In a suit for damages, the plaintiff is required to prove (1) the existence of a concluded contract between the parties: (2) there is clear breach of terms and conditions of the contract by the defendant; (3) that breach on the part of the defendant has caused certain losses to the plaintiff contractor, giving rise to a claim to sue for damages; (4) proving the actual extent of losses suffered by the contractor directly attributable to the breach of the terms and the clauses of the contract by the employer; (5) quantifying the damages and most importantly by mitigation of damages that is to say, a person claiming damages to claim only such extent of damages, which are actually suffered as an inevitable direct consequence of the breach of contract by the defendant, even after the plaintiff had taken all possible prudent, steps to minimize the extent of losses, it is only if the plaintiff establishes the actual quantum of damages on the basis of the above principles, a. suit for damages can be decreed by courts and not otherwise.
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
Appellants: Venkatesh Construction Co. a Proprietary Concern rep. by its Proprietor V. Venkatesh
Respondent: Karnataka Vidyuth Karkhane Limited (Kavika) an Undertaking of Govt. of Karnataka rep. by its Chairman and Managing Director
Respondent: Karnataka Vidyuth Karkhane Limited (Kavika) an Undertaking of Govt. of Karnataka rep. by its Chairman and Managing Director
D.V. Shylendra Kumar and N. Ananda, JJ.
Citation: 2011(1)KarLJ665, 2010(3)KCCR2265
1. These two appeals one by the plaintiff in O.S. No. 11037 of 1993 and the other by the defendant in the same suit are directed against the Judgment and decree dated 19.04.2003 on the file of the XXXI Additional City Civil Judge. Bangalore.
2. The stilt was for recovery of a sum of rupees thirty lakhs with costs and interest from the defendant.
3. The suit claim was resisted. The parties went to trial and the trial court on framing relevant issues has decreed the suit in part allowing the claim for a sum of rupees thirty lakhs upto Rs. 3,23,000/- and the trial court also allowed interest at 12% per annum from the date of the suit till the date of realization.
4. It is against this Judgment and decree, both the plaintiff and the defendant are in appeal before us as Indicated above.
5. Brief facts leading to filing of the suit, as averred in the plaint, are that, the defendant - Karnataka Vidyut Karkhane Limited - an undertaking of the Government of Karnataka, having its office at Mysore Road, Bangalore, had invited tenders from interested contractors for construction of a boundary wall to their factory located on the Mysore road within the precincts of Byatarayanapura Village adjacent to Vrishabhavathi river, which no more remains a river but is a open sewerage/drainage outlet for the city of Bangalore.
6. A proprietary concern by name M/s Venkatesh Construction Co. owned by the plaintiff engaged in construction of darn and other buildings as civil contractor for the Government of Karnataka amongst others, had offered its quotation to the advertisement issued by the defendant undertaking and it appears ultimately the defendant accepted the offer of the plaintiff and indicated its acceptance to the offer in terms of a communication dated 27.11.1991 wherein if was mentioned that the total estimated value of the work was around Rs. 10.86.200/-.
7. Parties entered into a formal agreement/contract as per agreement dated 12.02.1992 marked as Exhibit.P2. The volume of work and the rates at which the work executed by the contractor was to be paid which were all indicated in the tender documents formed part of the contract marked as Exhibit.P2[a]. The contractor it appears began the work on 27.11.1991 as per Exhibit.P1 on receipt of the work order. The contractor had presented two bills for the work executed as and when a part of the work had been completed and the first bill for a sum of Rs. 2,02,400/- was presented on 26.02.1992. The second bill for sum of Rs. 2.47.800/- was presented on 4.5.1992.
8. In so far as these two bills are concerned, there is no dispute between the parties as the defendant accepting the correctness of these two bills, has made payment and that position is also conceded by the plaintiff.
9. It transpires that thereafter the defendant employer being not very satisfied with the progress achieved by the plaintiff contractor, particularly as the work was required to be completed within timeframe of twenty weeks since inception and that having not been achieved, particularly with the plaintiff - contractor pleading considerable difficulties that they had encountered in the course of execution of the work, the work spot being in the vicinity of flowing river and the soil and earth condition being not very conducive and in favour of the contractor for either expeditious work or convenience of the contractor, it appears considerable correspondences has gone about where under the contractor has pleaded his difficulties, particularly, as reflected in letters marked as Exhibit.P5 to Exhibit P 17.
10. The plaintiff complaining that he had stocked considerable quantities of raw material at the camp site for execution of the work, but could not complete the work for more than 25% of the work as according to the plaintiff-contractor there were lot of unforeseen difficulties etc., encountered during execution of the work, stopped the work midway and sought for better payment in terms of various correspondences and that having not been responded positively by the defendant, came up with suit claim with the following pleas and particulars.
7c. The plaintiff submits that the width of the foundation to be 2.0 mtrs. and for excavating to a depth of 4 meters the plaintiff had to excavate earn commencing from width of 6 mtrs. the plaintiff submits that the entire nature of the work change involves extra work in as much as the plaintiff hail to put an embankment and kuccha drain and had to invest monies to purchase pumps for de-watering at cost of Rs. 50.000/-. The plaintiff submits that in this manner, the plaintiff put up foundation to an extent of 100 meters and side stone masonry to the extent of 1000 meters. A running bull for this work itself that was paid was in sum of Rs. 4.5 lakhs mid the total cost incurred by the plaintiff is as follows:Amount Rs. (a) Stock materials : 6,00,000.00 (b) Two pumps purchased for de-watering : 50.000.00 (c) Earth work (i) Levelling 1200 M3 x Rs. 20/- : 24,000.00 (ii) Bailing out water rate only lien: 300 mtrs. length x 4.25 mtrs width x 1.5 mtrs depth x 100 : 1,91.250.00 Extra depth: 300m x 4.25 width x 1.0 in depth x Rs. 150/- : 159,375.00 300 m x 4.25 width x 0.5 m depth x Rs. 175/- : 1,11,562.50 (d) Embankment and dug Kuccha drain : 46,000.00 (e) Boulders Soling 27.5 M3 x Rs. 100/- : 2,750.00 Plus 75% of Rs. 2.750/- : 2,062.00 (f) Base concrete (1:4:8) 50 M3 x Rs. 650/- : 32,500.00 Plus 75% of Rs. 32,500/- : 24.375.00 (g) Size stone masonary as per tender 150 M3 x Rs. 500/- : 75,000.00 EXTRA DEPTH 150 M x Rs. 500 : 75,000.00 Plus 25% of Rs. 75,000/- : 18,750.00 180 M3 x Rs. 500 : 90,000.00 50% of Rs. 90.000/- : 45,000.00 1000 M3 x Rs. 500 : 50,000.00 75% of Rs. 50,000/- : 37,500.00 TOTAL : 18,26,375.00And upon measurement made by the Engineers of the defendant taking into account the work executed by the plaintiff was paid a sum of Rs. 4.5 lakhs in 2 running payments. The plaintiff intimated to the defendant that, while the original tender rates were submitted based on the assumption that the earth work would be to an extent of 1? mtrs. depth and 20 mtrs. width. The work carried out was for depth of 4 mtrs. and width of 6 mtrs at the surf me sloping to 2.5 mtrs at the bottom. Accordingly for 100 mtrs work done upon measurements made the said sum of Rs. 4.5 lakhs is paid. The said measurements were also verified by M/s. Naresh Associates Structural Engineers, No. 251, Aprna. 12th Cross Sampige Road. Malleshwaram. Bangalore - 560003. the Engineers nominated by the defendant. The plaintiff submits that the cost of original work order was per the tender for the entire length of 4l6mtrs. of foundation was Rs. 10.68 lakhs and whereas for the quarter of the work the defendants had already incurred Rs. 4.5 lakhs. The defendants realised the folly in the tender estimate and therefore requested the plaintiff to stop further work stating that the revised drawing would he submitted and the plaintiff was requested only to proceed with excavation work and the plaintiff as in the process of waiting for fresh designs had completed 200 running mtrs. of earth work and was also stocked materials.
and as against this claim, a sum of rupees thirty lakhs more in the nature of damages with the following plea.
7k. The plaintiff submits that he has claimed a compensation of Rs. 30 lakhs payable by the defendants on the following heads:(a) Stock/materials Rs. 6,00,000.00 (b) Two pumps purchased for dewatering Rs. 50.000.00 (c) Towards earth work done Rs. 6,77,437.50 (d) Embankment dug Kuccha drain Rs. 46,000.00 (e) Boulders Soiling Rs. 4,812.50 (f) Base concrete Rs. 56.875.00 (g) Size stone masonry Rs. 3.91,250.00 (h Workers uxistage/Staff salary 9 months Rs. 2.00.000.00 (i) Daily expenses of the Contractor for 18 months Rs. 1,00.000.00 (j) Liquidated damages Rs. 8.73.625.00 ___________________ TOTAL RS. 30,00,000.00 ___________________
11. The suit of the plaintiff was contested by the defendant who filed their written statement denying the suit averments and suit claim except to the extent of specific admissions. The defendant denied all plaint averments and summed up the plea as under:
16. The defendant submits that the plaintiff is not entitled to either Rs. 30 lakhs (Rupees Thirty Lakhs) or any other amount either towards damages or loss as claimed by the plaintiff.17. The defendant submits that the suit as brought is not main tamable either under the terms of the contract or under the provisions of the Contract Act.18. The plaintiff submits that there is absolutely no cause of action for the suit and the one which is sought to be made out is neither correct nor tenable.19. The suit is not maintainable either in Law or on facts and the same is liable to be dismissed with exemplary costs.
and sought for dismissal of the suit with- exemplary costs etc.
12. The plaint, having been amended to give better particulars of the suit claim for rupees thirty lakhs, the defendant, filed additional written statement disputing the details and contending that the claims are frivolous in nature; that the defendant does not owe any amount as claimed in terms of the contract; that the defendant has made payment of the two bills which had been presented for payment in accordance with the terms of the contract and therefore the plaintiff is not entitled for any sum and suit claim is only to be dismissed.
13. It is in the wake of such pleadings, the learned Judge of the trial court framed the following issues:
1. Whether the plaintiff proven that he had to do extra work which were not included in the tender schedule as contended in para 8 of the plaint?2. Whether the plaintiff proves that during the first week of April 1992 the Asst. Manager (Maintenance) asked the plaintiff to stop the running work for want of revised, design and for retaining the wall?3. Whether the plaintiff proves that due to the stoppage of work side embankment began to fall in the trench due to the seepage of water and it became doable work for the plaintiff to remove the fallen loose earth?4. Whether the defendant proves that the rates quoted in the tender covered the showing and protected the foundation trenches?5. Whether the plaintiff proves that when he approached the defendants personally lie was informed that the board meeting had not taken place and once the meeting was held, the decision would he intimated to him with regard to commencement of work and sanction of extra items?6. Whether the plaintiff incurred heavy loss to the tune of Rs. 30.00.000.00 as contended?7. Whether the plaintiff is entitled to a decree for Rs. 30,00,000.00?8. What order?
14. The parties went to trial on these issues and on behalf of the plaintiff, the plaintiff deposed as PW.1 one C.R. Raghavendra Rao (a sporadic consultant for the defendant as and when needed) was examined as PW.2, an employee of the plaintiff by name Hanumegowda as PW.3 and one Naresh Kumar, Architect was examined as PW.4. The documents Exhibit. P1 to Exhibit. P33 were marked which apart from what we have noticed above, consists of a legal notice Exhibit.P33 which was issued prior to tiling of the suit.
15. On behalf of the defendant, one Jagadish Kumar, Deputy Manager - Maintenance was examined as DW. 1 and Exhibit.D1 - a letter written by the defendant to the plaintiff. Exhibit.D2 - acknowledgement, Exhibit.D3 & Exhibit.D4 -reply by plaintiff to the defendant. Exhibit.D5 - reply to legal notice were marked.
16. The learned Judge of the trial court, on appreciation of the oral and documentary evidence let in by (lie parties answered issues 1, 2 and 3 in the affirmative, issue No. A in the negative, issue No. 5 in the affirmative, issue No. 6 partly in the affirmative and so also issue No. 7 and therefore decreed the suit in part with details as under:
1) Balance amount payable in respect of the completed portion 1,45,525.00 2) Value of building materials stocked 1,00,000.00 3) Amount payable in respect of extra earth work 16,250.00 4) Amount payable in respect of embankment work 2,880.00 5) Amount payable in respect of extra soling work 2,612.00 6) Amount payable in respect of extra bed concrete work 32,727.50 7) Amount payable in respect of extra stone masonry work 23,000.00 _____________ Total 3,22,994.50 _____________ Rounded off to 3,23,000.00
17. It is this Judgment; and decree which has dissatisfied the plaintiff for not getting the suit claim and the defendant for suffering a decree for a sum of Rs. 3,23,000/- against them. Therefore an appeal each by the plaintiff as well as the defendant.
18. We have heard Sri Raju. learned Counsel for the appellant and Sri Mural id liar, learned Counsel for the respondent.
19. The common question that arises for determination in these two appeals is as to whether the trial court was justified in decreeing the suit in part as indicated in the .Judgment, as to whether such decree even to a part of the claim is justified or if the trial court should have decreed the suit in its entirety. The appeal of the plaintiff is for seeking the Judgment modified to make it one as a suit being decreed in its entirety whereas the appeal of the defendant, is to dismiss the suit in its entirety.
20. Mr. Raju, learned Counsel for the appellant with reference to the evidence of the plaintiff witness has taken us through the documentary evidence Exhibit. P1 to Exhibit. P23.
21. He has made submissions that the plaintiff was compelled to incur extra expenditure which could not be reflected earlier in the bill: that, by the time the plaintiff could present proper bills, work had been discontinued and therefore there was no possibility for plaintiff presenting a proper bill apart from two bills that, had been presented as discussed above and it is for the additional expenditure that the plaintiff had incurred over and above the two bills that. the letters were written seeking for payment; that notwithstanding the letters indicating the manner in which the plaintiff had incurred such additional expenditure under the various heads as claimed, the defendant having not paid the plaintiff was constrained to file a suit: that the learned Judge has not appreciated the evidence placed before the court on behalf of the plaintiff in a proper perspective; that the suit claim should have been decreed in its entirety and not in part.
22. Our attention is drawn in particular to Exhibit.28. ExhibitP.15 and Exhibit.P28. Exhibit.P28 is minutes of the joint: meeting field by the contractor wherein the officials and contractor participated on 28.7.1992.
23. It is submitted that the plaintiff was constrained to point out what additional payments were required to be made over and above the two bills initially as per Exhibit P10 and it: was further followed up by correspondence in Exhibit.P14 and Exhibit P15; that in the wake of such correspondences, the learned Judge of the trial court should have decreed the suit in its entirety.
24. Learned Counsel for the appellant has placed strong reliance on the evidence of PW. 1 as deposed during cross examination, wherein according to learned Counsel, witness on behalf of the defendant has admitted additional excavation work carried out by the contractor over and above the stipulated norms in view of the soil condition in the area and the minutes of the joint meeting held on 28.7.1992 having reflected some of such extra works carried out by the contractor, the learned Judge of the trial court should have given due credence to such material on record and should have decreed the suit if not in its entirety at least to commensurate extent and disallowing the suit claim arid decreeing the suit to a meager amount of Rs. 3,23.000/- is nothing short of ignoring relevant material on record and therefore the Judgment and decree of the trial court requires to be suitably modified.
25. Learned Counsel for the appellant would also submit that the contractor having been compelled to stock considerable raw material at the site in question, had stocked the raw material of the value of rupees six lakhs and such raw material having gone waste for the contractor due to the oral instructions on the part of the officials of the defendant - respondent to stop the work and such being the deposition of PW. 1 plaintiff, the learned Judge of the trial court should have taken note of this evidence and should have decreed the suit, claim for sum of rupees six lakhs as claimed by the plaintiff.
26. It is also submitted that the rate of payment for excavation work to lay the foundation should have been computed at Rs. 100/- per cubic metre and not at Rs. 20/-per cubic metre as had been granted by the department as earlier in respect, of 95 running metres of the excavation work and the learned Judge of the trial court has committed an error in not adopting the same norm for awarding the payment In respect of claim No. 3. namely, amount payable in respect of extra earth work which is quantified at a sum of Rs, 16.250/- which is based on the rate being at Rs. 20/- per cubic metre and which is required to be computed taking the rate at Rs. 100/ per cubic metre.
27. It is therefore submitted that the appeal of the plaintiff should be allowed accordingly and the appeal filed by the defendant should be dismissed.
28. On the other hand, Sri Muralidhar. learned Counsel for the defendant - respondent has drawn our attention to the contract marked as Exhibit.P28 and terms of the contract, particularly, Clauses 11, 15 and 18 relating to the presentation of the bills, basis for presenting the decree, the manner of taking measurement which can constitute the basis and the manner and time within which the payment, are to be made against the bills presented by the contractor and the provision relating to any extra work executed by the contractor.
29. Clauses 11. 15 and 18 read as under:
11(a) In case the Company thinks proper at any time during the progress of the work to make any alternations or additions to or omission from the work or any alteration in the kind of quality of the material to be used therein, it shall give notice thereof in writing to the Contractor, and the Contractor shall act in accordance with such a notice. Such alteration, omission or variation shall not vitiate this contract. The Contractor, however, shall not do any extra work or make any alteration or addition to or omission from the work or any deviation from any of the provisions of the contract documents without the previous consent in writing of the Company and the value of such extras, alterations, additions, or omissions shall in all cases be determined by the Company having regard to such fair and reasonable price as the Company shall decide in consultation with the Architects and the amount thereto shall be added to or deducted, as the case may be, from the contract sum. No. claim for any extra work shall be allowed unless it shall have been carried out by or under the written authority of the Company. PROVIDED HOWEVER that in case of authorised variations involving work specified in the order referred above, the Contractor shall be paid at the rates stipulated therein so far as they may be applicable.(b) The Contractor shall maintain a daily report book at the site for recording therein particulars of materials received, weather conditions, staff employed progress of work, variation orders, inspection notes and visitors.(c) The Contractor shall provide at his own cost a site order book, in duplicate, which should be kept in the Contractor's office at the site. Any special orders and instructions to be issued to the Contractor will be recorded in this book by the Architects/Engineers of KAVIKA or their authorised representatives. Each page of the book shall be numbered and initialed by the Architects/Engineers of KAVIKA. The Contractor shall note the instructions/orders entered in the order book daily and countersign each of these instructions/orders in token of his having seen and noted the same for necessary action at his end. The original copy of these instruction sheets shall be filed by the Engineers of KAVIKA.15. The Contractor shall on the completion of different stages of work notify to the Company in writing of the same. The Company shall thereupon arrange for the inspection of the work by the Architects who on being satisfied that the work inspected by them has been completed in accordance with the terms of this contract shall issue to the Contractor a certificate of that effect.18. The Contractor shall be entitled to payment from time to time upon the completion of work of the value of not less than Rs. 2.00,000/- (Rupees Two lakhs only) provided further that the first bill shall not be presented for payment until after the work of the value of not less than Rs. 1.50 lakhs (Rupees One lakh fifty thousand only) shall have been completed. The bill presented by the Contractor shall be accompanied by a statement giving the details of the work in respect of which the payment is claimed and a certificate issued by the Engineers who upon inspection of the work shall certify that the work of the value mentioned, in the certificate has been carried out by the Contractor in accordance with the terms of this contract. After the Engineers of the Company hare checked and satisfied themselves with regard to the quantity and quality, the company shall make payment of the amount claimed in the bill within a period not exceeding 20 clays from the receipt thereof. The mere failure for whatever reason of the part of the Company to make payment of the bill within the stipulated date shall not invalidate this Contract nor shall it entitle the Contractor to terminate the same upon that, ground.
30. Sri Muralidhar. learned Counsel for the defendant would further submit that the payment, to the contractor is only in terms of the agreement as per contract and not otherwise: that, the parties were very well aware of the mutual terms and conditions and when the contractor had presented bills for payment fully in consonance: with the terms of the contract, the defendant had after satisfying itself, of the correctness, and other aspects of the bill, had made prompt payment and it is in such manner two bills one dated 26.2.1992 for a sum of Rs. 2.02.400/- and another dated 4.5.1992 for a sum of Rs. 2,47,800/- produced by the other party, but not in dispute, had been paid in full which is also reflected in the admission on the part of the plaintiff that he had collected payment under the two running bills amounting to Rs. 4.50.000/- and With the contractor not having presented any further bill, there was no occasion or question for the defendant to make further payment; that the entire suit claim has no basis at all as the defendant had made payment against the bills presented and if the contractor had not even presented a bill, there was absolutely no occasion for the defendant - employer to make any further payment; that the suit, claim being not based with reference to the terms of the contract, not supported by any cogent material or evidence which can sustain the suit claim either on the premise of the contract or even otherwise the suit ought to have been dismissed by the trial court in its entirety and suit should not have been decreed even in part as has been done by the learned Judge of the trial court.
31. Pointing out to the part decree of the suit, particularly, awarding the amount of Rs. 3,23.000/- learned Counsel for the defendant respondent would submit that the amount of Rs. 1,45,525/- allowed by the court below is not even with reference to any plea or proof found on record: thai the claim is totally baseless and should have been dismissed in limine.
32. Sri Muralidhar. learned Counsel for the defendant respondent would also submit that even the allowing of Rs. 1,00,000/- towards claim under the head 'value of building materials stocked" is also without any basis: that it is neither with reference to the terms of the contract nor with reference to any joint inspection conducted by the parties and particularly the defendant having contested the claim for the entire sum of rupees six lakhs, there was no way of the learned Judge of the trial court, allowing sonic amount more by way of concession than on any legal basis and even as admitted in the course of cross examination of plaintiff - PW. 1 that no supporting documents had been placed before the court below for corresponding purchase of such raw material and further for having brought it to the site in question etc.; that, rite learned Judge of the trial Court has virtually allowed the claim to the extent of rupees one lakh on mere conjectures and guess work rather than on material on record.
33. Even with regard to the amount of Rs. 16.250/-. Rs. 2.880/-. Rs. 2612/-, Rs. 32.727.50/-, Rs. 23.000/- awarded towards extra earth work, embankment work, extra soling work, extra bed concrete work, extra stone masonry work respectively, submission is that they are all totally at variance with the terms of the contract: that the manner in which the contractor executes the work, is not the concern of the defendant and the claim being without any basis nor substantiated with relevant pleadings and proof, decreeing a suit, for such amounts is nothing but perversity in law and therefore the .Judgment and decree deserve to be set aside.
34. We have bestowed our attention to the submissions made at the Bar, perused the pleadings, gone through the Judgment, of the trial court and looked into the record comprising of oral and documentary evidence adduced by the parties.
35. The contract is one awarded by a public limited State undertaking and is a contract which is given to the plaintiff in open competition and on accepting the offer made by the plaintiff who had participated in the tender invitation by the defendant.
36. The terms between the parties are settled in terms of Exhibit.P28 - the written agreement between the parties and is supplemented by terms and conditions in the tender documents. The terms of the contract, particularly, Clauses 11, 15 and 18 provide for the manner of presentation of the bill by the contractor after executing work at different stages and alter notifying the company in writing of the actual work done till then and thereafter the defendant company arranging for inspection of the work executed by the contractor by the Architects who alter being satisfied about the quality of the work can issue a certificate of satisfactory execution of the work in favour of the contractor and thereafter the contractor has to present the bill which is to be paid in terms of Clause 18 of the contract.
37. It is not in dispute that apart from I he two bills dated 26.2.1992 and 4.5.1992. the contractor had not presented any other bill for payment. It is also not in dispute that the defendant - company has made full payment against these two bills. Therefore, in our view, there was no dispute between the parties regarding non-payment of any valid bill presented by the contractor for payment in terms of the clauses in the contract. The plaintiffs case itself is of this kind. Sri Raj it, learned Counsel for the appellant very strongly relics upon Exhibit.P 10 and Exhibit.P15 to contend that Exhibit.P10 and Exhibit.P15 are on par with bills for payment. On perusal of Exhibit.P10 and Exhibit.P 15, we are fully -satisfied that are not bills for payment and there was no other bill presented by the contractor than the earlier two bills referred to above.
38. We also notice that, the contractor has over a period of time improved upon his claim and sought to make it as a dispute and that he was entitled for certain amounts even when he had not even presented a bill for payment in respect of any oilier work which he had executed in terms of the contract.
39. The so called admission on the purl of the defendants witness during the course of cross examination that the contractor had, in fact, executed some additional excavation work which is very strongly relied upon by the learned Counsel for the appellant is not any worthwhile evidence to support, the case of the plaintiff for the simple reason that the terms between the parties are" reduced into writing as per Exhibit.P28 and these terms cannot, be varied or worked upon for improvement, even assuming that an official of the defendant: company has made certain admissions in favour of the plaintiff- contractor while in the witness box during cross examination.
40. In so far as the relationship between the parties in concerned, it is governed by the terms of contract as pet-Exhibit. P28. the terms of which cannot be varied, because of an admission made by a witness examined on behalf of the defendant assuming for arguments sake, there is such an admission (See Section 92 of Indian Evidence Act, 1872).
41. It: is trite law that documentary evidence weighs over oral evidence and in the wake of the written contract between the parties and any variation with, the terms of the contract, being required to be adhered to strictly in terms of the provisions of Clause No. 11 of the agreement and admittedly the plaintiff having not gone through the procedure envisaged under Clause-11 cannot put forth a claim for a higher payment on the premise that the contractor had executed some additional work or extra work over and above the stipulated quantity of work and at the rate stipulated between the parties.
42. The written agreement at all times governs the terms of the contract and a stray or sporadic admission that, there were some additional work executed by the contractor indicated by DW. 1 while in the witness box will nor have the effect of rewriting the terms of the contract and therefore any other claim put forth by the contractor independent of the terms in the agreement assuming has been made good on fads does not give rise to an entitlement in law in favour of the plaintiff and the learned .Judge of the trial Court could not have to his whims and fancies and on mere surmises and conjectures proceeded to decree the suit even in part.
43. A suit filed by the contractor, the plaintiff claiming a sum of money, namely, suit claim of Rs. 30 lakhs is one essentially in the nature of a suit for damages for breach of the terms of the contract.
44. The different heads under which the claims are elaborated, indicates that the plaintiff had put forth his claims with reference to the manner of working the contract virtually describing the method and the manner of execution of the work, which is subject to the terms agreed between the parties to the contract and to be execution under the supervision, of the Engineers of the defendant, is the concern and the responsibility and within the domain of the contractor.
45. The contractor, who had after participating in open tender, quoted his rates which the defendant company found to be the most competitive and therefore accepted and where alter a contract is entered into reducing the terms between the parties to writing, therefore, cannot thereafter start complaining that he has discovered so many other things, after entering into the contract and was taken by surprise other about the working conditions or the location of work spot or about other factors, winch even assuming they were not within the knowledge of the contractor at the time of either quoting his bid or entering into the contract, cannot make any difference for working better terms in favour of the contractor over and above the contractual terms.
46. It is a matter of prudence on the part of every businessman as to what business he wants to carry on and what lie would not. like to and also in what manner he runs his business. But, the point here is a person who competes in an open bidding and eliminates competition, cannot later turn around and complain that execution of the work is not remunerative. The person is estopped from contending to the contrary and at any rate contrary to the tern is and conditions of the contract.
47. Every businessman and every civil contractor undoubtedly works for a profit with an expectation to make a profit, and in a contract of the present nature where the estimated value of the work was around Rs. 10 lakhs to be precise Rs. 10,86.200/- which means it is quantified to the precise rupee, if the work is fully executed to the satisfaction of the defendant company, then the contractor can expect to make a reasonable profit which in normal business understanding and on commercial considerations can be between 10 to 15% of the total value of the contract. Thai means the contractor if lie completes the work in terms of the contractual obligations and to the satisfaction of his client, can expect a reasonable profit of around Rs. 1,00.000/ to Rs. 1,50.000/- and nothing more i.e. after working the contract, executing the work and having gone through the ordeals which one can expect in the normal course of a construction activity. In a suit for damages, the reasonable profit, constitutes the upper limit of damages which the contractor can expect after satisfactory completion of the contract. A person not even completing the contract cannot, by sitting idle expect a miracle to happen and to provide him the profit.
48. In business, loss is as much an incidence as is profit. More often than not, in such construction activities, with the escalation of the prices everyday, being a very common phenomenon and to the knowledge of persons who are in the field, such possibilities have all to be factored into the offer by the contractor, before he makes a commitment. If a person after satisfactorily executing the contract can make a profit, say between Rs. 1.00.000/- to Rs. 1,50.000/- even assuming there is breach of contract on the part of the defendant, the damages which the contractor can plead and can claim, can never exceed this limit subject TO the contractor, in fact, proving the actual losses, it is well settled legal principle, that while claiming damages, it is the duty of the person claiming damages to have taken all steps to ensure that, the damages are contained and limited to the minimum (Mitigation of damages).
49. The consequence which results in a damage should be due to an act which is necessary, incidental and directly relatable to a reasonable activity having correlation to the activity required to be performed by the contractor. Any and every claim cannot pass the test of mitigating damages. It is also a matter of sound business prudence that, a contractor who can expect, a reasonable profit of Rs. 1,00,000/- to Rs. 1,50,000/- after completing the work to the satisfaction of the client, will not hazard more money than what lie could reasonably earn i.e. a contractor will not hazard in investing several crores in a work of this nature, which if ultimately goes wrong could ruin the contractor. That is neither reasonable business prudence nor an acceptable claim on the part of the contractor, particularly, while suing for damages.
50. In a suit of this nature, if the contractor goes on making fabulous and fantastic claims, particularly, a claim of damages towards idling of men and machinery, ii can only reflect, upon either the imprudence or stupidity of the contractor and will not give rise to a claim for damages.
51. In the present case, the dubiousness and fantastic nature of the claim put forth in the plaint is amply demonstrated by the fact that the estimated value of the contract as earlier indicated is Rs. 10.86.200/- and the profit to be in the range of 1 to 1.5 lakh whereas the suit claim was for a sum of Rs. 30.00 lakhs, in the nature of damages for breach of contract on the part of the defendant which amount is almost three times the contract value and that too for not working the full contract, and not completing the work.
52. If the contractor, after having satisfactorily executed the contract, could have expected to earn a profit of about one to one and half lakh, it is reasonable to expect that, no prudent businessman will deploy men and machinery beyond the requirement and to the extent of idling them, for giving rise to a total claim in damages to the extent of Rs. 30.00 lakh, inclusive of a sum of Rs. 6 lakhs only towards idling charges, apart from damages claimed under other heads!
53. Of late, we notice a most unhealthy trend has developed in such matters involving disputes between the contractors and the employer in whose favour execution of civil work is undertaken by the contractors who alter participating in tenders invited by the employer institution, put forth claims in the nature of damages towards idling of men and machinery on the premise that the contractor was compelled to keep his men and machinery idle for considerable length of time in anticipation of the employer providing further instructions in the mailer of execution of the work.
54. Idle or otherwise, men and machinery is part of the business prudence and business management of the contractor. It is not an aspect with which the employer has anything to say. But what, the employer if at all expects is that the contractor should be equipped with sufficient men and machinery to execute the work within the agreed period as per the contract. It is not normally the concern of the employer as to what extent of men and machinery a contractor mobilizes at the work site and also as to in what manner he deploys his men and machinery to execute the work.
55. In a suit for damages, the plaintiff is required to prove (1) the existence of a concluded contract between the parties: (2) there is clear breach of terms and conditions of the contract by the defendant; (3) that breach on the part of the defendant has caused certain losses to the plaintiff contractor, giving rise to a claim to sue for damages; (4) proving the actual extent of losses suffered by the contractor directly attributable to the breach of the terms and the clauses of the contract by the employer; (5) quantifying the damages and most importantly by mitigation of damages that is to say, a person claiming damages to claim only such extent of damages, which are actually suffered as an inevitable direct consequence of the breach of contract by the defendant, even after the plaintiff had taken all possible prudent, steps to minimize the extent of losses, it is only if the plaintiff establishes the actual quantum of damages on the basis of the above principles, a. suit for damages can be decreed by courts and not otherwise. [See decisions in Muralidhar v. Harishchandra MANU/SC/0113/1961 : AIR 1962 SC 366 - Para-9 M. Lachia Setty 81 Sons Ltd. v. Coffee Board, Bangalore MANU/SC/0095/1980 : AIR 1981 SC 162 - Para 13 and C.T. Xavier v. P.V. Joseph MANU/KE/0028/1995 : AIR 1995 Kerala 140 -Para 46.
56. As it has happened, more often than not such disputes involving improper execution of work or no execution of work on the part of the contractor and many a times a contractor who has not even executed the work in terms of the contract, raises a dispute and seeks for appointment of an arbitrator complaining that he had been prevented by the employer from executing the work and comes up with fantastic and dubious claims claiming damages before the arbitrator.
57. Most of the contracts entered, into by the governmental departments, quasi-governmental departments and public sector undertakings have a clause providing for referring a dispute to an arbitrator for resolution and inevitably lands up before an arbitrator whether or not the work is executed in part or in full; whether or not the work is executed in consonance with the terms of the contract or otherwise: whether or not the work is of the expected level of quality as per the contract or otherwise.
58. In such disputes. Arbitrators are normally technical persons and in most of the cases, retired chief engineers in the government department/body. Such arbitrators being not fully conversant with the legal principles, may or may not being conversant with legal principles to be applied for awarding damages and by and large adopting a lay man's approach to the claim and opting to go by way of a midway option, in the sense, if there is a claim for damages to the tune of Rs. 30.00 lakh as in the present case, and if the defendant has totally denied the liability, the arbitrator opting to accept the average of the two figures i.e. accepting claim for damages in the vicinity of 10 to 15 lakh to be a reasonable and just way to resolve the dispute and such will be the impression of a legally not trained arbitrator as an arbitrator would himself hesitate to non suit a claimant for the entire disputed claim and would prefer to the an altitude of not offending either party by allowing the claim, not because of the merits of the claim petition but applying the principles of "give and take" would pass an award for a sum of Rs. 10 to 15 lakh.
59. An award of this nature though is neither possible when the dispute is before a court of law in a suit, nor can be sustained in law if viewed be the appellate Courts escapes such scrutiny because of the provisions of Arbitration and Conciliation Act. 1996 [for short, the Act), as the arbitrator is a forum chosen by the mutual agreement between the parties to resolve their disputes in an informal way and with courts not having jurisdiction to sit in appeal over the awards passed by arbitrators such an award can also attain finality.
60. When an aggrieved party seeks for selling aside such an award within the scope of the provisions of the Act and under the present enactment, it is only on an application filed tinder Section 34 of the Act for setting aside the award on the grounds enumerated therein, many untenable awards, unreasonable awards, unjustifiable awards, also can pass muster not because they are otherwise valid, but because civil court is acting as a court, of limited jurisdiction while examining the award on an application under Section 34 and not as an appellate court and therefore may not be in a position to set aside the award even, if it is an award which is otherwise not tenable.
61. This position, cannot be disturbed in further appeals either to the High Court, or even further appeal to the Supreme Court after seeking special leave. Over a period of time, awards containing a compensation allowed by way of idling charges having managed to escape judicial scrutiny and surgery and merely because having attracted attention through prolix litigation, which is inevitable in arbitration matters, even civil courts have gained wrong impression that such damages towards claim for idling charges for men and machinery is a tenable head of claim towards damages and is to be entertained and granted!
62. We find in the instant case that the learned judge of the court-below, has acted more like an arbitrator in examining the suit claim than from applying the relevant legal principles and has not examined the matter before the court, as a civil suit but more as an application filed under Section34 of the Arbitration Act by applying the judicial parameters indicated therein. A civil court cannot act like an arbitrator., In fact air arbitrator is sought to be regulated and laws of the land are incorporated into arbitration proceedings, if one should look at the scope for setting aside an award as provided under Sub-sections (1) and (2) of Section 34 of the Act.
63. Section 34 of the Arbitration and Conciliation Act 1996 reading as under:
34. Application for setting aside arbitral award:(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Section 121 and Sub-section .(2) An arbitral award may he set aside by the Court only if-(a) the party making the application furnishes proof that -(i) a party was wider some incapacity, or(ii) the arbitration agreement is not valid under the law to which the parties have subjected or failing any indication thereon., under the law for the time being in force: or(iii) the party making the application teas not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was oilier wise unable to present his case: or(iv) live arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:Provided that, if Die decisions on mailers submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or(v) the composition of the arbitral tribunal or the arbitral procedure was not. in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, Jailing such agreement, was not in accordance with this Part; or(b) the Court finds that-(i) the subject matter of the dispute is not capable of settlement by arbitration under die law for the time being in force, or(ii) the arbitral award is in conflict with, the public policy of India.Explanation - Without prejudice to the generality of Sub-Clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.(3) An application for setting aside may not be made after three months have elapsed from the dale on which the party making that application had received the arbitral award or if a request had been made under Section 33 from the dale on which that request had been disposed of by the arbitral tribunal:Provided that if the court is satisfied that the application was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.(4) On receipt of an application under Sub-section (1). the Court may where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
64. In a suit of the present nature, award of amount even to the extent of Rs. 3,23,000/- has no rhyme or reason. The plaintiff has not it all made out any of the grounds for awarding damages, as we have indicated above. The suit on the face of it, deserved only to be dismissed, be it more by way of a sympathetic or consolation measure has been decreed for a sum of Rs. 3,23,000/- with interest etc.
65. There is no question of courts adopting the attitude of sympathy or acting in an arbitrary manner or try to appease either party by applying the principle of 'give and take'. Our courts are courts of law, governed by the constitution and statutory provisions and the duty of Judges is to apply the relevant law to the fact situation and render judgments/opinions in accordance with the law applicable to the facts and circumstances and nothing beyond.
66. We find that the judgment under appeal, does not stand this scrutiny. It is therefore, the appeal by the plaintiff has to be dismissed and the appeal by the defendant has to be allowed.
67. On an overall examination of the entire material, we find that the plaintiff had not made good any case for decreeing the suit for any amount and the Judgment and decree of the trial court in decreeing the suit in part is not sustainable in law. The judgment, and decree even suffers from errors apparent on the face of the record.
68. Therefore, we allow the appeal filed by the defendant and dismiss the appeal filed by the plaintiff and dismiss die suit in its entirely. Parties to bear their respective costs.
69. Sri Muralidhar, learned Counsel for the defendant respondent submits that pursuant to the interim order passed by this Court at the time of granting conditional interim order, the defendant - department has deposited a sum of Rs. 2,35,329/- before the trial court. Will the dismissal of the suit, we direct the trial court to refund this amount, in favour of the defendant in the suit, with interest if any if had been deposited in any Nationalized Bank.