Contract – Levy of Penalty – When not justified – Penalty imposed on respondents-Contractors while granting extension of time to complete the work awarded – Held: Penalty was levied by the State Government invoking Clause 3.5.5(v) of the Odisha Public Work Department Code (OPWD Code) – However, said Clause is applicable in a case where the contract is terminated – Here, it is not a case of termination of the contract – Therefore, Clause 3.5.5(v) shall not be applicable at all – Neither the contract nor the OPWD code provides for imposition of penalty while extending the contract – However, in a given case, the State Government might be justified in imposing the penalty while granting the extension but, the contractor must be put to notice that extension of time can be granted on imposition of reasonable penalty – Thus, in the present case, the State was not justified in levying the penalty unilaterally while granting extension of time, without putting the contractor to notice – Levy of penalty while granting extension of time was hence illegal and rightly set aside by the High Court.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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