1 srk IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE First Appeal No.528 of 1998 With Civil Application No.3308 of 2004 The Member Secretary, Maharashtra Water Supply & Sewerage Board & ors. Appellants Vs. Shri Shripati Lakhu Mane Respondent Mrs.Neeta Karnik for appellants. Mr.Joel D’Souza i/b. Mr.S.M.Kamble for respondent. CORAM: B.H.MARLAPALLE & RAVI K.DESHPANDE,JJ. Reserved on : April 4, 2009. Pronounced on : April 24, 2009. JUDGMENT (PER B.H.MARLAPALLE,J.) : 1. This First Appeal filed under Section 96 of CPC arises from a decree for recovery of Rs.24,97,077/- with interest thereon at the rate of 20 % per annum from the date of suit till realisation and passed by the learned Civil Judge, Senior Division, Ratnagiri in Special Civil Suit No.90 of 1991 and the appeal has been filed by the original defendants. The respondent - plaintiff filed the said Suit for recovery of money for the work done but not paid, work done but paid at lower rate and for idle period and he claimed a total recovery of Rs.51,35,289/- and the suit was filed on or about 26/9/1991. Thus the suit has been partly 2 decreed. 2. Undisputed facts leading to the recovery suit could be stated briefly in the following words. . The plaintiff is a Registered Government Contractor and tender notice at Exhibit 121 was published by the defendant no.3 in some of the local newspapers in connection with the Regional Rural Piped Water Supply Scheme for Dabhol-Bhopan and other villages in Ratnagiri District. The plaintiff had submitted his tender and it was accepted at the rates mentioned with 47 percent rise on the estimated cost. The estimated cost was Rs.55,06,826/- and, therefore, the tender cost came to Rs.80,45,034/-. He was informed by communication dated 31/5/1986 (Exhibit 28) that his tender has been approved by the Chief Engineer and that he should deposit initial security amount so that formal work order can be issued. Security deposit was made on 12/6/1986 and the Work Order at Exhibit 29 was issued to him on 3/7/1986. It is the claim of the plaintiff that as per the letter at Exhibit 139 he had commenced the tender work before he received the work order i.e. on 19/6/1986. On 3/7/1986 he had also requested for sanction of 3 mobilization advance. However, by letter dated 28/7/1986 (Exhibit 30) the work order was directed to be kept in abeyance / suspended. The plaintiff represented by his letter dated 6/8/1986 (Exhibit 67) to defendant no.3 that he had collected the labour force and machinery at the site, had commenced the work from the end of June 1986 itself and he was suffering the financial loss. He submitted such representation on 24/9/1986 (Exh.68) and 7/11/1986 (Exh.69). By letter dated 17/12/1986 (Exh.31) he was called upon to recommence the contract work. He asked for line out vide his letter dated 19/12/1986 (Exh.70) and he recommenced the work from 29/12/1986. Vide his letter dated 14/1/1987 (Exh.71) he brought to the notice of the defendant no.2 that the pipes of various sizes i.e. 250 mm, 200 mm etc. were not available and he was informed about change in execution of 20690 mtrs. length of 250 mm dia pipe line and to be replaced by 200 mm and 150 mm dia. As per the letter dated 2nd March 1987 (Exh.75) the defendant no.3 called upon the plaintiff to stop the work and to undertake the construction of head works to be started at Panchanadi. On 4th March 1987 the defendant no.2 informed the plaintiff about the modification of the scheme which involved the construction of head works, 4 one at Karajai and the second one at Panchanadi. Work order for these jobs was issued on 1/7/1987 (Exh.77). He had submitted his second bill which was cleared in May 1987 by adjusting the advance paid and it was his grievance that the bill was not cleared as per the rates agreed for the extra items and as per the rates proposed on 20th February 1987 (Exh.74) and mutually agreed upon. It was his case that his representations for shortage of material, not clearing at the agreed rates and the indifferent attitude of the defendants did not permit him to continue with the contract and under such circumstances he was imposed a fine of Rs.10/- per day from 1st March 1988 as per the letter dated 1/3/1988 (Exh.90). By letter dated 22/3/1988 (Exh.86) he was informed that the scheme is split up in two parts in respect of Item No.4 on the Sub-Schedule F i.e. laying down of 250 mm dia pipe and the rate was fixed at Rs.6.32 and 4.55 for 200 mm and 150 mm pipes respectively. He was given notice on 28/7/1989 by the defendant no.3 (Exhibit 92) for action under Clause 3 of the Contract. The contract was to be completed within 30 months from the date of commencement and he was informed vide letter dated 19/4/1989 (Exhibit 90) that the commencement of the contract would be deemed to have started from 5 17/12/1986. He submitted representation against the action of levying fine. He issued a legal notice on 10/12/1988 (Exh.119). The fine of Rs.10/- per day was increased to Rs.25/- per day from 20th April 1989 which was protested by him vide his letter dated 2nd May 1989. The Plaintiff No.3 directly communicated to the plaintiff’s Bank for renewal of Bank Guarantee upto 31/12/1989 and thereafter upto 31/12/1990. He was granted extension in work upto 31st December 1989 as requested by him vide his letter dated 6/10/1989. By order dated 19/4/1989 (Exh.91) the defendant withdrew the work of 250 mm C-1 pipeline from Baijewadi to Dabhol, Item 4A Sub-work F, Clause 15 of accepted Tender of Chiplun Division. By further order dated 28/7/1989 (Ex.92) the remaining work of Sub-Work C was taken up at the plaintiff’s risk and cost. By letter dated 6/10/1989 (Exh.93) the fine rate was increased to Rs.50/- per day with retrospective effect i.e. 1/8/1989 as there was no work being carried on by the plaintiff. Plaintiff issued another notice under Section 80 of CPC on 24/8/1991 to defendant no.3 and finally on 26/9/1991 he filed the suit for the recovery of following money dues: (a) Compensation for idle machinery and labour 6 for a period of five months i.e. from August 1986 to December 1986. (b) Value of work of tendered rates which remained to be measured, recorded and paid. (c) Value of work completed at headload rates to be measured, recorded and paid as extra item. (d) Release of Security Deposit. (e) Damages due to overhead and loss of profits. (f) Interest at 18 per cent per annum on all the delayed payments upto the date of realisation. 3. In the suit he prayed for decree for Rs.51,34,389/- and also for a declaration that the defendant’s letter dated 19/4/1989 (Exhibit 90) is illegal. He prayed for interest to be paid at the rate of 18 per cent per annum on the suit amount from the date of the suit till realisation of the payment. 7 Along with the plaint he had annexed the details of recovery as under: Annexure Annexure Annexure I I I Sub-Schedule Sub-Schedule Sub-Schedule F F F Excavation in soft soil, excavation in hard soil providing and laying murum bedding Rs.10,72,485/- Sub-Schedule Sub-Schedule Sub-Schedule C C C Excavation in hard material, providing & laying P.C.C. constructing UCR masonry, bailing out water, providing approach road Rs.83,712/- Sub-Schedule Sub-Schedule Sub-Schedule D D D Excavation in soft strata, excavation in hard strata, murum bedding etc. Rs.30,323/- Total Total Total claim under Annexure I claim under Annexure I claim under Annexure I Rs.12,25,864 Rs.12,25,864 Rs.12,25,864 Annexure Annexure Annexure II II II Sub-Schedule Sub-Schedule Sub-Schedule F F F Item 4 Conveying from Deptt. store to site of work lowering, laying following pipes in grade and alignment 200 mm. dia C.I. Pipes 7000 mtrs. Rs.5,82,250/- Annexure Annexure Annexure III III III Refund of full security deposit in the form of Bank Guarantee No.13/86 dated 12/6/1986 Rs.2,21,000/- 8 Annexure Annexure Annexure IV IV IV Payment of labour charges for the period from August to December 1986 (idle labour) Rs.1,57,000/- Annexure Annexure Annexure V V V Damages for idle machinery from August to December 1986 Rs.91,000/- Annexure Annexure Annexure VI VI VI Overheads for the period from January 1989 to 30/9/1990 (21 months) at the rate of Rs.26,815/- per month Rs.5,63,115/- Annexure Annexure Annexure VII VII VII Loss of profit Rs.11,55,000/- Annexure Annexure Annexure VIII VIII VIII Interest at 18 per cent per annum Rs.11,38,860/- . Claim in Annexure I, Sub-Schedule F was given up and the claim in Sub-Schedule C came to be rejected by the Trial Court. The claim in Sub-Schedule D has been allowed at Rs.28,418/-. The claim in Annexure II has been allowed to the extent of Rs.4,42,994/- as against the claim of Rs.5,82,250/-. The claim in Annexure III for refund of security deposit of Rs.2,21,000/- has been allowed in toto. Claim in Annexure IV for idle labour has been allowed in toto at Rs.1,57,000/-. Claim in Annexure V for idle machinery at Rs.91,000/- has been allowed in toto. 9 Claim in Annexure VI has been allowed in toto at Rs.5,63,115/-. Claim in Annexure VII for loss of profit has been allowed at Rs.9,93,250/- and finally claim in Annexure VIII has been rejected as the claim for loss of profit has been allowed. 4. The defendants filed Written Statement at Exhibit 20 and opposed the suit. It was submitted that so far as the main contract at Exhibit 121 was concerned, the plaintiff had abandoned the work and had not done any work after his second bill was cleared in May 1987. Despite the extension in the contract period having been granted finally upto 31/12/1989, he refused to continue with the contract and by his own letter dated 27/8/1988 Exhibit 89 and the legal notice at Exhibit 119, he refused to carry out the work unless the bill for the extra item i.e. Item No.4(a) from Sub-Schedule F of the contract was paid to him at the rates purportedly agreed jointly in Exhibit 86. The alleged non clearance of the bill or non supply of material for the additional contract for construction of two different overheads at Karajai and Panchanadi. As the plaintiff abandoned the work of the main contract at Exhibit 121, Clause 3(b) of the contract was invoked so as to forfeit the security 10 deposit amount and as the plaintiff had not carried out any work from the end of May 1987, there was no question of entertaining his claim of either overheads or profits. The defendants denied that the required materials were not provided to the plaintiff so as to continue with the contract. They claimed that the plaintiff insisted that unless the rates for the extra items were agreed upon as per the jointly agreed proposal at Exhibit 86 he refused to carry out further work of the contract and under the terms of the contract the plaintiff was not permitted to do so. Such acts of the plaintiff amounted to abandonment of contract and due notices were served on him, the fine amount was initially imposed at Rs.10/-, revised to Rs.25/- and then further at Rs.50/- per day and despite these penal actions the plaintiff refused to continue with the contract. As per the defendants the claim was required to be rejected. 5. In support of his claim the plaintiff stepped in the witness box and on behalf of the defendants Prabhakar Shelgaonkar - DW 1 and Executive Engineer at the relevant time, Dattatraya Ramchandra Kulkarni - DW 2, Deputy Engineer from 11/7/1986 to 12/3/1987, Raghunath Patil - DW 3, Assistant Engineer from 1985 11 to 1989, Shivaji Karlekar - DW 4, Deputy Engineer from March 1987 to July 1988, Ashok Waghate - DW 5, Deputy Engineer from July 1988 to November 1991 were examined. 6. In support of the claim in Annexure IV i.e. for payment of idle labour charges from August to December 1986, the plaintiff brought on record six receipts at Exhibit 97 collectively issued by the contractor supplying the labour (Shri Laxman Salunkhe) and in support of his contentions that he had organised the labour force at the site along with the machinery and the labour as well as the machinery was idle till 17/12/1986. These receipts are in the sum of Rs.1,57,000/-. The defendants did not take any steps to issue witness summons to the labour contractor who issued the receipts so as to examine to test the veracity of these receipts. These receipts indicated that for supplying labour for the months of July 1986 an amount of Rs.20,000/- was paid, for the month of August 1986 an amount of Rs.30,000/- was paid, for the month of September 1986 an amount of Rs.30,000/- was paid, for the month of October 1986 an amount of Rs.30,000/- was paid, for the month of November 1986 an amount of Rs.30,000/- was paid and 12 for the month of December 1986 an amount of Rs.17,000/- was paid. We do not find any error committed by the trial Court in allowing this claim amounting to Rs.1,57,000/- more so when it is admitted that the contract was entered into between the parties on 3/7/1986 and he was called upon to commence the work in advance and he was immediately after signing of the contract called upon to stop the work. The contract remained in abeyance till 17/12/1986. If it was the claim of the defendants that he did not employ any labour force and did not have machinery at the site, the onus was on them to prove the same and they did not take any steps to do so. On the other hand, the plaintiff stated that on acceptance of the tender he was told to start, he had at the site 25 unskilled labour, 10 fitters and 5 masons. This evidence has gone unchallenged. It is admittedin the W.S. (Exhibit 20) that after the work order was signed on 3/7/1986, for the first time by the letter dated 28/7/1986 he was informed that the contract was kept in abeyance due to administrative exigencies. 7. Coming to the issue of compensation for idle machinery, the trial Court was right in stating that no effective cross-examination of the plaintiff was 13 subjected by the defendants and they allowed the claim to be entertained in default. Here again if the defendants claimed that there was no machinery collected at the site by the plaintiff during the period from July to December 1986, the onus was on them to prove the same by adducing evidence. The trial Court was, therefore, right and justified in allowing the claim of Rs.91,000/- by way of damages for idle machinery from August to December 1986. 8. The refund of security deposit at Rs.2,21,000/- (Annexure III) has been allowed by the trial Court without any justifiable reasons. The trial Court simply relied upon the decree passed in Special Civil Suit No.528 of 1990 which was filed by the State Bank of India. By the said decree passed against the plaintiff an amount of Rs.2,21,000/- was directed to be paid to the Bank. Clause 3 of the tender conditions states that in any case in which under any clause of the contract the contractor shall have rendered himself liable to pay compensation amounting to the whole of his security deposit or in the case of abandonment of work owing to serious illness, the Engineer on behalf of the Governor of Maharashtra shall have the power to adopt any of the following 14 courses viz. 3(a) to rescind the contract and in that case the security deposit of the contractor shall stand forfeited and be at the disposal of the Government. . In his letter dated 6/1/1988 at Exhibit 80 the plaintiff informed the Executive Engineer that unless the pending claims were settled and a written promise made for clearance of the bill, the contract work could not be commenced. On 2/2/1988 (Exhibit 82) the Superintending Engineer appealed the plaintiff to restart the contract work at the earliest possible and that his difficulties, if any, would be addressed to. Vide letter dated 22/2/1988 (Exhibit 85) the Superintending Engineer called upon the Executive Engineer to impose a fine of Rs.10/- per day on the plaintiff and the plaintiff was required to start the work latest by 1/3/1988. It was also informed that in case he failed to restart the work latest by 1/3/1988, the contract shall be immediately withdrawn under the relevant clause and got completed from any other agency. A copy of this letter was forwarded to the plaintiff and admittedly it was received by him. Vide his letter dated 29/4/1988 (Exhibit 84) addressed to the Executive Engineer the plaintiff clearly stated 15 that unless he was paid an amount of Rs.5,00,000/- he would not restart any work including the contract work and he referred to the personal discussions held on 7/4/1988 and 11/4/1988 with the Executive Engineer. He also acknowledged the fact that he was imposed a fine of Rs.10/- per day by the Superintending Engineer but stated that the said action was not in keeping with any Rules and was unjust. He requested the Executive Engineer to withdraw the order imposing fine lest he would not restart any work. He reiterated the same contentions vide the subsequent letter dated 7/7/1988 (Exhibit 88). In his letter dated 27/8/1988 (Exhibit 89) addressed to the Executive Engineer he assured to restart the work towards the end of September 1988. As per the letter dated 19/4/1989 (Exhibit 90) the fine amount of Rs.10/- per day was increased to Rs.25/- under Clause 2 of the Contract and with effect from 20/4/1989. On the same day by another letter at Exhibit 91 he was given notice of ten days under Clause 3(a) of the Contract agreement. By letter dated 6/10/1989 (Exhibit 93) he was informed that the time limit for execution of the contract had expired on 17/6/1989 and he did not apply for extension. Extension was granted upto 31/12/1989 and he was further informed that as he did not show any 16 progress and kept the work in abandonment inspite of penal charges, the rate of penal charges was increased to Rs.50/- per day with effect from 1/8/1989. There is no dispute that till he filed the Suit, the plaintiff did not submit any fresh bill after his second bill was cleared in May 1987. He did not challenge the orders imposing fine and no declaration was sought against the withdrawal of the contract on the ground of abandonment under Clause 3(a) of the Contract Agreement. Shri Raghunath Patil - DW 3 was the Assistant Engineer at Dapoli between the period from 1985 to 1989. He stated in his examination-in-chief that the contract work was in progress upto May 1987 and after May 1987 the plaintiff did not start work and he further reiterated that till his transfer on 5/10/1989 there was no work at the contract site resumed by the plaintiff. He also stated that there was separate tender in respect of Panchanadi work and that the plaintiff never made complaints regarding measurements. In his cross-examination he admitted that as per the letter dated 19/4/1989 (Exhibit 91) the entire work of gravity main was withdrawn from the plaintiff. Similarly Shivaji Karlekar - DW 4 who was the Deputy Engineer from March 1987 to July 1988 stated that 17 after May 1987 no work was started by the plaintiff till July 1988 when he left the charge of Dapoli. He also stated that subsequent to May 1987 the question of taking measurements did not arise since the plaintiff did not restart the work. In his cross-examination he admitted that when he joined at Dapoli in March 1987 the work of laying pipeline of 200 mm dia was in progress. He also stated that the plaintiff had informed the Department that he would not continue with the further work unless the rate for the extra item was fixed and the rate fixed for 250 dia CI pipe for 20690 mtr. was Rs.67.75 per sq.mtr. and it was decided to lay 200 mm dia instead of 250 dia CI pipe. Ashok Wagate - DW 5 was Deputy Engineer from July 1988 till November 1991. He stated in his oral depositions that during his tenure he had not seen the men of the plaintiff doing any work at the construction site. The evidence of these witnesses that after May 1987 the plaintiff did not start any work till the withdrawal notice was given, has gone unchallenged in their cross-examination and, therefore, it will have to be concluded that the plaintiff had abandoned the work of the main contract and subsequently the defendants were justified in invoking Clause 3(a) of the contract agreement under 18 which the security deposit can be forfeited. Surprisingly these aspects have not been considered by the trial Court and it placed reliance mainly on the decree passed in Special Civil Suit No.528 of 1990 filed by the Bank to which the defendants were not a party. The trial Court fell in serious error in awarding the forfeited amount to the plaintiff. The defendants had acted strictly as per the contract terms and the trial Court did not address to the aspect of abandonment of work by the plaintiff. Even if the payment in respect of the extra items or in respect of the contract at two stations i.e. Panchanadi and Karajai was pending, there was no justification in stopping the main contract work. Hence the claim for refund of the forfeited amount of Rs.2,21,000/- was required to be disallowed and the reasoning set out by the trial Court in allowing the said claim is grossly erroneous and hence unsustainable. 9. The trial court also considered the legality of imposing find on the plaintiff. The fine was initially imposed at Rs.10/- per day, was increased to Rs.25/- and finally to Rs.50/- per day. Issue Nos. 6 to 8 were framed and decided in favour of the 19 plaintiff. As per the trial court the said action of the defendants was illegal and unjustifiable. . We have noted that the tender contract at Exh.121 was the main tender contract and subsequently the plaintiff was called upon to do extra item i.e. replacement of 250 mm dia pipe line with 200 mm and 150 mm dia pipe. He was also called upon to undertake the main rise work at Panchanadi as well as Karajai. If his bills for the extra items or from the additional contract were not cleared, there was no justification for the plaintiff to stop the work of the main tender contract (Exh.121). In the earlier paragraphs we have referred to the correspondence between the parties right from 3/7/1986 till the suit was filed and despite the show cause notices and warnings issued to the plaintiff, he did not recommence the work of the main tender contract. Though the fine amount was imposed and revised from time to time, he remained adamant and put it in writing that unless the pending bills were cleared, he would not restart the main tender contract work. DW 3, DW 4 and DW 5 also stated after the second bill was cleared in May 1987, the work of the main tender contract was brought to a standstill. The defendants 20 had invoked their power under Clause 3 (a) of the tender contract and forfeited the security deposit on the ground that the plaintiff had abandoned the contract. On the face of such overwhelming evidence against the plaintiff, the defendants were justified in imposing the fine from time to time and increasing the same. Such an action was in keeping with the contractual terms. We, therefore, do not agree that the trial court’s finding that imposition and revision of such fine amount was illegal and unjustified. . The trial court has also allowed the plaintiff’s claim as against sub-schedule "D" in