The State Of A.P. vs P.N.

Srinivasulu Reddy on 1 March, 2021

JUDGMENT :

This is a regular appeal preferred under Section 96 CPC against the decree and judgment in
O.S.No.31 of 2005 of the Court of the learned Senior Civil Judge, Kovur, Nellore District.

2. The defendants are the appellants. The plaintiff is the respondent.

3. The respondent laid a claim against the appellants for Rs.5,60,564.96 ps. with future interest at
24% p.a. from the date of the suit till realisation and for costs.

4. This dispute is relating to a work contract which was in respect of special repairs to the road
viz., K.M.13/4 to 17/4 via Gandavaram, Peddaputhedu and Peyyalapalem. An agreement was
entered into between the respondent and the appellants when the respondent became lowest
tenderer for value of Rs.10,73,702/- for the estimated contract value of Rs.9,79,771/- at 9.59%
excess, based on SSR 97-1999. It was accepted by the 2nd respondent. The work was to be
completed within six months of handing over the site and as per the work agreement, the site was
handed over on 19.09.1998 on account of which the work was to be completed within six months
therefrom by 18.03.1999. Breach of this contract is alleged by both the parties in performance of
the terms and conditions thereunder which has lead to this action by the respondent against the
appellants.

MVR,J A.S.No.15 of 2009

5. The specific case set up by the respondent in the plaint was as under:

(a) The appellants failed to hand over a specific work site to the respondent after delineating the
parameters of the work drawing the center point and failed to provide a sketch to enable him to
plan his work within the time frame settled in the agreement. Therefore, it was a fundamental
breach and the site and the sketch were settled only a month later which lead to delay in
execution of the work, making the respondents to keep the labour continued, engineering
foreman, work materials and workmens' sheds idle. The respondent did inform the same in his
letter dated 04.04.2002 marking copies of the same to the 2nd appellant. By 20.02.1999 the
respondent executed the work worth Rs.1,91,328-21 ps., which was not immediately paid when
due and it was paid in three different instalments. Though the actual work turned out was worth
Rs.2,51,000/-, M-book entries were maintained only to a tune of the above sum mischievously
and thus defrauded the respondent of Rs.59,672/-. However, the appellants determined the
contract on 30.01.2002 under clause 60(A) of the P.S. to APDSS unlawfully and without
justification.
(b) Seven claims in all were raised by the respondent on account of the interest payable for
delayed payments even though the appellants were required to make such payments fortnightly
or monthly of submission of each bill, at the rate of 24% p.a. Second claim pertains to the
amount withheld and pooled by the appellants of Rs.14,350/- towards further security deposit
which was due for MVR,J A.S.No.15 of 2009 payment on 01.12.1999 on which he is also
entitled for interest at 24% p.a. from 01.12.1999 to 31.03.2005 of Rs.14,063/- and in all
Rs.28,413/-. Third claim is in respect of Rs.59,672/- that was not paid to the respondent for the
work done, which is payable with interest at 24% p.a. and thus in all Rs.1,10,989-92 ps. Claim
no.4 is in respect of overheads for establishment, salaries etc., in maintaining site office as well
as regular office with interest thereon, in all Rs.1,41,504/- till date of the suit. Fifth claim is in
respect of anticipated loss of profit at the rate of Rs.1,41,504/- computed at the rate of 15% on
the total value of the contract. Sixth claim relates to retention of earnest money deposit liable to
be repaid with interest and in all Rs.43,000/-. Seventh claim is for Rs.50,000/- for unjust
determination of the contract.
(c)Thus, the respondent claimed the relief against the appellants and to pass a decree in his
favour.

6. The 3rd appellant filed a written statement opposing the claim of the respondent adopted by
the appellants 1 and 2.

(a) The specific contention of the appellants in the written statement was that the site was handed
over to the respondent on the date of the agreement dated 19.09.1998 and that the work turned
out by the respondent was for Rs.1,91,328/- and not for Rs.2,51,000/-. They further contended
that after executing the work to that extent the respondent abandoned it, without attending
further. They further contended that the respondent had carted material for remaining work of
Rs.59,672/- which was understood by MVR,J A.S.No.15 of 2009 the department bona fide that
the respondent would complete the work. Therefore, according to the appellants, proposals were
sent for extension of time mentioning the work done for Rs.2,51,000/-. It was the plea of the
appellants in the written statement that in stead of carrying out such work, the respondent had
taken back the material, with a mala fide intention, and that taking advantage of the proposals so
forwarded, the respondent intended to make a gain. They further contended that the respondent
was paid Rs.1,51,826/- after deductions as per the agreement.

(b) The appellants further stated in their written statement that the respondent delayed the
commencement of work for no reason, failed to maintain rate of progress as per the agreement
and thereafter who continued his work at a very slow phase. They further stated in the written
statement that by the end of October, 1999 i.e. six months beyond contract period, he could
execute the work worth of Rs.1,91,328/- as against the contract value of Rs.10,73,702/- and that
on the applications of the respondent time was extended upto 31.10.2000 in the first instance and
later upto 28.03.2002. They further stated in the written statement that after receiving the amount
as aforestated, with a mala fide intention the respondents stopped the work on which the 3rd
appellant issued notices on 10.10.2000, 16.11.2000, 09.01.2001 and 10.07.2001 instructing to
complete the work, in vain and therefore, the 3rd appellant had to terminate the work on
30.01.2002 as per the agreement. Thus, the appellants denied the case of the respondent.

MVR,J A.S.No.15 of 2009

7. On the pleadings, the learned trial Judge, settled the following issues:

"1. Whether the plaintiff is entitled for recovery of suit amount as prayed for?
2. To what relief?"

8. At the trial, the respondent examined himself as P.W.1 and relied on Ex.A1 to Ex.A16 in
support of his claim. The then Executive Engineer, Roads & Buildings Department, Kavali,
examined himself as D.W.1 on behalf of the appellants and they relied on Ex.B1 to Ex.B19.

9. Considering the material and evidence, the learned trial Judge held that the claim of the
respondent is true and correct and that the appellants committed breach of contract. Accordingly
the suit was decreed holding both the issues in favour of the respondent and against the
appellants.

10. Sri P. Raj Kumar, the learned Government Pleader for Appeals, and Sri V.Tilak, learned
counsel for Smt. C. Vani Reddy, learned counsel for the respondent, addressed arguments.

11. Now, the following points arise for determination:

1. Whether the respondent is entitled for damages as claimed and if the appellants committed
breach of contract in question?
2. To what relief?
MVR,J A.S.No.15 of 2009 POINT No.1:
12. The burden is on the respondent to establish his claim to the effect that he could not complete
the work contract of repairing Madras-

Calcutta road in between K.M.13/4 to 17/4 on account of failure of the appellants to abide by its
terms and permitting to execute this work within the specified time frame.

13. Admittedly, six months time in between 19.09.1998 to 18.03.1999 was not adhered to, in
completing this work. The contract was also terminated on 30.01.2002 by which date the
respondent had turned out only 0.19% of estimated work under this contract. Out of value of this
contract of Rs.10,73,702/-, he carried out the work worth Rs.1,91,328/- according to the
appellants.

14. The contention of the respondent is that the work site in question was not handed over to him
as stipulated on the date of the agreement viz., 19.09.1998. Ex.A1 (a copy of which is Ex.B10) is
this agreement. There is a certificate as a part of articles in agreement in Ex.A1 to the effect that
on 19.09.1998 the site was handed over to the respondent. This certificate bears the signature of
the respondent admittedly. There is also a plan as a part of Ex.A1 agreement locating the site of
this work.

15. It is the contention of the appellants that in view of handing over the site on 19.09.1998 itself,
the version of the respondent that there was delay in handing over the same is not correct. Their
contention further is that having regard to the nature of this work, a sketch with specifications
need not be supplied drawing a center point. Their MVR,J A.S.No.15 of 2009 contention is that
the plan, which is part of Ex.A1, is sufficient and it was very much available for the respondent
to commence the work w.e.f. 19.09.1998 itself.
16. Rate of progress is also specified in Ex.A1 agreement, whereby 30% of the work should be
completed within two months, 70% by next four months and 100% or entire work to be
completed within six months. This part of Ex.A1 agreement was also signed by the respondent.

17. Time was agreed to be the essence of contract under this agreement, which fact the
respondent admitted as P.W.1. The very fact that the contract came to be terminated on
30.01.2002 with payments made in three instalments in between, according to the version of the
respondent from 01.12.1999 to 28.02.2000, indicated that the time schedules so fixed under
Ex.A1 were not adhered to. Extension of time was being granted either at the request of the
respondent or unilaterally by the appellants.

18. Ex.B1 dated 01.11.1999 and Ex.B2 dated 20.12.1999 were the letters of the respondent
whereby he sought extension of time and with due recommendations of the Assistant Executive
Engineer and Deputy Executive Engineer, the 3rd appellant apparently permitted these
extensions. Admittedly the respondent did not complain in Ex.B1 and Ex.B2 of the delay in
handing over the site or failure to hand over appropriate sketch for commencing the work. It is
further to be noted that both these extensions were sought long after the due date in terms of
Ex.A1 for completing the work. The respondent as admitted by him in MVR,J A.S.No.15 of
2009 cross-examination for the appellants could fill up the pits on the road forming one layer
with metal.

19. Ex.A4 is the letter dated 30.01.2001 whereby the respondent sought extension of time till
30.04.2001 to complete this work. The reasons assigned therein were that material was not
available, delayed payments and his ill-health. Though this letter was addressed to the 3rd
appellant by him, it was returned by the 3rd appellant on 31.01.2001 directing to forward through
proper channel and by means of a proforma. Ex.A-5 is another letter of the respondent citing
similar reasons as in Ex.A4 requesting for extension of time till 28.03.2002. It was forwarded by
the Executing Engineer, Kavali i.e. the 3rd appellant to the 2nd appellant along with a letter
dated 20.09.2001 with necessary proposals.

20. However, by Ex.A7 letter dated 30.01.2002 the respondent was informed by the 3rd
appellant that the contract stood terminated, as, in spite of granting time till 28.03.2002, he did
not resume the work. It was stated in this letter that the respondent did not come up with any
action to proceed with the work and finding that there was no hope of continuing the work, it
was stated in this letter that in terms of clause 60(a) P.S. to APSS, the contract was determined
forfeiting EMD etc. A specific reference is made in Ex.A7 that the respondent completed only
work worth Rs.1,91,328/- against the contract value of Rs.10,73,702/-.

21. The respondent addressed Ex.A2 letter dated 30.01.2002 referring to his request for
extension of time, necessary assistance from the department to complete this work and for
payment for the work done. As seen from Ex.A3 postal acknowledgment it was served on the 3rd
MVR,J A.S.No.15 of 2009 appellant. Though it is disputed on behalf of the appellants,
producing Ex.A3 is sufficient to offer proof of service on the appellants.

22. Ex.B3 is the copy of the letter of the respondent dated 06.02.2002, whereby he requested to
extent time for performance, which was not responded to, while further requesting for payment
of the amount due. He also complained that the 3rd appellant was not extending cooperation in
this process and that another contractor under NABARD scheme was handed over the site from
K.M.13/4 to 17/4 for execution of the work. He also requested in this letter to pay the bills for
the work done by him including the deposits. In response to Ex.B3, Ex.B4 letter dated
25.02.2002 was addressed by the 2nd appellant to the respondent referring to the circumstances
under which the contract was terminated and also leading to forfeiture of EMD and other
deposits. A reference is also made as to slow progress of work, extension of time granted for
completing this work and imposing a fine of Rs.1,000/- for this slow progress on account of
Ex.B16 letter of Assistant Engineer,Alluru, dated 29.01.2002.

23. Ex.A10 suit notice was issued by the respondent setting out similar claims made in the plaint
to which a detailed reply was issued by the 3rd appellant in Ex.A18 dated 06.05.2005 (After
institution of the suit).

24. Ex.A14 is the letter of the respondent dated 04.04.2002 mainly questioning the action in
determination of the contract, requesting to set aside the same by the 2nd respondent.

25. It is thus the contention of the respondent that the process of determination of the contract is
illegal and when time was sought to be MVR,J A.S.No.15 of 2009 extended till 28.03.2002, its
determination before hand by 31.02.2002, upon handing over a part of the work site to another
contractor Sri Ch.Rammohan Reddy under NABARD scheme illegally, justified his claim.

26. The main claim of the respondent is in relation to extent of work carried out by him for
Rs.2,51,000/-, which the appellants considered at Rs.1,91,328.21 ps. The basis to support this
claim is the proposals forwarded for extension of time as seen from Ex.A6. The proforma to
accompany the proposal for extension of time in Ex.A6 mentioned value of work done during the
extended period at Rs.2,51,000/- and that value of the work to be done at Rs.8,22,702/-. This
proforma was signed by all the concerned to this contract viz., Executive Engineer, R&B,
Kavali, Deputy Executive Engineer, R&B, Kovur and Assistant Executive Engineer, R&B,
Kavali. It was apparently forwarded to the 2nd appellant. Undisputedly, the Ex.B5-M-Book
maintained for this work with reference to its entries-Ex.B6 to Ex.B9 recorded the worth of the
work done at Rs.1,91,328.21 ps. The contention of the respondent in this context is that entries in
M-book were mischievously made suppressing the work done worth Rs.59,672/-.

27. The contention of the appellants in this respect is that the figure so mentioned of
Rs.2,51,000/- in Ex.A6 was only a proposal and it did not reflect the actual work carried out by
the respondent. They also relied on the statement of the respondent in cross-examination as
P.W.1 in this context that M-Book records the actual work turned out and that he also signed in
M-book to that effect. He denied a suggestion of the appellants that he did not complete the work
for Rs.2,51,000/- and except to the extent stated above as recorded in Ex.B5 M-book. He also
denied MVR,J A.S.No.15 of 2009 the suggestion that the contents of Ex.A6 were in anticipation
that he would complete the work to a tune of Rs.59,672/- further.

28. Ex.A6 is a part of intra-office communication. The manner of securing it by the respondent
was seriously canvassed at the trial questioning its authenticity, as seen from the suggestions to
P.W.1. Nonetheless, either in the written statement or at the trial, its contents are not as such
disputed. It is a communication of the appellants. The 3rd appellant then in office examined as
D.W.1 also admitted the contents of Ex.A6 in this context, though sought to explain in the
manner stated in the written statement, being only a proposal. At the same time, he stated
referring to Rs.2,51,000/- in column-12 of Ex.A6 that it was on account of the mobilisation of
the work. But, it is not substantiated by the contents of Ex.A6 itself. D.W.1 further went to the
extent of feigning ignorance of the defence set up by the written statement in this context.

29. In the circumstances, having regard to the contents of Ex.A6 which is not or cannot be
disowned by the appellants, value of the work till then completed by the respondent at
Rs.2,51,000/- has to be accepted. Want of M-book entries for Rs.59,672/-in this context, cannot
be a reason to deny the claim of the respondent. Though the respondent has attributed that this
amount was mischievous omission in M-book, it is for the appellants to explain. Explanation so
offered by them at the trial including in their pleadings neither is acceptable nor can be believed.
Therefore, this version of the respondent stands and the appellants are bound to make good this
amount of Rs.59,672/-.

MVR,J A.S.No.15 of 2009

30. The respondent has claimed interest at 24% p.a. whenever he received any payments or
which according to him are payable in this case. Not only that rate of interest at 24% p.a. is on
high side but also for the reason that Ex.A1 itself clearly stipulated in clause 15.1.7 that the
contractor is not entitled for interest. This part of all the claims cannot be permitted. On account
of it, the first claim for payment of interest at 24% p.a. on delayed payments, when he received
Rs.1,51,280/- in three different instalments, could not have been granted, by the trial Court.

31. In respect of the further security deposit withheld, when payments were made by the
appellants of Rs.14,350/- on account of the termination of the contract, the respondent is entitled
to receive the same.

32. Claim No.3 for Rs.59,672/- for the reasons stated is found proper and hence rightly the trial
Court permitted the same.

33. Claim No.4 could not have been permitted for want of evidence. There is absolutely no
evidence from the appellants in this context with justifying material. The claim of this nature
cannot be granted for mere asking without offering acceptable proof. Therefore, it should be
rejected.

34. Claim No.5 relates to anticipated profits and on account of the anticipated loss. There is
absolutely no justification for the respondent to make this claim. He had created a situation by
defaulting to perform his part of the contract to a major extent. He could turn out only 0.19% of
the work that too when it related to a road work, for effecting repairs in a rural setting, this
inaction on the part of the respondent assumed greater MVR,J A.S.No.15 of 2009 significance.
He cannot imagine getting such profit of 15%, even without executing the work properly. He
cannot take advantage of the lapse committed by him for this purpose. Therefore, this claim
should necessarily be rejected.
35. Claim No.6 is in respect of refund of earnest deposit of Rs.25,000/-. Though the appellants
stated that in view of determination of the contract as is stated in Ex.A7 letter followed by
another communication of Superintendent Engineer in Ex.B4 and Ex.B7 dated 25.02.2002, it
cannot be a justifiable stand. EMD was the amount of the respondent and there cannot be a
unilateral appropriation of this amount by the appellants forfeiting to the Government. Therefore,
the respondent is entitled for this amount.

36. In respect of Claim no.7, there is absolutely no material to hold that the respondent is entitled
for damages for the alleged unjust determination of the contract.

37. Therefore, basing on the material, the respondent is entitled for Rs.99,022/- only in this case.

38. The learned trial Judge, as seen from the tenor of the judgment placed burden on the
appellants to prove their stand. When it is the respondent, who had approached the Court setting
out a specific case and claim, the burden in terms of Section 101 of the Evidence Act is on him.
The appellants cannot be called to prove something in negative. Consideration of this matter by
the learned trial Judge, is rather improper and reasons offered in judgment under appeal are
difficult to sustain or MVR,J A.S.No.15 of 2009 support. Therefore, interference is required to
the extent stated above while rejecting the part of the claim of the respondent.

39. Sri V. Tilak, learned counsel for the respondent tried to justify the reasons assigned in the
judgment of the trial Court and in this context relied on Kailash Nath Associates Vs. Delhi
Development Authority1. It is a case of application of Section 74 of the Contract Act.
Nonetheless since EMD is directed to be refunded, contentions advanced in this context need not
have significance.

40. The learned counsel for the respondent also contended that grounds have to be raised in the
memorandum of appeal and that the learned Government Pleader addressed arguments without
raising such grounds. Conservator of Forests Nizamabad Circle, Nizamabad and Ors. vs. K.
Sridhara Reddy2 is relied on by the learned counsel for the respondent in this respect. When the
appeal is presented in terms of Section 96 CPC and when this Court is considering this appeal
not only as a last Court of fact but also in terms of law, it is open for the appellants to canvass on
all such issues relating to disputed facts and law. Therefore, when a re-appraisal of the material is
sought on behalf of the appellants, the same cannot in any manner be injuncted to.

41. The respondent is entitled for interest on the amount arrived at as stated above from the date
of the decree till realisation at 9% p.a. Thus, this point is held.

. (2015)4 SCC 136 . AIR 1968 AP 198 MVR,J A.S.No.15 of 2009 POINT No.2:-

42. In view of the findings on point no.1, this appeal is allowed in part as indicated above.

43. In the result, the appeal is allowed in part, decreeing the suit for Rs.99,022/- only with
proportionate costs thereon throughout and with future interest at 9% p.a. on Rs.99,022/- from
the date of the decree of the trial Court viz., 21.02.2008 till realisation against the appellants.
Rest of the suit claim is dismissed and without costs. If the amount withdrawn by the respondent
as per orders in A.S.M.P.No.2129 of 2009 dated 04.12.2009 is more than the decretal amount
now granted, the appellants are entitled for recovery of the same from him in the same
proceedings by executing this decree and for this purpose no separate suit is required to be filed
by the appellants against the respondents.

As a sequel, pending miscellaneous petitions, if any, stand closed. Interim Orders, if any, stand
vacated.

________________________ JUSTICE M.VENKATA RAMANA Dt:01.03.2021 RR MVR,J

60© Clarification
P.S. 60. Delays in commencement or progress or
neglect of work and
forfeiture of earnest money, security deposit and
withheld amounts :—(a) Time shall
be considered as of the essence of the contract. If, at
any time the Executive Engineer
shall be of the opinion that contractor is delaying
commencement of the work or violating
any of the provisions of the contract or is neglecting or
delaying the progress of the work
as defined by the tabular statement “Rate of progress” in
the “Articles of agreement”, he
shall so advise the contractor in writing and at the same
time, demand compliance. If the
contractor neglects to comply with such demand within
seven days after receipt of such
notice, it shall then, or at any time thereafter, be lawful
for the Executive Engineer to
determine the contract, which determination shall carry
with it the forfeiture of the
Security deposit and the total of the amount withheld
under Clause 68 below, together
with the value of such work as may have been executed
and not paid for, or such
proportion of such total sums, as shah be assessed by
the Executive Engineer.
[However, any authority higher in rank than the
Executive Engineer may, in his
absolute discretion, waive or modify any penalty or
forfeiture imposed by the Executive
Engineer, under the provisions of the clause].
[Added by G.O.Ms.No. 1007, Tr.Roads & Blds.(C1)
Dept., Dt. 5-11-1976]
[(b) If, however, the Executive Engineer notwithstanding
the failure of the
contractor to comply with the demand referred to in sub-
clause (a) of this clause or
failure to maintain the “Rate of Progress” specified in the
“Articles of Agreement” plus
any extension of time that may have been allowed to the
contractor as defined in Clause
59, shall permit the contractor to proceed with the whole
or part and continue and
complete the whole or such part of the work, such
permission shall not be deemed to be a
waiver in any respect by the Executive Engineer of the
right of forfeiture under this
clause:
Provided however that any such forfeiture under this
sub-clause shall not exceed 5
per cent of the total of the contract amount:
Provided however that any authority higher in rank than
the Executive Engineer
may in his absolute discretion waive or modify any
penalty or forfeiture imposed by the
Executive Engineer under the provisions of this clause].
[Amended by Memo No. 972, Codn./74-5, P.W.D., Dt.
18-9-1974]
(c) It shall be a further right of the Executive Engineer,
under this clause, at any
time the “Rate of Progress” in the agreement is not
maintained, to give any part of the
work to any other contractor at his discretion, in order to
maintain the “Rae of progress”
upon the completion of that part of the work that is
withdrawn. the Executive Engineer
shall certify the amount of expenditure incurred by the
department for getting it
completed by another contractor or contractors. Should
the amount so certified be less
than the amount which would have been due to the
contractor on the completion of that
part of the work by him, the difference shall not be paid
to the contractor. [Should,
however the former exceed the latter, the difference shall
be recovered from the
contractor by the Government, provided however that
such a recovery shall not exceed
5% of the total contract amount.
[Subs. by G.O.Ms.No. 140, Tr.R & B(B. III), Dept., Dt. 1-
7-1992]
[Note :—The contractor who makes a standing security
deposit of Rs. 1,00,000
(Rs. one lakh) with the Chief Engineer under whom he
wishes to tender
Date of commencement, completion, delays, extensions,
etc. 75
for works is eligible for concessional rates of Earnest
money deposit and retention from
bills. However, for the purpose of forfeiture under the
above clause, security deposit will
be reckoned at the normal rate, assuming that there is
no standing security and not at the
concessional rate].
[Amended by G.O.Ms.No. 471, Tr., R.&B. (C) Dept., Dt.
7-10-1983]
Clarification
Execution of Balance work after determination of
Contract under
Clause 60(c) of P.S. to A.P.D.S.S.
[Memo.No. 1778/C1/78-18, Tr.&R.B. (CI) Dept.. Dt. 10-8-
1981]
Clarification has been made as to the mode of execution
of balance Work and the
rate of which it may let out.
It is clarified that the Executive Engineer should have the
right to allot the balance
work on nomination to any other contractor at his
description in order to maintain the rate
and progress. No tenders need be invited so long as the
Executive Engineer can get the
balance work executed satisfactorily at the rate in the
agreement of the original
contractor. If the Executive Engineer is, however unable
to find a contractor to execute
the balance work at the original agreement rate, he shall
call for tenders at short notice
and obtain realistic rates. If the work so covered out and
completed by the other
contractor or contractors involves any extra cost, the
difference shall be received from the
original contractor under Clause 60(c) aforesaid
provided, however, that such recovery
shall not exceed 5% of the total finished contract