Writ petition by five construction firms seeking mandamus directing State and Union officials to settle outstanding dues for completed fishing harbour projects. Court ordered payment of principal plus 10% interest.
Payment of outstanding dues plus interest at 10% per annum within 60 days.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 12.01.2017 Pronounced on : 30-01-2017
CORAM :
THE HONOURABLE MR. JUSTICE B. RAJENDRAN Writ Petition Nos. 40247 to 40251 of 2016
M/s. Sripathy Associates a registered firm represented by its Managing Partner S. SrinivasaMoorthy Son of K.S. Samiappan 62, Thangaperumal Street Erode - 638 001 .. Petitioner in WP Erode District 40247 to 40249 M/s. SRM Constructions a registered firm rep. by its Managing Partner S. Boopathy Son of P.R. Subramaniam 9/450, Kaspapettai Erode - 638 115 .. Petitioner in WP.40250 Erode District M/s. Emjay Constructions a registered firm represented by its Partner K. Murugesan Son of Krishnan No.7, Central Street Kilpauk Garden Colony .. Petitioner in WP.40251 Chennai - 600 010 Versus
The Executive Engineer Fishing Harbour Project Division Near Vadasery Bus Stand Nagarcoil 629 001 ..3rd Respondent in
The Union of India rep. by its Secretary to Government Ministry of Agriculture and Farmers' Welfare Department of Animal Husbandry, Dairying and Fisheries New Delhi .. 4th Respondent in all WPs.
WP No. 40247 of 2016:- Petition filed under Article 226 of The Constitution of India praying for a Writ of Mandamus directing the respondents 1 to 3 to settle the admitted liability of Rs.8,59,34,317/- as per Lr.No.DB/JE/C.1506/2016 dated 06.10.2016 issued by the second respondent, payable under the Agreement No.5/2013-14 dated 13.06.2013 along with the Price Escalation, Withheld amount and bonus for completion of the construction work relating to the Main Breakwater for Fishing Harbour at Poombuhar in Nagapattinam District, notwithstanding their financial constraints by considering the representations dated 29.07.2014, 23.02.2015, 02.04.2016, 12.05.2016 and 02.06.2016
WP No. 40248 of 2016:- Petition filed under Article 226 of The Constitution of India praying for a Writ of Mandamus directing the respondents 1 to 3 to settle balance outstanding amount due of Rs.23,03,62,770/- as per Lr.No.DB/JE/C.1506/ 2016 dated 06.10.2016 issued by the second respondent, payable under the Articles of Agreement No.14/2014-15 dated 24.11.2014 along with the interest for the construction of the work done relating to the Main Breakwater for Fishing Harbour at Poombuhar in Nagapattinam District by considering the representations dated 02.04.2016, 12.05.2016 and 02.06.2016.
WP No. 40249 of 2016:- Petition filed under Article 226 of The Constitution of India praying for a Writ of Mandamus directing the respondents 1 to 3 to settle the balance outstanding amount due of Rs.9,32,02,210.00 as per Lr.No.DB/JE/C.1506/ 2016 dated 06.10.2016 issued by the second respondent, payable under the Agreement No.19/2013-14 dated 24.10.2013 along with the Price Escalation, Withheld Amount and Bonus for completion of the construction work relating to the Breakwater and its approaches for Fishing Harbour at Colachal in Kanniyakumari District by considering the representations dated 20.07.2015, 02.04.2016, 12.05.2016 and 02.06.2016.
WP No. 40250 of 2016:- Petition filed under Article 226 https://hcservices.ecourts.gov.in/hcservices/ of The Constitution of India praying for a Writ of Mandamus directing the respondents 1 to 3 to settle the balance outstanding amount due of Rs.5,98,56,993.00 as per
Lr.No.DB/JE/ C.1506/2016, dated 06.10.2016 issued by the second respondent, payable under the Agreement No.37/2013-14 dated 05.03.2014 along with the Price Escalation, Wtihheld amount and Bonus for completion of the construction fo Landside facilities at Chinnamuttam Fishing Harbour in Kanniyakumari District by considering the representations dated 08.04.2016, 10.05.2016 and 02.06.2016.
WP No. 40251 of 2016:- Petition filed under Article 226 of The Constitution of India praying for a Writ of Mandamus directing the respondents 1 to 3 to settle the balance outstanding due of Rs.19,51,98,161.00 as per Lr.No.DB/JE/C.1506/ 2016 dated 06.10.2016 issued by the second respondent, payable under the Agreement No.07/2013-14 dated 15.07.2013 along with the Price Escalation, Withheld Amount and Bonus for completion of the construction of Western Breakwater and its approaches for Fishing Harbour at Chinnamuttam in Kanniyakumari District by considering the representations dated 12.05.2015, 18.05.2016 and 02.06.2016.
The issue involved in these writ petitions are interrelated with each other. The learned counsel appearing on either side have advanced common arguments. Therefore, with their consent, the writ petitions are taken up for final disposal.
amount has to be paid to them only by the respondents 1 to 3. The amount has not been paid by the respondents 1 to 3 on the ground that the Central Government has not released the funds. According to the petitioners, such a reasoning assigned by the respondents 1 to 3 cannot be sustained or it will not be a ground for not paying the contractual amount.
WP No. 40247 of 2016
| S.No. | Particulars | Pending amount Interest (Rs.) Total (Rs.) |
|---|---|---|
| 1. | Bill pending | 0 1,98,85,793 .00 1,99,85,793.0 0 |
| 2. | Price Escalation | 4,41,59,505.00 30,27,043.0 0 4,71,86,548.0 0 |
| 3. 4. Total WP No. |
Withheld amount - 2.5% Bonus 40248 of 2016 |
1,25,41,703.00 3,43,883.00 53,60,564.00 50,16,681.00 3,43,883.00 53,60,564.00 8,59,34,317.00 |
| S.No. | Particulars Pen |
ding amount Interest (Rs.) Total (Rs.) |
| 1. | Bill pending 20 |
,16,77,802.00 2,86,84,968.00 23,03,62,770 |
| WP No. | 40249 of 2016 | |
| S.No. | Particulars | Pending amount Interest (Rs.) Total (Rs.) |
| 1. | Bill pending | 4,42,56,892.00 35,58,671.0 4,78,15,563.0 |
| 0 0 |
||
| 2. | Price Escalation | 2,65,77,243.00 12,71,339.0 0 2,78,48,582.0 0 |
| 3. | Withheld amount - |
1,19,55,300.00 5,71,889.00 1,25,27,189.0 |
| 2.5% | 0 | |
| 4. | Bonus | 47,82,120.00 2,28,756.00 50,10,876.00 |
| Total WP No. |
40250 of 2016 |
9,32,02,210.00 |
| S.No. | Particulars | Pending amount Interest (Rs.) Total (Rs.) |
| 1. | Bill pending | 4,31,35,178.00 1,38,09,426 .00 5,69,44,604.0 0 |
| 2. | Price Escalation | 6,76,993.00 2,15,673.00 8,92,666.00 |
| 3. | Withheld amount - 2.5% |
10,94,105.00 3,48,555.00 14,42,659.00 |
| 4. | Bonus | 4,37,642.00 1,39,422.00 5,77,064.00 |
| Total WP No. |
40251 of 2016:- |
5,98,56,993.00 |
| S.No. | Particulars | Pending amount Interest (Rs.) Total (Rs.) |
| 1. https://hcservices.ecourts.gov. |
Bill pending in/hcservices/ |
10,50,22,995.00 5,08,00,199 .00 15,58,23,194. 00 |
| S.No. | Particulars | Pending amount | Interest (Rs.) |
Total (Rs.) |
|---|---|---|---|---|
| 2. | Price Escalation | 1,86,12,309.00 | 55,07,204.0 0 |
2,41,19,513.0 0 |
| 3. | Withheld amount - 2.5% |
84,08,700.00 | 24,88,054.0 0 |
1,08,96,754.0 0 |
| 4. | Bonus | 33,63,480.00 | 9,95,221.00 | 43,58,701.00 |
Total 19,51,98,161.00
Rs.41,22,57,364/- and the balance to be paid to the petitioner, including the withheld amount of 5% would works out to Rs.6,59,54,569/- excluding price escalation. Since the withheld amount of Rs.1,19,55,299/- is to be refunded one year after completion of work, the petitioner is entitled to such amount only on 23.02.2017. As on date, the amount payable to the petitioner works out to Rs.5,39,99,270/-.
the amount would entitle the petitioners to claim interest. Further, there is no dispute as regards the completion of the work by the petitioners and the amount payable to them, while so, the question of invoking the jurisdiction of the Civil Court or to invoke the arbitration clause contained in the agreements will not arise. It is also stated in the rejoinder that the petitioners have borrowed amount from banks for execution of the work and because of the delay on the part of the respondents 1 to 3 in disbursing the outstanding amount, they are paying interest at the rate of 13% per annum for the loan availed by them from the banks.
outstanding amount with interest. It is also the grievance of the petitioners that they have availed loan from banks to complete the project but even after completion of the work, the respondents 1 to 3 failed to pay the outstanding amount, with the result, they are repaying the loan amount borrowed from the banks with interest at the rate of 13% per annum.
"20. The High Court has examined the rate of interest at 16.5% on the amount awarded in favour of the Contractor by the civil court and has considered the contention urged on behalf of NBCC that the rate of interest awarded is excessive and also the contention that there is no contract of payment of interest on the same and alternatively contended that the interest rate should not normally exceed 6% per annum. These contentions have been seriously contested by appellant’s counsel contending that the award of interest between 15% to 18% per annum on the basis of bank lending rates should be allowed as NBCC itself has claimed interest at the rate of 18.5% per annum on the amount claimed from the contractor. Keeping the aforesaid aspect in mind and in the absence of contract with regard to rate of interest to be awarded in favour of the contractor and having regard to the facts and circumstances of the case, the High Court has come to the conclusion and awarded interest at the rate of 12% per annum on the amounts due to the contractor on the basis of the rate of interest paid by the Banks to its customers on long term deposits prevailing in 1988. The same cannot be found fault with by this Court for the reason that the High Court taking relevant aspects into consideration has rightly reduced the rate of interest to 12% per annum from 16.5% per annum after holding that exercise of discretionary power by the Arbitrator under Section 34 of CPC is a discretionary power and the same cannot be interfered with by the High Court.
the court are erroneous and contrary to law. Therefore, the High Court has held that the impugned award passed by the Arbitrator which was made the rule of the court by the civil court is erroneous in law and it amounts to misconduct. Accordingly, the High Court has rightly set aside certain claims of the contractor and affirmed the award and granted extra amount on certain claims. It has also interfered with the damages awarded in favour of NBCC and partly allowed the appeal of the respondent NBCC by allowing certain claims, setting aside certain other claims and also reducing the rate of interest at 12% from 16.5% "
"8. Per contra, Shri L. Nageshwara Rao, learned Senior Counsel and Additional Solicitor General of India would submit that there was no infirmity whatsoever in the S.L. Arora case (supra) and that, therefore, the present reference was not required. Furthermore, the learned Additional Solicitor General would submit that the term “sum” as found in sub- section (7) of section 31 of the Act, 1996 should be read as “principal amount” as held in the S.L. Arora case (supra).
DISCUSSION :
increases to substantial amounts, sometimes even exceeding the actual amount awarded. The Court, in the S.L. Arora case (supra), then sought to set out the legal position on the award of interest to understand the authority of the tribunal as envisioned in sub- section (7) of Section 31 of the Act, 1996.
"12. Having considered the rival contentions of the parties, in our opinion, the appeal deserves to be allowed by granting relief to the appellant firm. It is well settled that award of interest is in the discretion of court. Normally, when interest is granted, appellate, revisional or writ court would not interfere with the exercise of discretion unless the discretion has been exercised arbitrarily or capriciously. It is equally well settled that like grant of interest, rate of interest is also in the discretion of the court and in the absence of any agreement between the parties, usually the court would not interfere with rate of interest unless it is convinced that the discretion of the lower court was ex-facie bad in law."
sponsored project for which the Government of India has to release their share of the amount and as and when such amount is released by the Government of India, they will disburse the amount to the petitioners. Thus, it is evident that there is no dispute with regard to the liability on the part of the respondents 1 to 3 to pay the outstanding amount to the petitioners. Even in the counter affidavits filed by the respondents 1 to 3, mentioned supra, the respondents 1 to 3 have admitted the date on which the work has been completed by the respective petitioners, amount paid to them and the balance amount payable to the petitioners. In such circumstances, the claim of the petitioners for payment of interest is justifiable and the respondents are bound to pay interest to the petitioners. At the same time, it has to be said that the petitioners are entitled for payment of interest not from the date of completion of the work by them but from the date when the completion of work was certified by the third respondent.
Sd/Assistant Registrar(CCC) //True Copy// Sub Assistant Registrar rsh To 1. The Secretary to Government State of Tamil Nadu rep. by its Animal Husbandry, Dairying and Fisheries Department Secretariat, St. George Fort Chennai - 600 009 2. The Chief Engineer Fisheries Department DMS Complex Teynampet, Chennai - 600 006 3. The Executive Engineer Fishing Harbour Project Division 26, Sattaippar East Street Nagapattinam - 611 001
WP Nos. 40247 to 40251/2016
https://hcservices.ecourts.gov.in/hcservices/ RSY(CO) EU 1.2.17
2 issues framed by the court
Whether public works contractors can be directed to pay outstanding contractual dues and interest despite non-release of central funds.
What is the appropriate rate of interest to be awarded for delayed payment of certified bills.
Colour shows how this judgement treated each authority
P. Radhakrishna Murthy vs. M/s. N.B.C.C. LimitedRelied on¶42
P. Radhakrishna Murthy vs. M/s. N.B.C.C. Limited (2003)
M/s. Hyder Consulting (UK) Limited vs. Governor, State of OrissaRelied on¶46
M/s. Hyder Consulting (UK) Limited vs. Governor, State of Orissa (2012 & 2013)
Manalal Prabhudayal vs. Oriental Insurance Company LimitedRelied on¶54
Manalal Prabhudayal vs. Oriental Insurance Company Limited (2009)
2 provisions across 2 enactments
M/s. Sripathy Associates
M/s. SRM Constructions
M/s. Emjay Constructions
State of Tamil Nadu
Chief Engineer Fisheries Department
Executive Engineer Fishing Harbour Project Division
B. Rajendran
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
