What is concept of reimbursement of unjust enrichment regarding Government Contract?

 Taking into account the legal position as enunciated in these judgments, the impugned award holds that the absence of a contract would not deprive the respondent/contractor from a reasonable remuneration for the work performed. The view taken in the impugned award is plausible, and based on an application of law laid down in the judgements referred to therein. Reference is also apposite to the judgment of a co-ordinate bench of this Court in M.C.D. v. Ravi Kumar, MANU/DE/4058/2017, where this Court had occasioned to specifically consider an identical issue, viz :-

"(i) Whether in absence of a formal agreement/contract awarding additional works to the respondent, the respondent is entitled to make a claim for such work?"

{Para 30}

31. As regards the above issue, this court held as under :-

"12. Interpreting the said provision, Supreme Court in case of Mulamchand v. State of Madhya Pradesh MANU/SC/0009/1968 : AIR 1968 SC 1218, held that in the absence of a formal contract between Dominion of India and a private individual not in the form required by Section 175(3) of the Government of India Act, 1935, the same was void and cannot be enforced, however, at the same time, if money is deposited and goods are supplied or if services are rendered in terms of the void contract, the provisions of Section 70 of the Indian Contract Act may be applicable and where a person has lawfully done something for other not intending it to be done gratuitously and the other person enjoys the benefit thereof then such other person shall become liable to make compensation to the former in respect of, or to restore, the things so done or delivered.

 IN THE HIGH COURT OF DELHI

O.M.P. (Comm) 405/2023, IA Nos. 19196/2023 and 19198/2023

Decided On: 03.10.2023

Bharat Sanchar Nigam Ltd. Vs. Vihaan Networks Ltd.

Hon'ble Judges/Coram:

Sachin Datta, J.

Citation: MANU/DE/6799/2023.

Read full Judgment here: Click here.

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Whether the contractor is entitled to get the payment for work allegedly executed by it even if no concluded contract came into existence?

It is highlighted at the cost of repetition that works in question had been undertaken by the Claimant for which it has incurred the expenditure. This was done at the instance of USOF/BSNL. Had the work been finally awarded, the Claimant would have recovered the amount of expenditure. Since that is not done, the Claimant would be entitled to the expenditure incurred in view of the provisions of Section 70 of the Contract Act, which reads as under:

"70. Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered."{Para 114}

115. This provision incorporates the doctrine Quantum Meruit. According to contract law, quantum meruit is a doctrine that states there is an inferred promise to pay a fair amount for work and the materials provided, even without a lawful, enforceable agreement between the parties. A party who carries out a worthwhile service for another party normally participates in a written, legally binding agreement or contract before fulfilling the service, especially when the party providing the service is in the business of executing that service."

 Likewise, the conclusion that the respondent/claimant was entitled to reimbursement of expenses incurred by it notwithstanding absence of a concluded contract was predicated upon Section 70 of the Contract Act which incorporates the doctrine of quantum meruit. The said view is not liable to be interfered, particularly on the touchstone of Section 34 of the A & C Act, 1996. (Para 28)

 IN THE HIGH COURT OF DELHI

O.M.P. (Comm) 405/2023, IA Nos. 19196/2023 and 19198/2023

Decided On: 03.10.2023

Bharat Sanchar Nigam Ltd. Vs. Vihaan Networks Ltd.

Hon'ble Judges/Coram:

Sachin Datta, J.

Citation: MANU/DE/6799/2023.

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Can Municipal corporations include a term in the works contract that they will make payments to the contractor as and when funds in a particular budget head are available?

  As per Himani Alloys Ltd. v. Tata Steel Ltd. (2011) 15 SCC 273 cited by the Corporation, the test for the invoking of Order XII Rule 6 of the CPC being that the admission so made must clear and unequivocal, on the face of which it is impossible for the party making it to succeed. In the light of the stand in the written statement, there is a clear admission as to the final bill amount as also that the Contractor has to wait in a queue. Thus the Trial Court has rightly invoked the provisions of Order XII Rule 6.{Para 55}

Conclusions and Findings

56. The General Conditions of Contract i.e., clauses 7 and 9 which are admittedly part of the work orders issued by both the NrDMC and the EDMC are being tested in these batch of cases. A contract which stipulates that the consideration would be paid in an unforeseen time in the future based on certain factors which are indeterminable, would in effect be a contract without consideration. Even if the contract is held to be a valid contract, then the concept of `reasonableness' has to be read into the same. Section 46 of the Contract Act and the explanation thereto is clear that “what is a reasonable time is a question of fact in each case.” A Corporation which gets works executed cannot therefore include terms in the contract which are per se unconscionable and unreasonable as -

a) There is no fixed time period as to when the funds would be available;

b) There is also no fixed mechanism to determine as to when and in what manner the head of account is to be determined and as to how the Contractor would acquire knowledge of these two facts;

c) There is also no certainty as to how many persons are in the queue prior to the Contractor and for what amounts;

d) There is enormous ambiguity in the receipt under the particular heads of accounts.

57. These clauses in effect say that the Contractor is left with no remedy if the Corporation does not pay for the work that has been executed. Such a Clause would be illegal and contrary to law. Such clauses, even in commercial contracts, would be contrary to Section 25 read with Section 46 of the Contract Act.

58. The clauses do not specify an outer time limit for payment. The expression reasonable time has to be `a time'. The concept of time itself is ensconced with specificity and precision. Clause 9 is the opposite of being precise. It is as vague and ambiguous as it could be because it depends on factors which are totally extraneous to the contract, namely -

 Allotment of funds to the Corporation by the Government;

 Allotment of funds in a particular head;

 Allotment of funds for payments who are in queue prior to the contractor;

59. Thus, these factors, which are beyond the control of the Contractor and which would govern the payment of consideration, make the said clauses of the contract completely unreasonable. The clauses have to thus, be read or interpreted in a manner so as to instill reasonableness in them.

60. By applying the above said principles, in respect of final bills raised by Contractors for works executed, that have been approved by the Engineer-in-Charge, the Clauses have to be read in the following manner:

a) Reasonable time for making of payments of final bills in respect of work orders up to Rs.5 lakhs shall be 6 months and work orders exceeding Rs.5 lakhs shall be 9 months from the date when the bill is passed by the Engineer-in-Charge.

b) The queue basis can be applicable for the payments to be made in chronology. However, the outer limit of 6 months and 9 months cannot be exceeded, while applying the queue system.

c) The payments are held to become due and payable immediately upon the expiry of 6 months and 9 months and any non-payment would attract payment of interest for the delayed periods.

d) A conjoint reading of Clauses 7 & 9 along with the amendment dated 19th May, 2006, clearly shows that for the payment of bills, the contractors have to follow the queue basis and as and when the amount is available under the particular head of account, the amount would be payable. The amendment does not, however, have a condition that no interest is payable for delayed payment. Such a condition exists only in Clause 7. Clause 9, therefore, when read with the amendment has to mean that the Corporation itself considers 6 months and 9 months to be the reasonable periods for which the payments of the final bills can be held back.

e) To the extent that queue basis is applied only for clearing of payments which do not extend beyond the period of 6 months and 9 months period, it is reasonable. However, if the queue basis is applied in order to make Contractors wait for indefinite periods for receiving payments, then the same would be unreasonable and would have to therefore be read down.

 IN THE HIGH COURT OF DELHI AT NEW DELHI

 RFA 160/2017 & CM APPL. 5807/2017 (Stay)

NORTH DELHI MUNICIPAL CORPORATION  Vs VIPIN GUPTA 

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Guidelines of Delhi high court for avoidance of delay in payment of contractual amount to contractor in government contract

 The present guidelines are being issued in all the appeals. The Court has had the opportunity of perusing the trial court records in all these 43 appeals. A perusal of the records reveals the following:-

1. In most cases, the Contractors who are awarded the work orders do not submit the interim or final bills to the Engineer-in-Charge for approval;

2. The final measurement recordal is done by the Engineer-in-Charge;

3. The final bill is also prepared and passed by the Engineer-in-Charge on his own accord and the Contractor then accepts it;

4. The procedure for obtaining labour clearance certificate from the Labour Officer is not followed;

5. Once the bills are passed, Contractors are made to wait endlessly for their payments on the ground of non-availability of funds;

6. Even for refunds of Security Deposit and Earnest money deposits, the Contractor is made to wait till the final payment is made;

7. The measurement books and the photographs of work, actually carried out, are not produced in evidence.

The above process is contrary to the General Conditions of Contract. It is therefore, necessary and important that all the steps of the Contract are followed by the Contractors and the Corporations. The following guidelines are being passed:

1. Along with the work order, all the Clauses of the General Conditions of Contract should be attached;

2. On the award of the Work order, periodic inspections of the work being carried out should be done by the Engineer-in-Charge;

3. If possible, photographs of the works at different stages should be taken and maintained on the record;

4. Interim bills should be submitted by the Contractor – duly certifying the work which has been carried out;

5. Final bills should be submitted by the Contractor – duly certifying the work carried out along with photographs;

6. The Bill should be scrutinised by the Engineer-in-Charge, works should be recorded in the measurement book and thereafter, the bill should be passed;

7. Once the Bill is passed, the payment schedule of 6 months and 9 months should be adhered to. Delay in payments would result in Interest being levied;

8. For refunds of Security deposit and Earnest Money deposit, the Contractor should unscrupulously comply with the conditions in Clauses 17 and 45. For refunds to be made, payment of final bill need not be awaited. Once the conditions of Clauses 17 and 45 are complied with and the final bill is passed, refunds ought to be made;

9. In suits relating to recovery of Contractor’s dues, all the evidence including the NIT, General Conditions of Contract, periodic inspection reports, Final bill as submitted, Final bill as passed, Measurements carried out, Photographs etc., should be produced and duly exhibited.

10. IT infrastructure ought to be created to maintain records of the work orders, inspection reports, final bills, photographs etc., digitally, as it is noticed that the trial court record does not contain all the relevant documents and in several cases, different versions of clauses are relied upon by both sides, bills are not properly understandable and there is no evidence of actual inspections or measurements having been taken. Maintenance of digital records will make it more transparent and easily accessible for the officials and for production in the Court in case of future litigation.

Adherence to the above shall ensure that the works are duly carried out as per the quality standards prescribed and there is proper record of work being done. Once the work is carried out payments ought not to be delayed, inasmuch as delay in payments compromises on availability of quality civil work for the Corporations, who take care of basic amenities for citizens such as roads, pavements, civil works, sewerage lines etc.

These guidelines shall be read along with the judgments pronounced today in these appeals.

 IN THE HIGH COURT OF DELHI AT NEW DELHI

 RFA 160/2017 & CM APPL. 5807/2017 (Stay)

NORTH DELHI MUNICIPAL CORPORATION  Vs VIPIN GUPTA 

CORAM:

JUSTICE PRATHIBA M. SINGH

Date of decision :22nd March, 2018

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Can an arbitrator award interest on delayed payment of the contractual amount in a government contract?

  In the case of Bright Power Projects (supra), it has been opined by this Court that unless otherwise agreed by the parties, the Arbitral Tribunal can award interest at reasonable rate for a period commencing from that date when the cause of action arises till the date of the award. In the dispute which forms the subject ­matter of this appeal, being the agreement, there was no specific exclusion of payment of interest on delayed payment in relation to the local currency component.

12. On the other hand, the specific term of the agreement entered into by and between the parties provided for payment of interest on delayed payment as terms of the contract. What was not specifically agreed upon was the rate at which such interest would be paid. The blank space in the “appendix to the bid”, in our opinion, cannot be construed as cancellation of the clause providing for payment of interest of delayed release of funds. We do not think the Appellate Court or the Arbitration Court was right in adopting the approach that by not specifying the blank space provided for filling in the interest rate. We are of the view that to come to such an inference, active exclusion of payment of interest under that head was necessary to have been incorporated in the agreement. Though the case of G.C. Roy (supra) was delivered in a dispute to which the 1940 Act was applicable, the Constitution Bench of this Court has laid down certain general proposition or principle on the aspect of grant of interest. This general proposition was referred to by the Tribunal. It has been held in paragraph 43.1 of the Report (in the case of G.C. Roy):­
“43. The question still remains whether arbitrator has the power to award interest pendent lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.....”

13. The underlying principle guiding award of interest is that interest payment is essentially compensatory in nature. But as we have already observed, in the case before us, interest on delayed payment formed part of the contract itself. The agreement did not contain any express exclusion clause on payment of interest on delayed payment whether on component of payment in foreign currency or local currency. We accept the reasoning of the Tribunal on the basis of which it rejected the respondents’ plea of waiver. 

Supreme Court

JUSTICE SURYA KANT JUSTICE ANIRUDDHA BOSE

M/s. Oriental Structural Engineers Pvt. Ltd. Vs. State of Kerala

CIVIL APPEAL NO. 3454 OF 2011

22nd April 2021

Author: ANIRUDDHA BOSE, J.

Citation: 2021 ALL SCR (ONLINE) 242

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How to ascertain that contract labourer was direct employee?

 It is now well settled that if the industrial adjudicator finds that the contract between the principal employer and the contractor to be a sham, nominal or merely a camouflage to deny employment benefits to the employee and that there was in fact a direct employment, it can grant relief to the employee by holding that the workman is the direct employee of the principal employer. Two of the well-recognized tests to find out whether the contract labourers are the direct employees of the principal employer are: (i) whether the principal employer pays the salary instead of the contractor; and (ii) whether the principal employer controls and supervises the work of the employee. In this case, the Industrial Court answered both questions in the affirmative and as a consequence held that the first Respondent is a direct employee of the Appellant.

19. The expression 'control and supervision' were further explained with reference to an earlier judgment of this Court as follows:

12. The expression "control and supervision" in the context of contract labour was explained by this Court in International Airport Authority of India v. International Air Cargo Workers' Union thus: (SCC p. 388, paras 38-39)

38. ...if the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker a direct employee of the principal employer, if the salary is paid by a contractor, if the right to regulate the employment is with the contractor, and the ultimate supervision and control lies with the contractor.

39. The principal employer only controls and directs the work to be done by a contract labour, when such labour is assigned/allotted/sent to him. But it is the contractor as employer, who chooses whether the worker is to be assigned/allotted to the principal employer or used otherwise. In short, worker being the employee of the contractor, the ultimate supervision and control lies with the contractor as he decides where the employee will work and how long he will work and subject to what conditions. Only when the contractor assigns/sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer but that is secondary control. The primary control is with the contractor.

20. From this judgment, it is clear that test No. 1 is not met on the facts of this case as the contractor pays the workmen their wages. Secondly, the principal employer cannot be said to control and supervise the work of the employee merely because he directs the workmen of the contractor 'what to do' after the contractor assigns/allots the employee to the principal employer. This is precisely what paragraph 12 explains as being supervision and control of the principal employer that is secondary in nature, as such control is exercised only after such workman has been assigned to the principal employer to do a particular work.

21. We may hasten to add that this view of the law has been reiterated in 'Balwant Rai Saluja and Anr. v. Air India Limited and Others' [MANU/SC/0732/2014 : 2014(9) SCC 407], as follows:

65. Thus, it can be concluded that the relevant factors to be taken into consideration to establish an employer-employee relationship would include, inter alia:

(i) who appoints the workers;

(ii) who pays the salary/remuneration;

(iii) who has the authority to dismiss;

(iv) who can take disciplinary action;

(v) whether there is continuity of service; and

(vi) extent of control and supervision i.e. whether there exists complete control and supervision.

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 1799-1800 of 2019 

Decided On: 20.02.2019

Bharat Heavy Electricals Ltd. Vs.  Mahendra Prasad Jakhmola and Ors.

Hon'ble Judges/Coram:

Rohinton Fali Nariman and Vineet Saran, JJ.

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When contractor is not entitled to claim damages from government?

There is another perspective on the method or manner in which limitation is to be computed. We have already narrated that the Respondent, on every occasion when the extension was sought by it, had requested to be compensated for delay. The Appellant State had granted the extensions but had repudiated and rejected the Respondent's claims for damages. The effect of these events would be that the cause of action for making the claim for damages indubitably arose on each of those occasions. It is certainly arguable that the Appellant State may have also been aggrieved by the delay, although the facts of the case appear to be unfavourable to this prediction, since delay can reasonably be laid at the door of the Appellant. The Respondent, however, could prima facie be presumed to have accepted a renewal or extension in the period of performance but with the rider that the claim for damages had been abandoned by it. If this assumption was not to be made against the Respondent, it would reasonably be expected that the Respondent should have filed a suit for damages on each of these occasions. In a sense, a fresh contract would be deemed to have been entered into between the parties on the grant of each of the extensions. It is therefore not legally possible for the Respondent to contend that there was a continuous breach which could have been litigated upon when the contract was finally concluded. In other words, contemporaneous with the extensions granted, it was essential for the Respondent to have initiated legal action. Since this was not done, there would be a reasonable presumption that the claim for damages had been abandoned and given a go-by by the Respondent.

11. In a works contract, more often than not, delays occur, and that is why it is assumed that time is not of the essence. Where extensions are asked for and granted, there must be a clear and discernable stand on behalf of either of the parties that the extension is granted and/or accepted without prejudice to the claim of damages. It has become commonplace that neither party lodges a claim for damages, but waits for the end of the contract to raise these disputes, taking advantage of the nebulous and equivocal nature of the transactions between them. This, however, is not the position that obtains before us since the Appellant State had categorically posited that the claim for damages for the alleged delay on its part would not be entertained.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 1770 of 2005

Decided On: 16.10.2015

 State of Gujarat Vs. Kothari and Associates

Hon'ble Judges/Coram:

Vikramajit Sen and Shiva Kirti Singh, JJ.

Citation:(2016) 14 SCC 761

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Whether contract can be rescinded if contractor fails to sign contract personally?

I have heard the learned counsel for the parties, appraised
the paper book and of the view that there is no merit and force in the
submission of Ms.Pathak, for, the Arbitrator categorically recorded a
finding with regard to tendering of documents at the behest of the
respondent-contractor. The officials of the Corporation should not have
been right in calling upon the contractor to sign the agreement as he was
in custody and, therefore, had executed GPOA and assignment of right of
a principal to the agent is recognised in law and once the Corporation
failed to honour the contract and insisted upon the presence of the
contractor for signing the agreement, there was no occasion for them to
cancel the contract. The intention of the contractor is evident from the
deposit of the security deposit. It is the conceded position on record that
respondent No.1 was in judicial custody w.e.f. 1.9.2002 and on
6.11.2002, the appellant issued notice to respondent No.1 to sign the

agreement in person by 17.11.2002, failing which the contract shall be
rescinded at his risk and cost and earnest money shall also be forfeited.
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
F.A.O.No.6853 of 2010 (O&M)
Dated: August 01, 2016
Central Ware Housing Corporation, Panchkula

V
M/s Jaswinder Singh,
CORAM:  AMIT RAWAL, JUDGE
Citation:AIR 2016(NOC)675 P&H

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When arbitration award should not be set aside?

I have heard the learned counsel for the parties, appraised
the paper book and of the view that there is no merit and force in the
submission of Ms.Pathak, for, the Arbitrator categorically recorded a
finding with regard to tendering of documents at the behest of the
respondent-contractor. The officials of the Corporation should not have
been right in calling upon the contractor to sign the agreement as he was
in custody and, therefore, had executed GPOA and assignment of right of
a principal to the agent is recognised in law and once the Corporation
failed to honour the contract and insisted upon the presence of the
contractor for signing the agreement, there was no occasion for them to
cancel the contract. The intention of the contractor is evident from the
deposit of the security deposit. It is the conceded position on record that
respondent No.1 was in judicial custody w.e.f. 1.9.2002 and on
6.11.2002, the appellant issued notice to respondent No.1 to sign the

agreement in person by 17.11.2002, failing which the contract shall be
rescinded at his risk and cost and earnest money shall also be forfeited.
It is now a settled law that in what circumstances, the award
has to be interfered with. The question, which is now raised in the
aforementioned appeal, has already been answered by the Hon'ble
Supreme Court in catena of judgments, wherein it has been laid down
that until and unless the award suffers from illegality as statutorily
prescribed under Section 34 of the Act, the same cannot be interfered
with. In this context, I intend to refer the judgments of Hon'ble Supreme
Court in Associate Builders Vs. Delhi Development Authority (2015)
3 SCC 49 and Navodaya Mass Entertainment Ltd. Vs. J. M.
Combines (2015) 5 SCC 698. In the aforementioned judgments, the
Hon'ble Supreme Court had culled out the ratio decidendi by holding that
until and unless there is error apparent on the face of record or the
arbitrator has not followed statutory legal position, it is only in these
circumstances, it would be justified interfering with the award. The High
Court should not act as a Court of appeal and reappraise the
material/evidence and embark on a path by substituting its own view in
support of the Arbitrator's view. It is not the case of the appellant that the
award is against the public policy or has violated the principles of
judicial approach, much less against the statute and other provisions of

Section 34 of the Act. The Arbitrator has dealt with the dispute, which
was contemplated and was within its scope. The parties to the lis had
participated in the proceedings and were given proper notice not only
with regard to the appointment of the Arbitrator but vis-a-vis
proceedings. In my view, the award of the Arbitrator does not suffer from
any illegality in as much as the Arbitrator, who is expert, has dealt with
the matter and decided the claims of respective parties to the lis.
In my view, the award read as a whole is just, fair and
reasonable. It is now a settled law that the Arbitrator is the sole judge of
quality and quantity of the evidence before him and decide on the basis
of the available evidence.
I am of the view that the award of the arbitrator is perfect,
legal and justice and based upon the appreciation of the evidence.

 IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
F.A.O.No.6853 of 2010 (O&M)
Dated: August 01, 2016
Central Ware Housing Corporation, Panchkula

V
M/s Jaswinder Singh,
CORAM:  AMIT RAWAL, JUDGE
Citation:AIR 2016(NOC)675 P&H

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When bank can not refuse to make payment to contractor in works contract?

After execution of the work, contractor, plaintiff-respondent No.1, herein instituted a suit for recovery of security amount, balance due, payment of final amount along with interest. 
It was pleaded in the plaint that the contractor, plaintiff-respondent, herein was always ready and willing to do remaining wooden work, but since the bills raised were not paid, therefore, the wooden work could not be carried by the contractor.
Having heard the learned counsel appearing for the parties, this Court is of the view that if there was a delay in execution of the work and the contractor had not commenced the work within four-&-half months, the period stipulated for completion of the work, the defendant-appellants always had the option to annul or cancel the work order. To their best of wisdom, the defendant-appellants persisted that the contractor should execute the work. 
This Court cannot become oblivious of the fact that the Bank had also given a provisional extension to the contractor to complete the work, hence, the Bank cannot rue for the delay on the part of the plaintiff-respondents. Furthermore, since the Bank itself had not cleared the bills, therefore, an impediment was caused for the contractor not to complete the wood work. 
Reportable
In the High Court of Judicature for Rajasthan at Jaipur Bench Jaipur

S.B. Civil First Appeal No.85 of 1996
Rajasthan State Cooperative Bank Limited and Others
V
Sh. Ramavtar Sharma and another
Dated:    15.02.2016

Hon'ble Mr. Justice Kanwaljit Singh Ahluwalia
Citation: AIR 2016 (NOC)657 Raj

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Whether court should quash prosecution against building contractor based on compromise with legal heirs of deceased?

 The Supreme Court in Narinder Singh (supra) has observed that the
power to quash the criminal proceedings in cases which are not
compoundable should be exercised sparingly and with caution. The guiding
factors in such cases would be to secure the ends of justice, or to prevent
abuse of the process of any Court. In the facts of the present case, neither of
the aforesaid two objectives would be achieved if the criminal proceedings/
FIR in the present case were to be quashed. There is nothing to show that
the accident was providential, and that it occurred despite due care and
precaution being taken by the petitioner. There is also nothing to show that
the criminal proceedings initiated against the petitioner are a result of mala
fides of any person, or an abuse of the process of the Court. The accident
has, undoubtedly, taken place in which one labourer has lost his life. The
nature of the accident itself is, prima-facie, suggestive of gross negligence.
In my view, it would defeat the ends of justice if the criminal proceedings
were to be quashed. The present endeavour of the petitioner to seek
quashing of the FIR and the proceedings arising therefrom – premised on a
settlement with respondents No.2 to 9, itself tantamounts to an abuse of the 
process of this Court. In a case like the present, even though respondents
No.2 to 9 may have entered into a settlement with the petitioner, it cannot be
said that the possibility of conviction is remote. It cannot be said that the
petitioner would be put to great oppression and prejudice, or that extreme
injustice would be caused to him by not quashing the criminal case.
32. In my view, quashing the FIR in question at this stage would certainly
send a very wrong signal not only to the petitioner, but the whole society at
large and particularly to other builders, contractors and other agencies
engaged in undertaking construction work, that even if they are grossly
negligent in taking preventive measures so as to prevent predictable
accidents – which may lead to serious injury and even loss of life, they could
get away by paying some compensation to the heirs of the injured/ deceased.
In fact, such like contractors/ builders/ agencies may find it more
economical to risk the lives of their workforce, and in the eventuality of an
accident occurring, to pay compensation, than to undertake all safety
measures which, if taken, would prevent such accidents in the first place.
33. As observed by the Supreme Court in Sheonandan Paswan (supra),
criminal proceedings are not a proceeding for vindication of private
grievance. They are initiated for the punishment of the offender in the
interest of the society. It is for maintaining stability and orderliness in the
society that certain acts are constituted offences and the right given to any
citizen to set the machinery of criminal law into motion for the purpose of
bringing the offender to book.
 IN THE HIGH COURT OF DELHI AT NEW DELHI

Judgment delivered on: 01.08.2016
 W.P.(CRL) 1280/2016 and Crl. M.A. No.6706/2016
BHAJAN LAL SHARMA

v
STATE (GOVT OF NCT OF DELHI) & ORS .
CORAM:
HON’BLE MR. JUSTICE VIPIN SANGHI
Citation: 2016 SCCONLINEDEL4234

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Whether contract entered by govt department with contractor can be rescinded without following principles of natural justice?

 Once a show cause notice was given and detailed
reply furnished by the parties, it is expected of the authorities to
pass an appropriate order after considering the reply, and not
merely stating that the reply was perused which was not found to
be satisfactory. Why it was not found to be satisfactory ought to
have been disclosed, which has not been done in the present case.
Issuance of notice to show cause and requirement of furnishing
reply is not to be an empty formality. The purpose would not be
achieved if the reply is not considered while passing the order.
 As we have already stated, the contract was in
operation at the time when the impugned order was passed, or else
the question of rescinding the contract would not have been there.
The extension granted by the opp. parties from time to time,
without imposing any cost or penalty on the petitioner, would itself
make it clear that the delay was not due to the fault of the
petitioner but because of the shortcoming or fault of the opp.
parties.
However, on merits, we find that the impugned order
is devoid of any reason and on this ground alone the order
deserves to be quashed. Merely completing the formality of giving
notice is not sufficient for complying with the principles of natural 
justice, as once after the notice is issued and a detailed reply is
given by the party, the authority is duty bound to pass a reasoned
order only after considering the contents of the reply, and not by
whimsically stating that the reply furnished was not found to be
satisfactory.
THE HIGH COURT OF ORISSA : CUTTACK
W.P.(C) No.20466 of 2015
In the matter of an application under Articles 226 and 227 of the
Constitution of India.

M/s. East Coast Constructions
Industries Ltd, Odisha … Petitioner
 -Versus
State
of Odisha and others … Opp.Parties

 P R E S E N T:
 THE HONOURABLE THE CHIEF JUSTICE MR. VINEET SARAN
 AND
 THE HONOURABLE DR. JUSTICE B.R. SARANGI
Decided on : 04.04.2016
Citation:AIR 2016(NOC) 456 Orissa

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Whether contractor can compel authority to award contract in his favour by offering better price after opening of sealed tenders?

In the light of the above contentions and from a perusal of the material on record, it is evident that respondents No. 1 to 4 had opened the sealed tenders in the presence of all the bidders, including the petitioner. The offer of respondent No. 5 was found to be most competitive. It was accordingly recommended for acceptance by the Central Purchase Committee of respondents No. 1 to 4. A letter of Intent was issued to respondent No. 5 as on 25.6.2015. It is noticed that the said respondent has, on receipt of the LOI, volunteered to offer a further discount of Rs. 200/KL over and above the discount of Rs. 850/KL, which was finalized by acceptance, apart from offering 30 days' credit facility and other value additions as seen from column 8 of the LOI.

On the other hand, the petitioner is found to have made more than one revised offer, after the opening of sealed tenders. This would render the sanctity and competitiveness of the closed bidding system meaningless. The petitioner's offer of a discount @ Rs. 1100/KL and other benefits ought to have been made in the first instance. The insistence that the respondents should accommodate the petitioner notwithstanding the process of acceptance of a tender of respondent No. 5, as the petitioner is now ready to better the offer of respondent No. 5 - is not tenable and may indeed result in an unfair trade practice, exposing respondents No. 1 to 4 to legal action.

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

Writ Petition No. 27719 of 2015 (GM-RES)

Decided On: 05.01.2016

Indian Oil Corporation Limited 

Vs.

 Karnataka State Road Transport Corporation and Ors.

Hon'ble Judges/Coram:Anand Byrareddy, J.

Citation: AIR 2016 (NOC)398

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When contractor in government contract should not be disqualified?

So far as clause (j) of the detailed notice inviting E-tender No.01/KMDA/MAT/CE/2013-2014 dated 10.5.2013 emanating from the office of the Chief Engineer is concerned, it seems to us that contrary to the conclusion in the impugned judgment, the clause is not an essential element or ingredient or concomitant of the subject NIT. In the course of hearing, the Income Tax Return has been filed by the Appellant-company and scrutinized by us. For the Assessment Year 2011-2012, the gross income of the Appellant- company was Rs.15,34,05,627, although, for the succeeding Assessment Year 2012-2013, the income tax was NIL, but substantial tax had been deposited. We think that the Income Tax Return would have assumed the character of an essential term if one of the qualifications was either the gross income or the net income on which tax was attracted.

In many cases this is a salutary stipulation, since it is indicative of the commercial standing and reliability of the tendering entity. This feature being absent, we think that the filing of the latest Income Tax Return was a collateral term, and accordingly the Tendering Authority ought to have brought this discrepancy to the notice of the Appellant- company and if even thereafter no rectification had been carried out, the position may have been appreciably different. It has been asserted on behalf of the Appellant-company, and not denied by the learned counsel for the Respondent-Authority, that the financial bid of the Appellant-company is substantially lower than that of the others, and, therefore, pecuniarily preferable.

14. In this analysis, we find that the Appeal is well founded and is allowed. The impugned judgment is accordingly set aside. The disqualification of the Appellant-company on the ground of it having failed to submit its latest Income Tax Return along with its bid is not sufficient reason for disregarding its offer/bid. 
SUPREME COURT OF INDIA

Rashmi Metaliks Ltd. & ANR. Vs. Kolkata Metropolitan Development Authority & Ors.

[Civil Appeal No. 6772 of 2013]

VIKRAMAJIT SEN, J.

Dated:11-9-2013

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Whether contractual dispute between govt and private party can be decided on the basis of administrative law?

 As noted above, the contention of the respondent is that PSCs
are in the nature of a contract agreed to between the two
independent contracting parties. It is also mentioned that before
the signing of the PSCs, the approval of Cabinet is obtained
which reflects that the PSC as submitted to the Cabinet has the
approval of one of the contracting parties, namely, Government of
India in this case. When it is signed by the other party it means
that it has the approval of both the parties. Therefore, a
contracting party cannot claim to be oblivious of the provisions of
the law or the contents of the contract at the time of signing and,
therefore, later on cannot seek retrospective amendment as a
matter of right when no such right is conferred under the contract.

Even the doctrine of fairness and reasonableness applies only in
the exercise of statutory or administrative actions of the State and
not in the exercise of contractual obligation and issues arising out
of contractual matters are to be decided on the basis of law of
contract and not on the basis of the administrative law. No doubt,
under certain situations, even in respect of contract with the State
relief can be granted under Article 226. We would, thus, be
dealing with this aspect in some detail.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6929 OF 2012
JOSHI TECHNOLOGIES INTERNATIONAL INC. .....APPELLANT(S)
VERSUS
UNION OF INDIA & ORS. .....RESPONDENT(S)
Citation;(2015) 7 SCC 728

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When offence under S 409 of IPC is not made out in case of govt contract?

 Some of the peculiar factors to be noted in this case are as under : (1) It took Cbi 8 years to file the chargesheet and that too without the requisite documents which would substantiate the said charges and without making K.D. Mitra, authorised representative of the contractor company a co-accused notwithstanding the fact that K.D. Mitra is the one who was taken delivery of the said goods from Delhi site and he had also got the indented material weighed at the site at Delhi. (2) This is not a case of vicarious liability and thirdly, it is not show as to how section 409, Indian Penal Code is attracted in a case on present nature because the petitioner is neither a public servant nor a banker nor a merchant, broker, Attorney nor agent. (3) It is also not shown as to how delivery of material which was taken by K.D. Mitra could be attributed to the present petitioner without any specific evidence of entrustment. In a case under Section 409 Ipc, the factum of entrustment and the factum of misappropriation of the entrusted articles is absolutely necessary. In the absence of these two essential ingredients, no charge can be framed underSection 409 Indian Penal Code (See Janeshwar Das Aggarwal v. State of Uttar Pradesh, ). In the absence of proof of entrustment, there can be no question of accused being found guilty of the offence (See Roshan Lal Raina v. State of Jammu & Kashmir, ). The petitioner, who is the Managing Partner of M/s B.K. Roy Choudhary & Company and is based at Calcutta, which is the Head Office of the said firm, had signed the aforesaid documents for the purposes of accounts irrespective of the fact that his Field Officer who was present at the site at Delhi, had taken the actual physical delivery after due weighment and he had also signed the necessary transfer entries in Mas register. Peculiarly, the Court has not summoned any of the other five co-accused. (4) There is no evidence shown of the petitioner being present on site for taking delivery of the material. (5) The documents which are signed by the contractor, could be to ascertain the civil liability in respect of each contract for costing and accounting purposes by transferring the value of the goods transferred from one site store to another site store. Under the terms of the contract/agreement awarding the contract, the Clauses-10 and 42(i) may be considered, which for the convenience are reproduced hereunder:- Clause-10 "If the specification or schedule of items provides for the use of any special description of materials to be supplied from Engineer-in-Charge's stores, or it is required that the contractor shall use certain stores to be provided by the Engineer-in-Charge as shown in the schedule of materials hereto annexed, the contractor shall be bound to procure and shall be supplied such materials and stores as are from time to time required to be used by him for the purposes of the contract only, and the value of the full quantity of materials and stores so supplied at the rates specified in the said schedule of materials may be set off or deducted from any sums then due, or thereafter to become due to the contractor under the contract, or otherwise or against or from the security deposit, or the proceeds of sale thereof if the same is held in government Securities, the same or a sufficient portion thereof being in this case sold for the purpose. All materials so supplied to the contractor shall remain the absolute property of government and shall not be removed on any account from the site of the work, and shall be at all times open to inspection by the Engineer-in-Charge. Any such materials remaining unused and in perfectly good condition at the time of the completion or determination of the contract shall be returned to the Engineer-in-Charge at a place directed by him, if by a notice in writing under his hand he shall so require, but the contractor shall not be entitled to return any such materials unless with such consent, and shall have no claim for compensation on account of any such materials so supplied to him as aforesaid not being used by him or for any wastage in or damage to any such materials. Provided that the contractor shall _____ no case be entitled to any compensation or damages on account of any delay in supply or non-supply thereof all or any such materials and stores." Clause-42(i) "The contractor shall see that only the required quantities of materials are got issued. Any such material remaining unused and in perfectly good condition at the time of completion and determination of the contract shall be returned to the Engineer-in-charge at a place where directed by him, if by a notice in writing under his hand, he shall so require. Credit for such material will be given at the prevailing market rate not exceeding the amount charged from him, excluding the storage charges levelled at the time of issue of materials to him. The contractor shall also not be entitled to cordage and incidental charges for returning the surplus materials from and to the stores wherefrom they were issued..."; Reading of the said clauses does not in any manner make out a case of entrustment. The delivery of the said materials and its transfer from one site to another and all the documentation primarily is a part of accounting procedure so that the cost of the material which is actually used at a different site, does not get added on to the first site wherefrom the material is shifted. The material which is supplied to the contractor is in the nature of sale from government to the contractor and the contractor unless and until the department required contractor by giving a notice in writing under the signatures of Engineer-in-Charge, cannot exercise his option to return the material. As and when the material is returned, the contractor is given credit for the value of the returned material. In the chargesheet, there is no allegation that at any point of time, the department had required the contractor to return unused material to the department because so far as Delhi contract is concerned, on the basis of Transfer Entries, Unstamped Receipt and Advice of Transfer of Debt, the account of the contractor appears to have been debited with the value of the materials transferred. There is no charge or allegation of misappropriation in respect of Tor Steel and cement indented by K.D. Mitra which was received at the transferee site. I am informed that arbitration is already pending in respect of the discrepancy in mild steel valued at Rs. 41,824.00 . As I have already noticed hereinabove in terms of Clauses-10 and 42(i) of the contract, there does not appear to be any case for entrustment. In the case of State of Gujarat v. Jaswantlal Nathalal, reported as 1968 Crl.L.J. 803, the Hon'ble Supreme Court had to deal with the question of entrustment and in para-8 observed as under:- "8.The term "entrusted" found inSection 405, Indian Penal Code governs not only the words "with the property" immediately following it but also the words "or with any dominion over the property" occurring thereafter - see Velji Raghavji Patel v. State of Maharashtra, . Before there can be any entrustment there must be a trust meaning thereby an obligation annexed to the ownership of property and a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner. But that does not mean that such an entrustment need conform to all the technicalities of the law of trust - see Jaswantrai Manilal v. State of Bombay, 1966 Scr 483 at pp.498-500 = (AIR 1956 Sc 475 at pp.582-583). The expression "entrustment" carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another, continues to be its owner. Further the person handing over the property must have confidence in the person taking the property so as to create a judiciary relationship between them. A mere transaction of sale cannot amount to an entrustment. It is true that the government had sold the cement in question to Bss solely for the purpose of being used in connection with the construction work referred to earlier. But that circumstance does not make the transaction in question anything other than a sale. After delivery of the cement, the government had neither any right nor dominion over it. If the purchaser or his representative had failed to comply with the requirements of any law relating to cement control, he should have been prosecuted for the same. But we are unable to hold that there was any breach of trust."

(4) The offence alleged can be constituted only if accused had failed or refused to return he material which was held by him is trust which is not the case here. The transaction being that of sale and that the department having never exercised its option for return of the goods, there was no question of any misappropriation on failure to return or refusal to return the said material return thereof having not been sought by the department. Failure to return such material could not, in any event, constitute an offence under Section 409 Indian Penal Code because an independent contractor cannot be described as an agent of the department. Even assuming that the contractor had any dominion over the material and there was an element of entrustment and some offence under Section 406 could be constituted. It is pointed out that the said offence underSection 406 is punishable with imprisonment of three years and, therefore, the limitation for prosecution under Section 406 is three years from the date of commission of the offence and in the present case, launching of prosecution would be hopelessly time barred. Apart from all the a foregoing facts and circumstances and keeping in view that this is not a case of vicarious liability, it is amazing to note how in the face of the facts that the petitioner had not indented the material nor did he get it weighed nor did he accept the actual physical delivery thereof and in the absence of evidence that the petitioner had disposed of any of the material in question or had refused to return the same, or acknowledged liability, could the offence under Section 409 Indian Penal Code be made out. No criminal liability can be created unless the involvement of the accused himself is substantiated by evidence, which in the present case, appears to be absent. Unless vicarious liability is created by a special statute, no such liability can give rise to criminal liability in respect of the petitioner, particularly in view of the allegations that all acts were being performed by the individual local representatives of the firm.

Delhi High Court

B.K. Roy Choudhary vs State (Central Bureau Of ... on 15 July, 1997

Equivalent citations: 1997 IVAD Delhi 490, 1997 CriLJ 4204, 1998 (1) Crimes 95, 68 (1997) DLT 484, 1997 (42) DRJ 615

Bench: J Mehra

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When govt authority is responsible to pay compensation for negligence of contractor?

IN THE HIGH COURT OF ORISSA

W.P. (C) No. 8105 of 2010

Decided On: 11.12.2014

Appellants: A. Sudha
Vs.
Respondent: National Aluminium Co. Ltd. and Ors.

Hon'ble Judges/Coram:Biswanath Rath, J.

Citation; AIR 2015(NOC)871 Orissa

Compensation - Death of a minor child on account of drowning in a place under the custody of the NALCO - NALCO Authorities have not taken any effective steps to atleast come to fix the responsibility on the contractor at the appropriate time - Both Contractor and NALCO are responsible for the incident - Held, since this is a death of a minor child, a sum of Rs. 3,50,000/- be given as ex-gratia by NALCO to the bereaved family.

NALCO authorities also cannot shift their responsibility on the plea that the responsibility of maintenance of the water system as well as the sewerage system was lying with the contractor. In any case there was no impediment on NALCO to make payment of appropriate compensation to the bereaved family, which may not be on the head of compensation but by way of ex gratia and by holding an inquiry NALCO could have fixed responsibility on the contractor and recovered the amount from the contractor thereafter. As appears from the case record, the incident had taken place on 14.6.2008 and this writ petition is taken up for hearing at the end of 2014. Even assuming that there is no strong material directly holding the NALCO negligent for the incident, the petitioner cannot be asked now to file a civil suit, as the same will be grossly bared by time.

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How to calculate damages for breach of contract in case of govt contract?

In McDermott International Inc. v. Burn Standard Co. Ltd. 
(supra), the Court specifically dealt with the method for computation
of damages. The Court prefaced its discussion with the remarks that
“In the assessment of damages, the Court must consider only strict
legal obligations, and not the expectations, however reasonable, of
one contractor that the other will do something that he has assumed
no legal obligation to do.” The Court then explained each of the
formulae commonly adopted. The Court noted the criticisms of the
Hudson‟s formula observing that “it adopts the head office overhead
percentage from the contract as the factor for calculating the costs and
this may bear little or no relation to the actual head office costs of the
contractor.” The Emden formula which has received judicial support
in a number of cases has the advantage of using the “contractor‟s
actual head office and profit percentage rather than those contained in
the contract.” The Eichleay formula is used “where it is not possible
to prove loss of opportunity and the claim is based on actual cost.”
The Court did not endorse any one particular formula since “it is an
accepted position that different formulas can be applied in different
circumstances and the question as to whether damages should be
computed by taking recourse to one or the other formula, having
regard to the facts and circumstances of a particular case, would
eminently fall within the domain of the arbitrator.” What is significant
as far as the above discussion is concerned is that it is only concerned
with the application of formulae and not whether the formulae would
apply notwithstanding there is no proof of the contractor having
suffered overhead charges or loss of profit.
The net result of the discussion is that nowhere in the decision in
McDermott International Inc (supra) did the Supreme Court hold
that even without producing any material to show loss of overheads or
profit, the Arbitrator could apply one of the formulae to award the
claims.
IN THE HIGH COURT OF DELHI AT NEW DELHI O.M.P. 249/2013
Decision on: March 25 2015 NATIONAL HIGHWAYS AUTHORITY OF INDIA..... Petitioner
versus BUMI HIWAY (M) SDN BHD ..... Respondent
CORAM: JUSTICE S. MURALIDHAR Dated; 25.03.2015  
Citation;AIR 2015(NOC)877 Delhi

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Whether claim for loss of profit can be allowed to contractor when it is not proved that he suffered loss of profit?

 On the other hand, the Court finds that it has been repeatedly

stressed in the decisions of the Court that some basic material has to

be placed on record by the contractor to demonstrate loss of profits. It

is one thing to say that on account of the premature termination of a

contract, losses would be suffered and such in such instances it will

be possible to demonstrate loss of profit. However, that is not the case

here. Extension of time was given by NHAI up to 30th September

2004 without levy of LD. As the AT itself noted, BHSB did earn

profits but over an extended period of time. Secondly, as the AT itself

noted, BHSB did not produce any material to show that it had  

suffered any overhead costs or loss of profit. Therefore, the question

of the AT simply applying the formulae did not arise. 

IN THE HIGH COURT OF DELHI AT NEW DELHI

O.M.P. 249/2013

Decision on: March 25 2015

NATIONAL HIGHWAYS AUTHORITY OF INDIA.

Vs

BUMI HIWAY (M) SDN BHD 

CORAM: JUSTICE S. MURALIDHAR

Dated; 25.03.2015

Citation;AIR 2015(NOC)877 Delhi

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