High Court of KeralaDivision Bench2023-03-24The appeal by the State (RFA 270/2017) is dismi...

RFA Nos. 270 of 2017 and 374 of 2017 (P.K. Ramachandran v. State of Kerala and Others)

Case / Petition Number:RFA 270/2017; RFA 374/2017

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: A. Muhamed Mustaque
Shoba Annamma Eapen
Judgment Date: 2023-03-24
Court Decision / Holding: I. RFA 270/2017 is dismissed. No order as to costs. II. RFA 374/2017 is partly allowed. The plaintiff is entitled to pendente lite and future interest at 6% until realization of decree on the reliefs granted, except for the decreted interest amount of Rs. 22,48,571/-, which is ordered to be paid toward interest. The plaintiff is also entitled to proportionate costs in the trial court and in the appeal.
Final Disposition: The appeal by the State (RFA 270/2017) is dismissed; the plaintiff’s claim remains; in RFA 374/2017 the Court partly allows the claim, granting pendente lite and future interest at 6% and directing proportionate costs; the decree will reflect these adjustments.

Parties to the Case

Appellants / Petitioners

P.K. Ramachandran; A.R. Deepa; A.R. Denoop

Respondents

State of Kerala represented by the Secretary to Government, Public Works Department, Government Secretariat, Thiruvananthapuram; Superintending Engineer, PWD Buildings & Local Works, Central Circle, Thrissur

Legal Representation & Advocates

Counsels for Petitioners

• K. Babu Thomas
• Marykutty Babu

Counsels for Respondents

• C.P. Pradeep

Case Synopsis & Summary

These Regular First Appeals arise from the judgment and decree dated 29-10-2015 in O.S. No. 85/2007 of the III Additional Sub Court, Ernakulam, on a contract for construction of a 350-bed Ayurveda hospital at Thripunithura. The plaintiff, P.K. Ramachandran, sought declaration and realization of money for work executed for the State Public Works Department (PWD); the work spanned from 1999 to 2005 with a late site handover and delayed material supply by the defendant. The trial court partly allowed the plaintiff’s claims under multiple heads: payment based on 1996 and 1999 PWD schedules, additional marble flooring, semi-wire-cut bricks, and open-market procurements, along with interest and cement value, totaling substantial sums. The defendants argued limitations and that supplemental agreements and final bills capped claims at agreed rates, asserting no entitlement to enhanced rates due to extensions. The appellate court overruled the limitation argument, recognized that the delay was not caused by the plaintiff, and relied on established case law (Aries v. Tamil Nadu Electricity Board, Assam State Electricity Board v. Buildworth, and P.M. Paul v. Union of India) to affirm escalation principles. It affirmed most of the trial court’s findings while clarifying interest and costs. On final disposal, RFA 270/2017 was dismissed; RFA 374/2017 was partly allowed, granting pendente lite and future interest at 6% and proportionate costs.

Legal Doctrines & Maxims

Pendente lite (pendency of suit interest)
Escalation/price adjustment as a normal incident in inflationary times (as supported by PM Paul v. UOI)
Duty of the parties to perform contract in accordance with contract terms

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellants (State respondents) contend that enhanced rates and escalation claims are barred by the supplemental agreements and the final bill. They argue that the extension of time and the clauses in supplemental agreements No. 1, 7, and 8 preclude any enhanced compensation, and that the time-bar on claims is grounded in the final bill and subsequent amendments. They challenge the basis for payments beyond the agreed rates and emphasize that the delay was attributable to the PWD’s own actions, not the contractor, thus negating escalation rights.

Contentions of Respondents

The plaintiff (Ramachandran) contends that escalation and additional payments are payable where delays were not caused by him, citing 1996/1999 PWD schedules and relevant case law (Aries v. Tamil Nadu Electricity Board; Assam State Electricity Board v. Buildworth; PM Paul v. UOI). He argues that the site handover delay and material supply shortcomings justify escalation by the expert valuation. The plaintiff also seeks interest on delayed payments and costs of proceedings.

Cited Precedents (3)

Case Name	Citation	Treatment	Explanation
M/s. Aries and Aries v. Tamil Nadu Electricity Board	AIR 2017 SC 1897	Positive	Cited by the plaintiff to support escalation entitlement when delay is not attributable to the contractor; relied upon to justify escation charges in the present case.
Assam State Electricity Board and others v. Buildworth Pvt. Ltd.	AIR 2017 SC 3336	Positive	Cited to support escalation/price adjustment rights in delayed works; used to reinforce entitlement principles in the judgment.
P.M. Paul v. Union of India	[1989 supp. (1) S.C.C. 368]	Positive	Cited for the proposition that escalation is a normal incident in inflationary conditions affecting contract performance.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **&** **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN FRIDAY, THE 24[TH] DAY OF MARCH 2023 / 3RD CHAITHRA, 1945 RFA NO. 270 OF 2017** **AGAINST THE JUDGMENT AND DECREE DATED 29.10.2015 IN O.S.NO.85/2007 OF III ADDITIONAL SUB COURT, ERNAKULAM** **------** ## **APPELLANTS/DEFENDANTS:** - 1 **THE STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, PUBLIC WORKS DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM.** - 2 **THE SUPERINTENDING ENGINEER, P.W.D.BUILDINGS & LOCAL WORKS, CENTRAL CIRCLE, T.B.ROAD, THRISSUR.** **BY SENIOR GOVERNMENT PLEADER, SRI.C.P.PRADEEP** ## **RESPONDENT/PLAINTIFF:** - **1 **P.K.RAMACHANDRAN, AGED 74 YEARS, S/O.KUNJU PANICKER, RESIDING AT DEEPA MANDIR KARUVELIPADY, KOCHI, THOPPUMPADY VILLAGE, KOCHI TALUK, ERNAKULAM.(DIED)** - Addl.R2 **A.R.DEEPA, SREELAKSHMI PRRA-9 PALLICHAMBEL ROAD, PALARIVATTOM P.O., KOCHI-682025.** - Addl.R3 **A.R.DENOOP, DEEPA MANDIR, KARUVELIPADY, THOPPUMPADY P.O., KOCHI-682005.** **BY ADVS.** **K.BABU THOMAS MARYKUTTY BABU** **THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 17.01.2023, ALONG WITH RFA NO.374/2017, THE COURT ON 24.03.2023 DELIVERED THE FOLLOWING:** RFA Nos.270 & 374/2017 ..2.. ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **&** **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN FRIDAY, THE 24[TH] DAY OF MARCH 2023 / 3RD CHAITHRA, 1945 RFA NO.374 OF 2017** **AGAINST THE JUDGMENT AND DECREE DATED 29.10.2015 IN O.S.NO.85/2007 OF III ADDITIONAL SUB COURT, ERNAKULAM APPELLANT/PLAINTIFF:** - ***1 P.K.RAMACHANDRAN, DEEPA MANDIR, KARUVELIPADY, THOPPUMPADY P.O., KOCHI TALUK, ERNAKULAM, KOCHI-682005.** - **Addl.A2 A.R.DEEPA, D/O.LATE P.K.RAMACHANDRAN, AGED 53 YEARS, SREELAKSHMI, PRRA-9, PALLICHAMBEL ROAD, PALARIVATTOM P.O., KOCHI-682025.** - **Addl.A3 A.R.DENOOP, AGED 45 YEARS,** **S/O.LATE P.K. RAMACHANDRAN, DEEPA MANDIR, KARUVELIPADY, THOPPUMPADY P.O. KOCHI -682005.** **(THE LEGAL REPRESENTATIVES OF THE DECEASED SOLE APPELLANT ARE IMPLEADED IN THE PARTY ARRAY AS ADDITIONAL APPELLANTS 2 AND 3 VIDE ORDER DTD.01/08/2018 IN IA 1224/2018** **BY ADVS. SRI.K.BABU THOMAS SMT.MARYKUTTY BABU** ## **RESPONDENTS/DEFENDANTS:** - **1 STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, PUBLIC WORKS DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695001.** - **2 THE SUPERINTENDING ENGINEER, P.W.D.BUILDINGS & LOCAL WORKS, CENTRAL CIRCLE, T.B.ROAD, THRISSUR-680001.** **BY SENIOR GOVERNMENT PLEADER, SRI.SRI.C.P.PRADEEP** **THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 17.01.2023, ALONG WITH RFA.NO.270/2017, THE COURT ON 24.03.2023 DELIVERED THE FOLLOWING:** RFA Nos.270 & 374/2017 ..3.. **A.MUHAMED MUSTAQUE & SHOBA ANNAMMA EAPEN, JJ. ---------------------------------------------RFA Nos.270 & 374 of 2017** **---------------------------------------------Dated this the 24[th] day of March, 2023** ## **JUDGMENT** ## **A.Muhamed Mustaque, J.** These appeals arise from the judgment of the Sub Court, Ernakulam in O.S.No.85/2007 dated 29.10.2015. 2. The above suit was for declaration and realization of money based on the contract entered between the plaintiff and the State Public Works Department, the defendants in the suit. The suit has been decreed substantially in favour of the plaintiff. These appeals are preferred by the plaintiff and the defendants. The parties, for brevity, in these appeals are referred to as the plaintiff and the defendants. 3. The plaintiff was awarded a work for the construction of 350 bedded ward of an Ayurveda RFA Nos.270 & 374/2017 ..4.. hospital at Thripunithura on 09.09.1997. The period of the contract was 24 months. The work was completed on 14.12.2005. The suit was laid for the unpaid value of the work. The plaintiff's claim and the claim allowed by the trial court can be summarized as follows: |Nature of claim|Plaint claim|Allowed by the trial court| |---|---|---| |The unpaid value of the work carried out between 21.9.1999 and 1.12.2004 based on 1996 PWD Schedule and 1999 PWD schedule rate.|Rs.2,35,46,148/-|Rs.2,35,46,148/-| |The unpaid value of the work carried out between 1.12.2004 and 14.12.2005.|Rs.47,84,011/-|Rs.45,29,922/-| |Unpaid agreed rate for flooring with marble tiles.|Rs.89,70,231/-|Rs.87,60,427/-| |Unpaid value of works using semi- wire cut bricks in the place of country burnt bricks.|Rs.15,72,751/-|Rs.15,72,752/-| |Interest on delayed payment|Rs.75,48,807/-|Rs.22,48,751/-| |The value of cement procured from the open market|Rs.10,57,446/-|Rs.10,57,446/-| RFA Nos.270 & 374/2017 ..5.. 4. Heard the learned counsel appearing for the plaintiff and the learned Government Pleader. 5. We note that there was a considerable delay in handing over the site and in supplying materials as agreed. No one has a case that the plaintiff had committed any default. The plaintiff was paid a sum of Rs.9,29,06,994/- pending suit on 16.02.2009. The final bill was prepared on 25.11.2005. Though an argument has been raised by the learned Government Pleader based on limitation, in the light of the fact that the final bill itself was prepared only in the year 2005 and the suit was filed on 01.02.2007, we find no merit in this argument. We, thus, overrule the argument of the learned Government Pleader. 6. The following issues were framed by the court below: - 1.Whether the plaintiff had made construction as per the agreement or not. 2. Whether the plaintiff is entitled to get a RFA Nos.270 & 374/2017 ..6.. decree for realization of the amount claimed. 7. We have already overruled the objection of the learned Government Pleader on the point raised on the limitation. According to the learned Government Pleader, the plaintiff received the money after the final bill. The plaintiff also executed a supplemental agreement and in the light of the supplemental agreement and the acceptance of the final bill, the contractor cannot claim any other amount other than as agreed in the agreement. 8. The learned Government Pleader referred to the following Clauses in the supplemental agreement: Clause-3 in supplemental agreement No.1 is as follows: “The decision of the Superintending Engineer regarding the amounts payable for the extra item shall be final and legally binding on the contractor and cannot be questioned by the RFA Nos.270 & 374/2017 ..7.. contractor in any manner whatsoever.” The recital in the supplemental agreement No.7 is as follows: “whereas the contractor further agreed that no further claim will be preferred on account of extension of the period of the contract”. Clause 2 in supplemental agreement No.8 is as follows: “The contractor shall not claim any enhanced rate or compensation whatsoever for or on account of such extra items due to the increased rate of labour or materials or any other ground.” The proceedings of the Superintending Engineer and his order dated 19.4.2020, in Clause 1, states that due to the extension of time for completion, no claim for enhanced rate will be allowed for the work. 9. While allowing the claim, the trial court relied on the opinion of the expert's report. The RFA Nos.270 & 374/2017 ..8.. rates were quoted in accordance with the 1996 schedule by 60% in July 1999 and 80% in December, 2004. The expert, accordingly, calculated the measured work and found that the plaintiff was entitled to a sum of Rs.2,73,33,999/- as against the claim for Rs.2,35,46,148/-. The question is whether the plaintiff is entitled to an enhanced claim in the light of the change of the PWD schedule of rates. 10. The learned counsel for the plaintiff Sri.Babu Thomas, placing reliance on the judgments in **M/s.Aries and Aries v. Tamil Nadu Electricity** **Board [AIR 2017 SC 1897** ] and **Assam State** **Electricity Board and others v. Buildworth Pvt.Ltd. [AIR 2017 SC 3336]** , argued that the plaintiff is entitled to escalation charges for the works delayed beyond the scheduled period of completion if the plaintiff is not at fault in completing the work. 11. The contract provisions have to be read RFA Nos.270 & 374/2017 ..9.. keeping in mind the duty attached to the parties to the contract to perform the contract in accordance with the terms and conditions in the contract. The various clauses referred to as above cannot deter the plaintiff from claiming escalation charges if the delay was not occasioned by the act of the plaintiff. In this case, the site was handed over to the plaintiff after two years. The materials were not supplied as per the agreement. No attribution of the fault has been made as against the plaintiff. The trial court correctly came to the conclusion that the delay was occasioned by the PWD itself. In **P.M.Paul v. Union of India [1989 supp.(1) scc 368],** the apex court opined that escalation is a normal incident arising out of a gap of time in this inflationary age in performing any contract. No one has a case that a calculation made by experts based on the prevalent schedule is erroneous. In such circumstances, we affirm the impugned judgment RFA Nos.270 & 374/2017 ..10.. awarding unpaid value work for Rs.2,35,46,148/and Rs.45,29,922/-. 12. The next claim is for the value of marble. As per the contract, the agreed rate for flooring the marble tiles included in item No.49 of the schedule of works, the plinth area was 10564.15 sq. m. The rate agreed was 1073.38 per sq.m.. The plaintiff admittedly carried out the marble flooring in the additional area. As per the expert report, the total area is 11169.45 sq.m. The plaintiff was paid for 10564.15 sq.m. in 2004. The expert opined that for the additional work done, the plaintiff was entitled to Rs.87,60,427/-. We do not find any error in the calculation of this amount. 13. The next claim was for the unpaid value of the work using semi-wire cut bricks in the place of country bricks. The expert calculated the total value of the semi-wire cut machinery at Rs.56,72,560/-. The plaintiff was paid RFA Nos.270 & 374/2017 ..11.. Rs.40,99,808/-. The balance has thus arrived at Rs.15,72,752/-. We also affirm the finding of the trial court. 14. The next claim was for reimbursement of the materials procured from the open market. Exts.A9, A14, A20, A33, A38, A41, A42, A43, A62, A63, A65, A70 and A78 were relied by the plaintiff to substantiate his claim. The above are communications issued by the plaintiff. There is no contradiction of the claim for these amounts as referred to in the above letters. Admittedly, the Department failed to provide the materials in time. We, thus, affirm that finding also. 15. The plaintiff filed a claim for Rs.75,48,807/- towards interest for the delayed payment. The court below allowed Rs.22,48,751/- towards interest for the delayed payment. This was subsequently incorporated in the original decree as it appears that there was an omission to include it in the judgment pronounced on RFA Nos.270 & 374/2017 ..12.. 29.10.2015. This portion was included only on 05.07.2016 as per the order in I.A. No.980/2016. It is seen from the judgment, 6% interest was allowed. The amount was calculated at Rs.22,48,751/- and subsequently incorporated in the decree. This can be treated as a clerical mistake and no illegality has been committed by the court below in calculating the interest. 16. The claim for the plaintiff that he is entitled to the enhanced rate of interest is untenable as it is not a commercial transaction. However, the plaintiff is entitled to _pendente_ _lite_ interest at 6% and future interest. So also the plaintiff is entitled to the cost before the court below though it was not granted by the trial court. Thus: I. RFA 270/2017 is dismissed. No order as to costs. II. RFA No.374/2017 is partly allowed. The plaintiff is entitled to _pendente lite_ RFA Nos.270 & 374/2017 ..13.. and future interest at 6% till realization of decree on the reliefs granted other than for the decreed amount of Rs.22,48,571/- ordered to be paid towards interest. III. The plaintiff is also entitled to the proportionate cost in the trial court. The plaintiff is also entitled to proportionate cost in the appeal. **Sd/-** **A.MUHAMED MUSTAQUE, JUDGE** **Sd/SHOBA ANNAMMA EAPEN, JUDGE** ln RFA Nos.270 & 374/2017 ..14.. ## **APPENDIX OF RFA 270/2017** PETITIONER ANNEXURES ANNEXURE I TRUE COPY OF SIGNED MEASUREMENT BOOK DATED 09.02.2009.