R.L. Kalathia &
Co. Vs State of Gujarat
P. Sathasivam, J.
appeal is directed against the judgment and final order dated 07.10.2002 passed
by the Division Bench of the High Court of Gujarat whereby the High Court set
aside the judgment and decree dated 14.12.1982 passed by the Civil Judge,
(S.D.), Jamnagar directing the State Government to pay a sum of Rs.2,27,758/-
with costs and interest and dismissed the Civil Suit as well as cross
objections filed by the appellant-Firm for recovery of the aggregate amount of
Rs. 3,66,538.05 on account of different counts as specified in the claim of the
facts: a) The appellant-Firm, a partnership firm registered under The Indian
Partnership Act, is carrying on the business of construction of roads, buildings,
dams etc. mostly in Saurashtra and also in other parts of the State of Gujarat.
In response to the invitation of tender by the State Government for
construction of Fulzer Dam II in Jamnagar District, the appellant-Firm quoted
and offered to construct the same for the quotation, specifications and design
of the Dam vide covering letter dated 05.06.1970. In the said letter, the appellant-Firm
also offered that they would give rebate of3/4% provided the final bill be paid
within three months from the date of completion of the work.
The offer of the
appellant being the lowest amongst other parties, it was accepted by the State
Government with the clause that the construction work was to be completed
within a period of 24 months from the works order dated 07.09.1970 which was
subsequently clarified that the period of 24 months was to be commenced from
the date of commencement of work i.e., 29.11.1970.b) During execution of the
said work, the Executive Engineer, who was in-charge of the project, made certain
additions, alterations and variations in respect of certain items of work and
directed the appellant to carry out additional and alteration work as specified
in writing from time to time. The final decision as to the alteration in
respect of certain items of work and particularly, in respect of the depth of
foundation which is known as cut off trenches (COT) took long time with the
result that the Firm was required to attend the larger quantity of work and
thus entitled for extra payment for the additional work.
As per the works
contract, the Firm was not paid the running bill within the specified time and,
therefore, suffered loss. c) On 16.07.1976, the Firm lodged a consolidated
statement of their claims for the additional or altered works etc. to the Executive
Engineer. As there was no response, the Firm served a statutory notice dated
04.01.1977 under Section 80of the Code of Civil Procedure (hereinafter referred
to as `the Code'). Again, on 24.03.1977, after getting no reply, the Firm filed
Civil Suit No. 30 of 1977 on the file of the Civil Judge(S.D.), Jamnagar
praying for a decree of the aggregate amount of Rs.3,66,538.05 with running
interest at the rate of 9% p.a. from the date of final bill till the date of
Suit and at the rate which may be awarded by the Court from the date of Suit
till payment. Vide order dated 14.12.1982, the Civil Judge allowed the suit and
passed a decree for a sum of Rs.2,27,758/- with proportionate costs together
with interest@ 6% p.a. from the date of suit till realization. d) Being
aggrieved by the said judgment and decree, the State Government filed First
Appeal No. 2038 of 1983 before the High Court of Gujarat at Ahmedabad.
The Division Bench of
the High Court, vide its order dated 07.10.2002, allowed the appeal of the
State Government and dismissed the suit of the appellant-Firm and also directed
that the decretal amounted posited by the State Government and as permitted to
be withdrawn by the Firm should be refunded within a period of four months from
the date of the judgment. Being aggrieved by the said judgment, the
appellant-Firm has filed this appeal by way of special leave petition before
Mr. Altaf Ahmed, learned senior counsel for the appellant and Ms. Madhavi
Divan, learned counsel for the respondent-State.
the trial Court after accepting the claim of the plaintiff granted a decree to
the extent of Rs. 2,27,758/- with proportionate costs and interest @ 6 per cent
per annum from the date of suit till realization, in the appeal filed by the
State after finding that the plaintiff was estopped from claiming damages
against the Department as the final bill was accepted, the High Court allowed
the appeal of the State and dismissed the suit of the plaintiff. The High Court
non-suited the plaintiff mainly on the ground of Clauses 8 and 10 of the agreement
and of the fact that the final bill was accepted by the plaintiff under
protest. In view of the same, it is relevant to refer Clauses 8 and 10 of the
agreement which are as follows:
payment shall be made for any work estimated to cost less than Rs 1,000/- till
after the whole of the said work shall have been completed and a certificate of
completion given. But in the case of work estimated to cost more than Rs
1,000/- the contractor shall, on submitting a monthly bill therefore, be
entitled to receive payment proportionate to the part of the work then approved
and passed by the engineer in charge whose certificate of such approval and
passing of the sum so payable shall be final and conclusive against the
contractor. All such intermediate payments, shall be regarded as payments by
way of advance against the final payments only and not as payments for work
actually done and completed and shall not preclude the engineer in charge from
requiring bad, unsound, imperfect or unskillful work to be removed and taken
away and reconstructed or re-erected, nor shall any such payment be considered
as an admission of the due performance of the contract or any part thereof in
any respect of the occurring of any claim nor shall it conclude, determine, or
effect anyway of the powers of the engineer in charge as to the final settlement
and adjustments of the accounts of otherwise, or in any other way vary or
affect the contract.
The final bills shall
be submitted by the contractor within one month of the date fixed for the
completion of the work, otherwise the engineer in charge's certificate of the
measurement and of the total amount payable for the work shall be final and binding
on all parties. Clause 10. A bill shall be submitted by the contractor each month
on or before the date fixed by the engineer in charge for all work executed in
the previous months and the engineer in charge shall take or caused to be taken
the requisite measurement for the purpose of having the same verified, and the
claim, so far as it is admissible, shall be adjusted, if possible within 10
days from the presentation of the bill. If the contractor does not submit the
bill within the time fixed as aforesaid, the engineer in charge may depute a subordinate
to measure up the said work in the presence of the contractor or his duly
authorized agent whose countersignature to the measurement list shall be
sufficient warrant, and the engineer in charge may prepare a bill from such
list which shall be binding on the contractor in all respects."
It is the stand of
the State and accepted by the High Court that the plaintiff-Firm has not fully
complied with Clauses 8and 10 of the agreement. It is also their stand that
mere endorsement to the effect that the plaintiff has been accepting the amount
as per final bill "under protest" without disclosing real grievance
on merits is not sufficient and it amounts to accepting the final bill without
any valid objection and grievance on merits by the plaintiff. The High Court
has also accepted the claim of the State that by the conduct of the plaintiff
in accepting the final bill and the Department has made full payment to the
plaintiff, sending statutory notice and filing suit for recovery of the
differential amount was barred by the principle of estoppel. On going through
the entire materials including the oral and documentary evidence led in by both
the parties and the judgment and decree of the trial Judge, we are unable to
accept the only reasoning of the High Court in non-suiting the plaintiff.
is true that when the final bill was submitted, the plaintiff had accepted the
amount as mentioned in the final bill but "under protest". It is also
the specific claim of the plaintiff that on the direction of the Department, it
had performed additional work and hence entitled for additional amount/damages
as per the terms of agreement. Merely because the plaintiff had accepted the
final bill, it cannot be deprived of its right to claim damages if it had
incurred additional amount and able to prove the same by acceptable materials.
going into the factual matrix on this aspect, it is useful to refer the
decisions of this Court relied on by Mr. Altaf Ahmed. In the case of Chairman
and MD, NTPC Ltd. vs. Reshmi Constructions, Builders & Contractors, (2004)
2SSC 663, which relates to termination of a contract, one of the questions that
arose for consideration was "Whether after the contract comes to an end by
completion of the contract work and acceptance of the final bill in full and
final satisfaction and after issuance a `No Due Certificate' by the contractor,
can any party to the contract raise any dispute for reference to arbitration?
While answering the said issue this Court held:-
rights and obligations of the parties are worked out, the contract does not
come to an end inter alia for the purpose of determination of the disputes
arising there under, and, thus, the arbitration agreement can be invoked.
Although it may not be strictly in place but we cannot shut our eyes to the
ground reality that in a case where a contractor has made huge investment, he
cannot afford not to take from the employer the amount under the bills, for
various reasons which may include discharge of his liability towards the banks,
financial institutions and other persons. In such a situation, the public
sector undertakings would have an upper hand. They would not ordinarily release
the money unless a "No-Demand Certificate" is signed. Each case,
therefore, is required to be considered on its own facts. 28. Further, necessity
as non habet legem is an age-old maxim which means necessity knows no law. A
person may sometimes have to succumb to the pressure of the other party to the
bargain who is in a stronger position."
Ambica Construction vs. Union of India, (2006) 13SCC 475 which also deals with
issuance of "No-claim Certificate" by the contractor. The following
conclusions are relevant which read as under:- "16. Since we are called
upon to consider the efficacy of Clause 43(2) of the General Conditions of
Contract with reference to the subject-matter of the present appeals, the same
is set out here in below: "43. (2) Signing of `no-claim' certificate.--The
contractor shall not be entitled to make any claim whatsoever against the Railways
under or by virtue of or arising out of this contract, nor shall the Railways
entertain or consider any such claim, if made by the contractor, after he shall
have signed a `no- claim' certificate in favour of the Railways, in such form
as shall be required by the Railways, after the works are finally measured up. The
contractor shall be debarred from disputing the correctness of the items
covered by `no-claim certificate' or demanding a reference to arbitration in
" A glance at
the said clause will immediately indicate that a no-claim certificate is
required to be submitted by a contractor once the works are finally measured
up. In the instant case the work was yet to be completed and there is nothing
to indicate that the works, as undertaken by the contractor, had been finally
measured and on the basis of the same a no-claim certificate had been issued by
the appellant. On the other hand, even the first arbitrator, who had been
appointed, had come to a finding that no-claim certificate had been given under
coercion and duress. It is the Division Bench of the Calcutta High Court which,
for the first time, came to a conclusion that such no-claim certificate had not
been submitted under coercion and duress. 18. From the submissions made on
behalf of the respective parties and in particular from the submissions made on
behalf of the appellant, it is apparent that unless a discharge certificate is
given in advance, payment of bills are generally delayed. Although, Clause
43(2) has been included in the General Conditions of Contract, the same is
meant to be a safeguard as against frivolous claims after final measurement. Having
regard to the decision in Reshmi Constructions it can no longer be said that
such a clause in the contract would be an absolute bar to a contractor raising
claims which are genuine, even after the submission of such no-claim
certificate. 19. We are convinced from the materials on record that in the instant
case the appellant also has a genuine claim which was considered in great
detail by the arbitrator who was none other than the counsel of the respondent
National Insurance Company Limited vs. Boghara Polyfab Private Ltd., (2009) 1
SCC 267, the question involved was whether a dispute raised by an insured,
after giving a full and final discharge voucher to the insurer, can be referred
to arbitration. The following conclusion in para 26 is relevant:- 10 "26.
When we refer to a discharge of contract by an agreement signed by both the
parties or by execution of a full and final discharge voucher/receipt by one of
the parties, we refer to an agreement or discharge voucher which is validly and
voluntarily executed. If the party which has executed the discharge agreement
or discharge voucher, alleges that the execution of such discharge agreement or
voucher was on account of fraud/coercion/undue influence practised by the other
party and is able to establish the same, then obviously the discharge of the
contract by such agreement/voucher is rendered void and cannot be acted upon.
Consequently, any dispute raised by such party would be arbitrable."
the above conclusions of this Court, the following principles emerge:
because the contractor has issued "No Due Certificate", if there is
acceptable claim, the court cannot reject the same on the ground of issuance of
"No Due Certificate".
as it is common that unless a discharge certificate is given in advance by the
contractor, payment of bills are generally delayed, hence such a clause in the
contract would not be an absolute bar to a contractor raising claims which are
genuine at a later date even after submission of such "No-claim
after execution of full and final discharge voucher/receipt by one of the
parties, if the said party able to establish that he is entitled to further
amount for which he is having adequate materials, is not barred from claiming
such amount merely because of acceptance of the final bill by mentioning "without
prejudice" or by issuing `No Due Certificate'.
the light of the above principles, we are convinced from the materials on
record that in the instant case, the appellant/plaintiff also had a genuine
claim which was considered in great detail by the trial Court and supported by oral
and documentary evidence. Though the High Court has not adverted to any of the
factual details/claim of the plaintiff except reversing the judgment and decree
of the trial Court on the principle of estoppel, we have carefully perused and considered
the detailed discussion and ultimate conclusion of the trial Judge. Though we
initially intend to remit the matter to the High Court for consideration in
respect of merits of the claim and the judgment and decree of the trial Court, inasmuch
as the contract was executed on 05.06.1970 and work had been completed in
August, 1973, final bill was raised on 31.03.1974 and additional claim was
raised on16.07.1976, to curtail the period of litigation, we scrutinized all
the issues framed by the trial Court, its discussion and ultimate conclusion
based on the pleadings and supported by the materials. The trial Court framed
the following issues:- " The following issues were framed at Ex. 16:-
1. Whether Plaintiff
proves that he executed extra work of change and entitled to claim Rs. 3,600/-?
2. Whether Plaintiff
proves that he did extra work of C.O.T. filing and hence entitled to claim Rs.
3. Whether Plaintiff
is entitled to claim Rs. 15,625/- in connection with excavated stuff?
4. Whether Plaintiff
is entitled to claim Rs. 7,585/- for guide bunds?
5. Whether Plaintiff
is entitled to claim Rs 5,640/- for pitching work?
Petitioner is entitled to claim Rs. 13,244/- for providing sand filter in
7. Whether Plaintiff
is entitled to claim Rs. 1,375/- for waster weir back filling?
8. Whether Plaintiff
is entitled to claim Rs. 30,600/- for extra item of masonry?
9. Whether Plaintiff
is entitled to claim Rs. 14,339.84 for breach of condition and irregular
Plaintiff is entitled to claim Rs 12,386.64 ps. for providing heavy gate?
Plaintiff is entitled to claim Rs. 1,37,478.17 ps for rising of prices?
Plaintiff is entitled to claim Rs. 30,000/- for establishment charges?
Plaintiff is entitled to claim Rs. 93,049.76 towards interest?
14. Whether notice
under Section 80 of the CPC is defective?
Plaintiff is estopped from filing suit in view of fact that he has signed and
accepted bills prepared by Defendant?
16. Whether suit is
barred by time?
17. Whether Court
has jurisdiction to decide the present suit?
18. What order and
have already considered and answered the issue relating to No. 15 in the
earlier paragraphs and held in favour of the plaintiff. In respect of other
issues relating to execution of extra work, excavation, construction of guide
bunds, pitching work, providing sand filter in river, waste weir backfilling,
extra masonary, providing heavy gate, additional amount due to raising of
prices, additional amount towards establishment charges, interest etc., the
trial Court based on the materials placed accepted certain items in to and rejected
certain claims and ultimately granted a decree for a sum of Rs. 2,27,758/- with
proportionate costs and interest @6 per cent per annum from the date of the
suit till realization. On going through the materials placed, relevant issues framed,
ultimate discussion and conclusion arrived at by the trial Court, we fully
agree with the same and the plaintiff is entitled to the said amount as granted
by the trial Court.12) In the result, the impugned judgment of the High Court
in First Appeal No. 2038 of 1983 dated 07.10.2002 is set aside and the judgment
and decree of the trial Court in Civil Suit No. 30 of 1977 dated 14.12.1982 is
restored. The civil appeal is allowed with no order as to costs.
(DR. B.S. CHAUHAN)