Bombay HC Clarifies Claims for Escalation of Costs and Running Account Bills of the Contractor
Commercial Suit for recovery of Rs.5,76,25,112/- with 15% interest.
On 16.3.1995, the plaintiff was given the contract for the construction work of Earthen Dam in Jalna district. Although the work was to be completed in 24 months, ultimately extensions were granted till 30.6.2023. During execution, the additional work of excavation and masonry dam from 2810 to 3040 was attached to the original work.
A running account bill, by its very nature, involves interim payments made at specified intervals, depending upon the progress of the contract works. A “running account” is account between parties having a series of transactions, which remains open and is usually subject to settlement at stated intervals. Such running account bills are only provisional in nature and do not result in the final settlement of rights and liabilities between the parties. There is no clause in the tender document to treat R. A. Bills as f inal to the extent of work covered in the R.A. Bill. However, there is also no clause to treat the payments made under R. A. Bills as advance till the f inal bill. In absence of the above clauses we treat the R. A. Bills as interim payment and the final settlement takes place only upon acceptance of the final bill.
There is no error pointed out in each individual R.A. Bill towards escalation price. The prices of labour, material and oil as on the last date of work i.e. 20 years after commencement of work cannot be the basis for calculation of price escalation for the whole tender work. Escalation is worked out at each R. A. Bill period. The plaintiff has, therefore, erroneously interpreted Clause 56 of the agreement, while submitting his final Bill.
Judgment dated 17.1.2026 in Commercial Appeal No.9 of 2019 of Executive Engineer, GMIDC, Sinchan Bhavan, Aurangabad and others Vs. Ms. Gurunanak Industries and another
