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2022 DIGILAW 639 (AP)

Bharat Sanchar Nigam Limited v. Tanneru Subba Rao

2022-07-13

B.S.BHANUMATHI

body2022
JUDGMENT : This appeal is preferred against the judgment and decree, dated 10.10.2011, passed in O.S.No.870 of 2008 on the file of the Court of II Additional Senior Civil Judge, Vijayawada. 2. Heard Sri I. Subramanyeswara Rao, learned standing counsel for BSNL appearing on behalf of the appellant and Sri Y. Vasudeva Rao, learned counsel for the respondent. 3. The plaintiff is a Government of India Enterprise, by name, Bharat Sanchar Nigam Limited (“BSNL”, for short) invited sealed tenders for construction of 2 Nos. Type-IV and 2 Nos. Type-V (G+1) including internal and external services in the administrative building compound at Khammam. The defendant submitted tender and was awarded work under letter reference No.23(623)/BSNL/CDV/2004-434, dated 08.04.2004, for Rs.41,76,076.50/-. The parties entered into an agreement. As per the terms and conditions of the contract, the defendant has to commence the work on 18.04.2004 and to be completed by 17.02.2005. However, the defendant could not complete the work within the stipulated time. The time was extended by the plaintiff upto 31.12.2005. The extension of time was granted without prejudice to the rights of the plaintiff to recover the liquidated damages in accordance with clause No.2 of the agreement. While so, all of a sudden, without giving any notice/intimation, the defendant stopped the work, vide letter dated 04.06.2005, notifying closure of the work with immediate effect. The plaintiff protested the action of the defendant as the closure of the contract by one party unilaterally without giving sufficient opportunity to the other party is illegal. The defendant invoked Clause No.25 of the agreement for adjudication of various issues of disputes before the Arbitrator. The defendant issued letter dated 12.01.2006. Mr. Gurubax Singh was appointed as an Arbitrator and award was passed on 27.02.2007 allowing certain claim and disallowing certain other claims. The plaintiff preferred an appeal before the District Judge, Machilipatnam, and the same is pending. The plaintiff got issued a notice to the defendant to pay Rs.4,17,608/- towards liquidated damages, as per Clause No.2 of the agreement, vide letter dated 19.04.2006. The defendant did not choose to pay the same. The arbitrator has not decided the issue of levy of liquidated damages as it was exempted and beyond the purview of the arbitrator. The plaintiff also made several demands to the defendant to pay the amount along with interest, but the defendant postponed the same. The defendant did not choose to pay the same. The arbitrator has not decided the issue of levy of liquidated damages as it was exempted and beyond the purview of the arbitrator. The plaintiff also made several demands to the defendant to pay the amount along with interest, but the defendant postponed the same. Hence, the plaintiff filed the present suit for recovery of damages from the defendant. Section 74 of the Indian Contract Act provides for compensation for breach of contract. Hence, the plaintiff brought suit for recovery of an amount of Rs.5,26,604/-from the defendant towards damages. 4. The defendants filed written statement denying the allegations made by the plaintiff and contending that the plaintiff is not entitled to the relief claimed. The agreement was entered into between the plaintiff and defendant on 08.4.2004. The site was handed over by the Sub-divisional Engineer, Khammam, on 24.07.2004. The said Engineer did not issue any drawings to start the work. The defendant addressed letter to the department of the plaintiff, on 29.04.2004, reminding about the handing over of the drawings for commencing the work. The Sub Divisional Engineer directed the defendant to collect the architectural drawings. The defendant collected the same during the first week of May 2004. However, the said drawings were not useful for starting the work in the absence of structural drawings. The defendant again got issued a letter on 17.05.2004 and also intimated about the practical difficulties for commencement of the work and requested the plaintiff’s department to provide the required material immediately. The Sub-divisional Engineer got issued a telegram on 24.07.2004 intimating that structural drawings were available in the office and requesting to collect the same. The structural drawings were issued only for columns and footings and there arose technical difficulty. Thereafter, the defendant again brought the said fact to the notice of the plaintiff and requested to respond positively. The delay is on the part of the defendant and the defendant alone is responsible for non-commencement of the work within the stipulated time. Meanwhile, there is abnormal hike in the prices of steel and corresponding fabrication prices. The defendant could not purchase the material at cheaper rates prevailing at that time and requested the plaintiff to approve the revised rates, which was denied by the plaintiff. The Executive Engineer denied the revised rates in view of the terms and conditions of contract. Meanwhile, there is abnormal hike in the prices of steel and corresponding fabrication prices. The defendant could not purchase the material at cheaper rates prevailing at that time and requested the plaintiff to approve the revised rates, which was denied by the plaintiff. The Executive Engineer denied the revised rates in view of the terms and conditions of contract. The department of plaintiff extended the period of contract, however, denied approving the revised rates. The delay was caused due to the inaction of the plaintiff in obtaining clearance from local body for causing RCC column above floor to level. There is no response from the plaintiff to the letter, dated 04.05.2005 in that regard. Thus, the whole work came to halt. The defendant was given sufficient time before notification of closure of work and the allegations in the plaint are absolutely false. The defendant notified closure of the contract only in view of silence and inaction on the part of the plaintiff. The defendant is not at all responsible for not carrying out the work and therefore, he cannot be penalized for the laches of the plaintiff. The subject matter of work to be undertaken was at Khammam. The defendant is resident of Hyderabad. This Court has no jurisdiction. The suit is barred by limitation. There is no cause of action for filing the suit. The arbitrator passed an award on merits. The plaintiff’s department filed the suit only with a view to harass the defendant. The defendant is not at all liable to pay the suit amount. The suit is liable to be dismissed. 5. On the basis of the above pleadings, the trial Court framed the following issues : 1. Whether the plaintiff is entitled for the suit claim as prayed for? 2. To what relief? 6. At trial before the trial Court, on behalf of the plaintiff, G. Rajesh Kumar, Executive Engineer, filed chief affidavit, on 06.07.2010, as PW1. Thereafter, a memo was filed to eschew the evidence of PW1 as he was transferred and the same was recorded. Thereafter, the plaintiff got filed the chief affidavit of N.G. Srinagesh as PW2. Exhibits A1 to A8 were marked on behalf of the plaintiff. On behalf of the defendant, the defendant himself was examined as DW1 and got marked exhibits B1 to B9. 7. Thereafter, the plaintiff got filed the chief affidavit of N.G. Srinagesh as PW2. Exhibits A1 to A8 were marked on behalf of the plaintiff. On behalf of the defendant, the defendant himself was examined as DW1 and got marked exhibits B1 to B9. 7. The trial Court, after hearing the submissions of both sides, dismissed the suit, by the impugned judgment and decree, observing as follows : “In the present case, the plaintiff did not act as per the terms of the contract, because of non handover of the site and sketches and drawings in time and there is no such suitable correspondence on behalf of the plaintiff with regarding to the approved building plans, as such it is clear that the plaintiff has violated the terms of the contract. In such circumstances, the plaintiff could not be entitled for any damages under Section 73 of the Indian Contract Act and there is no evidence on the part of the plaintiff with regarding to the data of damages which was incurred by the plaintiff because of stoppage of work by the defendant. In the absence of all material aspects, there is no ground available on record to award damages. In the result, the suit is dismissed. No costs.” 8. Aggrieved by the same, the appellant/plaintiff preferred this appeal. 9. In the absence of all material aspects, there is no ground available on record to award damages. In the result, the suit is dismissed. No costs.” 8. Aggrieved by the same, the appellant/plaintiff preferred this appeal. 9. In the grounds of appeal, while reiterating the pleaded case, the plaintiff contended that the trial Court erred in applying Section 73 of the Indian Contract Act, 1872 instead of Section 74 of the said Act, as the appellant herein has levied the liquidated damages as per Clause 2 of the agreement, which is in consonance with Section 74 of the Contract Act; that the defendant has abandoned the contract even after granting extension of time and therefore, if there is delay in executing the work, levy of liquidated damages is justifiable; that in the absence of material particulars, the trial Court is not justified in dismissing the suit ignoring the fact that the contractor continued the work till June, 2005 even after expiry of the contract period and further could not complete the work even after granting extension of time and ultimately abandoned the work and therefore, levy of liquidated damages is just and proper as per the contractual terms, but, the Court below erred in ignoring the rights of the appellant which accrue under Clause 2 of the agreement which is permissible under Section 74 of the Contract Act; and further that the impugned judgment is contrary to facts and against the probabilities of the case as the Court below failed to properly appreciate the evidence. 10. The main contention of the appellant is that the trial Court has erroneously relied on Section 73 of the Indian Contract Act, 1872 and dismissed the claim on the ground that loss has not been established, but the relief ought to have been examined under Section 74 of the Contract Act where loss need not be established when liquidated damages are prescribed in the agreement. 11. In this regard, it is pertinent to mention Section 74 of the Indian Contract Act, which reads as follows : “Section 74: Compensation for breach of contract where penalty stipulated for. 74. 11. In this regard, it is pertinent to mention Section 74 of the Indian Contract Act, which reads as follows : “Section 74: Compensation for breach of contract where penalty stipulated for. 74. When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.” 12. According to the appellant, the entire amount of damages indicated in the agreement is payable on the breach of the contract, whereas Section 74 itself indicates that even when some amount of damages is indicated in the contract, it is only a reasonable amount which can be granted by a Court not exceeding the amount stipulated in the agreement. Therefore, there is no merit in contending that the entire suit claim ought to have been allowed by the trial Court. 13. Even coming to the entitlement of the plaintiff to seek liquidated damages basing on Clause (2) of the agreement is concerned, it is the contention of the defendant that the plaintiff is at fault in not providing designs, drawings and permissions as required, within the stipulated time, and therefore, extension of time by the plaintiff without agreeing to the conditions by the defendant to enhance rate of amount payable under the contract, it does not amount to breach of contract by the defendant and rather the contract got terminated because of the conduct of the plaintiff and thus, Section 74 of the Contract Act has no application to the present case. In this regard, it is further contended that the dispute before the Arbitrator was also decided in favour of the defendant holding that the plaintiff herein is at fault, however, this claim raised by the plaintiff herein before the arbitrator as a counter claim No.2 could not be decided by the arbitrator as it fell in the exception. 14. In this regard, it is further contended that the dispute before the Arbitrator was also decided in favour of the defendant holding that the plaintiff herein is at fault, however, this claim raised by the plaintiff herein before the arbitrator as a counter claim No.2 could not be decided by the arbitrator as it fell in the exception. 14. In answer, the learned counsel for the appellant submitted that the award of the arbitrator is under challenge under Section 34 of the Arbitration Act before the District Court and thus the findings of the arbitrator holding against the plaintiff herein have not reached finality. 15. Though the observations have not reached finality, the reasons given by the arbitrator in the award are part of evidence before this Court in the suit and all such reasons clearly demonstrate the plaintiff has not furnished the designs, drawings etc. in time and thus, there was delay in execution of the contract and therefore, the defendant alone cannot be held liable for breach of contract. Mere extension of time for performance of the contract by the plaintiff without agreeing for other conditions of the defendant, the defendant cannot be held solely liable for the breach. Under Section 74 of the Contract Act, the person claiming breach is entitled to compensation but when there are reciprocal obligations, no complaint of breach against them can be raised. As such, in the present case, the plaintiff, without discharging its obligations cannot rely on the clauses in the agreement for liquidated damages just on the ground of termination of contract. 16. For all the aforesaid reasons, this Court finds that there is no merit in the appeal. 17. Accordingly, the appeal is dismissed. There shall be no order as to costs. Miscellaneous petitions pending, if any, shall stand closed.