Delhi Development Authority vs M/s Harcharan Dass Gupta and Others

V.K. Jain, J.—This is a suit for recovery of Rs. 7,82,41,640/-. The defendant No. 1, which is a partnership firm of defendants No. 2 to 5,

was awarded a contract for construction of 400 LIG houses in Group-III, of the value of Rs. 9,49,41,058/- and the stipulated date for completion

of the work was 16.8.2005. It is alleged in the plaint that from the very beginning, the defendants did not adhere to the time-schedule as per the

contract between the parties. The defendant No. 1 was required to sign the formal agreement within seven days of issue of award letter dated

7.8.2003. It, however, delayed the signing of the agreement and avoided to start the work on totally flimsy ground, that the terms and conditions of

the tenders were contradictory. The objections raised by the defendant vide letter dated 11.8.2003 were clarified by the DDA vide letter dated

22.08.2003 and the defendant asked to start the construction work. The defendant however, did not commence the work and raised frivolous

pleas vide letter dated 13.9.2003. The plaintiff was, therefore, constrained to issue notice dated 9.10.2003 giving last and final opportunity to the

defendant to start the work. Thereafter, the agreement was signed by the defendant only on 17.10.2003 and the site was taken over on that very

date, though it should have been taken over by 17.8.2003. It is alleged that deficient drawings were submitted on 4.11.2003, though they were

required to be submitted by 15.9.2003 and a number of deficiencies were found in those drawings, which were later re-submitted on 24.11.2003.

Again there were major mistakes in the earlier drawings and the same were accordingly returned to the defendants. Initially, the defendants

informed the plaintiff that there were some mistakes in the design calculation, but later informed that there was no mistake in the design. The design

was accordingly approved by the plaintiff on 20.02.2004. On account of delay on the part of the defendants, the work could not begin from

15.9.2003 to 27.01.2004. Since the defendants were delaying the construction of work on one pretext or the other, the plaintiff issued a show-

cause notice to defendant No. 1 stating therein that it was required to achieve 25% progress within six months but the progress on the site was

practically Nil. The reasons given by the defendant for the delay were not found satisfactory by the Superintendent Engineer. He, however, granted

indulgence to them and cautioned that he reserved the right to impose compensation in case sufficient progress was not achieved within next three

months. Since the defendants failed to achieve the desired progress, the plaintiff issued another show cause notice stating therein that the progress

achieved at the site was only 7% as against the stipulated requirement of 50% which ought to have been achieved at that time. The defendant was

time and again requested to accelerate the progress of the work. Since the defendants failed to adhere to the time-schedule for completion of the

work, compensation amounting to Rs. 94,94,106/- under Clause 16 of the agreement was levied upon them by the Superintendent Engineer vide

letter dated 7.3.2005. Since defendant No. 1 had completely abandoned the work, a notice under Clause 17 of the Agreement was also issued to

it on 9.3.2005 and the contract was later rescinded vide letter dated 7.5.2005. The plaintiff had paid mobilization charges of Rs. 47.47 lac to the

defendants against a bank guarantee of Rs. 48 lac. The mobilization advance was to carry interest @ 16% per annum. Consequent to rescission of

the contract, the plaintiff is claiming Rs. 18,93,622/- per annum being the balance of mobilization advance and interest on it after adjusting the bank

guarantee furnished by the defendants. The plaintiff is also claiming Rs. 4,36,023/- towards interest on the balance of mobilization advance @ 16%

per annum for the period from 3.11.2006, till filing of the suit.

The plaintiff is claiming a sum of Rs. 95,71,264/- from the defendants after adjusting the credit balance and recoveries to be made under various

heads including the compensation levied under Clause 16 of the Agreement. The plaintiff is also claiming Rs. 47,68,151/- towards interest on the

amount of compensation of Rs. 94,94,106 and Rs. 4287/- towards interest on the amount of Rs. 77158/- which becomes payable to the it due to

under recoveries.

It is alleged in the plaint that under Clause 17 of the Agreement, the plaintiff was entitled to get such part of the work which remained

unexecuted from another contractor and recover the excess amount, if any, paid by it from the defendants. After rescinding the contract on

7.5.2005, the plaintiff invited tenders for the balance work to be executed at the risk and cost of the defendants. That work was awarded to M/s

C.R. Sons Builders & Developers @ Rs. 8801/- per sq. meter plinth area, whereas the work to the defendant had been awarded @ Rs. 5109/-

per square meter plinth area. The excess amount which the plaintiff had to pay on this account is Rs. 6,30,51,492/-.

The following is the break-up of the amount of Rs. 7,96,71,839/-, which had become payable from the defendants:-

Some material of the defendants was abandoned by them on the site and that material was transferred by the plaintiff to the new contractor. The

defendant is entitled to credit of Rs. 14,30,199/- being the value of that material. The suit amount of Rs. 7,82,41,640/- arrived after deducting the

aforesaid amount of Rs. 14,30,199/- from the gross amount of Rs. 7,96,71,839/-.

The defendants filed written statement contesting the suit and took a preliminary objection that the suit is barred by limitation. On merits it was

alleged that rescinding of the contract was illegal since the work could not be completed on account of various hindrances on the part of the

plaintiff, non-availability of the site, non-approval of drawings and non-payment of the amount due for the work executed by the defendants. It is

alleged that no interest on the compensation is envisaged in the contract between the parties. The defendants have denied abandonment of the

work and have alleged that they had to move out of the site after the contract was rescinded by the plaintiff.

The following issues were framed on the pleadings of the parties:-

Whether the suit is barred by limitation? OPD

Whether plaintiff is entitled to recover an amount of Rs. 7,82,41,640/-, as claimed by it in para 26 of the plaint? OPP

Whether plaintiff is entitled to pendente lite and future interest, if so, on what amount and at what rate? OPP

Relief.

ISSUE NO. 2

The plaintiff has filed the affidavit of Mr. Radhey Shyam, Executive Engineer, RPD XI, by way of evidence. In his affidavit, the witness has

supported on oath the case set out in the plaint and has proved various documents filed by the plaintiff. He has stated that the defendant did not

have necessary resources ready in hand to start the work and therefore, delayed taking over the site for execution of work. He has further stated

that the defendant delayed signing of the formal agreement in terms of award letter dated 7th August, 2003 on one pretext or the other, stating that

the terms and conditions of the tender were contradictory. It was clarified to him that there was no question of ambiguity in the terms and

conditions of the tender. Despite that, the defendant did not come forward to sign the formal agreement. It was only after issue of the notice dated

9th October, 2003 that the formal agreement was signed by the defendant on 17th October, 2003. Thus, according to the witness, defendant was

responsible for the delay of more than 61 days by not executing the formal agreement within the stipulated period.

He has further sited that the drawings were submitted by the defendants only on 15th September, 2003. Vide letter dated 5th January, 2004, the

defendant then informed the plaintiff that there was some mistake in the design/calculation, and therefore, the design re-submitted by them be

withheld. However, vide subsequent letter dated 27th January, 2004, they informed the plaintiff that there was no mistake in the design.

Accordingly, the designs were approved on 20th February, 2004.

He has stated that the plaintiff, time and again, requested the defendant to accelerate the progress of the work but the defendant completely failed

to adhere to the completion programme. Compensation amounting to Rs. 94,94,106/- was then imposed upon the defendant by the

Superintending Engineer. According to the witness, since the defendant had completely abandoned the work, the plaintiff had no option but to

rescind the contract vide letter dated 7th May, 2005. He has also stated that the defendant had failed to construct the requisite cement godown

even after 21/2 months of issue of award letter, nor there was any activity at site and even the site office was not constructed. According to him,

the defendant brought Birla Chetak brand cement at the site which was not an approved brand.

In his deposition, Mr. Radhey Shyam has stated that the Nala shown to the lay out plan of the field investigation report existed only under 2 out of

the 20 blocks consisting of 20 houses each, which the defendant was required to construct and the remaining 18 blocks were free from any kind of

hindrance. He has also stated that the plaintiff did not suggest any increase in the length of row of blocks and it was the defendant who chose to

change increase of extension joint from 40 mm to 150 mm, which was agreed by the CDO of the plaintiff. According to this witness, the defendant

completely abandoned the work after November, 2004 and removed construction equipment from the site he has claimed that the defendant had

completed about 7% of the work by the time it was abandoned by him.

The witness of the plaintiff has also stated that on recession of the contract, the work was re-awarded to M/s. C.R. Sons Bldrs. & Developers at

the rate of 8801/- per square meter plinth area whereas the defendant was awarded this work at the rate of Rs. 5109/- per square meter plinth

area. According to him, it was difficult for the plaintiff to find another contractor for completion of the work which was left incomplete by the

defendant. He has stated that the difference of the cost on account of the work being awarded to M/s. C.R. Sons Bldrs. & Developers comes to

Rs. 6,30,51,492/-.

This witness has also stated that at the time of rescission of the contract, some material such as TMT bars, stone aggregate, coarse sand, site

office, godown, labour huts, tube well, pump house, laboratory i/c 270 Mt. Length for electric connection procured by defendant, was lying at this

site, that material was transferred to M/s. C.R. Sons Bldrs. & Developers and a sum of Rs. 14,30,199/- was deducted from their bill in this regard

and adjustment from that amount has been given to the defendant.

It is an admitted case that D-1 which is a partnership firm of defendants No. 2 to 5 was awarded a contract for construction of 400 LIG

Houses at the plinth area rate of Rs. 5109 per sq. mtr. and the time allowed for completing the construction was 24 months. This is confirmed from

a perusal of the work of the award letter (Ex. P1), which is dated 07.08.2003. A perusal of this document would show that the time of 24 months

to complete the work was to be reckoned from 10th day after the date of issue of letter. Therefore, the defendant should have commenced

execution of the work by 17.08.2003 and should have completed it by 16.08.2005. It is an admitted position that the defendant did not complete

the work by 16.08.2005.

The plea taken in the written statement is that the work suffered because of various breaches committed by the plaintiff and various hindrances

attributable to it. It is alleged that contradictory conditions were stipulated in the award letter and the work were delayed due to non-availability of

clear sight failure to approve drawings and non payment of dues for the work which had been executed. A perusal of the record would show that

vide letter dated 11.08.2003 (Ex. P-2), the defendant wrote to the plaintiff that clause 1.3 and 2.2 of the award letter dated 07.08.2003 were

contradictory. It was stated that they had quoted rates with maintenance period of one year whereas the award letter stipulated watch and ward of

un-allotted houses for a period of three years. It was also stated in the letter that during negotiations the maintenance period after completion of the

houses had been reduced from three years to one year since handing over of service to the civic body was not likely to take place in the absence

of peripheral services to be rendered by the department with the provision for extension for further two years at extra cost but the scope of work

in clause 2 stipulated that the service were to handed over to the respective department which was in-contravention of the discussions during

negotiations. Vide letter dated 22.08.2003 (Ex. P-3), DDA informed the defendants that there was no contradiction in the award letter. It was

pointed out that Clause 1.3 of the award letter provided for maintenance for one year after completion of the work and incase of need for

maintenance beyond one year the defendant was to be paid @ Rs. 53 per sq. mtr. of plinth area per year upto maximum of two years. It was

further pointed out that as per Clause 2.2, the watch and ward of un-allotted houses was to remain with the defendants for three years after

completion of the work and thereafter unalloted flats were to be made defect free and handed over to the department. It was stated in the reply

that there was no negotiations in this regard with the defendant and the award letter was based on the provisions of the tender document and as

per defendants'', negotiation letter dated 24.07.2003. The defendants were asked to attend the office of the plaintiff to sign the formal agreement

within seven days from the date of issue of the letter. However, vide letter dated 13.09.2003, the defendants avoided execution of the agreement

on the ground that those were sharaadh days and therefore they would sign the agreement only after 25.09.2003. A perusal of the notice Ex. P-5,

send by the plaintiff to the defendant on 09.10.2003 would show that the defendants did not execute the agreement even after 25.09.2003. The

defendants were, therefore, given one last and final opportunity for taking over the site and execute the agreement within seven days from the date

of the letter. Admittedly, the agreement was actually executed by the defendant on 16/17.10.2003. The drawings were submitted by the

defendants vide letter dated 04.11.2003 (Ex. P-6). The drawings were returned with certain objections vide letter dated 06.11.2003 (Ex. P-7).

This was followed by a letter dated 07.11.2003 to the defendants asking them to give undertaking as indicated in the letter with respect to handing

over of the site and the number of labours tents pitched by the defendants on the site, as also with respect to the site office consisting yard

laboratory etc. The drawings were re-submitted by the defendants on 22.11.2003 vide letter Ex. P-9. However, before these drawings could be

approved by the plaintiffs, the defendant vide letter dated 05.01.2004 (Ex. P-9) informed the plaintiff that there was a calculation mistake in

working out the loads according to their structure designs and they were in the process of submitting the same. The plaintiff was requested to

withhold the earlier structure designs submitted by the defendants. It would, thus, be seen that during 05.01.2004, the defendants had not been

able to finalize the structure designs and were still in the process of revising the same. Vide letter dated 16.01.2004, the defendants were informed

that they had failed to attain 25% progress within 1/4th of the period stipulated for completion of the construction and the progress at the site was

practically nil. The defendants were asked to show cause why compensation under clause 16 of the agreement be not levied upon them. There was

no response from the defendants to this letter. Vide letter dated 27.01.2004 (Ex. P-11), the defendants in continuation of their letter dated

05.01.2004, informed the plaintiff that there were no calculation mistake in working out the loads, and therefore, the structure designs submitted by

them may be approved. Thus, it was only on 27.01.2004 that the defendants finally sought approval of the structure designs submitted by them.

The structure designs were approved by the plaintiff vide letter dated 20.02.2004.

Vide letter dated 24.02.2004, (Ex. D-1), the defendants complained of flooding at site and various damages caused by the agency executing

the work on the upstream of their site and stated that the accumulation of water had also increased the level of water table, resulting in expenditure

on pumping out the same. The plaintiff was asked to define the work of the defendants and compensate them for the losses sustained by them.

Vide letter dated 24.03.2004 (Ex. P-13), the plaintiff gave an opportunity to the defendant to discuss the matter on 31.03.2004 before any action

was taken under Clause 16 of the agreement. Vide letter dated 17.05.2004 (Ex. D-2), the defendants sought withdrawal of the notice dated

16.01.2004 issued under Clause 16 of the Contract. It was stated in the letter that on account of increase in width of the expansion joint the

dimensions shown in the lay out plan were not in accordance with the dimensions prevailing on the ground, revision of lay out plan had become

necessary and work could not proceed further in the absence of revised lay out plan.

Vide letter dated 30.06.2004 (Ex. P-14), the Superintendent Engineer of DDA informed the defendants that they had miserably failed to organize

the work from the very beginning and had lost valuable time. The levy of compensation, however, was deferred despite failure of the defendant to

carry out their contractual obligations and they were advised to mobilize all resources and material, to execute the work.

Vide letter dated 04.10.2004 (Ex. D-3), the defendants complained that payment of advances had been assessed by the plaintiff on a lower site,

as a result of which their funds to the tune of Rs. 12 lacs had got blocked and secured advanced had not been allowed on store aggregates. The

plaintiff was requested to pay full value of the material after assessing it on the value of prevailing market rates.

Vide letter dated 08.10.2004 (Ex. D-4), the defendants sought reimbursement for the extra expenditure alleged to have been incurred at them on

procurement TMT.

Vide letter dated 03.11.2004 (Ex. D-5), the defendant again sought payment of secured advance on the basis of prevailing rates of the material

brought by them to the site. They also sought reimbursement on account of abnormal increase in price of bricks/cement.

Vide show cause notice dated 04.11.2004 (Ex. P-15), the Clause 17, the defendants were informed that actual progress of the work at that time

was only about 7% though 1/2 of the work should have been completed by 31.10.2004 as per Clause 16 of the agreement. The defendants were

asked to show cause why action under sub-Clause 17(a) and/or 17(b) and/or 17(c) of the agreement be not taken against them on account of

breach of the contract on their part.

Vide notice dated 04.11.2004 (Ex. P-16) sent by the Superintendant Engineer of DDA, the defendants were again asked to show cause within ten

days as to why the compensation under Clause 16 of the agreement be not levied upon them. It was pointed out in the notice that despite sufficient

opportunity given to them the defendants had not shown progress in the matter of construction and the progress at the site was only about 7%

though it should have been 50% by 31.10.2004. Reference was also made to the earlier notice dated 30.06.2004 whereby right to impose

compensation was reserved by the plaintiff.

The letter dated 08.10.2004 was replied by the plaintiff on 06.11.2004 and the reply is Ex. D-6. It was stated in the reply that the defendants had

delayed start of the work by taking late possession, not signing the agreement in time and late submission of foundation and other structural

drawings. The defendants were also informed that they have to procure TMT from the manufacturer as per the agreement and the reimbursement

of extra expenditure was beyond the scope of the agreement. The defendants were asked to submit documentary evidence incase TMT bars

specific dia''s were not available with the main procedures.

Vide letter dated 11.11.2004 (Ex. D-7), the defendants claimed that the delay in commencement and execution of the work was not attributable to

them and the progress of the work had suffered, due to lack of planning at the end of the plaintiff, which was reflected in the revision of the lay out

plan almost 09 months after the stipulated date of commencement of the work. It was also stated in the letter that the DDA had granted permission

to other contractors to procure the TMT bars from sources other than the manufacturers.

Vide letter dated 11.11.2004, the defendants, again, wrote to the plaintiff that they were being discriminated in the matter of secured advance since

other contractors were being paid at the rate of 75% of the prevailing rates of the material, whereas they were being paid up to only about 40% of

the cost of the material procured by them. This letter was written in response to DDA''s letter dated 04.11.2004. Yet another letter was written by

the defendants to DDA on 11.11.2004 (Ex. D-9), stating therein that there was no lapse or deficiency on their part and they were not responsible

for the delay in execution of the work. Reference in this letter was made to the show-cause notice received from the Executive Engineer in clause

17 of the agreement. Vide letter dated 16.11.2004, the defendants, again, sought secured advance to the extent of 75% of the prevailing market

rate of re-enforced steel and other material.

Vide letter dated 23-11-2004 (Ex. P-17), the concerned Executive Engineer informed the defendants that the position of the material at the site

was very alarming and if the same position continued, there would be no alternative except to take action under various Clauses of the contract. It

was stated that the progress achieved was hardly 7.5% though it should have been more than 50%. Vide letter dated 27.11.2004, the concerned

Executive Engineer, again asked the defendants to devote time and energy to accurate the progress of the work instead of exchanging unnecessary

correspondence.

Vide letter dated 29.11.2004 (Ex. D-14), the defendants sought permission to procure 300 MT of TMT bars from the secondary producers. Vide

letter dated 13.12.2004 (Ex. D-15), written to Engineer Member of DDA, the defendants complained that they had not been permitted to procure

re-enforced steel bars from secondary manufacturers and had not been paid secured advance on bricks and coarse aggregates, which they had

brought on the site. They also complained about non-payment of testing charges for steel and cement. Vide letter dated 13.12.2004, the

defendants, again, reiterated that delay in execution of the work was due to reasons stated in their earlier letters and was not on account of lack of

planning and resources on their part. This letter was written in response to letter of DDA dated 27.11.2004.

Vide letter dated 14.03.2005 (Ex. D-19) in reply to the show-cause notice under clause 17 of the agreement, the defendants informed the plaintiff

about filing of Suit No. 1435 of 2004 in this Court and requested that the outcome of the said suit be awaited.

Vide letter dated 11.04.2005, written in response to DDA''s letter dated 07.03.2005 the defendants refuted their liability to pay any amount to

DDA towards compensation. Vide letter dated 28.04.2005 (Ex. D-23), the defendants stated that the work stood abandoned being sub Judice

and requested that 50 MT of steel used by them in columns and rafts be recorded for payment and 20 MT of TMT bars lying at the site be taken

on record and the expenditure be reimbursed or in the alternative they may be permitted to lift the same. Similar request was made in respect of

other material such as stone aggregate, stone dust, shuttering material, etc.

Vide letter dated 01.06.2006, written in response to letter of DDA dated 05.05.2006, the defendants criticized the action of awarding the work of

another contractor and sought details and mode of working out the rate at which the work had been awarded to that contractor.

The first claim of the plaintiff is with respect to the amount which was given as mobilization advance to the defendants, after adjusting the

amount of the bank guarantee which the plaintiff invoked. It is alleged in para 26 of the plaint that the plaintiff had extended mobilization advance of

Rs. 47.47 lakh to the defendants on 06.05.2004 at the interest of 16% per annum and the defendants had furnished a number of bank guarantees

for an aggregate sum of Rs. 48 lakh to the plaintiff. The amount of interest at the rate of 16% per annum from 06.05.2004 to 02.11.2006, when

the bank guarantees were encashed, comes to Rs. 18,93,622/-. The balance amount of Rs. 29,06,378/- was adjusted by the plaintiff against the

principal amount of Rs. 47.47 lakh. Thus, the plaintiff is entitled to recover the balance mobilization advance, amounting to Rs. 18,40,622/- from

the defendants. Since the mobilization advance carried interest at the rate of 16% per annum, the defendants are also liable to pay interest on that

amount on the aggregate rate of 16% per annum. The amount of interest on Rs. 18,40,622/- for the period from 03.11.2006, till filing of this suit,

comes to Rs. 4,36,023/-. The plaintiff is entitled to recover the said amount from the defendants.

Clause 16 of the agreement between the parties reads as under:-

The works comprised in this tender are to be commenced immediately on receipt of written orders from the Divisional Officer to commence work.

The time allowed for carrying out of the work as entered in the tender shall be strictly observed by the contractor and shall be reckoned from the

10th day after the date on which the order to commence the work is issued to the contractor(s). The work shall throughout the stipulated period of

the contract be proceeded with all due diligence (time being deemed to be the essence of the contract(s) on the part of the contractor(s) and the

contractor(s) shall pay as compensation as amount equal to one percent or such smaller amount as the Superintending Engineer (whose decision in

writing shall be final) may decide, on the amount of the contract as shown in the tender for every day that the work remains un-commenced or

unfinished, after the proper dates and further, to ensure goods progress during the execution of the work, the contract(s) shall be found, in all cases

in which the time allowed for any work exceeds one month to complete one fourth of whole of the work before one fourth of the whole time

allowed under the contract has elapsed one half of the work before one half of such time has elapsed, and three fourth of the work before three

fourths of such time has elapsed. In the event of contractor(s) failing to comply with the condition he/they shall be liable to pay as compensation an

amount equal to one percent or such small amount as the Superintending Engineer, (whose decision in writing shall be final may decide on the said

amount of the contract for every day that the due a quantity of work remains incomplete; provided always that entire amount of compensation to

be paid under the provisions of this clause shall not exceed ten percent on the amount of the contract as shown in the tender.

In J.G. Engineers Pvt. Ltd. Vs. Union of India (UOI) and Another, , Supreme Court considering a clause identical to clause 2 of the agreement

between the parties to this suit, inter alia held as under:

Thus what is made final and conclusive by clauses (2) and (3) of the agreement is not the decision of any authority on the issue whether the

contractor was responsible for the delay or the department was responsible for the delay or on the question whether termination/rescission is valid

or illegal. What is made final, is the decisions on consequential issues relating to quantification, if there is no dispute as to who committed breach.

That is, if the contractor admits that he is in breach, or if the Arbitrator finds that the contractor is in breach by being responsible for the delay, the

decision of the Superintending Engineer will be final in regard to two issues. The first is the percentage (whether it should be 1% or less) of the

value of the work that is to be levied as liquidated damages per day. The second is the determination of the actual excess cost in getting the work

completed through an alternative agency. The decisions as to who is responsible for the delay in execution and who committed breach is not made

subject to any decision of the respondents or its officers, nor excepted from arbitration under any provision of the contract.

Supreme Court in this regard also referred to the following view taken by it in Bharat Sanchar Nigam Ltd. and Another Vs. Motorola India Pvt.

Ltd., :

x x x the decision contemplated under Clause 16.2 of the agreement is the decision regarding the quantification of the liquidated damages and not

any decision regarding the fixing of the liability of the supplier. It is necessary as a condition precedent to find that there has been a delay on the

part of the supplier in discharging his obligation for delivery under the agreement.

It is thus for the Court to decide whether delay in execution of the work, within the time stipulated in the agreement, was attributable to the

defendants or to the plaintiff. If the Court comes to the conclusion that delay in completion of the work is attributable to the defendants, the

decision of the Superintending Engineer in respect of quantum of the compensation would be final and binding on the parties and it would not be

open to the Court to sit in appeal over the decision of the Superintending Engineer with respect to the quantum of compensation and take a view

different from the view taken by him. On the other hand, if the Court finds that the delay in execution of the work was attributable solely to the

plaintiff, the decision of the Superintending Engineer levying compensation would be without jurisdiction. Similarly, if the Court finds that the

defendants had failed to maintain progress of the work in terms of the contract agreed between the parties and the plaintiff was not responsible for

the failure of the defendants to maintain the required progress, it is not permissible for the Court to interfere with the amount of compensation levied

by the Superintending Engineer since his decision with respect to quantum of the compensation is final and binding on the parties.

A perusal of the award dated 07.08.2003 would show that the defendants were required to commence the work within 10 days from the date

of issue of the letter which would mean that they were required to commence the work by 17.08.2003. The award letter further shows that the

work was required to be completed within two years from the date of commencement, which would mean that it was required to be completed by

16.08.2005.

A perusal of the clause 16 of the agreement would show that the defendants were required to execute one fourth of the work before one fourth of

the time allowed under the contract had elapsed, one half of the work before one half of the time allowed for completion of the work have elapsed

and 3/4th of the work before three fourth of the time allowed for completing the work have elapsed. Therefore, the defendants were required to

complete 25% of the work by 16.02.2004 and 50% of the work by 16.08.2004. The defendants were required to complete 75% of the work by

16.02.2005. The contract was rescinded by DDA on 07.05.2005. It was stated in the show-cause notice dated 04.11.2004 issued by the plaintiff

to the defendants that the progress achieved by that time was only 7%, though actual progress achieved should have been more than 50% by that

time. The averment to this effect finds mention in para 13 and 14 of the plaint.

In their written statement, the defendants have not disputed that the work executed by 31.10.2004 was only 7%. This was also their case that they

had executed more than 7% of the work by 31.10.2004. It has come in the unrebutted deposition of PW-1 that the defendant had completed only

about 7% of the work, when the contract was rescinded. Thus, it can hardly be disputed that the defendants did not adhere to the time schedule

fixed in the agreement for completion of the work.

The only plea taken in the written statement for delay in execution of the work are that the award letter contained contradictory conditions and

there were hindrances on the part of the plaintiff i.e. non-availability of clear site, non-approval of drawings on flimsy excuses and payment was not

made for the extra work executed by the defendants. No evidence has, however, been led by the defendants to prove any lapse on the part of the

plaintiff. No particular contradiction in the terms and conditions of the award letter has been pointed out by the defendants in the written statement.

The work was awarded to the defendants on 07.08.2003 and they executed a formal agreement on the same terms which were contained in the

award letter on 17.10.2003. Had there been any contradictory conditions in the award letter, the defendants would not have executed the formal

agreement without the alleged contradictions being removed from the terms of the agreement.

There is absolutely no evidence on record to prove that there was any delay on the part of the plaintiff in handing over site to the defendants. It

would be pertinent to note here that CS (OS) No. 1435/2004 was filed by the defendants when the plaintiff sought to invoke the bank guarantees

which they had furnished to the plaintiff. It was alleged in the plaint of that suit that DDA had played fraud upon them by not informing them about

existence of a Nala at the project site and, therefore, the contract between the parties was void due to non-closure of material facts. The case of

DDA in that suit was that the Nala was duly shown in the site plans. Rejecting the contention of the defendants, a Division Bench of this Court,

inter alia, held as under:-

The tender documents which were given to all the tenderers by respondent No. 1 before awarding the contract are part of the records. The

appellant also obtained the said tender documents and on the basis of the same, its tender was submitted. In the said tender documents, lay out

plan is attached to the soil inspection report at page 201. Existence of a nallah is clearly shown in the said lay out plan attached. Clause 27 of the

tender documents also clearly requires the tenderer to inspect the work site and to study the drawing, soil inspection reports, tender documents

and other conditions referred therein. Clause 1 of the Specifications and conditions of the tender, which appears at page 130 of the paper book,

requires the contractor to get acquainted with the proposed site of contract and study specifications and conditions carefully before tendering. The

aforesaid documents, which are on record and part of the tender documents, clearly indicate that the appellant was informed about the existence of

a nallah at the project site. The terms and conditions also require the tenderer to inspect the site before submitting its tender. It was also specifically

stated in the terms of the tender that the tenderer should submit the tender only after getting acquainted with the site. Before submitting the tender

the appellant must have meticulously followed and complied with the aforesaid conditions, including inspection of the site and, therefore, we are

prima facie satisfied that the appellant had knowledge and information that there existed a nallah at the project site.

It is stated by respondent No. 1 that the pace of the work of the appellant at the site was extremely slow for which several notices had to be

issued by the said respondent to the appellant. The appellant also received mobilization advance before filing of the aforesaid suit. Therefore, it

cannot be said that the appellant received mobilization advance without having knowledge and information about the location and situation of the

project site including the existence of nallah at the site. Therefore, we are satisfied that the allegation now made by the appellant that it did not have

the information about the existence of a nallah at the site is an afterthought and is a ploy to get out of the contract by hook or by crook. It is also

interesting to note that not a single letter was written by the appellant to respondent No. 1 prior to the receipt of the mobilization advance that it

had no knowledge regarding the site or that it had not inspected the site at all.

The contract was awarded to the appellant on 7th August, 2003 and site was handed over to the appellant on 1st November, 2003. When

possession of the site was handed over to the appellant on the said date, it cannot be expected that they received possession of the site for starting

construction work without having inspected the site. A letter was also written by the appellant to the DDA on 13th November, 2003 wherein also

no mention was made by the appellant of the fact that the appellant was unaware of the existence of nallah at the site. Although, in the plaint, a

stand is taken that the appellant became aware of the existence of the nallah only on 6th November, 2003 but the contemporaneous documents on

or about the said date clearly belies the fact that the appellant had no knowledge about the existence of a nallah at the project site. The appellant

also obtained mobilization advance to the tune of Rs. 47.47 lacs from respondent No. 1 on 6th May, 2004 and it cannot be expected that the

appellant had obtained the mobilization advance without even inspecting the site in question which was handed over to it on 1st November, 2003,

i.e. about six months prior to the date of release of mobilization advance.

Thus, existence of a Nala at the site cannot be said to be hindrance on the part of the plaintiff and the defendants had no justification to commit

delay in commencement or execution of the work on account of existence of Nala on the site. As regards approval of drawings, there is no

evidence of any abnormal delay on the part of the plaintiff in approving the drawings. In fact, the defendants themselves committed delay in

submitting the drawings. As per the contract, the foundation drawings were to be submitted on 15.09.2003, whereas the defendants submitted the

same on 04.11.2003 and even at that time, the drawings were not free from deficiencies and had to be re-submitted on 24.11.2003. At this stage,

the defendants sought withholding of the drawings on the ground that there was some mistake committed by them in drawings calculation. They

sought approval of the drawings vide letter dated 27.01.2004 and the drawings were approved on 20.02.2004, i.e., within about 24 days of the

defendants seeking approval of the drawings submitted by them. This is not the case of the defendants in the written statement that under the

agreement between the parties, the plaintiff was required to approve drawings in a period of less than 24 days. The time taken by the plaintiff for

approval of the drawings cannot be said to be unreasonable, considering the nature of the project and the work which the defendants were

required to execute.

As regards non-payment of the dues, I find that the written statement does not indicate which payment was delayed and by how much time. There

is absolutely no evidence of any delay having been committed by the plaintiff in payment of the work executed by the defendants. Therefore, it

cannot be said that the progress of the work was caused on account of delay in payments to the defendants. I have extensively referred to the

correspondence exchanged between the parties. On the other hand, PW-1 Radhey Shyam is emphatic in his deposition that the delay in

commencement and execution of the work was attributable solely to the defendants. This also becomes quite clear from a perusal of the

correspondence exchanged between the parties and a number of letters which the plaintiff wrote to the defendants from time to time, asking them

to accelerate the execution of the work.

Since it is the defendants, who were solely responsible for delay in execution of the work and a show-cause notice was also issued to them before

levying compensation, the Court would be justified in presuming that while levying the compensation, the Superintending Engineer considered all

the facts and circumstances of the case. There is nothing on record to indicate that the compensation levied by the Superintending Engineer was

unreasonable. No evidence has been led by the defendants to establish that amount of compensation levied upon them was unreasonable or

excessive. No evidence has been led by them to prove that there was no legal injury cased to the plaintiff on account of their failure to complete the

contract. Therefore, the Superintending Engineer, in my view, was fully entitled in law to levy compensation, amounting to Rs. 94,94,106/- on the

defendants.

The plaintiff has made certain adjustments from the amount of the final bill submitted by the defendants to it. A sum of Rs. 77,540/- was

payable to the defendants after adjustment of the value of the work which was show in the previous bills and the outstanding secured advance. The

plaintiff has claimed Rs. 53,675/- towards interest on secured advance which was agreed at 16% per annum. In the written statement, this is not

the case of the defendants that the secured advance was not to carry any interest or that it was to carry interest at less than 16% per annum.

Therefore, the claim of the interest on secured advance is justified. The Workers Welfare Cess and Work Tax are to be deducted from the bill and

the plaintiff has rightly claimed Rs. 3102/- towards Work Tax, Rs. 76930/- towards the Workers Welfare Cess after adjusting the amount which it

had already recovered. Adjustment of Rs. 3,044/- has been made towards income tax and Rs. 17,947/- towards balance security deposit. The

amount which remains payable to the plaintiff in terms of the claim made in para 26(C) of the plaint comes to Rs. 96,48,804/-, after adjusting the

amount of Rs. 77,540/- which was payable to the defendants towards final bill. The net amount which remains payable to the plaintiff against this

claim comes to Rs. 95,71,264/-. The plaintiff is entitled to recover this amount from the defendants.

The plaintiff has also claimed interest on the amount of compensation. The interest claimed is Rs. 47,68,155/- at the rate of 16% per annum

from the date of levy till the date of filing of this suit. The plaintiff has also claimed interest amounting to Rs. 4,287/- on the amount of Rs. 77,158/-

which is the amount of under-recoveries which remained payable to the plaintiff after adjustment from the final bill. There is no agreement between

the parties for payment of interest either on the amount of compensation levied under clause 16 of the agreement or on the recoveries towards

security deposit, work tax, income tax, workers welfare cess. It seems that the plaintiff is also claiming interest on the amount of Rs. 53,675/-

which was interest on the secured advance. Obviously, the plaintiff cannot claim interest on interest, since the agreement between the parties did

not envisage compound interest on the amount of secured advance.

Section 3 of Interest Act, to the extent it is relevant, provides that in any proceeding for the recovery of any debt or in any proceeding in which a

claim of interest in respect of any debt is made, the Court may allow interest to the person entitled to the debt at a rate not exceeding the current

rate of interest. The interest under this provision can be allowed by the Court, if the proceedings relate to any debt payable by virtue of a written

instrument at a certain time, from the date when the debt is payable to the date of institution of the proceedings and if the proceedings do not relate

to any such debt, then from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the

person liable, that interest will be claimed, up to the date of institution of the proceedings.

In the present case, the amount of compensation was not payable at a particular time. A notice dated 20.05.2005 was sent by the plaintiff to the

defendants, demanding the amount of Rs. 94,94,106/- which was the quantum of levy of compensation by the Superintending Engineer. It was also

stated in the notice that DDA shall also be entitled to interest on the said amount at the rate of 16% per annum. Therefore, interest u/s 3 of the

Interest Act, 1978 can be awarded to the plaintiff on the amount of compensation, with effect from 20.05.2005, till the date of filing of this suit. In

the facts and circumstances of the case, I am of the view that interest u/s 3 of Interests Act, 1978 should be awarded to the plaintiff at the rate of

12% per annum on the amount of Rs. 94,94,106/-. The Learned Counsel for the plaintiff states that the interest for the period from 20.05.2005, till

the filing of this suit on 05.05.2008 comes to Rs. 33,70,407.63/-. The plaintiff is entitled to this amount from the defendants.

Clause 17 of the agreement between the parties reads as under:-

In any case in which under any clause of this contract the contractor shall have rendered himself/themselves liable to pay compensation amounting

to the whole of his/their security deposit (whether paid in one sum or deducted by installment) or committed a breach of any of the terms contained

in Clause 20, the Divisional Officer on behalf of DDA shall have power:-

(a) To rescind the contract (of which recession notice in writing to the contractor(s) under the hand of the Divisional Officer shall be conclusive

evidence) and in such case the security deposit of the contractor(s) shall stand forfeited, and be absolutely at the disposal of DDA.

(b) To employ labour paid by the Delhi Development Authority and supply materials to carry out the work or any part of the work debiting the

contractor(s) with the cost of the labour and the price of the materials (the amount of such cost and price certified by the Engineer-in-charge shall

be final and conclusive) and crediting him/them with the value of the work done. The certificate of the Divisional Officer as to the value of the work

done shall be final and conclusive against the contractor(s).

(c) To take such part of the work as shall be unexecuted out of his/their hands, and to give it to another/other contractor(s) to complete. In which

case any expenses which may be incurred in excess of the sum which would have been paid to the original contractor(s) if the whole work had

been executed by him/them (of the amount of which excess the certificate in writing of the Divisional Officer shall be final and conclusive) shall be

borne and paid by the original contractor(s) and may be deducted from any money due to him/them by DDA under the contract or otherwise or

from his/their security deposit or proceeds the sale thereof or a sufficient part thereof. The cost of the work to be executed by the contractors shall

be determined based on market rates prevailing at the time of actual execution of the work.

In the event of any of the above courses being adopted by the Divisional Officer the contractor(s) shall have no claim to compensation for any loss

sustained by him/them by reasons of his/their having purchased or procured any material or entered into any engagements, or made any advances

on account of, or with a view of the execution of the work or the performance of the contract. And in case the contract shall be rescinded under

the provisions aforesaid, the contractor(s) shall not be entitled to recover or be paid by any sum for any work therefore actually performed under

the contract, unless the Divisional Officer will have certified in writing the performance of such work and the value payable in respect thereof, and

he/they shall only be entitled to be paid the value so certified.

In the present case, compensation has been levied by the Superintending Engineer upon the defendants under clause 16 of the agreement. The levy

of compensation has been found to be legal and justified. It was the defendant, who failed to maintain the required progress in execution of the

work and thereby compelled the plaintiff to rescind the contract. The concerned Executive Engineer sent notice under clause 17 of the agreement

to the defendants on 09.03.2005, stating therein that they had abandoned the work and gave them 10 days'' time. The contract was ultimately

rescinded by the plaintiff on 07.05.2005. In view of clause 17 of the agreement, the plaintiff was entitled to get the unexecuted work executed from

the other contractor and any expenses incurred by DDA in excess of the amount which it had contracted to pay to the defendants, can be

recovered by it from the defendants.

It has come in evidence that unexecuted work was awarded by the plaintiff to M/s C.R. Sons Builders and Developers at the rate of Rs. 8801/-

per square metre of plinth area. The rate agreed to be paid to the defendants was only Rs. 5,109/- per square metre of plinth area. The excess

amount, which the plaintiff agreed to pay to M/s C.R. Sons Builders and Developers for execution of the work, which was left unexecuted by the

defendants, comes to Rs. 6,30,51,492/- as stated in the affidavit of Mr. Radhey Shayam. The plaintiff is entitled to recover that amount from the

defendants.

For the reasons stated hereinabove, I hold that the plaintiff is entitled to the following amounts from the defendants:-

The issue is decided accordingly.

ISSUE NO. 1

As far as the recovery of balance mobilization advance is concerned, since the contract was rescinded on 07.05.2005, the plaintiff had no cause of

action to claim this amount prior to that date. Having been filed on 05.05.2008, the suit is within limitation as far as the balance mobilization

advance is concerned. Consequently, the suit to the extent it pertains to interest on mobilization advance is also within limitation.

As far as recovery of compensation levied under clause 16 of the contract is concerned, admittedly, the compensation was levied by the

Superintending Engineer prior to 07.03.2005. Vide letter dated 07.03.2005 the defendants were informed about levying of compensation and

were asked to deposit the same within 15 days from the date of the letter. Irrespective of whether the period of limitation is computed from the

date the compensation was levied or from the date stipulated in the letter dated 07.03.2005 for making payment, the suit having been filed on

05.05.2008 is barred by limitation, as far as this claim is concerned. For the same reason, the interest on the compensation levied under clause 16

of the contract is also barred by limitation.

As far as the amount of Rs. 77,158/- payable to the plaintiff on account of under recoveries mentioned in para 26(C) of the plaint is concerned, the

same is within limitation since the final bill was prepared only in the year 2007. Consequently, the claim for the interest on the amount of Rs.

77,158/- would be within limitation. The amount of interest on Rs. 77,158/- at the rate of 12% per annum, according to the Learned Counsel for

the plaintiff, comes to Rs. 3,215/. As regards the amount of Rs. 6,30,51,492/-, the same is within limitation since the contract to M/s C.R. Sons

Builders and Developers was awarded only on 14.02.2007, whereas the suit was filed on 05.05.2008. The issue is decided accordingly.

ISSUES NO. 3 AND 4

In view of my finding on the issue No. 1 & 2, the plaintiff is entitled a decree for recovery of the following amounts:-

For the reasons stated hereinabove, a decree for recovery of Rs. 6,54,08,510/- with proportionate cost and pendente lite and future interest at the

rate of 12% per annum is passed in favour of the plaintiff and against the defendants.

Decree sheet be drawn accordingly.