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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.       461-462            OF  2016 (Arising out of SLP (C) Nos.29680-29681 of 2010)

VENKATESH CONSTRUCTION COMPANY            ….Appellant

Versus

KARNATAKA VIDYUTH KARKHANE  LIMITED (KAVIKA)                      ...Respondent

J U D G M E N T

R. BANUMATHI, J.

Leave granted.  

2. These  appeals  assail  the  judgment  dated  15.06.2010  in  

R.F.A. Nos.1051 of 2003 and 1076 of 2003, by which the High Court  

of  Karnataka  vide  the  common  impugned  judgment  reversed  the  

judgment  of  the  trial  court  and allowed the  appeal  of  respondent-

defendant.  While doing so, the High Court dismissed the cross-appeal  

preferred by the appellant-plaintiff.

3. Briefly  stated  case  of  the  appellant-plaintiff  is  that  

appellant-company is engaged in construction of dams and other civil  

works  and  registered  as  a  civil  contractor  for  the  Government  of  1

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Karnataka amongst others. The respondent-defendant invited tender  

on 17.08.1991 “for constructing a compound wall along the boundary  

line of  Kavika and also for  constructing underground sump, shed to   

store useful laminations and also core assembly shop for these works”.  

The appellant responded to the said tender and appellant’s tender was  

accepted by the respondent. On 12.02.1992, a contract was executed  

between the  appellant  and the  respondent  incorporating  the  terms  

and conditions and the cost of work was estimated at Rs.10,86,200/-.  

The appellant had quoted the rates on the premise that the earth work  

for the foundation was to the depth of 1.5 metres and average width of  

4.25 metres. However, after the work commenced, even while digging  

earth to one foot depth, it  was noticed that soil was caving in and  

there was seepage of water from Vrushabhavathi river. The appellant  

was instructed by the respondent’s engineers to dig earth up to four  

metres depth until hard soil bed is reached.  Accordingly, in order to  

make a trench of four metres depth, appellant had to excavate earth  

commencing from width of  six  metres  at  the ground level  and the  

entire nature of work changed and appellant had to incur additional  

expenses on account of the changed plan. The changed measurements  

were verified by the engineers nominated by the respondent and a  

payment  of  Rs.4,50,000/-  was  made  in  two  running  bills.  The  

respondent then asked the appellant  to stop the work till  the new  

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designs are given by the respondent which was not forthcoming.  Vide  

several  letters  appellant  sought  permission  for  continuation  of  the  

work, but, there was no response from the respondent.  Finally, after  

issuing legal notice dated 15.03.1993, for which no reply was given by  

the respondent.   The appellant filed a civil  suit being Original Suit  

No.11037  of  1993  in  the  court  of  Additional  City  Civil  Judge,  

Bangalore, making a claim of rupees thirty lakhs under various heads,  

interalia, on  the work already completed,   towards the extra  earth  

work, stocking of materials and also liquidated damages and others.

4. Admitting the execution of the contract dated 12.02.1992,  

the  respondent  filed  a  written  statement  contending  that  the  

construction  of  the  compound  wall  was  in  accordance  with  the  

estimate and the question of the respondent’s directing the appellant  

to  stop  the  ongoing  work  for  want  of  fresh  design  did  not  arise.  

Respondent averred that the appellant unilaterally stopped the work  

and there is no question of defendant making further payment.  It was  

averred  that  no  extra  work  was  done  by  the  appellant  and  the  

respondent  was  not  liable  to  pay  any  amount  either  towards  the  

damages or towards the alleged loss sustained by the appellant.   

5. On the above pleadings, trial  court framed seven issues.  

To substantiate the claim, appellant-plaintiff examined four witnesses  

and  produced  thirty  three  documents.   On  behalf  of  respondent-

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defendant,  DW-1-Jagadeesh Kumar-Deputy  Manager  was  examined  

and five documents were produced. Upon consideration of  evidence  

adduced by the parties, the first three issues were answered in favour  

of  the appellant-plaintiff  viz.:  (i)  appellant’s claim as to extra work;  

(ii) respondent’s direction to stop the running work for want of revised  

design and (iii) due to stoppage of work side embankment began to fall  

in the trench due to the seepage of water and involving double work  

for the appellant-plaintiff  to  remove the fallen loose earth.   Taking  

note  of  the  fact  that  the  respondent  had  paid  only  a  sum  of  

Rs.4,36,575/-  to  the  appellant  out  of  the  assessed  value  of  

Rs.5,82,100/-, trial court calculated the balance of Rs.1,45,525/- as  

the balance amount payable in respect of  completed portion of  the  

work.  On the value of building material stock, trial court awarded  

Rs.1,00,000/- as against the appellant’s claim of Rs.6,00,000/-.  Trial  

court decreed the suit in respect of extra earth work, embankment  

work and other heads and directed the defendant to pay in all a sum  

of Rs.3,23,000/- to the appellant with proportionate cost and interest  

on the said amount at 12% per annum from the date of the suit till  

the date of realization.

6. Being  aggrieved,  respondent  as  well  as  the  appellant  

preferred appeals before the High Court and both the appeals were  

heard together and disposed of by the impugned judgment.  Referring  

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to the contract, the High Court held that the written contract governs  

the terms between the parties and any variation thereof ought to be in  

terms of the provisions of clause 11 of the contract and the appellant  

having not gone through the procedure envisaged under clause 11,  

the appellant cannot putforth a claim for a higher payment on the  

premise that  it  has  executed  some extra  work  over  and above  the  

stipulated quantity of the work. The High Court reversed the judgment  

of  the trial  court  observing that  the trial  court  acted more like an  

arbitrator in examining the suit claim and that the trial court erred in  

passing the decree in favour of  the appellant-plaintiff  for a sum of  

Rs.3,23,000/- with interest and proportionate cost.   

7. Learned  counsel  for  the  appellant  Mr.  Partha  Sil  has  

contended that the High Court failed to appreciate that the change in  

work  which  materially  changed  the  nature  of  intended  work  

mentioned  in  the  tender  document  which  was  admitted  by  DW-1-

Jagadeesh Kumar during trial.  It was further submitted that the High  

Court erred in ignoring the evidence adduced by the appellant which  

clearly establish that the respondent directed the appellant to stop the  

work resulting in double work due to soil caving in trenches causing  

severe financial loss and hardship to the appellant. It was submitted  

that  upon  appreciation  of  evidence  when  the  trial  court  recorded  

findings of fact, the High Court was not right in reversing the same.

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8. Per  contra,  learned  Senior  Counsel  for  the  respondent  

Mr. P. Vishwanatha Shetty submitted that appellant was appointed to  

complete the given work as per the terms of the contract and it was  

the duty of  the appellant  to  collect  the relevant information before  

making an offer  and the  appellant  was not  justified  in making an  

exaggerated claim of rupees thirty lakhs which is thrice the estimated  

cost of the work. It was submitted that the appellant failed to prove  

that he had purchased material and they were brought to the site and  

there is no acceptable evidence to show that the appellant had stored  

large quantities of material in the site.  It was submitted that the plea  

of the appellant that he was orally asked to stop the work and to await  

revised design is totally baseless and the High Court rightly reversed  

the judgment of the trial court.

9. We  have  carefully  considered  the  rival  contention  and  

perused the impugned judgment and also the judgment of the trial  

court and other material on record.

10. PW-1-Venkatesh,  who is  the proprietor  of  the appellant-

company  stated  that  the  alignment  of  compound  wall  to  be  

constructed is in line with the existing flow of water from the river and  

that excavation for the compound wall was done in the river itself and  

when the work commenced, water started collecting in the trenches  

and  the  plaintiff  had  to  dewater  the  same  simultaneously.  PW-1  

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further stated that the appellant requested the respondent to consider  

the  matter  and  accord  sanction  for  extra  items  namely,  making  

temporary drain, dewatering work and that the appellant had to do  

extra work for removal of loose earth and this caused double work for  

the appellant.  PW-3-Hanumegowda, working as a supervisor under  

the appellant corroborated the version of PW-1 and stated that while  

doing the foundation work, seepage water from river flooded in and  

collected  in  trenches  and  the  appellant  had  to  do  extra  work  in  

dewatering and removal of loose earth. PW-3 further stated that as per  

the estimate, depth of the earth excavation for the foundation work  

was only four feet and while digging the trenches it was found that the  

soil  was  loose  and  that  the  engineers  of  the  respondent  told  the  

appellant  to  dig  the  earth  to  a  further  depth  till  hard  soil  bed  is  

reached and on this score also, the appellant had to do extra work.  

The version of PWs 1 and 3 is fortified by letter dated 06.05.1992 (Ex.  

P4) sent by the appellant to the respondent stating that there was  

seepage of water in the trench and that embankment had fallen in the  

trench and that the appellant has to do extra work in dewatering and  

removing the loose soil.  Inspite of repeated letters (Exs. P4 and P5),  

there was no response from the respondent.   

11. DW-1-Jagadeesh Kumar working as Deputy Manager with  

the respondent had stated that the parties were not aware of the soil  

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strength  at  the  time  of  entrustment  of  the  work  to  the  appellant.  

However  during  cross-examination,  DW-1  admitted  that  before  

commencement  of  work,  both  parties  were  unaware  of  nature  of  

different strata of soil.  He also stated that in case soil testing had  

been done  before,  the  records  would  have  been available  with  the  

respondent.  But no such record was produced by the respondent. Be  

it noted that the defendant has not adduced any evidence to discredit  

the testimony of PWs 1 and 3 that extra work was required to be done  

on account of seepage of water and soil caving in and widening and  

deepening the trench.  On appreciation of evidence of PWs 1 and 3  

and other documentary evidence, the trial court recorded the findings  

of fact that the appellant had to do extra work incurring additional  

expenditure.

12. In so far  as the direction of  the respondent to  stop the  

work, PW-1 stated that during the first week of April, 1992 officials of  

the respondent had asked the appellant to stop the work for getting  

the design from the architect on account of seepage of water.  PW-2-

Raghavendra Rao working as Civil Engineer in the appellant company,  

has  also  corroborated  the  version  of  PW-1  and  stated  that  the  

respondent asked the appellant to stop the work and that the work  

could be resumed later.  Though DW-1 stated that the defendant did  

not issue any letter to the plaintiff complaining against the stopping of  

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work, he also stated that the plaintiff was orally told about the same.  

By  perusal  of  various  letters,  it  is  seen  that  inspite  of  number  of  

letters  by  the  appellant  seeking  permission  to  continue  the  work,  

there was no response from the respondent. Absence of any response  

on the part of the respondent, only indicates that the respondent was  

aware of the change of nature of work.   

13. PW4-Naresh Kumar-architect had stated about his visit to  

the work site at the request of the respondent for preparing the design  

after the masonry wall for the length of hundred metres was over and  

that he gave the revised design and PW-4 estimated the cost of the  

work as per the revised design at rupees twenty lakhs.  PW-4 was  

engaged  to  prepare  the  design  suitable  to  the  soil  strength  only  

because of the change in the nature of the work.  Otherwise the need  

for engaging PW-4 for preparing new design would not have arisen if  

the  earlier  design  would  have  been  suitable.  On  appreciation  of  

evidence,  trial  court  rightly  answered  issue  No.2  in  favour  of  the  

appellant that the respondent asked the appellant to stop the running  

work for want of revised design.   

14. The  High  Court  took  note  of  clause  11  of  the  contract  

dated 12.02.1992 which states that the contractor is not authorized to  

do  any  extra  work  or  make  any  alteration  without  the  previous  

consent  in  writing  of  the  respondent.   High  Court  set  aside  the  

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findings  recorded  by  the  trial  court  holding  that  the  parties  are  

governed by the terms of the written contract and any variation with  

the terms of the agreement was required to be done strictly adhering  

to clause 11 of the contract.  While saying so, the High Court brushed  

aside  the  admission  by  DW-1  that  extra  work  was  done  by  the  

appellant and the High Court was not right in ignoring the same to  

hold  that  the  admission  of  DW-1  cannot  have  the  effect  on  the  

contractual obligation of the parties.  It is to be pointed out that the  

respondent  has  not  raised  the  plea  relying  upon clause  11  of  the  

contract.   Further,  by  perusal  of  Ex.P2 dated  20.12.1991,  a  letter  

addressed  by  the  appellant  to  the  respondent  informing  the  

respondent about the extra work which needs to be done and the fact  

that PW-4 was engaged by the respondent to prepare the new design  

for the work, it is evident that the respondent was aware of the fact of  

the change in the nature of work and that there is alteration in the  

work done by the appellant.  When the evidence and material clearly  

depict the change of nature of work involved and when the extra work  

to be done was also admitted by DW-1, parties cannot be expected to  

go for a revised agreement/contract.  Moreover, having regard to the  

fact that the work was to be completed within a specified time-frame,  

the parties cannot be expected to go for a second round of negotiation  

and reframe the terms and conditions of the work.  While so, the High  

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Court was not right in placing reliance upon clause 11 of the contract  

to reverse the findings of fact recorded by the trial court.

15. So far as the claim of the appellant that it suffered loss due  

to loss of stock of material, PWs 1 and 3 have stated that they have  

stocked the material of worth about rupees six lakhs at the work site.  

The appellant also produced several letters (Exs. P5, P6 and P7) by  

which the appellant has informed the respondent that there was no  

progress in the work and that the building material are lying waste.  

Apart from these letters, the appellant has also produced photographs  

(Exs. P18 to P28) to substantiate their claim that the building material  

like bricks, size stones and other materials were stocked at the work  

site.  Even  though  the  appellant  has  claimed  rupees  six  lakhs  on  

account  of  loss  of  the  material  stocked,  as  the  appellant  had  not  

produced  any  bill  relating  to  purchase  of  material  nor  produced  

authentic trip sheet, the trial court rightly awarded rupees one lakh  

only on account of loss of building material. As noticed earlier, based  

on the evidence of PWs 1 and 3 and other documents, the trial court  

has awarded amount on various other heads viz., the amount payable  

in respect of:- (i) extra earth work; (ii) embankment work; (iii) extra  

soiling work; (iv) extra bed concrete work and (v) extra stone masonry  

work.  The amount so awarded by the trial court under various heads  

is based on evidence and material on record.

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16. The Appellate Court may not interfere with the finding of  

the  trial  court  unless  the  finding  recorded  by  the  trial  court  is  

erroneous or the trial court ignored the evidence on record.  The High  

Court reversed the decree passed by the trial court without discussing  

oral and documentary evidence and several grounds raised before the  

trial  court.   The High Court veered away from the main issue and  

went on to elaborate on the law of arbitration and the mode of setting  

aside  the  arbitral  award  under  Section  34  of  the  Arbitration  Act,  

which in our view, was not warranted.  Without considering the oral  

and documentary evidence, the High Court erred in interfering with  

the  factual  findings  recorded by the  trial  court  and  the  impugned  

judgment is liable to be set aside.

17. Trial  court  directed  the  respondent  to  pay  a  sum  of  

Rs.3,23,000/-  to the appellant with interest at the rate of 12% per  

annum from the  date  of  suit  till  the  date  of  realization.  To  award  

interest from the date of suit to date of decree and from the date of  

decree till the date of realization is entirely discretionary.  The terms of  

the  contract  do not  specify  any rate  of  interest.   In  the  facts  and  

circumstances  of  the  case  and  having  regard  to  the  fact  that  the  

matter is pending for over two decades and in the interest of justice, it  

is appropriate that the interest of 12% per annum awarded by the trial  

court is reduced to 6% per annum.

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18. In the result, the impugned judgment is set aside and the  

appeals are allowed.  The judgment and decree passed by the trial  

court is restored with the modification of reduction of interest at 6%  

per annum from the date of the suit till the date of realization. In the  

facts and circumstances of the present case, no order as to costs in  

these appeals.

…………………….…CJI.                (T.S. THAKUR)

………………………….J.         (A.K. SIKRI)

                                                                        ..………………………..J.                                                                            (R. BANUMATHI)     New Delhi; January 20, 2016

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