Karnataka High Court
Karnataka Power Corporation Ltd vs M/S Bangalore Construction Company on 22 February, 2024
1
RFA NO. 1188/2010
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 22ND DAY OF FEBRUARY, 2024
PRESENT
THE HON'BLE MRS. JUSTICE K.S.MUDAGAL
AND
THE HON'BLE MR. JUSTICE C.M.JOSHI
REGULAR FIRST APPEAL NO. 1188 OF 2010 (MON)
BETWEEN:
KARNATAKA POWER CORPORATION LTD.,
A GOVERNMENT OF KARNATAKA UNDERTAKING
HAVING ITS OFFICE AT
NO.116/2, TRADE CENTRE BUILDING,
2ND FLOOR, R.C ROAD,
BANGALORE-560 001.
REPRESENTED BY ITS HEAD (LEGAL SERVICES),
MR. CHIDANANDA RAO
...APPELLANT
(BY SRI MAHESHA A.S, ADVOCATE FOR
SRI ASHOK N NAYAK, ADVOCATE [PH])
AND:
1 . M/S BANGALORE CONSTRUCTION COMPANY,
A PARTNERSHIP FIRM
REGISTERED UNDER THE PARTNERSHIP ACT,
HAVING ITS OFFICE AT
NO.104, R V LAYOUT,
KUMARA PARK EXTENSION,
BANGALORE-560020.
REPRESENTED BY ITS 9 PARTNERS.
2 . MR. A S KUPPURAJU,
2
RFA NO. 1188/2010
AGED ABOUT 85 YEARS,
S/O SRI AKALA RAJU.
DELETED AS PER ORDER DATED 28.02.2011
3 . SRI K GOPAL RAJU,
AGED ABOUT 61 YEARS,
S/O SRI KUPPU RAJU.
4 . SRI KODANDA RAJU,
AGED ABOUT 38 YEARS,
S/O SRI A S KUPPU RAJU.
RESPONDENTS 2 TO 4,
HAVING ITS OFFICE AT
NO.104, R V LAYOUT,
KUMARA PARK EXTENSION,
BANGALORE-560 020.
...RESPONDENTS
(BY SRI S.K.V CHALAPATHY, SENIOR COUNSEL A/W
SMT. ANAGHA JAYAPRAKASH, ADVOCATE FOR R1 & R3 [PH];
R-4 SERVED;
R-2 IS DELETED V/O DATED 28.02.2011)
THIS RFA IS FILED U/S 96 OF CPC, AGAINST THE
JUDGMENT AND DECREE DATED 23.11.2009 PASSED IN
O.S.NO.1094/1989 ON THE FILE OF THE XLIII ADDL. CITY CIVIL
AND SESSIONS JUDGE, CCH-14, BANGALORE, PARTLY
DECREEING THE SUIT FOR RECOVERY OF MONEY.
THIS REGULAR FIRST APPEAL HAVING BEEN HEARD AND
RESERVED ON 09.01.2024, COMING ON FOR PRONOUNCEMENT
OF JUDGMENT THIS DAY, C.M.JOSHI J., DELIVERED THE
FOLLOWING:
3
RFA NO. 1188/2010
JUDGMENT
Being aggrieved by the judgment and decree passed
in O.S. No.1094/1989 by the learned XLIII Additional City
Civil and Sessions Judge, Bangalore, (CCH 4), dated
23-11-2009, the plaintiff- The Karnataka Power Corporation
Limited, is before this Court in this appeal.
2. The parties would be referred to as per their ranks
before the trial Court for the sake of convenience.
3. The brief facts of the case are as below:
The plaintiff-Corporation is a Public Undertaking of the
Government of Karnataka registered under the Companies
Act. Defendant No.1- M/s. Bangalore Construction Company
is a registered Partnership Firm engaged in Engineering
Constructional Contracts with the principal place of business
located at Bangalore. Defendants No. 2 to 4 are the
partners of the Firm. The admitted facts are that, the
plaintiff-Corporation had entrusted the construction of its
building at No.82, Race course Road, Bangalore, to the
defendant-Firm under Letter of Intent dated 22-3-1982.
The value of the work was to the extent of Rs.46.13 lakhs
and period of execution was 30 months from 22-3-1982.
The work included in the Contract was construction of a
building with framed structure having seven floors in
addition to cellar and ground floor with all civil works
excluding the electrical work. In pursuance to the Letter of
Intent, the site was handed over to the defendant-Firm on
31-3-1982 and the work commenced on 04-05-1982.
Defendant No.1-Firm gave a detailed programme of
execution by its Letter dated 15-6-1982. Though a detailed
agreement had to be executed by 04-03-1982, it was
actually executed on 09-12-1982 and letter dated
15-06-1982 was part of the agreement.
4. The plaintiff-Corporation averred in the plaint as
follows:
(a) That since the progress of the work was slow
from the beginning and several review meetings were
conducted calling upon the defendants to accelerate
the work, no improvement was shown by the
defendants. A penalty of Rs.50/- per day was imposed
and collected from 01-03-1983.
(b) The defendants issued a letter dated 25-04-1984
to enhance the rates by 30% for the work done from
the inception till 31-03-1984 and 50% of the quoted
rates for the works done from 01-04-1984, though the
contract did not provide for any enhancement.
(c) By letter dated 27-7-1984 defendants requested
for extension of time by eight months, which was
permitted by the plaintiff-Corporation without
acceding to the request for enhancement of the rates.
(d) By 21-09-1984, which was the stipulated date
for completion, defendants executed the work to the
tune of Rs.33.11 lakhs as against the total contract
value of Rs.46.13 lakhs.
(e) On account of certain additions and alterations in
design and additional requirements, the value of the
balance work at the end of 21-09-1984 was Rs.27.87
lakhs including the shortfall of the work was to the
tune of Rs.13.02 lakhs. Even during the extended
period, the defendants could not complete the work as
agreed and the extended period expired on
21-05-1985. The work executed was only to the tune
of Rs.2.56 lakhs as against Rs.27.87 lakhs.
(f) The defendants by their letter dated
14-10-1985 intimated the plaintiff-Corporation that
they are unable to continue the work and requested
the plaintiff to terminate the contract after settling
their claims. Thereafter, the defendants abandoned
the work from 29-12-1985, by which time they had
executed the work to the tune of Rs.3.44 lakhs as
against the balance of Rs.25.31 lakhs. The discussions
between the parties on 06-1-1986, 8-1-1986 and
10-2-1986 went in vain and the defendants had
breached the contract. Therefore, the plaintiff-
Corporation rescinded the contract by letter dated
21-02-1986.
(g) The plaintiff had to get the remaining work
executed by entrusting the work to other Piece
Contractors and get the work finished.
(h) Though the plaintiff had called upon the
defendants to appear at the spot to take accounts
they did not appear but gave an untenable and
evasive reply on 01-03-1986. They also filed a Writ
Petition No.3468/1986 to stay the letter of rescinding
the Contract and ultimately, the petition was
dismissed on 02-04-1986.
(i) The defendants filed OS No.1014/1986 before
the City Civil Court Bangalore, seeking injunction and
a Court Commissioner was appointed to record the
measurements of the work done under the contract
and after the Court Commissioner submitted his
report dated 21-06-1986 and 06-08-1986, the suit
came to be withdrawn.
5. On the above grounds, the plaintiff-Corporation
made following claims:
(A) The plaintiff has sustained loss of Rs.7,21,273.50
ps., due to consequences of breach of contract.
(B) The plaintiff had issued 405.31 MT of steel for
execution of the work and out of it 14.955 MT was
unaccounted and therefore, the defendants are liable
to pay a sum of Rs.1,49,398.06 ps., as value to
unaccounted steel.
(C) The plaintiff had issued 21,411 bags of cement
to the defendants and a quantity of 566 bags
remained unaccounted and as such, sum of
Rs.27,690/- is liable to be paid by the defendants.
(D) The plaintiff has to locate several of its offices in
rented buildings and the rentals per month for such
premises was Rs.53,690.14 ps. If the defendants had
completed the contract within a stipulated time, the
plaintiff could have saved a sum of Rs.13,58,815.10
ps., paid as rentals for its offices, which is liable to be
paid by the defendants.
(E) Due to the delay in execution of the work by the
defendants, plaintiff had to continue the services of
supervisory staff till the completion of the building by
piece work contractors and as such, a sum of
Rs.4,28,750/- is to be paid by the defendants for the
period of 01-06-1985 to 30-06-1987.
(F) The plaintiff is entitled to adjust the sum of
Rs.3,65,503.31 ps., towards the amount due to the
defendants under the contract and a sum of
Rs.12,364/- towards extra items/works done by the
defendants. Therefore, the defendants are liable to
pay the sum of Rs.26,85,926.66 ps., and after
deducting the dues from the plaintiff to the
defendants, the liability of the defendants is
Rs.23,08.059/-. Thus, the plaintiff claimed
Rs.23,08,059/- along with interest at 12% p.a.
6. After service of summons, defendants have
appeared before the trial Court through their counsel and
filed their written statement. The contentions of the
defendants are as below:
(a) As per the allegations of the plaintiff-Corporation
there was breach of agreement on 29-12-1985 and
the present suit is filed on 20-2-1989 and therefore,
the suit is barred by limitation.
(b) The site was handed over to the defendants on
31-3-1982 and commenced the work in April 1982,
but not on 4-5-1982 as claimed by the plaintiff. It was
denied that the progress of the work was slow and
there were several letters to speed up the work.
(c) Even at the time of signing the agreement the
plaintiff had not supplied the entire drawings and
designs in respect of each and every item of work to
be carried out, so that the defendants could have
chalked out the programme of the work and complete
the same within stipulated time.
(d) Even after the delayed supply of designs and
drawings, on several times they were changed which
resulted in rescheduling of the work by the
defendants, dismantling the fabricated structures and
re-designing such structures. Therefore, the delay in
progress of the work was completely attributable to
the acts, omissions and commissions of the plaintiff.
There was no justification for penalty of Rs.50/- per
day from 1-3-1983.
(e) It is admitted that the defendants claimed
enhancement of the rates for the work done and to be
done and also that the time stipulated for the work
was extended for eight months. There were valid
reasons and the written statement narrates those
reasons in detail.
(f) The time and rates stipulated under the
agreement was relevant only if both the parties
discharged their duties in accordance with the terms
and conditions of the agreement. Since there was
delay on the part of the plaintiff and violations of the
terms of the agreement, the plaintiff had failed to
perform its part of the agreement.
(g) The rates of the material as well as cost of
labour had increased nearly 3/4 and it was impossible
for the defendants to carryout the works at the rates
stipulated in the contract. Despite request by the
defendants, the plaintiff-Corporation did not take any
decision. But the Corporation went on to levy penalty
since it was in dominating position.
(h) The defendants deny the allegations that they
had completed works of the value of Rs.33.11 lakhs
and if any work remained unexecuted as on
21-09-1984, it was mainly due to the failure of the
plaintiff-Corporation in not making available the
drawings and designs, in not taking decisions
regarding height of floors, not communicating its
decision regarding fabrication of the works, etc.
(i) Defendants denied that during the extended
period of contract work only to the extent of 2.56
lakhs was carried out. Therefore, the defendants by
their letter dated 14-10-1985 intimated the plaintiff
that if its demands are not considered and grievance
remedied, they are not interested in continuing the
work. Even then the plaintiff-Corporation terminated
the contract by its letter dated 21-02-1986. The
defendants denied that they had committed any
breach of contract.
(j) The defendants also denied the several of the
claims made by the plaintiffs specifically and
meticulously.
(k) It was alleged that since the defendants had filed
OS No.3423/1986 against the plaintiff-Corporation,
the present suit was filed as a counter blast. On these
grounds, the defendants sought for dismissal of the
suit.
7. On the basis of the above pleadings, the trial
Court framed the following issues for its consideration:
"1. Whether the plaintiff proves the defendants have
committed breach of terms of contract, agreement
entered into between the parties?
2. Whether the plaintiff proves by 21.9.84 the date
originally stipulated for the completion of the
contract, the defendants had executed the work of
the value of Rs.33.11 lakhs as against the stipulated
work of the value of Rs.46.13 lakhs?
3. Whether the plaintiff further proves the defendant
has abandoned the work from 29.12.1985 and
during the period from 21.5.1985 up to the date of
stoppage of the work the defendants had executed
work of the value Rs.3.44 lakhs as against the value
of Rs.25.31 lakhs?
4. Whether the plaintiff proves that the contract of the
defendants was properly rescinded on 21.2.1986 by
letter No.CD/C3-T9C?
5. Whether the plaintiff proves they have sustained
loss to the extend of Rs.7,21,273=50 ps.?
6. Whether the plaintiff proves the damages sustained
by them amounting to Rs.31,58,815=10 ps. as
stated in para 16 (d) of the plaint?
7. Whether the plaintiff proves owing to delay in
execution work under the contract the plaintiff had
incurred loss of Rs.4,28,750/-?
8. Whether the plaintiff further proves that on account
of the negligence of the defendants, the defendants
are liable to pay Rs.23,08,059/-?
9. Whether the plaintiff proves the defendants are
liable to pay interest at 12% per annum?
10. Whether the suit is barred by Limitation?
11. Whether the plaint has been signed and verified by
competent persons?
12. Does the defendant prove the site was not handed
over to the defendant as contended by the plaintiff
and the plan has been supplied to the defendants at
a very late stage and also there were modifications
to the original plan to that of the work to be carried
out by the defendant?
13.Whether the defendants prove the delay in
completion of the work only on account of the faults
of the plaintiff's and not on the part of the
defendants?
14. To what relief the plaintiff is entitled to?"
8. In order to prove its case, the Executive
Engineers of plaintiff-Corporation were examined as PWs 1
and 2 and Exhibits P1 to P41 were marked in evidence.
Defendants have not led any oral evidence, but got marked
Exhibits D1 to D82 through PW2 on their behalf.
9. The trial Court after hearing both the parties,
has answered issue Nos. 1 to 4, 11 in the affirmative, issue
No.5,8 and 12 in partly affirmative and in partly negative
and issue Nos. 6,7,9,10 and 13 in the negative and
ultimately, partly decreed the suit with costs.
10. Being aggrieved by the said judgment and
decree, the plaintiff-Corporation is before this Court in
appeal.
11. On issuance of notice, respondents Nos. 1 and 3
have appeared through their counsel. Respondent No.2 is
deleted and respondent No.4 served and unrepresented.
12. The trial Court records were secured on
admitting the appeal and heard the arguments by
learned counsel appearing for appellant and learned Senior
Counsel appearing on behalf of the counsel on record for
respondent Nos. 1 and 3.
Arguments by appellant/plaintiff:
13. The learned counsel for the appellant- plaintiff
Corporation submits that though the trial Court comes to
the conclusion that there was breach of contract by the
defendants, while considering Issue No.5, it has not
awarded the claims made by the appellant-Corporation in
its entirety. He submits that though the claim made by the
plaintiff was to the extent of Rs.7.21 lakhs in respect of the
extra work which was entrusted to the piece contractors,
the same was not considered by the trial Court and it has
awarded a sum of Rs.53,126.05 ps. It is submitted that
had the plaintiff proceeded with the defendants as the
Contractor, he would have spent a sum of Rs.15.19 lakhs
but on the other hand, they have to spend Rs.22,40,126.05
ps., for which the defendants are liable. He submits that
the trial Court failed to consider the evidence of PW.2 in a
proper perspective.
14. So far as Issue No.6 is concerned, he submits
that the plaintiff-Corporation had to work from rented
premises as the building was under construction. Due to
the breach committed by the defendants, the offices of the
plaintiff-Corporation had to continue to work from the
rented premises for a longer period. Therefore, the rent of
such premises towards longer period of occupation is also
liable to be paid by the defendants as damages. It is
submitted that the Company Secretary had issued a
certificate about the money spent towards the rents and the
same should have been accepted by the trial Court. It is
submitted that the unliquidated damages should have been
considered by the trail Court though there was no such
clause in the Contract.
15. Regarding issue No.7, it is submitted that the
plaintiff-Corporation had to continue the services of the
Supervisory staff for completion of the balance work beyond
the time fixed under the agreement. The trial Court in para
54 of the judgment rejected the claim on the ground that
there was no such clause in the contract and therefore, the
defendants are not liable to pay towards the salary of the
supervisory staff. It is submitted that when there is breach
of contract, all incidental expenses incurred by the plaintiff
should have been compensated by the defendants.
Therefore, the rejection of claim of Rs.4,28,750/- as per the
Certificate at Ex.P37 issued by the Company Secretary
should have been allowed by the trial Court.
16. It is submitted that the suit is filed within three
years from the date of Ex.P12, the letter under which the
Contract was terminated. It is also submitted that even
after the alleged abandonment of the work on 29-12-1985,
the defendants had continued the work and therefore, it
was the date as per Ex.P12 which is relevant for Limitation.
Therefore, in the absence of any cross- objection or appeal
by the defendants, the claim of the plaintiff has to be
allowed.
Arguments by respondents/defendants:
17. The learned Senior counsel appearing for the
defendants/respondents No.1 and 3 herein, in his elaborate
and meticulous arguments has contended that even though
the defendants have not filed any cross- objection, by
virtue of Order 41 Rule 33 of CPC he is entitled to lay a
challenge to the findings rendered against the defendants.
In this regard, he relies on the judgments in the case of
Pannalal Vs. State of Bombay and others1 and in the case
of Saurav Jain and others Vs. A.B.P Design and others2 .
18. The first contention of the learned counsel for
the defendants is regarding the limitation. He submits that
the plaintiff clearly admits that the breach of contract was
on 29-12-1985 and PW.2 also states in his cross-
examination that the breach of contract occurred on
AIR 1963 SC 1516
Manu/SC/0509/2021
29-12-1985. The trial Court also holds that the breach
occurred on 29-12-1985. Article 55 of the Limitation Act,
prescribes a period of 3 years from the date of breach of
contract to claim damages. The plaint was filed on
20-2-1989 and therefore, the suit is obviously time barred.
He submits that the trial Court wrongly held that the
termination of the contract vide Ex.P12 dated 21-2-1986 is
the starting point of limitation.
19. He submits that Article 55 employs the words
'Breach' and 'Broken' and they connote the same meaning
in reference to commencement of the limitation under the
said Article. The word 'Broken' does not refer to termination
of the contract, but it is breach of the contract. It is
submitted that the termination of the contract is
subsequent to the breach and the limitation has to be
reckoned from the date of breach, but not
termination/rescission. In this regard, he relies on the
judgments in the case of Food Corporation of India and
others Vs. Babulal Agrawal,3 State of Gujarat Vs. Kothari
and Associates4, The Senior Regional Manager, Food
Corporation of India Vs. G.V.V.N. Hanumantha Rao and
others5 and Rajgopal Naidu Vs. Aiyyaswamy Chettiar and
others6. Relying on the judgments in the case of K.
Ramkumar Vs. Marappa and others7 and in the case of
Kamalesh Babu and others Vs. Lajapat Rai Sharma and
others8, he further submitted that the question of Limitation
being a question of law may be raised by the defendants in
appeal also.
20. Regarding 'Breach of Contract', he submitted
that to ascertain as to who has committed the breach of
contract, the nature of the Contract is to be appreciated.
The Contract between the plaintiff and the defendants being
the reciprocal in nature, it required both the parties to
discharge their obligations. In this regard, he relied on
Sections 52 and 54 of the Contract Act.
(2004) 2 SCC 712
(2016) 14 SCC 761
1993 (2) ALT. 524
1965(2) MLJ 135
21. He submitted that in the case on hand, the
defendants have clearly contended that work could not be
completed due to; (a) non supply of drawings and designs;
(b) repeated revision of the drawings even after the
fabrication works commenced and completed as per the
original drawings; (c) non payment of the running bills in
time; (d) not enhancing the rates regarding the altered
quantities which exceeded 25%; and (e) non supply of
material on time. When these breaches were shown to have
been committed by the plaintiff, the Breach of the Contract
could not have been attributed to the defendants.
22. In this regard, he has taken us through the
evidence on record and has pointed out that each of the
above elements of the breach are borne out of the records.
He further submitted that when considering the question as
to who has committed the breach? and as to whether the
plaintiff is entitled to damages?, the principle of mitigation
2021 (4) AKR 371
of damages as contained in Section 73 of the Indian
Contract Act, has to be considered. While calculating the
loss or damages, the means which existed of remedying the
inconvenience caused by non performance of the contract
must be taken into account. The plaintiff had not taken
steps to mitigate the loss consequent upon the breach and
therefore, the plaintiff is not entitled to any damages. In
this regard, he has pointed out to the testimony of PW.2 in
the cross-examination.
23. He submits that the Contract was entrusted to
piece work contractors with much delay and an early action
by the plaintiff could have resulted in the damages being
lessened. In this regard, he has relied on the judgments in
the case of M/s. Muralidhar Chiranjilal Vs. M/s.
Harishchandra Dwarakadas and another9 and in the case
of M. Nanjappa Vs. Muthuswamy10.
(2008) 12 SCC 577
AIR 1962 SCC 366
AIR 1975 KAR 146
24. Regarding claim for cost of cement and steel, he
submitted that Exs.P31 and P32 relied by the plaintiff do
not show that the defendants had received the cement and
steel and there is no acknowledgement in that regard. He
has pointed out some inconsistency in para 16 (f) of the
plaint to contend that the claim cannot be calculated twice.
25. Regarding rental expenses he submitted that
there is no clause in the contract which entitles the plaintiff
to seek rental expenses. He points out that there was no
difficulty for the plaintiff to occupy the first and the second
floors after completing the pending work within a week and
this aspect having been admitted by PW.2, the principle of
mitigating damages comes in play. Moreover, no material
is placed to substantiate that such rentals were paid by the
plaintiff. The certificate produced is self serving certificate
of the Company Secretary of the plaintiff-Corporation.
26. Regarding salaries of the supervisory staff, the
claim is bereft of any support from the clauses in the
contract. Moreover, since the piece work contractors were
entrusted with the work with much delay, there was no
necessity for the plaintiff to continue the supervisory staff.
Therefore, he submitted that the suit filed by the plaintiff
should have been dismissed by the trial Court.
Analysis and Conclusions:
27. Having heard the learned counsels appearing for
both the sides and having perused the records, the points
that arise are as below:
(i) Whether the suit is barred by time?
(ii) Whether there was breach of contract by the
defendant?
(iii) Whether the calculation of the claims of the
plaintiff under different heads is proper and
correct?
28. The first contention of the learned counsel for
the respondents that the Appellate Court has the power to
grant relief to the respondents sans the filing of the cross
objections or cross appeal is no more res-integra. The
judgment in the case of Pannalal Vs. State of Bombay
(supra) as early as in the year 1963 had the occasion to
deal with the powers of the Appellate Court under Order 41
Rules 22 and 33 of CPC. In para 12 of the judgment, it was
stated as below:
" Even a bare reading of O.41 R.33 is sufficient to
convince any one that the wide wording, was
intended to empower the appellate court to make
whatever order it thinks fit, not only as between the
appellant and the respondent but also as between a
respondent and a respondent. It empowers the
appellate court not only to give or refuse relief to
the appellant by allowing or dismissing the appeal
but also to give such other relief to any of the
respondents as "the case may require". In the
present case, if there was no impediment in law the
High Court could, therefore, though allowing the
appeal of the State by dismissing the plaintiff's suits
against it, give the plaintiff a decree against any or
all the other defendants who were parties to the
appeal as respondents. While the very words of the
rule make this position abundantly clear the
Illustration puts the position beyond argument."
(Emphasis supplied)
29. Such view of the Apex Court was again
reiterated in the case of Ravinder Kumar Sharma Vs. State
of Assam and others . It is settled principle of law that a
party who suffered an issue being answered against him
but not assailing the result of the suit can very well
challenge such a finding on the issue in the appeal filed by
the other party. Therefore, the defendant who suffered an
issue being answered against him need not file cross
objection or cross appeal to assail the issue provided the
resultant effect of the suit was in his favour. However, he
can assail the issue in the appeal filed by the other party.
30. Similar view was taken in several other
judgments of the Apex Court. Moreover, the powers of the
Appellate Court are wide enough to grant relief in favour of
the respondent. In the case of Koksingh vs. Deokabai12,
the Apex Court has held that, if an appellate Court is of the
view that any decree which ought in law to have been
passed was in fact was not passed by the court below it
(1999) 7 SCC 435
may pass or make such further other decree or order as the
justice of the case may require. Such view was reiterated in
the case of Mahant Dhangir and another vs. Shri Madan
Mohan and others13; Manasa Housing Co-operative
Society Limited Vs. Marikellaiah and others 14; Babusab
and others Vs. Maniksab and others15. The recent
judgment in the case of Saurav Jain Vs. ABP design and
others (supra) has again reiterated this view in para 25 of
the judgment, which reads as below:
"25. It is apparent from the amended
provisions of Order XLI Rule 22 Code of Civil
Procedure and the above authorities that there are
two changes that were brought by the 1976
amendment. First, the scope of filing of a cross-
objection was enhanced substantively to include
objections against 'findings' of the lower court;
second, different forms of raising cross-objections
were recognized. The amendment sought to
introduce different forms of cross-objection for
assailing the findings and decrees since the
AIR 1976 SC 634;
AIR 1988 SC 54;
AIR 2006 Kar.273;
2013 (2) KCCE 1309
amendment separates the phrase "but may also
state that the finding against him in the Court below
in respect of any issue ought to have been in his
favour" from "may also take any cross-objection to
the decree" with a semi colon. Therefore, the two
parts of the sentence must be read disjunctively.
Only when a part of the decree has been assailed by
the Respondent, should a memorandum of cross-
objection be filed. Otherwise, it is sufficient to raise
a challenge to an adverse finding of the court of
first instance before the appellate court without a
cross objection."
(Emphasis supplied)
31. Keeping in mind the above judgments on the
scope and powers of the Appellate Court under order 41
Rule 22, 33 of CPC, we proceed to consider the points
framed by us:
Re.Point No.1- Limitation
32. The question of limitation raised by learned
counsel for the respondents being a question of law can be
raised in appeal also. This Court in the case of K.
Ramkumar Vs. Marappa and others (supra) by relying on
the judgment in the case of Ravinder Kumar Sharma Vs.
State of Assam and others (supra), has held that the
question of limitation can also be considered by the
Appellate Court. Moreover, Section 3(1) of the Limitation
Act casts a duty upon the Court to consider the question of
limitation even though the bar of limitation has not been set
up as a defence.
33. The learned counsel for the respondents contend
that in para-18 of the plaint the plaintiff has clearly averred
that the defendant committed breach of contract on
29-12-1985. So also PW.2 in the cross-examination states
that the breach of contract had occurred on 29-12-1985.
He submits that the trial Court also holds that the
defendants committed the breach of contract on
29-12-1985 by abandoning the work. Therefore, the suit
should have been filed by the plaintiff within three years
from the date when the contract was broken, i.e., on or
before 28-12-1988. Evidently, the suit has been filed on
20-02-1989, which is beyond the period of three years.
34. Per contra, the learned counsel for the
plaintiff/appellant contend that the contract was terminated
on 21-02-1986 by a letter of the plaintiff at Ex.P12.
Therefore, it is the date of rescission of the contract which
is material. In the background of this contention, it is
necessary to consider whether the breach of contract would
be a relevant date or the date of termination of contract/
rescission of the contract which would be material to
calculate the period of limitation.
35. The provisions of Article 55 of the Limitation
Act, read as below:
Description of suit Period of Time from which period
Limitation begins to run
55.For compensation Three years When the contract is
for the breach of broken or (where there
any contract, express are successive breaches)
or implied not herein when the breach in
specially provided for respect of which the suit
is, instituted occurs or
(where the breach is
continuing) when it ceases.
36. Thus, it is evident that the time from which the
period of limitation begins to run is, when the contract is
broken or where there are successive breaches, when the
breach in respect of suit is instituted occurs or where the
breach is continuing, when it ceases.
37. In Food Corporation of India and others Vs.
Babu Lal Agarwal (supra), the Apex Court has observed
as below:
"In the case in hand, as indicated above, the
notice terminating the contract is dated 26.9.1988
saying that "we are going to vacate your above
plinths by October 10, 1988". The plaintiff replied to
the notice saying that the defendant could not vacate
the premises before 23.1.1990. However, the
defendant vacated the premises on 10.10.1988. This
is the date when the contract was broken and cause
of action also accrued. The suit had been filed on
4.10.1991 i.e., within three years of vacating the
premises. In view of the position indicated above, we
do not find any merit in the argument raised on
behalf of the appellant that the suit of the plaintiff
was barred by time. In the result, we find no
substance In the appeal preferred by the Food
Corporation of India".
38. In the case of State of Gujarat Vs. Kothari
and Associates (supra), where again, it was observed as
below:
"3. The period of limitation would be computed
under either Article 55 or Article 113. The facts at
hand are dissimilar to those in Gannon Dunkerley
and Co. Ltd. v. Union of India in that the damages
sought by the present Respondent are for work
covered by the contract, and the change in
circumstances was directly caused by breaches
ascribable to the Appellant State in not handing-over
the site on time. Facially, the suit claims are
damages incurred due to the extension of the
contract period and the resultant damages are
incurred by the Respondent. The suit would therefore
fall within the ambit of article 55. Article 113, which
is a residuary provision, cannot be resorted to.
4. It also appeared to the Court that the
contract was clearly not broken as the Respondents
chose to keep it alive despite its repeated breaches
by the Appellant State. The factual matrix presents a
situation of successive or multiple breaches, rather
than of a continuous breach, as each delay in
handing over the canal/site by the Appellant State
constitute to a breach that was distinct and complete
in itself and gave rise to a separate cause of action
for which the Respondent could have rescinded the
contract or possibly claimed compensation due to
prolongation of time and resultant escalation of
costs. Of course the Respondent is enabled to
combine all these causes of action in one plaint, as
postulated in the Code of Civil Procedure provided
each claim is itself justiciable. Even the Respondent
has argued before the High Court that the suit was
based on successive breaches committed by the
Appellant State. In Court's opinion, the suit was
required to be filed within three years of the
happening of each breach, which would constitute a
distinct cause of action."
(Emphasis supplied)
39. In the case of the Senior Regional Manager,
Food Corporation of India Vs. G.V.V.N. Hanumanth
Rao, (supra) while distinguishing "Breach of Contract" and
"Termination of Contract", in para 14, it was observed as
below:
"14. It may be pointed out here that there is
difference between breach of a contract and
termination of a contract; every breach of a contract
by one party to it does not result in termination of
the contract though it may furnish ground to the
other party to terminate the contract and every
termination of a contract does not necessarily result
in breach of the contract. The question here is not
as to when the contract as such was terminated or
came to an end; the short question which is to be
considered for purposes of application of Article 55
is when did the breach of the contract, in respect of
which compensation is claimed, occur? On
28-9-1972 the contractor has expressed his
inability to execute the work. That letter reached
the Food Corporation of India on 3-10-1972.
Therefore on that date the contract was broken,
whether or not the Food Corporation of India has
accepted the breach. Subsequent termination of
contract by the Food Corporation of India on 8-12-
1972, is immaterial for the purposes of Article 55.
The suit was filed by the Food Corporation of India
on 18-10-1975 which was beyond three years from
the date of breach of the contract on 28-9-1972
when the contractor declined to take up the work by
Ex.C-5 which was received by the Food Corporation
of India on 3-10-1972. It follows that the arbitrator
was right incoming to the conclusion that the suit
itself was barred by limitation and consequently the
claim put forth in I.A No.137 of 1976 which was filed
on 27-3-1976 was barred within the meaning of Sub-
section (3) of Section 37 of the Arbitration Act".
(Emphasis supplied)
40. In the case on hand, it is evident that the
plaintiff-Corporation, in para 18 of the plaint states that the
cause of action arose on 29-12-1985 when the defendants
committed the breach of the Contract by abandoning the
execution of the contracted work, and also on or about
21-02-1986 when the plaintiff rescinded the contract of
which the defendants committed breach and also on
30-6-1987 when the building was got completed by the
Corporation. It is evident that the intimation of termination
of contract was sent to the defendants on 21-02-1986 as
per Ex.P12. Much prior to that, the defendants had
indicated that the contract be terminated as per Ex.P11
dated 14-10-1985. In Ex.P11, the defendants had informed
the plaintiff to terminate the contract in view of the financial
stringency. There was no reply to the letter at Ex.P11 by
the plaintiff till 29-12-1985. It was also indicated in Ex.P11
that the successive requests for enhancement of the rates
was not considered for long period and ultimately, the
defendants abandoned the work on 29-12-1985. This
abandoning of the work by the defendants on 29-12-1985
is not in dispute.
41. PW2 in the cross-examination (Page 138 of PB)
has stated as below:
"It is true that there was delay in payment of
4th R.A. Bill as seen in Exhibit D.18. Witness
Volunteers: That he does not know the reason. It is
true that there was delay in payment of 5th R.A. Bill
as seen in Exhibit D55. I agree that as per the
original contract the entire work had to be completed
by 21st September 1984. By letter dated 27th
September 1984 by Exhibit D58, the Defendant was
intimated to alter the height of the 6th Floor from
3.10 Metres to 3.80 Metres. It is not true that the
height of the 7th Floor also was altered. It is true that
even by date of Exhibit D61 the details regarding 7th
Floor were not furnished. It is true that as per
Exhibit D69 there was a delay of 2 Months in the
payment of 8th R.A. Bill."
42. From the above facts and circumstances, it is
clear that the termination of the contract by letter dated
21-02-1986 is not the breach of the contract, but it was
when the defendants expressed their inability to go on with
the contract. Evidently, it was on 14-10-1985 when the
defendants asked the plaintiff to terminate the contract. A
perusal of Ex.P11 shows that it runs to 4 pages and after
narrating the various reasons indicating the breach of the
contractual obligations by the plaintiff, the defendants
states as below:
"Under the above circumstances, we are not prepared
to continue the work further and our Agency may
please be terminated after settling all our claims in
full."
(emphasis by us)
43. This averment in Ex.P11 clearly indicates that
the defendants would no longer wished continue to perform
the contractual obligations. Even then the plaintiff has not
responded to the same. The response is only on
21-02-1986 in the form of Ex.P12, whereby, termination
was informed. Therefore, it is evident that the defendants
had expressed their withdrawal from the contract by its
letter dated 14-10-1985. In other words, the cause of
action arose on 14-10-1985 when the breach of contract
was brought to the notice of the plaintiff in unequivocal
terms.
44. Now let us see whether there is any successive
breach which has occurred and whether the breach was
continuing?
45. As noted supra, PW.2 in his testimony has stated
that the plaintiff had permitted the defendants to continue
with work even after 21-5-1985 which is the date after
extension of 08 months period from 21-09-1984 to
complete the project. He also states that to the best of his
knowledge the defendants continued with the work even
after 29-12-1985 and subsequently, abandoned the work.
This testimony of PW2 is not supported by the pleadings.
The plaint avers in para 8 that the balance of the works till
the end of 21-09-1984 was Rs.27.87 lakhs. Thereafter, an
extension of 08 months was permitted and during such
period, i.e., till 21-05-1985, the work turned out was
Rs.2.56 lakhs. Even thereafter, i.e. from 21-05-1985 till
the stoppage of work on 29-12-1985, the work turned out
by the defendants was Rs.3.44 lakhs. In other words, there
was absolutely no work turned out after 29-12-1985 when
the defendants abandoned the work. The termination of the
contract was informed by the defendants under letter at
Ex.P11 dated 14-10-1985. Therefore, it is evident that
there was no such continuing breach after 29-12-1985. No
work was turned out after 29-12-1985 as per the pleadings.
There is no evidence on record to show that the defendants
had continued the work after 29-12-1985. Under such
circumstances, we are unable to accept the contentions of
the plaintiff that the limitation started from 21-02-1986.
Plaintiff knew that the termination was informed by the
defendants on 14-10-1985, but they kept mum till
21-02-1986.
46. It is also evident that the defendants filed
W.P.No.3468/1986 on 21-02-1986 which came to be
withdrawn later. O.S.No.1014/1986 was filed for injunctive
relief on 12-3-1986 where a Court Commissioner was
appointed for measurements of the works done. After the
Court Commissioner submitted the report on 21-6-1986
and 6-8-1986, the said suit came to be withdrawn.
Thereafter, the defendants filed OS No.3423/1986 seeking
certain claims. Therefore, it is evident that there was no
such continuing breach of contract by the defendants after
29-12-1985 when they abandoned the work.
47. Under these circumstances, it is clear that after
the cause of action arose on 29-12-1985, there was no
such continuing breach of the contract and the breach or
breaking was final and conclusive when the defendants
abandoned the work. It is evident that the plaintiff knew
the abandonment of the work in pursuance to Ex.P11 by
the defendants. Therefore, it was incumbent upon the
plaintiff to file the suit within three years from 14-10-1985
or from 29-12-1985. Certainly, Ex.P12 dated 21-2-1986
cannot be the starting point of the limitation.
48. The trial Court in the impugned judgment
observes that the time starts to run from the date of
rescinding of the contract and holds 21-2-1986 as per
Ex.P12 to be the starting point of the limitation. Article 55
of the Limitation Act, does not speak rescinding of contract,
but it speaks of the breach of the contract or when the
contract is broken. Evidently, the contract was broken by
the defendants addressing a letter as per Ex.P11.
Therefore, the trial Court erred in holding that Ex.P12 is the
starting point for the limitation.
49. In that view of the matter, we are of the view
that the suit filed by the plaintiff is barred by limitation. The
right to terminate the contract is on account of the contract
terms being broken by a party to the contract. In the case
on hand, the plaintiff alleged that the defendants had
breached the contract by abandoning the work on
29-12-1985 and to give effect to such breach, the contract
was terminated by letter dated 21-2-1986. Plaintiff knew
that the defendants had in unequivocal terms had broken
the contract by letter dated 14-10-1985. Consequently the
point No. 1 is answered in the affirmative.
Re.Point No.2: Breach of Contract
50. The second question that arises for our
consideration is, who has committed the breach of the
contract. The plaintiff alleged that though the letter of
intent was issued on 22-03-1982 stipulating the period of
completion of contract as 30 months i.e., till 21-09-1984,
the defendants did not commence the work and had to
remind them by letter dated 04-05-1982 as per Ex.P4.
Thereafter, the defendants furnished the bar chart showing
the program of the project to be executed by them as on
15-05-1982 as per Ex.P5. The agreement was entered into
between the parties on 09-12-1982. Thereafter, the
progress of the work had been slowed down and therefore,
the plaintiffs issued letter dated 03-03-1983 as per Ex.P6
indicating imposition of the penalty of Rs.50/- per day as
per Clause-3 of the agreement.
51. Thereafter, the defendants wrote a letter as per
Ex.P7 dated 25-04-1984 seeking enhancement of the rate
for the work already done at 30% and balance work at 50%
even though there was no provision in the agreement to
enhance the rate. Then on 25-07-1984 as per Ex.P8, the
defendants wrote a letter to the plaintiff seeking extension
of eight months time to complete the work beyond the
stipulated date of 21-09-1984. By that time, work executed
was to the extent of Rs.33.11 Lakhs out of Rs.46.13 Lakhs.
52. The plaintiff wrote a letter as per Ex.P9 on
25-05-1985 extending the time to complete the project by
8 months, however, the escalation of the prices claimed by
the defendants was not acceded to. On 14-10-1985,
defendants wrote to the plaintiff as per Ex.P11 seeking
termination of the contract and requesting to settle their
claims. Thereafter, on 21-02-1986, the plaintiff terminated
the contract as per letter at Ex.P12.
53. The defendants contend that the terms and
conditions of the contract show that it was a reciprocal
contract. They contend that non-supply of the drawings and
designs, repeated revision of the drawings, non-payment of
the running bills, non-enhancement of the rates regarding
altered quantities exceeding 25% and non-supply of the
material on time has seriously affected the timelines fixed
for completion of the project. In this regard, they rely on
several correspondences between the plaintiffs and
defendants.
54. The fact that the contract was of reciprocal in
nature and several of the acts of the defendants depended
upon supply of the designs, drawings and material is not
seriously disputed. The Clause 12 of Ex.P3 agreement reads
as below:
"Clause 12: The contractor shall execute the whole and
every part of the work in the most sound and
substantial and workman like manner and in strict
accordance with the specifications both as regards
materials and workmanship. The contractor shall also
conform exactly, fully and faithfully to the
designs, drawings and instructions in writing
relating to the work signed by the Divisional Engineer or
other competent authority and lodged in his office and
to which the contractor shall be entitled to have access
at such office, or on the site of the Work, for the
purpose of inspection during office hours and the
contractor, shall if he so requires, be entitled to his own
expense to make or cause to be made copies of the
specifications and of all such designs, drawings, and
instructions as aforesaid. The contractor shall also be
responsible for the delivery of structure in sound
condition and the execution of work strictly in
accordance with the specifications for the work."
(emphasis by us)
As per above clause, the defendant was ordained to
conform exactly and fully to the drawings and designs
supplied by the plaintiff in writing. It is clear that the
defendants were not responsible for preparation of the
working drawings/designs of the construction of the
building. Therefore, the defendants were dependant upon
the plaintiff for working designs and drawings. This
obligation of the plaintiff is admitted by PW.2 in his cross-
examination. However, the extensive correspondence
between the parties is available before the Court.
55. We have carefully gone through these letters
exchanged between the plaintiff and the defendants. The
correspondences between the plaintiff and defendants as
per Exs.D1 to D82 are admitted by PW2 in the cross-
examination. Though an objection was raised by the
learned counsel for the appellant/plaintiff that the original
letters were not produced, but only photo copies were
produced, the Court Commissioner who recorded the
evidence of PW2 has clearly stated that these letters were
admitted by PW2 and therefore, they were marked. Section
58 of Evidence Act, states that facts admitted need not be
proved. Therefore, despite the defendants not entering the
witness box to prove those letters, in view of the admission
of PW.2 that the correspondence was there between
plaintiff and defendants as per Ex.D1 to D82, it is not
necessary for us to say that the defendants had to prove
those correspondences. It is also clear that the progress of
the project depended on the timely supply of working
designs and drawings as well as supply of material like steel
and cement.
56. Here it is necessary to mention the provisions of
Sections 52 and 54 of the Contract Act, which read as
below:
"52. Order of performance of reciprocal
promises.--
Where the order in which reciprocal promises are to
be performed is expressly fixed by the contract, they
shall be performed in that order; and where the
order is not expressly fixed by the contract, they
shall be performed in that order which the nature of
the transaction requires.
54. Effect of default as to that promise which
should be performed, in contract consisting of
reciprocal promises.--
When a contract consists of reciprocal promises,
such that one of them cannot be performed, or that
its performance cannot be claimed till the other has
been performed, and the promisor of the promise
last mentioned fails to perform it, such promisor
cannot claim the performance of the reciprocal
promise, and must make compensation to the other
party to the contract for any loss which such other
party may sustain by the non-performance of the
contract".
57. The judgment of the Apex Court in the case of K
C Skaria Vs Govt of State of Kerala and another16 also
recognizes the principle of reciprocal promises and the
delay on the part of the employer to supply the materials to
the contractor.
58. We, therefore, come to the conclusion that the
contract between the plaintiff and the defendants was
reciprocal in nature. Our reasons in the below mentioned
paragraphs regarding the breach alleged by the parties also
augment this conclusion.
Non-supply of drawings and designs:
59. Exs.D1, 12, 13, 16, 20, 23, 26, 28, 30, 32, 35,
49, 61 and 62 are the letters between June-1982 to
I(2006) SLT 332
07.02.1985. Under these letters, the plaintiff had supplied
the drawings to the defendants. The Ex.D4, 6 to 8, 14, 19,
29, 38, 45, 58, 62, 65, 66, 71 are the letters between
02.08.1982 to 08.06.1985, under which, the plaintiff
furnished the revised drawings to the defendants. These
letters show that the drawings supplied earlier were revised
subsequently and fresh drawings were supplied to the
defendants.
60. We find from a perusal of Ex.P3, the contract
between the parties that, the dates on which the drawings
have to be supplied to the defendants are not stated.
However, in the cross-examination, PW.2 states that the
drawings and designs have to be furnished to the
defendants at least a week prior to the commencement of
the work as per the Bar Chart produced at Ex.P5. Ex.P5
happens to be a promise made by the defendants to
commence the work and to complete the different stages of
the work during the contract period. It is pertinent to note
that the comparison of Ex.P5 with reference to the letters
referred supra, shows that there was delay in supply of the
designs and drawings. There is no evidence on behalf of
PW.2 that the supply of drawings and designs at different
stages of the execution of the work depended upon the
completion of the previous stage as per Ex.P5. Therefore, if
the supply of the drawings and designs did not depend
upon the completion of the previous stages, there was no
impediment for the plaintiff to supply the drawings and
designs in one go.
61. In the cross- examination of PW2, he admits that
the defendants sought drawings and designs from the
plaintiff on different dates and there were minor changes in
the design. In the cross-examination, PW.2 has admitted
several of these aspects and that there was a need for the
revision of the drawings and the designs. Further, the
completion of each stage of the constructions of the
building as per Ex.P5 was not fully visualized when Ex.P5
was prepared. Evidently, in reply to Ex.P5, the plaintiff has
not stated as to when the final designs and drawings would
be supplied to the defendants. There is no material on
record to show that the defendants had demanded the
working drawings and designs atleast a week prior to the
commencement of each stage of the work as per Ex.P5.
Under these circumstances, we are of the view that though
the delay in supply of the working drawings and designs is
also the cause for the delay of the execution of work, there
is no sufficient material that the supply of drawings and
designs was the sole cause for delayed execution of the
work since there is no mention in the contract as to when
and at what time the drawings and designs have to be
supplied. It would suffice to say that there was delay on
the part of the plaintiff in supplying the working drawings
and the designs and revised drawings to the defendants.
Delayed payment of running bills:
62. The next aspect to be considered is non-
payment of the Running Bills. Again, PW2 in the cross-
examination has admitted that there was delay in payment
of the running bills. The payment of running bills to the
Contractor as agreed between the parties is one of the
reason for continuity in the work. When, such delay in
payment of bills was put to PW2 in his cross-examination,
he states that as and when the Contractor was preparing
the running bills, they were scrutinized and they were paid
to the defendants. However, he admits that there is a
delay in payment of 4th running bill which is as per Ex.D48.
He states that he does not know the reason as to why there
was a delay in payment of 4th and 5th running bills as per
Exs.D48 and D55. From the perusal of these documents, it
appears that there was delay of about two months in
payment of the RA bills.
63. It is also pertinent to note that, the entire
contract period was 30 months and due to the increased
quantity of the work, the period was extended by eight
months. In other words, a total of 38 months was allotted
for the Contractor to complete the work. Considering this
total period of the work, the delay in payment of the RA
bills by about a month or two cannot be said to be a
substantial breach on the part of the plaintiff.
Increase in quantity of work:
64. The third component of the breach is the
increase in quantities of the work. There cannot be any
doubt that there was increase in the quantity of the work.
Evidently, the quantity of the work is not specified in any of
the documents produced by the plaintiff. However the value
of such increased quantity of the work can be found in
para- 8 of the plaint.
65. It is relevant to note that, initially, the value of
Contract was Rs.46.13 lakhs. Later, the total quantity of the
work that was to be executed by the defendants is Rs.60.98
lakhs. In other words, there was increase of the value of
the work by Rs.14.85 lakhs. Therefore, obviously, such
increase in the quantity of the work was more than 25% of
the work which was stipulated under the contract. 25% of
Rs.46.13 lakhs would come to Rs.11.53 lakhs. Therefore,
any quantity which is in excess of Rs.11.53 lakhs was
obviously beyond the scope of the contract between the
parties as per Ex.P3. Such increase in the quantity of the
work should have been on the basis of the rates that could
be mutually accepted by both the parties. Such quantity of
work could not be on the same rates which existed as per
the contract entered into between the parties.
Delay in commencement and completion of work:
66. We have already held that the contract between
the parties was a reciprocal contract in view of Clause 12 of
the agreement. We have also noticed that the execution of
the contract was dependent upon the timely supply of the
working design and drawings, supply of steel and cement
etc. If the supply of steel and cement was delayed, then
definitely, it would have the bearing on the timely
completion of the work under the contract. Therefore, it is
necessary to ascertain whether the parties have understood
that the time was essence of the contract or not. In doing
so, it is relevant to note that in the case of M/s Hind
Construction Contractors By Its Sole Proprietor
Bhikamchand Mulchand Jain (Dead) By LRs Vs State
of Maharashtra17 it was held as below:
"(1)(a) The question whether or not time was of the
essence of the contract would essentially be a question
of the intention of the parties to be gathered from the
terms of the contract. Even where the parties have
expressly provided that time is of the essence of the
contract such a stipulation will have to be read along
with other provisions of the contract and such other
provisions may, on construction of the contract, exclude
the inference that the completion of the work by a
particular date was intended to be fundamental; for
instance, if the contract were to include clauses
providing for extension of time in certain contingencies
or for payment of fine or penalty for every day or week
the work undertaken remains unfinished on the expiry of
the time provided in the contract such clauses would be
construed as rendering ineffective the express provision
relating to the time being of the essence of contract."
67. The contract at Ex.P3 stipulated 30 months for
construction of the building and such construction shall be
(1979) 2 SCC 70
as per the designs, drawings and specifications suggested
and supplied by the plaintiff. Initially, both the parties
agreed for time bound execution and understood that the
time was the essence of the contract. Later, the increase in
quantity of the work beyond 25% was accepted and
therefore, as per Ex.P11(a) and Ex.P9, the period of
contract was extended by eight months. So also, the
contract envisaged imposition of the penalty for delayed
execution of the work at different stages. As noted supra,
there was delay on the part of the plaintiff also for supply of
the designs and drawings. There was delay in payment of
RA Bills by the plaintiffs. These aspects are admitted by
PW.2 in his cross-examination. Therefore, the parties
understood and acted in a way that the time was not the
essence of the contract. They had foregone the essentiality
of time as a fundamental requirement of the contract. The
delay in execution of the work could not have been a
substantial ground to rescind the contract, in view of the
conduct of the plaintiff and the defendants.
68. Thereafter, the plaintiff in pursuance to the letter
at Ex.P9 dated 25-07-1984, extended the dead line for
completion of the work by eight months i.e., till
21-05-1985. It was communicated through letter dated
25-5-1985. Obviously, it was after 04 days of the expiry of
the extended period of eight months. Clause 5 of the
contract at Ex.P3 contemplates extension of time for
completion of the work. It reads as below:
"Clause.5: If the contractor shall desire an extension of
the time for completion of the work on the ground of
his having been unavoidably hindered in its execution
or any other ground such as increase in quantities over
25% (vide clause no.14), he shall apply I writing to the
Divisional Engineer before the expiration of the period
stipulated in the tender or before the expiration of 30
days from the date on which he was hindered as
aforesaid or on which the cause for asking for
extension occurred, which ever is earlier and the
Divisional Engineer or other competent authority may,
if in his opinion there are reasonable grounds for
granting an extension, grant such extensions as he
thinks necessary or proper."
Further, Clause 14 of the contract also deals with
extension of time in case there is increase in the cost
occasioned by additions. It reads as below:
"Clause.14: The time limit for completion of the work
shall be extended commensurate with the increase in its
cost occasioned by additions, and the certificate of the
Divisional Engineer or competent authority to such
proportion shall be conclusive.
XXXX"
69. It is to be noted that in case there is increase in
the quantity of work by more than 25%, the contract does
not mention anything about the rates at which the
additional and extra work is to be carried out. It does not
provide for enhancement of the rates agreed.
70. Thus, it is evident that when the parties had
foregone the condition that time was essence of the
contract and even the extended period of eight months was
communicated by plaintiffs to the defendants after expiry of
eight months, it is evident that there is no reason to believe
that the parties had again, agreed upon the time lines and
revived the contract regarding its essentiality of time.
Therefore, the conduct of the plaintiff does not show that it
had kept up its promise regarding the time lines and
accepted the time to be the essence of the contract.
71. Coming to the delay in commencement of the
work, it is an admitted fact that the site was handed over to
the defendants on 31-03-1982 and thereafter, as per Ex.P4
dated 20-04-1982, the plaintiff states that the defendants
had agreed to commence the excavation work from
15-4-1982, but even till 20-04-1982 such work has not
commenced. In other words, there was delay of about 20
days in commencement of the work. When we compare
this delay of 20 days with reference to the total period of
contract which is 30 months, it is not possible to hold that
there was substantial delay in commencement of the work.
72. We have already noticed that there was delay in
supply of designs and drawings and payments of the
running account bills.
73. So also, a careful perusal of the correspondences
between the parties discloses that when the work was in
progress, there were several impediments which surfaced.
The height of the retaining wall, non- availability of the
space for the storage of the building materials like, steel
and cement and the excavated muck, were also the cause
for the delay. There was no effort by the plaintiff to resolve
these issues which surfaced, though he was in dominant
position. However, the defendants were in the knowledge of
the fact that there was no such space for storage and the
defendants had not flagged these aspects at the time of
entering into the contract between the parties. In that view
of the matter, the defendants had accepted that there were
difficulties for the storage of the building material, etc., and
even then, they had agreed to complete the work as per
the timelines mentioned in Ex.P5. Once the defendants had
agreed that they would execute the work as per the
timelines mentioned in Ex.P5, it was their duty to see that
the work gets completed subject to the plaintiff adhering to
the terms of the contract by supplying the working designs
and drawings and payment of the running bills in time.
Enhanced rates:
74. Apart from the delay, the plaintiff has contended
that though there was no such clause in the agreement, the
defendant demanded the enhanced rates at 30% and 50%.
There was no justification for the defendant to demand the
enhanced rates since the defendant had entered into
agreement as per Ex.P3 and the timelines agreed was 30
months. Therefore, such demand by the defendant for
enhanced rate so far as th work envisaged under the
contract was beyond the scope of the contract and on that
ground, the defendant could not have sought for
termination of the contract and abandonment of the work.
Conclusions reg. breach:
75. From the conspectus of the above documentary
evidence which is available and also evidence of PW.2
available on record in the cross- examination, we are of the
view that though the initial breach of contract was on the
part of the defendants in commencement of work as per
schedule, the subsequent conduct of both the parties show
that there were breaches by both the sides. The substantial
breach was on the part of the plaintiff on account of the
delay in resolving the issues like dearth for space for
storage of steel and cement, clearing and dumping of the
muck from the excavation, supply of working designs and
drawings well in time, considering the request by the
defendants for extension of time lines in time and payment
of the running bills in time. However, the increase in
quantity of the work by more than 25% is also an indicator
which show that the plaintiff had not planned the building
very well. Plaintiff went on increasing the quantity of the
work which is beyond 25% of the total quantity under
contract. This itself shows that the plaintiff was not prompt
in supplying the designs and drawings and also that it
increased the quantity of the work.
76. Thus, the substantial breach of the contract was
on the part of plaintiff and the breaches on the part of the
defendants were minor. The delay in commencement of the
work was only about 20 days as compared to total period of
30 months for completion of project. Even though the
defendants had demanded the higher rates at 30% till
the request was made and 50% for future work, that was
not permissible under the contract. It is evident that the
defendants had not stopped the work until 29-12-1985
even though there was no communication that the request
was not heeded to. All that was informed under Ex.P9 while
granting extension of time was that the other requests
were under consideration.
77. Hence, we hold that the substantial breach of
the contract was on the part of the plaintiff. The
admissions of PW.2 clearly establish that the reciprocal
promises were not adhered to by the plaintiff and the
essentiality of the time was also not adhered by the
plaintiff.
Reg: Point No. 3 - The damages
78. We now proceed to consider each of the claims
made by the plaintiff. The plaintiff has claimed the damages
under the following heads:
Plaint Amount
Description of the claim
para (In Rs.)
16(a) Money spent by plaintiff to complete the work through 7,21,273.50
peace work contractors
16(b) Unaccounted steel 1,49,398.06
16(c) Unaccounted cement 27,690
16(d) Rentals for housing the offices of plaintiff-Corporation 13,58,815.10
till completion of construction
16(e) Salary of Supervisory Staff 4,28,750
16(f) Reversal of EMD, Security Deposit and work turned -69,112.13
out by defendant after 9th RA bill
16(g) Extra items done regarding ramp and teak wood door -12,364
26,04,450
Total Claim 23,08,059
79. The plaintiff contends that as on 21-09-1984,
the date originally stipulated for the completion of the
construction, the defendants had not executed the work of
the value of Rs.32.02 lakhs. It is admitted that there were
additions and alterations in the design and there was
requirement of additional quantities of certain items.
Including the unexecuted portion of the work to the extent
of Rs.13.02 lakhs, the balance of the work was Rs.27.87
lakhs as on 21-09-1984. Thus, it is evident that there was
increase in the quantity of the work by Rs.14.85 lakhs
which was beyond the 25% that was permissible as per the
agreement Ex.P3. In other words, the total value of the
contract had increased to Rs.60.98 lakhs. It is an admitted
fact by the plaintiff that till 21-09-1984, the work of the
value of Rs.33.11 lakhs was completed. Thereafter, from
21-09-1984 to 21-05-1985, work of the value Rs.2.56 lakhs
was completed. Thereafter, from 21-5-1985 to 29-12-1985
when the defendants abandoned the work, the value of the
work completed was Rs.3.44 lakhs. Thus, totally, the work
completed by the defendants was to the tune of Rs.39.11
lakhs. The balance of the work including the increased
quantity was to the tune of Rs.21.87 lakhs. Curiously, the
plaintiff nowhere mentions as to what was the total quantity
of the extra work entrusted to the defendants.
80. It is pertinent to note that the plaintiff claims
that the plaintiff had to spend a sum of Rs.22.40 lakhs by
entrusting the work to the Piece Work Contractors. It is
stated that such contract entrusted to the Piece Work
Contractors was to the tune of Rs.22.40 lakhs. The plaint
schedule shows that the total expenditure incurred by the
Corporation due to non completion of the work by the
defendants was Rs.22,40,126.05 ps. It states that if the
work had been entrusted to the defendants as per the
terms of the contract, it would have valued Rs.15,18,852/-.
It is not known how the sum of Rs.15,18,852/- was arrived
at. Evidently, the balance of the work as mentioned in para
8 of the plaint shows that it was to the extent of (27.87-
(2.44+3.56)) Rs.21.87 lakhs including the extra work
entrusted to the defendants. It is not known as how the
plaintiff arrived at the figure of Rs.15,18,852.55 ps., as per
the plaint schedule. The plaint never explains as to how this
figure was arrived at.
81. Thus, it is evident that the total balance of the
work which was not executed by the defendants, including
the additional or extra work was to the tune of Rs.21.87
lakhs. The plaintiff claimed Rs.22.40 lakhs for the same
and therefore, the difference or the excess amount claimed
by the plaintiff was only to the extent of Rs.53,126.05 ps.
Though the trial Court has rightly arrived at this figure in
the impugned judgment, the analogy for having arrived at
the said figure was not properly explained by it. Therefore,
we do not find any reason to find fault with the trial Court
so far as the claim under this head is concerned.
82. The next claim by the plaintiff is in respect of
unaccounted steel and the cement as claimed in para 16(b)
and 16(c) of the plaint. The plaintiff has claimed that it had
issued 405.31 MT of steel and out of it, 14.955 MT of steel
has remained unaccounted and the value of the same is
Rs.1,49,398/-. It also claimed that 21,411 bags of cement
were supplied to the defendants, out of them 566 bags
remained unaccounted, the value of which was Rs.27,690/-.
83. In para 16(f) of the plaint, it is stated that,
EMD, Security Deposit and the amount towards the extra
work done by the defendants is due from the plaintiff to the
defendants. There cannot be any doubt on this aspect since
the plaintiff admits the same. However, the learned counsel
for defendants submits that the quantity of cement and
steel has also been deducted in the said amount and that is
not justifiable. It is pertinent to note that para 16(f) of the
plaint pertains to the payments which are due from the
plaintiff to the defendants. It is not the sum of Rs.69,112/-
alone which is stated to be payable by the plaintiff to the
defendants, but in addition to it, EMD amount of
Rs.46,125/- and security deposit of Rs.2,56,066/- is also
payable by the plaintiff to defendants. Totally, a sum of
Rs.3,77,867/- is payable to the defendants. Therefore, we
find no reason to find any fault in this regard, as it is an
admitted figure stated by the plaintiff. However, so far as
the loss of the unaccounted quantity of the steel and the
cement is concerned, the learned counsel for the
defendants states that Exs.P31 and P32 are the relevant
documents and there is no acknowledgement by the
defendants regarding this claim. If the defendants have not
rebutted this evidence of the plaintiff in any way, it cannot
be said that the said claim by the plaintiff is inadmissible.
The manner in which the quantity of the cement and steel
was consumed and whether it was in stock was the subject
matter of of RA Bill No.9. It is relevant to note that though
the defendants had got appointed the Court Commissioner
and he had visited the spot and had measured the quantum
of the work executed under the Contract, such a report was
not placed before the trial Court. Even, such report was not
relied by the defendants. Therefore, we find no reason to
accept the argument of the learned counsel for the
defendants in respect of the unaccounted quantity of the
steel and the cement.
84. Similarly, the plaintiff has stated in para 16(g)
that extra-work regarding the teak wood doors in the first
floor was to the extent of Rs.12,364/- and the plaintiff has
to pay the same to the defendant.
85. In para 16(d) the plaintiff has made claim in
respect of the damages occurring on account of the rent
paid by the plaintiff towards the premises occupied by the
Corporation till the completion of the construction of the
building. The said amount is assessed at Rs.13,58,815/-.
The learned counsel appearing for the defendants submits
that the provisions contained in Section 73 of the Indian
Contract Act, stipulate that in calculating the loss or
damage arising out of the breach of contract, the means
which existed for remedying the inconvenience caused by
non performance of the contract must be taken into
account. In this regard, he has drawn the attention of this
Court to the fact that there was delay in entrusting the
unfinished work to the Piece Work Contractors after the
defendants abandoned the work on 29-12-1985. He points
out to the cross-examination of PW.2 where he had stated
that he does not know why there was a delay in entrusting
the work to Piece Work Contractors after abandoning the
contract by the defendants on 29-12-1985 or after
rescission of the Contract by the plaintiff as per letter
Ex.P12. Therefore, he contends that the plaintiff had not
tried to mitigate the damages by expeditiously entrusting
the work to the Piece Work Contractor.
86. The trial Court in the impugned judgment has
elaborately discussed this aspect and has referred to the
judgment in the case of Muralidhar Chiranjilal Vs M/s
Harishchandra Dwarakadas and another (AIR 1962
SC 366) and Nanjappa Vs M P Muthuswamy (AIR
1975 Karnataka 146). Ultimately, it has come to the
conclusion that the person who is claiming damages is
under the duty to take all reasonable steps to mitigate the
loss consequent on the breach and he would be debarred
from claiming any part of the damages due to its neglect to
take such steps. It also noted that the plaintiff had not
entrusted the balance of the work expeditiously, had not
occupied the two floors which were completed. Thus, trial
Court did not award any damages in respect of the rentals
paid by the plaintiff in occupying the other premises.
87. We have another reason to concur with the
conclusions reached by the trial Court. Evidently, the
plaintiff has not produced any substantial evidence to show
that after the rescission of the contract and till the
completion of the work by the Piece Work Contractors, the
plaintiff had paid the rent of Rs.13,58,815/-. Except the self
serving certificate issued by the Company Secretary of the
plaintiff, there is nothing on record to show that such a rent
was paid. Obviously, the plaintiff was in possession of the
best evidence in this regard in the form of the receipts, the
agreement in respect of the tenancy, etc., and also the
receipts for having paid the rent during the said period.
The extract of the certificate or the ledger kept by the
plaintiff and certified by the company Secretary of the
plaintiff-Corporation would not be sufficient evidence within
the meaning of the provisions of the Evidence Act.
88. It is relevant to note that the author of Ex-P33-
Company Secretary, and author of Ex.P37 Senior Executive
(Finance)I, who prepared such documents were not
examined before the Court. The plaintiff relies on Exs.P33
and 37 the statement and certificate issued by the
Company Secretary and the Senior Executive Officer
(Finance) I showing the extra expenditure incurred by the
plaintiff towards the rent and expenses of the staff. It is
worth to note that Exs.P34 to P36 are the ledgers of the
plaintiff-Corporation, but there is no such presumption of
correctness for such statement of the account book kept by
it. It is not a banking company and therefore, it was
necessary for the plaintiff to prove such certificate and the
statement and subject the persons who authored these
documents to the cross-examination by the defendants.
Therefore, the best evidence that could have been produced
by the plaintiff is not available before the Court.
89. In para 16(e), the plaintiff has claimed a sum of
Rs.4,28,750/-, that was spent towards the salaries of Group
Engineers, Engineers, Work Assistants, 3 helpers and other
officers in-charge for the period 01.06.1985 to 30.06.1985.
The analogy applied for the claim in respect of rents for
buildings also applies to the claim in respect of the
expenses made by the plaintiff towards the supervisory
staff. It is relevant to note that neither the clauses in the
Contract nor any correspondence between the parties show
that the plaintiff was supposed to maintain a supervisory
staff over the defendants while executing the contract. It is
the case of the plaintiff that, it had maintained the
supervisory staff for the purpose of completion of the
building and such costs towards the salaries of the
supervisory staff has to be borne by the defendants. The
trial Court observes that there is no such agreement
between the parties. Even if we accept that such liability is
to be fastened on the defendants, the proof regarding the
salaries paid to such supervisory staff is not available on
record. The best evidence was to produce the details of the
salaries paid and examine the persons who were working as
a Supervisory Staff. A Certificate issued by the Company
Secretary cannot be sufficient evidence in this regard. Such
Company Secretary who issued the Certificate is not
examined before the Court. Under the circumstances, we
concur with the conclusions reached by the trial Court in
this regard that the plaintiff is not entitled for these claims.
90. For the foregoing reasons, we have come to the
conclusion that the finding of the trial Court that the
plaintiff is entitled for a sum of Rs.53,126.05 ps., for extra
expenditure, a sum of Rs.1,49,398.06 ps., towards
unaccounted steel and a sum of Rs.27,690/- towards the
unaccounted cement was proper and correct. The trial
Court has also awarded a damages of Rs.10,000/- to the
plaintiff. We have come to the conclusion that the plaint is
barred by time and the trial Court had erred in holding that
the breach of the contract was not on 29-12-1985 but it
was on 20-03-1986. Such conclusion of the trial Court
regarding limitation is not based on the material available
on record, especially, Ex.P11 which we have noted above.
Consequently, the suit has to be dismissed as barred by
time. Hence, the following:
ORDER
(i) The appeal is dismissed.
(ii) The impugned judgment and decree passed by
the trial court in OS No.1094/1989 on 23-11-2009 is set
aside.
(iii) The suit of the plaintiff against the defendants
stands dismissed as barred by time.
(iv) The amount paid by the defendants, if any,
pursuant to decree, be refunded to them.
Sd/-
JUDGE
Sd/-
JUDGE
tsn*/NR
