TaxTMI 
TaxTMI 
TaxTMI 
2015 (2) TMI 1418
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....rson committing breach. 4. The respondent - Delhi Development Authority awarded a contract vide agreement dated 4th October, 1995 to the appellant for constructing a sewerage pumping station at CGHS area at Kondli Gharoli at Delhi. Clause 2 in the agreement provided as follows: "the contractor shall comply with the said time schedule. In the event of the contractor failing to comply with this condition, he shall be liable to pay as compensation an amount equal to one percent or such smaller amount as the Superintending Engineer Delhi Development Authority (whose decision shall be final) may decide on the said estimated cost of the whole work for everyday that the due quantity of work remains incomplete; provided always that the entire amount of compensation to be paid under the provisions of this clause shall not exceed ten percent of the estimated cost of work as shown in the tender." Since the work proceeded at slow pace and the appellant-defendant failed to complete the same, the contract was terminated on 17th September, 1999. Under Clause 2 of the agreement, the Superintending Engineer of the respondent levied compensation of Rs. 20,86,446/- for delay in execution of the ....
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....d not be enforced in view of Section 74 of the Contract Act as laid down in Fateh Chand vs. Bal Kishan Das [(1964) 1 SCR 515], Maula Bux vs. Union of India [(1969) 2 SCC 554], M.L. Devendra Singh vs. Syed Khaja [(1973) 2 SCC 515], P. D'Souza vs. Shondrilo Naidu [(2004) 6 SCC 649] and Oil and Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. [(2003) 5 SCC 705]. Learned single Judge concluded as follows:- "20. The Court is of opinion that the plaintiff having not treated the contract as of the essence, and having extended the time for performance on several occasions, cannot now fall back on a presumptive condition to impose the maximum compensation leviable; enforcement of such action would be giving effect to a penalty clause. As far as granting reasonable compensation is concerned, the plaintiff has not shown even the basis for levying the compensation that it did in this case. As said earlier, this aspect assumes significance, because the plaintiff was aware what extent of the contract was performed, as well as what was the exact extent of loss, in monetary terms, either by way of payment to another contractor, or the amount spent for completing the work. In the circumstances, th....
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....ted to be kept in term deposit for a period of one year to ensure for the benefit of the successful party. Accordingly, the amount of Rs. 20,86,500/- is said to have been deposited which has been kept in FDR which is going to mature on 8th February, 2015. 11. Learned counsel for the appellant submitted that the Division Bench erred in holding that the entire amount of stipulated damages was genuine measure of compensation when instead of any fixed amount, only the maximum amount of compensation was stipulated. The contract in question only envisaged the upper limit of damages which could be claimed. It is submitted that the agreement quoted in earlier part of the order clearly shows that what is stipulated is that the compensation shall not exceed 10% of the estimated cost and the amount to be recovered as compensation was required to be determined by the Superintending Engineer. The respondent-plaintiff has failed to show the actual amount of loss suffered in getting the work executed from any other contractor. In these circumstances, at best a part of it could be taken to be compensation and the remaining penalty. He submitted that the judgment of this Court in Saw Pipes Ltd. (s....
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....hat stipulated damages are by way of penalty. In a given case, when highest limit is stipulated instead of a fixed sum, in absence of evidence of loss, part of it can be held to be reasonable, compensation and the remaining by way of penalty. The party complaining of breach can certainly be allowed reasonable compensation out of the said amount if not the entire amount. If the entire amount stipulated is genuine pre-estimate of loss, the actual loss need not be proved. Burden to prove that no loss was likely to be suffered is on party committing breach, as already observed. 17. It is not necessary to refer to all the judgments on the point in view of categorical pronouncement of this Court in Saw Pipes (supra), laying down as follows:- "64. It is apparent from the aforesaid reasoning recorded by the Arbitral Tribunal that it failed to consider Sections 73 and 74 of the Indian Contract Act and the ratio laid down in Fateh Chand case wherein it is specifically held that jurisdiction of the court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; and compensation has to be reasonable. Under Section 73, when a contract has been br....
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....tate. Similarly, in the present case, delay took place in deployment of rigs and on that basis actual production of gas from platform B-121 had to be changed. It is undoubtedly true that the witness has stated that redeployment plan was made keeping in mind several constraints including shortage of casing pipes. The Arbitral Tribunal, therefore, took into consideration the aforesaid statement volunteered by the witness that shortage of casing pipes was only one of the several reasons and not the only reason which led to change in deployment of plan or redeployment of rigs Trident II platform B-121. In our view, in such a contract, it would be difficult to prove exact loss or damage which the parties suffer because of the breach thereof. In such a situation, if the parties have pre-estimated such loss after clear understanding, it would be totally unjustified to arrive at the conclusion that the party who has committed breach of the contract is not liable to pay compensation. It would be against the specific provisions of Sections 73 and 74 of the Indian Contract Act. There was nothing on record that compensation contemplated by the parties was in any way unreasonable. It has been s....