V.S. Construction and Others vs Gujarat Housing Board

Jayant Patel, J.—The present appeal arises against the judgment and the order dated 18.10.1991 passed by the learned City Civil Judge, in Civil Suit No. 421/82, whereby the suit of the respondent herein-original plaintiff has been decreed and appellants herein-original defendants are directed to pay the amount of Rs. 12,40,159.90 with interest at the rate of 12% p.a., until the amount is realized. We may state that for the sake of convenience, the parties shall be referred to as their status in the original suit or as per their status in the present appeal.

The facts to the extent found relevant shall be referred to hereinafter.

It is an admitted position that the contract was given to defendant No. 1 partnership firm. The contract agreement is also admitted and has come on record. It is also proved before the Trial Court that the defendants abandoned the contract and thereafter, the plaintiff had to give the contract for the remaining work to another party.

As per the plaintiff, it had claimed the damages on the different heads as under:

Rs. 10,75,264.90 Damages on account of breach of contract

Rs. 64,210.00 Liquidated damages

Rs. 1,07,526.50 Supervision charges at 10%

Rs. 44,835.00 Balance of advances paid on security of materials.

Rs. 150.00 Notice charges

Rs. 12,91,986.40 Total

Rs. 6,001.50 Less : Realisation from auction of material

Rs. 12,85,984.90 Suit claim

The defendants had resisted the suit before the Trial Court contending inter alia that there was no fault on the part of the defendants and that the plaintiff is not entitled to recover the amount as prayed in the plaint. The evidence was led by both the sides and ultimately, the Trial Court after hearing both the sides, passed the judgemnt and decree which is under challenge in the present appeal.

We have heard Mr. Sukhwani, learned Counsel appearing for the defendants and Mr. Bhambhania appearing for the plaintiff.

It appears that the finding of the learned Judge on the aspect of maintainability of the suit and rescission of the contract and for the jurisdiction or the limitation is not challenged by the defendants nor any contention has been raised by the learned Counsel appearing for the defendants. The learned Counsel for the defendants however challenged the quantum of damages awarded by the Trial Court.

The contention raised is that the Trial Court has awarded damages under various heads which is not warranted under law. It was submitted that in a case where the express liquidated damages is provided in a contract, the additional damages by way of difference of the contract to a new contractor and the amount which was otherwise payable to the defendants, had the contract continued could not have been recovered. It was also submitted that if the liquidated damages were expressly provided, the security deposit could not have been forfeited independently and even if to be forfeited, the set-off would be required to be given. It was submitted by the learned Counsel for the original defendants that just for the difference of about 3 years, a new contract was given by the Housing Board, which is about 92% above the contract amount of the defendants. This shows that they have remained careless for exercising power for giving contract for which the defendants cannot be made to suffer or in any case, such would not be a valid basis for awarding of the damages. At the most, the genuine cost for the uncompleted work can be considered as the damages and not the arbitrary exercise of the power.

Whereas, the learned Counsel for the plaintiff submitted that when there is express Clause provided under the contract, the plaintiff would be entitled to recover the damages under all the heads as per the express condition of the contract and the learned Judge has rightly accepted the claim therefore, the appeal deserves to be dismissed.

In order to consider the controversy, it would be necessary to refer to the Clauses which are pressed in service, Clause 2 of the contract provides for compensation for delay. The relevant portion, of the Clause 2 which is relevant reads as under:

...In the event of the contractor failing to comply with this condition, he shall be liable to pay as compensation an amount equal to one per cent or such small amount as the Housing Commissioner (whose decision in writing shall be final may decide of the said estimated cost of the whole work for every day that the due quantity of works remains incomplete. Provided always that the total amount of compensation to be paid under the provisions of this Clause shall not exceed 10 per cent of the estimated cost of work as shown in the tender.

Clause 3(a) as well as 3(c) which would also be relevant for the purpose of the present appeal, reads as under:

3(a) To rescind the contract (of which rescission notice in writing to the contractor under the hand of the Executive Engineer shall be conclusive evidence) and in that case the security deposit of the contractor shall stand forfeited and be absolutely at the disposal of Board.

3(c) To measure up the work of the contractor and to take such part thereof as shall be unexecuted out of his hands, and to give it to another contractor to complete it in which case any expenses which may be incurred in excess of the sum which would have been paid to the original contractor, if the whole work had been executed by him (as to the amount of which excess expenses the certificate in writing of the Executive Engineer shall be final and conclusive) shall be borne and paid by the original contractor and shall be deducted from any money due to him by Board under the contract or otherwise or from his security deposit or the proceeds of sale thereof, or a sufficient part thereof.

In the event of any of the above courses being adopted by the Executive Engineer the contractor shall have no claim to compensation for any loss sustained by him by reason of his having purchased, or procured any materials, or entered into any engagements, or made any advances on account of or with a view to the execution of the work or the performance of the contract. And in case the contract shall be rescinded under the provision aforesaid, the contractor shall not be entitled to recover or be paid any sum for any work therefore actually performed by him under this contract unless and until the Executive Engineer shall have certified in writing the performance of such work and the amount payable in respect thereof, and he shall only be entitled to be paid the amount so certified.

The pertinent aspect is that, Clause 2 provides for recovery of the compensation for the delay not exceeding 10% of the estimated cost of the work will have the applicability so long as the contract subsists. If the case of the plaintiff is that the contract was rescinded or abandoned, the question of compensation for the delayed period would not arise. The contention that the plaintiff has calculated the compensation during the period when the rescission of the contract was not final, in our view, would not hold good when the suit was for recovery of the damages admittedly after the rescission of the contract.

The second Clause 3(c), if considered, it appears that the same would be available to the plaintiff in a case where for the unexecuted work, a contract is given to another party and the difference is there and the difference is to be suffered by the plaintiff. It is an admitted position that there was difference of Rs. 10,75,264/- between the amount which was payable to the defendants had he completed the contract and the amount at which new contractor was given contract. Therefore, it appears that as per Clause 3(c), the difference in normal circumstances would be recoverable.

The contention was raised that the unfinished work of Rs. 11,94,208/- is given for completion to another contractor M/s. Shiv Corporation for Rs. 22,92,879.90, at 92% above, shows that in an arbitrary manner without making any efforts on the part of the Housing Board, the contract has been given. It was submitted that for recovery of the damage, it is required for the respondent Board, who was plaintiff in the suit to satisfy the Court that reasonable care and steps required were taken and it is only thereafter, the difference can be assessed. He therefore submitted that the Trial Court has committed error in awarding the said amount without further examining the aspects of the case.

Prima facie, the contention appears to be attractive, but upon the close scrutiny, it appears that there was no such pleading whatsoever by the appellant-original defendant in the suit that in an arbitrary manner, the contract was awarded or that there was any collusion or that there was no proper care for awarding of the contract for the unfinished work to a new contractor. Under these circumstances, in absence of any pleading, the defence as sought to be canvassed cannot be accepted. It further appears that the respondent Board had invited tender by giving advertisement and thereafter, the contract has been given and such is one of the settled norms for giving contract for public work. Under these circumstances, it is not possible for this Court to accept the contention of the learned Counsel for the appellant that any error has been committed by the Civil Court in giving effect to Clause 3(c) being the difference of contract given and the work remained unfinished or uncompleted by the appellant.

The contention that if there was difference in the work which was required to be completed by the defendants and the work to be done by the new contractor, the same cannot be recovered from the plaintiffs deserves consideration. If the said contention is examined in light of the deposition of the Hemendra Jitendralal Desai, plaintiff''s witness No. 1, Exh.78, in cross-examination, it has transpired that the extra items of mosaic tiles of Rs. 3,51,414/- is included in the document at Exh.80 and the stone work is of Rs. 7373/-. But the pertinent aspect is that the said work of Mosaic tiles of Rs. 3,51,414/- is extra item and not included in the tender. Further, the amount of Rs. 7373/- of the stone work was already there even in the contract given to the appellant.

Under these circumstances, in absence of any clear evidence brought on record that in the contract given the Shiv Corporation (a new contractor) any extra work and the cost was included, it is not possible to accept the contention of the learned Counsel for the appellant that the amount as claimed of the difference deserves to be reduced.

The next aspect is the charging of supervision fee at the rate of 10%. In our view such fees could not be said as warranted under the agreement which can be recovered by way of the damages. When the contract was already rescinded, there was no question of additionally recovering any supervision fee as contended by the plaintiff-respondent. Same situation will prevail for the notice charges of Rs. 150/-.

In view of the aforesaid observations and discussion, we find that the damages which can be recovered on account of the breach of the contract would be the difference of the contract amount which the appellants-defendants had to complete and the new contractor who was given the contract and the said amount as per the plaintiff is Rs. 10,75,264/-. The other claim for liquidated damages or for supervision charge or for notice charge and other charges cannot be sustained.

We may state that it was declared by the learned Counsel for the respondent Board that the additional amount has been recovered by the Housing Board from the allottees on account of change in the amount of the contract. He stated that the decision is taken by the Housing Board that if any amount is recovered in the present proceedings, the same is to be distributed amongst the allottees and the Housing Board is not to be benefited thereby, but the allottees are to be benefited.

In view of the aforesaid observations and discussions, the Judgment and Decree of the Trial Court is modified to the effect that the Decree shall stand confirmed for recovery of amount of Rs. 10,75,264.90 with the running interest at the rate of 12% p.a. from the date of decree till realisation of the amount. The decree for the remaining amount is quashed and set aside.

Appeal is partly allowed to the aforesaid extent. There shall be no order as to costs.