JUDGMENT Dated this the 17 th day of January, 2025 This appeal is at the instance of the defendants in O.S.No.84/1999 on the files of the Sub Court, Kasargod, where the plaintiff being the licenced PWD contractor prayed for grant of decree to the tune of Rs.9,57,330.14 with future interest and costs raising contention that he agreed to do the special repairs to Vidyanagar–Mudippu road (Morthana Meeyapadavu) from KM 0/00 to 3/00 on behalf of the Government of Kerala for enhanced rate and completed the work thereafter. 2. Heard the learned counsel for the appellants/defendants as well as the learned counsel for the respondent/plaintiff. 3. Parties in this appeal shall be referred as “plaintiff” and “defendants” with reference to their status before the trial court for easy reference. 4. The case of the plaintiff is that he is a licenced P.W.D. contractor. As per an agreement No. E.E./KSD/34/86-87 dated 22.9-1986 with the 2 nd defendant on behalf of the State, he undertook the work of special repairs to Vidyanagar-Mudippu road. The contract is a schedule rate percentage contract and the estimated cost of the work put to tender was taken for Rs. 4,94,625/- less cost of materials to be supplied by the department, amounting to Rs.89,565/-. The plaintiff agreed to execute the work at 45% above the estimated rates, except cost of the materials to be supplied by the Public Works Department. The stipulated time for completion of the work was 3 months. But due to non-supply of materials by the department in time, the work could not be completed within 3 months. Time was not the essence of the contract and the time was extended from time to time till 12.03.1996. In respect of the 1 st and 2 nd part of the work done, a sum of Rs.25,106/- and Rs.99,938/- was paid to the plaintiff. During the transportation of cement supplied by the Public Works Department to the site, the Vigilance Police seized the cement and registered a case as C.C.No. 59/1992. Since the measurement books were not available, the work could not be carried out thereafter till the case ended in acquittal on 29.03.1994. Thereafter the P.W.D. revised the estimate. During the transportation of cement supplied by the Public Works Department to the site, the Vigilance Police seized the cement and registered a case as C.C.No. 59/1992. Since the measurement books were not available, the work could not be carried out thereafter till the case ended in acquittal on 29.03.1994. Thereafter the P.W.D. revised the estimate. A portion of the metalled part had been damaged and accordingly, the plaintiff was directed to proceed with the work as per the revised estimate made by P.W.D. The plaintiff was promised that the amount would be paid for the work at the revised rate prevailing at the time of the work. But P.W.D. paid the amount for the work done only at the rate fixed in 1986. Cost of the work as per the revised estimate was Rs.4,13,311/-. As per the old rate and the value of the materials to be supplied was Rs. 1,12,132/- and by estimating the amount payable at 45% above the estimate fixed, the amount payable was Rs.5,99,301/- and a sum of Rs.1,06,760/- and a sum of Rs. 2,75,677/- was paid to him on 31-7-1998 and 15-11-1997 respectively. The amount should have been paid at the new rate which prevailed at the time of commencement of the work in 1994. Revised Schedule as per the new rate was prepared as per letter No. C8A/37514/96/KD of the 3 rd defendant and file No.12535/C2/P.W.D. of the Secretary to Government P.W.D. Department. As per the new rate, the cost of the work done comes to Rs.9,51,872/- of which the cost of materials supplied by the department is Rs.1,12,132/-. The amount payable to the plaintiff comes to Rs.12,17,623/- and the amount paid to him, including deductions, is only Rs.5,99,301/-. The last payment was made on 15.11.1997 rejecting the claim for payment at the new rate due from the P.W.D. department to the plaintiff. Thus a sum of Rs.6,18,322/- is still due from the PW Department to the plaintiff. By way of cost of granite metal collected by the plaintiff in 1987 which could not be used till 1994 those materials were lost and the department has to pay damages of Rs.55,635.52 towards the work amount of 1940.78 M 3 The plaintiff is entitled to Rs.39,601.62 with interest at 12% from 15-11-1997. In spite of notice sent to the State under Section 80 of the Civil Procedure Code, no amount has been paid. In spite of notice sent to the State under Section 80 of the Civil Procedure Code, no amount has been paid. Hence the Suit for Rs.9,57,330.14/- with future interest and costs. 5. The defendants filed written statement mainly contending that the total amount, earlier agreed upon, as per agreement dated 22.02.1986 for the work, was Rs.7,11,434/- and the said payment was effected by three part bills and one final bill at the rate of Rs.28,910/-, Rs.1,15,901/-, Rs.1,51,931/-, Rs.4,14,692/- and the total amount would come to Rs.7,11,434/-. The specific contention raised by the defendants is that the work agreed upon could not be carried out since a vigilance case was registered against the plaintiff, and after the closure of the case as on 29.07.1995, the plaintiff executed a supplemental agreement for the execution of ‘extra items’ in terms of the original agreement and the plaintiff agreed to carry out the work as per paragraph No.10(vi) prescribed in the original agreement. Hence the plaintiff could not claim any enhanced rate or compensation whatsoever on account of such increase in rate of labour charges or cost of materials. 6. The trial court raised necessary issues and tried the matter. PW1 was examined and Exts.A1 to A6 were marked on the side of the plaintiff. DW1 was examined and Exts.B1 to B3 series were marked on the side of the defendants. Finally, the trial court found that there is no justification to deny the payment to the contractor/plaintiff at the revised rates for the work he had done during 1996-1997. But the trial court found that the amount entitled by the plaintiff at the revised rate would come to Rs.12,17,623/- as calculated in the plaint, out of which Rs.5,99,301/- was already paid and the balance thus calculated as Rs.6,18,322/-, and the same was ordered to be paid by the defendants at the rate of 12% interest per annum from 15.11.1997 to 24.09.1999 and thereafter at the rate of 6% per annum from the date of decree till realisation with cost of the suit. 7. While assailing the verdict of the trial court, the learned Government Pleader mainly pressed the point that in view of Ext.B2(a) supplemental agreement, the plaintiff agreed to do the work for the amount agreed upon based on the original agreement EE/KSD/34/86-87 executed on 29.07.1995 as per paragraph No.10 (vi) prescribed in the original agreement. 7. While assailing the verdict of the trial court, the learned Government Pleader mainly pressed the point that in view of Ext.B2(a) supplemental agreement, the plaintiff agreed to do the work for the amount agreed upon based on the original agreement EE/KSD/34/86-87 executed on 29.07.1995 as per paragraph No.10 (vi) prescribed in the original agreement. The learned Government Pleader fairly submitted that paragraph No.10.(vi) prescribed in the original agreement is not produced before the court. Otherwise, it is submitted by the learned Government Pleader further that the defendants paid Rs.7,11,434/- as agreed upon as per the earlier agreement and therefore, no amount is entitled by the plaintiff. Accordingly, he sought interference in the verdict of the trial court. 8. Relying on Exts.A1 to A3, it is pointed out by the learned counsel for the plaintiff that the original agreement was failed to be performed because of registration of vigilance case against the plaintiff without any fault of the plaintiff and accordingly, the work was able to be resumed subsequently during the period of 1996-1997. The learned counsel has given heavy reliance on Ext.A3, dated 25.04.1996, issued by the Executive Engineer to the Superintending Engineer, showing Rs.9,39,206/- as the amount required for doing the work at the revised rate during the relevant time. According to the learned counsel for the plaintiff, the plaintiff included 45% of the cost of the work in addition and accordingly, it was contended that the total amount entitled by the plaintiff would come to Rs.12,17,623/-. 9. Now the questions arise for consideration are; 1. Whether the plaintiff established his case to get the suit amount by evidence? 2. Whether the trial court went wrong in finding that Rs.12,17,623/- as the total amount entitled by the plaintiff and Rs.5,99,301/- is the amount already paid and the balance due is Rs.6,18,332? 3. Whether the decree and judgment would require interference? 4. Reliefs and costs. 10. Points Nos.1 to 3:- In the instant case, going by the evidence of PW1, supported by Exts.A1 to A6, it has been brought in that as per the admitted case of the plaintiff, the plaintiff agreed to do the special repairs of Vidhyanagar – Mudipp road and the payment originally agreed during 1986-1987 was Rs.4,94,625/- less cost of materials, to be supplied by the department, amounting to Rs.89,565/-. The plaintiff agreed to execute the work at 45% above the estimated rates except cost of the materials to be supplied by the Public Works Department. But the agreement could not be completed within the stipulated period of three months, according to the plaintiff, due to non-supply of materials by the Department in time and subsequent registration of vigilance case against him. Since time was not the essence of the contract, the time was extended from time to time till 12.03.1996. 11. In fact, the work could not be performed till 1996 because of registration of vigilance case against the plaintiff as C.C.No.59/1992. Anyhow, admittedly, the work was carried out after 1996 and Exts.A1 to A3 would show that there was proposal to increase the rate in the revised scale and as per Ext.A3 the amount was arrived at Rs.9,39,206/-. Even though the defendants raised contention, relying on Ext.B2(a), supplemental agreement executed in continuation of the original agreement, that the defendants agreed to the work at the rate as per paragraph No.10(vi) prescribed in the original agreement and therefore, the plaintiff is not entitled to get any enhanced amount, the factual aspect is that the work agreed upon during 1986-1987 could not be done due to registration and pendency of vigilance case against the plaintiff and after a lapse of 10 years the work was carried out on closure of the vigilance case after having arrived at the revised rate prevailing during 1996-1997. Therefore, the work definitely would require enhanced rates as seen from the proceedings of Exts.A1 to A3 finalising the same to the tune of Rs.9,39,206/-. 12. In this matter, according to the plaintiff, he had received only Rs.5,99,301/-. But the defendants raised a specific contention in the written statement, mentioning the amount paid as per three part bills and the 4 th and final bill comes to Rs.7,11,434/- and according to the defendants, the said amount alone is entitled by the plaintiff. 12. In this matter, according to the plaintiff, he had received only Rs.5,99,301/-. But the defendants raised a specific contention in the written statement, mentioning the amount paid as per three part bills and the 4 th and final bill comes to Rs.7,11,434/- and according to the defendants, the said amount alone is entitled by the plaintiff. The court below found that the defendants made the plaintiff to believe that he would be given revised rates and accordingly, he had done the work in anticipation of the revised rate and the trial court relied on the decision of the Apex Court in Hyderabad Municipal Corporation vs M. Krishnaswami Mudaliar and another, reported in AIR 85 SC 607 , where the Apex Court held as under, while decreeing somewhat a similar suit: “under the terms of the contract the work was to be completed by the contractor within a period of one year but due to financial difficulties less budget having been provided for in the year 1951- 52- the plaintiff was requested to spread over the work for two years more, that is to say to, complete the same in three years but the respondent-plaintiff was agreeable 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 increased rates of either material or wages. The Government did not intimate to the respondent-plaintiff that no extra payment on account of increased rates would be paid to him or that he will have to complete the work on the basis of original rates. In fact no reply was sent by the Government and a studied silence was maintained by the Government in regard to the respondent-plaintiff's demand for extra payment, in spite of several reminders in that behalf, till the plaintiff actually completed the work during the spread over period and only when after completion of work the plaintiff-respondent submitted his final bill claiming 20 per cent extra over and above the rates originally agreed upon between the parties the Government stated that he was not entitled to increased rates. After considering the correspondence exchanged between the parties and the other material on record the High Court has taken the view that the Government was liable to make extra payment for the work done as there was no dispute that the rates of material, etc. After considering the correspondence exchanged between the parties and the other material on record the High Court has taken the view that the Government was liable to make extra payment for the work done as there was no dispute that the rates of material, etc. had increased during the extended period of two years and plaintiff was entitled to such extra payment.” 13. The Apex Court had occasion to consider escalation in contract works in the absence of escalation clause in the contract, in the decision reported in Food Corporation of India v. M/s.A.M.Ahmed and Co. and Another, reported in 2006 KHC 1589 SC, where the Apex Court considered the decision in Hyderabad Municipal Corporation’ s case (supra) and also considered another decision of the Apex Court in P.M.Paul v. Union of India reported in AIR 1989 SC 1034 . In paragraph No.31 of the judgment, it is held as under: “31. The second judgment is in P.M. Paul v. Union of India ( AIR 1989 SC 1034 ) . In this case, the dispute that was referred to the arbitrator was as to who is responsible for the delay, what are the repercussions of the delay in completion of the building and how to apportion the consequences of the responsibility. The arbitrator found that there was escalation and, therefore, he came to the conclusion that it was reasonable to allow 20% of the compensation under the claim. He accordingly allowed the same. Counsel appearing for the Union of India submitted before this Court that the arbitrator had granted a sum of Rs.2 lakhs as escalation charges and cost in the absence of escalation clause was not a matter referred to the arbitrator. In other words, it was urged that the arbitrator had travelled beyond his jurisdiction in awarding the escalation cost and charges. This in Court in paragraphs 11 and 12 of the judgment held thus: “11. It is well settled that an award can only be set aside under S.30 of the Act, which enjoins that an award of an arbitrator/ umpire can be set aside, inter alia, if he has misconducted himself or the proceeding. Adjudicating upon a matter which is not the subject matter of adjudication, is a legal misconduct for the arbitrator. It is well settled that an award can only be set aside under S.30 of the Act, which enjoins that an award of an arbitrator/ umpire can be set aside, inter alia, if he has misconducted himself or the proceeding. Adjudicating upon a matter which is not the subject matter of adjudication, is a legal misconduct for the arbitrator. The dispute that was referred to the arbitrator was, as to who is responsible for the delay, what are the repercussions of the delay in completion of the building and how to apportion the consequences of the responsibility. In the objections filled on behalf of the respondent, it has been stated that if the work was not completed within the stipulated time the party has got a right for extension of time. On failure to grant extension of time, it has been asserted, the contractor can claim difference in prices. 12. In the instant case, it is asserted that the extension of time was granted and the arbitrator has granted 20% of the escalation cost. Escalation is a normal incident arising out of gap of time in this inflationary age in performing any contract. The arbitrator has held that there was delay, and he has further referred to this aspect in his award. The arbitrator has noted that Claim I related to the losses caused due to increase in prices of materials and cost of labour and transport during the extended, period of contract from 09/05/1980 for the work under phase I, and from 09/11/80 for the work under phase II. The total amount shown was Rs. 5,47,618.50. After discussing the evidence and the submissions the arbitrator found that it was evident that there was escalation and, therefore, he came to the conclusion that it was reasonable to allow 20% of the compensation under Claim I, he was accordingly allowed the same. This was a matter which was within the jurisdiction of the arbitrator and hence, the arbitrator had not misconducted himself in awarding the amount as he has done.” Thereafter, in paragraph Nos.32 and 33, the Apex Court held that the above two cases, in our opinion, squarely apply the facts and circumstances of the case therein. Paragraph No.33 is to the following effect. “33. Paragraph No.33 is to the following effect. “33. Escalation, in our view, is normal and routine incident arising out of gap of time in this inflationary age in performing any contract of any type. In this case, the arbitrator has found that there was escalation by way of statutory wage revision and, therefore, he came to the conclusion that it was reasonable to allow escalation under the claim. Once it was found that the arbitrator had jurisdiction to find that there was delay in execution of the contract due to the conduct of the FCI, the Corporation was liable for the consequences of the delay, namely, increase in statutory wages. Therefore, the arbitrator, in our opinion, had jurisdiction to go into this question. He has gone into that question and has awarded as he did. The Arbitrator by awarding wage revision has not misconducted himself. The award was, therefore, made rule of the High Court, rightly so in our opinion.” 14. Thus, the law is settled on the point that escalation of agreed rates for the extra expenses borne without the fault of the contractor in executing the work and due to delay on the part of the other side in performing the part of the contract is legally permissible. Similarly, in cases where the contract could not be performed within the period specified, not due to the laches of the contractor or that of the other side, then also, escalation of rates for the works done after a long period from the original agreement has to be given particularly when such proposal for escalation could be gathered from the evidence tendered. When an agreement was entered into in the year 1986-1987, and the work failed to be completed by the contractor because of registration of vigilance case, he agreed to do the work when the legal constraint was removed, that too, subject to payment of enhanced rate for the work which was carried out, after a long gap and by the time the cost of commodities and labour charge etc. were substantially raised, enhanced rate is liable to be granted. were substantially raised, enhanced rate is liable to be granted. If in a case, such a proposal was mooted by the contractor and practically acted upon by the Government, as evident from documents, and execution of supplementary agreement without denying the escalated price would entitle the contractor to get additional sum for the work he had done after a period of ten years. 15. In the instant case, even though the plaintiff would assert that he had received only Rs.5,99,301/-, he also failed to produce any documents to show that the amount received was only Rs.5,99,301/-. Thus, in the instant case, what has to be inferred from the evidence available is that the Government paid Rs.7,11,434/- and the amount, as per Ext.A3, entitled by the plaintiff would come to Rs.9,39,206/-. Nothing brought in evidence to show that the plaintiff agreed to do the work as per the original agreement. If so, the plaintiff is entitled to get Rs.2,27,772/- (Rs.9,39,206 – Rs.7,11,434) along with interest. In the matter of calculation of amount due to the plaintiff, the trial court used a hypothetical approach ignoring these aspects. However, as far as the entitlement of enhanced amount at the revised rate by the plaintiff is concerned, the finding of the trial court is only to be justified. But the quantum requires modification, in view of the discussion made hereinabove. 16. Therefore, the verdict of the trial court is interfered and modified to grant decree for Rs.2,27,772/- (Rupees two lakh twenty seven thousand seven hundred and seventy two only) with interest at the rate of 12% per annum from the date of suit till the date of decree and thereafter 6% per annum from the date of decree till realisation. Points Nos.1 to 3 answered thus. 17. In the result, this appeal stands allowed in part. The decree and judgment of the trial court stand altered and modified, allowing the plaintiff to realise Rs.2,27,772/- (Rupees two lakh twenty seven thousand seven hundred and seventy two only) with interest at the rate of 12% per annum from the date of suit till the date of decree and thereafter 6% per annum from the date of decree till realisation. 18. Point No.4 Considering the facts of this case, the parties shall suffer their respective costs. Registry is directed to forward a copy of this judgment to the trial court forthwith.