HON’BLE SRI JUSTICE B. PRAKASH RAO AND HON’BLE SRI JUSTICE G. BHAVANI PRASAD A.S.No. 2210 of 2002 Date: 21-07-2010 Between: The Government of Andhra Pradesh and others ………… Appellants and B. Jagga Reddy ………. Respondent HON’BLE SRI JUSTICE B. PRAKASH RAO AND HON’BLE SRI JUSTICE G. BHAVANI PRASAD A.S.No. 2210 of 2002 JUDGMENT: (Per Hon’ble Sri Justice G. Bhavani Prasad) This Appeal is directed against the Judgment and Decree in the Original Suit No.502 of 1996 on the file of the Principal Senior Civil Judge’s Court, Vijayawada, dated 16-04-2002. 2. The suit was filed by the respondent herein against the Appellants herein for recovery of Rs.17,94,288/- with interest at 24% per annum from the date of suit and costs. The respondent herein claimed that he was entrusted with the work relating to reconstruction of the bridge across Muniyeru river and sub-work of forming approaches to the bridge across the river. On acceptance of the tender of the respondent herein and approval by the Superintendent Engineer, the agreement was entered into for a work of the value of 59,34,209/- to be completed within six months. As the work site was handed over on 06-07-1993, the work had to be completed by 05-01- 1994, but the work was completed by April, 1994 under the supervision of the departmental authorities. The subsequent cyclone in July, 1994 resulted in unsettlement of embankment, which again was entrusted to another contractor and the damage to the work done by the respondent herein was due to the act of God and he need not rectify the same. The final bill was not settled by the departmental officials in spite of demands and a statutory notice, and therefore, the respondent herein was compelled to file the suit for recovery of Rs.11,00,000/- towards the balance of work done, Rs.2,00,000/- towards refund of the earnest money deposit and other deposits and Rs.2,00,000/- for the extra items of work done as per the instructions of the authorities beyond the agreed work. He also claimed Rs.2,94,288/- towards interest from the date of statutory notice to the date of suit. 3. The Appellants herein resisted the suit contending that the Deputy Executive Engineer complained against the poor progress of the work and communicated to the respondent herein by way of notice, who was also informed about the substandard quality of the material used. The rectification of the defects also was not done in spite of a notice, dated 23-06-1994 and subsequent telegram and it is the duty of the contractor to rectify the defects in the work and also the embankment since he was entrusted with the entire work. The Appellants herein contended that the department was forced to spend Rs.6.32 lakhs for getting the work rectified by some other contractor and the withheld amount of final bill will be released as per the terms of the agreement only, at which time the earnest money deposit claim also has to be settled. Therefore, the Appellants herein pleaded that the suit is to be dismissed. 4. The trial Court on such pleadings, framed appropriate issues on the questions whether the respondent herein himself committed breach of contract and whether he is entitled for recovery of the suit amount. 5. During trial, the respondent herein examined himself as PW-1, while DWs.1 and 2 were examined on behalf of the Appellants herein and Exs.A-1 to A-8 and Exs.B-1 to B-21 were marked. 6. The trial Court rendered the impugned Judgment noting that the contention of the Appellants herein is that the work was not completed within the agreed period and the defects in the work were not rectified in spite of demands by the authorities. The withholding of the final bill, which is admitted by the authorities, was attributed to the said cause and the trial Court further noted that for an amount of Rs.11,00,000/- claimed towards the value of the work done, during the evidence, PW-1 had admitted to reduce the claim to Rs.6,32,911-95 ps. The trial Court also noted that the Appellants herein did not dispute the correctness of the figures claimed by the respondent herein towards the earnest money deposit and other deposits or the value of the extra items of work done or the quantum of interest claimed at 21% per annum. The final bill was also admitted by the Appellants herein in the written statement to be for a sum of Rs.6,32,911-95 ps still due to the respondent herein to be paid towards the value of the work done. While noting that the bill was claimed to be under scrutiny, the trial Court concluded that on the admitted facts, the said amount has to be paid to the respondent herein. The trial Court also concluded, on appreciation of rival contentions and evidence, that the Executive Engineer was responsible for the defect in the design given to the contractor for execution of the work and there was no defect in the execution of the work on the part of the respondent herein. The deviation and extra work done as claimed by the respondent herein were not sought to be considered by the trial Court as it found that the details of such extra work were not recorded by the department and the alleged instructions of the concerned authorities to do extra work were not pleaded by PW-1. The trial Court of course held that the respondent herein is entitled for refund of the earnest money deposit and other deposits to a tune of Rs.2,00,000/- and further observed that the respondent herein completed the work by April, 1994 within the time extended by the department, while the department itself admits that they have to pay more than Rs.1,00,000/- to the respondent herein, the withholding of the amount due to the respondent herein by the department for the period beyond eight years was not justified in any manner and in the absence of any evidence by the respondent herein as to what rate of interest he was paying to his creditors, the lending rate of interest by the banks during the relevant period was adopted by the trial Court which was 18% per annum and that interest was awarded from the date of suit notice till the date of suit and then the subsequent interest after the suit was found justifiable at 12% per annum. Accordingly, the trial Court decreed the suit for Rs.8,32,911-95 ps with interest at 18% per annum from the date of suit notice till the date of suit and thereafter at 12% per annum with costs. 7. The Appellants challenged the said Judgment and Decree contending that the work had to be completed by 05-01-1994, but due to inadequate deployment of men and machinery and improper planning by the respondent herein, extension of time was sought to be granted. The Appellants again reiterated the claim that a third party has to be engaged to rectify the defects in the work at extra cost to the Government and also again contended that the conclusions of the trial Court were not based on any positive evidence on record. The rectification costs were not duly given credit to by the trial Court and the breach of contract by the respondent herein disentitles the claim for refund of the earnest money deposit and other deposits. Therefore, the appellants contend that the impugned Judgment and decree be reversed. 8. Sri Y. Chandrasekhar, learned Special Government Pleader on behalf of the Appellants and Sri R. Mahender Reddy, learned counsel on behalf of the respondent, are heard. 9. The respondent herein did not prefer any cross objections or cross appeal concerning that part of the suit which is disallowed by the impugned Judgment and decree and to that extent, the impugned Judgment and decree have become final and need no reconsideration. 10. Then the only point which remains for consideration is whether the trial Court is justified in directing the suit to be decreed for Rs.8,32,911-95 ps towards the balance of the value of the work done and the earnest money deposit and other deposits with subsequent interest at 18% and 12% respectively for the respective periods and costs. 11. It is seen from the pleadings of the parties themselves that the entrustment of the work to the respondent herein under an agreement entered into between the parties and the execution of the work by the respondent herein within the extended time permitted by the department are not in dispute. Though it is sought to be contended that the defects in the execution of the work were not rectified by the respondent herein, as seen from the evidence and as concluded by the trial Court, there was absolutely no evidence to show that there was any defect in the execution of the work by the respondent herein and the trial Court had found on the evidence before it positively that it was the Executive Engineer, who was responsible for any defect given in the design in the contract for execution of the work and the trial Court also rightly referred to the evidence adduced by the defendants themselves about their satisfaction with the manner in which the work was executed. The written statement, as noted by the trial Court, did not dispute the quantum of the amounts claimed and it was their own version that the amount still due under the final bill was Rs.6,32,911- 95 ps which includes earth work for diversion of approach and C.C. works etc. Though it was said to be under scrutiny at the time of filing of the written statement, what had happened thereafter till now is not shown by the Appellants and they cannot, therefore, withhold the value of the work done by the respondent herein and they are bound to pay the same. Similarly for withholding the earnest money deposit and other deposits to a tune of Rs.2,00,000/-, which was ordered to be refunded, the Appellants can withhold such amounts only if they are able to prove the default in complying with the terms of the agreement by the respondent herein and as seen from the evidence on record, there is no reason as to why the respondent herein should be attributed with any such default in complying with the terms of the agreement. The deposits have, therefore, to be refunded to the respondent herein and it is rightly pointed out by the trial Court that the Appellants had absolutely no justification or reason for withholding the amount due to the respondent herein for beyond eight years and the interest awarded from the date of suit notice till the date of suit was based on the then prevailing rate of interest on loans by the banks which offered a reasonable basis in terms of Section 34 of the Code of Civil Procedure, this being a commercial transaction. The award of interest from the date of suit notice till the date of realization at 18% and 12% per annum respectively cannot be considered to be in any way beyond the permissible judicial discretion, which was rightly exercised by the trial Court. Under the circumstances, the Appellants had absolutely no justification in challenging the impugned Judgment and Decree on facts or in law and the Appeal should fail. 12. Accordingly, the Appeal is dismissed without costs. ________________ B. PRAKASH RAO, J ___________________ G. BHAVANI PRASAD, J Date: 21-07-2010 YCR