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2025 Supreme(Online)(Raj) 11133
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR
MUNNURI LAXMAN, J
M/s Tirupati Cement Products – Appellant
Versus
State of Rajasthan – Respondent
S.B. Civil Writ Petition No. 8069/2025
For the Appellants/Petitioners: Mr. B.S.Sandhu, Mr. Gopal Sandu, Mr. Divik Mathur, Mr. Sunil Nath, through VC, Mr. Himanshu Choudhary, Ms. Nandini Bhown, through VC, Mr. Siddharth Bapna, through VC
For the Respondents: Mr. Sajjan Singh Rathore, Mr. Mehali Mehta, Mr. Lalit K. Purohit
The court ruled that deductions from contractors' bills for delays must be justified and cannot be arbitrary, emphasizing natural justice in contractual obligations.
Headnote:(A) Tender Document - Clause 2 - Liquidated damages/compensation/penalty - Deduction from running bills challenged - The court found that the respondents acted based on Clause 2 of the tender document, which mandates penalties for delays attributable to the contractor. The Chief Engineer's order lacked reasoning and violated natural justice principles. The deductions were deemed illegal and arbitrary, requiring refunds to the contractor. (Paras 3, 15, 12)
(B) Jurisdiction of Writ Court - The court emphasized that the jurisdiction of the writ court should not be declined in contractual matters, especially where civil consequences arise. (Paras 10, 11)
Facts of the case:
The petitions challenged the deduction of penalties by the respondents from the contractors' bills based on the tender's Clause 2. A similar issue was previously addressed in a related writ petition.
Findings of Court:
The deductions were quashed due to lack of justification and the need for adherence to natural justice.
Result: Interim orders vacated, and contractors permitted to make representations for claims.
Order
22/05/2025
1) Arguments were heard on the application for vacation of the interim orders.
2) All these writ petitions have been filed challenging the action of the respondents in deducting liquidated damages/ compensation/penalty from the running bills or final bills.
3) The respondents' action is based on Clause 2 of the tender document, which reads as follows:-
“Clause 2: Compensation for delay The time allowed for carrying out the work (21 months), as entered in the tender, shall be strictly observed by the Contractor and shall be reckoned from the 10th day after the date of written order to commence the work is given to the Contractor. If the Contractor does not commence the work within the period specified in the work order, he shall stand liable for the forfeiture of the amount of Bid security and Security Deposit. Besides, appropriate action may be taken by the Engineer-in-Charge/ competent authority to debar him from taking part in future tenders for a specified period or black list him. The work shall, throughout the stipulated period of completion of the contract, be proceeded with all due diligence, time being essence of the contract, on the part of the Contractor To ensure good progress during the execution of work, the contractor shall be bound, in all cases in which the time allowed for any work exceeds one month (save for special jobs), to complete 1/8th of the whole of the work before 1/4th of the whole time allowed under the contract has elapsed, 3/8th of the work before 1/2 of such time has elapsed and 3/4th of work before 3/4th of such time has elapsed. If the contractor fails to complete the work in accordance with this time schedule in terms of cost in money, and the delay in execution of work is attributable to the contractor, the contractor shall be liable to pay compensation to the Government at every time span as below: -
Note: The compensation, levied as above, shall be recoverable from the Running Account Bill to be paid immediately after the concerned time span. Total compensation for delays shall not exceed 10 percent of the total value of the work.
The contractor shall, further, be bound to carry out the work in accordance with the date and quantity entered in the progress statement attached to the tender.
In case the delay in execution of work is attributable to the contractor, the spanwise compensation, as laid down in this clause shall be mandatory. However, in case the slow progress in one time span is covered up within original stipulated period, then the amount of such compensation levied earlier shall be refunded. The Price escalation, if any, admissible under clause 45 of Conditions of Contract would be admissible only on such rates and cost of work, as would be admissible if work would have been carried out in that particular time span. The Engineer-in-Charge shall review the progress achieved in every time span, and grant stagewise extension in case of slow progress with compensation, if the delay is attributable to contractor, otherwise without compensation.
However, if for any special job, a time schedule has been submitted by the Contractor before execution of the agreement, and it is entered in agreement as well as same has been accepted by the Engineer-in-charge, the Contractor shall complete the work within the said time schedule. In the event of the Contractor failing to comply with this condition, he shall be liable to pay compensation as prescribed in forgoing paragraph of this clause provided that the entire amount of compensation to be levied under the provisions of this Clause shall not exceed 10% of the value of the contract. While granting extension in time attributable to the Government, reasons shall be recorded for each delay.”
4) Similar issue came up for consideration before a coordinate Bench of this Court in S.B. Civil Writ Petition No. 12533/2024, titled “GVPR Engineers Ltd. vs. State of Rajasthan & Ors.” The coordinate Bench, vide order dated 29.07.2024, dismissed the
