Case: R.L. Kalathia &amp; Co Vs. State of Gujarat

(a) The appellant-Firm, a partnership firm registered under The Indian Partnership Act, is carrying on the business of construction of roads, buildings, dams, etc. mostly in Saurashtra and also in other parts of the State of Gujarat. In response to the invitation of tender by the State Government for construction of Fulzer Dam II in Jamnagar District, the appellant-Firm quoted and offered to construct the same for the quotation, specifications and design of the Damvide covering letter dated 5.6.1970. In the said letter, the appellant-Firm also offered that they would give rebate of 3/4% provided the final bill be paid within three months from the date of completion of the work. The offer of the appellant being the lowest amongst other parties, it was accepted by the State Government with the clause that the construction work was to be completed within a period of 24 months from the works order dated 7.9.1970 which was subsequently clarified that the period of 24 months was to be commenced from the date of commencement of work i.e., 29.11.1970.(b) During execution of the said work, the Executive Engineer, who was in-charge of the project, made certain additions, alterations and variations in respect of certain items of work and directed the appellant to carry out additional and alteration work as specified in writing from time- to-time. The final decision as to the alteration in respect of certain items of work and particularly, in respect of the depth of foundation which is known as cut-off trenches (COT) took long time with the result that the Firm was required to attend the larger quantity of work and thus entitled for extra payment for the additional work. As per the works contract, the Firm was not paid the running bill within the specified time and, therefore, suffered loss.(c) On 16.7.1976, the Firm lodged a consolidated statement of their claims for the additional or altered works, etc. to the Executive Engineer. As there was no response, the Firm served a statutory notice dated 4.1.1977 under Section 80 of the Code of Civil Procedure (hereinafter referred to as ‘theAgain, on 24.3.1977, after getting no reply, the Firm filed Civil Suit No. 30 of 1977 on the file of the Civil Judge (S.D.), Jamnagar praying for a decree of the aggregate amount of Rs. 3,66,538.05 with running interest at the rate of 9% p.a. from the date of final bill till the date of suit and at the rate which may be awarded by the Court from the date of suit till payment.Vide order dated 14.12.1982, the Civil Judge allowed the suit and passed a decree for a sum of Rs. 2,27,758/- with proportionate costs together with interest @ 6% p.a. from the date of suit till realization.(d) Being aggrieved by the said judgment and decree, the State Government filed First Appeal No. 2038 of 1983 before the High Court of Gujarat at Ahmedabad. The Division Bench of the High Court,vide its order dated 7.10.2002, allowed the appeal of the State Government and dismissed the suit of the appellant-Firm and also directed that the decretal amount deposited by the State Government and as permitted to be withdrawn by the Firm should be refunded within a period of four months from the date of the judgment. Being aggrieved by the said judgment, the appellant-Firm has filed this appeal by way of special leave petition before this Court.

Court's reasoning:
28. Further, necessitas non habet legem is an age-old maxim which means necessity knows no law. A person may sometimes have to succumb to the pressure of the other party to the bargain who is in a stronger position.A glance at the said clause will immediately indicate that a no-claim certificate is required to be submitted by a contractor once the works are finally measured up. In the instant case the work was yet to be completed and there is nothing to indicate that the works, as undertaken by the contractor, had been finally measured and on the basis of the same a no-claim certificate had been issued by the appellant. On the other hand, even the first arbitrator, who had been appointed, had come to a finding that no-claim certificate had been given under coercion and duress. It is the Division Bench of the Calcutta High Court which, for the first time, came to a conclusion that such no-claim certificate had not been submitted under coercion and duress.18. From the submissions made on behalf of the respective parties and in particular from the submissions made on behalf of the appellant, it is apparent that unless a discharge certificate is given in advance, payment of bills are generally delayed. Although, Clause 43(2) has been included in the General Conditions of Contract, the same is meant to be a safeguard as against frivolous claims after final measurement. Having regard to the decision in Reshmi Constructions it can no longer be said that such a clause in the contract would be an absolute bar to a contractor raising claims which are genuine, even after the submission of such no-claim certificate.19. We are convinced from the materials on record that in the instant case the appellant also has a genuine claim which was considered in great detail by the arbitrator who was none other than the Counsel of the respondent Railways.In National Insurance Company Limitedv. Boghara Polyfab Private Ltd., VIII (2008) SLT 368=(2009) 1 SCC 267 , the question involved was whether a dispute raised by an insured, after giving a full and final discharge voucher to the insurer, can be referred to arbitration. The following conclusion in para 26 isWe have already considered and answered the issue relating to No. 15 in the earlier paragraphs and held in favour of the plaintiff. In respect of other issues relating to execution of extra work, excavation, construction of guide bunds, pitching work, providing sand filter in river, waste weir back filling, extra masonary, providing heavy gate, additional amount due to raising of prices, additional amount towards establishment charges, interest etc., the trial Court based on the materials placed accepted certain items in toto and rejected certain claims and ultimately granted a decree for a sum of Rs. 2,27,758/- with proportionate costs and interest @ 6 per cent per annum from the date of the suit till realization. On going through the materials placed, relevant issues framed, ultimate discussion and conclusion arrived at by the trial Court, we fully agree with the same and the plaintiff is entitled to the said amount as granted by the trial Court.