1. RFA No.192 of 2005 is preferred by the plaintiff/contractor against the judgment and decree insofar as it did not grant the entire amount claimed by him. RFA No.322 of 2005 is preferred by the Chief General Manager, Indian Rare Earths Limited and another (defendants 1 and 2) against the same judgment that granted partial relief to the plaintiff. Since both appeals arise from the common judgment and decree in O.S.No.55 of 1997, they are disposed of by this common judgment. The parties are referred to as they stood in the suit.

2. The plaintiff, a P.W.D. and Railway contractor, was awarded the work of construction of a godown, canteen building, civil work, water supply, sanitary and electrification for the defendant Corporation at a Probable Amount of Contract (PAC) of Rs.74,67,690/-, pursuant to an agreement dated 02.09.1994. The plaintiff's case is that the defendants delayed handing over the site, that the site as handed over was unsuitable, and that numerous material alterations and additions were directed by the defendants during execution, which are stated in the plaint as follows:

                  a) The total height of the structure has been raised by 1.5 meters from the initially planned height of 7.92 meters. The change was made after the plaintiff signed the agreement.

                  b) A 4.45 cm. wide sunshade was added to the drawing, projection from the roof slab, all around the building, which was again after the start of construction.

                  c) The parapet wall of the roof slab was changed to be built from the edge of the above-said sunshade projection from the roof slab. The risk factor for the workers in working from the edge of the sunshade, at such height, caused heavy expenses as special Kalasees and experts were hired for the purposes. As per the insistence by the mine safety department, heavy scaffoldings were used, which incurred additional expenses.

                  d) The parapet wall is designed in the original plan agreement was of curved shape, which was later (Middle of August, 1995) changed to a semi-circular shape in order to avert the strong wind from the sea.

                  e) All the external columns were lengthened and the beams provided connecting the parapet, all around the building to enhance the aesthetic beauty of the architecture. That was again not in the original plan and agreement.

                  f) According to the original plan, the thickness of the RCC roof slab was 12 cm, but it was changed to 14 cm as per the instructions of the civil Engineer at site.

3. The plaintiff also contended that the original agreement did not contemplate the entire construction of the second floor. The plaintiff had to carry out the construction of the second floor, including the staircase, staircase roof and the semi-circular parapet. He was forced to employ 132 workers of the Civil Contract Welfare Forum in addition to the skilled employees of the Defendant company, and the subsequent increase in the wages of the said workers resulted in additional expenditure. Concrete mixtures were to be used, which increased the expenditure of concrete work by way of hire charges of machine, cost of fuel, wages for operators, fall in volume of work, etc which works out losses to the plaintiff at the rate of Rs.100 per bag of cement mixed.

4. The plaintiff claims enhanced rates for excess work under Clause 17 of the agreement and for extra work under Clause 20, having received only Rs.76,72,625/- from the defendants against a claim of Rs.47,23,314.32/- claimed as per the notice under Section 80 CPC, but restricted to Rs.30,00,000/- for the purpose of the suit.

5. The defendants denied that the site handed over was unsuitable, denied that there was any material alteration to the design beyond minor changes, and contended that the final bill of Rs.76,72,635/- was paid in full and final settlement of all claims, evidenced by the plaintiff's own endorsement accepting the measurements in the Measurement Book. The allegation that the first defendant had to dismantle the existing building and handed over the site part by part is not true. As a result of the excavation of sand by the first defendant, the work to be done by the plaintiff was considerably reduced. He got more convenience for digging the pits for the construction of columns. No support was necessitated on the sides of the pit against land sliding due to the removal of the sand. Labour work was also considerably reduced. Thus, a more convenient site was handed over to the contractor. Thereafter, the construction of the column site was rebuilt at the expense of the defendants. All the extra work was accumulated and measured out by the plaintiff, and he received the amount without objection. Hence, he is not entitled to any amount.

6. There was no change to the godown due to the accommodation of heavy vehicles. The vertical height of the roof slab has been increased, and the thickness of the slab was increased by 2 cms, that too without affecting the size of ventilators or the variety of timber used. Additional payments were made for the quantity of contract work done for increasing the height of the column and the thickness of the roof slab. The allegation that there are significant changes to the original plan drawing is not true. The allegation that half of the Godown was converted into a unit of plant is not true. No change in the plant was effected. If at all, there was only a reduction in the size of the ventilators, which would not cause any loss to the contractor. The entire work carried out by the plaintiff has been properly measured out, and payments were effected. The final bill was passed with full and final settlement of the entire claims, for which the plaintiff obtained a certificate from the first defendant. The suit has been filed as an afterthought.

7. There was no carpenter of barbender attached to the defendant company. They had to be deputed from outside, and the plaintiff was well aware of these facts. The measurements of various items shown in the plaint are incorrect. The changes to the original plan could have been contemplated by the contractor. Such changes would cause no inconvenience or loss to the plaintiff. Payments were effected taking into account all these aspects. Though the original contract amount was for Rs.74,67,619/-, the final bill was paid for Rs.76,72,635/- taking into account the entire additional work done by the plaintiff. There was no agreement to pay anything more than that provided in the agreement. The plaintiff has been properly paid for the additional work done by him and prayed for the dismissal of the suit.

8. The trial court framed issues on maintainability, enforceability of the agreement, discharge by full and final settlement, and entitlement, and decreed the suit in part, granting the plaintiff Rs.2,97,798.34/- as 40% enhancement on the rate for work under Clause 17, and Rs.1,30,085.26/- for work under Clause 20 at KPWD rates, together with interest at 6% per annum. Both the plaintiff and the defendants, aggrieved by the extent of the decree, have preferred these appeals.

9. Learned Senior Counsel for the appellant contractor, Sri B.G. Harindranath, instructed by Smt.Anna Mary Mathew and Smt.Manavi Muraleedharan, made the following submissions:

                  1) The work site was not cleared and handed over as contracted; an excavated site was handed over instead of a levelled one, necessitating an unforeseen increase in the length of the foundation column and consequent additional expenditure.

                  2) The defendants directed extensive changes to the agreed plan and design during execution — increase in roof-slab thickness, extension of the slab and parapet with additional beams and tie-beams, change of the parapet from a curved to a semi-circular shape, construction of a staircase cabin, increase in the height of the building by 1.5 metres, and change of ventilator timber — none of which was contemplated in the original plan, design or work order, a fact affirmatively found by the court-appointed Commissioner.

                  3) These items fall into two distinct categories which the trial court erroneously conflated: Category I, being excess quantities of items already in the original schedule (governed by Clause 17), and Category II, being entirely new or substantially altered work outside the scope of the original agreement (construction of the second floor, staircase and staircase cabin, extended slab, additional beams, and the altered parapet), which cannot be compensated merely at scheduled or KPWD rates.

                  4) The loss occasioned by the mandatory engagement of 132 Civil Contractor Welfare Forum workers, the steep increase in their wages, and the consequent additional cost of machine-mixing of concrete were not properly considered by the trial court, though the Commissioner's report supports these claims, including the claim of a 300% rate for second-floor work (Ext.A7) and a 65% enhancement (Ext.A5).

                  5) The claim is not an afterthought: a chronology of contemporaneous communications (30.12.1994, 17.04.1995, 20.08.1995, 04.09.1995, 11.03.1996 and 04.05.1996) demonstrates that the claim for extra rates was consistently notified during execution, to which the defendants never replied disputing liability or directing the contractor to stop work.

                  6) The endorsement “measurement accepted subject to claims” in the Measurement Book is not an unconditional acceptance amounting to full and final settlement; being reasonably capable of two interpretations, it must be read against the defendants. This being a lump sum contract, the defendants cannot refuse payment merely on the basis of the final measurement bill; on substantial completion the contractor is entitled to the contract price subject only to specific, properly pleaded deductions. No deduction was pleaded in the written statement, and it cannot be introduced for the first time in appeal.

                  7) The defendants' silence in the face of repeated claims, coupled with knowledge of the variations and acceptance and continued use of the completed building, amounts to acquiescence in the plaintiff's claim. Having admitted in the written statement that the claims were discussed and allegedly settled orally, the burden of proving that alleged settlement lies on the defendants.

                  8) Even independent of Clause 17, the extra/altered work was lawfully done, not gratuitously, and was accepted and enjoyed by the defendants; the plaintiff is therefore entitled to compensation on the principle of unjust enrichment and quantum meruit under Section 70 of the Contract Act. The Commissioner's approach of adopting the best measurable figure where the foundation could no longer be physically verified (the area having been filled and levelled) is consistent with the “guesstimate” principle.

10. Learned Senior Counsel cited the following judgments:

Shri Ajodhya Pd. Bhargava v. Shri Bhawani Shankar Bhargava and Another [AIR 1957 All 1], Chairman and MD, NTPC Ltd v. Reshmi Constructions, Builders & Contractors,[(2004) 2 SCC 663], Hoenig v. Isaacs [(1952) 2 All ER 176], M/s R.C Thakkar v. (The Bombay Housing Board by its successors) now The Gujarat Housing Board, [AIR 1973 Guj 34], Trishala Jain and Another v. State of Uttaranchal and Another [(2011) 6 SCC 47], Chairman, State Bank of India and Another v. M.J James, [(2022) 2 SCC 301], State of West Bengal v. B.K. Mondal and Sons [AIR 1962 SC 779], V.R. Subramanyam v. B Thayappa (deceased) and others (AIR 1966 SC 1034), McDermott International Inc. v. Burn Standard Co. Ltd. and Others [(2006) 11 SCC 181].

11. Learned counsel for the respondent Company, Sri. Akshay Kammath made the following submissions:

                  1) The Commissioner did not report any change in the measurements recorded in the Measurement Book; there is no real dispute as to the quantity of work done, only as to the rate applicable, and Ext.C2 shows that the excess work was nominal compared to the total volume of work.

                  2) No claim lies under Clause 17 in the absence of a rate enhancement agreed in writing by the defendants before the excess work was executed; mere unilateral letters from the contractor, unanswered by the defendants, do not amount to an admission of enhanced rates, and the plaintiff completed the work and collected payment at scheduled rates without objection.

                  3) For extra items outside the tender/work order, PWD rates with proportionate adjustment under Clause 20 were correctly applied and paid; the trial court erred in additionally awarding a 40% enhancement over and above these rates, which is contrary to the terms of the contract and unsupported by evidence of price or wage escalation beyond the uncorroborated testimony of PW1.

                  4) The parties are bound by the specific rate mechanism agreed in the contract, and it was not open to the trial court to depart from it and award rates it considered fair; absent proof of breach by the defendants, no enhancement beyond the contractual rates is permissible.

                  5) Ext.B5, the final bill, was signed unconditionally by the plaintiff after aggregate computation of actual measurements against scheduled quantities, resulting in payment of Rs.76,72,635/- as against the original PAC of Rs.74,67,690/-, and constitutes a full and final settlement.

                  6) There is no material basis for any claim under the head of extra work; the Commissioner's reports (Exts.C1 and C2) quantify only the excess measurements, which are not in dispute, and do not support any material extra work; the claim under this head, and all other heads of claim, ought therefore to be rejected in their entirety.

                  7) The plaintiff, after impliedly admitting the fact that he has been paid for the excess measurements at the schedule rate, has claimed excess rates for excess measurements as per clause 17 of ExtA1 Tender. The periodical demands made by the plaintiff as per Ext A7 to A10 letters were not settled in writing by the defendants in due course but were finally settled as per Ext.B5 Final Bill. The Supreme Court in Union of India v. Master Construction Company [(2011) 12 SCC 349] has held that a contractor, after accepting the amount as per final bill, cannot thereafter claim additional amount.

12. Heard both sides and perused the records.

13. The Point for determination in these appeals is whether the plaintiff/ contractor is entitled to enhanced rates, over and above what has been granted by the trial court, for the excess and extra/additional works admittedly carried out by him, and if so, to what extent.

14. A few undisputed facts are to be noticed at once. The plaintiff undertook and completed the construction, which was accepted and is in continued beneficial use by the respondent Company since 09.03.1996 without any complaint of defect, and that deviations and extra work were carried out during the subsistence of the contract. It is equally undisputed that the plaintiff's periodical communications claiming extra rates were never answered by the defendants, and at no point during execution did the defendants dispute their liability to pay for the extra work, direct the plaintiff to desist, or assert that the work was unauthorised. Nor is it the defendants' case that the additional work was done gratuitously. In these circumstances, the only real defence available to the defendants is one of discharge — that payment of Rs.76,72,635/- under Ext.B5 constitutes full and final settlement of every claim.

15. The above defence cannot be accepted for various reasons. The endorsement relied upon, “measurement accepted subject to claims”, is on its face a qualified and conditional acceptance; it reserves rather than extinguishes the plaintiff's claims for enhanced rates. Where an admission is reasonably capable of two meanings, the interpretation unfavourable to the person making it ought not to be adopted [Shri Ajodhya Pd. Bhargava (supra)]. As held by the Supreme Court in Chairman and MD, NTPC Ltd (supra) — that a contractor with substantial sums locked up in a project, and liabilities to banks and financiers, is often left with no real choice but to accept payment under a final bill without a formal No-Demand Certificate — squarely applies here. No plea of deduction, still less particulars of any deduction, was taken in the written statement; it cannot be permitted to be built up for the first time in appeal out of the figures in Ext.B5.

16. This is, further, a lump sum contract accompanied by a schedule of rates for regulating additions and alterations, as recognised in M/s R.C. Thakkar (supra). In such a contract, measurement serves only to ascertain whether performance is substantially complete and to value departures from the scheduled work; it does not, without more, operate as an accord and satisfaction foreclosing a contractor's reserved claims for extra and altered work (Hoenig v. Isaacs (supra)). The undisputed absence of any defect in the completed building confirms substantial performance; what remains is only the valuation of the extra and altered work, not the contractor's entitlement to be paid for it.

17. The Commissioner's report is of particular importance. It was obtained with the concurrence of both sides; no objection was taken to it by the respondents, and on a subsequent remit by the trial court through its order dated 20.10.2003 it was supplemented by a further report specifically identifying the extra work under Clause 20 and the excess work under Clause 17. The Commissioner has affirmatively found that the changes to the depth of the foundation column, the thickness of the roof slab, the height of the R.C.C. slab, the shape of the parapet, and the construction of the second floor with a new staircase and staircase room were not contemplated in the original plan, design or work order, and has recommended a general revision of rates for all items other than those specifically excluded in paragraphs 1 to 4 of Ext.C1. That the depth of the foundation could not be physically re-verified, the area having since been filled and levelled, does not detract from this finding; adopting the best available figure from the contemporaneous records in such a situation is a legitimate and judicially sanctioned method of assessment — a “guesstimate” grounded in the material on record rather than mere conjecture (Trishala Jain (supra). It is significant to note that the written statement contains no specific denial, item by item, of the work pleaded by the plaintiff or its extent, as required by Order VIII Rule 2 to 4. A broad denial of this nature does not displace the plaintiff's pleaded and substantially proved case of extra work done.

18. On this footing, the works fall, as rightly submitted by the appellant, into two distinct categories. Category I comprises excess quantities of items already found in the original schedule, squarely governed by Clause 17 of Ext.A1, which entitles the contractor to an enhanced rate for excess work beyond 10% of the scheduled quantities where occasioned by bona fide changes in design. Category II comprises work of an altogether different character — the second floor, the staircase and staircase cabin, the extended and re-profiled parapet, and the additional beams and ties — work never contemplated by the original agreement at all, and therefore not amenable to valuation merely at scheduled or KPWD rates.

19. For Category II work, the defendants' conduct in directing, accepting, and thereafter enjoying the benefit of construction outside the four corners of the agreement gives rise to an independent obligation to compensate the contractor on the doctrine of unjust enrichment embodied in Section 70 of the Contract Act. The three conditions for its application are all satisfied: the plaintiff lawfully carried out the additional work for the defendants; he did not intend to do so gratuitously, as demonstrated by his continuous and contemporaneous claims; and the defendants have accepted and continue to enjoy the benefit of that work (B.K. Mondal and Sons (supra); V.R. Subramanyam (supra)). The defendants cannot direct and accept work outside the agreement and then resist payment on the sole ground that the procedure for a written rate-enhancement under Clause 17 was not followed for work to which Clause 17, on a true reading, does not even apply.

20. The plea of discharge is, in any event, inconsistent with the defendants' own written statement, where it is contended that the plaintiff's claims were discussed and settled. A party cannot simultaneously assert that a contractor's claims were the subject of an oral settlement and that no liability to consider those claims ever arose; having taken up the former plea, the burden of proving the terms of that alleged settlement lay squarely on the defendants, a burden they have not discharged. Equally, the defendants' conduct in standing by through the entire period of execution — receiving repeated written claims, raising no contemporaneous objection, permitting the work to proceed, and thereafter accepting and using the completed building — amounts to acquiescence of the kind described in M.J. James (supra), conduct from which an intention to accept the consequences of the variations directed by them is properly inferred. Acquiescence operates against the defendants, not the plaintiff, and reinforces rather than defeats the plaintiff's claim.

21. The reliance placed by the respondents on Union of India v. Master Construction Company (supra) does not assist them. That decision proceeds on the footing of an unconditional final bill signed without demur or reservation. Here, the endorsement itself preserves the claims, and the surrounding correspondence establishes that the claims were never abandoned; the principle in Master Construction Company has no application to a conditional or qualified acceptance of the kind found in Ext.B5.

22. Turning to quantum, the trial court's award of a flat 40% enhancement under Clause 17, and its adherence to plain KPWD rates for Clause 20 items, does not reflect either the Commissioner's report of a general revision of rates or the distinct character of the Category II work, and, as the material on record shows, proceeds without reference to the pleadings, the evidence, or the Advocate Commissioner's report. It is, for that reason, unsustainable, being both arbitrary in the rate it adopts and inadequate in the scope of work it compensates. The sum of Rs.2,04,945/- computed departmentally by the Corporation for the additional work noted by the Commissioner and pleaded by the plaintiff is, for the same reasons, plainly insufficient and cannot be accepted as the measure of the plaintiff's entitlement.

23. The correct measure of compensation must instead proceed on the following basis: (i) for Category I excess-quantity items governed by Clause 17, the rate enhancement recommended by the Commissioner by way of general revision of rates, as recorded in Ext.C1 (excluding the items specifically excepted in paragraphs 1 to 4 thereof), read with the further findings in Ext.C2; (ii) for Category II items — being work outside the scope of the original agreement — fair and reasonable compensation computed on prevailing market rates on the principle of quantum meruit under Section 70 of the Contract Act, with the benefit of the guesstimate principle where precise physical verification is no longer possible; and (iii) reasonable compensation for the additional labour cost occasioned by the mandatory engagement of Civil Contractor Welfare Forum workers and the consequent escalation in wages and machine-mixing costs, computed, insofar as head-office and allied overheads are concerned.

24. For the foregoing reasons, the judgment and decree of the trial court, insofar as it restricts the plaintiff's entitlement to Rs.2,97,798.34/- under Clause 17 and Rs.1,30,085.26/- under Clause 20, cannot be sustained. The plaintiff/appellant contractor has established, on the evidence and the unchallenged report of the advocate commissioner, that he is entitled to enhanced compensation computed on the basis set out above, in supersession of the quantification made by the trial court. Correspondingly, the grounds urged by the respondent Corporation in RFA No.322 of 2005 — that no amount at all, or no more than what has already been paid, is due to the plaintiff — stand rejected for the same reasons.

25. Ideally, the case should have been remanded for quantification of the amount payable; but the same will not serve any purpose due to the passage of time and also the difficulty in assessing the rates to be granted for the extra work done by the plaintiff, as the work of foundation etc., cannot be ascertained as structures have already been built over the same. Under such circumstances, taking note of the additional/extra claims made by the plaintiff, the evidence adduced, the commission reports, and to meet the ends of justice, I deem it appropriate to grant an amount of Rs.7,50,000/- (Rupees Seven lakhs fifty thousand only) with 12% interest per annum from 20.08.2004 till realisation.

Accordingly, RFA No.192 of 2005, filed by the plaintiff contractor, is allowed. The Appellant is granted a decree for Rs.7,50,000/- (Rupees Seven lakhs fifty thousand only) with 12% interest per annum from 20.08.2004 till realisation. The judgment and decree of the Principal Sub Court, Kollam, in O.S.No.55 of 1997 dated 20.08.2004, is modified to the above extent. RFA No.322 of 2005, filed by the defendant Company, is dismissed.