- 1 - IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO.433 OF 1998 1. Khopoli Municipal Council } at and Post: Khopoli Taluka } Taluka Khalapur,District Raigad } 2. The Chief Officer, Khopoli } Municipal Council,At and Post } Khopoli,Taluka Khalapur } District Raigad } . Appellants Orig.Defendants) vs Ram Malhari Sable (since deceased) } } 1. Smt Chanda R.Sable } 2. Mina Ram Sable } 3. Santosh Ram Sable } 4. Sandhya Ram Sable .. } 5. Sachin Ram Sable } All adults, residing at Khopoli, } Taluka Khalapur, District Raigad } .. Respondents (Orig.Plaintiff nos.1 to 5 in the suit) .. Mr.Gautam Patel a/w Mr.Rushir Tolat i.b.L.C.Tolat & Co for Appellants Mr.S.G.Aney,Sr.Counsel with Mr.Vineet B,Naik with Mr.R.S.Alange for Respondent nos. 1 to 5. CORAM: P.B.MAJMUDAR AND R.V.MORE,JJ Reserved on: 6th October, 2009 Pronounced on:16th October, 2009 JUDGMENT ( Per R.V.More, J ) 1. The appellant (Original Defendants) takes exception to the judgment and decree dated 7th March, 1998 passed by the Civil Judge, Senior Division, Panvel, at Panvel in Special Civil Suit No.91 of 1992 wherein the appellants were directed to pay Rs.53,32,411/- to the respondents by - 2 - way of damages with simple interest at 18 % p.a. From the date of the suit. The facts leading to the filing of the appeal are as follows : 2. One Ram Sable, predecessor-title of the respondents filed a suit against the appellants for a perpetual injunction and directing them to obey the agreements and resolutions passed from time to time for the construction of a hospital building. In the alternative, a claim was also made for recovery of an amount of Rs.35,65,411/- towards damages. (hereinafter for the sake of convenience Appellants and Respondents are referred to as defendants and plaintiff respectively.) The case of the plaintiff was that the defendants had called for tender for construction of a hospital building. The plaintiff filled in the tender and his tender being the lowest, the work of construction of hospital by a written agreement dated 19th August, 1980 was alloted to him. The period of completion of the construction of the said hospital was 18 months from the date of agreement. The defendants agreed to supply the required quantity of cement bags for the construction of hospital building. The work order in pursuance of agreement was issued on 21st August, 1980. The line out one was given on 12th September, 1980 and actual work of construction started on 15th September, - 3 - 1980. The plaintiff thereafter, collected the required material for the construction of the building and also obtained loan from the Bank of Maharashtra to the extent of Rs.3,50,000/-. It is the specific case of the plaintiff that the defendants stopped supply of cement and therefore, the work was stopped. The rates of building material was in the meantime enormously increased. The plaintiff did not seek any escalation in the rate of construction for a period of 18 months. However,thereafter demanded higher rate for the construction in view of the escalation of the price of the building material and the defendants in pursuant to the demand of plaintiff passed a resolution bearing No.64 on 22nd July, 1983 and agreed to the escalation in price. The plaintiff continued the construction work from August, 1983 but, on 31st March 1984 the Collector, Raigad stopped the construction work of the building on the basis of a complaint by one of the Councillors of the defendants. The plaintiff again sought for increase in the rate since the building material had become very costly during that period. The defendants passed a resolution bearing No.58 on 25th July 1986 and agreed to increase 25 % above the DSR of 1986. This resolution was again stayed by the Collector of Raigad and the plaintiff was compelled to suspend the construction activities. An appeal was filed against the order of the Collector to the Director of Municipal Administration. However, the - 4 - same was dismissed and thereafter Revision application was filed before the State of Maharashtra. The State of Maharashtra allowed the appeal of the plaintiff and a direction was given that the plaintiff should complete the construction work as per the rates given in the resolution No.58 dated 25th July, 1986. 3. The plaintiff thereafter in pursuance of the order of the government executed a fresh agreement on 16th May 1988. This agreement was subsequently confirmed by defendants by passing Resolution No.51 dated 9th June, 1988. The plaintiff contended that they are ready and willing to complete the construction work as per the agreement dated 16th May 1988. However, officers of the defendants did not allow the plaintiff to commence the work and they worked against their interest. The defendants did not pay the plaintiff adequate money, did not supply cement and did not record the measurement in the measurement book. The plaintiff also averred that had the defendants co-operated, he would have constructed the hospital building in time and would have earned goodwill. However, for the adamant attitude of the officers of the defendants the work could not be completed for a period of 9 years. It was also contended that exorbitant interest was required to be paid for the loan obtained by the plaintiff from the Bank of Maharashtra. An amount of Rs.10,10,000/- was also - 5 - claimed from the defendants towards running bills. This payment was also delayed by the defendants. The plaintiff ultimately served a notice on 21st August, 1989 and thereafter filed a suit requiring the defendants to obey the agreements and resolutions passed by them from time to time and an injunction restraining their officers, servants and agents from causing obstruction in the construction work. An amount of Rs.10,10,000/- was claimed towards outstanding bills as on 30th September, 1988. By way of damages, the plaintiff claimed an amount of Rs.6,60,000/- for the rent he had to pay for centering and machinery for a period of 11 months at Rs.60,000/- per month, Rs.15,76,818/- towards interest amount which the plaintiff was required to pay to the bank, an amount of Rs.3,13,700/- towards payment of salary to gateman and watchman and Rs.5,000/- for notice charges. 4. The plaintiff amended the plaint in pursuance of an order on Exhibit 32 and added para No. 39. By this amendment, he prayed for obedience of Resolution no.43 dated 9th May 1991. In pursuance of an order below Exhibit 75, the plaint was again amended so as to enhance the original claim of Rs.35,65,411/- to Rs.60,82,418/-. The plaintiff revised the claim for damages under the caption“ interest” from Rs.15,76,811/- to Rs.17,18,811/-. The plaintiff further claimed centering material bills at Rs.60,000/- per month from the date of notice till the - 6 - institution of suit totalling Rs.3,60,000/-. Thus, the claim for rent for centering and machinery and other material is calculated at Rs.10,20,000/- as on the date of suit. The plaintiff also added new claim of Rs. 19,50,000/-. This claim was made on the basis of resolution No.43 dated 9th May 1991. It is contended by the plaintiff that the defendants agreed to give construction rate as per DSR for 1991-92. Balance work of the hospital building was estimated at Rs.78,00,000/- and had the work was completed, he would have earned 25 % profit that is how claim of Rs.19,50,000/- was made. The plaintiff also claimed 24 % interest on the decreetal amount. 5. The defendants by filing the written statement resisted the claim of the plaintiff. The facts in respect of calling for tender, contract with the plaintiff and issuance of the work order are not disputed by the defendants. It was contended by the defendants that they have supplied 3355 cement bags to the plaintiff during the period from 14th November, 1980 to 3rd December, 1981. It was contended that considering the total supply of cement bags to the plaintiff and the total work done by the plaintiffs at site, it cannot be said that the construction work was suspended due to non supply of cement. The defendants denied that they have committed any breach of the agreement for the supply of cement. It - 7 - was the case of the defendants that payment of advance towards material, running account bills etc have been paid to the plaintiff and inspite of this he did not complete the construction of hospital within the agreed period and completely stopped the construction since November, 1981. The plaintiff was informed from time to time by letters dated 15th June 1986, 19th February 1982, 31st February 1982 and 12th July, 1982 for the lapses committed on his part. Notice dated 16th September 1982 was also issued to him. In the said notice, it was contended that the defendants complied with its obligation under the agreement and inspite of this, the plaintiff failed to complete the work within the prescribed period. It was specific case of the defendants that plaintiff raised false contentions of price escalation of building material and suspended the work. It also contended that brother of the plaintiff, Laxman Sable being a Municipal Councillor used his position to gain undue advantage and attempted to seek escallation in the amount of construction of the hospital building. It was contended that the plaintiff did not make sincere efforts for completion of the construction work within a period of 18 months. Inspite of resolution no.64 dated 22nd July 1983 granting him increased rates, the plaintiff started construction at a very slowly speed just to give a feeling that work was started. The defendants supplied 1700 bags of cement - 8 - during the period from 10th March 1983 to 8th October, 1984. An amount of Rs.2,00,000/- and Rs.1,00,000/- was paid on 30th December 1983 and 14th February 1983 respectively. Subsequently, resolution no. 58 dated 25th July, 1986 was passed under which the plaintiff was to be paid 25 % above DSR of 1986 and an amount of Rs. 2,00,000/- was to be given by way of advance. However, both the resolutions were quashed and set aside by the Collector and the respondents were directed to complete the work as per the original tender rates. It was contended that the government allowed the appeal of the plaintiff whereunder directions were given to complete the construction of hospital building as per resolution no. 58 dated 25th July, 1986. However, payment of Rs. 2,00,000/- was turned down which was agreed to be given as advance to the plaintiffs. In pursuance of this decision, the defendants supplied 1000 bags of cement between he period from 20th March 1988 to 29th April 1988. However, the plaintiff started demanding payment of all the work completed by them as per new rates which was contrary to the government order itself. The defendants paid to the plaintiffs 4th running bill of Rs. 6,09,600/-. It is specific case of the defendants that after receipt of this bill, the plaintiff again stopped construction work and did not obey the terms and conditions incorporated in the agreement dated 16th May 1988 executed in pursuance of government order. In such - 9 - a situation, the defendants passed a resolution dated 23rd December, 1988 and thereafter the plaintiff was served with communication that he should start work within 15 days otherwise the work will stand withdrawn. Inspite of this notice, the plaintiff did not re-start the work. In the meantime, all the files were requisitioned by the Collector of Raigad. The defendants were ordered not to make payment to the plaintiff. In the above view of the facts, it was contended that the plaintiff was never interested in starting the work as per the latter agreement and filed a false suit. It is the specific contention of the defendants that they had recorded measurement of construction done by plaintiffs in their measurement book. No further work was done by the plaintiff beyond the work recorded in the measurement book. The running bills have been paid for the measurement that were recorded. The claim along with the amended claim have been specifically denied by the defendants. On the contrary, the defendants contended that they have made extra payment of Rs.4,55,000/- to the plaintiff. They also contended that they supplied in total 6055 cement bags to the plaintiff. However, plaintiff used 4020 cement bags and 2035 bags of cement were received by the plaintiffs in excess. The price of the same is at Rs.63,737/-. Thus, the defendants claimed an amount of Rs.5,18,937/- from the plaintiffs for which counter claim was made. - 10 - 6. The plaintiff by filing written statement denied the counter claim of the defendants. At the stage of evidence, the plaintiff has restricted his claim to an alternate prayer for damages. 7. The learned trial Judge in view of the above pleadings framed as many as 13 issues. The plaintiff examined his brother who is the power of attorney holder as PW No.1. The plaintiff also examined one Jamalbhai Sisotia as PW2. On behalf of the defendants one Sunil Gawde, Civil Engineer was examined as DW 1. Both the plaintiff and the defendants relied upon number of documents to which reference will be made at an appropriate place. The learned trial Judge on the basis of the pleadings, documentary and oral evidence came to the conclusion that the defendants have committed breach of contract by stopping supply of cement by not making payment in time and by not giving cooperation to the plaintiff. The trial Court also held that the resolution no. 43 dated 9th May 1991 is legal and valid. The trial court also held that the defendants has not paid outstanding bill amount of Rs.10,10,000/- to the plaintiff. The trial court granted damages including the above amount of Rs.10,10,000/- at Rs.53,37,411/- with 18 % interest p.a.from the date of the suit till realisation of the decreetal amount. - 11 - 8. Mr.Gautam Patel, learned counsel for the defendants took us through the oral evidence of the plaintiffs and the defendants. He also invited our attention to various correspondence and notices exchanged between the parties. He submitted that the defendants have not committed any breach in supply of cement bags to the plaintiff. The measurement of the work done by the plaintiff was forthwith taken into the measurement book. The plaintiffs was given from time to time amounts towards advances and running bills. The plaintiff has alleged breach in respect of the first agreement dated 28th August, 1980. However, that agreement was not produced on record. Earlier agreement dated 19th August, 1980 is superseded by latter agreement dated 16th May 1988. He submitted that if allegations of the plaintiff is about breach of the first agreement, then the said agreement ought to have been produced on record. However, the plaintiff has not done so. He also submitted that if the suit is on the basis of latter agreement dated 16th May 1988 then a grievance cannot be made about breach of the terms and conditions of the first agreement. He submitted that finding of the trial court cannot be sustained if the evidence on record is appreciated in its proper perspective. He submitted that the plaintiff’s brother Laxman Sable is an influential person being a Councillor of the defendants-council since - 12 - 1975. The suit was filed by the said Laxman Sable as a power of attorney holder of the plaintiff. The said Laxman Sable had taken undue advantage of his position and got passed various resolutions from time to time. He also submitted that the plaintiff could not prove that the defendants had committed breach of the terms and conditions of agreement. On the contrary it was the plaintiff who was not interested in completion of the construction of the hospital work and only interested in getting increased rate in construction amount. Mr.Patel also submitted that the plaintiff failed to prove that Rs.10,10,000/- is due and recoverable from the defendant- council. He submitted that the plaintiff also failed to prove damages under the head of ‘loss of profit’, salary of staff, rent of centering and machinery and interest on loan. He lastly submitted that the plaintiff’s suit is liable to be dismissed. 9. Mr.Aney, learned senior counsel appearing for the plaintiff invited our attention towards the prayers made in the suit and submitted that the suit was filed for enforcement of the various resolutions passed by defendants from time to time. He invited our attention to the text of the resolutions of the defendants passed in the years 1980, 1983, 1986, 1988 and 1991. He submitted that there is enough evidence on record to show that the the defendants itself committed breach of the terms of - 13 - contract and terminated the contract. Mr.Aney took us through the impugned judgment and submitted that the learned trial Judge has given cogent reasons in arriving at a conclusion that an amount of Rs.10,10,000/- is due and recoverable from the defendants to the plaintiff. He also submitted that their grant of damages under other heads are allowed on the basis of evidence on record and the same cannot be faulted with in any way. Mr.Aney lastly submitted that the appeal filed is devoid of substance and the same deserves to be dismissed. 10. While considering the rival contentions, it is necessary to be seen as to who has committed breach of contract. In this regard, voluminous evidence produced by the parties is required to be considered along with the oral evidence adduced by the parties and only thereafter liability of either parties will have to be fixed. There is no dispute that the plaintiff’s tender was accepted and work of construction of hospital building was allotted to him. Accordingly, agreement was executed on 19th August, 1980. Under this agreement, the defendants undertook to supply cement bags to the plaintiff. The construction was to be completed within a period of 18 months from the date of execution of the agreement. - 14 - 11. At this stage, the evidence of the parties is required to be appreciated. Laxman Sable was examined as PW 1 who is brother and power of attorney holder of the plaintiff. He deposed in his deposition that from 1978 to 1984 he was the Municipal Councillor of the defendant council. Thereafter, he deposed about the tender and agreement executed between the defendants and the plaintiff for construction of the hospital. He further deposed that cement bags were to be supplied by the defendants in accordance with the progress of construction and it was decided that construction material was to be procured by the plaintiff against which the defendants were to pay advances and these advances were to be adjusted in their running bills. He also deposed that a loan of Rs.3,50,000/- was obtained by plaintiff from the Bank of Maharashtra, Khopoli Branch, in the name of the Company and repayment was to be made within interest at the rate of 18 % p.a. He deposed that the first running bill was issued within 2/3 months from commencing of the construction and progress of construction was depending on the supply of cement bags from the defendants. He testified that supply of cement bags should have been atleast 1000 bags per month as the plaintiff had capacity to utilise 1000 bags of cement. Cement in those days was available on permit and till September 1981 the defendants supplied 3355 bags of - 15 - cement. He testified that supply of cement was not regular after September, 1981 and construction was stopped for want of cement. He also testified that after September 1981 to July 1983 rates of building material were increased by 100% and therefore the defendants accepted his proposal for increase in rates of construction and passed resolution bearing no.64 of 1983. This resolution was stayed by the Collector, Raigad at the instance of one Councillor. He preferred a revision with the Commissioner, Raigad. However, the same was rejected and stay was confirmed. He also deposed that against order of the Commissioner, he filed an application to the government and the government allowed his application and as per this decision it was decided to enter into a fresh agreement which was executed on 16th May 1988 and thereafter resolution no.51 of 1988 was passed on 29th June, 2988. He deposed that he was ready and willing to perform his part of contract as per the new agreement but, the defendants were not ready. They did not abide by the terms and conditions of the agreement. They did not supply cement bags and did not make any payment against it. In para 17 he deposed that he has submitted the running bill of Rs.10,10,000/- to the defendants. However, payment under this bill was not paid to him and therefore on 21st August, 1989 notice was issued to the defendants. In para 8 he deposed that after filing of the suit there was a meeting between the - 16 - office bearers of the defendants and himself on 31st December, 1990 and it was decided to make payment of the running bills of Rs.10,10,000/- and they further agreed payment of Rs.26,00,000/- towards damages subject to outcome of the suit. The defendants thereafter passed a resolution No.43 dated 9th May 1991. The defendants also wrote a letter on 5th December 1991 to the Collector, Raigad seeking permission to make payment of Rs. 10,10,000/-. However, the Collector, Raigad did not give permission and no payment is made till today. In para 8 he has deposed that during the pendency of the suit he became President of Khopoli Municipal Council and he advised the plaintiff to give up their claim regarding the construction of the hospital and suit claim is restricted for recovery of the amount of running bills and dsamages. 12. In cross examination, he admitted that he was the Councillor during the period from 1978 to 1984 and from 1996 onwards. He further admitted that whenever he was not Councillor somebody from his family used to be Councillor of the defendant-Council. However, he denied that he has influenced other Municipal Councillors. He also admitted that he was unable to give the account of the centering. In para 11 he admitted that whatever bills he has produced on record are as per the measurement maintained by the defendants. He further - 17 - admitted that the completed construction was measured and plaintiff has submitted the running bills accordingly. He also admitted that there is no construction which is not measured by the defendants and about which no bill is prepared by him. In para 13 he has specifically admitted that the plaintiff had utilised 2355 cement bags upto February 1982. He also admitted that plaintiffs received 3355 cement bags from the defendants up to February 1988. He admitted that measurement books were signed by his brother. He admitted the measurement recorded in the books. He admitted having received 3 running bills. In para 14 he has deposed that he has not produced any document in respect of account of centering materials. He also admitted in this para that he has not produced any more document whatsoever in respect of the claim of Rs.10,10,000/-. He was confronted with the advocate’s letter dated 6th November, 1988 under which the plaintiffs agreed for deduction of an amount of advance from running bills. In para 15 he admitted that there is no documentary evidence in respect of the claim towards payment of salaries of watchman and gatekeeper. In this para he also deposed that he has not produced any document for refund of interest of loan amount to the bank or interest. 13. The plaintiff also examined one Jamal Sisotia as PW 2. This witness is doing business of contractor in the - 18 - name of Universal Contractor. He deposed about the material required for slab work and cost of material. He has also given rate of rent of that material. In cross examination he has admitted that Laxman Sable is having his own