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2012 DIGILAW 668 (HP)

Satish Kumar Goel v. State of Himachal Pradesh

2012-10-03

KULDIP SINGH

body2012
Judgment Kuldip Singh, J. 1. This appeal is directed against judgment, decree dated 31.03.2001 passed by learned District Judge, Kinnaur, Civil Division at Rampur Bushahr, in Civil Appeal No.30-A of 2000, decreeing the suit of respondent by reversing judgment, decree dated 23.05.2000 passed by learned Senior Sub Judge, District Kinnaur at Reckong Peo, in Civil Suit No.7-1 of 1997. 2. The facts, in brief, are that respondent had filed a suit for recovery of `1,09,929/- against appellant on the allegations that the State of Himachal Pradesh in 1988 had decided to construct 40 metres span foot-bridge over Spiti River at Tirasang’ in district ‘Kinnaur. The rates quoted by appellant were found acceptable and on 04.05.1989 the work was awarded to appellant vide Ex. PW3/A. The agreement Ex.PW3/B was executed between the parties. The appellant was required to complete the work within the stipulated period of three months. The site, drawings etc. were handed over to the appellant. The appellant could not complete the work within the stipulated period. The appellant had been paid for the material taken by him to the work site. 3. The Executive Engineer, Kalpa Division, Incharge of the work, repeatedly asked the appellant to complete the work. The appellant ignored the notices of the Engineer Incharge with the result the work allotted to the appellant was rescinded by Executive Engineer on 04.05.1991. 4. In accordance with the terms and conditions of the agreement Ex.PW3/B, the appellant was liable to pay compensation of 10% of the tendered amount `10,99,290/- for his failure to carry into execution the work in question, which comes to `1,09,929/-. The appellant after rescission of the contract illegally took the matter before the Arbitrator, who was not competent to go into the question of payment of compensation to the respondent for failure of the appellant to complete the work in question within the stipulated period. In these circumstances, the respondent on 18.03.1997 instituted suit for recovery of `1,09,929/- against appellant. 5. The appellant contested the suit by taking preliminary objections of maintainability, non-joinder of necessary parties, estoppel. On merits, the allotment of work was admitted, so also award letter dated 04.05.1989 Ex.PW3/A. The agreement Ex.PW3/B was also admitted. It has been denied that appellant failed to complete the work in question within the stipulated period. It was pleaded that respondent committed breach of terms and conditions of the agreement. On merits, the allotment of work was admitted, so also award letter dated 04.05.1989 Ex.PW3/A. The agreement Ex.PW3/B was also admitted. It has been denied that appellant failed to complete the work in question within the stipulated period. It was pleaded that respondent committed breach of terms and conditions of the agreement. The site, drawings and instructions for execution of the work were not provided in time to the appellant. The respondent had been accepting the work even after the lapse of stipulated period. 6. It was admitted that some notices were issued by respondent which were received by the appellant. The claim of the respondent was denied. It was pleaded that Executive Engineer, H.P.P.W.D., Kalpa Division, was not competent to levy penalty of 10% in accordance with the Clause-2 of the agreement Ex.PW3/B. The penalty was to be levied after hearing the appellant, but no such hearing was given to appellant. It was pleaded that matter was taken to the Arbitrator. The appellant ultimately denied the liability to pay any amount claimed in the suit. 7. On the pleadings of the parties, the following issues were framed:- 1. Whether the plaintiff is entitled to recover Rs.1,09,929/-on account of damages/compensation from the defendant, as alleged? O.P.P. 2. Whether the suit is not maintainable as alleged? O.P.D. 3. Whether the suit is bad for non-joinder of necessary parties, as alleged? O.P.D. 4. Whether the plaintiff is estopped from filing this suit on account of his act and conduct, as alleged? O.P.D. 5. Whether plaintiff himself has committed breach of contract by not providing the site-plan, designs and drawings, instructions required for the execution of the work done, if so, its effect? O.P.D. 6. Relief. 8. The issues No.1, 3 were answered in negative, issues No.2,4 and 5 in affirmative and the suit was dismissed by learned Senior Sub Judge on 23.05.2000. The respondent filed appeal which was allowed by learned District Judge on 31.03.2001, the suit filed by respondent for recovery of `1,09,929/- along with simple interest at the rate of 12% per annum from the date of institution till realization was decreed, hence second appeal, which has been admitted on following substantial questions of law:- 1. Whether a suit filed by the Secretary (PWD), to the Government of Himachal Pradesh alone without impleading the State of Himachal Pradesh as a party is competent? 2. Whether a suit filed by the Secretary (PWD), to the Government of Himachal Pradesh alone without impleading the State of Himachal Pradesh as a party is competent? 2. Whether a suit not verified and/or signed by the named plaintiff is competent in law? 3. Whether the Executive Engineer could be said to be competent to determine and impose compensation in the light of specific provisions in the agreement Clause 2 empowering only the Superintending Engineer ( S.E.) to determine the same? 4. Whether the compensation could have been imposed without following the principles of natural justice? 5. Whether the 1st Appellate Court has failed in observing the provisions of Section 55 of the Indian Contract Act whereby the State had lost its right to claim any compensation on account of its having accepted the work after the stipulated date of its completion? 6. Whether the learned 1st Appellate Court has erred in appreciating the provisions of Sections 73 & 74 of the Indian Contract Act wherein only compensation can be claimed when there is actual proof of loss occasioned by them? 9. I have heard the learned counsel for the parties and have also gone through the record. On behalf of the appellant, it has been submitted that suit was filed by Secretary(PWD) and not by State of Himachal Pradesh and, therefore, the suit itself was not competent. The plaint has not been properly verified and signed. The Executive Engineer was not competent to determine and impose compensation under Clause-2 of agreement Ex.PW3/B. The principle of natural justice was not followed before imposing penalty under Clause-2 of the agreement. The respondent under Section 55 of the Indian Contract Act has lost its right to claim compensation when respondent itself accepted the work executed by appellant after the stipulated period prescribed in the agreement. The Sections 73, 74 of the Indian Contract Act have not been followed while imposing penalty. 10. On behalf of the respondent, it has been submitted that the appeal before the lower appellate Court was filed by State of Himachal Pradesh. The appeal is the continuation of the suit, irregularity in the memo of parties showing Secretary (PWD), Government of Himachal Pradesh as plaintiff instead of State of Himachal Pradesh in the plaint has been rectified when the appeal was filed before the lower appellate Court. The appeal is the continuation of the suit, irregularity in the memo of parties showing Secretary (PWD), Government of Himachal Pradesh as plaintiff instead of State of Himachal Pradesh in the plaint has been rectified when the appeal was filed before the lower appellate Court. The filing of the suit in the name of Secretary instead of State of Himachal Pradesh was mere irregularity which has caused no prejudice to the appellant. In any case the error was rectified in the appeal. The plaint has been properly signed and verified. The work was to be executed in tribal area where Executive Engineer at the relevant time had the powers of Superintending Engineer and, therefore, the imposition of penalty under Clause-2 of the agreement could not be said to be wrong and illegal. The learned Deputy Advocate General has supported the impugned judgment, decree. 11. The substantial questions of law No.1 and 2 are taken first for determination as these substantial questions of law can be disposed of collectively. The perusal of the plaint would show that Secretary (PWD), Government of Himachal Pradesh, has been shown as plaintiff in the plaint. The plaint has been signed and verified by Superintending Engineer, 11th Circle, H.P.P.W.D., Rampur Bushahr. In the written statement preliminary objection has been taken that the suit is bad for non-joinder of necessary party i.e. State of Himachal Pradesh. It has also been pleaded that the plaint has not been verified in accordance with law. In the written statement, there is no objection that Superintending Engineer is not competent to sign and verify the plaint on behalf of the plaintiff. 12. The plea has been taken that plaint has not been verified in accordance with law, but what is the defect in the verification that has not been elaborated. The suit was dismissed by learned Senior Sub Judge and the plaintiff filed appeal before the lower appellate Court. The appeal was filed by State of Himachal Pradesh. The appeal was entertained and ultimately decided. It appears no specific objection was taken before the lower appellate Court that appeal filed by State of Himachal Pradesh was not competent. The appeal is the continuation of the suit. The irregularity in filing of the suit by Secretary (PWD) was rectified when appeal was filed by the State of Himachal Pradesh. The appeal was entertained and ultimately decided. It appears no specific objection was taken before the lower appellate Court that appeal filed by State of Himachal Pradesh was not competent. The appeal is the continuation of the suit. The irregularity in filing of the suit by Secretary (PWD) was rectified when appeal was filed by the State of Himachal Pradesh. In these circumstances, there is no merit in substantial questions of law No.1 and 2 which are decided against the appellant. 13. The substantial questions of law No.3 is with respect to the competenancy of the Executive Engineer to impose penalty and substantial question of law No.4 is with respect to failure of principle of natural justice before imposing penalty by Executive Engineer. The Clause-2 of the agreement provides imposition of penalty by the Superintending Engineer in case the work is not completed within the stipulated period. The Clause-3 of the agreement provides rescission of contract. The Clause-2 of the agreement is as follows:- “2. The Clause-2 of the agreement provides imposition of penalty by the Superintending Engineer in case the work is not completed within the stipulated period. The Clause-3 of the agreement provides rescission of contract. The Clause-2 of the agreement is as follows:- “2. The time allowed for carrying out of work as entered in the tender shall be strictly observed by the contractor and shall be deemed to be the essence of the contract on the part of the contractor shall be reckoned from the fifteenth day after the date on which order to commence the work is issued to the contractor, The work shall throughout the stipulated period of the contract be proceeded with all due diligence and the contractor shall pay as Compensation an amount equal to one per cent, or such smaller amounts as the Superintending Engineer (Whose decision in writing shall be final) may decide on the amount of the tendered amount of the whole work as shown in the tender for very day that the work remains uncommenced or unfinished after the proper dates And further to ensure, goad progress during the execution of the work, the contractor shall be bound in all cases in which the time allowed for any works exceeds one month save) for special jobs to complete one-eight of the whole of the works before one-fourth of the whole time allowed under the contract has elapsed, three-eight of the work, before one-half of such time has elapsed and three-fourth of the work , before three-fourth of such time has elapsed however four special jobs if a time schedule has been submitted by the contractor and the same has been accepted by Engineer-in-Charge, the contractor shall comply with the aid time schedule, in the event of the contractor failing to comply with this condition, he shall be liable to pay as compensation an amount equal to one per cent or such smaller amount as the Superintending Engineer ( whose decision in writing shall be final) may decide on the said tendered amo cost of the whole work for every day that the due quantity of work remains incomplete; Provided always that the entire amount of compensation to be paid under the provisions of this clause shall not exceed ten percent, on the tendered amount of the work as shown in the tender.” 14. It has been submitted on behalf of the appellant that in view of Clause-2 of the agreement, the Executive Engineer was not competent to impose penalty. The designated Officer under Clause-2 for imposing penalty was Superintending Engineer. Ex.PW2/C notice dated 04.06.1991, Ex.PW2/B notice dated 11.01.1991 imposing penalty of `1,09,929/- on the appellant were issued by Executive Engineer, Kalpa Division. The learned Deputy Advocate General has submitted that the work was to be executed in tribal area and, therefore, in view of letter dated 11.04.1988 of Secretary (Personnel) to the Government of Himachal Pradesh, the Executive Engineer in the tribal area was authorized with effect from 15.04.1988 to act on behalf of the Superintending Engineer. It has been submitted that work was awarded to appellant on 04.05.1989 and the agreement was executed subsequently. Therefore, imposition of penalty of `1,09,929/-vide Ex.PW2/D dated 01.01.1992 by the Executive Engineer is legal, valid and no fault can be found with the imposition of penalty. 15. The submission made by learned Deputy Advocate General in first blush appears to be attractive, but has no merit. The letter dated 11.04.1988 relied by respondent in support of imposition of penalty by the Executive Engineer has not been proved on record. The letter dated 11.04.1988 has been placed on the file of lower appellate Court in the appeal, but no application was filed for producing additional evidence nor lower appellate Court took on record letter dated 11.04.1988 by way of additional evidence. Once letter dated 11.04.1988 is not on record in the form of evidence, it cannot be read in evidence. The lower appellate Court before reading letter dated 11.04.1988 in evidence has not given any opportunity to the appellant to rebut the letter dated 11.04.1988. 16. In addition, the parties entered into an agreement Ex.PW3/B when according to the respondent the operation of letter dated 11.04.1988 was very much in existence. The parties are bound by the mutual agreement which will over-ride the letter dated 11.04.1988. In the agreement under Clause-2, the parties have agreed that the penalty will be imposed by the Superintending Engineer, therefore, in the teeth of such Clause, the penalty cannot be imposed by Executive Engineer under the shelter of letter dated 11.04.1988. Ex.PW2/D dated 01.01.1992 nowhere provides that decision to impose penalty of `1,09,929/- was taken under Clause-2 of the agreement by the Superintending Engineer. Ex.PW2/D dated 01.01.1992 nowhere provides that decision to impose penalty of `1,09,929/- was taken under Clause-2 of the agreement by the Superintending Engineer. Thus, the Executive Engineer was not competent to impose penalty vide Ex.PW2/D dated 01.01.1992 under Clause-2 of the agreement. 17. The imposition of penalty affected the rights of the appellant. The minimum required before imposing penalty was to issue notice to the appellant inviting his attention to the irregularities committed by him and calling upon his explanation. In the present case, there is nothing on record that before imposing penalty vide Ex.PW2/D dated 01.10.1992, any notice calling upon explanation of appellant was given to the appellant or he was heard in any manner. 18. In J.G.Engineers Private Limited Versus Union of India and another (2011) 5 SCC 758 , the Clause-2 noticed by the Supreme Court in the report in substance is same as Clause-2 in the present agreement. The Supreme Court has held that the question whether the other party committed breach cannot be decided by the party alleging breach. A contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committed breach. That question can only be decided by only an adjudicatory forum, that is, a court or an Arbitral Tribunal. In the present case, the penalty has been imposed by the Executive Engineer. The respondent did not approach the Court or Arbitral Tribunal/Arbitrator for imposition/adjudication of penalty of 1,09,929/- or any other amount to be imposed on the appellant. Thus, seen from any angle, the imposition of penalty of `1,09,929/-by Executive Engineer vide Ex.PW2/D is not sustainable. The learned District Judge has misconstrued and misinterpreted the relevant provisions of the agreement. He has considered inadmissible document in the form of letter dated 11.04.1988 while decreeing the suit of the respondent. The decree passed for `1,09,929/- along with interest @ 12% per annum by learned District Judge is, thus, not sustainable. The substantial questions of law No.3 and 4 are decided in favour of the appellant. 19. In view of decision on substantial questions of law No.3 and 4, no decision on substantial questions of law No.5 and 6 is necessary. The substantial questions of law No.5 and 6 are disposed of accordingly. 20. In view of above, appeal is allowed. The substantial questions of law No.3 and 4 are decided in favour of the appellant. 19. In view of decision on substantial questions of law No.3 and 4, no decision on substantial questions of law No.5 and 6 is necessary. The substantial questions of law No.5 and 6 are disposed of accordingly. 20. In view of above, appeal is allowed. The judgment, decree dated 31.03.2001 passed by learned District Judge, Kinnaur, Civil Division at Rampur Bushahr in Civil Appeal No.30-A of 2000, decreeing the suit of respondent, by reversing judgment, decree dated 23.05.2000 passed by learned Senior Sub Judge, District Kinnaur at Reckong Peo, in Civil Suit No.7-1 of 1997, are set aside. The suit of the respondent/plaintiff is dismissed with no order as to costs.