IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE A.K.BASHEER & THE HONOURABLE MR. JUSTICE P.Q.BARKATH ALI WEDNESDAY, THE 10TH MARCH 2010 / 19TH PHALGUNA 1931 AS.No. 930 of 1997() -------------------- OS.538/1983 of PRL.SUB COURT,TRIVANDRUM .................... APPELLANT: PLAINTIFF -------------- THE KERALA STATE ELECTRICITY BOARD REP. BY ITS SECRETARY VAIDYUTHI BHAVANAM, PATTOM THIRUVANANTHAPURAM - 4 BY ADV. SRI.C.K.KARUNAKARAN, SC FOR KSEB RESPONDENT: DEFENDANT --------------- C.T.CHACKO, S/O CHANDY THOMAS RESIDING AT PULINILKKUNNATHIL HOUSE KEEZHUKARA, KOZHENCHERRY P.O. ADV. SRI.M.RAJASEKHARAN NAYAR ASI.A.SUDHI VASUDEVAN, SC, KSEB FOR 57 5 THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 10/03/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: A.K.BASHEER & B.Q. BARKATH ALI, JJ. ------------------------- A.S. No.930 of 1997 -------------------------- Dated this the 10th March, 2010 J U D G M E N T Basheer,J. Kerala State Electricity Board has filed this appeal impugning the decree and judgment passed by the court below declining its prayer for grant of a decree for damages to the tune of Rs.32,14,384/- with 18% interest thereon. 2. The suit was instituted contending, inter alia, that respondent/defendant who was awarded a contract for construction of a masonary dam across Kullar under the 'Sabarigiri Augmentation Scheme' had abandoned the work without any justifiable reason. Resultantly the Board was constrained to re-tender the work and it was awarded to another contractor for a sum of Rs.55,57,783/-. Appellant Board contended that the defendant was liable to make good the loss sustained by it and pay the difference between the PACs of the two contracts. 3. The court below after an elaborate consideration of the oral and documentary evidence adduced by both sides, AS.No.930/97 2 dismissed the suit holding that the defendant had not abandoned the work as alleged and that the evidence on record clearly established that there was no laches on the part of the defendant in completing the work. On the contrary, the appellant Board had defaulted in carrying out its obligations like construction of the approach road, handing over possession of the forest land at the work site etc. 4. The case of the appellant/plaintiff as projected in the plaint may be briefly noticed. 5. The contract for construction of a 'masonary dam' across Kullar was awarded to the defendant at 7% above the estimate rate. The probable amount of contract (PAC) came to Rs.19,84,810/-. Though the work was awarded to the defendant on December 9, 1977, Ext.A1 agreement was executed on January 13, 1978. Plaintiff alleged that the defendant "turned up for the work" only on October 4, 1978. He failed to furnish " a complete construction programme showing the proposed programme of operation for orderly performance of work". Plaintiff asserted that it had discharged its obligations in time in such a way as not to affect the actual progress of the work and AS.No.930/97 3 provided all facilities for the work. But according to the plaintiff, the defendant failed to carry out the work mainly due to his inefficiency and laches to organise and manage the necessary labour force required to do the work effectively and to enforce discipline among them which was solely his responsibility. Plaintiff further alleged that the defendant abandoned the work on May, 17, 1980. According to the plaintiff during 19 months the defendant had carried out only 10,861 m3 of common excavation and 7837 m3 of rock excavation costing about 2.57 lakhs. Therefore, the Board was " forced to re-tender almost the entire work". Further case of the plaintiff was that the demand made by the defendant for escalation of rate by 40% over and above the agreed rate was turned down. This, according to the plaintiff, was yet another reason which prompted the defendant to abandon the work. In short, the plaintiff put the entire blame on the defendant for the non- completion of the work entrusted to him and claimed damages for the alleged loss sustained by the appellant by re-tendering the same at a much higher Probable Amount of Contract . 6. The defendant in his written statement primarily AS.No.930/97 4 contended that the suit was barred by limitation and also hit by Section 34 of the Arbitration Act, 1940. The defendant put the entire blame on the plaintiff for his failure to complete the work. It was contended by him that the work could not be commenced for nearly 10 months because the plaintiff Board failed to construct the road through the forest to reach the dam site. The Board also failed to provide air compressor and power at the work site as undertaken by it. It was further pointed out that under Ext.A1 agreement, the Kullar dam was to be raised to a height of 20 mtrs and not to 22 mtrs and the volume of dam under the agreement was only 11600 M3 and not 14000 M3 as alleged in the plaint. It was further contended that the work site being in the midst of dense forest, where there was no road access at all, the delay on the part of the Board in constructing the approach road to a distance of 1.5 kms to the dam site as undertaken by it, had resulted in considerable delay in starting the work. The plaintiff Board was not in possession of the required area where the dam was proposed to be built. The land which was in the possession of the Forest Department was acquired by the Board much later which necessarily resulted in AS.No.930/97 5 delay in commencement of the work. More importantly, compressed air supply which was the most essential requirement to commence the work was made available by the plaintiff Board only towards the fag end of 1978. Power supply was made available at the site towards the end of 1978. The labour problem was yet another factor which caused hindrance to the progress of the work. The work had to be stopped on many occasions. Several conciliations were held at the behest of the Board on different occasions. The labour problem was not something that the defendant had bargained for. The other contractors who were entrusted with various other items of work at the dam site were also at the receiving end due to the recalcitrant attitude of the agitating labourers. The defendant alleged that the Board did precious little to solve this problem. The other reason pointed out by the defendant was the changes made by the Engineers at site as regards the quantity of excavation to be carried out. Defendant alleged that he had to execute more than 650% of excavation over and above the agreed quantity with regard to blasting works alone. It was further contended by him that the Superintending Engineer AS.No.930/97 6 visited the site later with a revised plan and asked the defendant to carry out excavation of 10feet more than what was proposed earlier at the down stream. During this time, the labour problem became more acute and the defendant was constrained to declare 'lay off' on May 7, 1980. This notice of lay off was construed by the plaintiff as a notice of abandonment. Since the south west monsoon get in by that time, no construction activity was possible. Though the defendant was ready to commence the work after stoppage of monsoon rains, the plaintiff in the meanwhile issued Ext.A7 notice of termination on August 18, 1980. Defendant asserted that he had never abandoned the work as alleged by the plaintiff and the delay, if any, that occurred in completing the work was only because of laches on the part of the plaintiff and also for reasons beyond his control. He further asserted that the work re-tendered by the plaintiff was of a totally different nature and magnitude. According to the plaintiff, the re-tendered work was "a completely novated work altogether which has no basis with the original work put to tender" Thus the defendant contended that the suit was totally misconceived and he was not liable to pay any damages to the AS.No.930/97 7 plaintiff. 7. In this context, it may be noticed that the plaintiff had invoked the provisions contained in Section 20 of the Arbitration Act, 1940 and instituted Arbitration Suit No.135 of 1981 praying for appointment of an Arbitrator to resolve the disputes that had cropped up between him and the plaintiff. The order passed by the Subordinate Judge's Court in the above suit was ultimately set aside by this Court in M.F.A No.949 of 1988. A Division Bench of this Court in that case held that it would be open to the trial court to consider the question of alleged abandonment of work in the suit filed by the Board itself and appointment of an arbitrator was not warranted invoking the relevant clause in the agreement, especially since the work had already been terminated. 8. In the light of the contentions raised by the plaintiff and the defendant, the trial court settled the following issues: (i) Is the suit hit by Section 34 of the Indian Arbitration Act? (ii) Is the suit barred by limitation? (iii) Whether the delay in execution of the work was caused due to the laches on the part of the defendant? AS.No.930/97 8 (iv) Has the plaintiff sustained loss due to the non execution of the work by the defendant? If so, what is the quantum? (v) Reliefs and costs. 9. Issues Nos. (i) and (ii) referred to above were found against the defendant and in favour of the appellant. Learned counsel for the respondent has not seriously called in question the correctness of the above findings before us. Therefore, we do not propose to deal with those issues in this appeal. 10. While dealing with Issue No.(iii) as to whether the delay in execution of the work was caused due to the laches on the part of the defendant, the court below noticed that the plaintiff Board had, in clause 2 of Part III of "GENERAL SPECIFICATIONS AND ADDITIONAL CONDITIONS OF CONTRACT" undertaken to construct an approach road to dam site at a length of 1.5 km. For the sake of convenience the said clause is extracted hereunder" "LOCATION AND ACCESS: The area of construction is in Pathanamthitta taluk of Quilon District between AS.No.930/97 9 latitude 9-25' N and 9-28' N and longitude 77'8'E and 77-10'E. The main access to dam site is through a first class motorable road connecting Vandiperiyar and Pamba. Vandiperiyar is about 96km from Kottayam. Electricity Board is constructing an approach road to dam site of about 1.5 km in length branching off from 12th km from Pamba towards Vandiperiyar. This road is expected to be completed before the commencement of work by the contractor. But no claim for con completion of this road will be entertained by the Board. 11. It was contended by the defendant that the approach road was got ready by the Board only towards the fag end of 1978. Because of the delay in providing road access the defendant had to incur heavy additional expenditure in order to carry the construction materials to the work site. 12. In this context, we may refer to Ext.B6 communication signed by the Executive Engineer to the defendant on July 24, 1978. While admitting that board could not make available proper access to the site, the Engineer took pains to remind the AS.No.930/97 10 defendant that going by Clause 2 of Part III of the agreement, the Board expects to get the road ready before the commencement of the dam work and even if the road could not be completed, the contractor could not take it as an excuse for not commencing the work. In this communication, the Engineer had also taken pains to remind the contractor that failure on the part of the Board to supply materials will not make the contractor eligible to claim compensation. While referring to the liability of the Board to hand over the forest land to the contractor, the Engineer stated that the Board had already taken steps in this regard . 13. We have referred to the above aspects contained in Ext.B6 communication only to indicate that the Board had practically conceded that there was delay on its part in providing road access and also in supplying the requisite materials etc. More importantly, there was delay in making the forest land available at the work site to commence the work. Ext.B5 communication dated July 4, 1978 also gave assurance to the contractor that immediate steps would be taken to honour the commitments on the part of the Board. Any how, the fact AS.No.930/97 11 remained that admittedly the contractor could commence the work some time towards the end of the year 1978. While the appellant would contend that the defendant had carried out some work of negligible quantity worth Rs. 2. 5 lakhs , the case of the defendant was that he had completed work worth Rs. 4.5 lakhs to 5 lakhs. 14. It is significant to note that appellants had produced Ext.A12 Field book and Exs.A13 to 15 Measurement books which admittedly contain the details of check measurements of the work carried out at the Dam site. PW2, the Assistant Executive Engineer deposed that he had been on duty at the work site from November 1981 till March 1986. He further stated that all the measurements in relation to the work in question were available in the Measurement books produced before the court. A perusal of Exts.A12 to A15 will show that the measurements in relation to the entire work at the dam site are in fact available in those books. But curiously, no effort whatsoever was made to bring out the quantity of work that had been done either by the previous contractor or by the subsequent contractor. We deem it necessary to refer to this aspect only to point out that the AS.No.930/97 12 appellant had not chosen to bring it on record as to what was the actual quantity of work turned out by the defendant. 15. It is in this context that we have to consider the contention of the defendant that the nature of the work on the dam had been considerably varied, when it was re-tendered after terminating the contract in his favour. In fact PW3 in the course of his cross examination had asserted that the nature of the work in the two contracts was totally different. He further stated that at the time when he assumed charge about 70-75 % of the work on the dam was already over. 16. It is true that the appellant had asserted that in the course of 19 months , the defendant had carried out only 10,861 cubic metres of common excavation and 7837 cub metre of rock excavation costing about 2.57 lakhs. But no contemporaneous record or corroborative document was produced to substantiate the above contention. More over, no effort whatsoever was made to dispel the confusion as regards the nature of the contract, which was subsequently tendered by the Board after terminating the contract in favour of the defendant. 17. In this context, it may be profitable to refer to the two AS.No.930/97 13 agreements which were executed by the Board between the defendant and his successor namely Exts.A1 and A9 respectively. In Part III of Ext.A1 agreement which deals with general specifications and additional conditions of contract under Sub title Scope and extent of work, it is seen mentioned that the construction of the a Diversion Dam in Masonry and concrete across Kullar about 13.5 Km from Pamba and accessible from the Pamba Vandiperiyar road, involving about 11,600 m3 of rubble masonry and concrete of various strength as detailed in the technical specifications. But when the same was re-tendered in favour of the successor contractor, this quantum of 11600 m3 is conspicuously absent. 18. Sri.C.K.Karunakaran, learned counsel for the appellant points out that the omission was apparent for the reason that the defendant had carried out some work pursuant to Ext.A1 agreement. He also invites our attention to the two schedules annexed to the agreement. Apparently, there is marked variation in the quantum of work indicated in the two schedules. We have referred to the above aspect only to show that the case of the appellant that the defendant had not carried AS.No.930/97 14 out any significant quantity of work at the dam site cannot be accepted on the face of it. But the crucial question is whether the defendant had abandoned the work as alleged by the appellant/plaintiff. While the defendant would contend that he was forced to declare “lay-off” because of labour problems, the case of the appellant is that defendant himself had created such a scenario at the work site since he found that the work was not economical as far as he was concerned. In this context, learned counsel for the appellant has invited out attention to Ext.A6 communication signed by the Superintending Engineer to the defendant on April 26, 1980. It is true that in this communication, the Superintending Engineer has blamed the defendant for his lethargic attitude and warned him of the consequences, if sufficient work force was not deployed at the work site . The Engineer had further warned about the consequences, if the rumours about the proposal to declare “ lay-off” came true. Learned counsel submits that the defendant was entirely to blame for the slow progress of the work. More over, it was noticed by the Board officials that he had been disbanding the work force from the site with an ulterior motive. AS.No.930/97 15 19. In this context, learned counsel for the respondent/defendant has invited our attention to a few other communications sent by the Board officials to the defendant to show that attempts were being made by the Board itself through its officials to diffuse the tension because of the labour agitation. In one such communications, the Engineer had informed the defendant that union leaders had refused to attend the conference convened by him to find out a solution to the imbroglio. Learned counsel submits that the Board having admitted that the workers were creating law and order problem in that area, it was totally unfair to put the entire blame on the defendant and allege that it was his duty and responsibility to solve the problem. In fact, the Executive Engineer by his communication dated May 31, 1980 (Ext.B19) had curtly told the defendant that “maintaining law and order in your work site is primarily your responsibility. You may approach the police personnel to release your agents from the illegal custody of the labourers. Any how I have brought the matter to the notice of the Superintendent of Police, Quilon for taking appropriate action.” AS.No.930/97 16 20. Learned counsel cites this communication as a classic example of the attitude of the Board officials to the labour problem that he faced. Ext.B18 communication dated May 27, 1980 issued by the Executive Engineer will show that the defendant had in fact attended the office of the Engineer as directed, to have a conciliation with the labour leaders . But the General Secretary of the trade union did not participate. Therefore in Ext.B18 communication, the Executive Engineer advised the defendant that “ any problem can be solved by mutual discussion, making known the limitations and previlages as per the appropriate rules binding on you.”. The Engineer further reminded the defendant that “he may also agree with me that Gherao, picketting etc. will not be solution to the problems, nor do they hasten the process of getting a solution.”. While concluding the letter, the Engineer directed the defendant to refer the points of dispute for conciliation to the District Labour Officer, Quilon. 21. It is true that the Chief Engineer (Civil) had sent Ext.A7 communication to the defendant on August 18, 1980 calling upon the defendant to commence the work forthwith, AS.No.930/97 17 failing which, the defendant was warned that the department would be constrained to terminate the contract at the risk and cost of the defendant. Curiously, the Chief Engineer chose to remind the defendant that law and order problems are the concerns of the state and the Electricity Board has nothing to do with it except to request “the government to come to your rescue if they consider it necessary”. The Chief Engineer further went on to say thus : “ You have to do the work in the state with the conditions prevalent in the state and no special environment can be created for you. The department has agreed to make payment for works to be carried out by you. If you carry out the work, the department will pay for it. Otherwise, the department will enforce its rights in the proper way.” 22. Soon thereafter the notice of termination followed. To be precise, the Chief Engineer issued Ext.A8 notice of termination dated October 23, 1980 informing the defendant that the Board had no other alternative, but to terminate the contract at his risk and cost as provided under Clause 16 of the General Conditions of contract and instructions to tenderers annexed to the agreement. Significantly, the Chief Engineer asserted that the termination notice was given with effect from AS.No.930/97 18 the date of unilateral abandonment of work by the defendant. As has been mentioned already, the specific case of the appellant is that the defendant had abandoned the work with effect from May 17, 1980, where as the case of the defendant is that he was constrained to declare “lay- off” because of the labour problem. He had also pointed out that some of his agents/officers were gheraoed and restrained from making free movement. 23. But significantly, the Chief Engineer did not have a case in Ext.A7 dated August 18, 1980 that the defendant had already abandoned the work with effect from May 17, 1980 . What had been mentioned in Ext.A7 was only that the defendant had “stopped the work without the consent of the department.” Any how the appellant while issuing Ext.A8 notice of termination, took the view that the defendant had already abandoned the work. As rightly pointed out by the counsel for the defendant such a unilateral view or decision taken by the Board was wholly unwarranted and unjust. The Board very well knew that there was labour problem. The Board was aware that work had to be stopped because of the agitation by the labourers at the work site. In fact several communications issued by the AS.No.930/97 19 Board, which have been referred to earlier, also indicated that the Board had intervened to resolve the problem by inviting the union leaders for discussions. But when it was noticed by the Board that a amicable solution was not feasible, the Board had chosen to advise the defendant to seek his own remedies. The Board even went to the extent of advising the defendant that maintaining law and order was the business of the state and not that of the Board. It is contended by the appellant that the conduct of the defendant did clearly reveal that he did not want to recommence the work after stopping it in the second week of May 1980. If in fact the defendant was earnest enough to start the work again, he would not have disbanded his work force from the site. No effort whatsoever was made by the defendant to start the work. It was therefore that Ext.A8 notice of termination was issued by the Board. In this context, learned counsel submits that Superintending Engineer had already warned the defendant in Ext.A6 communication that any attempt on the part of the defendant to declare lay off and to withdraw the work force from the site would be viewed seriously. 24. It may be true that the Board might have noticed a AS.No.930/97 20 lethargic attitude on the part of the defendant in executing the work .But in the absence of any material to show that the labour problem was the creation of the defendant, we are unable to accept