SUPREME COURT REJECTS RESPONDENT’S CLAIM FOR DAMAGES IN GOVERNMENT CONTRACT WHERE DELAY WAS CAUSED BY THE RESPONDENT

Recently, a two Judge Bench of the Hon’ble Supreme Court comprising of Justice BR Gavai and Justice Sandeep Mehta passed a Judgment dated 09-05-2024 in Municipal Committee Katra & Ors. vs Ashwani Kumar, Civil Appeal No(s). 14970-71 of 2017 and observed that the Respondent-Bidder’s claim for damages cannot be allowed against the Appellant-Authority, as it is the Respondent who had failed to comply with the terms of the Tender and as such, he ought not to be permitted to make profit out of his own wrong.

Facts

i) That in the present case, the Appellant- Municipal Committee, Katra issued a Notice Inviting Tender dated 03-03-2010 (NIT), thereby, inviting bids for supply of mules and mazdoors essentially involved in transportation of pilgrims from the base camp at Katra to the holy shrine of Mata Vaishno Devi, atop the Trikuta Hill.

ii) That the Respondent- Mr. Ashwani Kumar emerged as the second highest bidder, but subsequently, he became the highest bidder, as the original highest bidder did not come forward to execute the contract.

iii) Accordingly, the Appellant awarded the Contract to the Respondent, which was accepted by the latter. The term of the said Contract was 01-04-2010 to 31-03-2011.

iv) As per Clause 8 of the NIT, the successful bidder was required to (a) deposit 40% of the bid amount within 24 hours from the time of acceptance, i.e. on or before 31-03-2010 and (b) the balance was payable in five equal instalments w.e.f. 01-05-2010 to September 2010 in the form of five post-dated cheques along with bank guarantee to secure the balance amount for the remaining period of the Contract.

v) But the Respondent sought for relaxation in Clause 8 of NIT from the Appellant-Authorities on the ground that the condition of furnishing bank guarantee for the remainder amount was unjust and arbitrary.

vi) However, when the Appellant-Authorities failed to respond to the Respondent, the latter filed a Civil Suit for Declaration that Clause 8 of NIT was arbitrary, along with it, filed an Application seeking temporary injunction before the Ld. District Judge, Reasi (Civil Court).

vii) The said Application was allowed by the Ld. Civil Court, vide Order dated 29-04-2010 and the Appellants were directed to issue the order of allotment of Contract to the Respondent.

viii) Aggrieved by the Civil Court Order dated 29-04-2010, the Appellants filed a Civil 1st Miscellaneous Appeal (CIMA) No.312 of 2010 before the Hon’ble High Court of Jammu and Kashmir. The High Court, vide Order dated 07-05-2010, directed the Appellants to issue a work order in favor of the Respondent.

ix) Accordingly, the Appellants issued a formal Work Order dated 10-05-2010 to the Respondent, who commenced the work and collected the revenue for the period commencing from 10-05-2010 to 07-04-2011.

x) That after the Contract Period ended, the Respondent filed an Other Writ Petition (OWP) No. 743 of 2013 before the High Court on the ground that his work had begun on 10-05-2010, as opposed to the starting date mentioned in the NIT i.e. 01-04-2010 and had, as such, suffered a loss of collection of earnings for a period of 33 days. Thus, the Respondent claimed pro-rata damages of Rs. 71,06,276/- to be paid by the Appellant-Authorities on account of curtailment of Contract Term by 33 days.

xi) The High Court, vide Order dated 03-07-2013, allowed the Writ Petition filed by the Respondent and directed the Appellant to consider the claim of the Respondent.

xii) Accordingly, the Respondent’s claim was submitted before the Appellant-Authority, which rejected such claim, vide Order dated 12-08-2013.

xiii) Aggrieved by the Appellant’s Order dated 12-08-2013, the Respondent filed OWP No. 1199 of 2013 before the High Court.

xiv) The Ld. Single Judge Bench of the High Court, vide Order dated 20-02-2015, observed that (a) the Respondent had partly complied with the NIT Order, as the remainder amount payable in post-dated cheques were not paid to the Appellant, (b) the bank guarantee was not furnished by the Respondent, (c) rather, the Respondent filed Civil Suit seeking relaxation of the condition of furnishing bank guarantee for the remainder amount. Hence, owing to this non-compliance, there was delay in issuing of allotment letter by the Appellant for commencing work under the Contract. As a result, there was 33 days of delay in commencing the work by the Respondent. However, in spite of taking note of this unjustified action of the Respondent, the Ld. Single Judge held that the Respondent was entitled to payment of pro-rata amount for those 33 days.

xv) Aggrieved by the Order dated 20-02-2015 passed by the Ld. Single Judge Bench of the High Court, (a) the Appellant filed an Appeal bearing LPAOW No. 20 of 2015 and (b) the Respondent filed an Appeal bearing LPAOW No. 21 of 2015, seeking modification of the aforesaid Order, before the Ld. Division Bench of the High Court.

xvi) The Ld. Division Bench of the High Court, vide Final Order dated 30-09-2015, upheld the Order dated 20-02-2015 passed by the Ld. Single Judge Bench of the High Court and thereby, disposed off the Appellant’s Appeal and dismissed the Respondent’s Appeal.

Supreme Court Observations

Aggrieved by the Final Order dated 30-09-2015 passed by the Ld. Division Bench of the High Court, the Appellant-Authority filed Civil Appeal No(s). 14970 of 2017 and the Respondent-Bidder filed Civil Appeal No(s). 14971 of 2017 before the Hon’ble Supreme Court. The Apex Court, vide Common Order dated 09-05-2024, made the following observations:

1) That as per the Latin Maxim ‘nullus commodum capere potest de injuria sua propria’, no one can take undue and unfair advantage of his/her own wrong to gain the favourable interpretation of the law. The said principle has been recognised in courts of law and of equity.

“It is a sound principle that he who prevents a thing from being done shall not avail himself of the nonperformance he has occasioned. To put it differently, ‘a wrong doer ought not to be permitted to make profit out of his own wrong’.”

2) That in the present case, the Respondent participated in the Tender process without raising an issue about the Clause 8 of the NIT. The Respondent further accepted the Contract awarded by the Appellant, knowing about the existence of such Clause.

3) However, merely to avoid compliance of Clause 8 of NIT, the Respondent filed a Civil Suit before the Ld. District Judge, Reasi, thereby, stalling the issuance of work order by the Appellant.

4) Thus, the Bench observed that as the Respondent was fully conscious about the terms and conditions of the Auction Notice i.e. NIT, while participating in the Tender process, hence, he is estopped from turning around and questioning the legality or validity of the terms and conditions of the NIT.

5) Thus, the Bench held that by dragging the matter to litigation, the Respondent himself was responsible for the delay caused in issuance of the Work Order, which, in turn, deprived him of the opportunity to work for the entire Contract Period. Hence, the Bench held that the Respondent’s claims ought not to be allowed.

6) Further, the relief which was sought by the Respondent in the Writ Petition was purely by way of damages, which could not have been the subject matter of extra ordinary writ jurisdiction of the High Court under Article 226 of the Constitution of India. “Law is well settled that disputes arising out of purely contractual obligations cannot be entertained by the High Court in exercise of the extra ordinary writ jurisdiction.”

Conclusion

Thus, based on the aforesaid observations, the Supreme Court held that the Respondent’s claims for damages cannot be allowed, as the Respondent was himself responsible for the delay caused in issuance of the Work Order and commencement of work and as such, the Respondent cannot be allowed to take advantage of his own wrongdoing. As a result, the Appeal filed by the Appellant-Authority was allowed and the Final Order dated 30-09-2015 passed by the Division Bench of the High Court, upholding the Single Judge’s Order dated 20-02-2015 that allowed the Respondent’s claims, were both set aside.

 

Harini Daliparthy

Senior Associate

The Indian Lawyer