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2024 Supreme(Online)(Ker) 89325
IN THE HIGH COURT OF KERALA AT ERNAKULAM
JOHNSON JOHN, J
State of Kerala – Appellant
Versus
Plaintiff – Respondent
O.S. No. 25 of 2009
For the Appellants/Petitioners:
For the Respondents:
The court affirmed the contractor's right to price escalation under contract clauses due to delays not attributable to him and emphasized fair treatment in claims against the government.
Headnote:(A) Contract Law - Price Adjustment Clauses - The court found that the plaintiff is entitled to price escalation under clause 32A due to delays not caused by him, and the foreclosure of work was not justified. The trial court's finding on limitation was upheld. (Paras 15, 27, 28)
(B) Limitation - The court emphasized that the government should not rely on technical pleas to defeat legitimate claims. (Paras 23, 24)
(C) Interest - The court clarified that interest on delayed payments should be reasonable and not automatically at higher rates. (Paras 36, 37)
Facts of the case:
The plaintiff, a contractor, was awarded various works under the Kallada Irrigation Project but faced foreclosure and payment disputes, leading to legal action. The trial court ruled in favor of the plaintiff for price escalation and interest claims.
Findings of Court:
The trial court's decision to allow the plaintiff to claim Rs. 28,87,190/- with interest at 6% was upheld.
Issues: The court addressed the validity of foreclosure, entitlement to price escalation, claims under LCB conditions, excess payments, and the applicability of limitation.
Ratio Decidendi: The court ruled that the plaintiff was entitled to price escalation due to delays not caused by him and that the government should not use technicalities to deny legitimate claims.
Result: The appeal and Cross Objection are disposed of allowing the plaintiff to realize Rs. 28,87,190/- with interest at 6%.
| Table of Content |
|---|
| 1. details of the contracts and foreclosure. (Para 2 , 3 , 4 , 5) |
| 2. defendants' counterclaims and allegations of excess payments. (Para 6 , 7 , 10 , 11) |
| 3. trial court's findings and arguments from both parties. (Para 15 , 16 , 17) |
| 4. court's reasoning on limitation and contract terms. (Para 18 , 19 , 20 , 21 , 22) |
| 5. entitlement to price escalation due to delays. (Para 27 , 28 , 29 , 30) |
| 6. final decision on payment and interest. (Para 36 , 37 , 44 , 45) |
JUDGMENT
JOHNSON JOHN, J
This appeal and Cross Objection are against the judgment and decree dated 26.02.2020 in O.S. No. 25 of 2009 of the Sub Court, Kottarakkara.
2. The Government of Kerala accepted the tender of the plaintiff, a registered ‘A’ class contractor, and awarded various works under the Kallada Irrigation Project after executing the following principal agreements:
“I. K1 & TCDP RBC Formation of Karunagappally branch canal from ch 20m to 2360 m including CD works – Agreement No. 18/5E/KCQ/1986-’87 of SE, KIP Circle, Quilon.
II.KI & TCDP RBC Formation of Vallikunnam distributory from ch.40 m to 2000 m inducing CD works – Agreement No. 4/SE/KCQ/1987-’88 of SE, KIP Circle, Quilon.
III. KI & TCDP LBC Formation of Mellila west distributory from ch 12000 to 14005 m, Flood damages work -Urgent rectification works between ch 13675 to 13805m –Agreement No.11/SE/KIP/LB/9394 of SE, KIP LB Circle, Kottarakkara.”
3. The estimate of Karunagappally Branch Canal work was Rs.63,68,552/- and the accepted PAC of Vallikunnam Distributory Work was Rs. 58,06,685/-. The time fixed for completion of the work was 14 months. But, during the progress of the work, there were alterations and changes, and supplemental agreements were executed for extension of time and thereby, the period for completion of the work was extended upto 31.03.1995. But, the second defendant—Superintending Engineer, by his proceedings dated 11.11.1994, foreclosed the work relating to Karunagappally Branch canal and Vallikunnam Distributory and directed the plaintiff to stop the work. The work executed by the plaintiff till foreclosure was measured and the final bill recorded during February, 1995. The measurements were taken in accordance with the terms of the contract and the total amount of the bills worked out to Rs.23,61,558.81 and the said amount is due and payable to the plaintiff. The plaintiff is entitled for price adjustment towards labour and materials and a sum of Rs.57,73,838/- is due to the plaintiff from the defendants under clause 32A of the contract. The defendants are also liable to pay interest at the rate of 12% per annum for the said amounts.
4. It is stated that the foreclosure was only a camouflage to avoid the contract conditions between the parties and the defendants wanted the plaintiff to continue and complete the work without LCB conditions and arbitration clauses. Since the plaintiff invested heavily in the contract and large amounts are due from the Department, he agreed to execute and complete the balance work by 31.08.1995. The amount due to the plaintiff under the final bill relating to Vallikunnam Distributory is Rs. 22,98,956/- and out of that, the defendants paid only Rs.10,98,096. Towards the cost of extra items of work, the plaintiff also claimed Rs. 11,78,128/- from the defendants.
5. The Melila West distributory work was completed on 30.06.1996. The plaintiff received the final bill of the above work under protest. It is stated that more than Rs.85,673.25 is due to the plaintiff for that work and that the defendants have charged penal rates illegally. The plaintiff also claimed interest for the delayed payment. When the defendants failed to make the payments as per the final bills, the plaintiff filed O.P. No. 18497 of 1999 and this Court directed the defendants to make payment of the admitted bills within 4 months. When the defendants failed to comply the directions, the plaintiff initiated contempt of court proceedings and in the said proceedings, this Court allowed the p
