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BOMBAY HIGH COURT
A.A. Halbe, H.H. Kantharia, JJ.
STATE OF MAHARASHTRA AND OTHERS - APPELLANTS
v.
SAIFUDDIN MUJJAFFARALI SAIFI - RESPONDENT
First Appeal No. 259 of 1985
Decided on: 25/29.1.1993
The dispute arose from a contract between the State and a contractor for the construction of a bridge. The contractor claimed additional payments for extra excavation, dewatering, and coarsed rubble trap masonry, as well as escalation costs and interest. The State denied liability, arguing that the contractor was bound by the terms of the tender and had not followed the proper procedures for claiming additional payments. The trial court found in favor of the contractor and awarded damages. The State appealed.
Fact of the Case:
The State of Maharashtra and its officers entered into a contract with a contractor for the construction of a bridge across the Serpani river. The contractor submitted the lowest bid and was awarded the contract at a rate 4.91% above the estimated cost. The contractor began work on the bridge, but encountered several difficulties, including the need for additional excavation, dewatering, and coarsed rubble trap masonry. The contractor claimed additional payments for these extra works, as well as escalation costs and interest. The State denied liability, arguing that the contractor was bound by the terms of the tender and had not followed the proper procedures for claiming additional payments.
Finding of the Court:
The court found that the contractor was entitled to additional payments for the extra excavation, dewatering, and coarsed rubble trap masonry. The court also found that the contractor was entitled to escalation costs and interest. However, the court reduced the amount of interest awarded by the trial court.
Issues: 1. Whether the contractor was entitled to additional payments for the extra excavation, dewatering, and coarsed rubble trap masonry. 2. Whether the contractor was entitled to escalation costs and interest. 3. Whether the amount of interest awarded by the trial court was excessive.
Ratio Decidendi: 1. The court found that the contractor was entitled to additional payments for the extra excavation, dewatering, and coarsed rubble trap masonry because: * The contractor had encountered unforeseen difficulties that were not contemplated in the tender. * The contractor had followed the proper procedures for claiming additional payments. * The State had failed to provide the contractor with the necessary information and assistance to complete the work. 2. The court found that the contractor was entitled to escalation costs and interest because: * The contract provided for escalation costs in the event of increases in the cost of materials and labor. * The contractor had incurred additional costs due to the unforeseen difficulties that it had encountered. 3. The court found that the amount of interest awarded by the trial court was excessive because: * The Interest Act, 1978 governs the award of interest in cases where there is no contractual provision for interest. * The current rate of interest under the Interest Act, 1978 is 11%.
Final Decision: The court allowed the appeal in part. The court upheld the trial court's finding that the contractor was entitled to additional payments for the extra excavation, dewatering, and coarsed rubble trap masonry, as well as escalation costs. However, the court reduced the amount of interest awarded by the trial court from 18% to 11%.
Halbe, J. - The State of Maharashtra and its officers have preferred this appeal against the judgment and decree passed by the Civil Judge, Senior Division, Dhulia, in Special Civil Suit No. 17/84, directing the appellant/State to pay Rs. 2,18,755/-, together with six per cent interest from the date of filing of the suit till realization to the respondent/plaintiff. The matter arises as follows.
The State proposed to construct the bridge across river Serpani at Mile No. 76 (622 Kms.) on Surat-Dhulia-Edlabad-Nagpur road. Accordingly, the tenders were invited and in response thereto various contractors submitted their tenders on due date and in time. On the scrutiny of those tenders, the tender of the plaintiff was found to be lowest as he had quoted rates at 4.91 per cent above the estimated rate. The plaintiff had attached certain conditions while submitting the tender, but later on withdrew those conditions and submitted the letter to that effect. Briefly, therefore, the tender of the plaintiff was accepted at the rate 4.91 per cent above estimated amount of the tender. It seems that the tender was published for Rs. 4,55,273/-, but in pursuance of the acceptance of the tender of the plaintiff, the estimated cost of the work rose to Rs. 4,77,627/-. The appellant/defendant No. 2 issued the work order AB/T/4781/78 on 5.7.1978 and is not in dispute that the plaintiff started that the work of the construction of the bridge across the said Serpani river. The prescribed time limit for this work was 18 months which on the basis of 5.7.1978 was 4.1.1980. It is, however, not in dispute that the date remained on paper and on account of several circumstances beyond the control of the plaintiff as well as the defendant, the construction of the bridge was completed on 15.2.1981.
2. The allegations of the plaintiff are that during the execution of the work, the plaintiff found several defects in putting up the foundation both for abutment and piers. The excavation had to be done deeper than the designed level and this necessitated further dewatering in the river bed. The plaintiff, therefore, wrote a letter to defendant No. 2 on 25.10.1978 pointing out the difficulties in respect of excavation of foundation and dewatering. It was stated in the said letter that the rates in the tender for this work were far less than the cost which he was required to incur for carrying out this work. To the details of this letter, we shall come latter, but suffice it to say at this stage that the difference started right from 24.10.1978. As usual, the appellants did not respond to this letter and this was followed by another letter, from the plaintiff dated 2.10.1979, inter alia, making the same grievance about the demand for rise in rates for the works indicated above. It is further contended that the defendant No. 2, under his letter No. E-8/NW/7594, dated 2.11.1979, replied to the plaintiff that the excavation was made in the softs strata as well as hard strata and thus the total quantity of excavation for foundation had not increased. It may be stated here that in the tender there was no reference whatsoever to the soft strata and digging had to be done or excavation had to be done, it was in hard strata. With this reply, the difference multiplied as the respondent plaintiff could envisage that the appellants/defendants were determined not to pay him as per his demand. The appellant/defendant emphasised that the respondent/plaintiff could not demand the rate for hard strata. There was a classification in strata and the payment could only be made according to the hard strata and soft strata. It must be stated here that for hard strata, the rate was Rs. 30/- per cubic metre. There was no reference whatsoever to soft strata, but the appellant has relied upon, for that purpose, on the District Scheduled Rates (D.S.R.). For this purpose, reference was made to Clause 38 of the Agreement read with the instructions contained in Government, B. & C. Depar
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