THE STATE OF ODISHA & ORS. versus RADHESHYAM AGRAWAL

Citation: [2023] 3 S.C.R. 653 · Decided: 24-03-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Dismissed

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Judgment (excerpt)

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THE STATE OF ODISHA & ORS.
v.
RADHESHYAM AGRAWAL
(Civil Appeal No. 4934 of 2022)
MARCH 24, 2023
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Contract – Levy of Penalty – When not justified – Penalty
imposed on respondents-Contractors while granting extension of
time to complete the work awarded – Held: Penalty was levied by
the State Government invoking Clause 3.5.5(v) of the Odisha Public
Work Department Code (OPWD Code) – However, said Clause is
applicable in a case where the contract is terminated – Here, it is
not a case of termination of the contract – Therefore, Clause 3.5.5(v)
shall not be applicable at all – Neither the contract nor the OPWD
code provides for imposition of penalty while extending the contract
– However, in a given case, the State Government might be justified
in imposing the penalty while granting the extension but, the
contractor must be put to notice that extension of time can be
granted on imposition of reasonable penalty – Thus, in the present
case, the State was not justified in levying the penalty unilaterally
while granting extension of time, without putting the contractor to
notice – Levy of penalty while granting extension of time was hence
illegal and rightly set aside by the High Court.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4934
of 2022.
From the Judgment and Order dated 08.04.2021 of the High Court
of Orissa at Cuttack in WPC No. 14922 of 2019.
With
Civil Appeal Nos. 4936 and 4935 of 2022.
Sibo Sankar Mishra, Debabarta Dash, Ms. Kanika C., Rajesh Kr.
Nayak, Uma Kant Mishra, Advs. for the Appellants.
Shubhranshu Padhi, Ashish Yadav, Vishal Banshal, Ms. Rajeshwari
Shankar, Anirudh Sanganeria, Advs. for the Respondent.
[2023] 3 S.C.R. 653
653
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SUPREME COURT REPORTS
[2023] 3 S.C.R.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment(s) and order(s) passed by the High Court of Orissa at Cuttack
in Writ Petition Nos. 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.
2. For the sake of convenience, the facts in Civil Appeal No.
4934/2022 arising out of the impugned judgment and order passed by the
High Court in Writ Petition No. 14922/2019 are narrated, which in a
nutshell are as under: -
2.1 That the respondent herein – original writ petitioner, who is a
special class contractor was awarded the contract for work of
“improvement to Khariar Boden Sinapali Road (MDR-121) from 8/000
Km. & 9/000 Km., 12/200 Km. to 20/959 Km., 23/550 Km. to 29/000
Km. & 44/300 Km. to 48/800 Km. in the District of Nuapara under
NABARD Assistance RIDF-XIII).” As per the contract and work order,
the work was to be completed by 12.09.2009. However, the contractor
could not complete the work within the stipulated period and continued
up to 12.03.2014. He completed the work by 12.03.2014. The contractor
– original writ petitioner applied for extension of time for the work. 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. Code (OPWD Code) Volume-I.
2.2 Levy of penalty @ 0.25% while granting extension of time
from 13.09.2009 to 12.03.2014 was the subject matter of writ petition
before the High Court.
2.3 It was the case on behalf of the original writ petitioner –
contractor before the High Court that the levy of penalty while granting
extension of time was wholly impermissible. It was submitted that para
3.5.5(v) of OPWD Code Volume-I under which the penalty was levied
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655
could not have been invoked as the penalty under the said para can be
imposed only in a case where the contract is terminated.
2.4 On the other hand, it was the case on behalf of the State that
as there was a delay on the part of the contractor in not completing the
work within the stipulated period and the contractor applied for extension
of time which came to be accepted by the State Government, it was
open for the d

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