CS(OS) No.882/2004 Page 1 of 21 IN THE HIGH COURT OF DELHI AT NEW DELHI CS (OS) 882 of 2004 Reserved on: 14th July 2009 Decision on: 7th August 2009 A.S. SACHDEVA AND SONS (P) LTD. ..... Plaintiff Through Mr. Raman Kapur with Mr. Dhiraj Sachdeva, Advocate versus DELHI DEVELOPMENT AUTHORITY AND ANR. ..... Defendants Through Mr. Bhupesh Narula, Advocate. CORAM: HON'BLE DR. JUSTICE S. MURALIDHAR 1. Whether Reporters of local papers may be allowed to see the judgment? No 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported Yes in Digest? JUDGMENT 07.08.2009 S. Muralidhar, J. 1. This is a suit for recovery of Rs.32,53,458/- along with pendente lite and future interest at 12 % per annum in favour of the plaintiff together with costs. 2. Defendant No.2, the Executive Engineer of Delhi Development Authority (DDA), invited tenders for the construction of 59 Category-III, and 118 Category-II SFS Houses, 148 MIG flats, 36 shops and a CS(OS) No.882/2004 Page 2 of 21 community hall including stilted parking space and internal development (Nagin Lake Apartment) near Village Peera Garhi, Pashim Vihar. The tender of the plaintiff was accepted and the work was awarded to it by the Defendant No.1 DDA. The date of the completion as per the agreement was 1st December 1997. The maintenance warranty period was to expire on the completion of six months thereafter, i.e., on 30th May 1998. According to the plaintiff it completed the entire work to the satisfaction of the defendants DDA on 1st December 1997 and a completion certificate was also issued by the DDA. The final bill was prepared on 26th July 2002. According to the plaintiffs DDA arbitrarily withheld from the amount due to the plaintiff a sum of Rs.45,000/- on account of the alleged repairs and Rs.2,00,000/- without assigning any reason. The plaintiff therefore first claims that it is entitled to the refund of Rs.2,45,000/- wrongly withheld by the DDA. 3. It is stated that although the flats were constructed by 1st December 1997, the possession thereof was given to individual flat owners over a period of time between December 1997 and June 2000. According to the plaintiff, the DDA also recovered a sum of Rs.25,518.80 as penal recovery for steel enforcement and a sum of Rs.1286/- towards penal recovery of cement. The plaintiff claims that the balance unconsumed quantity of steel and cement was returned to the DDA. No notice was issued by the DDA under clause 42 of the agreement to the plaintiff about any alleged loss CS(OS) No.882/2004 Page 3 of 21 suffered by the DDA or on account of the excess use of these materials. It is accordingly contended that the recovery of Rs.26,705.36 on account of the excess use of steel or cement was unjustified. A refund is claimed of the said amount. 4. According to the plaintiff, DDA also arbitrarily recovered various amounts from the final bill. The total amount on this account worked out to Rs.2,20,827/- and the break-up of the individual items forming part of this amount has been set out in para 7of the plaint. 5. It is further claimed that the plaintiff had provided a steel glazed door of 546.20 sq. m. amounting to Rs.5,85,480/-, which the plaintiff was entitled to in terms of clause 6.4 (d) of the agreement. 6. In terms of the agreement, the work was to be completed on 23rd September 1995 but was ultimately completed only on 1st October 1997. The extension of time for completion of the work up to 1st December 1997 was granted by the DDA without levy of any compensation. It is claimed by the plaintiff that due to the prolongation of the contract period, the establishment comprising engineers, supervisors, chowkidars and other staff remained idle at the site. The machinery deployed by the plaintiff also remained idle. The plaintiff claims that it suffered losses on account of the prolongation of the contract by twenty-six months. Accordingly, the CS(OS) No.882/2004 Page 4 of 21 plaintiff claims compensation at the rate of Rs.20,000/- per month for the delayed period of twenty-six months amounting to Rs.5,20,000/-. 7. The plaintiff had a lawyer’s notice dated 28th July 2003 issued to the DDA asking it to pay Rs.19,77,284/- together with interest at 18 % per annum. DDA sent a reply which according to the plaintiff was frivolous. Therefore the plaintiff was compelled to file the present suit. The summary of the total claims made by the plaintiff is set out in para 14 of the plaint as under:- “i) Towards amounts illegally and uncontractually withheld on account of alleged repair. Rs. 45,000.00 ii) Towards amount withheld without any reasons. Rs.2,00,000.00 iii) Towards unjustified penal recovery for steel reinforcement. Rs. 25,518.80 iv) Towards unjustified penal recovery for cement. Rs. 1,286.56 v) Towards unlawful reductions and deductions and less rates paid for extra items. Rs. 2,20,827.00 vi) Towards non payment against item No.6.4(d) – P/F. steel glazed doors for quantity of 546.20 Sqm. Rs.5,85,480.00 vii) Towards watch and ward from 1-12-97 to June-2000. Rs.2,40,000.00 viii) Towards compensation on account of loss suffered on idling of establishment, T&P, CS(OS) No.882/2004 Page 5 of 21 and machinery due to prolongation of the contract period by 26 more months. Rs. 5,20,000.00 ------------------------------ Total Rs.18,38,112.00” ------------------------------ 8. In its written statement, DDA contended that the delay in the completion of the project was due to insufficient labour and materials and lack of supervision on the part of the plaintiff. It is submitted that although the completion certificate was issued on 1st December 1997, nearly twenty defects were pointed out, and this was agreed to by the plaintiff by counter- signing the documents. However, till date, some of the defects remain to be attended to and therefore it is contended that Rs.2,45,000/- was rightly withheld. It is submitted that since the plaintiff accepted the bills and the measurements on 29th December 2000, the plaintiff was estopped from raising false claims. Since the suit was filed only on 29th May 2004 whereas the bill has been accepted on 29th December 2000, the suit was barred by limitation. The defects pointed out in the completion certificate had not been removed even during the subsistence of the maintenance period, i.e., 30th May 1998. The sum of Rs.45,000/- had been withheld for not providing slide door bolt door stopper etc. in nine vacant flats. The plaintiff had been provided these and therefore could not claim refund of this sum of Rs.45,000/-. Similarly, the sum of Rs.2,00,000/- withheld for not repairing the plaster or providing whitewashing and final coat of water proofing cement paint disentitled the plaintiff to recover this amount. It is submitted that inasmuch as the measurement book was signed also by the CS(OS) No.882/2004 Page 6 of 21 plaintiff, it was estopped from contending that any more amounts were owing to it. As regards the penalty on account of non-return of the unused quantities of cement and steel, in terms of clause 42 of the agreement, DDA was entitled to recover twice the issue rates. The work done was found defective during the quality control inspection. In terms of clause 42 such work had to be dismantled and redone by the plaintiff at its own cost. As regards the individual items constituting the withholding of Rs.2,20,827/-, it is submitted that the measurements showed that the deductions were justified since the work was not up to the standard prescribed. Since the de-rusting and steel work was not done properly, the deduction on this score was also justified. Likewise, instead of providing 12.50 ltr capacity cisterns, the plaintiff had supplied flushing cisterns of 10 ltr capacity. On various other individual items also, the deduction of amounts was sought to be justified by the DDA. As regards item No. 6.4 it is contended by the DDA that there was a duplicate claim in respect of the door since item 6.4 (d) also 6.4 (e) is one and the same. It is, therefore, contended that the claim in terms of 6.4 (d) is for an amount which is already paid by the DDA under item Nos. 6.4(a) and 6.4(e). It is contended that since the plaintiff had accepted the measurements as well as the final bill, the plaintiff was estopped from claiming a sum of Rs.5,20,000/- towards deployment of manpower and machinery during idle time. 9. In its replication, the plaintiff reiterated that all the defects have been CS(OS) No.882/2004 Page 7 of 21 removed. It is submitted that the flats were in fact handed over to the individual allottees by the plaintiff itself and that in order to safeguard the property it had to employ watch and ward personnel, the rates of which were strictly in accordance with the circular already issued by the DDA. The claim in terms of clause 6.4 (d) is also reiterated. 10. After admission and denial of documents, the following issues were framed on 6th February 2006: “1. Whether the plaint has not been signed and verified by the authorized representative of the Company? OPD 2. Whether the plaint is liable to be rejected inasmuch as it is not supported by an affidavit as required under the CPC? OPD 3. Whether the suit is barred by limitation? OPD 4. Whether the plaintiff has removed the defects pointed out to them at the time of recording of completion certificate? OPP 5. Whether the defendant is justified in withholding the amounts as claimed in para 3 of the plaint? OPD 6. Whether the plaintiff is entitled to the amounts as claimed in para 14 of the plaint? OPP 7. Whether the plaintiff is entitled to interest on the aforesaid amount and if so at what rate and for what period? OPP 8. Relief. 11. The submission of Mr. Raman Kapoor, the learned counsel for the plaintiff and Mr. Bhupesh Narula, the learned counsel for the DDA have been heard. CS(OS) No.882/2004 Page 8 of 21 Issue Nos. 1 and 2: 12. It is seen that the plaint has both been signed and verified by the plaintiff and is supported by the affidavit of the Managing Director of the plaintiff. Therefore, these two issues are decided in favour of the plaintiff and against the defendant DDA. Issue No.3: 13. Whether the suit is barred by limitation? It is seen that the suit was filed on 31st May 2004. The final bill admittedly was prepared and paid only on 26th February 2002. The cause of action for the plaintiff to claim the balance amount arose only then. The suit having been filed within two years thereafter cannot be said to be barred by limitation. In Pandit Construction Company v. Delhi Development Authority 2007(3) Arb. LR 205 (Delhi), a similar contention was rejected by this court. This issue is decided in favour of the plaintiff and against the defendant. Issue No.4: Whether the plaintiff has removed the defects pointed out to them at the time of recording of completion certificate? 14. The completion certificate was sent on 13th February 1998 by the Executive Engineer, DDA to the Superintending Engineer. It was stated therein that the date of the actual completion was 1st December 1997 and that the completion was “however subject to measurements being recorded, CS(OS) No.882/2004 Page 9 of 21 quality being checked by a competent authority and defects to be removed AE, EE……….during Site Inspection.” A list of twenty items has been appended indicating the works that required to be still completed. However, the completion certificate itself was signed on 1st December 1997. 15. The plaintiff had been asking for extension of time for completion. What is significant is that on 4th January 2001 the measurement was taken and the final bill was also prepared as on that date. The first two sheets of the final bill signed by the AE and the EE has been endorsed by the plaintiff stating that “measurement and bill accepted”. However, in page 3 which gives the break-up of the amounts including the amount withheld there is receipt by the plaintiff for receipt of the amount of Rs.1,52,440/- in which it endorsed “received under protest”. It is the case of the plaintiff that if in fact no work remained incomplete, there was no question of the final bill being prepared on 4th January 2001 and ultimately being paid on 27th March 2002. 16. It is submitted that the extension for completion of the work was granted from time to time with reasons being furnished. Reference is made to the letter dated 18th August 1998 issued by the Executive Engineer requesting that extension of time up to the date of completion of work, i.e., 1st December 1997 should be accorded “without levy of compensation”. In CS(OS) No.882/2004 Page 10 of 21 the said letter, the EE noted: “It is also certified that due to the delayed completion of work, the department has not suffered any financial loss. The contractor; on the performa Petitioner-I has also given the undertaking that due to the hindrances he has not suffered any financial loss and his labour and T & P never remained idle. He has also undertaken that he will not claim any liquidated damages on this account.” A reference is also made to the Plaintiff’s letters dated 10th April 1998 and 12th October 2001 informing the DDA that the defects pointed out in the letter dated 30th March 1998 had already been removed. 17. On behalf of the defendant DDA Shri S.P. Singh, the Executive Engineer, DDA was examined as DW1. In his cross-examination on 6th July 2007, he admitted that no notice was issued under Clause 42 of the agreement for levying penalty on the plaintiff. When he was asked as to who was responsible for delay in execution of the work, he stated that the delay was “on account of defaults on part of both the sides, i.e., contractor as well as of the department”. It was suggested to him by the counsel for the plaintiff that the defects pointed out in the completion certificate were required to be rectified only at the time of the allottee being granted possession of the flat. Although he denied the suggestion, he was unable to give details on the actual handing over the possession to the allottee of the flat. CS(OS) No.882/2004 Page 11 of 21 18. In his cross-examination on 22nd August 2007, DW1 again did not have records to indicate whether the defects pointed out were cured when the flat was handed over to the allottee. He, however, admitted that there was no complaint by any allottee after taking over the possession that he had found the fittings either incomplete or missing altogether. He was also unable to produce any document to show what was the amount spent by the DDA to complete the deficiencies in the flats. 19. This court concludes that DDA has been unable to bring on record any document to show that there was any defect in any of the flats at the time of handing over possession to the allottee. The reply given by DW1 in this regard is significant: “I have brought today the Allotment/Possession to allottes (sic allottees) Register. The first flat on the suit side delivered possession to the allottee was on 27.11.1998 as per this register. That possession to the allottee was given by DDA official i.e. by JE/AE. It is not recorded in the register brought by me whether the flat was complete in all respects when its possession was given to the allottee. I cannot say whether the items mentioned as deficient in the flats as per the completion certificate Ex PW1/D-18 had been provided when the possession of the flat was given to the allottee. Fittings like brass fittings, CP Fittings as mentioned in the completion certificate, to my opinion, were to be provided by the Contractor but it were not provided and I am not aware if those fittings were there with the JE/AE DDA and were fixed by the Contractor when the possession of flats were given to the CS(OS) No.882/2004 Page 12 of 21 allottees (sic allottees). I will have to check up the record if contractor did deliver those fitting meant for all the flats and deposited with the JE and then those fittings were released to the Contractor and he fixed those fittings while giving possession of the flat to the allottee. I am not aware if any allottee of the flat made any complaint that after taking possession of the flat he had found fittings either incomplete or missing. Whatever work was recorded incomplete in the completion certificate it was got carried out by DDA either through “impressed” or through department labour but not by engaging any outside agency. I cannot say if there is any document of the fact that any amount was spent by DDA to complete those deficiencies. It is wrong to suggest that DDA had not spent any amount to complete deficiencies in the flats in question. It is wrong to suggest that all the works had been completed by the Contractor or that no deficiency or incomplete work as recorded in the completion certificate Ex PW1/D-18, was left unattended by the Contractor.” 20. On the next date 28th September 2007, DW1 brought the allotment register pertaining to the allotment of flats. He explained: “…after inspection of the flat, when the allottee is satisfied after inspection, the allottee puts signature on the register. At the time of appending signature on the register, all the work in the flat was complete. Vol. In case, the contractor leaves the work incomplete, then the department completes the work. In the present case, the contractor had left the work incomplete. The remaining work was done by the department. The said work was completed by the department only by department labour and no outside agency was engaged for the work”. CS(OS) No.882/2004 Page 13 of 21 DW1, however, admitted that “no letter or notice was issued to the plaintiff informing him that the work would be completed at the risk and cost of the plaintiff”. Also he admitted that there was no document in the form bills with regard to the purchase of materials for completion of the flat by the DDA. 21. To this court, it appears that the DDA did not evolve any clear procedure for actual handing over the flats to the allottees. There is force in the contention of the learned counsel for the plaintiff that very often the handing over the flats is done by the builder/contractor and not the DDA. If indeed any of the flats remained with defects as pointed out in the completion certificate, there is no reason why the DDA should have agreed to extension of time for completion without charging any penalty. The letter extending the time for completion was issued much after the completion certificate prepared. It could have been possible for the DDA to deny extension of time without compensation if indeed the defects remained to be attended to. The explanation given by the witness for the DDA about the plaintiff not being authorized to hand over possession really does not throw much light on what was the procedure followed. It is also plain that at the time of taking over possession, the allottee would normally point out what the defects in the flat are. With there being not a single complaint by any allottee about any flat handed over being incomplete, the DDA has not been able to establish that the plaintiff did CS(OS) No.882/2004 Page 14 of 21 not carry out the defects as pointed out in the completion certificate. 22. Mr. Narula sought to refer to the photographs taken by the DDA sometime in 2006 about the status of the building. Photographs taken in 2006 may not really reflect what the position was when the individual flats were handed over to the allottees. That is what needs to be looked at in order to examine whether there is justification in the DDA withholding a sum of Rs.2,45,000/-. 23. In his evidence, the witness for the plaintiff explained in detail in what manner the defects were rectified. Further with the final bill having been paid in 2002, it is not open to the DDA to still maintain that the defects remained to be removed. 24. On a consideration of the evidence, it is clear that the plaintiff has been able to prove that it was able to remove the defects pointed out at the time of recording of the completion certificate. Issue No.4 is accordingly answered in favour of the plaintiff and against the defendants. Issue No.5: Whether the defendant is justified in withholding the amounts as claimed in para 3 of the plaint? 25. In view of the findings recorded hereinabove, the defendants were not justified in withholding the sum of Rs.2,45,000/- from the final bill paid on CS(OS) No.882/2004 Page 15 of 21 26th February 2002. The issue is accordingly answered against the defendants and in favour of the plaintiff. Issue No.6: Whether the plaintiff is entitled to the amounts as claimed in para 14 of the plaint? 26. As regards withholding of Rs.2,45,000/- this Court has already concluded that this was not justified. Next is the question of justification for the penal recovery for steel enforcement and cement. In the cross- examination of DW1, he has admitted that no show cause notice was issued in terms of Clause 42 of the agreement to the plaintiff seeking to recover penal interest on account of non-return of unused steel and cement. In K.R. Builders Pvt. Ltd. v. DDA 144 (2007) DLT 408, this Court referred to the decision of the Supreme Court in Maula Bux v. Union of India AIR 1970 SC 1955 which emphasized the importance of actually proving the loss suffered by the DDA. In other words, there could not be any automatic double rate recovery under Clause 42(2) without the defendant actually proving what was the loss suffered by it. 27. As regards the withholding of the sum of Rs.2,20,827/-, the reference may again be made to the admission by DW1 in his cross-examination that the work was complete in all respects when flats were handed over to the allottees. CS(OS) No.882/2004 Page 16 of 21 28. As regards the sum of Rs.5,85,480/- being the claim made by the plaintiff for fixing steel glazed door for a quantity of 546.20 sq. mts., it is sought to be contended by Mr. Narula, the learned counsel for the DDA that this is actually a double payment which is already included in the main portion of 6.4 and therefore does not have to be again paid in clause 6.4(d). 29. A careful perusal of the clause 6.4 shows that the main portion does not in fact indicate any quantity or sum. It merely states “providing and fixing steel glazed door, windows and ventilators of standard rolled steel sections…....”. Then from sub-cause (a) to (e) the individual items are specified. Sub-clause (a) talks of “over all portion treated as fixed” and a certain sum is provided for. Clauses (b) (c) and (e) use the adjective “extra” whereas clause (d) simply states “door”. Against this item, the quantity and rate are indicated, and the total sum payable calculated on that rate and quantity is indicated. It is not possible to agree therefore with the contention of the Mr. Narula that this is an extra payment. The payment for the door is specified only in clause 6.4 (d) and nowhere else. The absence of the word “extra” to qualify the word “door” shows that the claim by the plaintiff is justified. Watch and Ward: 30. The evidence of the plaintiff shows that it did deploy watch and ward in the premises. This became necessary since the DDA had in fact not CS(OS) No.882/2004 Page 17 of 21 taken over the site from the plaintiff formally and the entire site with the built up flats