. The plaintiff had to meet excess de-watering which he could not foresee at the time of submitting his tender. The same resulted in the variation of quantum of dewatering substantially. The same was reported to the 3rd defendant by the plaintiff in its letter dt. 21-2-1990 and requested him to verify the measurement of dewatering so that appropriate rate can be fixed towards additional cost which the plaintiff incurred for dewatering. The said request was followed by subsequent reminder dt. 20-4-1990. The plaintiff's request was rejected by the 2nd defendant in his letter dt. 27-7-1990 on the ground that the plaintiff is not entitled for extra payment as the rates mentioned in the agreement were inclusive of dewatering. On 9-11-1990 the plaintiff notified the defendants 2 and 3 as to plaintiff's preference to arbitration in terms of Clauses 56 and 57, Section 2, Vol. 1 of thecontract. Pursuant to thediscussion taken place at higher levels in respect of dewatering and rate of payment, the plaintiff mentioned a claim at Rs. 16.10 ps. per CM. of excavation in Nandyal Shalesdue on account of additional dewatering for the period upto 31-1-1991. As it was estimated at 0.295 H.P. hour per cubic metre, the plaintiff had to encounter dewatering at 2.143 H.P. hour which resulted in excess quantity of dewatering of 2.143 H.P. hour per cubic metre of excavation in Nandyal Shales. The plaintiff pleaded for additional dewatering at the rate of Rs. 7.50 per H.P. hour which works out to Rs. 16.10 per cubic metre of excavation. The defendants satisfied with the claim of the plaintiff. The claim of the plaintiff was in a sum of Rs. 1,09,53,812/- towards additional dewatering at the rate of Rs. 16.10 ps. per cubic metre of excavation in Nandyal Shales. A sum of Rs. 15,84,000/-was provided by the defendants towards dewatering in the estimates whereas the quantities of excavation in Nandyal Shales is 10,72,330/- cubic metres. The defendants considered the basic hourly rent per H.P. hour at Rs. 5 /-. Thus dewatering estimate is worked out to 0.295 horse power hour per cubic metre excavation whereas the plaintiff had to meet with dewatering at 2.438 horse power hour per cubic metre for excavation. Thus additional cost incurred by the plaintiff was at Rs. 16.10 per cubic metre. According to the plaintiff, the amount to which it is entitled towards dewatering was Rs. 1,09,53,812.00.
4. According to the plaintiff the price adjustment for the work done under the contract at the end of every quarter shall be determined in accordance with the formulae as mentioned in sub-clause (3) of Clause 34, Section 2, Vol. I of the contract. The plaintiff quoted the rates as per the terms of the contract. The defendants did not comply with the price adjustment in accordance with the said formulae. Whereas they computed the price adjustment clause without regard for the scope and ambit of the constituents as explained in Clause 34 (1) of the contract. According to the plaintiff, the value of the work done during the quarter, i.e.,'R' is payable in local currency only. The formula 'RI' shall be considered as 'R' in respect of three componen ts namely material, labour and fuel of all items specified in the contract. But the defendant No. 3 deviated the formula and changed the meaning and expression and considered the value of 'R' as the value of certain individual items of work done during the quarter. The formula that was suggested by the plaintiff was in fact followed by the department in respect of other works carried out by others. However, the request of the plaintiff was not accepted by the Executive Engineer which was confirmed by the higher authorities. Though the plaintiff was entitled to a total sum of Rs. 1,75,39,381 /- towards price adjustment, the authorities paid only Rs. 28,17,534/- adopting the value of the items concerned for the component 'R' in the said formula. It is averred that the minimum wages fixed under Contract Labour (Regulation and Abolition) Rules, 1971 is applicable to the workers engaged by the plaintiff. There was increase in wages. The defendants were liable to meet the said increase. The plaintiff also brought to the notice of the defendants that in the case of Sardar Sarovar Project In Gujarat covered by a similar agreement relating to World Bank, the authorities conceded to similar claim raised by the contractor in respect of raise or hike in minimum wages for labourers. It was explained that because of hike in price there was raise in wages of workmen from Rs. 13.50 ps. to Rs. 19.25 involving 42.6% increase from 1-6-1989. According to the plaintiff, it is entitled for a sum of Rs. 58,14,362/- from the defendants towards payment of price adjustment. The plaintiff stated that it is entitled for increase in steel price. He had to carry out more work than what is agreed upon. Steel price was raised from Rs. 8.00 to 12.50. Thus, the plaintiff is entitled for a sum of Rs. 4,70,740/- towards raise in steel price. The delays and defaults on the part of the defendants slowed down the plaintiff's work. The plaintiff averred that as against 91% of the work carried out to be completed by the end of November, 1991, the progress achieved was only 39%. Thus there was loss in progress of work by 52% of the contract price. According to the plaintiff by the end of November, 1992, the plaintiff had executed the work to a tune of Rs. 2,79,05,330/-. But he was paid only a sum of Rs. 2,65,88,789/- leaving a balance of Rs. 13,16,541/-. According to (he plaintiff, the contemplated 91% of the contract price works out to Rs. 6,40,32,617/-. In other words, the progress achieved was 43.58%. Hence, there was loss in progress of works which works out to 46.42% of the contract price. According to the plaintiff the loss of productivity of men and machinery deployed by the plaintiff works out to 23.71% of the contract price. According to the plaintiff, it is entitled to Rs. 37,95,533/- which works out at 24% or 23.71% of the contract price. According to the plaintiff in addition to the above sum, it is also entitled to a sum of Rs. 13,16,541/- towards work executed but not measured and not paid by the defendants. It is the further case of the plaintiff that it had received Rs. 96 lakhs from the 3rd defendant towards mobilisation advance loan against the bankguarantee as per the terms of the contract. Repayment of the said mobilisation advance was covered by Clause 10 Section 2, Volume 1 of the contract. According to the said term, the mobilisation advance shall be repaid with the percentage deductions at the rate of 22% of interim payments whereas the 3rd defendant effected recovery of additional amount including interest. When it was complained to the defendants 1 and 2 they accepted the mistake. But the 3rd defendant issued a letter d t. 7-1-1992 threatening to encash the bank guarantee. The defendants also threatened to encash the bank guarantee by writing letters to Vijaya Bank, Somajiguda covered for Rs. 32 lakhs and Rs. 96 lakhs respectively. The defendants considering the request for extending the time they threatened that if the plaintiff did not complete the work within the time stipulated, the contract will be cancelled. The defendants ignoring the terms of the contract invoked the bank guarantee of Rs. 96 lakhs in an arbitrary manner. The further case of the plaintiff was that because of the defaults and delays and the incorrect attitude on the part of the defendants which resulted in committing breach of the contract caused loss to the plaintiff for which he is entitled to be comensated. The plaintiff estimated that the contractor in any work of this nature and magnitude would make a profit of about 10%. Thus, for the remaining work to be done of a magnitude Rs. 3,61,27,631/-. The plaintiff contended that he is entitled to a sum of Rs. 36,12,763/- towards profits on the said amount of work. As per Clause 56 of the contract in the event of any dispute the matter shall be referred to the Arbitrator. Though the plaintiff submitted its representation to the employer for referring the matter to the arbitrator, his request was rejected which was confirmed by other higher authorities. It was also the caseof the plaintiff that because of various omissions and commissions on the part of the defendants, the plaintiff had to incur huge loss and as such he is entitled for payment on certain items. Thus the plaintiff is entitled for a sum of Rs. 4,15,75,137/- along with interest at the rate of 21% p.a. since the transaction in question is a commercial one.
5. The 3rd defendant filed written statement and the defendants 1 and 2 adopted the written statement of the 3rd defendant. According to the defendants they entrusted the work to the plaintiff by entering into an agreement. The site was handed over to the plaintiff on 12-2-1989. The execution of work was covered by the terms of the contract. The plaintiff was unable to execute the work within the time stipulated. 64% of the work was left by the end of three years. The plaintiff failed to maintain the rate of progress of work. The land was acquired and compensation was paid to the land owners and by that time the site was handed over to the plaintiff i.e., on 12-2-1989. As such there was no resistance from any one and no standing crop was there in the land at that time. The defendants never admitted that standing crops were in existence in the land and assured for clearance. The defendants denied that the residents of Vanala village prevented the plaintiff from executing the work as averred in the plaint. There were no telephone and power lines obstructing the work of the plaintiff as they were already shifted from the site. The defendants requested the plaintiff in their letter dt. 29-5-1990 to furnish the monthly requirement of spalls supported by the monthly programme. The plaintiff was also permitted to collect the spalls from spoil dumps of package No. V as per the terms of the contract. The plaintiff instead of completing the lining work started throwing blame on the defendants. According to the defendants, the plaintiff before submitting tenders had inspected personally and examined the site and the surroundings. Thus he was fully aware of the conditions of the site and only after satisfying that the site was free from obstructions etc., he submitted his tender. The plaintiff was aware of the conditions of the site work. They denied as to release of Srisailam water into K.C. canal by the Irrigation authorities. They denied that there was change in climatic conditions. The defendants stated that there was no delay in making payments to the plaintiff. On the other hand, payments were made regularly in terms of the contract. The defendants were taking measurements in accordance with the terms of the contract and used to make payments. The work executed was measured and the same was signed by the plaintiff. Water bills submitted by the plaintiff were honoured. As such the defendants are not liable to a sum of Rs. 8,89,739/- as stated by the plaintiff.
6. It was the further case of the defendants that there was no separate stipulation to the effect that separate payment will be made for dewatering. The plaintiff before submitting his tender was supposed to know the condition of the site - hydrological and climatic conditions, extent and nature of work and material necessary. The plaintiff was well aware that the site was situated within K.C. Canal ayacut. The plaintiff had not incurred any loss. The plaintiff is not entitled for payment of Rs. 1,09,53,812/-. The defendants stated that price adjustment was effected according to the price index received from the competent authority from time to time. The defendants denied that price adjustment was not effected in respect of components for the revision in minimum wages. On the other hand, price adjustment was as per the terms and conditions of the agreement. The defendants never violated the contractual conditions with regard to price adjustment. The defendants denied the entitlement of the plaintiff for a sum of Rs. 1,75,39,181/- towards price adjustment for all the quarters in respect of various items of work executed by him. According to the defendants the total value of the work executed by the plaintiff was about Rs. 2,54,12,989/- excluding the cost of cement supplied by the department. The entire amount was paid to the plaintiff. The price adjustment claimed by the plain tiff which exceeds to 69% is quite illegal. The plaintiff was also informed how he is not entitled with regard to price adjustment by the defendants in their letters dt. 24-7-1990 and 13-9-1990. According to the defendants the claim made in respect of price adjustment is baseless. The plaintiff is not entitled for hike in steel price let alone a sum of Rs. 4,70,740/- claimed by the plaintiff. According to the defendants, the plaintiff was supposed to make arrangements for procurement of steel at his cost. The plain tiff himself quoted the rate of steel at Rs. 8/-per K.G. The same was accepted by the defendants. The defendants denied that the plaintiff had executed all the work amounting to Rs. 2,79,05,333/- but was paid only Rs. 2,66,88,789/- leaving a balance of Rs. 13,16,541 /-. The defendants denied the entitlement of the plaintiff for extra payment towards loss on account of low progress of work. According to the defendants, the reasons for low progress of work was attributable to the plaintiff and not to the defendants. The plaintiff was informed by several letters and telegrams to carry out the work. Payments were made to the plaintiff in respect of total work carried out by him. The plaintiff's claim under the heading 'Overhaul" has no basis. The defendants denied the plaintiff's claim in respect of other heads as untenable. According to the defendants, the plaintiff failed to adhere to the programme of work as stipulated in the contract. The plaintiff was unable to complete the work within the extended period of eleven months. The termination of contract whenever the contractor failed to execute the work is just and the termination in the present case was done as per the contract. Bills were paid as per the work executed. Defendants had to recover the mobilisation advance as they had advanced it. The defendants did not commit any omissions or commissions. According to the defendants, the plaintiff is not entitled for a sum of Rs. 36,12,763/- towards loss of profits. The further case of the defendants is that the defendants are entitled to invoke bank guarantee. Defendants lastly contended that the breach if any is on the part of the plaintiff. The plaintiff for his omissions and commissions is not entitled for any amount let alone the amount claimed in the suit so also interest at 21°/.. Thus contending, the defendants sought the suit be dismissed.
7. On the basis of the above pleadings, the trial Court framed the following issues:
(1) Whether the defendants are guilty of committing breach of contract entered into by the plaintiff with the defendants?
(2) Whether the defendants have not handed over the site to the plaintiff free from obstacles for execution of work under the contract?
(3) Whether the plaintiff is entitled to recover a sum of Rs. 8,89,739/-towards overhaul charges as per the terms and conditions of the contract?
(4) Whether the plaintiff is entitled to recover a sum of Rs. 1,09,53,812/- towards additional, dewatering involved in excavating Nandyal Shales?
(5) Whether the plaintiff is entitled to recover a sum of Rs. 1,47,21,647/- towards the amount due to it, on the basis of correct interpretation of price adjustment clause?
(6) Whether the plaintiff is entitled to recover a sum of Rs. 58,14,362/- on account of the hike in the wages of labour under the Minimum Wages Rules?
(7) Whether the plaintiff is entitled to recover a sum of Rs. 4,70,740/-on account of the hike in steel price?
(8) Whether the plaintiff is entitled to recover a sum of Rs. 13,16,541/-towards payment for work done, but not measured and not paid by the defendants?
(9) Whether the progress of work was hit by omissions and commissions of D-2 and D-3 and other factors, not attributable to the plaintiff such as resistance from villagers in Venala, ryots in other areas, unanticipated and unforeseen conditions etc., specified in paragraph 5 of the plaint?
(10) Whether the plaintiff is entitled to recover a sum of Rs. 37,95,533/-towards loss of progress of work on account of omissions and commissions committed by D-2 and D-3?
(11) Whether the plaintiff entitled to recover a sum of Rs. 36,12,763/-towards loss of profit on the work foregone by the plaintiff on account of expulsion?
(12) Whether the termination and expulsion of the plaintiff from the site by the defendant is legal, just and reasonable, and if not whether the plaintiff is entitled to damages from the defendants?
(13) Whether the defendants are liable to pay interest at 21% P.A. on the amount payable to the plaintiff under the aforesaid issues from the date of execution of work till payment?
(14) Whether the bank guarantees of performance and mobilisation advance can be invoked by the defendants is the peculiar circumstances of the case?
(15) Whether the defendants are liable to return F.S.D. to the plaintiff?
8. On behalf of the plaintiff, P.Ws. 1 to 3 were examined and Exs. A-1 to A-94 were marked. On behalf of the defendants, D.W. 1 was examined and Exs. B-1 to B-51 and Exs. C-1 and Exs. X-1 to X-4 were marked.
9. In the light of the pleadings and the evidence given, the trial Court answered Issue Nos. 1,2 and 3 in favour of the plaintiff, Issue No. 4 answered partly in favour of the plaintiff, Issue No. 5 was answered in favour of the plaintiff, Issue Nos. 6, 7 and 8 were answered against the plaintiff, Issue No. 9 was held in favour of the plaintiff, Issue No. 10 was held against the plaintiff, Issue Nos. 11 and 12 were held in favour of the plaintiffs, Issue No. 13 was held in favour of the plaintiff ordering 15% interest and Issue Nos. 14 and 15 were held in favour of the plaintiff. While answering the issues, the Court below took into consideration the entire evidence both oral and documentary and gave findings with reasons. Accordingly the plaintiff's suit was decreed for recovery of a sum of Rs. 2,71,84,244/- from the defendants with proportionate costs with future interest at 15% p.a. from the date of filing of the-suit till the date of payment. Aggrieved by the said judgment and decree, the defendants 1 to 3 filed A.S. No. 2207/96, whereas plaintiff also filed A.S. No. 237/98 challenging disallowing its certain claims.
10. For and against the judgment, the grounds of attack and contentions raised are as follows:
It is contended by the defendants that the suit was not maintainable under Sections 8 and 20 of the Arbitration Act, even after amendment that was allowed on 12-2-1993 in I. A. No. 20/93 as the said amendment sought changed the very nature of the suit. The suit was not maintainable as there was no notice Under Section 80 CPC to the defendants. The Court below committed error in not framing proper issues arising out of the pleadings. The Judgment and decree are contrary to the pleadings. Regarding Issue No. 2 namely as to handing over of site to the plaintiff free from obstacles for the purpose of execution of the work under the contract, the Trial Court erred in holding that when the site was handed over to the plaintiff it was not free from obstacles. The Court below should have seen that as per the terms of the agreement, namely, Clauses 5(1), 5 (2), 6 (2), 7 (!) and 8 (1) of Volume-I of the agreement, it is the duty of the bidder to visit and examine the site of work and its surroundings. If there was any obstacle it was his responsibility to clear it off. Before tendering the bid, the plaintiff already visited and inspected the premises. The land in question was also acquired by the Government and compensation was paid to the owner. Thus it had vested in the State. If any encroachment or obstruction was there it was for the plaintiff to clear it off. The delay in taking possession of the site was at the instance of the plaintiff. There is no explanation as to why the plaintiff took possession at a later stage. The progress of the work was not shown as it was intended to be. The plaintiff did not take steps to do lining work and to take up structures. On the other hand, he did more earth work which was more fetching to him. The programme of work as per the contract had to be submitted within 30 days from the date of acceptance of the bid, but the same was not complied with by the plaintiff. The work carried out by the plaintiff was contrary to the instructions issued by the World Bank which instructed that the lining structures etc., shall be sub-divided into smaller readies such ay earth work, lining and structures are to be completed reach by reach instead of completing the entire earth work at the first instance. This was not complied by the plaintiff. The execution of the work etc., was contrary to the scheme that was contemplated. The allegation that site was not cleared, and on the other hand there was standing crop and though the plaintiff requested the defendants to clear the said obstruction, the same was not complied with, is again incorrect. There was no obstruction to several readies. The Court below erred in not noticing that under Ex.B-25, the defendants had clearly shown that whatever obstructions were there were removed and the site was free for carrying the work entrusted. In spite of the directions given by the High Court at Ex.A-3, the plaintiff failed to complete the work. The telephone line and electric lines were removed the moment the complaint was received. As per the terms of the contract carrying out blasting work is the duty of the plaintiff by taking necessary precautions. Allowing the claim of overhaul payment for a sum of Rs. 8,89,739 is quite incorrect and contrary to Clauses 3.2.2,3.2.3 and 3.2.6. Clause 3.2.2. envisages that "the quantity of payment of excavation in soils and rock will be arrived at by taking pre-levels and finished -levels of respective strata". Granting relief in respect of dewatering to the plaintiff is quite incorrect as the same was included in the weighted average statement. As such the demand made by the plaintiff towards additional dewatering is impermissible. The recommendations of the Engineers are not binding on the Government to pay any amount towards additional charges. The finding of the Court below in respect of the issue relating to price adjustment is incorrect and contrary to Clause 34 of S.2 Vol. 1 of General conditions of the contract which suggests that percentage of labour, material and fuel are different from different items of work and this percentage forms the very basis for calculation of price adjustment. The Court below should have seen that the expression total value of work done in the definition of 'R' is restricted to the individual items of work namely all soils, HDR. Nandyal Shales, leads, lifts, soil and rock, borrow area etc., but not the entire work of all the aforesaid items. The Court below should have taken into consideration that the value of the each item of work in the different sub-works has to be taken into consideration. Calculating the amount on the basis of aggregate of the entire work done instead of the value of each individual item of work in the difference of work, is erroneous. Thus the escalation amount for each item of work was incorrect. The statement as to the comparison of escalation amount furnished by the department and the plaintiff, belies the plaintiff's theory that the amounts paid by the plaintiff are quite unrealistic. The percentage shown earlier was in the following manner:
Earth Work:
Labour : 45%
Materials : 32%
Fuels : 23%
But the same was changed in the subsequent contracts particularly at Ex.X-1 which reads as follows:-
Labour : 40%
Cement : 24%
Steel : 15%
Other Materials : 15%
Fuel : 6%
Clause 34 sub-clause (2) of General Conditions of the Contract Volume I reads as follows:-
"To the extent that full compensation for any rise or fall in costs to the contractor is not covered by the provisions of this or other clause in the contract shall be deemed to include amounts to cover the contingency of such rise or fall in costs" and also written in agreement that the contract price shall be adjusted for increase or decrease in rates and price of labour, materials, fuel and lubricant. This shows that the contract unit price quoted by the contractor is for each item. Therefore, the adjustment for the total quantity of work done multiplied by contract unit price will become total value but not the total value of work done inclusive of several items. The Court has erred in reading the definition of 'R' in isolation. It should have been read with all clauses of para 34 of the price adjustment. If the contract price is adjustable for all items of work the items would not have been specified in the agreement individually. Further it is also made clear that the unit rates and prices included into contract were also deemed to include to cover the contingencies for rise or falling cost. Therefore, the price adjustment is not a full compensation for any rise or fall in cost to the contractor.
The Court assumed that there was increase within a period of three years for the respective component of labour materials and fuel to an extent of above 57%, 36% and 46% respectively and thus a full compensation of 67% on total value of work done is allowed. It is pertinent to state that for the simple reason that if the definition of 'R' is mentioned as total work done during the quarter instead of total work done of individual item is misinterpreted without reading with other Sub-clauses under the same clause. This erroneous assumption that the contractor is entitled for full compensation is untenable and the definition of 'R' is to be taken as the total value of work of individual price adjustment is quite legal and as per terms and conditions but not as contended by the Hon'ble Court and plaintiff."
Whereas the finding of the Court below runs contrary to the said conditions. The defendants further contended that whatever designs and drawings required by the plaintiff were supplied to it well in time. There was no seepage into SRBC canal as alleged by the plaintiff. The findings that there was default on the part of the Government and as such the termination of the contract was quite in correct, is again erroneous. The default ordelay, if any, in executing the work was at the instance of the plaintiff which is clear from Ex. B-42, a letter written by the Superintending Engineer to the Chief Engineer. The plaintiff at no point stuck on to the programme. Even after the revision of the plan, the lining work was not started by the plaintiff. There was no breach of contract on the part of the defendants. No importance should have been attached to Exs.B-39 and B-49 as they have no binding force on the State. As to the loss of profi ts, no amount should have been granted by the Court below since the plaintiff failed to establish the same. Any recommendation made by the authorities either to pay the amount for dewateriny or to extend time to complete the work is without any authority of law. Likewise Ex. B-40, letter written by the Chief Engineer to the Principal Secretary to Government suggesting deletion of the canal lining above the Gorakaliu, was only a suggestion. The finding of the Court below in revoking the bank guarantees, if any was incorrect and further folding that the said bank guarantees offered by the plaintiff were discharged is quite incorrect.
11. The learned Advocate General once again reiterated the same grounds urged in the memorandum of appeal and further contended that appreciation of evidence by the Trial Court is not in proper perspective. The Trial Court failed to take into consideration the change of nature of the suit by way of amendment and also failed to consider the jurisdiction. Lastly he contended that the Court below while disallowing certain claims of the plaintiff should not have granted relief on other items as the evidence given by the parties is same. The same is contrary to the known procedure. Thus arguing, he sought the appeal be allowed, and the appeal A.S. No. 237 of 1998 filed by the plaintiff be dismissed.
12. Aggrieved by the same judgment and decree in disallowing certain claimsof the plaintiff, the plaintiff filed Appeal Suit No. 237 of 1998 contending that the Court below committed a mistake in not allowing the plaintiff's suit in toto. When the trial Court held that the delay, if any, to low progress work was at the instance of the defendant accepting the plaintiff's claim on the other issues, the Court below should have also accepted its claim against other items. Disallowing its claim in respect of hike in wages and steel is quite arbitrary. The judgment and decree of the Court below in so far as disallowing the plaintiff's claim is concerned, it is not the result of proper appreciation of evidence. Regarding the grounds urged by the appellants, it was contended by the plaintiff that those grounds have no merit in the eye of law. As far as decreeing the suit on certain issues was concerned, the same was decreed after appreciating the evidence in proper perspective. The suit was not hit by the provisions of Section 80 of CPC for want of notice. Pursuant to the order of this Court in CMA No. 526/92 the application filed under Arbitration Act was converted into one of suit wherein the defendants filed their written statement. But at no point of time, they took objection as to the maintainability of the suit or want of jurisdiction. For the first time, they put forth their plea that the suit is not maintainable only in the appeal which is impermissible. The participation of the defendants in the proceedings before the trial Court suggests that the defects if any for considering the suit were waived. As such now it is not available for them to contend that the suit is hit by Section 80 of CPC. To support the above contentions, Sri S.R. Ashok, learned senior Advocate appearing for the plaintiff placed reliance on some of the authorities which will be referred to a little later.
13. In the light of the above existence of facts and the contentions, we have to see how far the findings of the Court below are correct.
14. Issue No. 2 relates to whether the defendants have not handed over the site to the plaintiff free from obstacles for execution of work under the contract. The case of the plaintiff was that there was a breach of contract on the part of the defendants that the 2nd defendant did not hand over the entire site for carrying out the work undertook by the plaintiff. The plaintiff requested the defendants to hand over the site in question to him free from obstacles. In Ex. A-1 dated 12-2-1989 the plaintiff gave the details of the crops standing over the canal alignment area and requested the 2nd defendant to hand over the site in total length free from encroachments to carry out the work. Exs.A-2 to A-8 are the similar requests made by the plaintiff. Ex.B-1 is the reply given by the defendants mentioning that the site has been handed over to the plaintiff for executing the work for package No. 1, i.e., from KM 10.000/ 10.222 to K.M. 16.000/17.056 and that the question of again handing over the site doesnotarise. The defendants also gave another reply under Ex. A-9, dated 24-5-1989 reiterating that the plain tiff alone has to clear the site. The Executive Engineer gave reply under Ex.A-9 and assured that the departmental officer will see that no objection will be made from the ryots at the time of clearing the site. The Court below found that the crops raised by the ryots are standing in the site, but the 2nd defendant disowned the responsibility and shifted the bu rden on the plaintiff. There is no single incident where the department had taken any steps to evict the ryots or proceeded with the plaintiff around the site in order to prevent the ryots from cultivating the lands. The Court below found that delivery of possession under Ex. B-1 is only a matter of formality on paper and no physical possession was given to the plaintiff- DW-1 V. Shanumugam. Executive Engineer was examined on behalf of the defendants. He (D.W. 1) initially expressed his ignorance about the existence of standing crops, but he realised and admitted that the department has not taken any steps for removal of the standing crops. According to him the 2nd defendant is under no obligation to do so. D.W. 1 further opined that the cultivators will not allow any one to damage their standing crops. The Court below observed that because of squatting on land by the owners, the plaintiff could not tackle the work relating to construction of structures and lining. He could only be able to do excavation work to the extent possible that took in spells. Regarding excavation of earth work is concerned, the rate of progress was more than what was required. It has come in the evidence that the World Bank suggested that instead of completing the earth work in the first instance and programming for lining and structures at a later stage, the entire reach is to be sub-divided into smaller reaches and all items of work such as earth work, lining and structures are to be completed reach by reach. But there is no evidence to show that the Executive Engineer having exercised his power, handed over a portion of the site by sub-dividing it into smaller reaches as pointed out by the World Bank. The Court below found that if the compensation was paid in accordance with Land Acquisition Act, the proper remedy was to evict the encroachers who were squatting on the property. This responsibility was on the department or the Government and it cannot be shifted on to the plaintiff. The plaintiff had done whatever a little that he could do by bringing to the notice of the authorities about the raising of crops by several ryots by his letter dt. 12-2-1989 on the very day on which possession of the site was said to have been delivered to the plaintiff. It is also not the case of the defendants that there were no standing crops as on the date of handing over the site. If there were no standing crops as alleged by the second defendant, he should have immediately reacted to cause a reply to Ex. A-1 letter addressed by the plaintiff. He remained silent for all the letters addressed by the plaintiff, one after another and at a later stage, he gave his reply for Ex. A-4 letter by Ex. A-9 letter. In Ex. A-9 it is very vaguely stated that the department is not at all responsible, that the plea taken by the plaintiff with regard to the standing crops existing will not be conceded for extension of time etc. However, the 2nd defendant assured the plaintiff that he will provide his departmental person who will seek no objection from the ryots. But the 2nd defendant did not depute or name any person who can seek no objection from the ryots. It is an admitted fact by the 2nd defendant that crops raised are standing all over the area of canal alignment. It is therefore the obligation of the defendants to evict all those ryots encroached on the site and make it free for executing the work by the plaintiff. Mere taking over the site by plaintiff under Ex.B-1 does not amount that the plaintiff has taken over the site free from obstacles to carry out the work. It is only after he took over the site under Ex.B-1, the plaintiff could be able to point out obstacles and hurdles that he came across to proceed with the work. The plaintiff has rightly represented the matter to the 2nd defendant on the very day he took over the site. Otherwise, there was no reason for the plaintiff to concoct at the beginning of the contract itself. The Court below found that non-carrying out the structural work in the initial period by the plaintiff is not contradicted by the defendants. It is also not the case of the defendants that there were no standing crops in the places pointed out by the plaintiff. When once existence of standing crops in the canal alignment area is accepted, no obligation can be placed on the plaintiff for the inadequate progress of the work. Apart from this, when once the defendants admit about the existence of standing crops in the canal alignment area, it has to be inferred that the site is not handed over physically free from obstructions by the defendants. Therefore, the 2nd defendant has not discharged his fundamental obligation under the contract.
15. It has come in the evidence that excavation work, in spells, has brought down the outturn of work because heavy machinery has to be moved from one place to another, leaving intervening gaps. The lack of progress was purely on account of non-handing over the site free from obstacles. It has also come in the evidence of P.W. 2, Advocate-Commissioner who visited the site and reported that there is existence of hutments, school building and panchayat office and even other structures within the canal alignment area at a distance of 50 metres. P.W. 3 is one of the villagers of Vanala and he also confirms the same. He stated that he filed a writ petition requesting the Court to issue directions not to blast around the site. There was also stay order by the High Court which was subsequently vacated. The Court below found that the Vanala villagers objected to carry out the work of blasting in Vanala village. Exs. A-10, A-11, A-13, A-14, A-15, A-16, A-17, A-18, A-20 and A-21 are the letters written to the defendants informing that villagers of Vanala are resisting to carry out the work in Vanala village. According to the plaintiff, he was able to complete the work of top soil removal only in the reaches of Vanala village. The plaintiff by his letter at Ex. A-17 pointed out to the Executive Engineer that all excavators, 21 tippers and 4 units compressor would remain idle because of stagnation of work. According to the plaintiff, the length of the canal passing through Vanala is to an extent of 12.226 Kms. The cost of work to be carried out is 138.5 lakhs which works out to 21.6% of the total work.
16. According to the plaintiff, there was also delay in shifting of the power and telephone lines. In connection with the same, the plaintiff sent letters at Exs. A-18 dated 28-6-1990, A-20 dated 29-7-1990 and Ex. A-21 dated 1-10-1990 requesting the defendants to take steps to shift the power and telephone lines as they are obstructing to execute the work. The plaintiff also addressed a letter Ex. A-27 on 30-6-1989 bringing to the notice of the 3rd defendant about the shifting of telephone and electrical lines crossing the canal alignment area. Though there was assurance from the 3rd defendant, Executive Engineer, that power lines and telephone lines will be removed, no action was taken. The existence of power lines and telephone lines was spoken to by the Advocate-Commissioner in his report at Ex. C-1. He stated that the telephone lines are crossing the canal alignment area and poles are also in canal alignment area at K.M. 12.22. Further he stated that 75 K.V. transformer and electric line were there just within 5 or 6 feet from the land acquired for the canal. The existence of telephone and power lines was also corroborated by D.W. 1. The Court below found that on the date of Commissioner's visit, i.e., in the month of May, 1993, power lines were crossing canal alignment area and a transformer was located within 5 or 6 metres away from the canal. The trial Court also observed that there was no attempt made to shift the power lines and they continued to be at the place where they had existed earlier. It further observed that:
"The plaintiff relies on the condition in clause 3.6.12 Vol. II of the contract, wherein it was stated that all electrical lines which constituted danger for the work of charging shall be removed from the site."
There was no attempt made to shift the power lines and they continued to be at the place where they existed earlier. Thus, the plaintiff relies on the condition in clause 3.6.12 Volume II of the contract wherein it was stated that all electrical lines which constituted danger for the work of charging shall be removed from the site. Hence, in view of the circumstances discussed above, the Court below held Issue No. 2 in favour of the plaintiff and against the defendants to the effect that the defendants failed to hand over the site to the plaintiff free from all obstacles in order to execute the work under contract.
17. Issue No. 3 relates to whether the plaintiff is entitled to recover a sum of Rs. 8,89,739/- towards overhaul charges as per the terms and conditions of the contract. To explain whether the plaintiff is entitled to overhaul charges or not, the Court below relied on clause 3.2.6 Volume II of the contract which reads as follows:
"Payment for overhaul will be made only for excavated materials required for canal embankment, temporary and permanent embankment for Roadways and Road crossings and for excavated materials directed to wasted beyond the limit of free haul (initial lead of 10 metres and lift of 2 metres).The entire cost of hauling of the above described materials any distance upto the free haul limit from the original position shall be included in the price bid in the schedule for excavation of the materials. Unless otherwise specifically provided, no overhaul payment is made for haul of materials paid for as back-fill about structures, revertment, gravel bedding for revertment or for selected bedding material used in preparing foundation for concrete canal lining."
18. The aforesaid clause lays down that payment of overhaul shall be made for the quantities of excavated material, by measuring the overhauled material in units specified therein for the soils. The contention of the plaintiff is that the language of clause 3.2.6 of the contract clearly indicates that the payment shall be made with reference to excavated material required for canal embankment, but not with reference to the point of excavation that inspite. If the intention of the contracting parties was to ensure payment only with reference to the measurements taken at pit point, there would not have been any need or occasion for the contract should have as well indicated that the measurements taken to the excavation will hold good for haulage also. The plaintiff emphasises his arguments by placing reliance on the last paragraph of clause 3.2.6 of the contract Vol. II, which reads as follows:-
"In measuring quantities of overhaul for payment, the volumes of the overhauled material will be measured in cubic metric units for excavation in rock including Nandyal shales and ten cubic metre units for excavation in soils upto hard disintegrated rock. The length of haul will be measured as stated above in Kilometres. Payment for overhaul will be made at the unit price bid for Kilometre extra lead therefore in Schedule-A".
19. The defendants though sought for denying plaintiffs claim for overhaul charges, but failed to establish the same. The relevant portion of discussion of the trial Court is extracted hereunder:
"Therefore, the statement made by P.W. 1 that for one cubic metre cutting of soil, S.D.R. and Nandyal shales mere would be 1.3, 1.45, and 16 excavated material respectively, is not disputed by the defendants. D.W. 1 also did not state anything against to contradict the soil engineering characteristics, as spoken to by F.W. 1. It is therefore very reasonable to conclude that the dimensions of soil would alter to 1.3, 1.45 and 1.6 cubic metre for every CM. of excavated soil, odd rock and Nandyal shales respectively. The issue stated in proper form is that whether the haulage shall be paid with reference to the excavated point or excavate material. Keeping the contractual conditions in mind and also the purpose for which the lead, lift and haulage is provided for, it is loose soil that would be more relevant."
20. To support the claim of the plaintiff for overhaul charges, reliance is placed on the decision of the Supreme Court in S.A. Jais & Co. v. Gujarat Electricity Board wherein it is held as follows:-
"There would be an increase in the volume of murram when it is excavated from the ground as when it is forming part of the ground it is in a compact condition whereas once excavated it becomes loose, and there will be an increase in the volume"
21. An increase of 9.80% in respect of murram is accepted by the Supreme Court in the said decision. The plaintiff consistently in his letters addressed to the defendants has been mentioning that the volume of the soil would work out to 1.3 cubic metre in case of soil, 1.45 in case of S.D.R. and 1.6 CM in case of Nandyal shales. Nothing has been, the trial Court observed, brought on record by the defendants to contradict the same. On this aspect there is no cross-examination whatsoever by the defendants. Nor did the defendants bring any material to contradict the same. Therefore, the evidence of P.W. 1 is unchallenged and it can be accepted. The principles of soil engineering also establish that there will be increase in the volume of material excavated at 1.3,1.45 and 1.6 CM. respectively. Therefore, it is reasonable to conclude that the plaintiff has proved that the soil, S.D.R. and Nandyal shales do increase in their respective volumes to 1.3,1.45 and 1.6 CM respectively for every cubic metre. Thus, observing the Court below held that the plaintiff is entitled to a sum of Rs. 8,89,739/- towards overhaul charges.
22. Issue No. 4 deals about the entitlement of the plaintiff to recover a sum of Rs. 1,09,53,812/- towards additional dewatering involved in excavating Nandyal shales. In support of this claim, the plaintiff gave evidence at Exs.A-64 dated 21-4-1990, A-66 dated 20-4-1990, A-67 dated 15-6-1990 and Ex.A-69 dated 16-8-1990. According to the plaintiff the quantum of dewatering was to the extent of 6,80,360 cubic metres and he requested for payment at the rate of Rs. 7.50 ps. per H.P., which works out to be Rs. 16.10 ps. per cubic metre of excavation in Nandyal Shales. According to the defendants, the plaintiff is not entitled for this claim as the contractor has to take into consideration all surface, sub-surface and hydrological climatic conditions while submitting his tender. If any amount was due in respect of excavation done was paid as per estimated rate, the question of paying additional amount towards dewatering does not arise. Contrary to the stand taken in the written statement, defendants 2 and 3 had recommended the case of the plaintiff to the Government for payment of the additional work undertaken by the plaintiff. According to the plaintiff, the additional horse power per hour actually incurred was 0.295 H.P. per cubic metre and he is entitled at the rate of Rs. 7.50 ps. per H.P. which works out at the rate of Rs. 16.10 ps. per cubic metre of excavation. The same was not falsified in the cross-examination made by the defendants. The defendants also denied that there was unprecedent seepage of water which necessitated additional dewatering. It was also elicited in the cross-examination of P.W. 1 the quantum of dewatering carried out by the plaintiff. In Ex. A-94, the Executive Engineer admitted the work and loss caused to the plaintiff towards dewatering operations. He also admitted in the evidence that the Superintending Engineer has also recommended in favour of the plaintiff for payment of additional dewatering charges vide his letter at Ex. B-44. The Chief Engineer also recommended for payment of additional amount towards dewatering. At Ex. A-94, the Executive Engineer recomended the case of the plaintiff to the Superintending Engineer on 11-3-1991 which reads as follows:
"The usual site conditions which could not have been articulated earlier and actually faced by the contractor of package I are as follows:-The first 10 K.M. of S.R.B.C excavated in full of water and is acting as ahead reservoir for the reach 110.222 onwards. In the region of the reach of package-I, the water unable is just below theground level. (A statement of ground level and water level met with is enclosed). No valley in this reach is deeper than the bed level of the S.R.B.C. Further, the alignment of S.R.B.C. in the reach is running through the ayacut of K.C. canal on both sites and two major vagus and 11 filed channel crossings are crossing the canal which are used as pick up points of K.C. canal ayacut. Thus, having on one side the water filled S.R.B.C. canal 0 to 10 K.M. on leftside the K.C. Canal, Minnulavagu on right side ayacut command of K.C. Canal working in this reach is almost doing work under water as the entire surroundings are highly saturated with water."
23. Further, it is the case of the plaintiff that in the meetings held by the Chief Engineer along with the World Bank members, the issue of dewatering was discussed and admitted that the plaintiff deserves additional payment. The Director of A.P.B.R.L., Hyderabad inspected the reach and found dewatering and other defects. According to him, dewatering works out to Rs. 1,01,77,968/-and a sumof Rs. 5,50,769/- for excavation in Nandyal shales. Further, during the inspection, the Director found that in some reaches whatever is excavated and the voids made is filled up with water and round the clock dewatering the excavation in certain stretches is found absolutely necessary and in these areas certain measure of compensation is to be worked out and recommended. For the same, the Court below found that the subsurface condition is a force majeure one and would not have been anticipated by the contractor. Whatever loss caused is to be compensated. The Chief Engineer in his letter at Ex. B-47 sent to the Government mentioned as follows:
"In the present situation of the excavation of Srisailam Right Bank Canal from K.M. 0/0 to K.M. 20/0 there is unprecedented seepage and the subsurface condition cannot be easily anticipated even by an experienced contractor. The intensity of the seepage was aggravated by the storage in Srisailam Reservoir and the connection made into the reservoir by cutting the watershed through canal of 17 K.M. and for the first 10 K.M. of S.R.B.C. and the breaking or piercing of the dyke and the obstruction which had changed the underground subsurface conditions of the area in which the excavation is now being carried out. The perennial standing water in the first 10 K.M. on one side and the K.C. canal system on the left side and there being no natural drainages to the excavation the present excavation is to be virtually carried out under heavy continuously replenishing underground water conditions amounting a virtual excavation under water.
The intensity of the seepage into the excavated area is unusually high and required spontaneous pumping arrangement to maintain the necessary work and to continue the excavation. This had resulted in substantial cost of dewatering to the contractor as per the records maintained and observations made by the contractor and as per the report of the Executive Engineer.
After detailed examination and consultation of the water potentiality and intensity of seepage, it is proposed to treat the particulars -excavations as under water as per the S.S.R. item No. 232-L 14 (i). But in view of the fact that the tender is a discount tender after applying covered in the estimate to Rs. 1.47 the rate works out to Rs. 1.65 per cum. of earth work excavation below the minimum ground water level actually obtaining and duly certified by the Executive Engineer.
As per the Daily Progress Report, the average pumping rate had worked out to Rs. 17.57 per cum. The Executive Engineer in-charge of the work had worked out the additional dewatering rate for various methods and the most reasonable rate of Rs. 14.85 per cum. of earth work below the observed, certified, established, minimum lowest water level below which the excavation is to be the minimum lowest water below which the excavation is to be considered as under moist under water condition. Against this rate, the contractor was claiming Rs. 16.10 per cum as per the actuals incurred by him."
24. Taking above information into consideration, the Court below found that having recommended the case of the plaintiff by all the authorities, it is not fair on the part of the defendants to contend that the plaintiff is not entitled for payment of dewatering charges. According to the trial Court, Exs.A-94, B-44 and B-47 clearly indicate that Srisailam water let out into K.C. Canal at the instance of the Government. Thus, it has come in the evidence that the seepage water in excavation is on account of normal condition. Normal conditions have been altered by the positive conduct of the defendants by allowing Srisailam water into K.C. Canal which had its impact on the increased seepage. Having created such an unfortunate situation by their own action, it is not fair to the defendants to turn round and contend that the contractor should have visualised the sub-surface conditions. There was no suggestion to P.W. 1 disputing quantum of dewatering which was undertaken by him. On the other hand, D.W. 1 admitted that as per 'daily progress reports' maintained by the contractor, the plaintiff carried out dewatering work for 1,30,159 hours between March, 1990 and January, 1991. D.W. 1 also admitted the contents of Ex.A-94 as correct. Regarding dewatering, the Court below took into consideration the rate admitted by the Executive Engineer in his report stating that the S.S.R. rate in Anantapur region for dewatering per horse power is fixed at the rate of Rs. 20/- per cubic metre. The Court below also took into consideration the similar rates fixed at other places and ultimately found that the plaintiff had done 6,18,500 cubic metres of excavation work upto the last bill. Therefore, the plaintiff is entitled for additional dewatering charges at the rate of Rs. 12.87 per cubic metre for 6,18,500 cubic metres, which comes to Rs. 79,60,095/- Thus discussing above, the Court below held issue No. 4 partly in favour of the plaintiff holding that the plaintiff is entitled for recovery of a sum of Rs. 79,60,095/- for additional dewatering.
25. Issue No. 5 relates to whether the plaintiff is entitled to recover a sum of Rs. 1,47,21,647/- towards the amount due to it, on the basis of correct interpretation of price adjustment clause. According to the plaintiff, in Clause 34 (2) of Vol. 1 of the Contract it is mentioned that price adjustment has to be made in respect of three components of work namely material, fuel and labour, by applying the formula which was agreed by both the parties under the contract. For every component a separate formula is mentioned with the same underlying principle.
26. Price adjustment clause reads as follows:-
"The contract price shall be adjusted for increase or decrease in rates and price of labour, materials, fuels and lubricants in accordance with the following principles and procedures.
(a) The cost of materials and electrical energy supplied by the Employer at fixed prices shall be excluded from the scrop of price adjustment.
(b) The price adjustment shall apply only for the work carried out within the stipulated time or extensions granted by the employer and shall not apply to work carried out beyond the stipulated time for reasons attributable to the contractor.
(c) The price adjustment shall be calculated for the local and foreign components of the payment for the work done in the manner explained in sub-clause (3) thereof.
(d) The price adjustment shall be determined during each quarter from the formulae as detailed hereinafter under sub-clause (3) thereof. Following expansions and meanings are assigned to the value of work done during each quarter.
R = Total value of work done during the quarter excluding (a) cost of materials and electrical energy supplied by the employer at fixed prices and (b) any adjustments in payment resulting from legislative or statutory action as per sub-clause (4) of this clause.
R1 =Portion of 'R' as payable in local currency.
RE = Portion of 'R' as payable in foreign currency (at fixed exchange rates).
R = RI + RE (2) To the extent that full compensation for any rise or fall in costs to the contractor is not covered by the provisions of this or other clause in the contract, the unit rates and prices included in the contract shall be deemed to include amounts to cover the contingency of such rise or fall in costs.
(3)(a) Local currency component:-
(i) Price adjustment of increase or decrease in the cost due to labour shall be paid in accordance with the following formulae;
VL = 0.75 P I (i-io)
------ x RI ------
100
VL = Increase or decrease in the cost of work during the quarter under consideration due to changes in rates for local labour.
io = the average, consumer price index for industrial workers for Adoni centre for the quarter preceding the date of opening of tenders as published by the Bureau of Economics and Statistics, Government of Andhra Pradesh, Hyderabad.
i = the average consumer price index for industrial workers for Adoni Centre for the quarter under consideration as published by Bureau of Economics and Statistics, Government of Andhra Pradesh, Hyderabad.
PI = Percentage of local labour component (specified in Schedule II Section 7) of the item.
(ii) = Price adjustment for increase or decrease in cost of local material procured by the contractor other than fuel and lubricants shall be paid in accordance with the following formulae.
VL = 0.75 PM (i-io)
------ x RI ------
100 io
Vm = Increase or decrease in the cost of work during the quarter under consideration due to changes in rates in local material other than P.O.L. io = the average wholesale price index (all commodities except fuel and lubricant) for the quarter preceding the date of opening of tenders as published by the Ministiy of Industrial Development, Government of India, New Delhi.
i = the average wholesale price index (all commodities except fuel and lubricant) for the quarter under consideration as published by Ministry of Industrial Development, Government of India, New Delhi.
pm = Percentage of local (material component other than fuel and lubricant (specified in Schedule III Section 77) of the item.
(iii) = Price adjustment for increase or decrease in cost of fuel and lubricants shall be paid in accordance with the following formulae:-
VL = 0.75 Pf (i-io)
------ x RI ------
100 io
vf = Increase or decrease in the cost of work during the quarter under consideration due to changes in rates for fuel and lubicants.
io = the average officials retail price of High Speed Diesel (H.S.D) at the existing consumers pumps of IOC Nandyal on the day thirty days prior to the date of opening of tenders.
i = the average officials retain price of H.S.D. at the existing consumer pumps of I.O.C. at Nandyal for the 15th day of middle calendar month of quarter under consideration.
PI = Percentage of fuel and lubricants (specified in the Schedule III, Section 7) of the item, for the application of this clause, the price of High Speed Diesel Oil (H.S.D.) is chosen to present fuel and lubricants group.
(b) = Foreign currency component:-
(i) The Foreign Currency component:-
(i) the foreign currency component of each payment which is convertible into foreign currency at fixed exchange rate shall be adjusted according to the following formulae.
VFC - increase or decrease in cost of work payable due to charges in cost of foreign in-put.
Fo = the index applicable for the foreign input (plant, material, Engineer's salary etc., as the case may be) 30 days prior to the date of opening of tender as published in the country of origin.
FI = Corresponding index for the quarter under consideration (average index in case indexes are published at lesser intervals)
(ii) = The bidder shall, in his tender, indicate the foreign input (plant material, Engineer's Salary etc., and a pprop riate index the sou rces of which shall be Government or public organisations, the bidder shall also attach specimen of the publications, for information of the Employer of the preceding 12 months publications. If this index is not acceptable to the Employer then he will specify an alternative Index and the source of publications of the Index,
(iii) = If the tenderer has requested payment in more than one foreign currency, FR shall be suitably broken up the formulae applied separately to each currency component by taking into account the foreign input of the currency and corresponding indices (index and currency belonging to the same country).
iv) = The currency of foreign exchange payment and the index shall belong to the same country. If this is not the case, then a suitable correction factor ZO/O (multiplying factor) will be applied to the formula (b) (i) to allow adjustment, where ZO is the number of units of currency of country of the index, equivalent to one unit of currency of payment on the date 30 days prior to date of opening of tender and Z is the corresponding number of such currency unit on the date of current index.
(4) If after the date thirty days prior to the date of opening of tenders for the works there occur in India changes to any National or State statute.
Ordinance, Decrees or other law or any regulations or bye-law of any local or other duty constituted authority, or the introduction of any such State statute, Ordinance, Decrees, Law regulation or bye-law which causes additional or reduced cost to the contractor, other than under Sub-clauses (1), (2) and (3) of this clause, in the execution of the works, such additional or reduced cost shall be certified by the Engineer after examining the record provided by the claimant and shall be paid by or credited to the Employer and the contract price adjusted accordingly.
Notwithstanding the foregoing, such additional or reduced cost shall not be separately paid or credited if the same shall already have been taken into account either wholly or partly in the indexing of any input to the price adjustment formula in accordance with Sub-clauses (1), (2) and (3) of this clause."
27. There is no dispute as to the derivatives for each of the abbreviations as mentioned in the formulae in respect of material and fuel. The controversy is only in respect of the meaning attached to the abbreviation 'R' which deals with payment of amount in Indian Currency and Foreign Currency. In case of both foreign currency and Indian currency are involved, it is only Indian currency that has to be considered. In the case on hand foreign currency is not involved. As such payment of Indian Currency abbreviation of R1 has only to be payable in the local currency. 'R' defines the total work done during the quarter excluding the cost of material of electrical energy supplied by the employer at fixed rate and any adjustment made in payments resulting out of legislative or statutory action as per sub-clause (4) of the clause. However, in the present case exclusive items are not existing. According to P.W. 1 it is the total value of the work done during the relevant quarter that has to be taken into consideration for effecting the price adjustment. While submitting tender it took into consideration the formulae and its meaning in the price adjustment clause. Then he submitted his tender. This was admitted by DW-1 in his deposition. According to him, it is the total value of the work done during the quarter that has to be adopted while calculating the price adjustment. According to the defendants, definition 'R' is quite meaningless whereas the plaintiff's case is that having entered into the contract, the formulae prescribed in the contract shall be accepted and both parties shall follow the same. According to him, there is no basis for the Government to say that the value of item that has to be adopted in place of 'R' for price adjustment. When once an offer is accepted, later a separate meaning cannot be substituted to such a contract. For this proposition, he placed reliance on the decision in "Eastern v. Russ" (1914) 1st chapter at page 48 as quoted in the Sanjiva Row's book on Contract Act 9th Edition at page 211 Vol. II which is extracted herein;
"It seems on general principles clear that one party to a contract can never defend himself against it by setting up misunderstanding on his part as to the real meaning and effect of the contract or any of the terms in which it is expressed. To permit such a deviation would be open to the door of per jury and to destroy the security of contracts."
Thus when once an offer is made and accepted, it binds both the parties. If the price adjustment as contended by the defendants is understood it runs contrary to Clause 34 of the contract. If that was the intention of the parties, the plaintiff would have quoted a different rate than what he mentioned in the tender. The Court below found that the controversy between the parties revolves on the correct interpretation of 'R'. According to the plaintiff 'R' is the total value of the work done during quarter, whereas the defendants interpretation is that it is the total value of the work done during the quarter for each individual item which has to be taken into consideration. Whereas 'R' does not convey the meaning that each individual item of the value for every quarter is to be taken into consideration. As to how the formula has to be adopted towards price adjustment, the Court below went through several clauses in the contract. According to the contract that price adjustment clause provides 75% of the escalation worked out under the formula has to be paid in respect of individual components on the work carried out under the contract. A separate formula is prescribed in respect of the three components. He accepted that abbreviations VL, Vm and Vf are to be applied in the case of increase and decrease in the cost of work in respect of three components. Likewise PI, Pm and Pf mentioned in the formula conveyed the meaning of percentage of local labour, material and fuel components. According to him, other abbreviations namely 'V and 'io' are the price index in the preceding date of opening of tender and ending of the quarter under consideration. The trial Court was convinced that the controversy not in respect of other abbreviations but only in respect of abbreviation R and R1. According to him, since the foreign currency is not involved, R1 be meant as R itself. R1 defines as total value of the work done during the quarter. While considering the percentage of labour, material and fuel, the word "item" is mentioned as percentage of component of the individual item of work. When once the formula is fixed the parties are bound by it. The learned trial Judge agreed with the contention of the plaintiff if R is taken as one reference as individual item of the total value of the work done during the quarter then he will be put to heavy loss, because at the time of submitting his tender the formula he understood was as it was mentioned in the contract. The Court below made reference to Ex.X-1. According to him, even in the subsequent contract given to the plaintiff, there was no change in the meaning of 'R'. In other words,, the meaning of 'R' expressed in Ex.B-34 and X-1 is one and the same. The Court below took into consideration the submission of the plaintiff when compared to subsequent contract entrusted the figures quoted by the plaintiff at Ex.B-34 was far less. The trial Court took into consideration the bill of quantity pertaining to me plaintiff's work. The item of work that was en trusted and carried out and the price quoted by him for different items of work have been detailed in para 72 of the judgment. By making reference under each item of work and the price quoted including item of work that was entrusted by sub-contract and the price quoted by the said contractor therein for different items of similar work which was accepted by the department, the learned Counsel for the plaintiff argued that the price quoted by the plaintiff to the work entrusted was far less. The plaintiff made the said demonstration to show that there was enormous increase in the price quoted by the plaintiff and the price quoted by the subsequent contractor due to change of percentage in the price adjustment clause by the Government. The trial Court compared the price index with all components, namely labour, material and fuel from the date of entrustment of work till its completion, that is, under Ex.B-38. From the date of entrustment till completion of work, the price index of the labour was increased by 57%. In respect of materials, there was a raise in price index at 35%. In respect of fuel, there was raise in 46%. Thus, there was increase from period to period in respect of all the three components. He found that the price quoted by another contractor was 2 to 3 times more than what it was at the relevant period. The representations made by the plaintiff at Exs. A-75 and A-77 seeking for price adjustment was rejected by the Executive Engineer in his letter dt. 3-9-1990. The Court below examined the amount quoted by the plaintiff as equivalent to abbreviation 'R' for the period in question at Rs. 2,54,12,989/- whereas the claim made by the plaintiff is Rs. 1,75,38,181/-. Thus amount claimed under price adjustment was 69% increase. The learned Subordinate Judge took into consideration the admission of DW 1 that R1 means the total value of the work done during the quarter. Having thus accepted the meaning of R it is not open for the defendants now to plead for adoption of value of each item in the place of R. The conduct of the defendants in changing the meaning of R in the subsequent contract compelled the trial Court to reject the interpretation given by the defendants to the abbreviation 'R'. According to the Court below, the price adjustment that was worked out at Exs. A-78 to A-89 for the period from September, 1989 to March, 1992 was at Rs. 1,47,21,647/-. Nothing contra was elicited by the defendants from the evidence of P.W.1. The trial Court found, on the other hand, during the course of arguments, the defendants' Counsel admitted that the figures submitted by the plaintiff are not at all disputed. The trial Court found that if the defendants had intended to consider the value of the work of individual item during the quarter, they would have supplied the word "item" for the meaning and expression of 'R' in clause 34. On the other hand, the defendants removed all the items under Clause 34 in the subsequent contract. The trial Court found that at the beginning itself both the parties accepted the real meaning attached to the derivation 'R'. The Court below observed that it is not the duty of the Court to make a contract for the parties or substitute words which are not available in the contract as explained by Lord Wright in "Hillas & Co. v. Arcos Ltd., (1932) All E.R. 494 which is extracted herein:
"Business men often record the most important agreements in crude summary fashion; modes of expression sufficient and clear to them in them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the Court to construe such documents fairly and broadly, without being too as tute or subtle in finding defects; but on the contrary, the Court should seek to apply the old maxim of English law "Verba it a sunt intelligenda utres magis valeat quam per eat". The maxim, however, does not mean that the Court is to make a contract for the parties or to go outside the words, they have used; except in so far as they are appropriate implications of law".
Ultimately, the Court below found that the plaintiff quoted less price a 118.42% when compared to the price quoted in the subsequent contract and he quoted less rates believing that the price adjustment clause will come into his aid. Thus observing, the Trial Court held that the plaintiff is entitled for recovery of a sum of Rs. 1,47,21,647/- towards price adjustment.
28. Issue No. 6 relates to the plaintiff's demand for recovery of a sum of Rs. 58,14,362 on account of hike in wages of labour under minimum wage rates. At the time of the contract, the wages prevailing in the State of A.P. as notified was at Rs. 25, Rs. 18/- and Rs. 13.50 ps for skilled, semi-skilled and unskilled labour respectively. The said minimum wages were revised w.e.f. 1-6-1989 as per the Notification at Ex.A-90 which was issued revising the rates at Rs. 33/-, Rs. 25/- and Rs. 19.25 ps in case of skilled, semi-skilled and unskilled labour respectively. Because of the said revision in the wages, the plaintiff felt that he is entitled to a claim with proportionate increase in theratesat39%,42%and 64% respectively. To claim this, he also placed reliance on clause 34 of Vol. 1 which entitles the contractor to claim for change in minimum wages if effected by virtue of any statute or notification or ordinance. Such increase shall be borne by the employer. A request was made to the defendants at Ex. A-90 to pay increased wages. Whereas the defendants denied it saying that the plaintiff is not entitled for separate claim under wage hike as he already included the said amount in price adjustment clause. Both sides placed reliance on Clause 34 Sub-clause (4.) As far as the plaintiff is concerned, the defendants placed reliance on Clause 34 sub-clause (3). But the contention raised by the plaintiff did not find favour by the Court below. He found that as the statute increase for labour was already taken into consideration for fixing the price adjustment there cannot be separate payment under Clause 34 (4). The Court below was convinced that the defendants were right in their submission that the plaintiff did not produce any material to show that he paid revised wages to the workmen. Having thus observed, the Court below held Issue No. 6 against the plaintiff.
29. Issue No. 7 relates as to the entitlement of the plaintiff to recovery of a sum of Rs. 4,70,740/- on account of hike in steel price. Again, the learned Sub-Judge applied his mind to the effect of clause 34 (4) and found that any raise in steel price is not subject to agreement when they entered into. Accordingly, the said issue was held against the plaintiff.
30. Issue No. 8 relates to the entitlement of the plaintiff to recover a sum of Rs. 13,16,541/- towards payment for work done, but not measured and not paid by the defendants. As the said claim was substituted by giving acceptable reason the Court below rejected the said claim holding this issue against the plaintiff.
31. Issue No. 9 relates as to whether the progress of work was hit by omissions and commissions of defendants 2 and 3 and other factors not attributable to the plaintiff such as the resistance from the villagers in Vanala, ryots in other area, unanticipated and unforeseen conditions etc. Reliance was placed on Ex. A-94, report of the Executive Engineer. The same is extracted herein:
"The first 1 = Km of SRBC excavated is full of water and is acting as a head reservoir for the reach 10.222 onwards. In the region of the reach of package I, the water table is just below the Ground level (A Statement of Ground level and water level met with is enclosed). No valley in this reach is deeper than the bed level of the SRBC. Further, the alignment of SRBC in this reach is running through the ayacut of KC Canal on both sides and two major vagus and 11 field channels crossing are crossing the canal which are used as pick up points of K.C. Canal Ayacut. Thus having on one side the water field SRBC Canal 0 to 10 KM on left side the K.C. Canal, Minnulavagu, on right side Ayacut command of K.C. Canal working in this reach is almost doing work under water as the entire surroundings are high staturated with water In the meeting conducted by the Chief Engineer (Projects) in the Chamber of Superintending Engineer, SRBC Circle No. 1 Nandyal on 18-6-90 along with Engineers, Contractors in many other meetings of World Bank members and consultants the issue of excess dewatering this contractor was facing has been discussed. Recently, one of the Retired Chief Engineer with whom the above subject was discussed, also held the opinion that the contractor deserves additional payment."
Further, it is to submit that for carrying out the excavation work below water table, keeping the water level during the excavation period below the excavation level is a pre-requisite for successful completion involving the necessary operators such as drilling, blasting and removal of blasted loose much and it needs continuous pumping especially where the water table is very high".
32. The Court below found that there was parallel seveage (sic. seepage) of water in the area in question whereas as per the Commissioner's report the underground water level was normally low in those parts. The plaintiff pointed out the problem with the lining work etc. The difficulties which the plaintiff faced were explained by the Superintendent Engineer in his letter Ex.B-42 which is extracted herein:
"In this connection, I am to submit that as per the tract report of the contractor the execution of this work, they have done maximum of 1.89 lakhs cubic metres of earth work during the period, July 1989 to September, 1989. They have shown good progress on construction of structures during the period from April, 1990 to June, 1990. For construction of structures, the department supplied cement to the contract and steel is readily available in the market. The contractors have already collected some materials like metal, stone, required for the structures. Hence, there is not much resource mobilisation required for completion of construction of structures which the contractors will be able to handle the work without any difficulty as per the revised programme furnished by them. The contractors have got the requisite machinery, material at their disposal to adhere to the revised programme furnished by them for completion of work in the extended period as requested by them.
xxx xxx xxx I am therefore to submit, based on the past performance and track record of the contractors in execution of the Work, it is said feasible that the contractors will be able to complete the work in all respects in the extended period sought by them upto the end of December, 1992."
In Ex.B-43 the Chief Engineer found that the contractor was unable to complete the work for the reasons beyond his control. All the authorities on review found that because of the reasons which were in the nature of force majeure rendered the contractor not to complete the workinfull within time prescribed. On the other hand, he is entitled to seek extension of time to complete the work. The Court below found that the plaintiff failed to complete the work due to various omissions and commissions on the part of the defendants. Thus observing, the trial Court held that if there was any delay in progress of the work it was purely at the instance of the defendants and it is not of the plaintiff.
33. Issue No. 12 relates to whether the termination and expulsion of the plaintiff from the site by the defendants is legal, just and reasonable, and if not whether the plaintiff is entitled to damages from the defendants. Taking into consideration the plaintiff confronting with the unforeseen difficulties the authorities namely Executive Engineer, Superintendent Engineer and Chief Engineer recommended for extension of time for completion of the work. According to the plaintiff, the loss or delay in progress was not at his instance. DW-1 in his cross-examination admitted the contents of Exs.A-94, B-42 and B-43, the earlier recommendations of the authorities including certifying the work of the plaintiff as good. Subsequently, the plaintiff did not carry out the work within the stipulated period is incorrect whereas in the report of the Executive Engineer at Ex.B-42 extended time, the contents of which are already extracted above. It was further mentioned in Ex.B-42 that the contractors have also expressed their resolve to complete the work in all respects and abide by the agreement conditions during the extended period. They have also agreed for the recovery of mobilisation loan with interest during the extended period of the work.
34. The Chief Engineer in his letter at Ex.B-43 also recommended the case of the plaintiff for extension of time. He took into consideration the reasons which were assigned by the plaintiff for non-fulfilment of work, which is extracted herein:
"(1) Un-anticipated subsurface high water table involving considerable deployment of dewatering equipment for bailing and consequent delay in execution because of the slow rate of progress and high costs.
(2) They having been physically prevented carrying out the Rock Excavation following the conventional techniques of blasting in deep cuts by the villagers of Vanala and Somapuram and by the APSEB where the HT lines cross the alignment.
(3) Due to the Gulf War crises there were short of no supplies of fuel oils essentially required to carry out their mechanised operations of dewatering, drilling, mucking and transporting.
(4) The intervening General Elections and Global changes economic crisis and the adjunct alround price hike, shortage of essential materials which affected the smooth and continued progress of their works.
(5) Besides these, they were projecting same reasons which are intrinsic to the work and which they could not sort it out with their organisational set up.
These contractors did show considerable progress even ahead of the programme in the first quarter, but later on the progress rate stopped down because of meeting some of the unforeseen problems, which are beyond their control as explained above. All these tenders essentially being discount tenders, the steep hike in the rate structure has "widened the gap quoted rates and actual workable rates."
35. The Chief Engineer mentioned in his report the views of the Superintending Engineer and the Executive Engineer as to the satisfactory work turned out by the contractor and the difficulties in which he was placed. The Chief Engineer agreed, in his letter, with the findings of the Superintending Engineer, which is extracted herein:
"I too agree with the findings of the Superintending Engineer, who is Employer that these contractors be given an elongation of the contract period, reckoning the time so lost on account of the aforesaid reasons beyond the normal domain of an average experienced contract agency. Affording the opportunity of reasonable extension of the time to these contractors to consumate the balance work at their quoted rates, would mean a lot of savings to the department, as they were all discount tenders. Apart from the economy in the long run, if the balance works were to be entrusted to another contractor, the allowable time schedule to be followed in securing such a suitable alternative agency, is not only unavailable, but is also fraught with the risk of possible prolonged litigation. The probability of receiving a higher bid because of the balance nature of work involved and also to be in conformity with the prevailing trend of rates cannot be ruled out. Due weightage and consideration of the time over runs resulting in a costlier situation attend ant with litigation may tilt the decision in favour of getting the job completed through the same agency within the extended contract period.
The Employer is being advised to sort out any location specific problems and disputes within the reach of the agreement and also review periodically the progress being maintained as per the revised programme furnished by the contractor or not, and check slipages in the Resusicated programme.
As the Superintending Engineer, being the employer and is the competent authority to grant reasonable extension of time applying his mind and weighing the over all circumstances, cost, time factors and the consumate intention of the contractors etc., the employer will adjudicate and grant the reasonable extension of time for completion of the contract works as per the continuing contract rates and terms. This decision would better be taken on merits fortnight before the expiry of the original completion date.
I had submitted in my letter No. 36657 T.S/91 dt. 16-8-91 that from consideration of avoiding the potential risk of litigation and also saving a large amount of cost involved in getting the balance work completed through another agency based on pre-qualifications and tendering process and the consequential delay etc., we may afford an opportunity to these present contractors and complete the works with extension of time under the special circumstances.
In the light of the above, the intention of the employer in his letters 993, 992 and 991 CE dt. 30-10-91 to continue the present contractor for completing the balance work notifying the due extension of time sought for by the contractors merits concurrence and commendation."
36. From the above information, the Court below found that the delay if any in progress of work was at the instance of the defendants. The Court further found that the order passed on 21-1-1992 was incorrect. Thus observing held Issue No. 12 in favour of the plaintiff.
37. As far as Issues 1, 10 and 11, namely whether the defendants are guilty of committing breach of contract, whether the plaintiff is entitled to recover a sum of Rs. 37,95,533/- towards loss of progress of work on account of omissions and commissions by D-2 and D-3 and whether the plaintiff is entitled to recover a sum of Rs. 36,12,763/- towards loss of profit on the work foregone by the plaintiff on account of expulsion, are concerned, the trial Court found that in view of the discussion made on other issues namely Issues 3, 4, 5, 9 and 12, it held Issue No. 1 in favour of the plaintiff, namely the defendants are guilty of committing breach of the contract. Regarding Issue No. 10, the trial Court did not agree with the plaintiff and accordingly it was held against it. Regarding Issue No. 11, the trial Court having found while deciding other issues that breach was committed by the defendants and having estimated 10% of the contract work remained to be done at the time of expulsion and also taking into consideration the principles laid down by the Supreme Court in the case of "Asalamathulla and Ors. v. Government of A.P. wherein it is held that while considering the loss of profits on account of the work foregone due to the breach of contract committed by the employer, the loss has to be made good by the employer, and the trial Court also having found that the approximate loss incurred by the plaintiff was at 10% taking support from the report of the expert body like Rates and Costs Committee appointed by the Government of India held that the plaintiff is entitled for recovery of a sum of Rs. 36,12,763/- and accordingly held mis issue in its favour.
38. Issue No. 13 relates as to the liability of the defendants to pay interest at 21% p.a. on the amount payable to the plaintiff from the date of execution of work till the date of payment. The Court below taking into consideration the effect of Section 34 of C.P.C. and the powers of the Court to exercise discretion in awarding interest granted interest only at the rate of 15% p.a. from the date of institution of the suit till the date of payment.
39. Regarding Issue No. l4 as to whether the bank guarantee of performance and mobilisation advance can be invoked by the defendants in the peculiar circumstances of the case, the trial Court in view of its findings on Issues 1 to 4, 5, 9 and 11, held this issue in favour of the plaintiff.
40. Regarding Issue No. 15 as to whether the defendants are liable to return F.S.D. to the plaintiff, since the contract has come to an end, the Court held that the plaintiff is entitled for the money retained by the defendants.
41. Having thus answered all the Issues 1 to 15, on Issue No. 16 the Court below held that the plaintiff is entitled to recover a sum of Rs. 2,71,84,244.00 from the defendants with proportionate costs and awarded future interest at the rate of 15% p.a. from the date of filing of the suit till the date of realisation.
42. Before considering the correctness of the reasoning adopted by the trial Court in decreeing the suit in part and disallowing certain claims of the plaintiff, first it is proper to consider the legal contention raised by the learned Advocate General appearing for the defendants about the maintainability of the suit. The main ground of attack by the learned Advocate General regarding the maintainability of the suit is that the suit filed against the Government is not maintainable in the absence of notice under Section 80, C.P.C. He further contended that when the proceedings initiated under the Arbitration Act were converted into a suit by virtue of amendment, there should have been a notice to the defendants and non-compliance of the same vitiated the entire proceedings and as such the suit itself deserved to be dismissed.
43. Against these contentions, Mr. S.R. Ashok, learned Counsel appearing for the plaintiff submitted that the contention now raised by the learned Advocate General is not sustainable for the reason that the State was quite aware about the initiation of proceedings under the Arbitration Act and then converting the same into suit pursuant to the orders passed in C.M.A. No. 526/92. When amendment was sought to convert the proceedings under the Arbitration Act to original proceedings, no objection was raised by the defendants and no plea about the maintainability of the suit was taken in the written statement and the additional written statement filed after the amendment. He further contended that when several issues were framed by the trial Court, the issue as to the maintainability of the suit was not framed. Both the parties understood the scope of the suit, effect of non-issuing notice under Section 80, CPC and went to the witness box. Further, when the parties have waived certain issues and participated in the proceedings, they are not permitted to raise such an issue subsequently. In support of his contentions, Mr. Ashok placed reliance on several decisions of High Courts and the Supreme Court. In Puma Chandra Sarkar v. Radharani Dassya, AIR 1931 Calcutta 175, the Calcutta High Court while dealing with Section 80, CPC, held that:
"The plea of want of notice under Section 80, Civil P.C., which is a clear bar to the institution of proceedings against public officer must be taken at the earliest possible opportunity and must be specifically pleaded. Where such a plea is taken by the defendant at a very late stage of the suit and at a time when the plaintiff would be precluded by the law of limitation from bringing a further suit against the defendant, the defendant must be deemed to have waived the privilege of notice."
A Full Bench of Rajasthan High Court in the case of Rajasthan State v. Girdharilal, , holding that it is not open to the Rajasthan State to raise the plea of notice under Section 80, CPC for the first time in appeal as it must be deemed to have been waived, observed as follows:
"When the case came up for hearing before this Full Bench, learned Counsel for the respondent contended that even if the notice be asssumed to be invalid so far as the Rajasthan State was concerned, the objection could not be raised at the appellate stage, and must be deemed to have been waived in the circumstances of the present case. After hearing learned Counsel for the parties, we are of the opinion that in the circumstances of the case, the objection as to want of notice to the Government of Rajasthan must be deemed to have been waived. There was some conflict of opinion among the High Courts in India as to whether the objection as to want of notice or invalidity of notice under Section 80 could be waived, but the controversy has been set at rest by a decision of the Privy Council in Vellayan Chettiar v. Government of the Province of Madras, AIR 1947 PC 197. It was observed:
"There appears to their Lordships to be no reason why the notice required to be given under Section 80, should not be waived if the authority concerned thinks fit to waive it. It is for his protection that notice is required; if in the particular case he does not require that protection and says so, he can lawfully waive his right."
As to what acts of the defendant were necessary to constitute a waiver, the observations of their Lordships of the Supreme Court in Dhian Singh Sobha Singh v. Union of India, are pertinent:
"It is relevant to note that neither was this point taken by the respondent in the written statement which it filed in answer to the appellant's claim nor was any issue framed in that behalf by the Trial Court and this may justify the inference that the objection under Section 80 had been waived."
In the present case, the plea as to want of notice or the insufficiency of notice which was given to the then Government of Jaipur was not raised by the defendant State of Rajasthan, and no issue was framed on this question. The contention on behalf of the Rajasthan State that the notice given by the plaintiff to the then State of Jaipur was not sufficient compliance with Section 80 in the present suit, which was instituted against the State of Rajasthan, was taken for the first time in appeal. We are of the opinion that it is not open to the Rajasthan to raise that plea now, which on the authorities mentioned above, must be deemed to have been waived. It is, therefore, not necessary to consider whether 1958 Raj. L.W. 542 had been correctly decided."
Similarly, in the case of Gaja v. Dasa Koeri , the Allhabad High Court, while dealing with Section 80, CPC observed as follows:
"The object of a notice under Section 80 is to acquaint the authorities mentioned in the section of the facts and circumstances which are said to necessitate the institution of the threatened suit and to afford them an opportunity to take stock of the situation and avoid litigations, if so advised, by settling the claim or making amendments. The section is thus intended to grant to such authorities a special protection for their own benefit of which, if they so choose, they may avail. The objection to the entertainability of a suit for want of notice may be waived by the authorities concerned."
"If a notice can be and has been waived by the authority concerned, it is not open to any other party to the suit to urge want of notice against the maintainability of the suit".
The Bombay High Court in the case of Vasant Ambadas v. Bomaby Municipality, held that:
"No suit can be instituted without service of notice if such service of notice is required statutorily as a condition precedent. The giving of the notice is a condition precedent to the exercise of jurisdiction. But, this being a mere procedural requirement, the same does not go to the root of jurisdiction in a true sense of the term. The same is capable of being waived by the defendants and on such waiver, the Court gets jurisdiction to entertain and try the suit"
A learned single Judge of Madras High Court in the case of N. Pararneswara Kurup v. State, , observed that:
"The other point raised by the learned Government Advocate appearing for the State is that in O.S. 9 of 1977, the plaintiff has not given notice under Section 80 CPC and therefore the suit should fail. But my attention is invited by the learned Counsel appearing for the appellant in S. A. 1847 of 1979 to the fact that the plaintiffs in O.S. 9 of 1977 filed a writ petition W.P. 938 of 1975 (N. Parameswara Kurup v. State of Tamil Nadu, rep. by the Secretary to Govt., Education Dept., Madras) against the State of Tamil Nadu challenging the Tamil Nadu Recognised Private Schools (Regulations) Act 29 of 1974, and a Bench of this Court dismissed the said writ petition granting three months' time to the petitioner to seek the remedy by way of suit. Accordingly the plaintiffs filed the suit. O.S. 9 of 1977, within three months from the date of judgment in W.P. 938 of 1975. Therefore, I must hold that the suit is not bad for want of notice Under Section 80, CPC."
In the case of Co-op. Group Housing Society v. M/s. H.S. Nag & Asso (P) Ltd. 1998 (5) Supreme 147, the Supreme Court observed that rigour of notice under Section 80 CPC was softened by CPC 1976 Amendment Act in directing in an appropriate case, post suit notice.
44. Though the argument is advanced by the learned Advocate General appearing for the defendants that the suit is not maintainable for want of notice under Section 80 of CPC, the same is not agreeable since the parties, particularly the defendants knowing fully well about non-issuing of notice have not raised such a plea in the written statement or additional written statement filed in the suit. Even when the Issues were framed, the defendants did not complain that proper Issues were not framed particularly as to maintainability of the suit. Having participated in the original proceedings, now it is not open for the defendants to raise the contention as to the maintainability of the suit, in view of waiving the defect if any at earliest point of time.
45. It is the case of the plaintiff that the defendants committed breach of contract that was entered into between both the parties. According to the plaintiff, the site where the work had to be executed was not handed over to it free from obstacles and obstructions. It has come in evidence that major portion of the site was under encroachment and in spite of the complaint made at Ex.A-1, no steps were taken by the defendants to clear the obstructions. Even land acquisition proceedings intiated in respect of the site that has to be handed over to the plaintiff were not completed. The defendants took the stand that when once the plaintiff accepted the site, it was his duty to clear any obstructions. In support of their stand, the defendants placed reliance on Ex.A-9. The learned Subordinate Judge discussed about the obstacles and obstructions in the site in paragraph 36 of his judgment. He referred to the long correspondence between the plaintiff and the defendants. He took into consideration the correctness of Ex.A-1, dt. 12-2-1989 Ex.A-3 dt. 6-4-1989; Ex.A-4 dt. 13-5-1989, Ex.A-9 dt. 24-5-1989; Ex.A-5 dt. 29-5-1989; Ex.A-6 dt. 26-7-1989, Ex.A-7 dt. 4-8-1989 and Ex.A-8 dt. 3-12-1989. He also found that delivery of possession under Ex.B-1 was only formal and that physical possession was not handed over to the plaintiff. The Trial Court also found that at a number of places, ground-nut, cotton, paddy, sun-flower and other crops were risen, which fact was also admitted by D.W. 1. The learned Subordinate Judge discussed on this point in his judgment from paragraphs 39 to 44 which includes the evidence of P.W. 2, Advocate Commissioner who inspected the site and gave his report (Ex. C-1) as to the existence of crops on the site. From Ex.C-1 report, it was found that a number of structures including residential buildings and other structures are abutting the canal alignment area. The trial Court observed that non-clearing of the site from several obstalces and obstructions including non-removal of shifting of power lines and telephone lines has to be held as default on the part of the defendants.
46. Regarding over-haul charges, the said item is covered under Clause 3.2.6 of Vol. II of the contract. It envisages the plaintiff's entitlement for over-haul charges. Clause 3.2.6 reads as follows:
"In measuring quantities of overhaul for payment, the volumes of the overhauled material will be measured in cubic metre units for excavation in rock including Nandyal shales and ten cubic metre units for excavation in soils upto hard disintegrated rock. The length of haul will be measured as stated above in kilometres. Payment for overhaul will be made at the unit price bid for kilometre extra lead."
According to the above clause, the payment for over-haulage will be made only for excavated materials required for canal embankment. The above clause supports the case of the plaintiff. The learned Subordinate Judge discussed about the entitlement of the plaintiff for over-haul charges in paragraphs 49 to 51 of his judgment and reiteration of same again is not warranted.
47. As regards the plaintiff's entitlement to additional dewatering charges involved in excavating Nandyal shales for a sum of Rs. 1,09,53,812/-, the Court below took into consideration the correspondence between the parties, particularly the letters, Ex.A-64 dt. 21-4-1990, Ex.A-66 dt. 20-4-1990, Ex.A-67 dt. 15-6-1990 wherein the plaintiff explained in detail about the additional dewatering that had to be encountered by it. According to the plaintiff, the seepage of water has been accelerated on account of the release of Srisailam water into K.C. canal. The plaintiff contended that little provision of 5% for dewatering is far less when compared to the dewatering the plaintiff had carried out. It has come in the evidence that the claim made by the plaintiff was found reasonable by the defendants 2 and 3. They also found that additional horse power was incurred by the plaintiff and that it is entitled at the rate of Rs. 7.50 p, per H.P. which works out at the rate of Rs. 16.10 per cubic metre of excavation. It has also come in the evidence of D.W. 1 that the issue regarding additional dewatering was discussed in the meeting of Engineers and the Superintending Engineer recommended the plaintiff's case for payment of additional dewatering charges at Ex.B-44. The Chief Engineer also submitted a report to the Government of Andhra Pradesh vide Ex.B-45, dt. 2-7-1991 recommending for payment of the plaintiff's claim. It has also come in the evidence that according to the Director of A.P. Engineering Research Laboratories, the plaintiff excavated 5,50,769 cubic metresofNandyal Shales during the period from March, 1989 to January, 1991 and the entire quantity involved in excavation was below water level. A lumpsum provision was made in the estimates for dewatering at Rs. 15,84,000/- which works out to 5%. The time taken for dewatering was also very long. The Court below, taking the factors like time taken, price paid etc., into consideration, held that the plaintiff's claim for dewatering was reasonable, but instead of ordering the entire claim, found that the plaintiff is entitled for additional dewatering charges at the rate of Rs. 42.87 per cubic metre for 6,18,500 cubic metres, which comes to Rs. 79,60,095/-.
48. Regarding price adjustment clause and the correctness of the plaintiff's claim for recovery of a sum of Rs. 1,47,21,647/-, the learned Subordinate Judge found that as per clause 34 (2) of Vol. I of the contract, the contract price shall be adjusted for increase or decrease in rates and price of labour, materials, fuels and lubricants as detailed in the said clause. The said clause refers to various abbreviations, derivatives. The defendants' contention was that adoption of the total value of the work done in the place of 'R" to work out the price adjustment formula is incorrect. The learned Subordinate Judge found that when once the contract is entered into between the parties, both the parties are to follow the same and that it is not open to the Government to contend that it is the value of the item concerned that is to be adopted in the place of 'R' for causing price adjustment. The learned Judge observed that merely becausea party to the contract misunderstood the terms of the contract, it is not permissible to deviate from it or to request the Court to take a different view. The meaning of 'R' and 'RI' etc. has been defined in the contract itself. 'R' is the total value of work done during the quarter. The learned Subordinate Judge discussed about the price adjustment on different items namely labour, fuel and material in respect of various items of work carried out. He took into consideration the rise in prices of various items and price index and rejected the contention of the defendants that the claim made by the plaintiff under price adjustment clause is more than the value of the total work executed, i.e., the claim increased by 69%. But the same was negatived by the Court below by referring to percentage of work carried out, rise in prices etc. The Court below also found the effect of the word 'item' which finds in Clause 34 and observed that having once entered into the contract and understood the terms of the contract, it is not permissible to deviate from it or to request the Court to take a different meaning as held by Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd. (1932) All.E.R. 494, which reads as follows:
"Business men often record the most important agreements in crude summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the Court to construe such documents fairly and broadly, without being too as tute or subtle in finding defects; but on the contrary, the Court should seek to apply the old maxim of English law "Verba it a sunt intelligenta ut res magis valeat quam pereat." The maxim, however, does not mean that the Court is to make a contract for the parties or to go outside the words, they have used; except in so far as they are appropriate implications of law".
The Court below found that because of the changes effected by the defendants in clause 34 in the subsequent contract, the prices quoted by the subsequent contractor are enormously increased, whereas the plaintiff quoted less prices i.e., 18.42% less than the estimated rates and accordingly held that the plaintiff is entitled to claim a sum of Rs. 1,47,21,647/- towards the amount due on account of price adjustment.
49. As far as the claim of hike in wages and hike in the prices of steel is concerned, the Court below rejected the claims of the plaintiff holding that having once entered into the contract, merely because there is rise in prices of certain materials, the contractor (plaintiff) cannot claim extra amount. The learned Subordinate Judge discussed the effect of clause 34 (4) of the contract and took into consideration the price index at Adoni which is a neighbouring town and rightly rejected the claim of the plaintiff in respect of hike in wages.
50. The argument advanced by the learned Counsel for the plaintiff that the Court below erred in disallowing the claims of the plaintiff in respect of hike in wages and steel prices in view of the above discussion does not stand to reason.
51. Regarding the claim of the plaintiff in respect of the work done, which was not paid by the defendants, the evidence adduced by the plaintiff to substantiate his claim was not acceptable to the lower Court. Therefore, the learned Judge rightly rejected the claim of the plaintiff.
52. Regarding the contention that the progress of work was hit by the omissions and commissions of the defendants 2 and 3, the Court below framed issue No. 9 and dealt with it at para 83 of its judgment.
53. The case of the plaintiff was that the progress of work was hit by different omissions and commissions of the defendants and other factors not attributable to the plaintiff such as resistance from villagers, non-clearance of site free from obstacles and obstructions. The issue is almost similar to issues 1 and 2. Under Ex.A-65, the plaintiff explained the difficulties which he had to undergo while executing the work. Exs.A-66 and A-67 are on the similar lines. It has come in the evidence that there was seepage of water on account of release of water from Srisailam dam and that there was standing crop on the site which contributed to delay in the execution of work. The learned Subordinate Judge took into consideration the failure on the part of the defendants in not complying with the various requirements, particularly in supplying the drawings and designs, dropping out certain items from the drawings and designs like causing lining in the canal system. The trial Court also took into consideration the report of the authorities and found that there was no omission or commission on the part of the plaintiff in executing the work. On the other hand, the omissions and commissions were attributable to the defendants. If there was omission or commission on the part of the plaintiff, there was no necessity for the Superintending Engineer to submit the report at Ex.B-42 explaining the problems the plaintiff had to face while executing the work. Thus, the Court below held that on account of the omissions and commissions on the part of the defendants and other factors not attributable to the plaintiff, the progress of work suffered substantially.
54. Regarding termination of the contract, the Court below took into consideration the experience, equipment and capacity of the plaintiff in executing the work, the terms of contract entered into, the reports of various Engineers, total work carried out, admission of D.W. 1 in the cross-examination, several letters written by the authorities requesting the Government to extend the contract period. It has come in the evidence that the defendants committed breach of contract in the matter of handing over the site free from obstacles and obstructions. Further, the plaintiff did not receive the payment under price adjustment clause, which prevented the progress of work. All these factors prevented the plaintiff's capacity to proceed with the work. The grievance of the plaintiff was explained to the authorities, but they resorted to terminate the contract without considering the problems faced by the plaintiff in executing the work. The Court below taking into consideration all these factors held that the termination of the plaintiff's contract is illegal. However, the learned Judge refused the plaintiff's request to direct the defendants to pay certain amount towards loss of profit in the work saying that such a claim is not reasonable. Regarding the loss of profit and the plaintiff's entitlement, the Court below taking into consideration various factors which prevented the plaintiff from carrying out the work, held that the plaintiff is entitled to claim a sum of Rs. 36,12,763/- towards loss of profit on the unexecuted portion of work.
55. The Court below taking into consideration its findings on Issues 1 to 4,5,9 and 11 held that the defendants are not entitled to invoke mobilisation advance and performance guarantee. The Court below further held that the Bank Guarantee, if any, be deemed as discharged and mobilisation advance be recovered from the claims adjusted in favour of the plaintiff. Thus held this issue in favour of the plaintiff.
56. As ragards interest, though the plaintiff claimed interest at 21%, the Court below taking into consideration the effect of Section 34 of CPC ordered interest at 15% per annum on the amount payable. In our view the findings of the Court below that the plaintiff is entitled to recover a sum of Rs. 2,71,84,244/- from the defendants with interest at 15% per annum from the date of filing of the suit till the date of payment, is just one.
57. Sri Ashok learned Counsel for the plaintiff tried his best to convince us that the Trial Court not justified in disallowing certain claims of the plaintiff. But the grounds urged by him to allow the remaining claims which were rejected by the Trial Court in the light of the nature of evidence available, and discussions made by the Trial Court as to how far the same is acceptable and stands to reason, we are of the opinion, the same has no merit and partial dismissal of the suit a just one.
58. Having gone through the entire evidence as also the judgment of the Court below and its findings on several issues and after hearing the learned Counsel on both sides, we are of the view that the judgment and decree passed by the Court below do not call for any interference by this Court and both the appeals are liable to be dismissed.
59. Accordingly A.S. No. 2207 of 1996 and A.S. No. 237 of 1998 are dismissed and judgment and decree of the Court below are confirmed. The bank guarantee, if any, given by the plaintiff pursuant to the interim directions of this Court is hereby discharged and the amount, if any, deposited in the Court towards bank guarantee the same shall be returned to the plaintiff. There shall be no order as to costs.