K. Ramanna, J.@mdashThis appeal is directed against the judgment and decree of dismissal of the suit filed by the appellant in OS. 66/94 passed by the Pit Civil Judge (Sr. Dn.) at Jamkhandi, on 15.10.2001. Assailing the said judgment and decree of dismissal of the suit, the Executive Engineer of Kamataka Electricity Board, Belgaum Division, has come up with this appeal.
2. Brief facts leading to this appeal are that the appellant/Karnataka Electricity Board now ''KPTCL'' is claiming damages of Rs. 1,51,000/- with interest thereon. Initially, the appellant/plaintiff issued a tender notification for construction of Masonry Earth and Hume Pipe Drain all round O.D. yard at 220 K.V. Station at Mahalingapura, Mudhol Taluk. The respondent/defendant submitted his tender as per the notification, which was accepted by the appellant and to that effect, entered into an agreement dated 22-11-1988 to complete the work within 4 months from the date of layout given to the defendant by the plaintiff/KPTCL The respondent ought to have completed the work on or before 7.4.1989 inspite of payment of part of the bill and also 200 bags of cement were also supplied and time was extended for completion of work undertaken by the respondent but he failed to complete and hand over the same to the appellant/KPTCL. Therefore, an agreement entered into on 22-11-1988 came to be terminated by the appellant and to that effect, a letter was communicated on 1.1.1992 thereafter, the said work was entrusted to another contractor by name S.C. Chikka Reddy, P.W.D. Contractor, Bijapur, for Rs. 2,57,931-37 Ps. At 20.7% excess cost over the amount put to tender based on S.R. rates of 1992-93, Therefore, the appellant/plaintiff Board has incurred additional expenditure of Rs. 1,51,000/- and has suffered loss due to the breach of agreement by the respondent/defendant. Before filing the suit, the legal notice came to be issued on 23.9.1993 calling upon the respondent/defendant to refund the amount i.e., damages. Since the respondent failed to pay the amount, suit came to be filed. In pursuance of the notice issued to the respondent/defendant, he appeared through the counsel and filed a detailed written statement and denied the averments of the plaint contending that as per Clause 30 of the agreement/Ex. P.2 such disputes were to be referred to the Arbitrator to resolve the same, therefore, the suit filed by the appellant/plaintiff is not at all maintainable. The appellants have not made any attempt to refer the matter to the Chief Executive Engineer (Major Works) which is premature. Therefore, the Civil Court has no jurisdiction to entertain the suit. Since the appellant/plaintiff has not supplied the materials as undertaken to complete the work within the stipulated period of 4 months, the appellant/KPTCL itself is liable to pay 10% of the tender amount i.e., Rs. 16,000/- on account of breach of contract. When there is a delay of more than 2 years in supply of materials like cement, there is no fault or negligence on the part of the respondent/defendant in completing the work entrusted to him and the appellant cannot even entrust the work to other contractor.
3. On the basis of the available pleadings, the following issues were framed by the trial Court and additional issues as under:
Issues:
1. Whether plaintiff-KEB proves that as per agreement, defendant has failed to complete work even during the extended period, Board was compelled to complete work by entrusting the same to another contractor and it had to incur extra costs of Rs. 1,50,990/- as contended in the Plaint paras-(1)(5) and (6)?
2. Whether the defendant proves that suit is not maintainable without referring to Arbitrator first as contended in paras - (12) and (13) of the Written Statement?
3. Whether the plaintiff is entitled for damages against the defendant?
4. What order or decree?
Additional Issues:
1. Whether the defendant proves that it is the plaintiff who breached the terms of contract?
2. Does he further prove that the time stipulated for the completion of work is not an essence of contract?
3. Whether the rescission of contract and forfeiture of earnest money and security deposit are illegal and defendant is entitled for its refund?
4. Whether the defendant proves that he is not liable to pay damages over and above 7.5% of amount put to tender in case of rescission of contract is held legal?
5. Whether defendant is entitled for Rs. 16,000/- on account of breach of contract by the plaintiff, if it is held proved?
4. To prove their respective contentions, the appellant/plaintiff got examined two witnesses i.e., L. Suresh, Asst. Executive Engineer, KEB, Bangalore and Sri Mangesh Mahabaleshwar Upkalkar, Asst. Engineer, Service, Bagalkot and marked in all 36 documents. Whereas, the respondent/defendant examined himself as D.W. 1 and closed his case.
5. After considering the oral and documentary evidence as well as the arguments pleaded by the respective parties, the trial Court recorded its finding on Issue No. 1 against the plaintiff, Issue No. 2 in affirmative and held that Addl. Issues 1 to 4 does not survive for consideration and the suit filed by the appellant/plaintiff came to be dismissed.
6. Heard the arguments of the learned Counsel appearing on both sides and perused the documents. It is contended by the learned Counsel for the appellant/KFTCL that respondent is none other than the contractor. As per the tender, the respondent herein submitted his tender for escalation work. It is contended that the trial Court has misread Clause 30 of the agreement Ex. P.2. At the request of the respondent, 200 bags of cement was allotted and earlier 100 bags was allotted and it was duly informed to the respondent to lift 100 bags. At the request of the respondent, 200 bags of cement was allotted and therefore, there is no delay in allotment of required number of cement bags for completion of work. Therefore, the suit filed by the appellant is maintainable but the finding recorded by the trial Court that in view of Clause 30 of the agreement Ex. P.2 the Superintendent Engineer has failed to refer the matter to the Arbitrator for adjudication and wrongly came to the conclusion in recording the findings in favour of the respondent/defendant on Issue No. 2. So, as per Clause 52 of the agreement Ex. P.2 suit is maintainable and the said suit filed by the appellant/plaintiff for recovery of damages of Rs. 1,51,090/- with interest, as they have entrusted the work to some other contractor to complete the work. Since the respondent has not completed the work within 4 months from the date of agreement, the Corporation was compelled to call for the fresh tender, which was allotted to some other contractor in excess of the tender submitted by the respondent. While arguing the case, learned Counsel for the petitioner drew the attention of this Court to Clause 30 and 52 of the agreement, ft is argued that to refer the matter to an Arbitrator if there is any dispute with regard to the specification, design, drawing and instructions and as to the quality of the workmanship; or materials used on the work, or as to any other question, claim, right, matter or thing whatsoever, in any way arising out of the contract, then only the matter require to be adjudicated by the Arbitrator. Therefore, the suit tiled by the appellant/plaintiff is maintainable and the trial Court has erroneously misread and misunderstood Clause 30 of Ex. P.2. The appellant/plaintiff by invoking Clause 52 of Ex. P.2 agreement filed the suit. It is contended that in case the contractor refuses to do the work in the middle, which may force the Board to entrust the work to some other contractor and the excess amount incurred by the Board shall be made good by the defaulting contractor besides forfeiting the earnest money deposit. Therefore, it is submitted that after supplying 200 bags of cement, the respondent has done only excavation work and etc., and has failed to complete the work as per the contract, therefore, the trial Court is totally wrong in coming to the conclusion that the suit is not maintainable, which is perverse, capricious and against the legal evidence. It is further contended that u/s 73 of the Contract Act, the appellant is entitled to sue against a person on account of breach of contract. It is also contended that when contract is broken the party who suffers such a breach is entitled to receive compensation from the defaulting party for the loss of damage caused to them. Therefore, the judgment and order of dismissal of the suit filed by the appellant/plaintiff is liable to be set aside and the suit be decreed holding that the appellant/plaintiff is entitled to recover a sum of Rs. 1,51,000/- with interest.
7. In support of his contention, learned Counsel for the appellant relied upon a decision reported in case of
Taking other steps in the suit proceedings connotes the idea of doing something in aid of the progress of the suit or submitting to the jurisdiction of the court for the purpose of adjudication of the merits of the controversy in the suit.
8. As against this, learned Counsel for the respondent submitted that since the appellant/KPTCL did not supply the material in time, it cannot now blame the contractor for the delay if any caused in completion of work entrusted and time is not the essence of the contract. The appellant has taken more than two years time to supply the cement bags as undertaken by it and therefore, there is no breach of work i.e. agreement and the trial Court has rightly framed the Issue No. 2 regarding maintainability of the suit. It is contended that when there is an arbitration clause i.e., Clause 30 of Ex. P.2 the remedy available for the appellant/plaintiff is to refer the matter to the arbitrator. It is contended that as per the agreement entered into on 22.11.1988 four months time was granted to complete the work. Whereas, the cement was supplied on 25.7.1991 and the notice of termination of contract was issued on 1.1.1992 i.e., within four months he could not complete the work. It is contended that Clause 4 and 16 of the agreement are binding on both parties and since the appellant/plaintiff is also responsible for the delay, he cannot blame the respondent. Therefore, he is not liable to pay the damages. However, it is clear that in case there is a breach of contract, remedy available to the aggrieved person is to levy the penalty at 7.5% of the contract work. It is further contended that in view of the admissions made by P.W. 1, the appellant/plaintiff is not entitled to get any damages much less 1,50,990/- and at the most, the appellant/plaintiff is entitled to get the value of the cost of cement supplied amounting to Rs. 35,000/-. Therefore, the appeal is liable to be dismissed.
9. .Learned Counsel for the respondent relied upon a decision reported in case of
Agreement: B-1 & B-2 Tender Forms - Clause 30: Circular Memorandum No. CAT 1070/460 - Desk-2 Dated 9-5-1977 - Wordings investing power in Superintending Engineer making his decision final: Arbitration Clause - Superintending Engineer to resolve dispute between Government & Contractor - Upon his refusal, Contractor at liberty to move Court.
10. After hearing the arguments and after examining both oral and documentary evidence, the points that arise for my consideration and decision are:
1. Whether the suit filed by the appellant/plaintiff is maintainable?
2. Whether the appellant/plaintiff has proved and accepted that the time stipulated for the work is the essence of contract? and;
3. Whether the appellant/plaintiff is entitled to forfeit the earnest money deposit?
4. Whether the respondent is not entitled to pay damages over and above 7.5% of the tender in case of recession of contract legally?
11. It is an undisputed fact that the appellant herein is a Board called as K.P.T.C.L. and the Executive Engineer of the Board, Bidar called for tender. Since the tender submitted by the respondent was accepted for a sum of Rs. 1,85,000/- and to that effect, an agreement was entered into as per Ex. P.1 and the respondent has not disputed about the execution of the agreement. It is not in dispute that the respondent agreed to complete the work entrusted by the board within four months i.e., on or before the end of March 1989. According to the terms of Ex. P.2, the appellant/plaintiff is required to supply the cement and other materials. Ex. P.1 is the original agreement and Ex. P.2 is the schedule of contract. Respondent has not denied about the execution of Ex. P.1 and the terms contained in Ex. P.2. According to the terms of the agreement Ex. P.1, respondent agreed to carryout the work of construction as per the agreement and both parties abide by the terms and conditions of the contract contained in the schedule Exs. P.2 and P. 3 and agreed to complete the work within four months from the date of lineout given to the respondent by the Executive Engineer. Clause 16 of the agreement discloses that contractor shall not be entitled to claim any damages for the loss suffered on account of the delay or supply of materials and the delay has been caused because of the difficulties relating to the supply of materials. Ex. P.1 was entered into between the parties on 22.11.1988 and the respondent herein accepted Clause 16 of the terms of the agreement and the appellant/plaintiff is expected to supply the cement i.e., required quantity of cement at the rate of Rs. 65/- per bag. It is also mentioned in the schedule ''A'' of Ex. P.2 that the contractor is expected to lift the cement from M.W. Stores, Hubli. This fact has not been seriously disputed. To appreciate the contentions of the parties, it is better to cull out Clause 30 of the agreement which reads as under:
Clause 30 - Except where otherwise specified in the contract and subject to the powers delegated to him by KEB under the Code Rules then in force, the decision of the Chief Engineer for the time being shall be final conclusive, and binding on all parties to the contract upon all questions relating to the meaning of the specifications, designs, drawings, and instructions herein before mentioned and as to the quality of workmanship; or materials used on the work, or as to any other question, claim, right, matter or thing whatsoever, if any way arising out of, or relating to the contract, designs, drawings, specifications, estimates and instructions, orders or those conditions, or failure to execute the same whether arising during the progress of the work, or after the completion or abandonment thereof.
12. The trial Court just by depending upon Clause 30 of the agreement Ex. P.2 held that suit is not maintainable. The trial Court failed to consider Clause 52 of the agreement, which reads as under:
Clause 52 - In case the contractor leaves the work in the middle which may force the Board to entrust the work to some other contractor for completion, the excess cost incurred by the Board shall be made good by the defaulting contractor besides forfeiting the Earnest Money Deposit.
13. So, in the instant case, respondent/defendant failed to complete the work and left it in the middle. As could be seen from the materials i.e., Ex. P.6, that there is a delay in construction work. If he fails to commence the work and complete within one month on the receipt of notice Ex. P.5 they will cancel the contract and to get the balance work done entirely at the cost of the respondent. Ex. P.7 is a letter addressed to the appellant/plaintiff that the work will be completed on or before August 1990. He has made a request to the appellant/plaintiff to allot 100 bags of cement as per Ex. P.6, Even though he has received a letter from the appellant as per Ex. P.9, at the request of the respondent, 100 bags of cement was allotted and he was informed to lift 100 bags of cement to complete the work within 3 months. But the respondent herein requested the appellant as per Ex. P.9 to allot 200 bags of cement instead of 100 bags. Accordingly, the request of the respondent has been considered and 200 bags of cement was allotted for the construction work and directed him to lift 200 bags of cement within 28.5.1991.
14. Of course, the appellant agreed to supply the cement at the rate of Rs. 65/- per bag. It is for the contractor either to take the said cement allotted by the appellant or to purchase in the open market the required number of cement bags. It is only an offer made by the appellant and ultimately, it is for the contractor to inform the authorities concerned well in time the required number of cement bags for completion of the contract work. Therefore, as per Ex. P. 5 the notice dated 27.6.1990 came to be issued as he has failed to complete the work within the stipulated time and when the notice was issued, the respondent herein opened his eyes and requested the appellant/plaintiff to supply 200 bags of cement in the month of July 1990. As per Ex. P.7, he had undertaken to complete the work on or before August 1990 and he gave the reason as to why he did not complete the work and as per Ex. P.9 at his request only 100 bags of cement was allotted and as per Ex. P.11 at his subsequent request, 200 bags of cement were allotted. Therefore, there is no delay as such in allotting 200 bags of cement. Therefore, the finding recorded by the trial Court mat there is a delay in supply of cement cannot be accepted. When Clause 52 of the agreement discloses that if the contractor leaves the work in the middle, then the appellant/plaintiff is entitled to entrust the work to some other contractor and to recover the excess amount payable to the second contractor. Therefore, there is no dispute with regard to the specification, design, drawings, estimate and instructions to refer the matter to the Arbitrator i.e., at the decision of the Executive Engineer to adjudicate this matter. Therefore, u/s 73 of the Contract Act, the suit filed by the appellant/plaintiff is maintainable since there is breach of contract i.e., Exs. P. 1 and 2. The decisions referred to by the learned Counsel for the appellant are aptly applicable to the facts of the case. Whereas, the decision referred to by the learned Counsel for the respondent/defendant and relied on by the trial Court are distinguishable.
15. The respondent contractor in pursuance of the tender notification issued by the Board submitted his tender for construction of masonry earth and etc., and after acceptance of his tender by the appellant/plaintiff, an agreement was entered into. According to Clause 30 as per Ex. P.2 any dispute arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or those conditions or failure to execute the same shall be referred to Chief Engineer and that his decision will be final. So also, Clause 52 expressly provides that in case the contractor leaves the work in the middle if the appellant/plaintiff incurred excess cost in completing the work by entrusting the work to the other contractor, the appellant/plaintiff can recover the same from the contractor-respondent apart from forfeiting the earnest money. Therefore, the trial Court totally misread the decisions referred to in
16. The other contentions urged by the advocate for the appellant is that in case if this Court comes to the conclusion that time is the essence of the contract, then the appellant is entitled to levy the penalty at 7.5% to the cost of contract. In the instant case, the admission made by P.W. 1 clearly indicates that he has already received a bill of Rs. 35,000/- apart from 200 bags of cement amounting to Rs. 13,000/- and inspite of that, he has not completed the work at least after lifting of 200 bags of cement within 4 months from the date of receipt of lifting of 200 bags allotted to him, which shows his inability and there is a delay in requesting for supply of cement and also lifting of cement. In view of the above facts of the case, it is just and proper to impose interest at the rate of 6% p.a. on the excess amount incurred by the appellant/plaintiff in getting the work completed through second subsequent contractor i.e., Rs. 1,50,990/-.
17. For the foregoing reasons, the appeal is allowed. The judgment and decree passed by the trial Court is hereby set aside. The appellant/Board is entitled to recover Rs. 1,50,990/- from the respondent with interest at 6% p.a. from the date of filing of the suit till the date of realization.
