Contractual delay damages require cogent proof and compliance with stipulated claim procedures.

The respondent-contractor was awarded a public works contract for laying, lowering and jointing the sewer collection system for the Himmatnagar Drainage Scheme, Zone “D”, for a contract value of Rs.46,25,487.86, with completion stipulated by 21 July 1987.

The contractor alleged that the work was delayed because the Board failed to provide materials, drawings, an uninterrupted site and a clear working line, and that the work was stopped on 12 June 1986.

After extensions, the work was completed and the contractor received the 22nd and final bill amounting to approximately Rs.49,55,175.70 without protest.

The contractor instituted Special Civil Suit No.409 of 1989 claiming Rs.47,70,077 under eleven heads, including extra payment for inspection chambers, idle establishment and machinery, escalation-related losses, loss of profit and other damages.

The Trial Court partly decreed the suit for Rs.44,28,524 with 10% interest from 30 January 1989 until realization.

The Board challenged that decree in the present First Appeal, contending that the claims were unsupported by cogent evidence and contrary to the contractual terms.

Whether the contractor established, through cogent and substantial evidence, that the delay was attributable to the Board and that the contractor consequently suffered the claimed losses and damages?

Whether the Trial Court could award compensation and loss of profit primarily on the basis of the contractor’s unilateral correspondence, without examining the contractual clauses governing extension of time, material supply, extra work and delay compensation?

Whether the claims were barred or restricted by the express terms of the contract, including Clauses 6, 14, 15-A and 40?

Whether the suit was defective for having been instituted in the name of the cooperative society through its authorised representative?

The Court applied the principle that a party claiming contractual damages must prove the breach, causation and actual loss by cogent evidence; damages cannot be awarded merely on assertions or unilateral correspondence.

Contractual claims must be determined primarily by the terms agreed between the parties. Clause 6 governed applications for extension of time; Clause 13 required execution in accordance with the specifications, drawings and written instructions; Clause 14 regulated alterations, additional work and corresponding extension of time, including the requirement of certification by the Engineer-in-Charge; Clause 15-A excluded compensation for loss caused by delay in Government supply of materials; and Clause 40 restricted compensation claims for delay in execution in the specified circumstances.

The Court further held that the Hudson formula for loss of profit cannot be mechanically applied and requires proof of non-attributable delay, the contractor’s established business capacity and credible evidence of loss of profitability.

The Board’s objection based on Section 6 of the Societies Registration Act, 1860 was not accepted on the facts because the society was represented through its authorised representative and its pleadings and affidavits had been duly sworn.

The Court found that the Trial Court had attributed the delay to the Board largely because the contractor’s letters complaining of shortage of materials, non-availability of frame covers, obstruction by trees and financial difficulties had not been answered. Mere non-reply to unilateral correspondence, however, did not prove the truth of the allegations or discharge the contractor’s burden of proof.

The contractor produced no adequate evidence demonstrating the actual cost of materials purchased from the market, the period during which machinery or staff remained idle, the loss actually suffered, or the price escalation and additional expenditure claimed.

The Court also relied on the fact that the contractor sought and obtained an extension of time, completed the work during the extended period and accepted the final payment without protest. This weakened the assertion that the machinery and manpower remained idle or that the Board’s breach caused the claimed losses.

The Trial Court had failed to examine the contractual provisions requiring appropriate certificates and regulating claims for material-supply delays, additional work and extension of time.

Consequently, awards under the various heads, including idle resources, extra expenditure and loss of profit, were held to rest on assumptions and presumptions rather than legally sufficient evidence.

The First Appeal was accordingly allowed, and the judgment and decree dated 22 December 2005 in Special Civil Suit No.409 of 1989, awarding Rs.44,28,524 with interest, were quashed and set aside.

The Registry was directed to remit the records and proceedings to the Trial Court.