Whether the government can claim liquidated damages from other party while extending time for completion of project contrary to terms of contract?

5.2 In the communication granting extension of time with levy

of penalty, penalty is levied by the State Government

invoking Clause 3.5.5(v) of the OPWD Code. However, it is

required to be noted that Clause 3.5.5(v) of the OPWD

Code shall be applicable in a case where the contract is

terminated. It permits the appropriate authority/State to

terminate the contract with penalty when the progress of

work is not as per the conditions of contract. Here, it is not

a case of termination of the contract. Therefore, Clause

3.5.5(v) of the OPWD Code which has been invoked in the

communication granting extension of time but with levy of

penalty shall not be applicable at all.

5.3 So far as the reliance placed upon Clause 3.5.30 of the

OPWD Code by learned counsel appearing on behalf of the

State is concerned, even under the said clause, there is no

provision for imposition of penalty while granting extension

of time. Clause 3.5.30 only provides that while

communicating to the contractor of extension of time, he

must be informed that extension is granted without

prejudice to State Government’s right to levy compensation

under relevant clause of the contract. If the relevant clause

of the contract is seen and/or considered, there is no

condition stipulated in the contract that while granting the

extension of time, there may be levy of penalty. The

relevant clause with respect to the extension of time is

Clause-4, which has been reproduced hereinabove. Neither

the contract nor the OPWD code provides for imposition of

penalty while extending the contract. Therefore, levy of

penalty while granting extension of time is wholly without

authority of the law and is illegal. The same has been

rightly set aside by the High Court.

5.4 Even otherwise, it is required to be noted that before the

levy of penalty of a particular percentage, while granting

extension of time, no opportunity of being heard has been

given to the contractor as to why the penalty may not be

imposed while granting extension of time and at what rate.

In a given case, the State Government might be justified in

imposing the penalty while granting the extension.

However, the contractor must be put to notice that

extension of time can be granted on imposition of

reasonable penalty. However, without putting the

contractor to notice, unilaterally, the State is not justified

in levying the penalty while granting extension of time.

6. In view of the above and for the reasons stated above, the

High Court has rightly set aside the penalty levied while

granting extension of time. 

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4934 OF 2022

The State of Odisha & Ors. Vs Radheshyam Agrawal 

Author: M.R. SHAH, J.

Dated: MARCH 24, 2023.

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Whether incorrect interpretation of leave and licence agreement is binding on licensor?

Mr. Seervai then relied upon Section 55 of the Maharashtra Rent Control Act, 1999, which reads as under:

55. Tenancy agreement to be compulsorily registered.-(1) Notwithstanding anything contained in this Act or any other law for the time being in force, any agreement for leave and licence or letting of any premises, entered into between the landlord and the tenant or the licensee, as the case may be, after the commencement of this Act, shall be in writing and shall be registered under the Registration Act, 1908 (XVI of 1908).

(2) The responsibility of getting such agreement registered shall be on the landlord and in the absence of the written registered agreement, the contention of the tenant about the terms and conditions subject to which a premises have been given to him by the landlord on leave and licence or have been let out to him, shall prevail, unless proved otherwise.

 Secondly, and more important, is the fact that the reliance upon Section 55(2) in the facts of the present case, is entirely misconceived. Under Section 55(2) if the agreement is not registered "the contention of the tenant about the terms and conditions subject to which a premises have been given to him by the landlord on leave and licence or have been let out to him, shall prevail, unless proved otherwise". The term "contention" in Section 55(2) refers to contentions of fact and not of law. Construction of the terms and conditions of a contract are questions of law. A court cannot be bound by an erroneous construction of the contract.

19. In this case, there is no dispute between the parties as to the terms of the agreements. It is not the company's case that any terms other than those contained in the said leave and licence agreement were agreed upon between the parties. In other words, the submission was not based on the existence of an independent term. The first contention raised by Mr. Seervai was based on the construction of admitted terms. I have held this construction to be erroneous. There is nothing in Section 55 which remotely suggests that even an incorrect interpretation of an agreed/admitted term is binding on the licensor.

IN THE HIGH COURT OF BOMBAY

C.P. No. 898 of 2008

Decided On: 12.02.2009

 Corporate Management Council of India P. Ltd. Vs.  Lonza India P. Ltd.

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When time is not essence of contract?

Learned counsel
for the appellant further argued that in the case of sale of
immovable property there is no presumption as to time being the
essence of the contract. Even if it is not the essence of the
contract, the court may infer that it is to be performed in a
reasonable time if the conditions are: (i) from the express terms
of the contract; (ii) from the nature of the property; and (iii) from
the surrounding circumstances, for example: the object of
making the contract and for that reliance has been placed upon
(1993) 1 Supreme Court Cases 519 Chand Rani (Smt.)
Dead) by Lrs… Appellants versus Kamal Rani (Smt.) (Dead)
by Lrs… Respondents. 
The agreement to sale (Ext. 3)
contains the terms which have been agreed upon that the
transaction of sale should be completed within six months from
the date of execution of the agreement i.e. from 28.10.1988 till
27.04.1989. In last paragraph there is term that if the vendee
fails to get the sale deed registered within the time then, amount
of only Rs. 25,000/- will be forfeited and that cannot be realized
from executant. Further it is mentioned that the land to be sold
would be measured and the payment of the price would be finally
calculated accordingly. In the case of Smt. Indira Kaur and
others (supra) and also in the case of Chand Rani (Supra) it
has been held that the law is well settled that in transaction of
sale of immovable properties time is not the essence of the
contract. The Apex Court in the case of Balasaheb Dayandeo
Naik (dead) through LRS & Ors. vs. Appasaheb Dattatraya
Pawar reported in (2008) 4 SCC Page 464 in paragraph 10,
11, 12 and 14 held that the time was not the essence of the
contract. Here also the land going to be sold is immovable
property and agricultural land and as such time was not the
essence of the contract. There is nothing on the record on behalf
of defendants to show that the defendants got measured the land
rather the plaintiff after sending the Ext. 1/A (legal notice)
requested the defendants to get the land measured and
demarcated and to get the sale deed executed. From the oral 
evidences adduced on behalf of the parties also it reveals that the
time was not the essence of the contract and it was never agreed
that the entire earnest money will be forfeited rather by way of
cost only Rs. 25,000/- was to be forfeited. No party can be
allowed to go beyond the express term contained in the
agreement to sale. Accordingly, it is held that the time was not
the essence of the contract.
IN THE HIGH COURT OF JUDICATURE AT PATNA
First Appeal No.42 of 2006

Most.Sita Devi V Mahal Sahkari Grih Nirman Samiti Ltd. Patna, 
CORAM: HONOURABLE MR. JUSTICE JITENDRA MOHAN
SHARMA
Citation:AIR 2016 Patna 191
Date: 06-09-2016

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Whether terms of contract can be changed considering change in law?

 When the tariff order itself is subject to periodic review it
is difficult to see how incorporation of a particular tariff
prevailing on the date of commissioning of the power project
can be understood to bind the power producer for the entire
duration of the plant life (20 years) as has been envisaged by
Clause 4.6 of the PPA in the case of Junagadh. That apart,
modification of the tariff on account of air cooled condensers
and denying the same on account of claimed inadequate
pricing of biogas fuel is itself contradictory.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5875 OF 2012
GUJARAT URJA VIKAS NIGAM LIMITED 
 V
TARINI INFRASTRUCTURE LTD. & ORS. 
RANJAN GOGOI, J.
Dated:JULY 05, 2016.
Citation:(2016) 8 SCC743

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