The entitlement to withhold liquidated damages depends on proving the breach of contract and the actual loss suffered, and correct valuation and payment of court fees for the relief sought.

S. Sankarasubban, J.

This appeal is filed by the defendant in O.S. No. 156 of 1988 on the file of the Additional Sub Court, Ernakulam. The suit was filed by the present respondent. The respondent had entered into a contract with the appellant for the work of fabrication, erection, testing and calibration of roof storage tanks at Cochin Refineries Ltd. The suit was filed on the ground that even though the respondent completed the work as per the terms of the contract, the appellant had illegally recovered a sum of Rs. 1,86,548.12 as liquidated damages from the final bill amount due to the plaintiff. The respondent/ plaintiff sought for a declaration that the appellant is not entitled to levy any liquidated damages on account of the performance of the contract on the ground that there was no breach of contract on his part. The plaintiff also claimed for recovery of certain amounts, which were withheld by the appellant, on various heads like shortage in stock, cost of diesel, etc. The total claim comes to Rs. 1,06,600 under the different claims.

2. The appellant/ defendant filed a written statement and contended that as per the agreement between the parties, time was the essence of contract and the plaintiff had undertaken to complete the work within five months from the date of receipt of the letter of intent or from the date of release of work front. The letter of intent was issued to the plaintiff on 13th September, 1983 and the work front for the first tank was released on 13th September, 1983 and the work front for the second tank was released on 30th December, 1983. The plaintiff could not complete the work within the agreed time and the time was extended to 23rd April, 1984. The plaintiff completed the work only on 16th March, 1985, after 11 months from the stipulated date for completion of the work causing irreparable loss and injury to the defendant. According to the appellant, since the plaintiff committed breach of contract by not completing the work within the stipulated time under clause 9.4.1 of the work order, the defendant was entitled to collect compensation and liquidated damages to an extent of 1/2 per cent of the total order value of contract for every week or part thereof, that the work may remain incomplete beyond the time schedule agreed by the parties or subsequently revised, subject to a maximum of 10 per cent of the total order value. In accordance with Clause 9.4.1 of the contract, the defendant recovered a sum of Rs. 1,86,458.12 from the plaintiff.

3. On the basis of the above pleadings, the court below raised as many as eight issues. The Court below gave a declaration that the defendant was not entitled to levy liquidated damages and then gave a decree for recovery of an amount of Rs. 1,06,600. It is challenging the above decree that the present appeal is filed.

4. No Cross Appeal or separate appeal has been filed by the plaintiff. Issues 2 and 3 are, whether the delay in completion of the work was caused due to the lapses of the defendant? And whether the defendant is entitled to invoke the liquidated damage cause? So far as issue Nos. 4 to 6 are concerned, they were found against the plaintiff and hence, it is not necessary for us to consider that issues. Issue No. 7 is whether the plaintiff is entitled to the declaration sought for?

5. Learned counsel for the appellant submitted that Clause 9.4.1 of the conditions of contract enables the appellant to realise liquidated damages from the plaintiff in case the contract was not completed in time. According to the defendant, the work was not completed in time by the plaintiff, while the plaintiff would contend that there was no breach of contract on his part. It is also admitted that an amount of Rs. 1,86,458.12 has been withheld by the defendant on the ground that it was the amount with regard to the liquidated damages due to the defendant. The first attack made by the learned counsel for the appellant is that the declaration prayed for is not m