State of Kerala & Others v. E. Ummer Bava

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE &** **THE HONOURABLE MR. JUSTICE P.SOMARAJAN** **FRIDAY, THE 22ND DAY OF JUNE 2018 / 1ST ASHADHA, 1940** **RFA.No. 384 of 2008 C** **AGAINST THE JUDGMENT & DECREE IN OS 392/2000 of I ADDL.SUB COURT, KOZHIKODE DATED 31-08-2006** ## **APPELLANT(S)/DEFENDANTS:** - **1 STATE OF KERALA, REPRESENTED BY CHIEF** **SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM.** - **2 SUPERINTENDING ENGINEER, P.W.D. ROADS** - **AND BRIDGES (NORTH) CIRCLE, CALICUT 673 001.** - **3 EXECUTIVE ENGINEER, P.W.D.ROAD DIVISION,** - **NEAR CIVIL STATION, KOZHIKODE-20.** ## **BY ADV.GOVERNMENT PLEADER SRI.K.V.MANOJ KUMAR** ## **RESPONDENT(S)/PLAINTIFF:** **E.UMMER BAVA, AGED 58 YEARS, S/O.ALIKUTTY HAJEE, P.W.D.CONTRACTOR,, "SAKKEENA MANZIL", DOWN HILL, MALAPPURAM DISTRICT.** **R1 BY ADV.SRI.JAYAKUMAR K (SR) R 1 BY ADV. SRI.LAL K.JOSEPH BY ADV. SRI.K.K.M.SHERIFF BY ADV. SRI.P.M.KUNJUMOIDEENKUTTY BY ADV. SMT.SHEENA SAMUEL BY ADV. SRI.ZIYAD RAHMAN** **THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 9-03-2018, THE COURT ON 22/6/2018 DELIVERED THE FOLLOWING:** ## **A.M. SHAFFIQUE & P.SOMARAJAN, JJ.** ========================== RFA No. 384 of 2008 ==================== Dated this, the 22[nd] day of June, 2018 ## **J U D G M E N T** ## _**Shaffique, J.**_ This appeal is filed by the State and its officers challenging judgment dated 31/8/2006 in OS No.392/2000 by which suit has been decreed permitting the plaintiff/respondent to recover an amount of `1,47,14,405/- with interest at the rate of 18% per annum from 31/5/1999 till date of realisation. 2. The short facts involved in the suit are as under:- The plaintiff is a contractor who had undertaken the work relating to construction of a bridge at Edavazhikadavu on Mavoor Pannikode road in Kozhikode district. As per the terms of work order/agreement, he had to complete the work within 24 months and time stipulated was considered to be the essence of the contract. Agreement also contemplated that 25% of the work has to be completed by the end of 6[th] month, 50% by 12[th] month, 75% by 18[th] month and 100% by 24[th] month. The PWD offered to supply RFA No.384/08 -:2:- cement and MS rods for the work at PWD rates. Though the plaintiff was told that he will be handed over the entire site required for commencing and continuing with the work and the plaintiff had made all preparations for the same, the site was not handed over as per the terms of agreement. It was realised that the respondents were not in possession of a single extent of land required for the work. The agreement was executed on 30/11/1993. According to the plaintiff, after 3 months from the date of agreement, a very small portion of the site was handed over to the plaintiff. It was alleged that there was local resistance from neighbouring land owners and therefore the acquisition proceedings could not proceed. Plaintiff avers that even as on the date of suit, the Government was not in a position to take over the entire land required for the bridge especially the land for approach road on Cheruvadi side. The site for approach road on Cheruvadi side was taken possession by the department only by the middle of 1997 and the possession was given to the plaintiff much later. It is submitted that failure to give the land required for the approach road initially had put him into serious difficulties in transportation of materials required for construction of the RFA No.384/08 -:3:- bridge. If the approach road had been completed initially, he would have saved huge amounts towards transportation charges. It is submitted that despite all these hindrances and the breach committed by the department, he had completed the work. But he had suffered huge loss and damages on account of the delay on the part of the Government in providing the site in time. It is further contended that there was further delay to supply cement and MS rods whenever it was needed. Since the bridge has to be constructed across Eruvaipuzha, which is a branch of Chaliyar river, for certain months when Kerala Water authority used to construct bunds, the work could not proceed. December, January and February were the ideal months for carrying on the construction in the site without any difficulty, due to the rise in the level of water. But on account of delay in supply of cement and steel, the work could not proceed which also caused huge losses to the plaintiff. Plaintiff further contends that he had issued several letters to the department from 29/12/1993 onwards stating the reasons for the delay in carrying out the work,. It is further submitted that over a period of time, PWD themselves had increased the schedule of rates and despite the RFA No.384/08 -:4:- fact that plaintiff had continued with the work during the period when PWD rates were also increased, no such benefit was extended to the plaintiff. 3. It is stated that he had undertaken to complete the work at the rate of 84% more than the 1990 Schedule of rates fixed by the department. Since the work had to proceed beyond the stipulated time on account of various breaches committed by the defendants, and in the meantime, there had been an increase in the PWD schedule of rates during the year 1992 and 1996, he claimed 84% increase for the works that he had done after 1992 and after 1996 on the basis of the schedule of rates fixed by the PWD. He also claimed certain other amount towards loss and damages suffered in carrying out the work. 4. The defendants filed written statement _inter alia_ contending that major portion of the land was handed over to the plaintiff immediately on execution of the agreement. The site for construction of the bridge and the existing road was handed over on 1/12/1993, the land in block No.1 was handed over on 01/02/1994 and the balance land was handed over on 22/4/1995, except a length of 60 metres. It is submitted that the department RFA No.384/08 -:5:- had tried its level best to supply the departmental materials in time. However, the plaintiff was sending letters after letters in order to justify his stand in the matter. It is further contented that while calculating the final bill, an amount of `19,816/- was found to be due to the plaintiff, which he had received in full and final settlement of his claim on 31/3/2001. Defendants therefore denied the claim made by the plaintiff and sought for dismissal of the suit with costs. 5. Before the Trial Court, plaintiff was examined as PW1 and he relied upon Exts.A1 to A29. One witness was examined on the side of defendant as DW1 and he placed reliance upon Exts.B1 to B3. 6. The Court below based on the evidence found that the entire site was not handed over by the department to the plaintiff as the department itself was not in possession of the entire land either on the date of tender or at the time of execution of the agreement. Therefore, defendants had committed breach of contract and plaintiff cannot be made responsible for not completing the work within the stipulated time. It was found that though application was filed by the plaintiff calling upon the RFA No.384/08 -:6:- defendants to produce the files relating to the award that were passed in respect of the land that was acquired, the defendants only filed an affidavit stating that the documents were in the custody of revenue department. Hence it was found that defendants had failed to produce the material documents before Court to prove their contention that the land was given possession immediately thereafter. Accordingly the Court had drawn an adverse inference against the defendants for non production of the records. Court below thereafter found that the defendants also failed to prove that there was an existing road to the point where the bridge was constructed and the same was utilised by the plaintiff for carrying men and materials to the bridge side. From Exts.A5 to A23 documents, the Court below observed that the contractor had explained his difficulties and the losses he was suffering on account of the breach committed by the defendants. Finally the plaintiff issued a registered lawyer's notice, to which there was no reply as well. Court below therefore found that the defendants were responsible for the delay in carrying out the work and therefore he is liable to be compensated. It is found that the plaintiff had completed the work RFA No.384/08 -:7:- to the satisfaction of the department. But it could be seen that there had been delay in carrying out the work and at the instance of the defendants. On the said finding, the Court below observes that the plaintiff is entitled for the difference in the schedule of rates charged during the continuance of the work. Certain amounts had been deducted from the final bills. Due to non availability of cement and steel at the department store, plaintiff had to acquire the same from other agencies. The contention of the defendants was that since department materials were not available, he could have purchased cement from Malabar Cements and steel from Steel Industries Ltd, Kerala. Court below observed that in Ext.B1 agreement, the direction was to purchase cement from open market and taking into account the said fact, it cannot be contended by the defendants that the cement and steel have to purchased either from Malabar cement or Steel Industries. It is found that there is no illegality to claim the tender excess on the value of cement purchased by the plaintiff from other agencies. Another item on which recovery had been effected was non return of jute bags. Plaintiff contended that cement has been supplied in plastic/paper bags and therefore no RFA No.384/08 -:8:- recovery could be effected on that ground. Court below found that the amount collected on jute bags has to be refunded. Similarly, 1% of the bill amount has been deducted as contribution towards the Labour Welfare Fund. Admittedly, the obligation to remit 1% of the bill amount towards Labour Welfare fund is only for earthwork items, and the same cannot be deducted from the entire contract amount. Court below therefore directed to refund the said amount to the plaintiff. The 3[rd] defendant further deducted an amount of `1 lakh from the tender excess as the charges for the road roller proceeding that it is defendant's machinery. In fact, the plaintiff has used his own road roller. Court below found that the plaintiff has used his own road roller for which no amount can be withheld by the defendants and accordingly directed return of `1 lakh from the final bill. Plaintiff had a further claim that on account of the flood on 16/5/2005, he had to put 2400 bags of sand and 250 loads of boulders to save the island form being washed of by the flood. He had to spent `1 lakh under the said head. Though these matters were informed to the defendants by letter dated 16/5/1995 (Ext.A15), Court below found that due to heavy flood, the river bank was washed off and RFA No.384/08 -:9:- the river changed its course for about 20 to 25 metres. The situation had occurred after the Superintending Engineer had approved the levels. The water level of the area also shot up and the island and inspection bridge were washed off. It was observed that despite the contention of the defendants that they are not responsible for maintaining the island, no evidence was adduced. Court below therefore allowed the claim of `2 lakhs under this head. It is further found that the bridge was inaugurated by the Minister of PWD on 28/5/1999 and since the defendants had failed to prove their contention, the plaintiff was entitled for a decree. 7. Learned Government Pleader placing reliance on the documentary evidence adduced in the case submits that the plaintiff is not entitled to claim any amount from the defendants as he had received the balance amount due to him in full and final settlement. He had also executed necessary documents to indicate that he had no other claims. The time for carrying out the work has been extended by mutual agreement and the plaintiff had agreed that he will not make any claim in future. 8. On the other hand, learned Senior counsel Sri.K.Jayakumar appearing on behalf of the plaintiff/respondent RFA No.384/08 -:10:- submits that this is an instance where there has been fundamental breach of contract by the defendants. Though time was the essence of contract, since the site was not handed over in time, the plaintiff was unable to complete the work in accordance with the time schedule. When such fact is admitted, necessarily, the plaintiff is liable to be compensated for the loss suffered by him. The Court below having considered the entire matter in its proper perspective, there is no reason to disturb the said finding. 9. Learned Government Pleader placed reliance upon judgment in _**State of Kerala v. M.A.Mathai**_ [(2007) 10 SCC 195]. That was a case in which a contractor obtained a decree for recovery of money in connection with the work awarded to him by the respondent State. Court below had awarded `10 lakhs towards damages which was confirmed by the High Court. The appellant State contended that the contractor was not doing the work within the stipulated time and was asking for extension, whereas, the stand of the plaintiff was that extensions were sought for and supplemental agreements were executed not on the free will and free consent of plaintiff whereas it was due to circumstances which prevailed at that time which necessitated RFA No.384/08 -:11:- the plaintiff to agree to the commands of the defendants. The Apex Court observed that plaintiff's contention was that it was due to coercion that supplemental agreements were executed. Apex Court observed that the Trial Court and the High Court were totally confused about the nature of suit, suit itself was a suit for recovery of money for damages. Before the Apex Court, the plaintiff contended that the suit was not for damages, but for extra work done which the Apex Court did not agree. After referring to the judgment in _**G.M. Northern Railway v. Sarvesh Chopra**_ [(2002) 4 SCC 45], it was held that if instead of avoiding the contract, contractor accepts the belated performance of reciprocal obligation on the part of the employer, the innocent party i.e., the contractor cannot claim compensation for any loss occasioned by the non performance of the reciprocal promise by the employer at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so. It was therefore held that under the Indian Law, in spite of there being a contract between the parties whereunder the contractor has undertaken not to make any claim for delay in performance of the contract occasioned by an act of the RFA No.384/08 ## -:12:- employer, still, a claim would be entertainable in one of the following situations; (i) If the contractor repudiates the contract exercising his right to do so, u/s 55 of the Contract Act, (ii) the employer gives an extension of time either by entering into supplemental agreement or by making it clear that escalation of rates or compensation for delay would be permissible, and (iii) if the contractor makes it clear that escalation of rates or compensation for delay shall have to be made by the employer and the employer accepts performance by the contractor in spite of delay and such notice by the contractor putting the employer on terms. 10. Learned Government Pleader also placed reliance on judgment in _**Rajasthan State Mines and Minerals v. Eastern Engineering Enterprises**_ [(1999) 9 SCC 283]. This judgment relates to challenge to an award passed under the Arbitration Act, 1940. This judgment had been relied upon by the Government Pleader to emphasise the point that the arbitrator being a creature of the contract between the parties cannot ignore the specific terms of the contract. 11. _**C.H.Ramalinga Reddy v. Superintending**_ RFA No.384/08 -:13:- _**Engineer**_ [(1999) 9 SCC 610] was also a judgment relating to an award passed by the arbitrator under the Arbitration Act, 1940 in a case where extra rates were claimed for work done beyond the agreement time at the schedule of rate prevailing at the time of execution. It was held that as per Clause 59 of the A.P. Standard Specifications, which applied to the contract between the parties, no claim for compensation on account of delays or hindrances to the work of any cause would lie except as defined therein. In so far as the claims fall outside the defined exceptions, the claim was inadmissible. 12. The judgment in _**State of Rajasthan v. Nav Bharat Construction Company**_ [(2006) 1 SCC 86] is also a matter arising under the Arbitration Act, 1940. In that case also, the Apex Court held that when majority of claims are against the terms of contract, the arbitrators could not have awarded any amount under the said head. 13. In _**Rashtriya Chemicals and Fertilizers Ltd v. Chowgule Brothers and others**_ [(2010) 8 SCC 563], it was held that when the contract contains a stipulation that any subsequent increase in wages would not result in escalation of RFA No.384/08 ## -:14:- rates, the rate has to remain firm till the end of extended period. It was held that award contrary to the said stipulation was unsustainable. 14. In _**A.P.State Trading Corporation v. G.V. Malla Reddy and Company**_ [2010 AIR SCW 6337], the Apex Court held that the arbitrator has no jurisdiction to direct interest to be paid at 18% when there is no covenant in the contract as to rate of interest. 15. In _**State of Rajasthan and another. v. Ferro Concrete Construction Pvt. Ltd**_ [(2009) 12 SCC 1], the Apex Court considered a claim for breach of contract arising u/s 73 of the Contract Act. This was also a case coming under Arbitration Act, 1940. It was held that while making a claim, if there was no evidence at all and the arbitrator makes an award claimed in the statement without anything more, the award becomes invalid. ## 16. _**H.R.Basavaraj v. Canara Bank**_ [(2010) 12 SCC 458]. This judgment has been cited to emphasise the principle laid down u/s 62 of the Contract Act, 1872. The Apex Court held that S.62 gives statutory form to the common law principle of novation. The basic principe behind the concept of novation is the RFA No.384/08 -:15:- substitution of a contract by a new one only through the consent of both the parties to the same. Such consent may be expressed as in written agreements or implied through their actions or conduct. When the rights under the old contract were kept alive even after the second agreement, and rights under the first agreement has not been rescinded, there was no substitution of contracts and, hence, no novation. 17. Another Division Bench judgment in _**State of Kerala v. N.Jayaprasad**_ (Arb.Appeal No.71/13) was cited wherein the Court after relying upon the judgment in _**Ferro Concrete Construction**_ (supra) and _**A.P. State Trading Corporation**_ (supra) had refixed the interest at 9% per annum as against the award of 18% per annum. 18. Learned Government Pleader also contended that as per the additional agreements, contractor was not entitled to claim any extra or enhanced claims or for compensation due to non availability of lands. He shall not be entitled for any claim for compensation for non completion of the work within the agreed time and for continuing the work in the extended time of agreed time due to such reasons. Further contract also stipulates that RFA No.384/08 ## -:16:- even if the schedule of rates are revised by the Government, the rate for the different works in the work awarded as per the agreement will not be revised. It is submitted that when the contractor has without any demur completed the work in full satisfaction of the department and has entered into supplemental agreements by which extension of period has been granted without any claim for enhanced rates, contractor cannot claim any damages at all. 19. On the other hand, learned senior counsel appearing for the plaintiff placed reliance upon the following judgments:- (i) _**M.N.Gangappa v.A.N.Setty and Co.**_ [(1973) 3 SCC 406]. In this case, the suit was one for recovery of damages for breach of contract. The contract was for supply of groundnut seeds of a specified quantity. Plaintiff dispatched certain quantity of goods by rail and the railway receipt was sent by registered post which was returned as refused. When a telegram was sent, defendant replied by stating that the contract was illegal and unenforceable. Apart from the other issues it was found that even in the absence of any evidence being adduced with regard to RFA No.384/08 -:17:- actual rates prevailing as on the date of breach, but when it was fully established that the validity and genuineness of certain rates were not disputed, the High Court having taken the lowest of the rates was justified in computing damages based on the said position. ## (ii) In _**Hyderabad Municipal Corporation v.**_ _**M.Krishnaswami Mudaliar**_ [(1985) 2 SCC 9]. In this case also, the question considered was whether the plaintiff was entitled to claim 20% extra over and above the rates originally agreed upon between the parties. Plaintiff had undertaken certain works which was to be completed within a period of one year. At the instance of the Executive Engineer, PWD due to financial difficulties, the plaintiff was requested to spread over the work to two years more, that is to complete the same in three years. The plaintiff agreed to spread over the work for two years more as suggested on condition that extra payment will have to be made to him in view of the increased rate of either materials or wages. The Government did not intimate to the respondent that no extra payment would be payable or that he will have to do the work on the basis of the original rates They maintained a silence. The RFA No.384/08 -:18:- plaintiff completed the work during the spread over period and submitted his final bill claiming 20% extra over and above the rates originally agreed upon. The High Court found that the Government was liable to make the extra payment as there was no dispute about the fact that rate of materials was not increased during the extended period of 2 years and the plaintiff was entitled to extra payment. Apex Court held that both in equity and in law plaintiff is entitled to such extra payment. (iii) A Division Bench judgment of this Court in _**State of Kerala v. T.E.Mohammed Kunju**_ (2008 (3) KLT 424) is also cited. That was a case in which suit was filed for realization of damages by a contractor who had undertaken works for construction of a building. The original period of completion of contract was 24 months. The agreement was executed on 8/2/1983 and site was handed over on 7/3/1984. It was alleged that there was delay on the part of the Government in giving the designs and of the structure. There were other hindrances also in carrying out the work. The structural designs have to be changed and therefore there is breach of contract. Claiming compensation for works beyond the stipulated time, suit was filed. Defendants RFA No.384/08 -:19:- denied the allegations raised. On evidence the Trial Court found that acceptance of the final bill by the plaintiff will not create any bar nor the contractor is estopped from claiming damages. It was found that the work was not completed within the original period as agreed upon and time was extended from time to time as per supplemental agreements. Last of the supplemental agreement is for extra items which had occasioned due to change in design. In the said agreement, there is a specific clause that the contractor is not entitled to claim any enhancement of rates and he is bound to do the work strictly in accordance with the agreed rate as provided relating to supplemental items. It was found that no claim had been made for compensation or for damages for extra items. But in regard to two supplemental agreements, which is executed for extending the original period, there were no other terms specifically altered. It was further found that plaintiff had issued a notice to the Principal claiming damages as per Ext.A1 and it is thereafter that supplemental agreements were entered into. Therefore, Court below observed that it did not exclude the claim of any damages in the supplemental agreement. Reference was also made to the judgment of the Apex Court in _**Mathai**_ RFA No.384/08 -:20:- (supra) and _**Sarvesh Chopra**_ (supra). It was held that the case of the contractor was covered by Clause (iii) of _**Mathai**_ (supra). The Division Bench therefore confirmed the decree passed by the Court below. 20. There is no dispute regarding the legal position which emanates from the factual circumstances involved in the case. A perusal of the plaint would show that the plaintiff has in so many words narrated the hindrances that had been caused at the instance of the defendants in completing the work. He therefore claimed enhanced rates and also the amounts which had been wrongfully withheld from the final bill. The claim made by the contractor in paragraph 14 is as under:- |1|The amount payable as per the difference<br>adopting schedule of rates in 1992 for<br>works executed upto May 1996 and after<br>May 1996 adopting the 1996 schedule of<br>rates with tender excess at 84%|Rs.1,09,32,273/-| |---|---|---| |2|The reduction made by the Dept. From the<br>actual bills for purchase of 510 tonnes of<br>cement.|Rs.1,02,000.00| |3|Tender excess on the value of the cement<br>purchased by the plaintiff|Rs.12,85,200.00| |4|Amount incurred for reconstruction of the<br>island which was destroyed due to the rain<br>and flood on 11.4.94|Rs.25,000.00| RFA No.384/08 -:21:- |5|Excess amount spent as labour charges<br>for transporting materials for abutment<br>works due to failure of Dept. to give site<br>for approach roads.|Rs.2,00,000.00| |---|---|---| |6|Damage and loss caused on account of<br>protecting the island and scafoldings of<br>bridge from the flood on 16.5.95|Rs.1,00,000.00| |7|Loss and damages due to heavy rain and<br>floods during June-July 1995|Rs.2,50,000.00| |8|For filling up the banks of the river in<br>between the abutments and the banks<br>eroded and washed away due to heavy<br>floods after 3 initial levels were taken of<br>quantity of 8500 M (8500x788+84%)|Rs.12,32,432.00| |9|For continuing the establishment even<br>after the stipulated period of completion<br>of the work, provided in the agreement<br>(continuing the service of engineers,<br>supervisors and other establishment<br>charges from 1.12.93 to May 1999 at the<br>rate of Rs.7,500/- p.m|Rs.4,87,500.00| |10|Road Roller charges illegally deducted by<br>the Dept. in tender excess|Rs.1,00,000.00| ||Total|Rs.1,47,14,405/-| The entire claim had been decreed by the Court below. 21. Except items 3 and 10, all others are for the damages suffered by the plaintiff. Item No.2 relates to reduction made from the actual bill for purchasing 510 tons of cement and item 10 relates to amounts illegally deducted due to tender excess. 22. The first question to be considered is whether plaintiff is entitled to claim any damages alleging breach of contract. 23. As already stated, the defendants place reliance upon RFA No.384/08 -:22:- the supplementary agreements and the receipt of balance amount under full and final settlement in order to justify their contention that damages are not payable. Ext.B1 is the contract entered into between the parties. From Exts.B1 to B3 produced on behalf of the defendants as a file, it contains the agreement executed between plaintiff and the Superintending Engineer of the defendants for completing the work within a period of 24 months from the date of handing over the site. The contractor was under obligation to execute the work as per the terms and conditions stipulated in the notice inviting tender and also other terms and conditions. The rate quoted shall be inclusive of all operations contemplated in the specifications and tender schedules including sales tax. Special conditions indicate that all works shall be done in conformity with the specification and condition in the contract in force in the PWD. Clause 42 further provides that the work shall be completed in all respects and also at the rate of progress within the time limit and stipulations in Form No.83-notice inviting tender, failing which the contractor is liable to be fined as stipulated in condition No.49 subject to modifications as per Government directions. Clause 49 relates to RFA No.384/08 -:23:- liquidated damages payable for non compliance of the time schedule. The document contains an acknowledgment for handing over of the site to the contractor by which the contractor had acknowledged to have taken over the site on 1/12/1993. A further supplemental agreement is seen executed as additional works in accordance with Clauses 16 and 63 of preliminary specifications. This agreement is executed without any date, but in a stamp paper which is seen purchased on 14/7/1995. A draft of the supplemental agreement in slip No.1 is also annexed which is dated 31/7/1995. This is for the purpose of incorporating extra items of work and the contractor has agreed to execute all the extra items of works at the rates arrived at as described in para 10(vi) of the Conditions of Contract prescribed in the original agreement. The contractor has also agreed not to make any claim at enhanced rate or compensation whatsoever or on account of such extra items due to the increase in the rate of labour or materials or any other ground. A supplemental agreement is seen executed between the parties in the year 1996 which states that the period for completing was within 24 months ie from 1/12/1993 to 30/11/1995 and since the contractor has requested RFA No.384/08 ## -:24:- the Superintending Engineer for extension of period of completion upto 31/5/1999, it is extended upto 31/5/1999. Accordingly, clause 4 of the principal agreement has been amended suitably. Another agreement is also prepared between the parties on 19/4/2000 extending the period for completing the work from 1/04/1997 to 31/5/1999. The document also contains a letter dated 12/8/1996 issued by the Superintending Engineer, stating that as per the provisions contained in the supplemental agreement executed time of completion of the work is extended upto 31/3/1997 without any fine. Similarly another letter is seen addressed to the contractor on 24/4/2000 extending the time upto 31/5/1999 on the basis of the supplemental agreements executed by him. Though time is considered to be the essence of contract, when there is delay on the part of the department in providing the site for construction in full, time has ceased to be the essence of contract. It is settled law that when there is a provision to claim liquidated damages, time cannot be considered as the essence of contract. Liquidated damage clause clearly implies that time can be extended by the parties on payment of damages. In the case on hand, the rate quoted by the contractor RFA No.384/08 -:25:- is for carrying out the work within a period of 24 months . He could carry out the said work at the said rate quoted by him only if the site is handed over within the stipulated time. Despite the letter signed by both parties indicating that the site was handed over on 1/12/1993, it is virtually admitted in the written statement that the site was handed over in a piecemeal manner. Further even after completion of the work, the entire site was not handed over. These circumstances clearly indicate that the reason for delay in completion of contract can only be attributed to the defendants. The question is whether in such instances the contractor is entitled to claim any damages and to what extent. Perusal of the averments in the plaint would indicate that the contractor claims damages based on a different formula. According to him, the PWD Schedule of rates were modified in the year 1992 and 1996. His quote was based on the 1990 schedule of rates. He had quoted 84% more than the 1990 schedule of rates. Therefore, according to him, the work done after the new schedule of rates had come into force in 1992 and 1996 has to be applied and he should get 84% above such rate. This, according to us, does not indicate a formula for claiming damages. When a RFA No.384/08 -:26:- claim for damages is made based on S.73 of the Contract Act, it should be actual damages. The loss actually suffered by the contractor for the delay in performance by the principal can alone be computed as compensation. In other words, if the contractor has spent more amounts than what he has actually quoted and had to complete the work beyond the specified period due to the delay on the part of the other party to contract, the same would amount to compensation. Therefore, _prima facie_ the computation of damages arising out of breach of contract as seen in item No.1 cannot be sustained. 24. Now if we look at the other claims made, especially item No.2, there is justification on the part of the Court below to have directed refund of `1,02,000/- which was deducted from the final bill of the contractor. When the plaintiff had purchased 510 tons cement from outside agencies, he was entitled to collect the amount which had been agreed upon between the parties. If he purchases at a lower rate, that will not enure to the benefit of the department. Therefore, the said claim is justifiable. 25. With regard to third item, no specific averment had been made and therefore the said claim is not sustainable. RFA No.384/08 -:27:- 26. Item No.4 relates to reconstruction of an island which was destroyed due to rain and flood on 11/4/1994. In so far as this claim has not been admitted and there is no evidence to prove the said fact, court below was not justified in allowing the same. 27. Item No.5 relates to extra labour for transporting materials due to failure on the department to give approach road. We do not think that such a claim is justifiable when the plaintiff claims damages for the breach of contract, since this is also an item which is justifiable only if there is evidence to prove the same. Since no material had been produced to prove the aforesaid fact, we do not think that the claim can be sustained. 28. Similarly item No.6 relates to damage and loss for protecting the island and for making additional scaffoldings. There is no evidence to prove the aforesaid claim and therefore, it is not sustainable. Same is the case relating to loss and damages due to heavy rain as stated in item No.7. A similar claim had been made as item No.8 for filling up the banks of the river. No claim is sustainable which is beyond the terms of the contract. If any additional work is done by the contractor, it has to be done at the instance of the respondents. Unless it is approved by the RFA No.384/08 ## -:28:- department, a separate claim is not maintainable. 29. Clause 9 relates to continuing the establishment even after the stipulated period. Apparently this is an item of claim that is sustainable. The work had to be completed as on 1/12/1993. This claim had been made by the contractor at the rate of `7,500/- per month. Definitely the contractor would suffer some damages for the delay on the part of the Government. Since the delay is admitted and it is proved that the defendants are responsible for the delay, we are of the view that the aforesaid claim is justified. Taking into account the overall contractual amount, we do not think that this claim is excessive in any manner. Hence, item No 9 claim is allowable. 30. Item No.10 relates to amounts deducted from the final bill as road roller charges. According to the contractor, the road roller was brought by him and not by the Government. Therefore, there is justification on the part of the court below in decreeing the said amount. 31. This is a case where the contractor despite the delay has completed the work. Though it is contended by the learned Government Pleader that the contractor had received the balance RFA No.384/08 ## -:29:- amount in full and final settlement, we do not think that the said contention is sustainable. In para 16, it is specifically averred that the plaintiff was asked by the 3[rd] defendant to close the contract by completing the work within the available area and so the plaintiff had completed the work accordingly. Bridge was later inaugurated by the Minister of PWD on 28/5/1999. It is stated that, on 15/5/2000, he had issued a notice u/s 80 of C.P.C. claiming the amounts narrated above with future interest. 32. It is relevant to note that the plaintiff had been repeatedly requesting the defendants to arrange the site and has also stated that if the time over runs, the plaintiff will be put to serious loss. It is relevant to note that when time had been extended only after completion of the work, while extending the time for performance, no provision had been made in such agreements denying any amount as compensation or denying any enhanced rate being given. Only in the supplementary agreement relating to extra items of work, a clause had been incorporated that no enhanced rate will be given. This is an identical situation arising in the judgment of this Court in _**T.E.Mohammed Kunju**_ (supra). RFA No.384/08 ## -:30:- 33. But as already stated, the quantification of the claim is not in accordance with the settled legal position and therefore the decree granted by the Court below to that extent as far as item No.1 is concerned is liable to be set aside. 34. Learned senior counsel appearing for the respondent sought for an opportunity to adduce evidence regarding the actual loss suffered by the contractor on account of the fact that time has overrun. We do not think that, at this point of time, that is after a lapse of 17 years, any useful purpose will be served in remitting the matter back to the Trial Court. 35. Out of the claims raised by the contractor in paragraph 14 of the plaint, as already held, the following amounts are allowable:- (i) Item No.2. `1,02,000/(ii) Item No.9 `4,87,500/(iii) Item No.10 `1,00,000/-------------Total `6,89,500/- 36. Plaintiff is also entitled for interest on the aforesaid amount from the date of suit till realisation @9% per annum. In the result, the appeal is partly allowed and the decree RFA No.384/08 ## -:31:- shall stand modified as under:- (i) That the plaintiff is entitled for a decree to recover an amount of `6,89,500/- (Rupees Six lakhs eighty nine thousand five hundred only) with interest @9% per annum from the date of suit till realisation with proportionate costs from the defendants. (ii) In all other respects, the decree shall stand confirmed. Sd/- ## **A.M. SHAFFIQUE, JUDGE** Sd/- **P.SOMARAJAN, JUDGE** Rp //True Copy// PS to Judge