An authority cannot withdraw a previous order, which waived a penalty in favour of a contractor, without granting the affected party an opportunity of being heard (audi alteram partem) and without providing valid reasons for such withdrawal.

Satyen Vaidya, Judge (Oral):

The instant Regular Second Appeal has been filed by the appellant/plaintiff under Section 100 of the Civil Procedure Code (for short “CPC”) against the judgment and decree dated 30.05.2016, passed by the learned Additional District Judge, Chamba, in Civil Appeal No. 927 of 2014, whereby the judgment and decree dated 21.11.2014, passed by the learned Civil Judge Junior Division, Dalhousie, District Chamba, in Civil Suit No. 45 of 2010, has been set aside and the suit of the appellant/plaintiff has been dismissed.

The appellant/plaintiff had filed a suit seeking declaration to the effect that Office Order dated 31.07.2009, passed by the Superintending Engineer, Himachal Pradesh Public Works Department (HPPWD), Dalhousie, District Chamba, H.P., was wrong, illegal, and not binding on the rights of the appellant/plaintiff. The relief of permanent prohibitory injunction restraining the defendants from effecting recovery of the penalty amount of Rs. 9,95,090/- was also sought.

The case as set up by the appellant/plaintiff before the learned Trial Court was that he was a Class-B Contractor and was enlisted with the HP Public Works Department. He had been awarded the execution of work relating to the construction of the Senior Secondary School building at Dalhousie, and for this purpose, a contract had been entered into between him and defendant No. 3, i.e., the Executive Engineer, Dalhousie Division, HPPWD, Dalhousie, District Chamba (H.P.). The work was awarded to the appellant/plaintiff on 13.01.2006. The stipulated period for completion of the work was two years, and the time was to be reckoned from the 15th day of the issuance of the letter of award. Accordingly, the work was to be completed by 27.01.2008.

It was further the case of the appellant/plaintiff that although he had executed the work with due diligence, the work could not be completed within the stipulated period. He further maintained that the reasons for delay in completion of the work were not attributable to him.

Plaintiff raised the grievance that defendant No. 3, vide letter dated 26.11.2008, had imposed compensation/penalty on the appellant/plaintiff to the tune of Rs. 8,29,780/- under Clause 2 of the contract and Rs. 1,65,310/- under Clause 3 thereof.

Aggrieved against the imposition of penalty the appellant/plaintiff had represented before defendant No. 2, i.e., the Superintending Engineer, HPPWD, who, after holding hearings on 31.01.2009, 04.03.2009, 20.03.2009, 17.04.2009, and 18.05.2009, had come to the conclusion that the delay in execution of the work was not attributable to the appellant/plaintiff and, resultantly, vide order dated 11.06.2009, had waived off the penalties imposed by the Executive Engineer, Dalhousie Division, HPPWD.

Plaintiff further alleged that the Superintending Engineer, HPPWD, subsequently withdrew his order dated 11.06.2009 by another order dated 31.07.2009, without assigning any reason and without affording the plaintiff an opportunity of being heard.

In response, the defendants had filed their joint written statement. Objections as to the maintainability of the suit, locus standi of the plaintiff, absence of cause of action, jurisdiction of the Court, and valuation were taken. It was alleged that the dispute as raised by the appellant/plaintiff was arbitrable under Clause 25 of the contract; hence, the Civil Court did not have jurisdiction.

On merits, it was alleged that the work had not been completed on account of reasons attributable to the appellant/plaintiff. On this basis, the imposition of penalty by the Executive Engineer, HPPWD, was sought to be justified. It was specifically alleged that the order dated 11.06.2009, passed by the Superintending Engineer, HPPWD, whereby the penalty had been waived off, was without jurisdiction. According to the defendants, the cost of the work was Rs. 61,20,712/-, which exceeded the jurisdiction of defendant No. 2 – the Superintending Engineer, HPPWD; hence, su