Full Judgment Text
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PETITIONER:
HIMACHAL PRADESH NAGAR VIKAS PRADHIKARAN
Vs.
RESPONDENT:
M/S. AGGARWAL & CO.
DATE OF JUDGMENT: 27/01/1997
BENCH:
K. RAMASWAMY, G.T. NANAVATI
ACT:
HEADNOTE:
JUDGMENT:
O R D E R
Leave granted.
This appeal by special leave arises from the judgment
and order dated May 2,1996 of the Himachal Pradesh High
Court passed in O.M.P. No. 626/93 in Ex. P. No. 27/1993. The
admitted facts ar that the respondent had entered into an
agreement with the appellant to execute certain works
pursuant to which there was a dispute which was referred to
the Arbitrator, on directions of the High Court. The
Arbitrator in the Award dated April 25, 1992 stated as
under:
"After considering whole matter
submitted to me by both the
parties, both verbally and in
writing I have come to this
conclusions that delay lies on the
part of the respondent - Executive
Engineer,
It is awarded that the plaintiffs
shall be paid by the respondent-
Executive Engineer an increase of
25% over and above their tendered
rates for all works executed by
them after the stipulated date of
completion i.e. 21.5.89."
The awarded was made rule of the Court. In
implementation of the award, the appellant worked out the
details, as mentioned in the letter No. SDA (D) - Acctt-
7/93-644-47 dated November 12, 1993 which reads as under :
"With reference to your letter
No.AV/SIM/804-93-94 dated
5.10.1993, I am enclosing herewith
a cheque bearing No. 807801 dated
12.11.1993 amounting to Rs.
4,99,307/- on account of payment of
award announced by the director
which has been made as rule of
court by the Hon’ble H.P. High
Court. The details of the awarded
amounts and recoverise due to be
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made from you are as under:
Gross amount of the work done after
11th R/A Bill i.e. after 21.5.1989
onwards upto 26th R.A. Bill)
Rs. 69,78,354.00
Less cost of material i.e.
Cement/Steel supplied by the SDA o
which there has been no increase in
the issued rates. (-)
23,25,685.00
-------------
Net amount 46,52,669,00
25% increase on Rs. 46,52,669/0 as
awarded by the Arbitrator.
11,63,167.00
Less 2% I-Tax on 23,263/- on
Rs.11,63,167/-12% S.C on I. Tax
Rs. 2,792.00 (-) 26,055.00
-----------------------------
Total Rs. 26,055.00 11,37,112.00
With held on account of recoveries
due to be made from you against
agreement No. 52 of 1987-88. (-)
6,37,805.00
---------------
Net payable 4,99,307.00
Please send stamped receipt.
Your faithfully,
(Executive Engineer (d),
Shimla Development Authority,
Kasumpti, Shimla-9"
It is seen from the contents of the letter that the
appellant has deducted only the cost of the material, i.e.,
cement and steel supplied the SA on which there has been no
increase in the issue rates. After working out of the
Details, a sum of Rs. 4,99,307/- became due to the
respondent. The appellant calculated the amount actually due
and payable to the respondent under the award less the
income-tax and surcharge etc. and the balance amount came to
be paid. But when the respondent claimed a further sum of
Rs. 5,81,421/-, the appellant objected thereto under Section
47 of the CPC. The High Court over-ruled the objection and
directed payment thereof. Thus, this appeal by special
leave.
It is submitted by Shri H.K. Puri, learned counsel for
the appellant that the enhancement of 25% is relatable to
the tendered rates for the works executed by the respondent
and does not relate to the rates of raw material supplied by
the appellant. He also submitted that cement and steel were
supplied by the Department at the contract. Thus, escalation
in price of raw materials supplied by the appellant the
entire burden was borne by the appellant and, therefore, no
extra payment could have been intended to be made under the
award in respect to those items. Therefore, the High Court
was not right in directing payment thereof. We find force in
the contention. It is contended by Shri Upadhyay, learned
counsel for the respondent, that when the Arbitrator
recorded a finding that delay in execution was on account of
the laches on the part of the Executive Engineer and awarded
25% more than the agree normal rate, as per the contract and
the award having been allowed to become final, it is not
open to the appellant to deny 25% escalation charges for the
period. In other words, it amounts to interference with the
award which has attained finality. In support thereof, the
learned counsel relied upon paragraph 12 of the judgment in
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P.M. Paul V. Union of India [ 1989 supp. (1) SCC 368].
Therein, the question was whether the contractor was
entitled to escalated rates due to delay in execution of the
award on the part of the Department. As seen, There is no
dispute on the proposition that when the award has been made
awarding escalation charges, necessarily the increased rates
of the cost of securing the material for performance of the
contract are required to be compensated by paying the amount
to the extent of the escalated charges. It is seen that
under Clause 10 of the contract, the appellant was required
to supply the material at the rates prevailing as on the
date of the execution and it was entitled to deduct the same
from the amounts payable after the execution of the
contract. In other words, when the iron and cement were
supplied, during the relevant period, even after the expiry
of the year for which the award came t be made, necessarily
it included the increase in rates. It is stated that they
did not charge increased rates but the rates prevailing as
on the dates and the amount worked out came to Rs.
23,25,785/-. The respondent is not entitled to 25% of the
escalated costs in that behalf. The very object of awarding
escalated cost was that the contractor had secured the
material from the open market at the price prevailing at the
relevant time and used the same for execution of the work.
In view of the fact that iron and that iron and cement were
not procured by the respondent during the extended time and
actual price for which they were supplied has been worked
out as detailed earlier, the respondent is not entitled to
25% more on that material supplied by the Department itself.
Under these circumstance, The High Court was clearly in
error in directing payment of the said amount.
The appeal is, accordingly, allowed but in the
circumstances without costs.