IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

 CIVIL APPEAL NOs. 926-927 OF 2002

UNION OF INDIA                                           Appellant (s)

                       VERSUS

CHANDALAVADA GOPALAKRISHNA MURTHY & ORS.                 Respondent(s)

 O R D E R

These appeals  are directed against  the judgment and order dated 8th May,

2001 passed by the Division Bench of the Andhra Pradesh High Court.

We have heard the parties at length.   

In view of the order that we propose to pass, it is not necessary to recite the

entire facts leading to the filing of the present appeal.  Suffice it to say that a contract

was entered into between the appellant and the respondent regarding the construction

of  laboratory,  Officers'  room  and  class  room  at  Indian  Railway  Institute,

Secunderabad.   Agreement  was  entered  into  on  31.01.1981.   According  to  the

agreement, the contract was to be completed within a period of 9 months i.e. upto 27th

October, 1981.  It is stated that  

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on request made by the contractor/respondent  extension of time was granted under

clause 17(3) of the general conditions  of the contract.  Ultimately, the contract was

completed on 31st August,  1983.  A dispute  arose between the  parties and the the

respondent made various claims under 7 heads and demanded for arbitration.  The

arbitrator  granted Award under all 7 heads.  The Award was filed before the City

Civil Court.  The City Civil Court made the award a rule of the court in respect of

claim No.2 to 6 but  set  aside  the Award regarding  item No.  1  and 7.   Aggrieved

thereby, the respondent filed an appeal before the Division Bench of the High Court

and by the impugned order the Division Bench maintained the order of the  Civil

Court  with  regard to  item No.7.   However,  the Division  Bench allowed  the  claim

under item No.1.   Hence, the present appeals.

The dispute now to be resolved is confined only to item No.1 of the claim.  To

answer this question, we may refer to clause 17(3) of the contract.  Clause 17(3) reads:

 “Clause  17(3):   In the event of  any failure  or delay by the Railway to hand over to the contractor possession of the lands necessary for the execution of the works or to give the necessary notice  to  commence  the  works  or  to  provide  the  necessary drawings or instructions or any other delay caused by the                    -3-

Railway due  to any cause, whatsoever, the said failure or delay shall  in  no  way  effect  or  vitiate  the  Contract  or  alter  the character  thereof  or  entitle  the  contractor  to  damages  of compensation thereof  but  in  any such case,  the Railway may grant such extension of extensions of the completion date as may be considered reasonable.“

Clause 17(3) reads thus clearly shows that if there is delay by the Railways the

terms of the contract can be extended as has been done in the present case.   However,

the contractor shall not be entitled to damages or compensation.

A similar question raised before this Court was considered by a three-Judge

Bench of this Court in Ch. Ramalinga Reddy   Vs. Superintending Engg. & Anr. 1999

(9)SCC 610.  This Court held in that case that if the contract is extended under the

terms of  the  contract,  compensation  cannot  be  awarded  by  the  Arbitrator.   The

aforesaid judgment  has been followed in another decision of this Court in  General

Manager (Northern Railway) & Anr. Vs. Sarvesh Chopra 2002(4)SCC 45.

Learned counsel for the respondent referred to the judgment rendered by this

Court in the case of  K.R. Raveendranathan Vs.  State of Kerala 1998(9) SCC 410.

The  

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said  decision  is  not  applicable  in  the  facts  of  the  present  case.   For  the  reasons

aforestated, the case in hand is squarely covered by two decisions of this Court.  In the

result, the order of the High Court is not tenable in law and is  accordingly set aside.

The appeals are allowed.

No costs.   

   .........................J     (H.K. SEMA)

   .........................J     (MARKANDEY KATJU)   

New Delhi; April 10, 2008.