A contractor is entitled to recover damages for loss of profit when delays are caused by the other party's breach of contract, and penalties cannot be imposed on the contractor under such circumstances.

ORDER :

Biren Vaishnav, J.

1. These appeals are filed against the common judgement and decree passed by the 3rd Joint Civil Judge (SD), Nadiad, District : Kheda, dated 02.01.1998. It is a common judgement and decree in Special Civil Suit No. 185 of 1993 filed by the Contractor Shri Arvindbhai C. Patel for recovery of Rs.8,20,792/- and in Special Civil Suit No. 205 of 1993 filed by the Kheda District Panchayat for recovery of Rs.21,44,722.32/-. By the aforesaid judgement and decree, the learned Trial Judge allowed the suit of the Contractor, namely, Special Civil Suit No. 185 of 1993 directing that an amount of Rs.8,20,792/- be recovered with 12% penal interest from the Kheda District Panchayat. Special Civil Suit No. 205 of 1993 filed by the Kheda District Panchayat was dismissed. Hence, the respective appeals.

2. Facts in brief indicate that the work order was issued on 27.03.1987 by the Kheda District Panchayat to Shri Arvind C. Patel for constructing Sarkhej – Kakarkhad Ravadavad road II stage. Since the Contractor was the last bidder whose tender amount was Rs.14,74,396.10/-, the contract was awarded to the Contractor. The date of completion was stipulated to be 26.06.1988.

2.1 It was the case of the plaintiff – Contractor that since the site was not handed over on time due to pending land acquisition proceedings, the work could not be completed within the stipulated time. Payments also were irregular. Claims, therefore, were raised against the Kheda District Panchayat, six in number, which are as under:-

“(i) Rs.34,291/- asked for to return of security deposit which is deposited with defendant paid in cash. F.D.R., N.S.C along with accrued interest thereon.

(ii) Rs.20,000/- for work done but not paid.

(iii) Claim No.3 amounting to Rs.30,000/- as account of the metal, machine out and quarry west.

(iv) Claim No.4 amounting to Rs.2,65,468/- on account of loss of profit at the rate of 20%.

(v) Claim No.5 is of Rs.4,42,350/- on account of establishment charges.

(vi) Claim No.6 amounting to Rs.27,183/- final bill Rs.1,500/- asked for notice charges and total amount comes to Rs.8,20,792/- found due against defendant which may be allowed together with 18% penal interest by passing a decree against defendant along with the cost of the suit.”

2.2 After hearing the parties, the suit of the Contractor, namely, Special Civil Suit No. 185 of 1993 was decreed as above.

2.3 Special Civil Suit No. 205 of 1993 filed by the Kheda District Panchayat on the ground that the work was not completed within the stipulated time, and therefore, the work had to be allotted to one Shri Rakesh Shah as a result of which amounts were to be recovered from the Contractor of Rs.17,87,381.30/- paid by the plaintiff – Panchayat, was dismissed by a common judgement and decree. Since the respective suits were allowed and / or dismissed, the Kheda Panchayat is in appeal.

3. Mr. H.S. Munshaw, learned counsel appearing for the Kheda District Panchayat, being aggrieved by the decree in favour of the Contractor, would submit as under:

3.1 There were several set of evidences on record to show that the Contractor did not complete the work within the stipulated time limit which was clearly established. He would press into service the documents at Exhs 29 and 35 i.e. the last bill given to the subsequent Contractor, to submit that the suit of the Kheda District Panchayat ought not to have been dismissed on the ground of limitation as the last bill was of the year 1991 whereas the suit was filed in the year 1993.

3.2 Mr. Munshaw, learned Counsel, would submit that the learned Judge committed an error in holding that the land acquisition proceedings were pending. He would submit that the possession of the Survey Nos. 119, 283, 284, 319 & 322 was already handed over to the earlier Contractor M/s. Nihil Corporation. The work which was to be executed by the Contractor could not be completed due to his sole negligence.

3.3 Mr. Munshaw, learned Counsel, would submit that notices were given to