The main legal point established in the judgment is that the observations in the PAC report alone would not be dispositive of the demand made by CPWD against Shapoorji, and the claim made by CPWD against Shapoorji based solely on the audit objection raised by the CAG as affirmed by the PAC was unsustainable.

Headnote:
CPWD - Contract Dispute - Clause 29 of the General Conditions of the Contract - [Clause 29] - The court discussed the interpretation and application of Clause 29 of the General Conditions of the Contract, which allows the Engineer-in-Charge or the Government to withhold and retain sums due and payable to the contractor against any claim of the Engineer-In-Charge or Government. The court highlighted that the claim for delay in completion of work and the extent of the delay, as well as the waiver of compensation for such delay, were disputed questions of fact and law that had not yet been adjudicated between the parties.
Fact of the Case:

The Central Public Works Department (CPWD) filed an appeal challenging a judgment that quashed demand letters and a memorandum issued by CPWD demanding a sum of Rs.30.80 crores from Shapoorji Palonji & Co. Pvt. Ltd. The demand was based on CPWD's interpretation of a contract clause regarding a bid for construction work.
Finding of the Court:

The court found that the claim made by CPWD against Shapoorji was unsustainable based solely on the audit objection raised by the CAG as affirmed by the PAC. The court highlighted that the observations in the PAC report alone would not be dispositive of the demand made by CPWD against Shapoorji.
Issues: The issues included the interpretation and application of Clause 29 of the General Conditions of the Contract, the disputed questions of fact and law regarding the delay in completion of work, and the sustainability of CPWD's claim against Shapoorji based on the audit objection raised by the CAG as affirmed by the PAC.
Ratio Decidendi: The court held that the claim made by CPWD against Shapoorji based solely on the audit objection raised by the CAG as affirmed by the PAC was unsustainable. The court emphasized that the observations in the PAC report alone would not be dispositive of the demand made by CPWD against Shapoorji.
Final Decision: The court dismissed the appeal, finding no infirmity in the impugned judgment, and left it open for CPWD to initiate appropriate proceedings for adjudication of its claim in accordance with the law.

JUDGMENT :

Anup Jairam Bhambhani, J.

Cm Nos. 13662-63/2019 (for exemption)

Allowed, subject to just exceptions.

CM No. 13660/2019 (for condonation of delay)

For the reasons stated in the application, the delay of 38 days in filing the appeal is condoned.

The application stands disposed of.

LPA 206/2019 & CM No. 13661/2019 (for stay)

The Central Public Works Department ("CPWD"), Ministry of Urban Development, Union of India has filed the present Letters Patent Appeal ("LPA") under Clause 10 of the Letters Patent of the Delhi High Court challenging judgment dated 13.12.2018 rendered by the learned single Judge in W.P.(C) No. 9281/2017. The writ petition was filed by M/s. Shapoorji Palonji & Co. Pvt. Ltd. ("Shapoorji"); and allowing the writ petition, the single Judge quashed communications dated 18.08.2017, 05.09.2017, 20.09.2017 and 12.10.2017 issued by CPWD demanding that Shapoorji pay-up a sum of Rs.30.80 crores. The single Judge also quashed Memorandum dated 09.10.2017 whereby CPWD had called upon various other CPWD regional offices and establishments to withhold the sum of Rs.30.46 crores from any amounts that may be due and payable to Shapoorji.

2. The demand made by CPWD was premised on its interpretation of Clause 29 of the General Conditions of the Contract in relation to a bid given by Shapoorji for construction of "fixed tensile membrane roofing" over the seating area of the Jawaharlal Nehru Stadium, New Delhi, including civil and electrical works, as part of the up-gradation/renovation and new construction of the stadium for hosting the Common Wealth Games, 2010 at New Delhi.

3. Shapoorji's bid was accepted and the work was awarded for a lump sum amount of Rs. 3.08 crores. Disputes arose between the parties by reason of delay in execution of the work awarded, with each party contending that the delay was attributable to default on the part of the other.

4. It is relevant to mention that Shapoorji sought extension of time for completion of the project milestones from time-to-time, which extension was granted by CPWD. Shapoorji sought extension of time last by letter dated 18.01.2011, in response to which CPWD granted extension by its reply dated 14.12.2011, which reply said thus :

"Dear Sir,

Extension of time for completion of the above mentioned work is granted upto 26.08.2010 (actual date of completion) without levy of compensation by the Competent Authority.

Provided that notwithstanding the extension hereby granted, time is and shall still continue to be the essence of the said agreement."

(Emphasis Supplied)

As recorded in letter dated 14.12.2011 the project was actually completed on 26.08.2010 ; and therefore ex-post-facto extension was in fact granted by CPWD in terms of the letter.

5. It is relevant at this point to extract the provisions of Clause 29 of the General Conditions of the Contract which reads as under:

"CLAUSE 29

(i) Whenever any claim or claims for payment of a sum of money arises out of or under the contract or against the contractor, the Engineer-in-Charge or the Government shall be entitled to withhold and also have a lien to retain such sum or sum in whole or in part from the security, if any deposited by the contractor and for the purpose aforesaid, the Engineer-in-Charge or the Government shall be entitled to withhold the security deposit, if any, furnished as the case may be and also have a lien over the same pending finalization or adjudication of any such claim. In the event of the security being insufficient to cover the claimed amount or amounts or if no security has been taken from the contractor, the Engineer-in-Charge or the Government shall entitled to withhold and have a lien to retain to the extent of such claimed amount or amounts referred to above, from any sum or sums found payable or which may at any time thereafter become payable to the contractor under the same contract or any other contract with the Engineer-in-Charge of the Government or any contracting person through the Engineer-in-Charge

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2019 Supreme(Del) 575

Cases Referred (1)