Q: Elaborate the citation of Vishal Engineers & Builders vs Indian Oil Corporation Limited on 30 October, 2011 ?

Ans: Vishal Engineers & Builders vs Indian Oil Corporation Limited on 30 October, 2011.

The appellant was awarded the work of internal roads earth filling, drains and pipe culverts at L.P.G. Bottling Plant, Farrukhabad, U.P. vide order No.LPG/ENG/1564 on 2.9.1994. The stipulated date of completion of the work was 1.4.1995 but the work was completed by the appellant only on 15.5.1996. It is the say of the appellant that the non-availability of WBM and soling stones, because of agitation in Uttarakhand as also non-availability of regular transport and non-availability of bitumen on account of closure of refinery in the months of March-April, 1996, led to the delay.

The respondent also recovered liquidated damages to the extent of 10 per cent of the contract value amounting to `4,59,992.00 on account of delay in completion of the work by the appellant. 

Section 73 of the Contract Act, thus, contemplates award of damages for losses suffered by breach of contract by the opposite party. Section 74 of the Contract Act stipulates that in case of such a broken contract if a sum is named in the contract as the amount to be paid in case of such breach, whether or not actual damage or loss is proved to have been caused thereby, the aggrieved party is entitled to receive from the opposite party who has broken the contract, a reasonable compensation not exceeding the amount so named.

The honourable Delhi High Court held that the aforesaid would naturally give rise to the issue of interest on this amount which has been improperly recovered by the respondent. We are conscious of the fact that the interest regimes since 1996 has varied over different periods of time with periods of lower interest regime and higher interest regime. We also cannot lose sight of the fact that this is a commercial transaction where the amount has been utilized by the respondent. We, thus, consider it appropriate to grant interest @ 15 per cent per annum (simple interest) from the date the amount was appropriated by the respondent till date of payment.