Sri K. Marappan (Dead) through Sole Lr. Balasubramanian vs The Superintending Engineer T.B.P.H.L.C. Circle Anantapur

Claim No.3 – Non-supply of food grains as per the conditions of the agreement – Under the food for work programme of the Central Government, food grains were to be made available by the respondent and part of the wages of the works was to be supplied by the appellant in food grains as part of the contractual obligation – It was the case of the appellant that the food grains were not supplied though it was available – Consequently, the appellant had to supply food grains to his workers by procuring the food grains at higher prices from the open market – The arbitrator noted the argument of the State that the relevant clause only contemplated making available food grains, if it was available – The arbitrator proceeded to award various sums under the three contracts on the basis that the appellant was constrained to expend money for supplying his workers by purchasing food grains from the open market – Held: In terms of agreement, the appellant was to supply the food grains only if the food grains were made available by the Government – Therefore, it is totally untenable for the appellant to set up a case that attracted by the clause which resulted from the representation and negotiation, he submitted his tender – Appellant was not bound to pay the fair wages to the workers and he was not also liable to offer food grains apart from fair wages – A perusal of the clause would make it clear that what was contemplated was if the food grains were available and supplied, the appellant was to make use of the same, supplied it to the workers ‘in lieu of wages’.

Claim No.4 – Reimbursement of short supply of cement – It was the case of the appellant-contractor that in order to achieve progress, he procured cement from outside – The department contended that cement was in fact supplied as per the contract and the contractor was not authorized to purchase cement from outside and further contractor did not produce any vouchers – Department further relied on Clause 10 of the contract which provided that no claim for compensation for non-supply of cement would lie – The arbitrator, however, rejected all the contentions of the department and relied on s.70 of the Contract Act – The non-production of the cement issue register and unstamped receipt by the department led the arbitrator to raise an adverse inference against the department – The arbitrator proceeded to award varying sums under the three contracts – Held: The correspondence between the appellant and the department showed that the officers proceeded on the basis that there was a shortage of cement – Therefore, this appeared to be a case where sufficient cement may not have been supplied to the appellant – The sub-court on the other hand found that none of the correspondence by the officers indicated that the appellant was given permission to buy cement from outside – There was no indication in any of the letters written by the appellant which were the other sources from which he was procuring cement – The most important obstacle for the appellant was the clause in the contract namely, for procuring cement by the contractor, he must maintain ledger and which may be open to scrutiny by the officer as and when demanded – In this case, the appellant did not produce any ledger/voucher showing purchase of cement from other sources – There was no written permission produced to purchase cement from other sources – The fact that there were neither vouchers nor any ledger entries nor bills produced warrant interference with the award – Claim is not accepted – Contract Act, 1872 – s.70. Claim No.7 – Claim on account of stock of materials accumulated by the contractor for work in the project – The claim of the appellant was that he had purchased various materials and stocked at the work site for carrying out the work but the department prevented appellant from carrying out the work and, therefore, the appellant was entitled to the value of the materials which he had collected at his expense – Appellant raised a claim for enhanced compensation – He alleged that there was delay on the part of the respondent on various grounds – This is apart from alleging other factors like breakout of malaria, unfavourable weather and delay in taking decision by the departmental officers, which contributed to escalation in cost – Held: Insofar as the appellant did not use any of the materials to carry out the work and set up the claim only on the basis of assurance which was not admitted, the action of the appellant in purchasing the materials would not result in establishing his claim for compensation – Clause 59 prevents the Court from awarding compensation on account of any factor relating to the delay which may be due to any cause whatsoever – In such circumstances, the appellant did not make out any cause for compensation in regard to this claim.

Claim No.9 – Interest of 18% p.a. under the Interest Act – Under Claim No.9 which related to interest at 18% under the Interest Act, the interest was awarded @ 12% p.a. on all claims from the date of the claim petition namely 23.11.1983 – The court took the date on which the arbitrator entered upon the reference as 26.4.1988 and the date of the awards as 23.8.1988, and held that for the said period, the arbitrator did not have the power to grant interest on the amount found due – Therefore, the Court set aside the award of interest for the period 26.4.1988 till 23.8.1988 and in regard to the rest the award of interest was sustained by the Court – Correctness – Held: The arbitrator awarded interest at 12% from the date of the claim but excluded interest from commencement of proceeding till date of award – As long as the agreement between the parties does not prohibit grant of interest and the matter is referred to the arbitrator, arbitrator would have power to grant interest pendente lite – The sub Court was not justified in setting aside interest and the interest as awarded by the arbitrator is restored – Interest. Partly allowing the appeals, the Court

HELD: 1.1 In terms of Clause 59 of the Agreement, it was not open to a contractor to claim compensation which arose on account of the fact that the work was delayed or hindrance was caused to the work from any cause whatsoever. The clause interdicts raising claim for compensation by the contractor if the employer poses hindrance to the work. If work gets delayed on account of the contractor himself, it is axiomatic that he cannot claim compensation as it would amount to a person taking advantage of his own wrong. Delay from any cause cannot found a claim for compensation. It may also happen that the work may get delayed not due to the fault of the employer. There may be natural causes such as natural calamities which may cause delay in carrying out the work. Even in such cases, Clause 59 cast an embargo against a claim by the contractor. This interpretation would give full play to the words ‘delays from any cause whatsoever’. Equally, if there is hindrance to the work from any cause whatever, a claim for compensation would not lie. While compensation on account of delay and hindrance is impermissible, what Clause 59 provides however, is that reasonable extension of time be allowed. Request for extension of time must arise from causes beyond the control of the contractor. [Paras 26, 27] [171-C-G]

1.2 Claim No.1 relates to claim for extra lead for carrying out the work of quarrying stone and metal from a quarry located at a greater distance from the work site. As far as the said claim is concerned, it cannot be associated with a delay to the work for any cause whatever within the meaning of Clause 59. The claim, on the other hand is, on account of the appellant carrying out work of quarrying from a site which was located further away than the site which was specified under the contract. [Paras 29, 30] [172-D-E; 173-D]

1.3 The claim for Rs.15/- per cu.m. was based on abnormal increase in transport charges due to increase in cost of fuel, automobile spare parts etc. If escalated rates are claimed then it may attract the wrath of Clause 59. The claim of extra lead cannot be denied. The claim of Rs.15/- per cu.m., if it is over and above the amount which is already received will be in the teeth of the contractual provision which is relied on by the sub Court for which he has not taken any exception to in which case the amount as ordered by the sub Court is to be awarded to him under this claim. This means the amount is to be worked out as provided in the letter dated 13.11.1982. In other words, the amount must be awarded on the basis of the cost of conveyance being calculated at the rate of Rs.13.75 and the amount must be calculated and paid by exercising power under Article 142 to sustain the decision of the Sub Court under this claim. [Para 41] [177-G-H; 178-A-C]

2. Non-supply of food grains as per the conditions of the agreement

2.1 The original tender conditions contemplated supply of wheat at Rs.115/- per quintal, if available. The appellant was to supply the food grains only if the food grains were made available by the Government. Therefore, it is totally untenable for the appellant to set up a case that attracted by the clause which resulted from the representation and negotiation, he submitted his tender. May be at the time of entering into the contract following his representation and negotiation the clause was incorporated which provided for supply of rice or wheat and other terms. In other words, at the time when appellant submitted his tender which may have been lesser than the estimated rate by about 10 to 12%, the negotiated clause was not there. On this score, the case sought to be built up around the clause being attractive cannot be accepted. [Para 53] [184-G-H; 185-A-B]

2.2 As regards the supply of food grains, the appellant is not correct in having contended that the appellant was duty bound to supply food grain even if the food grains were not supplied by the department. A perusal of the clause relating to supply of food grain would show that food grains would be supplied, if available. Again, the words “if offered” is conspicuous. The words in the clause which provided that the appellant shall supply food grain to the labourers is not to be considered in isolation. [Para 54] [185-B-D]

2.3 The sub Court was right in holding that the correspondence referred to by the arbitrator did not show that the food grains were actually available with the department and department was only trying to get the food grains from the administration with which the food grains was available. No doubt the contractual provision which provides that the appellant is to keep accounts and produce accounts relating to receipts and distribution may assume relevance when appellant receives food grains from the department and distributes. But at the same time the appellant is putting up the claim for compensation and that too a claim which runs into a fairly large sum. There would certainly be material to evidence the actual purchase and further actual supply to the workers or payment as alleged. Even assuming everything that the appellant says is correct about the fact of the negotiated settlement, there is virtually no material except the appellants statement that the appellant paid for the price of food grains to the workers. Further, the claim involves payment of price of rice at escalated rates for period beyond the contract also and it invites the wrath of Clause 59. The award of the claim by the arbitrator cannot be sustained. [Para 63] [188-G-H; 189-A-C]

3. Reimbursement of short supply of cement.

3.1 The claim is not hit by Clause 59 as the appellant was not claiming compensation for any delay. The Sub-Court while setting aside the award had held that Cement is a controlled commodity and it could not be purchased from outside, without valid permit. It was found that the appellant did not produce any document to show that cement was actually purchased from outside. The source was not mentioned. The appellant did not produce any permission from the Department for purchasing cement from outside. Even if purchased, it was to be checked by check measure but there was no check measurement. The tabular statement shown by the appellant, only represents the theoretical requirement in the quantity of cement. In the letters of the Officers, there is no reference about the use of cement by the appellant which was brought from outside. The letters written by the appellant also complained only of inadequacy of supply of cement and there is no mention of use of cement which he brought from outside. More importantly, he referred to the contractual provision to find that the Government is entitled to recover the cost of theoretical quantity which is not used and use of any lesser amount in comparison to theoretical amount would only enure to the Department. The contract provides that cement will be supplied at cost by the Department inter alia and the cost of cement issued will be recovered from the contractor’s bill at the rate specified. The contract also contains the theoretical requirement of important materials which include cement. The rate of recovery is shown as Rs.416/- per metric tonne.[Paras 67-69] [191-A-G]

3.2 A perusal of the contractual provisions yields the following inevitable result. Cement is a scarce material to be supplied by the Department. The appellant was to maintain separate ledger for the item for which cement was supplied by the Department. The issue price was Rs.416/- per metric tonne. The cost of cement at the said rate was to be recovered from the appellant’s bill at the issue rate. Thus, if the value of the work is Rs.100/- and the value of the cement is Rs.5/-, the appellant would get only Rs.95/-. There are theoretical requirements in regard to the use of cement. It is not unnatural for the Department to prescribe for the theoretical requirement. This is to ensure that it is used exactly as per the theoretical requirement so that the structure on the one hand is built in a safe manner and at the same time nothing in excess is used so as to avoid wastage of scarce material. There are three situations which are contemplated. In the first situation, it is provided that if materials are drawn according to the schedule and are short used then the excess quantity is to be returned to the Department in good condition and for the same the contractor will not get any payment. Furthermore, if the short-used material is not returned to the Department, their cost will be recovered at the market rate or at the issue rate which is greater plus wastage charges and sales tax. The second situation is where the materials are drawn in excess of theoretical requirements. The contract contemplates that in such a situation, the excess drawn quantity must be returned to the Department in good condition and otherwise there will be recovery at the issue rate plus 100% surcharge or market rate whichever is higher plus storage and taxes. The third situation contemplated is that if the materials are short drawn or short used it is specifically provided that in such a situation, the saving due to short drawal/ use should be secured to the Government by recovering the cost thereto at issue rate from the contractor. Further, the contract contemplates that if materials are required to be procured by the contractor, he must maintain separate ledger for each of the item which are so required to be procured by the contractor. [Paras 71-74] [193-C-H; 194-A-E]

3.3 In respect of short used material, though, properly drawn the recovery would be in addition to the recovery for the cost of materials which is returned. This would mean that if the appellant had indeed secured cement from outside, the appellant was obliged under the Contract to maintain a separate ledger. Further the Contract contemplates that there could be recovery from the bill of the Contractor for the cost of cement which is actually not supplied to the contractor and it will be based on the theoretical requirement. Thus, the mere fact that there has been excess recovery meaning thereby that without issuing the cement to the appellant the amounts have been recovered would not mean that the appellant would be able to substantiate his claim that there was inadequate supply of cement. That is a matter which must be substantiated with reference to other material. From the correspondence, it would appear that the officers proceeded on the basis that there is a shortage of cement. Therefore, this appears to be a case where sufficient cement may not have been supplied to the appellant. However, under Clause 10 of the agreement no right to compensation lies for short supply of cement. There is no indication in any of the letters written by the appellant which the other sources were from which he was procuring cement. The most important obstacle for the appellant is the clause in the contract namely, for procuring cement by the contractor, he must maintain ledger and which may be open to scrutiny by the officer as and when demanded. In this case, the appellant has not produced any ledger showing purchase of cement from other sources. There is no written permission produced to purchase cement from other sources. No voucher has been produced by the appellant to establish purchase of cement from outside. [Paras 74, 75, 80, 82] [174-D, F-H; 196-F-G; 197-D-F]

3.4 A party is supposed to produce the best evidence or rather the evidence which under the contract is contemplated. The failure on the part of the appellant to produce the ledger has fatal consequences. The matter becomes further aggravated by the failure on the part of the appellant to even produce vouchers or bills in support of the claim to purchase the cement from outside sources. A contractor may have without written permission but for the purpose of the work purchased cement from outside. But certainly, the fact that there are neither vouchers nor any ledger entries nor bills produced to hold that the matter may warrant interference with the award under Section 30. The claim is not accepted. [Para 86] [198-G-H; 199-A-C]

4. Claim on account of stock of materials accumulated by the contractor for work in the project.

As regards this claim, the claim appears to be that appellant collected materials and it was lying at the site. Admittedly, the appellant has not used this material for the purpose of doing the work. Only the case set up by the appellant is that he was given an assurance that he will be permitted to carry out the work and therefore, since he has spent money for the same, he must get the amount which is claimed for having spent on the material. Insofar as the appellant has not used any of the materials to carry out the work and sets up the claim only on the basis of assurance which has not been admitted, the action of the appellant in purchasing the materials cannot result in establishing his claim for compensation. The appellant raised a claim for enhanced compensation. He alleged that there was delay on the part of the respondent on various grounds. This is apart from alleging other factors like breakout of malaria, unfavourable weather and delay in taking decision by the departmental officers, which contributed to escalation in cost. Correspondence was exchanged with the Executive Engineer and the Superintending Engineer, the Superintending Engineer and the Chief Engineer and finally between the Chief Engineer and the Government. It appears that at that stage appellant invoked the arbitration clause and a panel of arbitrators gave their award. In fact, the work itself was stopped. Clause 59 prevents the Court from awarding compensation on account of any factor relating to the delay which may be due to any cause whatsoever. In such circumstances, the appellant has also not made out any cause for compensation in regard to this claim. [Para 87] [199-C-H]

5. Interest of 18% per annum under the Interest Act.

As far as the question relating to interest is concerned, the arbitrator has awarded interest at 12% from the date of the claim but excluded interest from commencement of proceeding till date of award. As long as the agreement between the parties does not prohibit grant of interest and the matter is referred to the arbitrator, arbitrator would have power to grant interest pendente lite. The sub Court was not justified in setting aside interest and the interest as awarded by the arbitrator is restored. [Paras 88, 89] [200-A-C; 201-C]

Assam State Electricity Board & Ors. v. Buildworth (P) Ltd. (2017) 8 SCC 146 : [2017] 7 SCR 123 ; Jugal Kishore Prabhatilal Sharma v. Vijayendra Prabhatilal Sharma (1993) 1 SCC 114 : [1992] 2 Suppl. SCR

118; The National Highways Authority v. Afcons-Apil Joint Venture (2017) 8 SCC 146 – relied on.

Smt. Aruna Kumari v. Government Of Andhra Pradesh and Anr. AIR 1988 SC 873 : [1987] SCR 624 ; Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. & Anr. AIR 1989 SC 973 : [1989] 1 SCR 318 – referred to