In Brief
Mahanadi Coalfields Ltd. hired Dhansar Engineering to extract coal/coal measure strata for Rs. 17 per cubic metre on a one-year contract from April 2003. The contractor requested contract extension to July 2004 due to financial hardship. The principal then increased the work quantity by 30% in June 2004, but the contractor withdrew after completing 108.47% of the total 130% work. The principal demanded compensation for the unfinished portion, assigning it to a third party at Rs. 31.50 per cubic metre. The High Court quashed the penalty. The Supreme Court partly allowed the principal's appeal, holding that clause 5 permitted quantity increase during the subsisting contract period and the contractor remained bound to perform. The contractor was held liable for the financial loss to the principal, but reserved questions on penalty justness for reconsideration by the principal through the contractor's representation."
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