VidhiSangh

Supreme Court of India · 24/03/2023

THE STATE OF ODISHA & ORS. versus RADHESHYAM AGRAWAL

[2023] 3 S.C.R. 653 · 2023 INSC 289

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Summary

A contractor engaged for a NABARD-assisted road work in Nuapara district was to complete it by 12 September 2009 but finished only on 12 March 2014. The State of Odisha granted extension of time without price escalation but levied a penalty of 0.25 per cent on the value of work done in the extended period, invoking paragraph 3.5.5(v) of the Odisha Public Works Department Code; two other contractors were similarly penalised. The Orissa High Court set the penalties aside and the Supreme Court dismissed the State's appeals: paragraph 3.5.5(v) applies only where a contract is terminated for poor progress, paragraph 3.5.30 and Clause 4 of the contract contain no provision for penalty while extending time, and in any event a penalty cannot be imposed unilaterally without putting the contractor on notice as to its imposition and rate.

Issues

  1. Whether the State may levy a penalty on the value of work done during an extended period while granting a contractor extension of time under the Odisha Public Works Department Code and the contract, where the contract is not terminated.

Provisions considered

Held

Result

Appeals dismissed; Orissa High Court judgments setting aside the penalties levied on the contractors while granting extension of time affirmed; no order as to costs.

Judgment PDF: Supreme Court of India, [2023] 3 S.C.R. 653.