14922/2019, 10344/2021 and 20066/2019, by which, the Division Bench of the High Court has allowed the said writ petitions preferred by the respective contractors – original writ petitioners and has set aside the penalty imposed while granting the extension of time to complete the work awarded, the State of Orissa has preferred the present appeals. The request for extension of time came to be accepted and allowed by the appropriate authority/State Government vide order dated 07.02.2019, without price escalation during the extended period from 13.09.2009 to 12.03.2014 but with levy of penalty @ 0.25% over the value of the work done during the extended period as per para 3.5.5(v) of Odisha Public Work Dept. 5 Accepting the submission made on behalf of the original writ petitioner – contractor that the levy of penalty while granting the extension of time was illegal and arbitrary and beyond para 3.5.5(v) of OPWD, by the impugned judgment and order, the High Court has set aside the levy of penalty which is the subject matter of present appeal. Shri Sibo Sankar Mishra, learned counsel appearing on behalf of the State has vehemently submitted that it is not in dispute and it cannot be disputed that the contractor did not complete the work within the stipulated time and as such, there was a delay on the part of the contractor in completing the work and that the contractor applied for extension of time which came to be allowed by the State Government, however, subject to payment of penalty on the value of the work done during the extended period.
1
It is vehemently submitted by Shri Padhi, learned counsel appearing on behalf of the respective respondents – original writ petitioners that in the facts and circumstances of the case, the High Court has not committed any error in setting aside the penalty levied while granting extension of time. 2
It is further submitted that in the communication/order granting extension of time but with penalty, the State Government has relied upon Clause 3.5.5(v) of OPWD Code.
Having heard learned counsel appearing on behalf of the respective parties and having gone through the impugned judgment(s) and order(s) passed by the High Court, the short question which is posed for consideration of this Court is whether the State Government is justified in levying the penalty while granting extension of time in favour of the contractor when the contractor fails to complete the work within stipulated time under the contract and subsequently, completes the work beyond the period prescribed under the contract?
Also Read: https://newslaw.in/case-type/civil/acquisition-of-land-and-deemed-lapse-under-the-act-2013/
1 In order to consider the aforesaid issue, the relevant clauses of the contract and OPWD Code, are required to be referred to and considered, which are as under: – Relevant provision of the contract agreement Extension of Time Clause-4 “If the contractor shall desire an extension of the times for completion of the work, on the ground of his having been unavoidably hinder in its execution or any other ground he shall apply in writing to the Executive Engineer within 30 days of the date of the hindrance on account of which he desires such extension as aforesaid and the Executive Engineer shall, if in his opinion (which shall be final) reasonable grounds be shown thereof, authorize such extension of time, if any, as may in his opinion, be necessary or proper. The adopted format for percentage rate is same as that of the form adopted for item rate tenders but the word “item rate” shall be replaced by “percentage rate” and the contract form may be named as P-1.
….”
Clause 3.5.30 of the OPWD Code “Application for extension of time for the completion of a work on the grounds of unavoidable hindrance or any other grounds shall be submitted by the contractor within 30 days of such hindrance and the Divisional Officer shall authorise or recommend such extension of time as deemed necessary or proper within fifteen days of the receipt of such an application.
Also Read: https://newslaw.in/case-type/civil/taxation-of-engineering-design-drawings-goods-or-services/
If the orders of the competent authority are not received in time the Divisional Officer may grant extension of time under intimation to the concerned authorities so that the contract might remain in force, but while communicating this extension of time, he must inform the contractor that extension is granted without prejudice to Govt.’s right to levy Compensation under relevant clause of the contract.” 2 In the communication granting extension of time with levy of penalty, penalty is levied by the State Government invoking Clause 3.5.5(v) of the OPWD Code. 3 So far as the reliance placed upon Clause 3.5.30 of the OPWD Code by learned counsel appearing on behalf of the State is concerned, even under the said clause, there is no provision for imposition of penalty while granting extension of time. 4 Even otherwise, it is required to be noted that before the levy of penalty of a particular percentage, while granting extension of time, no opportunity of being heard has been given to the contractor as to why the penalty may not be imposed while granting extension of time and at what rate. In the facts of the cases, there shall be no order as to costs.
Case Title: THE STATE OF ODISHA Vs. RADHESHYAM AGRAWAL (2023 INSC 289)
Case Number: C.A. No.-004934-004934 / 2022
