Himachal
Pradesh Nagar Vikas Pradhikaran Vs. M/S. Aggarwal & Co [1997] INSC 74 (27
January 1997)
K.
RAMASWAMY, G.T. NANAVATI
ACT:
HEAD NOTE:
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 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 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.
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