HIGH COURT OF ORISSA: CUTTACK. R.F.A. NO.46 of 2002 From the judgment and decree dated 29.4.2002 passed by Shri S.K.Paty, Civil Judge(Senior Division), Bhubaneswar in M.S.No.287 of 1987. Orissa State Electricity Board vested in Grid Corporation of Orissa Limited , Bhubaneswar …… Appellant - Versus- Bana Behari Patra …… Respondent For Appellant : M/s Pradipta Mohanty,D.N.Mohapatra, G.S.Satapathy & Smt.J.Mohanty. For Respondents : M/s. G.D.Tripathy, A.K.Swain, B.Jalli, J.K.Acharya, T.K.Acharya, D.K.Dwibedy, D.Patnaik & B.Guin and B.N.Tripathy. --------- PRESENT: THE HONOURABLE SHRI JUSTICE B.K. PATEL Date of hearing & judgment – 24.8.2011 B.K. PATEL, J. Defendant no.1 is in appeal against the judgment and decree dated 29.4.2002 passed by the learned Civil Judge (Senior Division), Bhubaneswar in M.S.No.287 of 1987. Respondent no.1 was the sole plaintiff whereas proforma respondents 2 to 4 were other defendants in the suit. 2. Plaintiff filed suit for realization of Rs.5,35,574.70p towards dues for execution of work contract along with pendente lite and future interest as well as cost. In terms of agreement in work contract under Ext.1, plaintiff was entrusted by the defendants with the work of construction of 48 E-type quarters inside Talcher Thermal Power Station compound area. Estimated cost for construction was Rs.17,07,920/-. As per the agreement construction of quarters was to be completed on 2.2.1985. However, on plaintiff’s prayer for extension of time under Ext.A series time for construction of work was extended. Plaintiff submitted no-claim certificate dated 30.7.1984 under Ext.B in respect of construction during extended period. Possession of quarters was handed over to the defendants on different dates after 28.2.1985. Plaintiff was paid his dues up to 15th running account bill. These facts are not in dispute. 3. Plaintiff’s case is that construction of all the quarters was completed within the stipulated date. However, extension of time was granted by defendant no.4 to attend to some minor works. Works in all respect was completed before 15.4.1985. However, defendants did not release plaintiff’s dues in the final bill. His earnest money deposit was withheld. His claim towards empty gunny bags, escalation cost of labour and materials, as well as cost of excess steel amounting to Rs.3,77,165.45p was not released. Plaintiff’s request `and legal notice 2 having not yielded any result, plaintiff filed suit for realization of the amount along with interest @ 18% per annum. 4. Defendants filed written statement assailing maintainability of the suit on the ground of under valuation and bar of limitation. It is pleaded that as the plaintiff could not complete the work within the time stipulated in the agreement, time for completion was extended till 28.2.1985. Again on plaintiff’s request time was extended up to 15.5.1985. Construction of quarters was completed on different dates after 15.5.1985. Plaintiff having failed to complete the work within the time stipulated in the contract, he is liable to pay penalty @10% on the estimated cost of Rs.17,07,920/- as per Clause 2 of the contract. Defendants admit plaintiff’s balance dues to be Rs.2,05,540/- towards the 16th running bill and final bill, withheld amount for extension of time, earnest money, security deposit and empty cement bags. Thus, defendants’ stand is that plaintiff is entitled to receive a sum of Rs.34,748/- ( i.e. dues of Rs.2,05,540/- less penalty amount of Rs.1,70,792/- ). It is further case of the defendants that while availing extension of time for construction plaintiff in his letter dated 15.3.1985 had explicitly agreed that he would not claim any additional liability towards escalation in labour and material cost. Therefore, plaintiff’s claim towards escalation of labour and material cost during the extension period is not acceptable. As per clause 56 of the D.T.C.N. rod 3 was to be supplied to the plaintiff in the shape of coil or straight by weightment but payment was to be made as per length in metre measurement in full multiplied by theoretical weight coefficient per metre. Therefore, plaintiff’s claim towards cost of rod is also not maintainable. Agreement being silent regarding payment of interest, plaintiff is not entitled to any interest also on his dues. 5. Considering the rival pleadings, following issues were settled by the trial court : (1) Is the suit maintainable? (2) Is there any cause of action to bring the suit ? (3) Is the suit barred by limitation? (4) Is the suit had for mis-joinder of necessary parties? (5) Is the amount claimed correct and plaintiff is entitled to recover the same from the defendants? (6) To what relief, if any, the plaintiff is entitled ? 6. In order to substantiate his case, plaintiff examined himself as P.W.1 and relied upon documents marked Exts. 1 to 8. Defendants examined one witness D.W.1 and relied upon documents marked Exts. A to G. 4 7. It appears that Issue nos.3 and 4 were not pressed by the parties. Upon appraisal of materials on record learned court below adjudicated Issue no.5 holding that the plaintiff is entitled to Rs.3,70,760/- towards balance dues as well as amount withheld for extension of time, earnest money deposit, security deposit and empty gunny bags, and towards escalation of labour cost and cost of steel rods along with pendente lite and future interest @ 10% per annum. It was also held that defendants are not entitled to impose penalty for execution of work by the plaintiff during the extended period. Issue nos. 1, 2 and 6 were answered accordingly and the suit was decreed in part. 8. In assailing the impugned judgment and decree learned counsel for the appellant submits that Clause 2 of the Conditions of Contract for Works under Ext.1 itself provides for compensation for delay in execution of work. Defendants were entitled to impose penalty not exceeding 10 % on the estimated cost of the work. Learned trial court has failed to take note of the implication of the said Clause inasmuch as the plaintiff is bound by the terms of agreement in the contract. It is further submitted that while extending the time for execution of work on the prayer made by the plaintiff, it was specifically pointed out under Ext.C that the contractor will not be entitled to raise 5 any additional claim. Therefore, learned trial court should not have upheld plaintiff’s claim towards escalated labour cost. 9. In reply, learned counsel for the respondent no. 1 submits that Clause 5 of the Conditions of Contract provides for extension of time for completion of the work. Considering plaintiff’s application, time was granted by the defendants for completion of the work. While extending the time for completion of work it was never stipulated that extension was subject to payment of compensation for delay. At no point of time before institution of the suit, defendants demanded penalty from the plaintiff. Moreover, plaintiff’s claim towards escalation of labour cost does not relate to the extension period. Escalation of cost occurred during the contractual period. 10. Having perused the materials on record, upon reference to rival contentions, it is obvious that dispute between the parties in the present appeal is confined to defendant’s claim of penalty for delay in execution of work and plaintiff’s claim towards escalation of labour cost. 11. Clause 2 of the Conditions of Contract under Ext.1 providing for ‘compensation for delay’ reads: “The time allowed for carrying out the work as entered in the tender shall be strictly observed by the 6 contractor and shall be reckoned from the date on which the written order to commence work is given to the contractor. The work shall throughout the stipulated period of the contract be carried on with all due diligence (time being deemed to be of the essence of the contract on the part of the contractor) and the contractor shall pay as compensation an amount equal to 1/3 per cent on the amount of the estimated cost if the whole work as shown by the tender for every day that the work remaining uncommenced or unfinished after proper dates. And further, to ensure good progress during the execution of the work the contractor shall be bound, in all cases in which the time allowed for any work exceeds one month; to complete one fourth of the whole of the work before one fourth of the whole time allowed under the contract has elapsed one-half of the work, before one-half of such time has elapsed, and three-fourths of the work, before three- fourths of such time has elapsed, in the events of the contractor failing to comply with the condition, he shall be liable to pay as compensation an amount equal to one-third per cent on the said estimated cost of the whole work for every day that the due quantity of work remains incomplete. Provided always that entire amount of compensation to be paid under the provisions of this clause shall not exceed 10 per cent on the estimated cost of the work as shown in the sender,” (sic) Thus, this Clause provides for detail procedure for calculation of the penalty which shall not exceed 10 per cent on the escalation of labour cost. 12. In the present case, plaintiff’s application for extension of period for execution of the work was allowed. Clause 5 of the Conditions of Contract under Ext.1 providing for ‘extension of time for completion of work’ reads: “If the contractor shall desire an extension of the time for completion of the work, on the ground of his having been unavoidably hindered in its execution or any other ground, 7 he shall apply in writing to the Executive Engineer within 30 days of the hindrance on account of which he desires such extension as aforesaid and the Executive Engineer shall of in his opinion (which shall be final) reasonable grounds be shown therefor authorize such extension of time, if any as may in his opinion be necessary or proper. The Executive Engineer shall at the same time inform the contractor whether claim compensation for delay,” (sic) 13. Materials on record do not indicate that while allowing extension of period of work defendants disclosed that the plaintiff was liable to pay compensation for not completing the work in time. In Ext.C there is no mention regarding imposition of penalty. That apart, defendants did not appear to have at any point of time before institution of the suit given an opportunity to the plaintiff to have his say in the matter of imposition of penalty or quantum thereof. Defendants have not made any counter claim for realization of dues towards penalty or pleaded set off also. Admittedly, defendants claim deduction of penalty amount from the dues which the plaintiff is entitled to receive for execution of the work. However, basis for calculation of the penalty at the rate of 10 per cent has not been spelt out. Therefore, in the absence of any counter claim or prayer for set off in accordance with law the learned trial court rightly held defendants’ claim for set off of 10 per cent of the estimated cost of work towards penalty to be unacceptable. 8 14. So far as plaintiff’s claim towards escalation of labour cost is concerned, it does not appear to be confined to the period of extension which was duly allowed. Ext.1 itself provides for payment towards escalation of labour cost and procedure for quantification thereof. Therefore, it was perfectly within the right of the plaintiff to claim escalation of labour cost which the trial court has estimated to be Rs.1,25,200/- by assigning reasons. Thus, there appears no infirmity in the impugned judgment so far it relates to allowing the plaintiff’s claim towards escalation of labour cost. 15. In view of the above, this Court finds no merit in the contentions raised on behalf of the appellant. There is no merit in the appeal. Hence, the appeal is dismissed and the impugned judgment and decree are confirmed. Parties shall bear their own cost. ….……………… B.K. Patel, J. Orissa High Court, Cuttack, Dated the 24th August, 2011/Palai 9