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BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
V. BHARATHIDASAN, J.
S. Shanmugasundaram
Versus
The Project Director, Tsunami Project Implementation Unit, Rural Development and Panchayat Raj Department, Chennai & Another
Writ Petition (MD) No. 18556 of 2014 & M.P. (MD) No. 2 of 2014
Decided On : 28-11-2016
Price Escalation Cost - Construction Contract - Clause 47 of the agreement - 47.1
Fact of the Case:
The petitioner, a class-1 Contractor, sought an extension of time to complete a construction project due to non-availability of materials and other factors. The second respondent granted multiple extensions, and the petitioner completed the work within the extended time. The petitioner claimed price escalation cost as per clause 47 of the agreement, which was rejected by the second respondent.
Finding of the Court:
The court found that the delay in completing the work was not attributable to the petitioner, as the reasons for delay were beyond their control. The court also noted that the petitioner's application for price escalation cost was not belated, and the alternative remedy of arbitration was not a bar to entertaining the writ petition.
Issues: The issues revolved around the applicability of clause 47 of the agreement, the delay in completing the work, and the availability of alternative remedies.
Ratio Decidendi: The court held that the delay was not attributable to the petitioner, and as per clause 47.1 of the agreement, the petitioner was entitled to the price escalation cost. The court also established that the alternative remedy of arbitration was not a bar to the writ petition.
Final Decision: The impugned order rejecting the petitioner's claim for price escalation cost was set aside, and the second respondent was directed to consider and grant the petitioner's application for the price escalation cost.
(Prayer: Petition filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorarified Mandamus, calling for the records relating to the impugned proceedings issued by the 2nd respondent District Collector in Na.Ka.NO.779/2011 A 11 dated 22.8.2014 quash the same and further direct the 2nd respondent District Collector to sanction and disburse the amount towards the increased amount of a sum of Rs.12 03 065/- and Rs.11 67 704/-(Totalling Rs.23 70 769/-) towards the 1st quarter and 4th quarter respectively in the light of clause 47 of the Agreement dated 08.09.2010.)
Challenging the order passed by the second respondent, dated 22.08.2014, rejecting the petitioner's request for disbursement of price escalation costs for the work done by the petitioner, the present writ petition has been filed.
2. Heard Mr. Isaac Mohanlal, learned counsel appearing for the petitioner, Mr. R.Anandaraj, learned Government Advocate appearing for the respondents.
3. The case of the petitioner, in brief, is as follows:-
The petitioner is a class-1 Contractor and he was awarded with a contract for the reconstruction of 76 houses in vulnerable areas of coastal habitation in S.R.Pattinam Panchayat in Thanjavur District by the second respondent by an order dated 12.08.2010. According to the petitioner, he has deposited a sum of Rs.14.61 lakhs towards performance security plus additional security. Subsequently, he has also entered into an agreement for the said work and as per the agreement, the petitioner should complete the work within 15 months ie., before 08.12.2011 and stated that after the agreement, immediately, he commenced the work. It is further stated that due to non availability of labourers and construction materials viz., sand and bricks and due to heavy rain, continued power shut down, the petitioner could not complete the work within the stipulated time. In the above circumstances, the petitioner has approached the second respondent seeking extension of time to complete the construction work. The second respondent has also accepted the petitioner's request and extended the time for completing the work on various periods which are tabulated as under:-
| Sl.No. | Application for extension | Reasons for extension of time | Period of extension |
| 1 | 12.12.2011 | Delay in getting the materials viz., sand and bricks in view of the KVVT (kalaignar Veetu vasadhi thittam) scheme | From 09.12.2011 to 29.02.2012 |
| 2 | 17.04.2012 | The labourers who are belonging to Cuddalore District were affected by the Dhane storm | From 01.03.2012 to 31.05.2012 |
| 3 | 21.06.2012 | Non availability of skilled labourers and the continuous power cut | From 01.06.2012 to 31.07.2012 |
| 4 | 14.08.2012 | Continuous power cut and non availability of quarry materials | From 01.08.2012 to 30.09.2012 |
| 5 | 04.10.2012 | Continuous power cut and shortage of sand | From 01.10.2012 to 31.11.2012 |
4. According to the petitioner, during the fourth extension period, the second respondent issued a show cause notice dated 15.09.2012 calling upon the petitioner to give explanation for the non completion of the work. It is further stated in the said notice that if the work is not completed within one week, as per clause 59 of the agreement, dated 08.06.2010, the contract would be cancelled and the performance bank guarantee would be credited into the Government Account. Thereafter, the petitioner has submitted a detailed explanation on 25.09.2012. Based on the said explanation, the second respondent granted the fifth extension till 30.11.2012. According to the petitioner, he has completed the entire work within the extended time i.e., on 30.11.2012. It is further stated that the actual estimation of the reconstruction process was increased for the 4th quarter (from October to December 2012) and 1st quarter (from January to
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