Contract act, (breach of contract) i need citation for this issue.

KASI VISWANATHAN (Querist) 02 March 2015 This query is : Resolved
1. Investment Advisors India Ltd ("IAIL"), an Indian Company, is a growing private equity firm based in Mumbai. It had an annual turnover of Rs. 200 crore for the financial year 2005-2006.
2. Supreme Constructions Consortium ("SCC") is also an Indian Company. It is a real estate contractor, which has executed several prestigious building contracts for top corporate houses over the years and has become a reputed name in the real estate industry.
3. In June, 2005 it was decided in the Board Meeting of IAIL to setup their own corporate house in Mumbai, at a unique address in keeping with their growing market repute etc. In July, 2005 for the aforementioned purposes, IAIL procured a piece of land from MMRDA in the prestigious locale of Bandra - Kurla Complex ("BKC"). In August, 2005 IAIL invited Request for Proposal ("RFP") (including Building designs, quotation etc) for constructing their corporate house. In September, 2005 after reviewing several proposals, IAIL selected the proposal submitted by SCC for its unique design, costs and other factors. On 15 September 2005, IAIL and SCC signed the contract that provided: -
a. SCC shall complete the construction of the project by December, 2006;
b. The total cost of the project was Rs. 60 crore;

c. IAIL will make payment in four equal tranches of Rs. 15 crore each, in October- 2005, February-2006, June-2006. The final settlement was to be made in December-2006 when the project was completed and was handed over to IAIL.
d. SCC was required to furnish a bank guarantee in favour of IAIL to cover breach on their part; which was 50% of the value of the contract or Rs. 30cr.
4. The construction began in October, 2005 and continued as per plan without any delay till June, 2006. On 10 June, 2006 a fire broke out on the top two floors of building causing severe damage to the project under construction. It was found that a certain machinery kept by SCC caught fire; thus substantially delaying the construction work. SCC and IAIL set up a committee of their officers to investigate the fire. The Committee recorded minutes that the fire arose from the position of machinery kept by SCC, and that the committee was unable to conclude whether SCC was at fault, and that this question of deciding fault will be referred to experts by IAIL immediately. IAIL never made this reference. The committee also noted that the fire had caused loss to the incomplete structure, and that the cost for completion would increase by at least 20%. After heated discussions at the meeting about extra costs, and about who shall bear these, IAIL and SCC decided to discuss these in a later meeting. This meeting also never happened.

5. The construction was finally completed in March, 2007, three months behind schedule. The final tranche of payment (Rs. 15 crore) was withheld by IAIL till the construction was complete on 1 March, 2007. SCC sent a letter on 15 March 2007 to IAIL claiming the last tranche of payment that was due and additional charges of Rs. 5 crore for the delay in construction citing clause 11 & 12 of the contract. The clauses read as under:

"11.0 SCC will not be liable for any loss or damage arising out of the work
carried out under this contract;
12.0 Furthermore, SCC is entitled to levy additional charges where (i) extra work is required to prepare the project before handing over of the finished project, and (ii) increase in costs arising from delay in completion of project, where delay occurs from causes outside the control of SCC."
6. IAIL refuted the contentions made by SCC vide a reply letter dated 20 March, 2007, stating that construction had not been completed as per schedule agreed under the contract, furthermore, it pointed out that due to delay in completion of the building, IAIL had incurred a loss of Rs. 50 lakhs as rental charges towards its leased office premises for the period of January-March, 2007. It also emphasized that it had the right to invoke the bank guarantee that was furnished as part of the contract. Further, IAIL stated that it was withholding the payments due to SCC for these reasons.

7. Meanwhile, an article containing an interview with the CEO of IAIL published in a
popular business magazine mentioned how the contracts entered with SCC were performed in bad faith.
8. On 30 March 2007, IAIL invoked the bank guarantee and collected 50 lakhs under the guarantee from the bank.

9. On 20 May, 2007, SCC filed a Civil Suit (C.S. No 1000/2007) against IAIL in the City
Civil Court Mumbai claiming the amount of Rs 15 crores of the final tranche of pay
ment,
Rs 5 crores for extra cost caused by the delay in construction, 50 lakhs being the amount
collected by IAIL under the bank guarantee, interest on these amounts, and also for Rs. 5
crore as compensation for loss arising from libellous statements made
against its
reputation. In the reply to the plaint, IAIL has refuted the contentions stating inter alia
that they were entitled to withhold payments for non
-
adherence to time schedule by SCC
and loss
es that arose as a consequence.
10.
Pending this suit, in Jul
y 2009, and at the instance of the Court, IAIL deposited 15 Crores
in the Court and SCC handed over the
constructed corporate house
to IAIL. Parties did
this without prejudice to their rights.
11.
The facts stated in paras 1 to 8 are either admitted or suffici
ently proved. The matter is
fixed for final hearing. Argue for (i) Supreme Construction Consortium, or (ii) Investment
Advisors India Ltd in the said civil suit.
This imaginary problem is formulated
for the purpose of moot court only.

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