- (1.) Civil Appeal No. 4789 of 2008 The Chittaranjan Locomotive Works at Chittaranjan, West Bengal floated a tender by issuing a tender notice dated 18.01.1996 for "repairs of leaky roof in staff quarters and service buildings at Chittaranjan by Bitumen Tar-felting under Colony No.I", during 1995-1996. M/s S.R. Ghosh, the appellant herein, was the successful tenderer. It is therefore, that the respondent accepted the appellant's offer, through a formal letter dated 10.05.1996.
(2.) An important component namely the raw material for executing the contract was bitumen. The appellant received information about a notification dated 3.7.1996 of the Central Government, which increased the price of petroleum products including bitumen. It is pointed out that the erstwhile price of bitumen of Rs. 5,700/- per metric tonne was revised to Rs. 7,400/- per metric tonne. On the issue of a consequential impact of price rise, the first communication addressed by the respondent to the appellant was dated 15.07.1996. An extract of the aforesaid communication is reproduced hereinbelow: "Please refer your above cited letter addressed to this office. You have awarded the work of repair of leaky roofs by proving bitumen tarfelt in staff qrs. Under IOW/Col-I, Col-II, Col-III vide above mentioned letters dated 10.05.1996. It is worth to note that you had sufficient time for last two months to arrange bitumen and tarfelt and other materials. It was requested to you to start the work immediately but it is regretted that due to failure at your end the progress of work NIL for the last two months. Under such circumstances the Railway is not responsible if there is any loss due to hike in the cost of labour and materials required in the work. As such the contract does not have any clause of price variation and all the accepted rates of the agreement are binding upon both parties. Notwithstanding any rise or fall in the rate of labour and materials, the agreed noted of the contract shall not be affected. Therefore, you are requested to please improve the progress of work by arranging sufficient labour and materials immediately." (emphasis is ours) A perusal of the letter addressed by the respondent clearly reveals, that the respondent pointedly brought to the notice of the appellant, that it would not be responsible for the loss incurred by the appellant, on account of the price variation, and further, that the rates expressed in the agreement were binding on the parties.
(3.) The letter of the respondent dated 15.07.1996 was responded to by the appellant on 22.07.1996. The position assumed by the appellant needs a careful examination. Relevant part of the same is accordingly extracted below: "That Sir, the second claim of the Dy.CE(M)/CLW also does not hold as he states that the Railway is not responsible for hike in cost of labour or materials. It may be noted in this connection that the contract states that the Railway shall not be responsible for or due to fluctuations in the market prices but in this instant case it is not a case of fluctuation of market price but a statutory increase made vide a Government notification. This is surely not a case of personal opinion but a point of law. The photo copy of the letter of Dy. CR(M)CLW is enclosed and marked as Annexure 'C' for identification. That Sir, may we beg to mention that in similar nature of works and under similar circumstances under Eastern Railway we have been given awards by Arbitrators in four contracts. The awards are enclosed and marked collectively as Annexure 'D' for identification. May we thus request your kind self to look into the matter and most hopefully we await your judicious as this increase in prices of petroleum product had created a situation wherein we are unable to maneuver ahead without your confirmation that escalation shall be granted to us on a analysis of rates taking into consideration the prevalent rates of bitumen and tarfelt in relation to rates prior to the effects of the increase. Any necessary documents shall be produced before your good self as and when desired. Thanking you in anticipation and awaiting a favourable and early response. We remain." (emphasis is ours) The position assumed by the appellant was, that the fluctuation of the price of the bitumen was not a consequence of market fluctuation, but a statutory increase made by a government notification. The appellant also relied on 4 such awards rendered in its favour in similar circumstances. The appellant accordingly positioned itself by asserting that the rates expressed in the agreement would not be binding, since the price rise was not a matter of market fluctuation. ;