Para 9.3.8 — GOODS_MANUAL

9.3.9 Quantum of LD 1. While granting an extension of the delivery period, where the delivery of stores or any instalment thereof is accepted after the expiry of the original delivery period, the CA may recover from the contractor, as agreed, as LD a sum equivalent to 0.5 (half) per cent of the delivered price (including elements of GST, freight and variations as per sub-para 2) below) of the delayed Goods and/ or incidental Works/ Services for each week of delay or part thereof until actual delivery or performance, subject to a maximum deduction of the 5% (or any other percentage if prescribed in the contract) of the total contract value. In case of inordinate delay (para 9.3.3-2 above) this maximum deduction shall be 10% of the total contract value. 2. In contracts governed by any variation (PVC, ERV or statutory variations), LDs (if a percentage of the price) will be applicable on the price as varied by the operation of the PVC. LDs accrue only in case of delayed supplies. Where or as far as no supplies have been made under a contract, upon cancellation, recovery of only the loss occasioned thereby can be made, notwithstanding the fact that prior to the cancellation, one or more extensions of the delivery period with reservation of the right to LD are granted. 3. As mentioned in para 9.5.2-3-e) below, for purpose of GST, liquidated damages should be shown as deductions on the invoice value by the contractor.

9.3.10 Waiver of LD 1. There should normally be no system of waiver of LDs for delayed supplies in supply contracts and it may strictly be an exception rather than a rule. For an extension of the delivery date with waiver of LD, approval of the CA with consultation of associated Finance may be taken and justifications recorded. 2. Government establishments/Departments, as distinct from PSUs, which execute contract work should not be dealt with as ordinary contractors and not generally be penalised for late delivery and claims for loss on risk-purchase should not be enforced against them. Serious cases of defaults should, however, be brought to the notice of the Head of Department or the Government Department concerned. 3. In the case of development/indigenisation contracts, LDs are not levied. However, the nature of such contracts should be declared at the time of placing them.

9.3.8 Liquidated Damages (LD) Compensation of loss on account of late delivery (actually incurred as well as notional) where loss is pre-estimated and mutually agreed to is termed as Liquidated Damages (LD). The law allows recovery of pre-estimated loss provided such a term is included in the contract, and there is no need to establish actual loss due to late supply. However, it would strengthen the Procuring Entity’s rights if it were established and kept on record that inconvenience and loss have been caused due to the delay in supplies, though the loss cannot be exactly quantified, and hence liquidated damages are applicable as a genuine pre-estimate of the loss.

9.3.12 Minor Short/ Excess Deliveries Minor shortfall/ excess deliveries in the last/ final consignment are unavoidable due to the manufacturing and supply chain vagaries. Although to close the contract, an amendment may require to be issued, yet to simplify the process, the consignee receiving the material can be authorised to treat the Contract as completed, provided the deliveries are short/ excess upto 5 per cent of the total value of the Contract or Rs. 5 Lakhs, whichever is less. Payment will be made without the issue of formal contract amendment and without reference to the ultimate user/ indentor. This shall not be applicable to indivisible items or machinery and plants.

9.3.11 Handling Deliveries at the last moment or after the Expiry of the Delivery Period 1. As per law, if stores are accepted after the expiry of the delivery date of a particular instalment without an extension in the delivery period having been given, even duly reserving our rights to levy LD, it amounts to voluntary abrogation of our legal rights under the contract to claim LDs or other remedies. 2. If the contractor makes supplies locally after the expiry of the delivery period, the supplies may be provisionally retained under a franking clause reserving right, and the contractor may be asked to obtain an extension of the delivery period from an authorised officer with or without any LD/denial clause.

“Please note that materials have been supplied after the expiry of the contracted delivery date, and its provisional retention does not acquiesce or condone the late delivery. It does not intend or amount to an extension of the delivery period or keeping the contract alive. You may apply for an extension of delivery date from the procuring entity. The goods are being retained without prejudice to the rights of the Government of India under the terms and conditions of the contract.”

3. As regards supplies coming from outside contractors, if the contractor dispatches the stores after the expiry of the delivery period, the consignee should, after the receipt of the railway receipt, lorry receipt or goods consignment note or airway bill, send an intimation to the contractor stating that the action taken by him in dispatching the goods after expiry of the delivery date is at his own risk and responsibility and that the consignee is not liable for any demurrage, wharfage and deterioration of goods at the destination station and, in his interest, the contractor should get an extension of the delivery period from the purchasers. A copy of the communication sent to the contractor should also be sent to the purchaser.

4. In the case of imports, the contractor must not dispatch the consignment after the expiry of the delivery period without taking a prior extension of the delivery period. In any case, the terms of LC should be such that if there are dispatches beyond the delivery period, payment should be denied without a levy of full LD and without a formal extension of the delivery period by the purchaser.