IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. Civil Suit No. 65 of 1999. Reserved on: 05.10.2010. Decided on : 07.01.2011. _____________________________________________________ Rama Sood and Others. …Plaintiffs. -Versus- Himachal Pradesh Tourism Development Corporation Ltd. Ritz Annexe, Shimla and another. …Defendant. Coram: The Hon’ble Mr. Justice Rajiv Sharma, Judge. Whether approved for reporting?1 No. __________________________________________________________ For the plaintiffs. : Mr. Bhupender Gupta, Senior Advocate with Ms. Charu Gupta, Advocate. For the defendants. : Mr. G.C. Gupta, Senior Advocate with Mr. Sandeep Chauhan, Advocate. ---------------------------------------------------------------------------------------- Rajiv Sharma, Judge: The predecessor-in-interest of the present plaintiffs, Shri Ajay Kumar Sood, has instituted the suit for recovery of `1,18,99,147.00/-. 2. Case of the plaintiff-Ajay Kumar Sood (deceased), in a nut-shell, is that he was a registered contractor. The defendants floated tender on 12th September, 1995 for the construction of Tourism Complex at Rampur Bushahr, District Shimla, H.P. Plaintiff also participated in the tender process. His tender was accepted on 31.10.1995. The work was awarded to the plaintiff by the defendants. The work was to commence on 15.11.1995 and was required to be completed within a period of 1 Whether the reporters of the local papers may be allowed to see the judgment? No. - 2 - 18 months. The agreement was duly executed between the parties. Plaintiff started the work of excavation and leveling the site in the month of November, 1995. However, the defendants in the month of June, 1996, changed the scope of the work and original drawings were changed. Plaintiff was asked to stop the work in the month of August, 1996. In the month of February, 1997, the defendants decided to shift the site of work to a different place and the new site was handed over to the plaintiff by the defendants after dismantling the existing old structure in the month of March, 1997. On account of shifting of the site and also changing the scope of work and drawings etc., the time frame was to commence from March, 1997. Plaintiff completed the entire project much ahead of time and the same was inaugurated by the then Chief Minister on 14th March, 1998. The defendants did not finalize the bills. Plaintiff served a legal notice upon the defendants on 9th August, 1998. Consequently, the plaintiff has prayed that a decree for a sum of ` 1,18,99, 147.00/- may be passed in his favour and against the defendants alongwith interest @ 36% per annum. 3. The defendants contested the suit by filing a detailed written statement. They have also taken preliminary objections. According to the preliminary objections, the plaint lacked better and material particulars and the suit was barred in view clause 25/P-28, which provides for settlement of disputes between the parties by way of arbitration. It is also averred that the plaintiff is estopped from filing the present suit on account of his acts, deeds, conduct and acquiescence etc.. It is admitted by the defendants that the work of the construction - 3 - of Tourist Complex at Rampur was awarded to the plaintiff on 31.10.1995 as per letter dated 30.10.1995. As per the agreement, the work was to commence from 15.11.1995 and it was to be completed within a period of 18 months, i.e., by 14th of May, 1997. The time frame was further extended up to 28th February, 1998 and finally the work was completed by the plaintiff on 15.06.1998. The final cost of construction of the work was `1,26,65,622.72 and an amount of ` 94, 74, 116.00/- was already paid to the plaintiff. The final bill of the plaintiff was prepared, but the acceptance of the plaintiff was awaited. It was admitted that the scope of the work and the original drawings were revised, however, there was no fundamental change in the terms and conditions. Plaintiff was never assured by the defendants for any other item or for compensating him outside the original terms and conditions of the agreement. The defendants have also served notices to the plaintiff on 25.11.1997 and 23.04.1998, under clause 2 and 3 of the agreement to proceed further in accordance with the contractual obligations and complete the construction work, as agreed. The defendants vide letter dated 29.08.1997 had directed the plaintiff to complete the work by 15.10.1997, however, according to them, the work was completed on 15.06.1998. According to them, the Complex was finally handed over to them on 15.06.1998. The plaintiff was required to obtain the completion certificate under clause 6 & 17 of the agreement. According to the defendants, the plaintiff had not submitted the analysis of the rates appropriately, as such, he was directed to support the analysis vide letter dated 01.04.1998. It is also the case of the - 4 - defendants that the plaintiff has been paid advances towards the costs of work done by him from time to time and even at the time of the filing of the written statement, advance amounting to `33.00 lac was awaiting final settlement. As per clause 8 of the agreement, the plaintiff was required to submit bill for each month for all the items executed by him in the previous month, but he failed to do so. However, he was paid advances at different dates. 4. The plaintiff filed replication to the written statement filed by the defendants. In the replication, the plaintiff has reiterated the facts, as stated in the plaint and prayed to decree the suit. 5. On the pleadings of the parties, the following issues were framed on 15.09.2000: 1. Whether the plaint lacks better and material particulars, as alleged? If so, to what effect? OPD. 2. Whether the plaintiff has no locus standi to file the present suit, as alleged? If so, its effect? OPD. 3. Whether this Court has no jurisdiction to try and decide the present suit? If so, its effect? OPD. 4. Whether the plaintiff is estopped from filing the present suit, as alleged? If so its effect? O.P.D. 5. Whether the suit is bad for mis-joinder of parties, if so, who are such parties and the effect thereof? OPD. 6. Whether there is no valid contract between the parties, as per the provisions of Article 299 of the Constitution of India? If so, to what effect? OPD. - 5 - 7. Whether the suit is premature, as alleged? If so, its effect? OPD. 8. Whether the plaintiff is entitled to the suit amount, as alleged?OPP. 9. Whether the plaintiff is entitled for interest on suit amount, as alleged? If so, at what rate? OPP. 10. Whether the suit is barred in view of the Clause 25/p-28 of the agreement? OPD. 11. Whether the plaintiff has no cause of action to file the suit? OPD. 12. Relief. 6. I have head the learned counsel for both the parties and gone through the records carefully. 7. For the reasons to be recorded hereinafter while discussing the issues, my findings to the issues are as under: Issues No. 1 : No. Issue No. 2 : No. Issue No. 3 : Not pressed. Issue No. 4. : Not pressed. Issue No. 5. : Not pressed. Issue No. 6. : Not pressed. Issue No. 7. : Not pressed. Issue No. 8. : No. Issue No. 9. : Redundant. Issue No. 10. : Not pressed. Issue No. 11. : Not pressed. Relief : The suit is dismissed as per operative portion of the judgment. - 6 - REASONS FOR FINDINGS Issues No. 1, 2 and 8. 8. O.M.P. 457 of 2001, under Order 13 Rule 2 of the Code of Civil Procedure was allowed by this Court on 02.11.2001. O.M.P. No. 424 of 2002 preferred under Order 7 Rule 7 of the Code of Civil Procedure was allowed on 24.10.2002. O.M.P. No. 276 of 2003 filed under Order 8 Rule 1-A (3) of the Code of Civil Procedure was allowed by this Court on 08.06.2004. Plaintiff-Ajay Kumar Sood died during the trial of this suit and his legal representatives/L.Rs. were brought on record by way of O.M.P.(M) No. 02 of 2004. 9. Plaintiff-Ajay Kumar Sood has appeared as PW-1. He has testified that he was working as a registered contractor since 1981. He has proved the award letter Ex.PW-1/A. According to him, the construction work was to commence within 15 days of the award of the work, i.e., 15th November, 1995. He started the construction work within the stipulated period. He worked on the site for about one month, however, thereafter the drawings were changed. He started the work of construction till June, 1996, when the drawings were changed. He has proved Ex. PW-1/B, whereby he was asked to re-start the work after the drawings were changed and received by him. In the month of August, 1996, he received a telegram from the defendants asking him to stop the work. He has proved the telegram Ex.PW-1/C. Thereafter, in the month of February, 1997, the defendants selected another site for the construction and handed over the same to him in the month of March, 1997. The existing structure was dismantled. He commenced the work on the new site in the month of March, 1997. He was assured by - 7 - the defendants to be compensated because of escalation and increase in the price index. According to him, because of the change of the site, the work was to be completed within 18 months from the date of handing over of the new site for the construction work. On 1st April, 1997, he received a letter sent by the defendants regarding two clauses of the agreement vide Ex. PW-1/F. He also received another letter from the defendants asking him to complete the construction work by 7th of November, 1997, copy of which is Ex. PW-1/G. He sent the rate analysis letter to the defendants pertaining to such items which were extra or market rate items vide Ex. PW-1/H. It consisted of seven sheets. A similar letter was sent by him to the defendants Ex. PW-1/J(3 sheets). The defendants had been making payments against the running bills or otherwise as advance. The Deputy General Manager (Projects) sent a copy of Ex. PW-1/K to the concerned Assistant Engineer, intimating him that the running bill was not complete. Another letter was written by the concerned Superintending Engineer to the Assistant Engineer that the rate analysis was also not complete, copy of which is Ex. PW-1/L. According to PW-1, the construction work was completed within the period as extended by the defendants and the communication extending the period is Ex.PW-1/M. Thereafter, the analysis of rate regarding ceiling Ex. PW-1/N was submitted by him to the defendants. The construction of the two floors of the building was completed in the month of March, 1998 and it was inaugurated by the then Chief Minister on 14.03.1998. On 5th December, 1997, he submitted the analysis of rates of panel door shutters to the defendants, copy - 8 - of which is Ex. PW-1/P (3 sheets). He received the communication regarding extension of time for completion of the work vide Ex. PW-1/Q. In December, 1997, he submitted three bills of escalation to the defendants which are Ex. PW-1/R, Ex. PW-1/S and Ex. PW-1/T. These bills were sent vide letter Ex. PW-1/U. He submitted the analysis of rates of various items/ works done to the defendants vide Ex. PW-1/V. In March, 1998, another analysis of rates consisting of 4 sheets was submitted by him to the defendants. He received a letter from the Superintending Engineer vide Ex. PW-1/X. Thereafter, he submitted two more analysis of rates Ex. PW-1/Y and Ex. PW- 1/Z. He also addressed a letter to the defendants regarding payments of bills Ex. PW-1/CC. This communication was replied by the defendants vide communication Ex. PW-1/DD. According to him, he had to divert the entire labour and resources to complete the construction. He had to raise money from the banks for the completion of the projects, rendering his financial position very tight. According to him, the hotel became functional in the month of May, 1998. He further stated that the construction work was carried out by him as per the drawings, specifications and also as per the orders given on the site. At the time of taking over the possession, the defendants were satisfied about the work. He sent a letter of request along with the bill and annexures in the month of July, 1998. According to him, the amount which has been received from the defendants from time to time, has been deducted and adjusted in the bill. He has admitted that a sum of `84, 99, 391/- was due from the defendants. The letter of request for payments was replied by the - 9 - defendants vide Ex. PW-1/FF. However, no payment was made to him. Thereafter, he served a legal notice upon the defendants vide Ex. PW-1/GG. He has proved on record the copies of postal receipts and acknowledgments Ex. PW-1/HH-1, Ex. PW-1/HH-2, Ex. PW-1/HH-3 and Ex. PW-1/HH-4. In his cross-examination, he has reiterated that the rates agreed by him were according to the tender. According to him, at the time of floating of the tender, the assessed expenditure on the construction work was approximately `59.25 lacs. He admitted that the first bill for `8,84,259/- was prepared on 30th May, 1997 and the second running bill for `12,81,997/- was prepared on 21st of August, 1997. Against these two bills, a sum of `10 lacs was paid to him by the defendants on 1st September, 1997 and another sum of `11 lacs was paid on 4th October, 1997. Third running bill for `14, 90, 643/- was prepared on 20th October, 1997. Fourth running bill for `24,81,484/- was prepared on 08.12.1997. Against these bills, on 22.10.1997, he was paid a sum of `1,16, 497/-. A sum of `10 lacs was paid on 16.12.1997 and another sum of `7 lacs on 24th December, 1997 and `16 lacs on 10th March, 1997. These amounts were adjusted against the aforesaid four running bills. He admitted that the income tax and sales tax was to be deducted at the source. He has also admitted in his cross-examination that he had not objected to the rates on the basis of which, the running bills were prepared nor he took payment under protest. According to him, he has been orally protesting. He has also admitted in his cross- examination that the time was extended till 28.02.1998 on his request. He also admitted that he has to get a completion - 10 - certificate from the defendants at the time of handing over the premises. However, he did not get any such certificate from the defendants. He has admitted that he handed over the possession of the buildings to the defendants on 15.06.1998. However, he has not given any reply to the communications Ex. PW-1/M and Ex. PW-1/AA received from the defendants. He also admitted in his cross-examination that he received letters from the defendants to the effect that his 5th running bill has been prepared by them and he should sign them or the measurement book. However, he has not given any written reply to these letters. He also admitted that he has not given any reply to letter Ex. PW-1/X. He had denied the suggestion that the quantity of items shown in the bill has been shown on the higher side than the items actually used on the spot. He also denied the suggestion that item No. 37 in the bill is the same which has been mentioned in item No. 19. He also denied that item No. 40 in the bill has not been executed on the spot. He also admitted that there was no agreement with the defendants that in the event of late payment, they would be liable to pay interest. According to him, the defendants have assessed the value of the work at `1,26,65, 602.72/-, however, according to him, this was not the correct assessment. On a suggestion, he deposed that orally he does not recollect that the total payments made by the defendants to him were in the sum of `94,99,860/-. He also admitted that he was bound to pay 2% on account of income tax and 2% on account of sales tax. This is the evidence led by the plaintiff. - 11 - 10. DW-1 is Shri V.K. Chopra. He retired as Project Officer on 31.03.2005 from defendant No. 1-Corporation. According to him, the construction of the project in question was awarded to late Shri Ajay Sood in the year 1995. Before the tender was accepted, the notice inviting tenders was issued. Late Shri Ajay Kumar submitted his tender and the same was accepted. Thereafter, an agreement was entered into between the parties. The terms and conditions relating to work in question were to be governed in terms of Ex. PW-1/A. According to Ex. PW-1/A, the work was to be completed within a period of 18 months. The extension to complete the work in question was granted by defendant No. 1 at the instance of contractor. He has categorically deposed that against the contracted cost of `59.24 lacs, a final bill of `1.40 crores was prepared. This entire amount has been paid to the contractor from time to time. Some amount was also paid during the pendency of this suit. The final bill prepared by the department to the tune of ` 1.40 crores against the contracted cost of `59.24 lacs was because of the extra work done as well as on account of change of specifications on the spot at the instance of defendant No. 1. Bills were released to the plaintiff from time to time. According to him, the final bill of the work in question was prepared by defendant No. 1, but its payment could not be released to the plaintiff, for the reason that he did not sign the bill as well as the measurement books, whereafter the payment was to be released. According to him, the defendant No. 1 was always ready and willing to pay balance amount in terms of the final bill, provided the contractor had come to sign the bill as well as - 12 - the measurement books. He has admitted the issuance of Ex. PW-1/GG by the contractor. According to him, there was no liability of defendant No. 1 for paying interest on belated payments in terms of Ex. PW-1/A. So far as rates of extra items of the work got done beyond Ex. PW-1/A were concerned, the same were finalized by the then Managing Director, Shri S.K. Malhotra and Shri Amar Chauhan, the then Superintending Engineers as well as Shri Kaundal, Head Draftsman of defendant No. 1. During the pendency of this suit, the parties were directed to go to the spot for reconciling the matter after spot verification. A difference of about `2 lacs was found. This amount also stood paid to the contractor. This amount is also included in the sum of `1.40 crores paid to the contractor. Measurements were carried at the spot in the presence of contractor and after accepting those, he received the final payment without any objection. In respect of any extra work, the contractor was supposed to submit his rates alongwith supporting documents in response to the notice inviting tenders. In the instant case, the contractor had not submitted such rates. He was required to do the needful, however, he did not do the needful. On the failure of the contractor to do the needful, Shri Yash Behal, Assistant Engineer and Dharmender Kumar, Junior Engineer, got the rates from Rampur Bushahr where the project was being implemented in respect of extra work done by the contractor at the instance of defendant No. 1. These rates were then approved by Shri S.K. Malhotra and Shri Amar Chauhan, the then Superintending Engineers working with the defendant. Thereafter, the payments were made by the - 13 - defendant No. 1 in respect of the extra work. In his cross- examination, he had admitted the contents of Ex.PW-1/B, Ex. PW-1/C and Ex. PW-1/D. He has admitted in his cross- examination that in terms of Ex. PW-1/A, plaintiff was to get 10 c.c. claim from the defendants. He also admitted that 10 c.c. claim is not included in the sum of ` 1.40 crores, as stated in his examination-in-chief. He voluntarily stated that payment of this claim was to be made after the contractor had submitted his bill in that behalf. He had admitted on the basis of Ex. PW-1/CC that the plaintiff had submitted 10 c.c. claim. He reiterated that the claim of 10 c.c. payable by defendant-Corporation to the plaintiff has not been released to him despite his letters Ex. PW1/CC and Ex. PW-1/EE. According to him, the final bill of the project in question was prepared somewhere in December, 1998. DW-2 is Shri Hem Chand Sharma. According to him, Shri Tarun Shreedhar was the Managing Director of the defendant No. 1-Corporation. He has executed power of attorney in his favour authorizing him to appear as witness and give statement on behalf of the Managing Director in this suit. He produced the original power of attorney notarized by the Notary Sub Division (R ), District Shimla, copy of which is Ex. D-2. 11. DW-3 is Shri Yashpal Behl, Junior Engineer. According to him, the work was allotted to the contractor in the month of November, 1995. According to him, the rates were settled between the parties on the basis of availability of the material that was to be used for the implementation of the project. He took over the supervision of the project in question from DW-1 in February, 1997 as Assistant Engineer. He, as - 14 - Assistant Engineer, made test checks of spot measurements. The initial contract entered into between the parties awarded in favour of the contractor was of the total value of `59.25 lacs. Its cost got escalated to `1.40 crore. On receipt of the bills, running payments were being made to the contractor from time to time. In all, four running bills were prepared at the first instance. Fifth running bill was the final one. This was followed by sixth revised bill after filing of the present suit. In terms of these six bills, every penny has been paid to the contractor. According to him, the defendants were not liable to pay any interest. According to him, the payment of fifth and final running bill could not be made as it contained part rates. The part rates were accompanied by supporting vouchers of the contractor. Thereafter, the supporting documents were collected from the market and on the basis of prevalent lowest market rates, the fifth and final running bill was prepared and the payment on its basis was not made to the contractor because the contractor did not come forth to sign the fifth and final running bill, despite having been called upon to do the needful. The measurements were also carried out at the spot on the basis of the directions issued by this Court. Late Shri Ajay Kumar as well as Junior Engineer Dharmender Sharma, went personally to the spot and verified the measurements there. At the spot, after the needful had been done, the measurements were accepted by late Shri Ajay Kumar, contractor. Photostat copy of the proceedings prepared at the spot is Ex. D-10. According to him, the entire payments in terms of Ex. D-10 had been made to the plaintiff after filing of the suit. In addition to the amount paid in terms of - 15 - Ex. D-10, another sum of ` 41,26,821 was paid on 28.03.2002 and 02.05.2002 by defendant No. 1 to the plaintiff. Plaintiff has not raised any objection while receiving the payment in terms of Ex. D-10. He had seen the rate analysis, wherein comparison of rates submitted by the contractor as well as assessed by defendant No. 1 Ex. D-11 was prepared on the basis of documents submitted by the contractor which were corrected by the department. 12. DW-4 is Shri Amar Singh