State of Kerala represented by the Secretary to Government, Public Works & Transport Department, Secretariat, Thiruvananthapuram v. K.J. Mathew

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE V.CHITAMBARESH & THE HONOURABLE MR. JUSTICE SATHISH NINAN** **WEDNESDAY, THE 8TH DAY OF FEBRUARY 2017/19TH MAGHA, 1938** **AS.No. 607 of 2001 (B)** **-----------------------** **AGAINST THE JUDGMENT IN OS.479/1996 of PRINCIPAL SUB COURT,NORTH PARAVUR DATED 31.08.2000** **APPELLANT(S):** - **-------------** **1. STATE OF KERALA REPRESENTED BY THE SECRETARY TO GOVERNMENT, PUBLIC WORKS & TRANSPORT DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM.** **2. THE SUPERINTENDING ENGINEER, P.W.D (R & B), CENTRAL CIRCLE, ALUVA - 683 101.** **BY GOVERNMENT PLEADER SRI.B.JAYASURYA** ## **RESPONDENT(S):** **--------------K.J. MATHEW, S/O JOSEPH, KACHAPPILLY HOUSE, MAIKADU P.O, ANGAMALY NEDUMBASSERY VILLAGE, ALUVA.** **BY ADV. SMT.SANTHA VARGHESE** **THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 27-01-2017, THE COURT ON 08.02.2017 DELIVERED THE FOLLOWING:** ## **V.Chitambaresh & Sathish Ninan, JJ. ============================== A.S No.607 of 2001** **========================== Dated this the 8[th] day of February, 2017** ## **JUDGMENT** ## **Sathish Ninan, J** 1. The defendants in a suit for recovery of money are the appellants. The trial court decreed the suit in favour of the plaintiff. - 2.A contract was entered into between the plaintiff and the defendants for improvements to the Rajakkad - Ponmudi road as per Ext.B1 agreement dated 06.05.1991. The period of contract was 24 months from the date of handing over of the site. The site was formally handed over on 15.05.1991 and the contract ought to have been completed by 14.05.1993. The performance of the contract was delayed and was completed only on 30.08.1994. The suit was filed A.S No.607/2001 2 contending that the delay in performance of the contract was caused due to the fault on the part of the defendants and that consequent to the delay, there has been a steep escalation in the cost. The plaintiff claims enhancement in the rates and also the cost for the additional work. The defendants contended that the plaintiff was responsible for the delay in completion of the contract and that the plaintiff had executed supplementary agreements undertaking to complete the works at the original contract rate and after having entered into such agreements the plaintiff is not entitled to claim any increase in the rates. - 3.Heard the learned Government Pleader for the appellant and the learned counsel for the respondent. 4. The period of the contract was upto 14.05.1993. How ever the work was completed only on 30.8.1994. The foremost issue is as to whether the delay was caused by the plaintiff or the defendants. The evidence A.S No.607/2001 3 reveal that there was delay on the part of the defendants in taking the initial measurements and also in approving the initial measurements (levels), without which the work could not be started. Though the initial levels were taken on 09.07.1991, the same were approved by the defendants only on 10.09.1991. That there was delay on the part of the defendants is evident from Exts.A1, A2 and A3 letters issued by the plaintiff to the defendant. So also, it is in evidence that though as per the estimate of the defendants the required quantity of rubble was 12850 cubic metre, only 688 cubic metre was provided by the defendants. The plaintiff had as per various letters namely Exts.A2, A4, A5, A7 and A8 sought for permission to obtain rubble from other sources. But it was only on 27.04.1992, as per Ext.A9 letter, the superintending engineer sanctioned such procurement. As per Ext.A10 letter dated 06.05.1992 the Executive Engineer communicated the same to the Assistant A.S No.607/2001 4 Engineer. Thus, it was only as per Ext.A10 letter dated 06.05.1992 the permission for procurement of rubble was given by the defendants. Apart from the above, there was delay on the part of the defendants in supplying cement and steel. The fact that cement and steel were to be supplied by the defendants is not in dispute. It has been so admitted by DW1. Ext.B1 also provides the same. Ext.A11 letter dated 15.06.1992 issued by the plaintiff reveals that the same were not supplied by the defendants. Ext.A12 letter dated 27.08.1992 of the Executive Engineer further affirms the said fact. In addition to all the above, it is also in evidence that there was interference from the Electricity Board regarding the execution of work, which is also evident from Ext.B10. Therefore, it is beyond doubt that the delay in performance of the contract was caused at the hands of the defendants. The finding of the court below in the said regard is confirmed. A.S No.607/2001 5 5. The plaintiff claims that consequent to the delay in carrying out of the work, there has been escalation in the labour and material cost, which has resulted in loss to the plaintiff. Even the PWD has revised its rates from the 1990 schedule of rates, in the year 1992 with an overall increase of over 50%. The plaintiff claims that they are to be paid at the said escalated rate. It is also claimed that procuring rubble by the plaintiff was not one provided for in the agreement and therefore, the actual cost of materials and other charges including conveyance are to be granted as extra items. The defendants mainly rested their case on the supplementary agreements executed by the plaintiff. The supplementary agreements not only provided for extension of period, but also an undertaking to complete the work at the original rate. 6. It cannot be disputed that consequent to the fault on the part of the defendants there occurred delay in A.S No.607/2001 6 the performance of the contract. Obligations on the part of the defendants under the contract were not performed by them in time. Consequent to the nonperformance on the part of the defendants, the period of the contract was extended. It cannot be disputed that there has been enhancement in the cost and rates during the period which even compelled the PWD rates to be enhanced in 1992. It is to be noted that Ext.B1 agreement was on 06.05.1991. Though there is no independent evidence to prove the actual increase in the cost and expenses, the fact that revised rates have been fixed by the PWD itself fixing more than 50% increase in the rates prove the said fact. Though the plaintiff claims that the actual cost incurred are more than the PWD rates of 1992, in the absence of any such evidence, only the PWD rates of 1992 could be taken as the basis. Once it is found that the delay was caused at the hands of the defendants and that there has been increase in the cost and A.S No.607/2001 7 rates and that the PWD itself has revised its rates in 1992, then, the question would be as to whether after execution of the supplementary agreement whereunder the plaintiff agreed to complete the work at the same rate, is entitled to claim any enhanced rate. It is the contention of the plaintiff that the supplementary agreements were caused to be executed by the defendants under duress and coercion. It is the case of the plaintiff that if he did not yield to the compulsion of the defendants to execute the supplemental agreements, the bill amounts would not be honoured by the defendants. Unless the supplemental agreements were executed, even the part bills would not be paid, and therefore, the plaintiff had no other option but to sign the agreement. 7. As per Ext.A13 dated 15.10.1992, the plaintiff had notified the defendants regarding the increase in the rates, the extra expenditure and further that notwithstanding the requirement of execution of A.S No.607/2001 8 supplementary agreement for the purpose of payment the defendants were to consider the plaintiff's claim. In Ext.A14 letter dated 27.10.1992 also the defendants were put on notice that the plaintiff is, under the circumstances, compelled to enter into the supplementary agreements and that it is not to preclude him from claiming enhanced rate. As per Exts.A16, A18, A20, A23 and A25 letters dated 19.11.1992, 30.4.1993, 12.5.1993, 12.3.1995 and 10.7.1995 respectively, the plaintiff had put the defendants on notice that the execution of the supplementary agreements is without prejudice to his claim for enhanced rates. Here it would be apposite to refer to paragraphs 31 and 32 of the judgment of the apex court in **K.N.Sathyapalan v State of Kerala and Another ((2007) 13 SCC 43).** “31. The question which we are called upon to answer in the instant appeal is whether in the absence of any price A.S No.607/2001 9 escalation clause in the original agreement and a specific prohibition to the contrary in the supplemental agreement, the appellant could have made any claim on account of escalation of costs and whether the arbitrator exceeded his jurisdiction in allowing such claims as had been found by the High Court. 32. Ordinarily, the parties would be bound by the terms agreed upon in the contract, but in the event one of the parties to the contract is unable to fulfil its obligations under the contract which has a direct bearing on the work to be executed by the other party, the arbitrator is vested with the authority to compensate the second party for the extra costs incurred by A.S No.607/2001 10 him as a result of the failure of the first party to live up to its obligations. That is the distinguishing feature of cases of this nature and _Alopi Parshad_ case and also _Patel Engg._ case. As was pointed out by Mr.Dave, the said principle was recognised by this Court in _P.M.Paul_ where a reference was made to a retired Judge of this Court to fix responsibility for the delay in construction of the building and the repercussions of such delay. Based on the findings of the learned Judge, this Court gave its approval to the excess amount awarded by the arbitrator on account of increase in price of materials and costs of labour and transport during the extended A.S No.607/2001 11 period of the contract, even in the absence of any escalation clause. The said principle was reiterated by this Court in _T.P.George_ case.” 8. As noted, the Apex Court was also dealing with cases where supplemental agreements were executed, which contained even a specific prohibition against making any claim for escalation in price. The Apex Court held in favour of the contractor. In view of the above, we find no reason to interfere with the finding of the court below that the plaintiff is entitled to get enhanced rate, namely the revised PWD rate of 1992. 9. The next question that arises is, whether, after acceptance of the final bill the plaintiff is entitled to put forward the present claim. In 2011(2) SCC400, the Apex Court, on deliberating the said issue held thus; A.S No.607/2001 12 “13. From the above conclusions of this Court, the following principles emerge: (i) Merely because the contractor has issued “no-dues certificate”, if there is an acceptable claim, the court cannot reject the same on the ground of issuance of “no-dues certificate.” (ii) Inasmuchas as it is common that unless a discharge certificate is given in advance by the contractor, payment of bills are generally delayed, hence such a clause in the contract would not be an absolute bar to a contractor raising claims which are genuine at a later date even after submission of such “no- claim certificate.” iii) Even after execution of full A.S No.607/2001 13 and final discharge voucher/receipt by one of the parties, if the said party is able to establish that he is entitled to further amount for which he is having adequate materials, he is not barred from claiming such amount merely because of acceptance of the final bill by mentioning “without prejudice” or by issuing “no-dues certificate”.” 10. From Exhibits A23, A24 and A25 letters dated 12.3.1995, 20.12.1995 and 10.7.1995 respectively, it is evident that the final bill was received subject to and without prejudice to the rights of the plaintiff. The finding of the court below is thus liable to be confirmed, and we do so. 11. We notice that interest has been granted at the rate of 18% per annum from the date of suit till realisation, which is arbitrary and excessive. Grant A.S No.607/2001 14 of 9% interest would be fair and reasonable. We hold that the plaintiff shall be entitled to interest at the rate of 9% per annum from the date of suit till realisation. The decree and judgment passed by the court below shall stand modified to the said extent. In the result, the appeal is allowed in part modifying the rate of interest and re-fixing it at 9% per annum from the date of suit till realisation. The decree of the court below shall stand confirmed in all other respects. Sd/- ## **V.Chitambaresh, Judge** Sd/- **Sathish Ninan, Judge** vdv