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2024 DIGILAW 1222 (GUJ)

Kheda District Panchyat v. Arvindbhai C. Patel

2024-06-12

BIREN VAISHNAV, NISHA M.THAKORE

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ORDER : Biren Vaishnav, J. 1. These appeals are filed against the common judgement and decree passed by the 3rd Joint Civil Judge (SD), Nadiad, District : Kheda, dated 02.01.1998. It is a common judgement and decree in Special Civil Suit No. 185 of 1993 filed by the Contractor Shri Arvindbhai C. Patel for recovery of Rs.8,20,792/- and in Special Civil Suit No. 205 of 1993 filed by the Kheda District Panchayat for recovery of Rs.21,44,722.32/-. By the aforesaid judgement and decree, the learned Trial Judge allowed the suit of the Contractor, namely, Special Civil Suit No. 185 of 1993 directing that an amount of Rs.8,20,792/- be recovered with 12% penal interest from the Kheda District Panchayat. Special Civil Suit No. 205 of 1993 filed by the Kheda District Panchayat was dismissed. Hence, the respective appeals. 2. Facts in brief indicate that the work order was issued on 27.03.1987 by the Kheda District Panchayat to Shri Arvind C. Patel for constructing Sarkhej – Kakarkhad Ravadavad road II stage. Since the Contractor was the last bidder whose tender amount was Rs.14,74,396.10/-, the contract was awarded to the Contractor. The date of completion was stipulated to be 26.06.1988. 2.1 It was the case of the plaintiff – Contractor that since the site was not handed over on time due to pending land acquisition proceedings, the work could not be completed within the stipulated time. Payments also were irregular. Claims, therefore, were raised against the Kheda District Panchayat, six in number, which are as under:- “(i) Rs.34,291/- asked for to return of security deposit which is deposited with defendant paid in cash. F.D.R., N.S.C along with accrued interest thereon. (ii) Rs.20,000/- for work done but not paid. (iii) Claim No.3 amounting to Rs.30,000/- as account of the metal, machine out and quarry west. (iv) Claim No.4 amounting to Rs.2,65,468/- on account of loss of profit at the rate of 20%. (v) Claim No.5 is of Rs.4,42,350/- on account of establishment charges. (vi) Claim No.6 amounting to Rs.27,183/- final bill Rs.1,500/- asked for notice charges and total amount comes to Rs.8,20,792/- found due against defendant which may be allowed together with 18% penal interest by passing a decree against defendant along with the cost of the suit.” 2.2 After hearing the parties, the suit of the Contractor, namely, Special Civil Suit No. 185 of 1993 was decreed as above. 2.3 Special Civil Suit No. 205 of 1993 filed by the Kheda District Panchayat on the ground that the work was not completed within the stipulated time, and therefore, the work had to be allotted to one Shri Rakesh Shah as a result of which amounts were to be recovered from the Contractor of Rs.17,87,381.30/- paid by the plaintiff – Panchayat, was dismissed by a common judgement and decree. Since the respective suits were allowed and / or dismissed, the Kheda Panchayat is in appeal. 3. Mr. H.S. Munshaw, learned counsel appearing for the Kheda District Panchayat, being aggrieved by the decree in favour of the Contractor, would submit as under: 3.1 There were several set of evidences on record to show that the Contractor did not complete the work within the stipulated time limit which was clearly established. He would press into service the documents at Exhs 29 and 35 i.e. the last bill given to the subsequent Contractor, to submit that the suit of the Kheda District Panchayat ought not to have been dismissed on the ground of limitation as the last bill was of the year 1991 whereas the suit was filed in the year 1993. 3.2 Mr. Munshaw, learned Counsel, would submit that the learned Judge committed an error in holding that the land acquisition proceedings were pending. He would submit that the possession of the Survey Nos. 119, 283, 284, 319 & 322 was already handed over to the earlier Contractor M/s. Nihil Corporation. The work which was to be executed by the Contractor could not be completed due to his sole negligence. 3.3 Mr. Munshaw, learned Counsel, would submit that notices were given to the Contractor vide Exh.26 and resolution was passed by the Executive Committee of the District Panchayat, and therefore, the suit of the Panchayat ought to have been allowed. 3.4 Relying on various letters issued by the District Panchayat which were exhibited in the Trial Court, Mr. Munshaw, learned Counsel, would submit that the learned Judge has clearly ignored the evidences adduced by the District Panchayat which clearly showed that it was only the subsequent Contractor Shri Rakesh D.Shah who could complete the work. 3.5 Mr. Munshaw, learned Counsel, would further submit that the correspondences entered into between the parties clearly established that it was the Contractor who failed to complete the work within the time stipulated. 3.5 Mr. Munshaw, learned Counsel, would further submit that the correspondences entered into between the parties clearly established that it was the Contractor who failed to complete the work within the time stipulated. He would submit that from the depositions given at Exhs.101 and 108 it was clear that the case of the Panchayat was established which was never discussed by the learned Judge. The rate of interest at 12% too was excessive. 4. Mr. Paras Sukhwani, learned counsel appearing for the Contractor would submit that the Trial Court committed no error in allowing the suit of the plaintiff – Contractor and dismissing the suit of the Panchayat. He would submit that there was evidence on record which was rightly appreciated by the learned Judge and a decree was rightly passed in favour of the Contractor in the suit filed by him and the decree to recover amounts at the hands of the District Panchayat was rightly refused by the learned Judge. He would rely on the following decisions : (i) In the case of Hind Construction Contractors, M/s. Vs. State of Maharashtra., reported in AIR 1979 SC 720 . (ii) In the case of A.T. Brij Paul Singh M/s. Vs. State of Gujarat., reported in AIR 1984 SC 1703 . (iii) In the case of State of Karnataka Vs. K. Krishnappa Naidu & Co., reported in AIR 1987 SC 1359 . (iv) In the case of O.N.G.C. Vs. NOBEL STEEEL, rendered in First Appeal No. 2972 of 2000, dated 16.07.2012. 5. Having considered the submissions made by the learned counsels appearing for the respective parties, if the facts are deciphered in a nutshell, it was a case of cross claims by the respective parties to the Contract. Special Civil Suit No. 185 of 1993 was filed by the Contractor for recovery of claims which have been set out hereinabove. Special Civil Suit No. 205 of 1993 was filed by the Panchayat alleging that the contract was not completed within the stipulated time and it had to be awarded to a new Contractor, and therefore, the payment made to the plaintiff – Contractor of the suit needed to be recovered. Perusal of the Trial Court’s judgement indicates that issues had been raised in each of the suits respectively. Perusal of the Trial Court’s judgement indicates that issues had been raised in each of the suits respectively. 5.1 Evident it is from the facts that initially the contract was awarded to one Nihil Corporation which could not complete the work and hence the contract was awarded to the Contractor in question. The Trial Court on perusal of the work order at Exh.102 and the notices issued to Nihil Corporation, the erstwhile Contractor, found that it was an admitted position that said Nihil Corporation, could not complete the work. Perusal of the letters, especially the notices of the present Contractor at Exhs. 104 and 105 indicate that the Contractor had addressed to the Panchayat that despite several requests, no response was given by the Panchayat to its notices or letters and that material was lying at the site and the Contractor was hampered from completing the work because of any positive response from the Panchayat. Issues had been raised in the notice extensively at Exh.105 which indicate that despite efforts being made by the Contractor, the Panchayat was solely and fully responsible in assisting the Contractor in discharge of its contract. That the land was not fully acquired and the issue of payment of compensation to the owners of the land was a factor which prevented the execution of the Contract is also apparent from the letters at Exhs. 39 and 40 which are letters addressed by the land owners indicating that they would not permit laying down of metal on the road unless and until their grievance of adequate compensation is satisfied. 5.2 Perusal of the reasonings of the learned Judge would indicate that for the reasons as aforesaid, the learned Trial Judge found that the land on which the contract had to be executed was not promptly handed over to the Contractor which resulted in the delay of executing the contract which caused damage to the Contractor, inasmuch as, the material and the heavy machinery remained unutilized at the site. This resulted in rising of certain claims which were set out by the claim and the Trial Court, on appreciation of evidence towards Exhs. 17 to 25 found that despite several reminders to the Panchayat, the work suffered and execution of the contract was delayed, and therefore, the levy of penalty at the hands of the Panchayat to the Contractor was misconceived. 17 to 25 found that despite several reminders to the Panchayat, the work suffered and execution of the contract was delayed, and therefore, the levy of penalty at the hands of the Panchayat to the Contractor was misconceived. 5.3 As far as the suit of the Panchayat is concerned, the Trial Court in the issues raised, found that the suit was time barred. The suit was instituted on 15.09.1993 whereas the agreement of which the alleged breach was committed was of the year 1986-87. Apparently therefore, even if the work order’s date is taken into consideration, the suit was clearly time barred. The Hon’ble Supreme Court in the case of Hind Construction (supra), has held that time could not have been held to be the essence of the contract, and therefore, when it was found that if time was not the essence of the contract and if there was failure to complete the work and when it was found on evidence that the Contractor was not at fault, penalty could not be levied on the Contractor. In the case of A.T. Brij Paul Singh (supra), para 9 of the judgement reads as under : “9. It was not disputed before us that where in a works contract; the party entrusting the work, commits breach of the contract, the Contractor would be entitled to claim damages for loss of profit which he expected to earn by undertaking the works contract. What must be the measure of profit and what proof should be tendered to sustain the claim are different matters. But the claim under this head is certainly admissible. Leaving aside the judgment of the trial Court which rejected the claim for want of proof, the High Court after holding that the respondent was not justified in rescinding the contract proceeded to examine whether the plaintiff- Contractor was entitled to damages under the head ‘loss of profit’. In this connection, the High Court referred to Hudson’s Building and Engineering’s Contract (1970), tenth edition and observed that in major contracts subject to competitive tender on a national basis, the evidence given in litigation on many occasions suggests that the head-office over heads and profit is between 3 to 7% of the total price of cost which is added to the tender. In other words, the High Court was of the view that the claim under this head was admissible. In other words, the High Court was of the view that the claim under this head was admissible. The High Court, however, addressed itself to the question whether adequate proof is tendered to sustain the claim, in this connection, it was observed that the loss of profit when it is sought to be recovered on the percentage basis has to be proved by proper evidence. Having settled the legal position in this manner, the High Court proceeded to reject the claim observing that the bare statement of the partner of the Contractor’s firm that they are entitled to damages in the nature of loss of profit @ 20% of the estimated cost is no evidence for the purpose of establishing the claim. The High Court further observed that the appellant has not proved by any primary documents the basis of its pricing for the purpose of quotation in reply to the tender and mom so when it has quoted at 71/2% less than the original estimated cost and in this view of the matter the claim for loss of profit is unsustainable.” 5.4 Reading the aforesaid judgement would indicate that where a party entrusting work commits a breach of the contract, the Contractor would be entitled to damages. In the facts of the present case when it was clearly found that the Contractor was not at fault and it was the Panchayat who had not handed over the possession of the land in question, no fault can be found by us to the Trial Court’s finding of facts on correct appreciation of evidence that the suit of the Contractor was rightly decreed. 6. For the aforesaid reasons, therefore, we find no reason to entertain the appeals of the Panchayat. Appeals are dismissed, accordingly. While admitting the appeals, this Court in the civil applications for interim relief had permitted the Contractor to withdraw part of the 50% of the amount of bank guarantee. Now that the appeals of the Panchayat are dismissed, the Contractor – original plaintiff of Special Civil Suit No. 185 of 1993 will be entitled to the fruits of the decree of the suit in light of the appeals being dismissed. Order accordingly.