IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA. RFA No.159 of 2002. Judgment reserved on:04.03.2008 Date of Decision:March 18, 2008 H.P. Housing Board. …Appellant. Versus M/s.Rajeev Bros. …Respondent. Coram The Hon’ble Mr. Justice Kuldip Singh, Judge Whether approved for reporting?1 Yes For the appellant : Mr Chandernarayan Singh, Advocate. For the respondent : Mr K.D.Sood, Advocate. Kuldip Singh, Judge. This appeal has been directed against the judgment, decree dated 30.3.2002 passed by learned District Judge, Kangra at Dharamshala, in Civil Suit No.5-D/I/1999 dismissing the suit of the appellant for recovery of Rs.3,32,135 along with interest at the rate of 18% per annum. 2. The facts, in brief, are that appellant had invited tender for the construction of Houses under Partial Self-Financing Scheme at Bindraban, Palampur. The respondent submitted tender and after negotiations the work amounting to Rs.33,21,848.88 was awarded to 1 Whether reporters of Local Papers are allowed to see the Judgment? Yes …2… respondent. The respondent entered into an agreement No.19 of 1993- 94 on 17.7.1993 with the appellant for completion of the said work. As per Clause-2 of the agreement, if the contractor fails to complete the work within stipulated period in that event he will be liable to pay compensation up to10% of the awarded amount to the department. The time limit for the execution of work was fixed two years which was accepted by the respondent. Necessary store items were supplied to the respondent from time to time. The awarded work was required to be completed on or before 31.7.1995. 3. The respondent executed the work very slowly. Notices dated 30.8.1993, 22.9.1993, 10.4.1993, 19.10.1993, 2.11.1993, 4.2.1994, 22.4.1994, 18.6.1994 and 27.7.1994 were issued to respondent to expedite the execution of the work. The appellant had correspondence with its senior officers i.e. Superintending Engineer to this effect and the Superintending Engineer authorized the appellant vide letter dated 10.5.1994 to take action against the respondent under Clause-2 of the agreement. 4. The respondent out of the awarded work of Rs.33,21,848.88 executed the work amounting to Rs.3,47,431 only and thus violated terms and conditions specified in Clause-2 of the agreement. The respondent failed to execute the work according to agreement. Accordingly, action was taken under Clause-2 of the agreement against the respondent and compensation amounting to Rs.3,32,135 was levied on respondent which was conveyed to the Superintending Engineer by Executive Engineer vide letter dated 17.10.1994. The Superintending Engineer before levying compensation of Rs.3,32,135 on respondent …3… under Clause-2 of the agreement had given opportunity to the respondent to present his case but the respondent failed to respond and finally the action of levying compensation by the Executive Engineer amounting to Rs.3,32,135 was confirmed by Superintending Engineer on 30.12.1998. The respondent is thus liable to pay Rs.3,32,135 on account of compensation to the appellant along with interest at the rate of 18% per annum from 30.12.1998. 5. The suit was contested by respondent by filing written statement in which preliminary objection of maintainability of the suit in view of arbitration clause between the parties was taken. The pleas of jurisdiction, limitation, res-judicata, non-joinder of necessary parties, estoppel and the suit being false and vexatious have also been taken. On merits, it has been submitted that store items were never supplied by appellant to respondent as per demand and the supplies were always delayed. The execution of work was delayed due to non co-operative attitude of Executive Engineer who never supplied store items in time. The respondent suffered financial loss due to non supply of essential items resulting in retaining the labour without work for months together. Notices allegedly issued by appellant to the respondent were denied. It has been asserted that not even a single notice was received by the respondent. The complete site was not handed over while giving lay out of the site plan. The respondent did not violate Clause-2 or any other Clause of the agreement. The entire fault for delay lies with the appellant. The Superintending Engineer did not afford any opportunity to the respondent before the imposition of the compensation. The appellant earlier proceeded against the respondent and started arbitration …4… proceedings in respect of all claims against the respondent and the learned Arbitrator has already given the award in favour of the respondent to the tune of Rs.6445. The suit is, thus, not maintainable. 6. The appellant filed replication and denied the preliminary objections of the respondent. On merits, it has been denied that store items were not supplied to the respondent in time. It has been asserted that respondent violated Clause-2 of the agreement and, therefore, is liable to pay the amount of compensation claimed in the suit. 7. On the pleadings of the parties, learned District Judge has framed the following issues:- i) Whether the defendant failed to execute the work according to the agreement and as such the plaintiff is entitled to damages? If so, to what extent? OPP ii) Whether the suit is not maintainable in view of the Arbitration clause? OPD iii) Whether this Court has no jurisdiction? OPD iv) Whether the suit is not within time? OPD v) Whether the suit is bad for non-joinder of necessary parties? OPD vi) Whether the suit is barred under the principles of res-judicata? OPD vii) Whether the plaintiff is estopped from filing the suit? OPD viii) Relief. The issue No.1 was decided against the appellant, issues No.2 and 4 were decided in favour of the respondent and issues No.3, 5, 6, 7 were …5… decided against the respondent and ultimately the learned District Judge dismissed the suit, as noticed above, hence, this appeal. 8. I have heard Mr.Chandernarayan Singh, learned counsel for the appellant and Mr.Kapil Dev Sood, learned counsel for the respondent and gone through the record. It has been submitted by Mr.Singh that learned District Judge has wrongly held that suit is not maintainable. He has submitted that clause 2 of the agreement is not arbitrable as per law laid down by the Apex Court in Vishwanath Sood versus Union of India and another, AIR 1989 SC 952, therefore, suit for recovery of compensation levied under clause 2 is maintainable. He has also submitted that learned District Judge has wrongly held that suit is time barred, oral and documentary evidence has not been properly appreciated by the learned Court below and he has submitted for acceptance of the appeal. Mr.Sood, representing the respondent, has submitted that the appellant has not led any legal evidence on record to show that the respondent has violated clause 2 of the agreement and compensation imposed by the appellant is justified. He has submitted that the contract was rescinded on 20.2.1995 and suit was filed on 19.8.1999, therefore, suit is hopelessly time barred. He has supported the impugned judgment, decree. 9. In Vishwanath Sood versus Union of India and another, AIR 1989 SC 952, the Apex Court has held that clause 25 excludes matters like those mentioned in clause 2 in respect of which any dispute is left to be decided by a higher official of the department. The question of awarding compensation under clause 2 is out side the purview of the arbitrator. Therefore, there is substance in the contention of learned …6… counsel for the appellant that the learned District Judge has erred in returning the finding that suit is not maintainable in view of arbitration clause. The arbitrator has no jurisdiction to determine the dispute referable to clause 2 of the agreement, therefore, even if the appellant had approached the arbitrator regarding the dispute covered by clause 2 of the agreement that would not confer jurisdiction on the arbitrator. In view of Vishwanath Sood’s case (supra), it is held that the arbitrator had no jurisdiction to adjudicate the dispute with respect to dispute covered by clause 2 of the agreement and the learned District Judge has wrongly held that the suit is not maintainable because of arbitration clause. This apart, the other question is whether the appellant is entitled to suit amount? 10. The case of the appellant is that right from very beginning the respondent was very slow in execution of the work, many notices were given to the respondent to expedite the execution of the work but despite that respondent did not complete the work within the stipulated period which was 31.7.1995. The respondent had executed work amounting to Rs.3,47,431 as against the awarded work of Rs.33,21,848.88. In these circumstances, under clause 2 of the agreement, the appellant has rightly demanded Rs.3,32,135 from the respondent. The respondent has attributed delay for the execution of the work to the appellant. It is the case of the respondent that store items were not supplied to the respondent by the appellant in time as per agreement. The supplies were always late, complete site was not handed over to the respondent in time. The appellant has wrongly and illegally imposed compensation on the respondent. The necessary facts …7… for imposing the compensation have not been placed by way of legal evidence before the Court. The suit is time barred. 11. PW-1 Arun Gupta, Executive Engineer Housing Board, in his statement has proved agreement Ext.PW-1/A. He has stated that under clause 2 of the agreement 10% penalty can be imposed. The respondent executed the work very slowly and the department issued many notices to the respondent. There was no improvement in the work of the respondent, therefore, under clause 2 of the agreement 10% penalty was imposed and an amount of Rs.3,32,135 was claimed from respondent. The respondent could not complete the work within the time limit fixed by the appellant and, therefore, under clause 3 of the agreement contract was rescinded vide Ext.PW-1/B. The Superintending Engineer was approached for approving the penalty and the Superintending Engineer confirmed the penalty on 30.12.1998. Thereafter, the suit was filed. In his cross examination, he has stated that he had no acknowledgement showing service of any notice on the respondent. He denied that no notice was served on the respondent. He has stated that in the record he has no acknowledgement of service of notice before taking action under clause 2 of the agreement. He has admitted that as per agreement some store items were to be supplied by the department. He has admitted that before commencement of the work site is handed over to the contractor. He has shown his ignorance that complete site was not handed over to the respondent after award of the contract in favour of the respondent. The contract was rescinded on 20.2.1995. PW-1 has nowhere stated in his statement that work was executed by respondent under him or how he was connected with the …8… execution of the work of the respondent. In his cross examination, he has stated that plaint is not signed by him. The agreement Ext.PW-1/A is not signed by him, rather agreement is signed by S.C.Sood, Executive Engineer. He has not placed on record necessary facts by way of documents that respondent was slow in executing the work awarded to the respondent vide agreement No.19 of 1993-94. He has proved Ext.PW-1/A agreement, Ext.PW-1/B decision to rescind the contract and Ext.PW-1/C permission to file the suit. He has placed no other document on record to prove the case of the appellant that in fact respondent has violated clause 2 of the agreement and compensation has been validly imposed on the respondent under the agreement. 12. PW-2 Ramesh Chand, Accountant in his statement has placed on record documents Ext.PW-2/A to Ext.PW-2/Q. The exhibition of all these documents was objected on behalf of the respondent. PW-2 in his statement has nowhere stated that he has prepared documents Ext.PW-2/A to Ext.PW-2/Q. The mere putting of the exhibit on the documents Ext.PW-2/A to Ext.PW-2/Q will not prove the contents of the documents, therefore, documents Ext.PW-2/A to Ext.PW-2/Q have not been proved and these cannot be looked into. PW-2 has also stated that action against the respondent was taken under clause 2 of the agreement vide letter dated 6.10.1994 Ext.PW-2/R. He has also stated that imposition of compensation was confirmed vide Ext.PW-2/S. In the end of examination in chief he has stated that work was awarded to the respondent vide letter dated 17.7.1993 Ext.PW-2/T. PW-2 has stated that PW-1 Arun Gupta came to Dharamshala in May 2001 from Parwanoo after transfer. He has also stated that documents Ext.PW-2/A …9… to Ext.PW-2/S do not bear his signatures. He has further stated that he does not have any record to show that letters Ext.PW-2/A to Ext.PW-2/S were sent to respondent. He was not present in the proceedings before the Superintending Engineer. 13. DW-1 Sanjiv Behal has stated that he is a partner of M/s.Rajeev Brothers and the agreement was executed with him. The complete site was not handed over to the respondent. The store items were not supplied by the appellant as per progress of the work and, therefore, the work proceeded with slow pace. He met Executive Engineer Incharge several times but nobody took corrective measures. The appellant did not issue any notice to him for slow progress. The contract was rescinded on 20.2.1995, no notice under clause 2 of the agreement was given to him. No amount is payable to the appellant. 14. From the testimony of PW-2, it is clear that work of agreement No.19 of 1993-94 was not executed by respondent under PW-1 Arun Gupta. In other words, PW-1 Arun Gupta has no personal knowledge about the execution of the work by respondent under agreement No.19 of 1993-94. PW-1 has proved nothing from the record showing the violation of clause 2 of the agreement by respondent. The collective reading of statements of PW-1 and PW-2 does not prove the case of the appellant against the respondent for imposing compensation under clause 2 of the agreement and demand of Rs.3,32,135 from respondent. DW-1 has denied the liability. Therefore, it was for the appellant to prove the case which it has miserably failed to prove. 15. It has come on record that the contract was rescinded on 20.2.1995. In State of Maharashtra and another versus Digambar …10… Balwant Kulkarni, (1979) 2 SCC 217 where more or less similar type of clauses 2 and 3 were involved, the Apex Court has held that clauses 2 and 3 have to be read together and interpreted with reference to each other. The suit was filed on 19.8.1999. It has not been pointed out which specific article of the Limitation Act, 1963 is applicable in the present case but even if general article 113 is applied in that case also, the limitation of filing the suit is three years. The contract was rescinded on 20.2.1995 and alleged violation of clause 2 by respondent had taken place before 20.2.1995, therefore, the suit filed on 19.8.1999 is time barred. 16. No other point was urged. 17. The result of above discussion, there is no merit in the appeal which is dismissed and the parties are left to bear their own costs. March 18, 2007 ( Kuldip Singh ), J. (soni) …11…