IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL No. 262 of 1988 With CROSS OBJECT No. 80 of 2010 For Approval and Signature:
HONOURABLE MR.JUSTICE JAYANT PATEL Sd/-
HONOURABLE MR.JUSTICE C.L. SONI Sd/-
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========================================= STATE OF GUJARAT Versus JAISING ARJANBHAI AND CO.
=========================================A ppearance :
MS MOXA THAKKAR, ASSTT GOVERNMENT PLEADER for the Appellant MR GT DAYANI for the Respondent ========================================= CORAM : HONOURABLE MR.JUSTICE JAYANT PATEL and HONOURABLE MR.JUSTICE C.L. SONI Date : 18/07/2012 CAV JUDGMENT (Per : HONOURABLE MR.JUSTICE C.L. SONI)
1. This Appeal is at the instance of the State of Gujarat against the judgment and decree dated 30.4.1987 passed by learned Civil Judge (S.D.), Narol in Special Civil Suit No.46 of 1983, whereby the suit filed by the respondent-plaintiff (hereinafter referred as the 'Contractor') came to be partly allowed and the decree for Rs.14,43,160/- came to be passed against the appellant. The appellant was directed to pay the decretal amount with interest at the rate of 12% per annum till the same is realized. The contractor has preferred the above-referred Cross Objection, claiming Rs.6,84,823/- being dissatisfied with the rejection of some of the claims put forth in the suit.
2. The facts, as could be noticed from the record of the case, are stated as under:-
2.1. The Executive Engineer, Irrigation Project, Junagadh had invited tenders for the work of construction of Amipur (Ghed- Bagasara) Irrigation Scheme and estimated cost for the said project was Rs.1,49,68,176/-. The tender of the Contractor was accepted at Rs.1,37,46,000/-. The work order was issued to the Contractor on 21.6.1978 and the work under the tender was to be completed within three years, i.e. on or before 21.1.1981.
2.2. The agreement was entered into between the parties. The agreement provided inter alia for compensation, to be levied on the Contractor for not adhering to the time bound schedule for the progress of the work, for extension of time for completing the work, for taking of action by the appellant, like rescission of the Contractor, taking back the work and getting it completed through another Contractor, etc.
2.3. The appellant took action under Clause 3-B and Clause 4 of the agreement, on the ground that the Contractor committed breach of the contract by not completing the work within the time limit provided in the contract. However, after the said action was taken, the Contractor filed a suit for recovery of Rs.21,27,886/-, stating therein that it could hardly complete the work of Rs.29 lacs as the appellant did not provide the possession of sand and rubble quarries, the lands were not fully acquired and the site was not handed over fully in time, designs of the structure and designs of afflux band were not finalized, the appellant did not help in procuring diesel though there was a condition to the said effect in the contract. The suit was filed for the following claims:-
Rs.17,64,718/- Loss of profit at 15% on remaining work of Rs.1,17,64,805/-
Rs. 66,485/- Loss suffered towards price escalation due to prolonging of the work.
Rs. 1,50,000/- Security deposit in the form of bank guarantee.
Rs.21,27,886/-
2.4. The appellant resisted the suit by filing written statement at Exh.8 and denied all the allegations made by the Contractor in the suit. On the pleadings, the learned Judge framed the issues at Exh.9 as under:-
“1. Whether the plaintiff proves that the suit contract creates mutual and bilateral reciprocal contractual obligation ?
2. Whether the plaintiff proves that the possession of land and rubble quarries were not given for a long time by the deft ?
3. Whether the plaintiff proves that the deft. Did not acquire the suit land and therefore, did not hand over the site of work in time ?
4. Whether the plaintiff proves that the design of structure and design of afflux and were not finalized upto the time of filing of the suit ?
5. Whether the plaintiff proves that defendant did not help the plaintiff for procurement of diesel as per conditions of the contract ?
6. Whether the plaintiff proves that due to part/full preventions, the plaintiff could only do the work of Rs.29/- lakhs only ?
7. Whether the plaintiff that the defendant committed breach of contract in not performing their contractual obligations ?
8. Whether the plaintiff proves that the time is not essence of the contract ?
9. Whether the plaintiff proves that the time was not extended mutually after expiring of original time limit ?
10. Whether the plaintiff proves that the order of defendant to get the part work done under clause read with clause 3 is illegal and wrongful ?
11. Whether the plaintiff proves that no item-wise programme was fixed by Executive Engineer as per clause 2 of the agreement and therefore was not given by the defendant ?
12. Whether the plaintiff proves that he was not regularly paid and therefore, defendant committed a breach of contract ?
13. Whether the plaintiff proves that the defendant wrongly deducted the due amounts of the plaintiff from R.A. Bill ?
14. Whether the plaintiff proves that there was price escalation in labour wages and materials ?
15. Whether the plaintiff proves that they demanded price escalation and the same was not granted by the plaintiff ?
16. Whether the plaintiff proves that he is entitled for return of security deposit of Rs.66,683/- ?
17. Whether the plaintiff proves that he is entitled for Rs.30,000/- for price of work done and not paid ?
18. Whether the plaintiff proves that he is entitled for Rs.50,000/- for wrongful deductions ?
19. Whether the plaintiff proves that he is entitled for Rs.17,64,718.00 for loss of profit ?
20. Whether the plaintiff proves that he is entitled for Rs.66,485/- towards price escalation ?
21. Whether the plaintiff is entitled for discharges of Bank Guarantee of Rs.1,50,000/- furnished towards security deposit ?
22. What order and decree ?
The above issues are answered as under:-
1. In the affirmative
2. In the affirmative
3. In the affirmative
4. In the affirmative
5. In the negative
6. In the affirmative
7. In the affirmative
8. In the affirmative
9. In the affirmative
10. In the affirmative
11. In the affirmative
12. Does not survive
13. In the affirmative
14. In the negative
15. In the negative
16. In the affirmative
17. In the negative
18. In the affirmative
19. The plaintiff is entitled to claim Rs.11,76,480/-
20. In the negative
21. In the affirmative
22. As per final order below.”
2.5. On behalf of the plaintiff, the Contractor examined one Shri Madhusudan Prabhudas Rajguru at Exh.43, who claimed to be the partner of the Contractor partnership firm. He was cross-examined at length. The appellant examined one Shri Narendrabhai Jayantilal Parekh as its witness at Exh.190, who was at the relevant time Deputy Executive Engineer. The said witness was also cross-examined at length on behalf of the Contractor. They also produced documentary evidence on record.
2.6. On the basis of the evidence on record, ultimately, the learned Judge partly allowed the suit as stated above.
3. Learned Assistant Government Pleader Ms.Moxa Thakkar has submitted that the learned Judge has committed grave error in allowing the claim of Rs.11,76,480/- towards loss of profit. As per her submission, since the Contractor was responsible for committing breach of the contract, by not completing the work under the tender within the stipulated time, it was in fact a case of damages to be recovered from the Contractor. She would submit that from the beginning, the Contractor was very slow in the progress of work. The Contractor had completed only 1/10th of work as against 1/4th of the work which was required to be completed within the time prescribed for completion of the said work. The Contractor was made available not only the site of the land for carrying out the work under the contract but also was made available two quarries, one at Mitty village and another at Bhadar river, still the Contractor did not show any progress in the work. The Contractor was addressed many letters asking him to speed up and complete the work within the time schedule, however unfortunately, the Contractor did not respond to any of the requests made by the appellant. Therefore, the Contractor was not entitled to any claim towards loss of profit. She further submitted that the Contractor is also not entitled to claim Rs.66,485/- towards the alleged loss suffered on account of the price escalation due to prolonging of the work. She would submit that it was the Contractor who was responsible for showing no progress in the work and the Contractor allowed the time period of 3 years to over without showing any interest to complete the work because after taking of the contract and doing some work, the Contractor had realized that if the work would be continued, it would result into suffering damages by it. She further submitted that the fact that the Contractor has laid its claim for loss for price escalation shows that the Contractor would not have made any profit, had the Contractor continued with the work and completed it within the time limit prescribed for completing the work. Therefore, he did not deliberately complete the work. He was therefore, not entitled to any amount on this claim.
3.1. Learned Assistant Government Pleader would further submit that it is the case of the Contractor in the plaint that the contract has become void on or after 21.1.1981 and the Contractor is not bound to carry out further work after 21.1.1981. She has further pointed out from the plaint about issuance of the notice under Section 80 of the Civil Procedure Code on 28.5.1982. In her submission, the Contractor, though asked for extension of time and the appellant though requested the Contractor to try to complete the work as early as possible, thereafter the Contractor has taken clear stand that after 21.1.1981, the Contractor was not bound to carry out further work. She further submitted that the Contractor having based all its claims, on the aforesaid pleadings and had not shown any response to do any work after 21.1.1981 in spite of writing many letters by the appellant, it was a clear case for the appellant to take actions under Clause 3-B and 4 of the agreement and no illegality was committed by the appellant in resorting to the above-said actions. In view of this position, therefore, the learned Judge was not justified in awarding other claims in favour of the Contractor, including loss of profit.
3.2. In reply to the submissions made by learned Assistant Government Pleader, learned advocate for the Contractor Shri G.T. Dayani has submitted that it was the appellant who failed to give possession of the entire land acquired by the appellant for the project in question. He submitted that since the appellant was not in a position to handover the complete site of the land, it was not possible for the Contractor to complete the work. However, whatever site was available, the Contractor could start and continued the work to the extent of Rs. 29 lacs, that too after facing lot of trouble from the side of the farmers. He would contend that in fact, the appellant also did not handover the possession of sand and rubble quarries to the Contractor, because of which, the Contractor faced lot of hurdles in procuring sand and rubble from a distant place. He would further submit that the appellant has also not finalized the designs of structure till completion of the period of the contract. He also submitted that the appellant was not justified in deducting Rs.66,683/- from the RA Bills of the Contractor and, therefore, the learned Judge was justified in granting the claim for the said amount.
3.3. Learned advocate Shri Dayani also strenuously urged that there is an ample documentary evidence on record in the form of revenue record, to establish that the lands which were acquired for the purpose of the project in question continued to remain in possession of the farmers and therefore, it was because of non-availability of the site, the Contractor could complete work of only Rs. 29 lacs, as a result of which, the Contractor suffered loss of profit. He submitted that had full site of the lands been made available the Contractor, the Contractor would have continued the work under the contract within the time limit and would have earned profit as claimed by the Contractor. He therefore, submitted that it was the appellant who had committed breach of the contract and the Contractor was not at all responsible for not completing the work within the time limit. Under these circumstances, the appellant was not justified in taking action under Clauses 3-B and 4 of the agreement against the Contractor. He submitted that since the agreement provided for extension of time, since the Contractor had already applied for extension of time and since without taking any decision on the request for extension of time, the action under Clauses 3-B and 4 of the agreement taken by the appellant was totally illegal. He submitted that at the time of taking action, the Contractor was asked to complete the work, meaning thereby, the contract was still in force till the action was taken. Under the circumstances, since the action of the appellant under Clause 3-B and 4 of the agreement was totally illegal, the action for forfeiting the security deposit and of deducting the amount from the RA bills was totally wrong action.
3.4. He thus urged that the appeal filed by the appellant is required to be dismissed and the claim put forth in the cross-objection by the Contractor is required to be allowed.
4. We may first refer the oral evidence on record. The witness of the Contractor at Exh.43 in cross-examination has stated that the Contractor has started the work after 10 to 12 days from the date of the work order on getting line-out from the Engineer. He stated that whenever drawings, map, specification, etc. were required, the Contractor used to get the same from the Engineer present on the site. He stated that the Deputy Engineer had given line-out for first chenage upto 360 meters. He stated that it is not correct that when the contract was given, design of Ardhan Dam was not ready. However, he came to know about the same thing after sometime. He stated that after the site clearance, the work of digging for C.O.T. upto 360 meters was completed within two months. It has come in his deposition that upto October 1978, the Contractor has completed the work for Rs.11,27,304/-. He admitted that the total work of the tender was of Rs.1,37,00,000/- and out of work required to be carried out in 1/4th period of three years of the contract, only 1/10th of work was carried out. He also stated that the possession of the land was taken by the Contractor directly from the occupiers of the lands. He stated that the possession of the land from village Bhathrot could be taken lastly in the month of October 1978. He further stated that in October 1978, work was completed in the chenage from 360 to 1995 and in the said chenage, digging work for C.O.T. was completed in March 1979. He stated that in December 1979, as per the bill raised, work of Rs.16,55,711/- was over and within these two years, 1/8th of the work of the tender agreement was completed. He stated that such work to the above extent was done because in the chenage from 361 to 1995, the area of Hunterpur village was covered, wherein the work of head regulator and cross regulator and west-viour was done. However, he ultimately stated in his deposition that the said work was not done because of non-finalization of the structural design. He, however, could not say that lands of how many survey number of village Hunterpur were cultivated and which crops were standing on the land. He further stated that under the agreement, sand was required to be taken from Mitty village and Bhadar river. Quarry of Kulra village was not included in the tender and Mitty place was nearer to the place of the project. There was good quality of sand available in Bhadar river. He stated that sand was brought from Kulra village as trucks were not allowed by owners of the agricultural lands to bring sand from Bhadar River. He however admitted that it was for the Contractor to make way for bringing sand on the site. He stated that initially 3 to 5 trucks sand was brought from Bhadar river, but thereafter, because of obstruction created by the land owners, it was not possible to bring sand from Bhadar river. He stated that the Contractor was to carry out the work as per the line given by the Engineer. He also stated that the Contractor carried out the work in Survey Nos.311,322,326, 335 and 334 of Bagasara village. He stated that the lands of Survey number of Amipur village were given but the possession of whose lands was given, he cannot say. He has admitted that he has stated in his chief that the work in chenage No.3390 to 3920 was completed. He stated that by 31.1.1981, work of Rs.24,98,225/- was completed as per R.A. Bill No.26. He stated that as per the agreement, it was responsibility of the department (appellant) to provide diesel. He also stated that on 10.5.1979, the department had given chenage of 9000 to 9750. He stated that he was informed for likelihood of change in the design of the dam but he was never informed in writing about such change. He has stated that he is not aware whether after 3.6.1981, the Contractor had ever done any work. He has stated that whatever work was done till 3.6.1981 as per the accounts drawn, there was no profit made but the Contractor has suffered loss. He has denied that the appellant had given letters about slow progress in the work. He has stated that the Contractor has received letters dated 20.6.1981 and 26.11.1981 about the program of the work and for re-starting the work. He has also stated that the Contractor has received notice dated 7.12.1981 from the appellant and also letter dated 12.2.1982 for starting the work. He stated that the claim for loss of profit is of Rs.17,64,718/-. However, he stated that he is not aware that there was any such condition in the agreement for claiming loss of profit. The above, in short, were important evidence from the cross-examination of the witness of the Contractor.
4.1. From the cross-examination of the witness of the appellant, following important evidence is required to be referred. This witness has stated that it is true that when the work order was given, entire 10 km. long land was not available with the department. He also stated that the work of diversion because of flow of water of river was to be done by the department. He, however, stated that at the adjacent site where the construction was to be made, waste land was available from where it was possible to reach the site and make construction. He stated that even if the lands of 3 survey numbers were not available, construction was possible. He stated that it is true that the land of these three survey numbers were to be utilized for the construction of dam. He stated that though there was scarcity of diesel, but it was not out of the control of the Contractor to obtain diesel. He stated that for the purpose of bringing sand, Mitty and Bhadar quarries were provided in the tender and out of two quarries, one was near to the site of the proposed project and one was away from the site of the project. He stated that the possession of Mitty quarry was obtained by the department on 8.3.1978 and it is not correct that the possession of Mitty quarry was obtained only on 24.11.1978. He stated that it is not correct that the Contractor faced obstruction and difficulties because the work order was given to the Contractor without obtaining possession of the land and without finalizing the designs. He stated that there is a provision for extension of time in Clause 6 and for penalty in Clause No.2 of the agreement. The Contractor had asked for extension of time, vide letter at Exh.90 but whether time was extended or not, he did not remember.
5. It is pertinent to note that this witness has referred many letters addressed to the Contractor asking to expedite and show progress in the work. In the evidence of this witness, it has also come on record that the Contractor had left the work from the month of June 1981 and thereafter, it has never resumed the work. This evidence is not challenged in the cross-examination of this witness.
6. We may, now, refer to some of the relevant letters/ communications out of the letters produced on record. Letter dated 7.7.1978, Exh.119, addressed to the Contractor to show progress in the work. Similarly, letter at Exh.120 dated 30.8.1978, Exh.121 dated 8.8.1978, Exh.122 dated 30.8.1978, Exh. 123 dated 3.10.1978, Exh.124 dated 12.10.1978, Exh.125 dated 9.11.1978 and Exh.126 dated 25.11.1978, wherein it is stated that against the work to be done of Rs.13,74,300/-, the Contractor had done work of only Rs.6,23,790/-. Exh.127 dated 9.11.1978, Exh.128 and Exh.129 are telegram, Exh.130 dated 27.11.1978, Exh.132 dated 18.1.1979, Exh.131 dated 29.1.1979, Exh.134 dated 29.1.1979, Exh.135 dated 18.3.1979 addressed to the Contractor to show progress in the work, as required under the agreement. Only thereafter, the Contractor, vide letter dated 6.4.1979 at Exh.85 addressed to the Executive Engineer, stated that village people were creating obstruction in procuring sand from Mitty village and there was scarcity of water and therefore, necessary progress in the work could not be made by it. There is one another letter of even date Exh.86 addressed to the Executive Engineer stating that the possession of Mitty village quarry was handed over on 24.11.1978 and thereafter also, village people of Mitty village had created lot of obstruction against lifting of sand. There are further letters from the Deputy Engineer at Exh.136 dated 24.7.1979, Exh. 137 dated 5.5.1979, Exh. 138 dated 29.5.1979, Exh.139 dated 2.6.1979, Exh.140 dated 2.6.1979, Exh.141 dated 18.6.1979, Exh.142 dated 20.11.1979, Exh.143 dated 29.12.1979, reminding the Contractor that the Contractor had not done any progress in the work and as against target of work of Rs.54,97,200/-, to be completed on 28.7.1978, the Contractor had completed the work of only Rs.10.94 lac as on 31.3.1979. At this stage, the Contractor addressed a letter dated 18.3.1980 Exh.90 to the Executive Engineer, stating that he had to face small and big obstacles from the village people and with such difficulties, it was not possible to construct dam at Vegli river. It further stated that village people had raised strong objection against taking of sand from Mitty village. It also stated that the place at which the dam was to be constructed, which was of 10.5 km. in the length, where sand and stones were required to be brought from surrounding areas, but because of rain, all activities connecting to the construction on the dam were stopped and there was a scarcity of diesel and because of such scarcity, it was not possible to continue to do work of construction of dam. It was further stated that though it was planned out to start the work and to show progress in the work, but because of non-availability of the labours and diesel for the vehicles, the whole planning had failed. In this letter, it was also stated that its amount of deposit, which was withheld for slow progress in the work, might be released and the time limit of work may be extended by 24 months. There is one more letter written by the Contractor to the Executive Engineer dated 6.8.1980 Exh.92 stating that after the contract was awarded to it, there has been rise in price of diesel, tyre tube, labour, etc. and because of such rise in price of the said commodities, it was not possible for the Contractor to continue the work with the rates at which the contract was taken and if the work is done with the same rates, the Contractor might incur loss. In the said letter, it was requested by the Contractor to bring to the notice of the highest officer of the Government about the rise in the cost/ price of the above-referred commodities. The Contractor also addressed one letter dated 20.10.1980 Exh.93 asking the Executive Engineer to make provision for diesel per week as per its requirement. There are two letters, dated 4.11.1980 Exh.54 written by the Executive Engineer to the Collector to issue necessary permit for procurement of diesel for the Contractor and also letter dated 4.11.1980 Exh.55 addressed by the Executive Engineer to the Manager, Indian Oil Corporation, Rajkot to arrange for supply of diesel, i.e. in the quantity of 9000 Ltrs. per week for the Contractor. By letter dated 25.11.1980 at Exh.94, the Contractor stated that it brought labours, but it was not possible to submit the work in absence of getting line for the work. It, therefore, requested to give line of work so as to start the work. The Executive Engineer has also written letter dated 28.11.1980 to the Mamlatdar, Kutiyana asking him to issue permit in favour of the Contractor for weekly requirement of 10,000 Ltrs. of diesel from any petrol pump near to the site and if it was not possible from the petrol pump near to the site, to issue permit for any other petrol pump in District Junagadh. There is one letter dated 28.11.1980 at Exh.196 from the Superintending Engineer, to the Executive Engineer, stating that the project site was visited by him on 19.11.1980 and again visited with the Executive Engineer on 25.11.1980 and it was discussed with the Chief Engineer and Joint Secretary that no major change in the design was proposed and the Executive Engineer should see to it that line out for the work is given to the Contractor upto the Chainage of 5000 Mtrs. and also permit the Contractor for new earth work as well as for doing remaining work including pitching for the old work. The Contractor has addressed one letter dated 22.12.1980 at Exh.63, to the Executive Engineer, wherein he has stated that the work upto 5000 chainage was done, it had with it ready drainage pipe of 350 Mtrs. and after completion of this work, work of Sundfilter could be taken on hand. In this very letter, it also requested to pass necessary order for the purpose of taking on hand the work of canal outline and control regulator in feeder canal. It is also stated in this letter that work of Ardhan dam between chainage 2200 to 2500 was not done because no diversion from the river was provided. In response to the aforesaid letter, the Executive Engineer wrote a letter dated 30.12.1980 at Exh.64 to the Contractor stating that necessary arrangement and instructions were already given to the Contractor for starting work of canal regulator in feeder channel etc. and the Contractor should do necessary work as per the instructions given at the time of inspection. By letter dated 31.12.1980, at Exh.95, the Executive Engineer wrote to the Contractor stating that though the Contractor had asked for extension of two years, still it was stated that the work could be completed in the month of June 1983 and all necessary technical details were available and there was no question of delay in completing the work. It is also stated therein that necessary instructions for supply of diesel was issued and every time, the department had tried to help out the Contractor for procurement of diesel, still there was no attempt made by the Contractor to get diesel. It is stated that it was not the obligation on the part of the department to procure diesel for the Contractor and if progress in the work was not maintained because of non-availability of diesel, the department would not be responsible. The Executive Engineer, by letter dated 9.2.1981 at Exh.179 drew the attention of the Contractor as regards the provisions of Clause 3-B and Clause 4 of the agreement by pointing out that in spite of several opportunities given to the Contractor, the Contractor did not avail any of such opportunities and take up the execution of the work so as to complete within reasonable time. Attention of the Contractor was drawn to the fact that the work from the Contractor would be taken and given to another Contractor and the Contractor shall be debited with cost of the labours and price of the material and credited with the value of the work done in all respects, in the same manner and in the same rates, as if it had been carried out under the terms of the contract. By letter dated 26.3.1981 Exh.154, Deputy Engineer wrote to the Contractor stating that the work under the contract was totally stopped before many days and in spite of the repeated requests, the work has not been re-started and the work should be immediately re- started so as to show progress in the work. Thereafter, several telegrams, being Exhs. 156, 157, 158, 159, 160 and 161, were sent to the Contractor, requesting it to expedite the progress of work. By letter dated 12.6.1981, Exh.162, the Deputy Engineer wrote to the Contractor that the Contractor had totally stopped the work with effect from 3.6.1981 and requested it to resume the work and immediately show the progress in the work. The Contractor, vide letter dated 2.10.1981, Exh.98, then wrote to the Executive Engineer, pointing out various difficulties being faced by it. In the said letter, it also stated that the lands were not fully acquired and whatever lands which were acquired, the owners of the land were in possession of the acquired lands. It is also stated that because of delay in procurement of sand from Mitty village, it was not possible to do work under the contract properly and there were always objections from the village people of Mitty village. It is further stated that there was scarcity of diesel and it was not at all possible to procure diesel at the time when it was needed and because of such non-availability of diesel, the work could not be done as planned out. It is also stated that if sufficient diesel was made available and if structural design and hydrology as also free board was finalized, then it was possible to work as per the planning. In this very letter, it is stated that because of rise in the price of various goods and also rise in the price of diesel, it was not possible to do work under the old rates. It is categorically stated that the Contractor has incurred huge loss against the investment made by it. By letter dated 7.12.1981, at Exh.178, the Executive Engineer issued notice to the Contractor under Clause 4 read with Clause 3-B of the agreement, stating therein that the progress of work in the reach between Ch. 7530 Meters to 10530 Mtrs. is particularly bad. In fact, no execution is done till date in the said reach. It is, therefore, proposed to take action under the said Clauses and therefore, notice is issued to the effect that the department will be constrained to act under the above said clauses if the Contractor fail to satisfy the department within the stipulated period of 10 days as regards the capacity and intention of the Contractor to take up the execution in the reach and complete it within reasonable time. Ultimately, by letter dated 7.2.1982, at Exh.69, the Executive Engineer informed the Contractor that he has been constrained to act under the provisions of Clause 4 of the contract and to withdraw the work falling in the reach between Ch. 7530 to 10530 Mtrs. for execution under the provisions contained in Clause 3-B of the contract as the Contractor has not availed opportunity to prove its intention to take up execution in this reach and complete within the reasonable time. It is also informed to the Contractor that the Contractor will be debited with cost of labour and price of the material for getting the said work done through another Contractor.
7. The Executive Engineer addressed letter dated 19.5.1982 at Exh.180 to the Contractor, stating that even if the time limit was to be taken upto 30.6.1983, then also, work of more than Rs.13,26,664/- could not have been executed by the Contractor and in fact, no activity on the site was done by the Contractor since June 1981. Therefore, it was proposed to levy compensation at the rate of 100% per day with effect from 3.6.1981, i.e. the date of stopping of the further execution of the work by the Contractor. In the said letter, the Contractor was given one more opportunity to still execute the work and to save itself from consequences of paying extra expenditure incurred by the department. The Contractor, however, issued notice under Section 80 of the Civil Procedure Code to the State Government through Chief Secretary, calling upon the State Government to pay Rs.27,26,252/- along with 18% interest, failing which, it was stated that the Contractor would be compelled to file civil suit for recovery of the above sum. Thereafter, the Contractor filed Civil Suit No.117 of 1982 for declaration, that the recovery of Rs.35,64,702/- from the bill of the Contractor is illegal and also to declare that the demand of the Bank Guarantee of Rs.1,50,000/- is also illegal and for permanent injunction, restraining the State authorities from executing and operating the order issued by the Executive Engineer for the aforesaid purpose.
8. From the rival contentions and from the evidence on record, two main points arise for our consideration:-
(1) Whether the Contractor was justified in abandoning and leaving the work before contract period was over and not doing any work after the contract period was over though several opportunities were given to the Contractor ?
(2) Whether the Contractor having left the work and having not done any work after the period of the contract was over though having asked for extension of time and though was repeatedly called to continue and complete the work even after contract period was over, is entitled for compensation on the ground of loss of profit ?
From the communications on record, it clearly appears that from 2.5.1978 onwards till 6.4.1979, the Contractor had not responded to any of the letters addressed by the Executive Engineer and the Deputy Executive Engineer to show progress in the work and in fact had not made any serious grievance about non-availability of the site.
Thereafter, on 18.3.1980, the Contractor made grievance about non- availability and difficulty in procuring sand from Mitty village and of diesel. It is also pertinent to note here that sand was to be procured from different quarries, one at Mitty village and another at Bhadar river. The Contractor had not made serious efforts to procure the same from Bhadar river. As far as procurement of diesel is concerned, it was for the Contractor to make its full efforts to get diesel required for the project. Still the Executive Engineer and the Deputy Executive Engineer gave full support to the Contractor by writing letters to the Collector, Mamlatdar and Indian Oil Corporation so that the Contractor may not get any difficulty in getting diesel. For several times, the Contractor was put to notice that he had done the work to a very meagre extent as against the requirement of completing the work within the time limit. Still, the Contractor did not show any interest in expediting the work. It may be that the Contractor might have faced difficulty in procuring sand from Mitty village as also in procuring diesel but, from various letters addressed by the Executive Engineer and Deputy Executive Engineer, it clearly appears that for long time, the Contractor did not show any interest in showing progress in the work. In fact, it is the case of the Contractor itself that full site of the land acquired could not be made available. However, it was not that the Contractor could not have continued the work under the contract with the site already available. From two communications of the Contractor, two things clearly have come out, one is that the Contractor had already decided not to do any work after expiry of the period of the contract i.e. 21.1.1981 and second is about demand of increase/ rise in the price of the goods, diesel, etc., for which it wrote for change of rates in the original contract. The Contractor has clearly stated in the communication that it has already incurred loss because of the rise in the price of the goods and diesel and it was not possible for it to continue with the same rates under the contract. The Contractor wanted in fact to get rise in the rates already fixed in the contract for completing the work of the dam. Therefore, it clearly appears that the Contractor had, in fact, long before the expiry of the contract period, intentionally not shown any progress in the work and virtually, left the work and after expiry of the period of the contract, i.e. from 21.1.1981, the contractor had not executed any work, which is found from the evidence, and declaration made in the plaint. In fact, even after the date of the expiry of the contract, the Contractor was given sufficient opportunity to still continue with the work so as to see that the work under the contract is completed. The Contractor did not avail of such opportunity. Thus, we are of the opinion that it was the Contractor who was responsible to leave and abandon the work without genuine reasons and had in fact declared its clear intention not to do any work after 21.1.1981. Such conduct and attitude on the part of the Contractor warranted the action to be taken by the appellant under Clause 4 and Clause 3-B of the contract. We do not find that the appellant has committed any error in resorting to take such action. We are of the opinion that the learned Judge has committed error in reaching to the findings that the Contractor could not complete the work because of non-availability of the site, sand, etc. and therefore, the Contractor suffered loss of profit.
9. In our view, to a large extent, the Contractor was responsible for not completing the work within the time limit of the contract and thereafter, within the several opportunities given to the Contractor. Under these circumstances, the Contractor was not entitled to any compensation for loss of profit.
10. We have, however, given our thoughtful consideration to the other claims of the Contractor. One of such claims is non-refund of security deposit of Rs.66,683/-, which was deducted by the appellant from R.A. bill. Clause-3 in the Contract is in respect of forfeiture of the security deposit, which reads as under:-
“Clause-3: In any case, in which under any clause or clauses of this contract, the contractor shall have rendered himself liable to pay compensation amounting to the whole of his security deposit (whether paid in the sum or deducted by installments) or in the case of abandonment of the work owing to serious illness or death of the contractor or any other cause, the Executive Engineer, on behalf of the Govt. of Gujarat shall have power:-
(a) to rescind the contract (of which recession notice in writing to the Contractor under the hand of the Executive Engineer shall be conclusive evidence) and in that case the security deposit of the Contractor shall stand forfeited and be absolutely at the disposal of the Government.”
Thus, the above Clause of the Contract clearly provides that for forfeiture of the security deposit, prior notice and recession of the contract is must. Learned Judge in his judgment recorded finding of fact that security deposit is not forfeited by the appellant. Learned Judge has also recorded that the appellant has not proved any loss or damage and no set-off or counter claim is made by the appellant in the suit and in absence of such loss or damage proved by the appellant and in absence of set-off or counter claim laid by the appellant, the security deposit cannot be forfeited. We, therefore, find that deduction of Rs.66,683/- of security deposit from R.A. bill, which amounted to non-refund of the security deposit, was contrary to the terms and conditions of the contract. Since the appellant had not exercised the powers under Clause-3 of the contract, the appellant was not justified in deducting the amount of security deposit from R.A. bill of the Contractor. We, therefore, hold that the Contractor would be entitled to refund of security deposit amount of Rs.66,683/-. So far as the claim of Rs.50,000/- for wrongful deduction is concerned, since learned Judge has recorded findings, with which we concur that since the department of the appellant did not direct to use excavated material for feeder channel in the work of earthen dam and since the appellant could not point out clear condition from the agreement to use such material for the work of earthen dam, the Contractor could not be found at fault for utilizing such excavated material for spoil Bank. Under these circumstances, we do not find any error in the judgment for making the plaintiff entitled to Rs.50,000/- for wrongful deduction. Such claim, therefore, is required to be allowed. So far as the claim of Rs.1,50,000/- is concerned, the same was in respect of furnishing bank guarantee towards security deposit. Since it was only a bank guarantee, there was no question of refund of the amount equivalent to bank guarantee to the Contractor but the bank guarantee would come to an end. However, if the bank guarantee was already encashed, the Contractor shall be entitled to refund thereof. Thus, the Contractor shall be now entitled to Rs.66,683/- of security deposit and Rs.50,000/- which was wrongly deducted by the appellant, total of them would come to Rs.1,16,683/-.
11. In view of the above, the appeal is required to be partly allowed. Accordingly, it is partly allowed. We reverse the judgment and decree in so far as awarding the amount of Rs.11,76,480/- towards loss of profit to the Contractor is concerned and confirm the judgment and decree in so far as the claims of the Contractor for refund of the security deposit of Rs.66,683/- and for refund of Rs.50,000/- wrongly deducted by the appellant is concerned. The respondent-Contractor shall be now entitled to recover Rs.1,16,683/- with interest at the rate of 12% per annum till the same is realized. The Contractor shall also be entitled to refund of bank guarantee amount of Rs.1,50,000/- with also interest at the rate of 12% per annum, provided the bank guarantee was encashed by the appellant towards security deposit. Since the First Appeal is partly allowed, Cross Objection shall stand dismissed. Decree shall stand modified accordingly. The parties shall bear their own cost.
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(JAYANT PATEL, J.) omkar Sd/-
(C.L. SONI, J.)