Kerala High Court
Kerala State Electricity Board vs Ms/. Paily Pillai & Sons on 14 October, 2025
RFA 266/2024
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE C.PRATHEEP KUMAR
TUESDAY, THE 14TH DAY OF OCTOBER 2025 / 22ND ASWINA, 1947
RFA NO. 266 OF 2024
OS NO.144 OF 1997 OF SUB COURT, MUVATTUPUZHA
APPELLANT(S)/DEFENDANTS 1 & 2
1 KERALA STATE ELECTRICITY BOARD
REPRESENTED BY THE SECRETARY, KERALA STATE ELECTRICITY
BOARD, VYDYUTHI BHAVANAM, PATTOM, TRIVANDRUM, PIN -
695004
2 THE CHIEF ENGINEER (CIVIL-GENERAL)
KERALA STATE ELECTRICITY BOARD, VYDYUTHI BHAVANAM,
PATTOM, TRIVANDRUM, PIN - 695004
BY ADVS.
SRI.AJIT JOY
SRI.ANEESH JAMES
RESPONDENT(S)/PLAINTIFFS & DEFENDANT NO.3
1 M/S.PAILY PILLAI & SONS
ENGINEERS AND CONTRACTORS, PERUMPILLIL, KOLENCHERY,
REPRESENTED BY (1) MANAGING PARTNER, P.M. PAILY PILLAI,
PERUMPILLIL, KOLENCHERY (2) PARTNER, BIJU PAUL,
PERUMPILLIL, KOLENCHERY, PIN - 682311
2 THE MANAGER, BANK OF INDIA, VALAKOM BRANCH, KUNNACKAL
P.O., MUVATTUPUZHA., PIN - 682316
BY ADVS.
SHRI.P.SATHISAN
SHRI.SHIBU B.S
SHRI.JAVED HAIDER
SHRI.ABHIRAM SUNISH
SMT.AKSHARA RAJU
THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON
26.9.2025, THE COURT ON 14.10.2025 DELIVERED THE FOLLOWING:
RFA 266/2024
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JUDGMENT
Dated : 14th October, 2025
Defendants 1 and 2 in O.S. 144/1997 on the file of the Sub Court,
Muvattupuzha are the appellants. (For the purpose of convenience, the parties
are hereafter referred to as per their rank before the trial court.)
2. The plaintiff, a partnership firm represented by its partners, filed
the suit for settlement of accounts and for realisation of money. The plaintiff is
a contractor, who had entered into an agreement with defendants 1 and 2 on
31.1.1990 for the 'Idamalayar Project - Protective works at the downstream of
Idamalayar Dam on the right bank at the earth slipped area'. The period
stipulated for the completion of the work was 24.4.1991. The accepted P.A.C
was Rs.74,23,792/-, which includes the cost of departmental materials, valued
at Rs.34,08,414.75. As per the terms and conditions of the contract, 10% of the
P.A.C will be released by the 1st defendant to the plaintiff as mobilisation
advance subject to the condition that interest at the rate of 12% per annum will
be charged and for the mobilisation advance bank guarantee is to be furnished
by the plaintiff. On 17.3.1990, he could complete only 15% of the work due to
strike of employees and also continuous slip of boulders and earth from the top
of the hill. According to the plaintiff, the progress of the work was delayed due
to reasons beyond his control and the said fact was known to the defendants.
Though the plaintiff demanded for revised rates and extension of time, the same
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was not granted by the defendants. According to the plaintiff, resumption of
work was prevented by a massive hill slide over the project area on 29.8.1993
covering the entire worksite, materials stored, buildings and machinery with
earth and boulders more than 15 metres high. Though the plaintiff claimed a
compensation of Rs.14.60 lakhs in that respect and the 2 nd defendant estimated
the loss at Rs.10 lakhs, the 1 st defendant has awarded only Rs.4,81,762/-.
Though he was making all efforts to resume the work, the 1 st defendant
terminated the work on 20.7.1994. Though the plaintiff requested the
defendants to settle the final bill, it was protracted by the defendants. In the
meantime, the plaintiff had to renew the bank guarantee for the mobilisation
advance and had to pay interest also for the said amount to the bank. Though
the 1st defendant awarded a sum of Rs.4,81,762/- by way of compensation, the
same was not released to the plaintiff and it was adjusted towards mobilisation
fund and advance. On 30.6.1997, the Executive Engineer issued a letter
assessing the total liability of the plaintiff at a sum of Rs.15,21,040/-, including
Rs.6,61,461/- towards interest due on mobilisation advance. According to the
plaintiff, in fact the plaintiff is entitled to get a sum of Rs.2,50,493/- from the 1 st
defendant and the amount claimed by the defendants is not correct. It was in the
above context that the plaintiff filed the suit for rendition of accounts and for
realisation of the amount due from the defendants.
3. Defendants 1 and 2 filed a written statement refuting the claims in
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the plaint and alleging that the work was delayed and could not be completed
solely due to the default of the plaintiff. According to the defendants, the
plaintiff has not engaged sufficient number of workers for completing the work
in time and also has not taken steps to settle the labour dispute in time. They
denied the allegation that the slow progress of the work was due to the
continuous slip of boulders and earth from the top of the hill. The plaintiff
stopped the work on 5.6.1991 and thereafter, did not turn up to resume the work
in spite of repeated requests. Therefore, the Board was compelled to terminate
the contract. As per the terms of the contract and instructions to tender, the
contractor shall not suspend the work without the written consent of the
engineer in charge and in the event of suspension of work without the
permission of the Board, the Board shall have the right to recover all loss from
the contractor. The contract also provides for termination of the contract in case
the terms of the contract are violated by the contractor. The compensation for
the loss sustained by the plaintiff due to earth slip was adjusted against the
mobilisation advance due from the plaintiff. Thereafter, the interest on
mobilisation advance was charged only for the balance amount. The FCC could
be finalised only after accepting the measurements by the plaintiff. The plaintiff
did not turn up for accepting the measurements, in spite of repeated requests
and finally he accepted the measurements only on 30.12.1996. Thereafter, the
FCC was finalised and notice dated 30.6.1997 was served on the plaintiff
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directing him to remit a sum of Rs.8,13,716/- with interest. The said amount
was arrived at only as per the terms of the agreement and the details were set
out clearly in the said notice. Since the plaintiff failed to pay the amount as
demanded in the notice, defendants 1 and 2 have given instructions to the 3 rd
defendant, bank, to encash the bank guarantee executed by the plaintiff.
According to the defendants, there is no merit in the claim raised by the
plaintiff that he is entitled to get a sum of Rs.2,50,493/- from the defendants.
Therefore, the defendants prayed for dismissing the suit.
4. The trial court framed seven issues. The evidence in the case
consists of the oral testimonies of PW1, Exts.A1 to A32 and B1 to B42.
Initially as per the judgment and decree dated 31.1.2005, the trial court
dismissed the suit holding that it is barred by limitation. Aggrieved by the
above judgment and decree, the plaintiff preferred RFA 335/2005 before this
Court. As per judgment dated 18.1.2023, this Court found that the trial court
dismissed the suit on the ground that it is barred by limitation, without framing
a specific issue in that respect. Accordingly, this Court set aside the above
judgment and decree and remanded the matter to the trial court for fresh
disposal after affording opportunity to both sides to adduce evidence. After the
remand, no further evidence was adduced by both sides. As per the impugned
judgment and decree, the trial court found that the suit filed for settlement of
accounts is within the period of limitation and a preliminary decree was passed
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for rendition of accounts. Aggrieved by the above preliminary judgment and
decree, defendants 1 and 2 preferred this appeal raising various grounds.
5. Now the points that arise for consideration are the following :
1) Whether the suit is barred by limitation ?
2) Whether the impugned preliminary judgment and decree of the
trial court calls for any interference, in the light of the grounds raised
in the appeal?
6. Heard Sri.Ajit Joy, the learned counsel for the appellant and
Sri.P.Sathisan, the learned counsel for the respondents/plaintiffs.
7. The points :- One of the arguments advanced by the learned
counsel for the appellants is that the trial court has exceeded the authority given
by the High Court while ordering remand. According to him, in RFA 335/2005,
the direction was only to frame an issue on limitation and to decide the said
issue alone and that there was no scope for going beyond the above limited
direction. On the other hand, the learned counsel for the plaintiff would argue
that this Court has directed the trial court to afford opportunity to adduce
evidence to both sides and the direction was to adjudicate the matter afresh and
as such there was nothing wrong on the part of the trial court in disposing of the
case afresh considering all the issues.
8. On a perusal of the judgment of this Court in RFA 335/2005 it can
be seen that the direction was to frame an issue on the question of limitation
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and to answer and adjudicate the same and to deliver judgment and decree
afresh, after affording opportunity to both sides to adduce evidence, if any.
Since the direction was to dispose of the matter afresh after framing an issue on
limitation and both parties were permitted to adduce fresh evidence, the
intention of this Court was to enable the trial court to dispose of the matter
afresh and not merely to decide the question of limitation alone. As per the
judgment dated 31.1.2005, the trial court dismissed the suit holding that it is
barred by limitation. As per the judgment in RFA 335/2005 this Court set aside
the above judgment and decree and remanded the matter to the trial court with a
direction to frame an issue on limitation and for fresh disposal after affording
opportunity to both sides to adduce evidence. In case the trial court finds that
the suit is not barred by limitation, it is bound to answer all other issues also,
afresh. After the remand the trial court found that the suit is not barred by
limitation. In the above circumstances, the trial court was justified in disposing
the matter afresh, deciding all the issues including the issue on limitation.
Therefore, I find no merits in the above argument advanced by the learned
counsel for the appellants.
9. The main argument advanced by the learned counsel for the
appellants is regarding the finding of the trial court on the question of
limitation. According to the learned counsel, the appellants terminated the
contract on 20.7.1994 and hence the suit filed on 1.12.1997, more than three
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years after the termination of the contract, is barred by limitation. Therefore,
according to the learned counsel, the finding of the trial court on the issue of
limitation is erroneous. On the other hand, the learned counsel for the plaintiff
would argue that this is a suit for rendition of accounts and as per Ext.A19
proceedings of the KSEB, sanction was accorded to pay an amount of
Rs.4,81,762/- to the plaintiff towards compensation for the loss sustained due to
the earth slip occurred at Idamalayar on 29.8.1993. Ext.A19 is dated 17.4.1995.
Therefore, going by Ext.A19, the suit filed on 1.12.1997 is within the period of
limitation.
10. Now the argument advanced by the learned counsel for the
appellants is that the present suit, though styled as one for rendition of accounts,
is only a suit for realisation of damages and not a suit for accounts. Therefore,
according to the learned counsel, the date of Ext.A19 cannot be taken into
consideration as it is only a compensatory payment and not a payment on the
basis of Ext.A1 contract. Further, according to the learned counsel, in order to
sustain a suit on accounts, there should be a current account in which debits and
credits of both sides find a place in the accounts. According to the learned
counsel for the appellants, in the instant case, only the amount due to the
KSEB finds a place in the account and as such it cannot be styled as an open
current account and hence, a suit for accounts is not maintainable. On other
other hand, the learned counsel for the respondents relied upon the written
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statement filed by the defendants in which the amounts due from the plaintiff
and the amount due to the plaintiff are shown and hence, it was argued that the
amount due to both the parties finds a place in the account and therefore,
according to the learned counsel, the suit for accounts is perfectly maintainable.
11. In the written statement filed by the defendants the amount due
from the plaintiff as on 30.6.1997 is shown in a tabular form as follows :
1 Mobilisation advance 605147
2 Interest on mobilisation advance upto 30.6.1997 661416
3 Room rent 36270
4 Hire charges (-) 10004
5 Cost of Materials sold 12815
6 Storage charge for materials sold 2690
8 Penal recovery for steel 73.902.00
9 Current charges 2652
10 Short conveyance charge 1849
11 Cost of short issued materials 20746
12 Cost of unreturned a.c.bags 7658
14 Cost of materials 66.483.00
15 Income tax 2% for Rs.102052/- (F.C.C. Amount) 2041
16 I.T.2% Rs.4,81,762 (compensation amount) 9.64
17 Sales tax 2.1% for Rs.102052 2143
18 Sales tax at 2% fpr Rs.12,35,091/- (C.C.T. Amount) 24702
Total 1521040
12. The total amount claimed by the defendants due from the plaintiff
is shown as Rs.15,21,040/-. Thereafter, the amount due to the plaintiff is also
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shown in the written statement as follows :-
1 Retention 123510
2 Compensation for earth slip 481762
3 Value of work done 102052
Total 707324
13. The total amount allegedly due to the plaintiff as per the written
statement is Rs.7,07,324/-. It was thereafter that the defendants came to the
conclusion that the balance amount due to the defendants from the plaintiff will
come to Rs.8,13,716/-. The plaintiff disputes the above statement furnished by
the defendants in their written statement. In the plaint, the contention taken by
the plaintiff is that the figures arrived at by the 1 st defendant are totally wrong
and against the actual facts. It is also contended that the figures are arrived at
arbitrarily without giving an opportunity to the plaintiff to place before the
defendants the actual amount due to him. According to them, the defendants
have no authority to decide unilaterally the liability said to have arisen from the
part of the plaintiff. According to the plaintiff, on a proper settlement of
accounts he is entitled to get an amount of Rs.2,50,493/- from the 1 st defendant
and that the calculation made by the defendants to the contrary is incorrect. The
relief claimed by the plaintiff is to direct the 1 st defendant to pay a sum of
Rs.2,50,493/- with interest at the rate of 18% per annum or any other amount
found due to the plaintiff on such settlement. Since two separate statements are
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given in the written statement, one showing the amounts due to the defendants
and the other due to the plaintiff, the learned counsel would argue that in the
instant case there is mutual open and current account with reciprocal demands
between the parties and as such Article 1 of the Limitation Act applies.
14. Relying upon the decision of the Hon'ble Supreme Court in
K.C.Skaria v. The Govt. of State of Kerala and Ors, AIR 2006 SC 811, the
learned counsel for the appellants would argue that the relationship between an
employer and an independent contractor to execute certain work in terms of the
contract, will not come within the purview of a suit for accounts and the remedy
is to file a suit for the cost of the work done. In the above decision the apex
court held in paragraph 14 that:
"It is now well settled that the right to claim rendition of
accounts is an unusual form of relief granted only in certain specific
cases and to be claimed when the relationship between the parties is
such that the rendition of accounts is the only relief which will enable
the plaintiff to satisfactorily assert his legal right".
15. In the above decision, the contract was an item-rate contract and
payment for the work done had to be made by the employer to the contractor as
per the measurements recorded in the measurement book maintained by the
department. It was in the above context that the apex court found that in the
event of non-payment for the work done, the remedy is to file a suit for the cost
of the work done quantifying the amount due and not a suit for rendition of
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accounts. In paragraph 16, the Apex Court summarised the law on the point in
the following words :
"To summarise, a suit for rendition of accounts can be maintained
only if a person suing has a right to receive an account from the
defendant. Such a right can either be (a) created or recognized under
a statute; or (b) based on the fiduciary relationship between the
parties as in the case of a beneficiary and a trustee, or (c) claimed in
equity when the relationship is such that rendition of accounts is the
only relief which will enable the person seeking account to
satisfactorily assert his legal right. Such a right to seek accounts
cannot be claimed as a matter of convenience or on the ground of
hardship or on the ground that the person suing did not know the
exact amount due to him, as that will open the floodgates for
converting several types of money claims into suits for accounts, to
avoid payment of court fee at the time of institution."
16. The learned counsel for the appellants relied upon the decision of
a Single Bench of this Court in Komu Haji Hydrose Haji v. Moosakutty
Bava, 1984 KLJ 729 also in support of his argument. In the above decision, a
learned single judge of this court while considering the scope of Article 1 of the
Limitation Act, dealt with what is 'open and current account'. In paragraph 7,
the learned Single Judge held that:
"....An account is nothing but a detailed statement of a series of
receipts and disbursements. An account is said to be open when it is
not settled. It is current when it is not closed. Then the further question
is when can an account be considered as a mutual account. It is only
when parties agree to bring together their items of debits and credits
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relating to their mutual dealings for a set off against each other, that a
mutual account comes into existence. The mutual dealings must result
in independent obligations in both directions. There should be two sets
of independent transactions between the parties with the result that the
creditor in one will be the debtor in the other. It is then that there will
be room for reciprocal demands between the parties. This does not
mean that either party must have actually made a demand against the
other. Going by the nature of the transactions there need only be a
possibility of cross claims. Mutuality will not be lost if the claims are
of different nature. When one party claims wages for services rendered
the other party can demand price of goods delivered. But both the sets
of transactions must be entered in the same account. A shifting balance
will no doubt be a test of mutuality but it is not a must. It is enough
that the nature of the transactions was such that a shifting balance
also was possible...."
17. In the above decision the respondent was an employee of the
appellant. He also used to purchase provisions on credit from the appellant's
shop. Therefore, the account contained two different transactions resulting in
independent obligations. It was in the above context the learned Single Judge
found that in the above facts a suit for rendition of accounts is not maintainable.
18. In the decision in Hindustan Forest Company v. Lal Chand
and Others, AIR 1959 SC 1349, relied upon by the learned counsel for the
appellants, there was no reciprocity of dealings. There were no independent
obligations. The sellers had undertaken to make delivery of goods and the buyer
had agreed to pay for them and had in part made the payment in advance. In the
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above facts also, the apex court held that there involved no reciprocity of
demands and as such, in a suit filed for recovery of price of goods sold and
delivered, Article 115 of the Jammu & Kashmir Limitation Act relating to suit
on accounts, was held not applicable.
19. As held in the decision in Komu Haji Hydrose Haji (supra), for
maintaining a suit on accounts, there should be two sets of independent
transactions between the parties with the result that the creditor in one will be
the debtor in the other. If that be the case, there will be room for reciprocal
demands between the parties. It is true that in the written statement, defendants
admitted that some amounts are due from the plaintiff to the defendants and
some amount is due from the defendants to the plaintiffs. However, the amounts
admitted by the defendants to be due to the plaintiff are only retention amount,
value of work done and compensation for earth slip. The compensation for
earth slip was awarded by the defendants to the plaintiff due to the reason that
while the work was in progress, there was land slid from the top of the hill into
the work site and caused damage to the plaintiff. It was in the above context
that the defendants assessed the compensation for the damage caused to the
plaintiff and fixed the compensation at Rs.4,81,762/-.
20. In this context it is to be noted that in the instant case the plaintiff
has not raised any separate claim towards compensation for the damage
sustained due to earth slip. The other two entries as per which the amount due
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to the plaintiff is only retention amount and the value of the work done as
assessed by the defendants. In the instant case also, the plaintiff has entered into
an agreement with the defendants undertaking to do certain work as per the
terms of the contract. He has performed only about 15% of the contract and his
claim is for the amount due to him for the work done. In the above
circumstances, by applying the dictum laid down by the Apex Court in
K.C.Skaria (supra), as well as the decision of this court in Komu Haji
Hydrose Haji (supra), it is to be held that the remedy of the plaintiff is to file a
suit for the cost of the work done and not for rendition of accounts. In the above
circumstances, as argued by the learned counsel for the appellants, Article 1 of
the Limitation Act does not apply to the facts of this case. Therefore, the
present suit is to be treated as one for realisation of the amount due to the
plaintiff for the work done.
21. Even as per the memorandum of appeal, the FCC could be
finalised only after accepting the measurements by the plaintiff. According to
the defendants, the plaintiff accepted the measurements only on 30.12.1996 and
immediately thereafter, the defendants finalised the FCC and notice dated
30.6.1997 was served on the plaintiff directing to remit a sum of Rs.8,13,716/-
along with interest. In spite of the said notice, the plaintiff has not remitted any
amount and instead, they filed the present suit.
22. One interesting aspect is that the defendants have not filed any
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suit against the plaintiffs for realising the amount of Rs.8,13,716/- claimed in
the notice dated 30.6.1997. Even in this suit they have not raised any counter
claim. Another interesting aspect is that, at the time of the arguments, the
learned counsel for the plaintiffs submitted that in the final decree proceedings,
the Chartered Accountant appointed by the trial court already filed a report and
as per the above report, the KSEB is entitled to get a sum of Rs.3,03,817/- from
the plaintiff. At the time of arguments, a copy of the above report was also
handed over to him for perusal, which shows that a sum of Rs.3,03,817/- is due
to the defendants/KSEB from the plaintiff. Since the KSEB has not filed any
suit or raised any counter claim and in this case KSEB is contending that a suit
for accounts is not maintainable and this court has already found that a suit for
accounts is not maintainable, even if this appeal is allowed and the impugned
judgment and decree of the trial court is set aside, the beneficiary will be the
plaintiff herein. According to the learned counsel for the plaintiff, in a suit on
accounts, even if it is found that the plaintiff is liable to pay any amount to the
KSEB, he is prepared to pay the same and that the plaintiff does not want any
amount found legitimately due to the KSEB, if any. However, since this court
already found that the suit of accounts is not maintainable, and that the remedy
of the plaintiff is only to file the suit for the amount of work done by the
plaintiffs, the impugned preliminary judgment and decree of the trial court for
rendition of accounts is liable to be set aside.
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23. Even as per the memorandum of appeal, the final accounts were
taken by the KSEB only on 30.6.1997 and as per the accounts, a sum of
Rs.8,13,716/- is due to the defendants from the plaintiff. At the same time, a
sum of Rs.4,81,462/- was awarded to the plaintiff towards loss sustained on
account of hill slide. This suit is not filed for the compensation due on account
of the damage sustained because of the hill slide. Since the defendants admitted
in the memorandum of appeal that the final accounts were finalised only on
30.6.1997, the suit filed on 1.12.1997 cannot be held as barred by limitation. In
other words, I hold that the present suit assuming that it is one for realisation of
the amount due for the work done, is within the period of limitation.
24. The plaintiff claimed a sum of Rs.2,50,493/- as the amount due
from the defendants. The manner in which such a figure is arrived at is not
disclosed. There is also no reliable evidence to substantiate the said claim. As
per the statement furnished by the defendants, the amount due to the plaintiffs
including Rs.102052/- being value of work done is Rs.7,07,324/- and the total
amount due to the defendants including mobilisation advance of Rs.6,05,147/-
and interest thereon Rs.6,61,416/- is Rs.15,21,040/-. At the time of arguments
the learned counsel has not raised any specific objection against any particular
entries in the statement furnished by the defendants. As per the above
statement, the defendants are entitled to get a sum of Rs.813716/- from the
plaintiffs. As noted above, even as per the audit report handed over by the
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learned counsel for the plaintiffs, the plaintiffs are liable to pay a sum of
Rs.3,03,817/- to the defendants. In the available evidence, there is nothing to
show that the plaintiffs are entitled to get a sum of Rs.2,50,493/- from the
defendants. Therefore, the suit is liable to be dismissed. Points answered
accordingly.
25. In the result, the impugned judgment and decree of the trial court
decreeing the suit is set aside. The suit, O.S. 144/1997, is dismissed.
Considering the facts, both sides are directed to suffer their respective costs.
All pending interlocutory applications in the appeal shall stand
dismissed.
Sd/-
C.Pratheep Kumar, Judge
Mrcs/7.10.25
