Case: Venkatesh Constrn.Co Vs. Karnataka Vidyut Karkhane Ltd.(Kavika)

is engaged in construction of dams and other civil works and registered as a civil contractor for the Government of Karnataka amongst others. The respondent-defendant invited tender on 17.08.1991constructing a compound wall along the boundary line of Kavika and also for constructing underground sump, shed to store useful laminations and also core assembly shop for theseThe appellant responded to the said tender andtender was accepted by the respondent. On 12.02.1992, a contract was executed between the appellant and the respondent incorporating the terms and conditions and the cost of work was estimated at Rs.10,86,200/-. The appellant had quoted the rates on the premise that the earth work for the foundation was to the depth of 1.5 metres and average width of 4.25 metres. However, after the work commenced, even while digging earth to one foot depth, it was noticed that soil was caving in and there was seepage of water from Vrushabhavathi river. The appellant was instructed by theengineers to dig earth up to four metres depth until hard soil bed is reached. Accordingly, in order to make a trench of four metres depth, appellant had to excavate earth commencing from width of six metres at the ground level and the entire nature of work changed and appellant had to incur additional expenses on account of the changed plan. The changed measurements were verified by the engineers nominated by the respondent and a payment of Rs.4,50,000/- was made in two running bills. The respondent then asked the appellant to stop the work till the new designs are given by the respondent which was not forthcoming. Vide several letters appellant sought permission for continuation of the work, but, there was no response from the respondent. Finally, after issuing legal notice dated 15.03.1993, for which no reply was given by the respondent. The appellant filed a civil suit being Original Suit No.11037 of 1993 in the court of Additional City Civil Judge, Bangalore, making a claim of rupees thirty lakhs under various heads, interalia, on the work already completed, towards the extra earth work, stocking of materials and also liquidated damages and others.4. Admitting the execution of the contract dated 12.02.1992, the respondent filed a written statement contending that the construction of the compound wall was in accordance with the estimate and the question of thedirecting the appellant to stop the ongoing work for want of fresh design did not arise. Respondent averred that the appellant unilaterally stopped the work and there is no question of defendant making further payment. It was averred that no extra work was done by the appellant and the respondent was not liable to pay any amount either towards the damages or towards the alleged loss sustained by the appellant.5. On the above pleadings, trial court framed seven issues. To substantiate the claim, appellant-plaintiff examined four witnesses and produced thirty three documents. On behalf of respondent-defendant, DW-1-Jagadeesh Kumar-Deputy Manager was examined and five documents were produced. Upon consideration of evidence adduced by the parties, the first three issues were answered in favour of the appellant-plaintiff viz.: (i)claim as to extras direction to stop the running work for want of revised design and (iii) due to stoppage of work side embankment began to fall in the trench due to the seepage of water and involving double work for the appellant-plaintiff to remove the fallen loose earth. Taking note of the fact that the respondent had paid only a sum of Rs.4,36,575/- to the appellant out of the assessed value of Rs.5,82,100/-, trial court calculated the balance of Rs.1,45,525/- as the balance amount payable in respect of completed portion of the work. On the value of building material stock, trial court awarded Rs.1,00,000/- as against theclaim of Rs.6,00,000/-. Trial court decreed the suit in respect of extra earth work, embankment work and other heads and directed the defendant to pay in all a sum of Rs.3,23,000/- to the appellant with proportionate cost and interest on the said amount at 12% per annum from the date of the suit till the date of realization.Being aggrieved, respondent as well as the appellant preferred appeals before the High Court and both the appeals were heard together and disposed of by the impugned judgment. Referring to the contract, the High Court held that the written contract governs the terms between the parties and any variation thereof ought to be in terms of the provisions of clause 11 of the contract and the appellant having not gone through the procedure envisaged under clause 11, the appellant cannot putforth a claim for a higher payment on the premise that it has executed some extra work over and above the stipulated quantity of the work. The High Court reversed the judgment of the trial court observing that the trial court acted more like an arbitrator in examining the suit claim and that the trial court erred in passing the decree in favour of the appellant-plaintiff for a sum of Rs.3,23,000/- with interest and proportionate cost.Briefly stated case of the appellant-plaintiff is that appellant-companyis engaged in construction of dams and other civil works and registered as a civil contractor for the Government of Karnataka amongst others. The respondent-defendant invited tender on 17.08.1991g a compound wall along the boundary line of Kavika and also for constructing underground sump, shed to store useful laminations and also core assembly shop for theseThe appellant responded to the said tender andr was accepted by the respondent. On 12.02.1992, a contract was executed between the appellant and the respondent incorporating the terms and conditions and the cost of work was estimated at Rs.10,86,200/-. The appellant had quoted the rates on the premise that the earth work for the foundation was to the depth of 1.5 metres and average width of 4.25 metres. However, after the work commenced, even while digging earth to one foot depth, it was noticed that soil was caving in and there was seepage of water from Vrushabhavathi river. The appellant was instructed by thes to dig earth up to four metres depth until hard soil bed is reached. Accordingly, in order to make a trench of four metres depth, appellant had to excavate earth commencing from width of six metres at the ground level and the entire nature of work changed and appellant had to incur additional expenses on account of the changed plan. The changed measurements were verified by the engineers nominated by the respondent and a payment of Rs.4,50,000/- was made in two running bills. The respondent then asked the appellant to stop the work till the new designs are given by the respondent which was not forthcoming. Vide several letters appellant sought permission for continuation of the work, but, there was no response from the respondent. Finally, after issuing legal notice dated 15.03.1993, for which no reply was given by the respondent. The appellant filed a civil suit being Original Suit No.11037 of 1993 in the court of Additional City Civil Judge, Bangalore, making a claim of rupees thirty lakhs under various heads, interalia, on the work already completed, towards the extra earth work, stocking of materials and also liquidated damages and others.Admitting the execution of the contract dated 12.02.1992, the respondent filed a written statement contending that the construction of the compound wall was in accordance with the estimate and the question of theg the appellant to stop the ongoing work for want of fresh design did not arise. Respondent averred that the appellant unilaterally stopped the work and there is no question of defendant making further payment. It was averred that no extra work was done by the appellant and the respondent was not liable to pay any amount either towards the damages or towards the alleged loss sustained by the appellant.On the above pleadings, trial court framed seven issues. To substantiate the claim, appellant-plaintiff examined four witnesses and produced thirty three documents. On behalf of respondent-defendant, DW-1-Jagadeesh Kumar-Deputy Manager was examined and five documents were produced. Upon consideration of evidence adduced by the parties, the first three issues were answered in favour of the appellant-plaintiff viz.: (i)m as to extras direction to stop the running work for want of revised design and (iii) due to stoppage of work side embankment began to fall in the trench due to the seepage of water and involving double work for the appellant-plaintiff to remove the fallen loose earth. Taking note of the fact that the respondent had paid only a sum of Rs.4,36,575/- to the appellant out of the assessed value of Rs.5,82,100/-, trial court calculated the balance of Rs.1,45,525/- as the balance amount payable in respect of completed portion of the work. On the value of building material stock, trial court awarded Rs.1,00,000/- as against theclaim of Rs.6,00,000/-. Trial court decreed the suit in respect of extra earth work, embankment work and other heads and directed the defendant to pay in all a sum of Rs.3,23,000/- to the appellant with proportionate cost and interest on the said amount at 12% per annum from the date of the suit till the date of realization.g aggrieved, respondent as well as the appellant preferred appeals before the High Court and both the appeals were heard together and disposed of by the impugned judgment. Referring to the contract, the High Court held that the written contract governs the terms between the parties and any variation thereof ought to be in terms of the provisions of clause 11 of the contract and the appellant having not gone through the procedure envisaged under clause 11, the appellant cannot putforth a claim for a higher payment on the premise that it has executed some extra work over and above the stipulated quantity of the work. The High Court reversed the judgment of the trial court observing that the trial court acted more like an arbitrator in examining the suit claim and that the trial court erred in passing the decree in favour of the appellant-plaintiff for a sum of Rs.3,23,000/- with interest and proportionate cost.

Court's reasoning:
14. The High Court took note of clause 11 of the contract dated 12.02.1992 which states that the contractor is not authorized to do any extra work or make any alteration without the previous consent in writing of the respondent. High Court set aside the findings recorded by the trial court holding that the parties are governed by the terms of the written contract and any variation with the terms of the agreement was required to be done strictly adhering to clause 11 of the contract. While saying so, the High Court brushed aside the admission by DW-1 that extra work was done by the appellant and the High Court was not right in ignoring the same to hold that the admission of DW-1 cannot have the effect on the contractual obligation of the parties. It is to be pointed out that the respondent has not raised the plea relying upon clause 11 of the contract. Further, by perusal of Ex.P2 dated 20.12.1991, a letter addressed by the appellant to the respondent informing the respondent about the extra work which needs to be done and the fact that PW-4 was engaged by the respondent to prepare the new design for the work, it is evident that the respondent was aware of the fact of the change in the nature of work and that there is alteration in the work done by the appellant. When the evidence and material clearly depict the change of nature of work involved and when the extra work to be done was also admitted by DW-1, parties cannot be expected to go for a revised agreement/contract. Moreover, having regard to the fact that the work was to be completed within a specified time-frame, the parties cannot be expected to go for a second round of negotiation and reframe the terms and conditions of the work. While so, the High Court was not right in placing reliance upon clause 11 of the contract to reverse the findings of fact recorded by the trial court.The Appellate Court may not interfere with the finding of the trial court unless the finding recorded by the trial court is erroneous or the trial court ignored the evidence on record. The High Court reversed the decree passed by the trial court without discussing oral and documentary evidence and several grounds raised before the trial court. The High Court veered away from the main issue and went on to elaborate on the law of arbitration and the mode of setting aside the arbitral award under Section 34 of the Arbitration Act, which in our view, was not warranted. Without considering the oral and documentary evidence, the High Court erred in interfering with the factual findings recorded by the trial court and the impugned judgment is liable to be set aside.17. Trial court directed the respondent to pay a sum of Rs.3,23,000/- to the appellant with interest at the rate of 12% per annum from the date of suit till the date of realization. To award interest from the date of suit to date of decree and from the date of decree till the date of realization is entirely discretionary. The terms of the contract do not specify any rate of interest. In the facts and circumstances of the case and having regard to the fact that the matter is pending for over two decades and in the interest of justice, it is appropriate that the interest of 12% per annum awarded by the trial court is reduced to 6% per annum.So far as the claim of the appellant that it suffered loss due to loss of stock of material, PWs 1 and 3 have stated that they have stocked the material of worth about rupees six lakhs at the work site. The appellant also produced several letters (Exs. P5, P6 and P7) by which the appellant has informed the respondent that there was no progress in the work and that the building material are lying waste. Apart from these letters, the appellant has also produced photographs (Exs. P18 to P28) to substantiate their claim that the building material like bricks, size stones and other materials were stocked at the work site. Even though the appellant has claimed rupees six lakhs on account of loss of the material stocked, as the appellant had not produced any bill relating to purchase of material nor produced authentic trip sheet, the trial court rightly awarded rupees one lakh only on account of loss of building material. As noticed earlier, based on the evidence of PWs 1 and 3 and other documents, the trial court has awarded amount on various other heads viz., the amount payable in respect of:- (i) extra earth work; (ii) embankment work; (iii) extra soiling work; (iv) extra bed concrete work and (v) extra stone masonry work. The amount so awarded by the trial court under various heads is based on evidence and material on record.e Appellate Court may not interfere with the finding of the trial court unless the finding recorded by the trial court is erroneous or the trial court ignored the evidence on record. The High Court reversed the decree passed by the trial court without discussing oral and documentary evidence and several grounds raised before the trial court. The High Court veered away from the main issue and went on to elaborate on the law of arbitration and the mode of setting aside the arbitral award under Section 34 of the Arbitration Act, which in our view, was not warranted. Without considering the oral and documentary evidence, the High Court erred in interfering with the factual findings recorded by the trial court and the impugned judgment is liable to be set aside.Trial court directed the respondent to pay a sum of Rs.3,23,000/- to the appellant with interest at the rate of 12% per annum from the date of suit till the date of realization. To award interest from the date of suit to date of decree and from the date of decree till the date of realization is entirely discretionary. The terms of the contract do not specify any rate of interest. In the facts and circumstances of the case and having regard to the fact that the matter is pending for over two decades and in the interest of justice, it is appropriate that the interest of 12% per annum awarded by the trial court is reduced to 6% per annum.