CS(OS)No.2448/2000 Page 1 of 51 THE HIGH COURT OF DELHI AT NEW DELHI % Judgment Reserved on: February 15, 2011 Judgment Pronounced on: February 23, 2011 + CS(OS) No. 2448/2000 M/S. S.N.NANDY & CO. ..…Plaintiff - versus - M/S. NICCO CORPORATION LTD. .....Defendant Advocates who appeared in this case: For the Plaintiff: Mr. S.D.Singh, Ms. Bharti Tyagi, Mr. Rahul Kumar Singh, Ms. Megha Bansiwal, Advs. For the Defendant: Mr. Rahul Gupta, Mr. Pinaki Addy and Ms. Ira Gupta, Adv. CORAM:- HON’BLE MR JUSTICE V.K. JAIN 1. Whether Reporters of local papers may Yes be allowed to see the judgment? 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported Yes in Digest? V.K. JAIN, J 1. This is a suit for recovery of Rs.92,20,562/-. The defendant-company, which was awarded the work for Biological Oxidation Plant for Coal Chemical Effluents at Rourkela Steel Plant (hereinafter referred to as “RSP), assigned the civil work for the aforesaid plant to the plaintiff for a lump sum amount of Rs.2,87,30,000/- vide Letter of CS(OS)No.2448/2000 Page 2 of 51 Intent (hereinafter referred to as LOI) dated 15th October, 1992. The scope of work as also the commercial terms for its execution were annexed to the LOI. It is alleged that in a meeting held in the last week of February, 1993, among the plaintiff, defendant and the officials of RSP, some major changes were made in the nature of civil work which was assigned to the plaintiff and those changes involved extra work and extra price implications. Some other extra works were later entrusted to the plaintiff for execution. The plaintiff submitted a claim of Rs.32 lakhs to the defendant for the extra work executed by it, which was later on corrected and changed to Rs.42,04,500/-. It is alleged that a sum of Rs.5 lakhs was paid by the defendant to the plaintiff in February, 1994, which was adjusted towards payment for the extra works. The amount payable by the defendant to the plaintiff towards payment of the extra work is alleged to have accumulated to Rs.57,18,500/. The plaintiff has claimed an amount of Rs.43,51,217/- as principal sum from the defendant along with interest on that amount at the rate of 24 % per annum, amounting to Rs.48,69,345/- - till 31st March, 2000. 2. The defendant has contested the suit. It has taken a CS(OS)No.2448/2000 Page 3 of 51 preliminary objection that a full and final payment of Rs.9,36,900/- was made to the plaintiff on 29.8.1997 and having accepted that amount, the plaintiff cannot claim any further amount under the contract in question. The other preliminary objection taken by the defendant is that the suit is barred by limitation having been filed on 26.9.2000. On merits, it has been alleged that the defendant has cleared all the liabilities which were due to the plaintiff under contract in question. It is also alleged that extra work claimed by the plaintiff was already covered in the scope of price breakup given by it on 15.3.1993 which was subsequently amended on 19.3.1993. The defendant has denied for entrusting extra work to the plaintiff and having assured payment for the alleged extra work. It is claimed that the plaintiff, on his own did the alleged extra work and got the same approved from RSP because he was fully aware that under the contract he was required to do that work. 3. The following issues were framed on the pleadings of the parties:- 1. Whether plaint has been signed and verified and suit instituted by a duly CS(OS)No.2448/2000 Page 4 of 51 authorized person on behalf of the plaintiff? 2. Whether plaintiff executed extra work not covered by the letter dated 15th October 1992? If answer is in affirmative, of what amount? 3. Whether plaintiff is entitled to interest? If so, on which amount, at what rate and for which period? 4. Whether amount of Rs.9,36,900/- was received by the plaintiff by way of full and final payment as alleged in para No.1 of the preliminary objection of written statement? 5. Whether suit is barred by time? 6. Whether this Court has no territorial jurisdiction to try the suit? 7. Relief. Issue No.6 4. During arguments, the learned counsel for the defendant stated that he was not pressing this issue. Accordingly, this issue is stuck off. Issue No.1 5. Mr. S.N.Nandy is the proprietor of S.N.Nandy & Co. and the plaint has been signed and verified by him. Institution of suit, and signing and verification of pleadings by the proprietor of a partnership concern is perfectly legal and valid. In fact, Mr.S.N.Nandy & Co. is only a trade name adopted by him and the suit ought to have been filed by Mr CS(OS)No.2448/2000 Page 5 of 51 S.N. Nandy as its proprietor. The issue is decided against the plaintiff and in favour of the defendant. Issue No.2 6. The plaintiff has examined himself as PW-1 whereas the defendant has examined one witness Mr. Kartick Kumar Chatterjee as DW-1. 7. In his affidavit by way of evidence, the plaintiff has stated that in the last week of February, 1993, a meeting was organized between him, the defendant and the department of RSP and certain major changes in the scope of civil work were made by RSP and accepted by the defendant. He accordingly wrote letter dated 2.3.1993 to the defendant giving details of the extra works as well as the price implication. He claimed to have sent another communication dated 17.6.1993 to the defendant in this regard and has stated that the defendant had permitted him to proceed with the work including extra and additional work with promise and assurance that payment would be made in due course. He has further stated that in the meetings held on 3.1.1994 and 6.1.1994, the defendant acknowledged the extra works done by the plaintiff and also accepted his entitlement for payment. He accordingly sent a CS(OS)No.2448/2000 Page 6 of 51 communication dated 7.1.1994 to the defendant in this regard. He claimed that the defendant made promises and assurances to clear his dues but failed to do so. According to him, in the joint meeting held on 11.3.1994 and 12.3.1994, the issue with regard to extra work was discussed and the defendant promised to scrutinize the claim and make payment against the same. Similar promise, according to him, was made when he visited the office of the defendant on 29.6.1994 and 14.7.1994. He has stated that on 10.11.1994, Deputy Managing Director of the defendant company came to Delhi and the issue about payment of extra work was discussed and a promise was made to make payment. He further stated that a sum of Rs.5 lakhs was received by him towards extra work on 15.02.1994. He maintained that the extra work was executed at the site with the consent and due information to the defendant and on their assurance to make payment. He further stated that the defendant sent a cheque of Rs.9,36,900/- being last 5% of the original contract value and the payment towards extra work remained payable to him. He has proved the comparative statement Ex.PW-1/51 prepared by him. Ex.PW-1/52, according to him are details CS(OS)No.2448/2000 Page 7 of 51 of change in scope of work. 8. In rebuttal, Mr. Kartick Kumar Chatterjee who was examined as DW-1 has stated that the plaintiff was entrusted the work of design, construction and maintenance of civil work in the Biological Oxidation Plant for coal chemical effluents of RSP on turnkey basis, for a total lump sum price of Rs.2,87,30,000/- as per the terms and conditions stipulated in the LOI dated 15.10.1992. The LOI, according to him, did not contemplate any extra work with extra price implication nor did it contain any price variation clause. He has also proved the letter dated 15.3.1993 written by the plaintiff giving detailed item-wise price-wise breakup and has stated that complete full and final payment under the contract and LOI was made to the plaintiff vide receipt dated 29.8.1997. According to him, nothing is left due to the plaintiff. He maintained that the plaintiff never executed any extra item or extra work. 9. Ex.PW-1/4 is the offer made by the plaintiff to the defendant company for civil work of BOD plant at RSP. Paras 2 and 3 of the letter read as under:- “We have gone through the entire scope of civil work and specifications furnished to us along with the enquiry. Our lumpsum CS(OS)No.2448/2000 Page 8 of 51 offer for entire civil work is based on M/s. NCL’s scope of work, specifications and layout, and Flow diagram drawings sent to us. Our total lumpsum price consideration for the above job shall be Rs.275 lacks (Rupees two hundred seventy five lacs only) includes design, execution and supervision. Our lumpsum price also includes cost of all materials and manpower required for the job. The price implication of WCT is not considered, by us.” 10. Ex.PW-1/5 is the letter of the plaintiff dated 6.8.1992 whereby, he submitted lump sum price quotation for Earthern Sludge lagoon for a covered area of 800 sqm. and providing one metre wide pavement. A sum of Rs.2,55,000/- was quoted for the sludge lagoon and Rs.3,35,000/- was quoted for the pavement. Ex.PW-1/6 is the letter dated 15.10.1992 whereby the work for the design, engineering, drawing, construction and maintenance of all the civil works in the Biological Oxidation Plant for coal chemicals effluents etc. at RSP was awarded to the plaintiff for a lump sum price of Rs.2,87,30,000/-. The scope of work covered by the letter and major chemical terms and conditions were also enclosed to this letter. The scope of work as defined in the annexure to this document CS(OS)No.2448/2000 Page 9 of 51 reads as under:- “SCOPE OF WORKS The scope of work of this LOI covers the Design. Engineering preparation of Arrangement and Detailed Drawings, obtaining approval from RSP, construction in accordance with the approved drawings, Specifications and Instructions of RSP/NCL and maintenance of all the Civil-Works involved in the Biological Oxidation Plant for Coal Chemical Effluents at RSP. The list of items of Civil-Works involved in the above project is shown in the enclosed Annexure No.1.” Annexure-I gave detailed breakup of the scope of work awarded to the plaintiff. 11. It would thus be noticed that though the initial offer made by the plaintiff was for Rs.2,75,00,000/-, the work was awarded to him for Rs.2,87,30,000/- which is Rs.12,30,000/- more than the quotation given by him and the difference between the price and the price at which the work was awarded is more than the amount of Rs.5,90,000/- which the plaintiff had claimed for extra items/earthern sludge lagoon and bituminous pavement, vide letter Ex.PW-1/5. This becomes important since contention of the learned counsel for the defendant was that CS(OS)No.2448/2000 Page 10 of 51 value of the work was enhanced in order to pay for the extra work involved in the execution of contract. 12. Ex.DW-1/P-1 is the letter of the plaintiff dated 15.3.1993 whereby he sent detailed price breakup for the civil work awarded to him. This breakup was sent by the plaintiff in order to facilitate progressive payment to him during the execution of the work. A perusal of the annexure to this letter would show that the plaintiff had divided the amount of Rs.2,87,30,000/- into various heads and sub- heads. This break up is important as no item-wise value was given either in the quotation of the plaintiff or in the LOI issued to him by the defendant. It is not open to the plaintiff to say that the items mentioned in this break up were not included in the scope of work awarded to him, nor can he claim any amount higher than the amount assessed by him for each item mentioned in this document. 13. Admittedly, the work was awarded to the plaintiff on turnkey basis and a composite amount of Rs.2,87,30,000/- was to be paid to him for the whole of the work. Unless the plaintiff is able to show that the work claimed by him as extra work was beyond the scope of the composite work awarded to him on turnkey basis, he will not be entitled to CS(OS)No.2448/2000 Page 11 of 51 any extra payment. Since the break-up submitted by the plaintiff as annexure to his letter Exhibit DW1/P1 was based on the awarded amount, which was higher than the amount initially awarded by him, he can claim payment only for that work, which was not included in the break up sent by him to the defendant. Of course, he would be entitled to payment of the work, which was not included in the break-up given by him to the defendant as well as for the quantity which exceeded the quantity indicated in the break-up, provided he is able to make out either a contractual obligation or a statutory obligation on the part of the defendant to pay to him for that extra work/extra quantity. 14. The case of the plaintiff is that the extra works were executed by him on the instructions of the defendant. The case of the defendant, however, is that no extra work was entrusted by it to the plaintiff and the works claimed as extra work were included within the scope of the work awarded to the plaintiff. 15. In his cross-examination, the plaintiff has admitted that no prior permission was taken before executing the extra works. The next question which then comes up is as CS(OS)No.2448/2000 Page 12 of 51 to whether the defendant had impliedly consented to pay for the works. Exhibit PW1/9 is the letter sent by the plaintiff to the defendant on 2nd March, 1993, referring to the discussions held with various departments of RSP and stating therein that the defendant had agreed for some major changes/incorporations in the scope of civil work having substantial extra price implication on the agreed lump sum value. The details of the additional work with extra price implications were annexed as Annexure A to this letter. The items mentioned and included in Annexure A to this letter were sludge drying beds in place of sludge lagoons, treated effluent sump for increased capacity, screed concrete in channels and plaster with WPC in all RCC tank floors, providing anti-forming system, providing fencing around MCC/Transformer rooms with gates and bituminous pavement, providing additional aprons around RCC tanks and pathways as approach to units and two coats of Epoxy Paint inside Equalization tanks. Out of these items, screed concrete in channels and plaster with WPC in all RCC tank floors, anti-foaming system, fencing around MCC/Transformer rooms and pathways as approach to units and two coats of Epoxy Paint inside Equalization CS(OS)No.2448/2000 Page 13 of 51 tanks have not been shown either in Exhibit PW1/51 or in Exhibit PW1/128, which indicates that either these works were not actually executed or were treated to be within the scope of the awarded work and that is why the plaintiff has not claimed any payment from the defendant for these works. Exhibit PW1/12 is the letter of the plaintiff dated 17th June, 1993, informing the defendant that the works mentioned in the letter would be treated as extra works and payment for them shall have to be made separately to him over and above the agreed lump sum value. The two items mentioned in this letter were dry pump house attached with the sump size of 5.00 M X 5.00 M and providing necessary support foundation and walkway platform suitable for installation of Cooling Tower Device on the top of the sump. However, neither of these items has been claimed in Exhibit PW1/51 or PW1/128. Vide letter dated 7th January, 1994, which is exhibit PW1/17, the plaintiff sought outstanding payment along with finalization of extra work, which were claimed to be worth Rs.32 lakhs. Vide letter dated 25th July, 1994, which is exhibit PW1/21, the plaintiff again sought payment for the extra claim raised by him. Vide letter dated 30th September, 1994, which is exhibit PW1/26, CS(OS)No.2448/2000 Page 14 of 51 the plaintiff again requested the defendant for finalization of his extra claims, which he had submitted on 31st December, 1993. This request was reiterated vide fax massage dated 9th November, 1994, which is exhibit PW1/27, fax message dated 29th November, 1994, which is exhibit PW1/29 and fax letter dated 12th December, 1994, which is exhibit PW1/33. 16. A payment of Rs.5 lakhs was made by the defendant to the plaintiff vide cheque No.251361 dated 15th February, 1994 drawn on Hong Kong Bank. Vide letter dated 30th May, 1995, which is Exhibit PW1/D-2, the defendant claimed that this payment was to be adjusted against further R/A bills commencing from 10th R/A bill onwards but inadvertently that was not done. The plaintiff immediately replied to this letter vide his response dated 2nd June, 1995, which is Exhibit PW1/35 and claimed that the payment of Rs.5 lakhs was made as advance against extra work carried out by him and had been released after he had submitted his claim of Rs.41 lakhs towards extra work. He maintained that this amount could be adjusted against payment of extra work. There was no response from the defendant to this letter, which leads to the inference that CS(OS)No.2448/2000 Page 15 of 51 this payment was made towards extra work. Vide letter dated 5th August, 1997, which is Exhibit PW1/44, the plaintiff sought payment for the extra work executed by him. Vide fax message dated 18th July, 1996, which is Exhibit PW1/38, the plaintiff again sought payment for the extra work. Vide letter dated 17th June, 1997, which is Exhibit PW1/43, the plaintiff demanded a sum of Rs.51,34,500/- from the defendant towards price of extra work after deducting a sum of Rs.5 lakhs already received by him as advance towards these extra works. The above referred correspondence clearly indicates that some extra works were executed by the plaintiff to the knowledge of the defendant. Had the defendant not given an implied consent to any extra work, it would have adequately responded to the letters of the plaintiff and would not have paid Rs 5 lakhs to the plaintiff towards payment of extra works. Silence on the part of the defendant, despite repeated correspondence and claims from the plaintiff for the extra works alleged to have been executed by him gives an indication of an implied consent for some payment for the extra works by him. 17. Assuming, however, that the extra works claimed by CS(OS)No.2448/2000 Page 16 of 51 the plaintiff were not authorized by the defendant and, therefore, the defendant is under no contractual obligation to pay for those works, the plaintiff is entitled to get reasonable payment for these works in view of the provisions contained in Section 70 of the Contract Act, 1872, which reads as under:- “70. Obligation of person enjoying benefit of non- gratuitous act.— Where a person lawfully does anything for another person, or delivers anything to him not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.” 18. A bare perusal of the above referred Section would show that three conditions need to be fulfilled before benefit of this provision can be invoked by a person. The first condition is that the claimant should either lawfully do something for another person or deliver something to him. The second condition is that while doing or delivering something, the claimant must not be acting gratuitously and thirdly, the person for whom something is done or to whom something is delivered must enjoy the thing done for or delivered to him as the case may be. CS(OS)No.2448/2000 Page 17 of 51 Invocation of Section 70 of the Contract Act was disputed by learned counsel for the defendant on the ground that the plaintiff has not pleaded essential requirement of the Section. In support of his contention that pleading ingredients of Section 70 is a pre-condition for its invocation, the learned counsel for the defendant has referred to Kotah Match Factory Kotah v. State of Rajasthan, AIR 1970 Rajasthan 118, Hansraj Gupta & Co. v. Union of India, AIR 1973 SC 2724, Union of India v. Sita Ram Jaiswal, AIR 1977 SC 329 and Devi Sahai Palliwal v. Union of India and another, AIR 1977 SC 2082. 19. In Kotah Match Factory (supra), the Rajasthan High Court noted that the plaintiff did not raise the plea for compensation under Section 70 of the Contract Act nor was any issue framed, nor were the parties given an opportunity to lead any evidence on the point. It was found that the case of the appellant before the Court was based upon an agreement. It was held that since the parties had not gone on trial on the question of compensation under Section 70 of the Contract Act, if the benefit of the aforesaid provision is allowed at this stage, it would amount to taking the CS(OS)No.2448/2000 Page 18 of 51 opposite party by surprise. In Hansraj Gupta & Co.(supra), the Supreme Court was of the view that the conditions for the applicability of the Section 70 must at least be set out in the pleadings and proved. In Sita Ram Jaiswal (supra), the Supreme Court, inter alia, observed as under:- “6. The three ingredients to support the cause of action under Section 70 of the Indian Contract Act are these: First, the goods to be delivered lawfully or anything has to be done for another person lawfully. Second, the thing done or the goods delivered is so done or delivered “not intending to do so gratuitously.” Third, the person to whom the goods are delivered “enjoys the benefit thereof.” It is only when the three ingredients are pleaded in the plaint that a cause of action is constituted under Section 70 of the Indian Contract Act. If any plaintiff pleads the three ingredients and proves the three features the defendant is then bound to make compensation in respect of or to restore the things so done or delivered.” In Devi Sahai Palliwal (supra), the Supreme Court found that there was no allegation in the plaint to support any pleading in proceeding under Section 70 of the Indian Contract Act. Relying upon its earlier decision in Sitaram CS(OS)No.2448/2000 Page 19 of 51 Jaiswal (supra), it was held that in the absence of proper pleadings under Section 70 of the Indian Contract Act, the plaint should not be entertained. 20. The learned counsel for the plaintiff on the other hand has referred to State of West Bengal v. M/s B.K. Mondal and Sons, AIR 1962 SC 779, V.R. Subramanyam v. B. Thayappa and others, 3 SCR 663 and Food Corporation of India & Others v. Vikas Majdoor Kamdas Sahkari Mandli Ltd., 2007 (13) Scale 126. In the case of B.K. Mondal and Sons (supra), the Supreme Court, after reiterating the three conditions, which need to be satisfied before invoking Section 70 of the Contract Act, was of the view that when these conditions are satisfied, Section 70 imposes upon the person for whom something is done or to whom something is delivered, the liability to make compensation in respect of or restore the thing done for or delivered to him. During the course of the judgment, the Court, inter alia, observed as under:- “14…….If a person delivers something to another it would be open to the latter person to refuse to accept the thing or to return it; in that case S. 70 would not come into operation. Similarly, if a person does something for another it would be open to the latter person not to accept CS(OS)No.2448/2000 Page 20 of 51 what has been done by the former; in that case again S. 70 would not apply. In other words, the person said to be made liable under S. 70 always has the option not to accept