Dismissed

Chhattisgarh Housing Board v. Shreejikrupa Project

Chhattisgarh HC4 Jan 2026CR/36/2016

Case brief

AI extract

What is this about?

Cross-revisions against a Madhyastham Adhikaran award on a housing construction contract. The court held recovery of Rs.32,61,000 without adjudication was illegal, upholding the award in the Board's revision, and affirmed rejection of the contractor's claims on boring diameter, reinforcement cost, penalty, secured advance interest and interest rate.

What the court decided

AI extract

Chhattisgarh Housing Board Vs Shreejikrupa Project — Arbitration | Chhattisgarh HC (2026)

NIRMALA RAO

2026:CGHC:428

NAFR

HIGH COURT OF CHHATTISGARH AT BILASPUR

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CR No. 36 of 2016

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1 - Chhattisgarh Housing Board Aged About 44 Years Through- The Housing Commissioner, Chhattisgarh, Raipur, Chhattisgarh, Chhattisgarh

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2 - The Executive Engineer, Division-1, Chhattisgarh Housing Board, Raipur, Distt.- Raipur, Chhattisgarh ..........Respondents, District : Raipur, Chhattisgarh

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--- Petitioner(s)

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versus

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1 - Shreejikrupa Project Engineering And Contractors, Through Partner, Shri Karsan Bhai Bachu Bhai Varasani S/o Bachu Bhai Varsani R/o 289, Sunder Nagar, Near Sharma School, Behind C.S.E.B. Office, Raipur, Chhattisgarh, Office At Krishna Complex-2, Office-6, 2nd Floor, Rajnagar Chowk, Najna Mava Road, Rajkot-4 Gujarat.

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--- Respondent(s)

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CR No. 55 of 2016

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1 - M/s Shreejikrupa Project, Engineering And Contractors, A Partnership Firm Having Its Office At Office No.6, 2nd Floor, Krishna Complex-2, Rajnagar Chowk, Najna Mava Road, Rajkot Guj., Represented Through The Partner Mr. Karsan Bhai Bachu Bhai Varsani, Aged About 54 Years, Resident

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Of 289, Sunder Nagar, Near Sharma School, Behind C S E B Office, Raipur, Chhattisgarh.

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--- Petitioner(s)

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Versus

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1 - C. G. Housing Board, Through- The Housing Commissioner, Chhattisgarh Raipur, Chhattisgarh

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2 - The Executive Engineer, Division No.1, Chhattisgarh Housing Board, Raipur, Chhattisgarh, District : Raipur, Chhattisgarh

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--- Respondent(s)

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CR No.36 of 2016:

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For Applicant/ C.G. Housing Board :Shri Anumeh Shrivastava, Advocate. For Respondent :Shri Ashok Mishra, Advocate. CR No.55 of 2016: For Applicant :Shri Ashok Mishra, Advocate. For Respondent/ C.G. Housing Board:Shri Anumeh Shrivastava, Advocate.

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Hon'ble Shri Justice Rakesh Mohan Pandey

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Order on Board

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05.01.2026

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1. These two revisions have been preferred under the provisions of Section 19 of the Chhattisgarh Madhyastham Adhikaran Adhiniyam, 1983 challenging the award passed by the learned Chhattisgarh Madhyastham Adhikaran, Raipur in Reference Case No.13 of 2009, dated 3.2.2016, whereby the learned Adhikaran allowed one claim of the contractor and rejected six claims. The Housing Board has challenged the award whereby one claim of the contractor was

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allowed, whereas the contractor has challenged the part of award whereby his six claims were rejected.

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2. The facts, in brief, are that Shreeji Krupa Project (in short Contractor) participated in a bid floated by the Chhattisgarh Housing Board for construction of 255 houses at Kabir Nagar, Raipur. The contract was awarded to the Contractor work order was issued. An agreement was entered into between the parties on 7.2.2005. The total cost of construction was Rs.11,73,27,824/-. The contractor was required to complete the construction work within a period of 12 months from 7.2.2005. The contractor sought extension for 6 months vide application dated 20.1.2006 and in turn 3 month extension was granted vide letter dated 31.1.2006. Again extension was sought by the contractor on 4.5.2006. Thereafter, a show-cause notice was issued to the contractor but time was extended up to 6.8.2006 subject to payment of penalty of Rs.18,85,628/- vide letter dated 4.7.2006. The contractor again sought an extension for 3 months on 29.7.2006, which was granted vide letter dated 13.9.2006. On 28.10.2006, the contractor again sought extension for 3 months. After a delay of 9 months, the Chhattisgarh Housing Board terminated the agreement vide letter dated 21.11.2006. The contractor made a representation before the Board and he was permitted to complete the work. Finally, the contractor completed the work after a delay of 26 months on 6.4.2007. The Chhattisgarh Housing Board paid the final bill of Rs.11,92,68,951/- on 19.8.2008. The contractor invoked clause 29 of the agreement for recovery of the balance amount and preferred an appeal before the Commissioner under clause 29 of the agreement on 20.3.2009. The Commissioner rejected the claims of the contractor

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and against the said order, a reference was made before the learned Tribunal, which was dismissed for want of jurisdiction vide order dated 21.12.2011. Civil Revision No.52 of 2012 was preferred by the contractor assailing the order dated 21.12.2011. The said revision was disposed of vide order dated 4.10.2013 and the matter was remitted back to the Tribunal to decide it on merits. The parties appeared before the learned Tribunal and a final award was passed on 3.2.2016. Aggrieved by the said award, these two revisions have been preferred. In the first claim the contractor claimed a sum of Rs.2,07,05,410/- on the grounds that, according to agreement, he provided pile foundation of 20 cm diameter whereas, in agreement, the diameter of boring hole was 20 mm.

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3. In claim No.2, the claimant/ contractor claimed a sum of Rs.19,251,945/- on the ground that the items mentioned in the tender do not include the cost of reinforcement bars and clause covers fixing operation, cutting, bending, binding and handling with cost of required binding wire. The claimant stated that since the reinforcement bars were provided by the contractor itself, he was entitled to get cost thereof.

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4. In claim No.3, the claimant claimed a sum of Rs.1,58,150/-, the amount of penalty imposed by way of liquidated damages by the Board.

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5. In claim No.4, the claimant claimed a sum of Rs.3,25,336/- as per clause 11(B) of the contract agreement, interest competent charged by the Chhattisgarh Housing Board on the interest-free secured advance.

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6. Claim No.5 was not pressed by the claimant/ contractor.

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7. Claim No.6 was allowed by the learned Tribunal whereby the

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Housing Board was directed to make payment of Rs.32,61,000/-.

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8. Claim No.7 related to the grant of interest @ 16% on the entire claim amount, and the learned Tribunal granted interest @ 6% per annum on Rs.32,61,000/- from the date of recovery till its realization.

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9. Shri Anumeh Shrivastava, learned counsel for the Chhattisgarh Housing Board would submit that the findings recorded by the learned Tribunal with regard to claim No.6 are erroneous. He would refer to clause 38 of the agreement, which deals with a penalty for breach of contract and contend that the Housing Board had the right to recover any sum due from any other running contract between the parties. He would submit that, invoking clause 38 of the work agreement, the Housing Board recovered a sum of Rs.32,61,000/- as the contractor failed to complete the work within the stipulated time. He would pray to set aside the findings recorded by the learned Tribunal with regard to claim No.6.

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10. Shri Ashok Mishra, Advocate would oppose the submissions made by counsel for the Chhattisgarh Housing Board. He would submit that no opportunity of hearing was afforded to the contractor and that there was no adjudication in this regard. He has placed reliance on the judgment passed by the Coordinate Bench in the matter of M/s. Ajendar Singh vs. State of Chhattisgarh and Anr., passed in CR No.23 of 2017 .

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11. Heard learned counsel for the parties and perused the documents present on the record with utmost circumspection.

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12. In the matter of M/s. Ajendar Singh vs. State of Chhattisgarh and Anr., passed in CR No.23 of 2017 , it is held that in the absence of any adjudication by the Competent Authority or by the Tribunal with

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regard to the amount recovered from another contract, such recovery would be illegal and violative of the principles of natural justice. The relevant paras 10 & 16 are reproduced herein below:

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“10. A Division Bench of this Court in the matter of A.K. Construction Company (supra) where work of construction was awarded after completion of work, bills were submitted and the claim bills, however, were not released which led to dispute between the parties and the aggrieved party approached Arbitration Tribunal constituted under the Adhiniyam, 1983. Defence of the State Government was that the Government dues were to be recovered and in terms of the agreement, the Government was entitled to recover “sums recoverable” not only under the contract in question, but also under other contracts. The Division Bench speaking through A.K. Patnaik, CJ (as then His Lordship was), held that the Government could not be arbiter, Judge of its own cause and could not recover the amount unless the amount is held to be due and recoverable by way of adjudication either by the Court or by the Arbitration Tribunal, and observed as under: -

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“It will be clear from second sentence of the aforesaid clause that in the event of the security being insufficient or if no security has been taken from the contractor, then the balance or the total sum recoverable, as the case may be, shall be deducted from any sum then due or which at any time thereafter may become due to the contractor under the instant or any other contract with the Govt. The expression 'sum recoverable' would mean any sum that is admitted by a contractor to be due to the Govt. or that is disputed by the contractor but adjudicated by the Court or the arbitrator to be due and recoverable form the contractor. This can be the only interpretation of Clause 4.3.39.1 consistent with the principle of natural justice that no person can be a Judge of his own cause. In case, it is held, as has been held by the Arbitration Tribunal that the “sum recoverable” is any amount which the Govt. or any authority of the Govt. considers to be recoverable from the contractor, then the Govt. or such authority will be a Judge of its own cause and would be entitled to recover any sum from the contractor, even though the said sum is disputed and not adjudicated

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to be due and recoverable from the contractor by the arbitrator or the Court.”

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16. Since the amount of ₹7,64,871/- has been recovered from the another contract of the applicant which has not been adjudicated by the Competent Authority either by the Court or by the Arbitration Tribunal, without any adjudication the State Government could not be arbiter, Judge of its own cause and could not recover the said amount unless the amount is held to be due and recoverable by the Competent Authority. In that view of the matter, the impugned order dated 16.11.2016 is hereby set aside. The respondents are directed to pay the amount to the tune of 7,39,006/- along with interest thereon @ 6% from the date of filing of reference before the Chhattisgarh Madhyastham Adhikaran, Raipur, i.e. 11.03.2010.”

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13. Taking into consideration the fact that there was no adjudication by the Authority concerned prior to taking the decision of recovery of Rs. 32,61,000/- and no opportunity was afforded to the contractor while retaining said amount, thus, the action taken by the Housing Board was illegal and arbitrary. Therefore, the order passed by the learned Tribunal with regard to claim No.6 appears to be just and proper. Accordingly, the revision preferred by the Housing Board is dismissed.

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14. Shri Ashok Mishra, Advocate would submit that the learned Tribunal committed an error of law while dismissing claim No.1. He would contend that in the contract agreement, the diameter of the boring hole was specifically mentioned as 20 mm, whereas the contractor provided 20 cm diameter boring holes and the work done by Contractor was verified and certified by the Housing Board. He would contend that there was a typing mistake in the agreement with regard to the diameter of the boring hole. It is contended that no objection

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was raised by the Housing Board when the contractor completed the work using 20 cm diameter boring holes. He would submit that the claimant/ contractor was entitled to get a sum of Rs.2,07,05,410/-.

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15. On the other hand, Shri Anumeh Shrivastava, would submit that the learned Tribunal has considered all these grounds at length and thereafter concluded that it was not possible to carry out the work with 20 mm diameter boring holes and the contractor should have brought this fact or the alleged mistake erupted in agreement to the notice of the Housing Board. He would submit that the contractor completed the work and after payment of the final bill, raised his claim. He would contend that claim No.1 has properly been adjudicated by the learned Tribunal.

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16. Heard learned counsel for the parties and perused the documents present on the record with utmost circumspection.

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17. Learned Tribunal has placed reliance on the judgment passed by the Hon’ble Supreme Court in the matter of Shri Tarsem Singh vs.

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Shri Sukhminder Singh, reported in AIR 1998 SC 1400 , has held that:

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“Contract' is a bilateral transaction between two or more than two parties. Every contract has to pass through several stages beginning with the stage of negotiation during which the parties discuss and negotiate proposals and counter-proposals as also the consideration resulting finally in the acceptance of the proposal. The proposal when accepted gives rise to an agreement. It is at this stage that the agreement is reduced into writing and a formal document is executed on which parties affix their signatures or thumb impression so as to be bound by the terms of the agreement set out in that document. Such an agreement

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has to be lawful as the definition of contract, as set out in Section 2(h) provides that "an agreement enforceable by law is a contract". Section 2(9) sets out that "an agreement not enforceable by law is said to be void".

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Considering what contracts are void and what their impact would be, the Hon'ble Supreme Court by quoting section 20 of the Contract Act has observed that the section provides that an agreement would be void if both parties to the agreement were under a mistake as to matter of fact essential to the agreement. Unilateral mistake is outside the scope of the section.

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In Law of Contract and Tenders by M.C. Bhandari 3 addition, 3rd reprint 2011 at page 195 and 196 at para 7 of the commentary under section 20 of the Contract Act has written that:-

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“In the present case, there was no allegation of fraud or unfair practice. The sole contention of the plaintiff was that an honest mistake as to the distance was made. The judge found that the plaintiff could not have made a mistake, for he was a man of the locality and fairly experienced in Government contracts. Whether or not the plaintiff knew the correct distance, in the circumstances of this case, has to be taken that he ought to have known the distance. If he did not verify the distance, but negligently treated the distance as less than 25 miles, he was not justified in saying that the Government is liable to compensate him for the loss which he has himself caused as a result of this negligence. He has no case that if he had pointed out the correct distance he would not have been placed in the correct zone.”

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18. Admittedly, an agreement was entered into between the parties, it was signed after due discussion and negotiation. Therefore, it cannot be said that there was any mistake in the agreement. It is not a case

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where the contractor used 20 cm diameter boring hole after taking prior permission of the Housing Board.

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19. In the schedule of items for the construction work, it would make clear that the contractor had to use 20 mm diameter boring holes upto 2.5 mtr. depth along with filling. The contractor had specific knowledge that it was not possible to carry out work using 20 mm diameter boring holes and therefore, he used 20 cm diameter boring holes to complete the work. The contractor never sought permission from the Housing Board to use 20 cm diameter boring holes nor brought this fact to the notice of the Housing Board. If the contractor executed the work contrary to the terms and conditions of the agreement without obtaining prior permission of the Board, he cannot be permitted to raise such a claim. Therefore, the learned Tribunal has rightly decided Claim No.1 against the contractor. Accordingly, the findings recorded by the learned Tribunal with regard to claim No.1 are hereby affirmed. 20. With regard to claim No.2, Shri Ashok Mishra Advocate would submit that the claimant had a quoted rate of Rs.31/- per kg for carrying out the operations of fixing of reinforcement in position, cutting, bending and binding, including the cost of the required binding wire. However, since the reinforcement bars were provided by the contractor itself, the contractor is entitled to get a sum of Rs.19,251,945/- against the cost of reinforcement.

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21. The contract agreement with regard to iron work, reads as under:

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“Iron work for reinforcement for mild steel/ tor steel tested fixed in position complete including cutting, bending, binding or handlings and binding with binding wire and placing in position etc. complete including cost of binding wire.”

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A bare reading of this clause would make it clear that it includes mild steel or tor steel with its fixing in position, cutting, binding or handling or binding with binding wire and therefore, the rate of Rs.31/per kg was quoted by the contractor.

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22. Learned Tribunal has arrived at the conclusion that the contractor never raised bills towards the cost of reinforcement while submitting running bills or final bill and, after completion of work, the first time raised his claim in reference. The findings recorded by the learned Tribunal in this regard appear to be just and proper, and are, therefore, hereby affirmed.

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23. Shri Ashok Mishra would submit that the Housing Board imposed a penalty by way of liquidated damages to the tune of Rs.1,58,150/- as the contractor could not complete the work within the extended time. Clause 2 reads as under:

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“ Clause-2. Compensation for delay :

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The time allowed for carrying out the work as entered in the tender form shall be strictly observed by the contractor and shall be deemed to be the essence of the contract and shall be reckoned from the date of work order in commence work. The work shall throughout the stipulated period of contract be proceeded with all due diligence, keeping in view that time is the essence of the contract. The contractor shall be bound in all cases, in which, the time allowed for any work exceeds one month, to complete 1/8 of the whole 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 ¾ of the work before 3/4th of such time has elapsed. In the event of the contractor failing to comply with the above conditions, the Executive Engineer shall levy on the contractor as compensation an amount equal to :

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1. 1/2 percent of the value of work per week in respect of work costing upto Rs.2,00,000.

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2. 3/8 percent of the value of work per week in respect of work costing above Rs. 2,00,000 and upto Rs. 5,00,000.

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3. 1/4 percent of the value of work per week in respect of work costing above Rs. 5,00,000 and upto Rs. 10,00,000.

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4. 1/8 percent of the value of work per week in respect of work costing above Rs. 10,00,000 and upto Rs. 25,00,000.

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5. 1/16 percent of the value of work per week in respect of work costing above Rs. 25,00,000.

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The total amount of compensation under the provision of the clause shall be limited to 6 percent of the value of work.

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The decision of the Dy. Housing Commissioner shall be final.

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The delay in departmental assistance in-grained in the contract will be taken duly into account while recovering any compensation for the delay in the scales prescribed above.

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Where the Engineer-in-Charge decides that the contractor is liable to pay compensation for not giving proportionate progress under this clause and the compensation is recovered during the intermediate period such compensation shall he kept in deposit and shall he refunded if the contractor subsequently makes up progress for the lost time within the period of contract including extension granted if any.”

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24. A perusal of the written statement filed by the Housing Board would show that time was extended to complete the construction work and, accordingly, the penalty was imposed strictly in accordance with Clause 2. Mr. Mishra could not demonstrate that the decision taken by the Board is in contravention to the terms of the Clause 2. Therefore,

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in my opinion, the learned Tribunal has rightly declined claim No.3 of the contractor.

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25. With regard to claim No.4, Shri Ashok Mishra, Advocate would submit that according to clause 11(B) of the contract agreement, the contractor was entitled to get an interest-free secured advance. However, the Housing Board paid the secured advance and all of a sudden charged interest to the tune of Rs.3,25,336/- in the final bill. He would contend that the Housing Board has placed reliance on the circulars issued by the Commissioner Housing Board vide Annexures – I, J & K. According to him, since these documents were not part of the agreement, the learned Tribunal committed error of law while rejecting claim No.4 of the contractor.

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26. On the other hand, Shri Anumeh Shrivastava opposed the submissions. He would submit that the circulars issued by the department from time to time would be part of the contract agreement and therefore, the Housing Board justified in charging interest on the interest-free secured advance. He would further submit that the petitioner duly executed the indenture i.e. Annexure-J, which lays down for charging of interest over the secured advance paid to the petitioner.

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27. Clause 11(B) is reproduced herein below:

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“Clause-11 (B):

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Advance to contractors are as a rule prohibited and every endeavour should be made to maintain a system, under which no payments are made except for work actually done. Exceptions are, however, permitted in the following cases:

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Cases in which a contractor, whose contract is for finished work, requires and advance on the security of materials brought to sites, Divisional Officer may in such cases, sanction advance up to an amount not exceeding 75% of the value of work but 90% in the case of steel (as assessed by the Divisional Officer)

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provided that the rate allowed in no case is more than the rate payable for the finished item as stipulated in the contract of such materials provided that they are of imperishable nature and that a formal agreement is drawn up with the contractor under which Board secures a lien on the materials and is safeguarded against losses due to the contractor postponing the execution of the work or the shortage or misuse of the materials and against the expense entitle for their proper watch and safe custody.

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Payment of such advances should be made on the certificate of an officer not below the rank of Assistant Engineer, that the quantities of materials upon which the advances are made, have actually been brought to site, that contractor has not previously received any advance on that security and that all the materials are required by the contractor for use on items of work for which rate for finished work have been agreed upon. Recoveries of advances as made should not be postponed until the whole of the work entrusted to the contractor is completed. They should be made from his bills, for work done as the materials are used, the necessary deductions being made whenever the item of work in which they are used are billed for.

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Before granting the secured advance, the contractor shall sign the prescribed Indenture Bond in the prescribed form.”

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28. The Indentures were executed pursuant to clause 11 (B) of the agreement and the Contractor has not specifically denied due execution of Indenture J read with circular I. Annexure J is a Indenture for secured advance, which has been executed by the contractor and the Board and Annexure I a circular No.8 of 2002 issued by the Commissioner Housing Board, according to which, the contractor has to pay interest over the secured advance.

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29. Taking into consideration the pre-requisite execution of the indenture bond, which was duly executed between the Contractor and Board, the learned Tribunal has rightly rejected claim No.4 as the

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petitioner had agreed to make payment of interest on the secured advances paid. Therefore, the learned Tribunal has rightly rejected claim No.4.

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30. With regard to claim No.7, the grant of interest in the learned Tribunal is discretionary, and the learned Tribunal has rightly exercised its discretion. I do not find any good reason to increase or decrease the rate of interest granted by the learned Tribunal. Accordingly, the

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finding recorded with regard to claim No.7 is hereby affirmed.

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31. In the result, both the revisions are hereby dismissed.

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Sd/-

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(Rakesh Mohan Pandey) Judge

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Nimmi

Chhattisgarh Housing Board v. Shreejikrupa Project

Case brief

What is this about?

What the court decided

Chhattisgarh Housing Board v. Shreejikrupa Project

Case brief

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