State of Kerala and The Superintending Engineer, Harbour Engineering, North Circle, Kozhikode v. C. Jayaprakash

RFA.188/2005 1 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MRS. JUSTICE SHIRCY V.** **MONDAY, THE 16TH DAY OF DECEMBER 2019 / 25TH AGRAHAYANA, 1941** ## **RFA.No.188 OF 2005** **AGAINST THE JUDGMENT & DECREE IN OS 63/2002 DATED 22-07-2004 OF I ADDITIONAL SUB COURT, KOZHIKODE** ## **APPELLANTS/DEFENDANTS:** **1 STATE OF KERALA REP. BY THE DISTRICT COLLECTOR, KOZHIKODE. 2 THE SUPERINTENDING ENGINEER HARBOUR ENGINEERING, NORTH CIRCLE, KOZHIKODE 6.** **BY GOVERNMENT PLEADER SMT. N.S. REHANA** ## **RESPONDENT/PLAINTIFF:** **C.JAYAPRAKASH, AGED 52 YEARS, S/O.LATE UNNI, P.W.D.CONTRACTOR, RESIDING AT CHAMAKKALAYAIL HOUSE, BANK ROAD, KALATHINKUNNU, AMSOM, DESOM KOZHIKODE TALUK.** **R1 BY ADV. SRI.M.KRISHNAKUMAR R1 BY ADV. SMT.PRABHA R.MENON** **THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 15-11-2019, THE COURT ON 16-12-2019 DELIVERED THE FOLLOWING:** RFA.188/2005 2 ## **JUDGMENT** **Dated this the 16th day of December 2019** The defendants in O.S. No. 63 of 2002 on the file of the Subordinate Court, Kozhikode are the appellants. The suit filed by the plaintiff/respondent was decreed by the impugned judgment and decree dated 22[nd] July, 2004. Aggrieved by the same, this appeal has been preferred. 2. The brief facts required for the disposal of this appeal are as follows: The plaintiff, a Contractor, was entrusted with the work of reconstruction of Auction Hall of Fishing Harbour at Beypore. The plaintiff entered into an agreement with the defendants on 21.5.1999. The work was satisfactorily completed by the plaintiff on 31.12.1999. Therefore, the bill has to be paid on 1.1.2000 as per the terms of the contract. Later a cheque was issued to the plaintiff, but the plaintiff received money as per the cheque dated 17.1.2002 only on a later date due to treasury ban. Though two supplemental agreements were executed on 4.2.2000 and 30.3.2000, the claim is for the delayed payment for the original RFA.188/2005 3 work which was completed on 31.12.1999.The plaintiff has claimed an amount of Rs.5,63376/-as interest limiting it at the rate of 18% per annum from 1.2.2000 to 17.1.2002. 3. The defendants admitted that the payment was effected only on 17.1.2002. They contended that as per the agreement, the period for completion of the work was six months. The site was handed over to the plaintiff on 31.5.1999. So, the work was to be completed on or before 30.11.1999. It was also admitted by them that the work was completed by the plaintiff on 31.12.1999 and the measurement was taken on 29.2.2000. The defendants have a case that part payment was effected on 31.3.2000. The final bill was signed on 31.12.2001 and soon thereafter the cheque was issued. They are not liable for the delay in presenting the cheque and encashing the same. The suit was filed only to harass them. 4. Before the court below, on the side of the plaintiff Exts. A1 to A11 were marked. On the side of the defendants, DW 1 was examined and Exts. B1 to B8 were marked. The court below, after evaluation and appreciation of the evidence concluded that the plaintiff is entitled to realize a sum of Rs.2,69,282/- with interest at the rate of 6% from the date of the RFA.188/2005 4 suit till the date of realisation. Though the claim for interest was at the rate of 18%, the court has awarded only 6% interest for the period from 1.2.2000 to 17.2.2002. 5. Feeling aggrieved with the decree to pay that much amount as interest, this appeal has been preferred by the defendants. 6. Heard Smt. N.S. Rehana, the learned Government Pleader for the appellants and Smt. Prabha R. Menon, the learned counsel for the respondent. 7. The question to be considered is whether the plaintiff is entitled to realize interest for the delayed payment. Admittedly, the plaintiff was entrusted with the work on 21.5.1999 which was completed by him on 31.12.1999. Therefore, the payment was to be effected on 1.1.2000. The main defence advanced by the defendants to resist the claim of the plaintiff is on the basis of clause 69 of the preliminary specification of Madras Detailed Standards Specification (MDSS) which restricts the right of the contractors from claiming interest on delayed payment. The said argument is opposed by the plaintiff pointing out that clause 68 of the preliminary specification of the MDSS has to be read in consonance with RFA.188/2005 5 Clause 69 where it is specifically stated that the department have to pay the amount due to the contractors within 14 days of the completion of the work excluding 5% which will be withheld and retained as security. 8. The learned counsel for the plaintiff relies on the decision of a Division Bench of this court in Anirudhan v. Government of Kerala (1999 (3) KLT 1) wherein it was held as follows: "19. ............... Having regard to the explicit terms of Art. 180 of Kerala Financial Code and 15 of the Kerala P.W.D. Manual it is clear that Government are duty bound to make payments to the work completed. The aforesaid provision, in our opinion would unambiguously command that no work shall be tendered except with the availability of complete funds, has given rise to a promise or representation and it is on that basis alone the contractors come forward to undertake the work, plan their work programme and arrange for the employment of staff and engagement of machinery and incur large investments. ............... Non-payment of the amounts due to the contractors will cause grave injustice to them. It is held that the contractors are engaged by the State on their expectation and therefore cannot be denied their legal dues. A citizen is entitled in law to insist that the State will go by the procedure which it has laid down. In all these cases the State has RFA.188/2005 6 entered into a contract undertaking payment upon satisfactory completion of the work. The Government has also undertaken to pay the other amounts for the work done as per the agreement. Therefore, the Government, in our opinion cannot be permitted to violate the solemn contracts. Such a position would be contrary to the clear mandate under the Constitution for the State to act free from unfairness. We are also unable to accept the argument of the learned Advocate General that the principles of seniority has to be maintained. We are of the opinion that principles of seniority is totally irrational and opposed to the mandate under the Financial Code, P.W.D. Manual and provisions of the agreement. As already noticed, the Financial Code and the P.W.D. Manual provide for complete finding and tendering and only thereafter the work is to be called. The arrears, as pointed out by the contractors and also by the State, are accumulating only because of violation of the rules by not providing full funds as provided in the rules. The Government has to make payments strictly in time........... Even though interest is asked for, for the delay in payment of the amounts due, we are not now awarding interest in view of the undertaking now given by the State that all the contractors who have filed writ petitions and appeals on or before 23.6.1999 will be paid within four months." In State of Kerala v. P. Edward John (2015 (3) KHC 867), another Division Bench of this court held as follows: RFA.188/2005 7 "17. When the provisions in the Kerala Financial Code, PWD Manual and the contract for execution of the work mandate payment of part bill during the progress of work and final bill immediately after the completion of the work, the contractors are legally entitled for such payments without any delay, as they are undertaking the contract work on the legitimate expectation and promise that payment will be made at any rate immediately after the completion of work. ............ When payment of part bills is delayed indefinitely, the contractors are constrained to complete the entire work within the time stipulated in the contract by investing the entire funds raised by them, which in most of the cases would be borrowed funds from banks or financial institutions at higher rate of interest." "21. S.3 of the Interest Act, 1978 deals with the power of the Court to allow interest. As per sub-section (1) of S.3 of the said Act, in any proceedings for the recovery of any debt or damages or in any proceeding in which a claim for interest in respect of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the Court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest for the whole or part of the period enumerated in Clauses (a) and (b) to the said sub-section. Going by Clause (a), if RFA.188/2005 8 the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings and going by Clause (b), 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, to the date of institution of the proceedings. The proviso to sub-section (1) of S.3 provides that, where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under this Section for the period after such repayment." In State of U.P. v. Harish Chandra [(1999) 1 SCC 63], the Apex Court has held as follows "10. .......The claim for damages or claim for paymant for the work done and which was not paid for would not obviously cover any money which may be said to be lying with the Government. ................. Therefore, the contention of learned Senior Counsel for the appellant-State that clause 1.9 barred the consideration of such a claim for interest cannot be sustained. The High Court, therefore, rightly came to the conclusion that that clause was not a bar to such a claim." "11. ............ Further, it could not be said that the arbitrator had found the interest at the rate of 6 per cent per annum to be reasonable. In fact, he had no authority or power to to go beyond RFA.188/2005 9 6 er cent interest. So far as the Court is concerned, it is in its discretion to award 15.5 per cent interest on the decreetal amount from the date of the decree till satisfaction of the decree. As that was within the realm of the discretionary jurisdiction of the trial court, it could not have been set aside by the High Curt in appeal. The cross-appeal will stand allowed to this extent by modifying the judgment and order of the High Court by substituting 15.5 per cent interest instead of 6 per cent interest per annum from the date of the decree till payment." In Harish Chandra's case (supra) it was further held that if the amount is not disbursed owing to any dispute or difference, the Arbitrator has no authority or power to go beyond the agreement and awarding interest in such a case is the discretionary jurisdiction of the trial court and the Arbitrator had in fact no authority or power to go beyond 6%. As far as the court is concerned, it is in its discretion to award more than 6% interest (in that case 15.5.% interest) as that was within the realm of the discretionary jurisdiction of the trial court. 9. The limited consideration to be made in this appeal is to determine, whether the court was right in awarding interest for the delayed payment.The principle laid down in all the RFA.188/2005 10 above three decisions, is that when there is delay in payment of the actual amount due to the contract on completion of the work entrusted to him, he is entitled to claim interest for the delayed payments. 10. When a work is entrusted to a Contractor, he is supposed to complete it within the stipulated time. But when the work is completed, the department is equally bound to effect payment. Most of the contractors are doing their work on the basis of the part payments effected in the course of the work. When the payments are delayed or not paid they have to avail financial assistance from financial institutions on exorbitant interest. In Anirudhan's case (supra) a Division Bench of this Court made it clear that no work shall be tendered except with the availability of complete funds and applying the principles of seniority in making payments is totally irrational and opposed to the mandate of the Financial Code as well PWD Manual. It is also made clear that a citizen is entitled in law to insist that the State will go by the procedure which it has laid down. Applying the principle laid down in all these decisions, I find that there is absolutely no justification in interfering with the judgment rendered by the court below . RFA.188/2005 11 The appeal is, accordingly, dismissed with no order as to costs. Sd/SHIRCY V JUDGE sb