SHRIPATI LAKHU MANE VS THE MEMBER SECRETARY, MAHARASHTRA WATER SUPPLY AND SEWERAGE BOARD Case
SHRIPATI LAKHU MANE VS THE MEMBER SECRETARY, MAHARASHTRA WATER SUPPLY AND SEWERAGE BOARD Case
Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.556 of 2012
SHRIPATI LAKHU MANE ... APPELANT(S)
VERSUS
THE MEMBER SECRETARY,
MAHARASHTRA WATER SUPPLY
AND SEWERAGE BOARD & ORS.
...RESPONDENT(S)
J U D G M E N T
V. Ramasubramanian
1. The plaintiff in a suit for recovery of money has come up with
the above appeal challenging the judgment and decree of the High
Court of Judicature at Bombay in a regular appeal under Section
96 of the Code of Civil Procedure, 1908, by which the decree
granted by the Trial Court for recovery of Rs.24,97,077/ together
with interest at 10% per annum was modified into a decree for
recovery of Rs.7,19,412/ together with interest.
2. We have heard Mr.Vinay Navare, learned senior counsel for
the appellant, and Mr. Sunil Murarka, learned counsel for the
respondents.
3. The appellant is a registered contractor with the Government
of Maharashtra. In a tender for the execution of the work of
Regional Rural Piped Water Supply Scheme for DabholBhopan and
other villages in Ratnagiri District, the appellant became the
successful tenderer. He was issued with a work order on
03.07.1986, for the execution of the work at the cost of
Rs.80,45,034/, which was 47% above the estimated cost. The time
for the completion of the work was stipulated as 30 months. But it
appears that Respondent No.3 herein issued a letter dated
28.07.1986 informing the appellant that the work order was kept in
abeyance. After a few representations, Respondent No.3 informed
the appellant vide letter dated 17.12.1986 to start the work.
4. Though the appellant started executing the work from
29.12.1986, he was informed about the nonavailability of C1 pipes
and cement pipes of the diameter stipulated in the contract. Later,
the respondents wanted a change in the terms of the work order by
substituting pipes of different diameter. Therefore, the appellant
started demanding modified rate.
5. When the above dispute was brewing, Respondent No.3
instructed the appellant, vide letter dated 02.03.1987 to stop the
pipeline work and start the work of construction of another work at
a different place namely Panchanadi. By another letter dated
04.03.1987, the Respondent No.2 informed the appellant about a
modification which involved the construction of one headwork at
Karjai and another at Panchanadi. A work order dated 01.07.1987
was also issued in respect of these headworks.
6. Compounding the agony of the appellant, the bills raised by
him were not honoured in time due to shortage of funds. Therefore,
the appellant did not proceed with the work. As a result,
Respondent No.2 issued a threat to withdraw the work order and
also to levy a fine of Rs.10/ per day from 01.03.1988. Ever since
then, the parties were at loggerheads, which ultimately led to the
appellant filing a suit for recovery of a sum of Rs.51,35,289/
7. The aforesaid claim of Rs.51,35,289/ comprised of several
heads of claim such as (i) value of the work done; (ii) release of the
security deposit; (iii) compensation; and (iv) damages etc.
8. Before the Trial Court, the appellant examined himself as PW1 and marked several documents as exhibits. On the side of the
respondents, 5 witnesses were examined as DWs 1 to 5 and the
respondents also marked several documents.
9. Eventually, the Trial Court, by a judgment and decree dated
02.02.1998 decreed the suit partially, directing the respondents to
pay to the appellant, a sum of Rs. 24,97,077/ together with
interest at 10% per annum from the date of the suit till realization.
10. Aggrieved by the decree so granted, the respondents filed a
regular civil appeal under Section 96 of the Code of Civil Procedure,
1908 on the file of the High Court of Judicature at Bombay. The
appellant did not file any appeal though the suit was decreed
partially.
11. By a judgment and decree dated 24.04.2009, impugned in this
appeal, the High Court allowed the appeal partially and reduced the
decree amount to Rs.7,19,412/. Therefore, the plaintiff has come
up with the above appeal.
12. Before we proceed to consider the grounds of attack and the
rival contentions, it will be useful to see the different heads of
claims made by the appellant before the Trial Court, the heads of
claims and the extent to which these heads of claims were allowed
by the Trial Court, and the heads of claims allowed by the High
Court in the impugned judgment. For easy appreciation, they are
presented in a tabular column as follows:
S.No. Heads of Claim Amount claimed
in Plaint (Rs.)
Amount awarded
by Trial court (Rs.)
Amount awarded
by High Court Rs.)
1. Value of work done but not
paid, up to the date of
withdrawal of work
12,25,864 28,418 28,418
2. Value of work done under
extra item
5,82,250 4,42,944 4,42,944
3. Release of security deposit 2,21,000 2,21,000 Disallowed
4. Idle labour 1,57,000 1,57,000 1,57,000
5. Idle machinery 91,000 91,000 91,000
6. Overheads 5,63,115 5,63,115 Disallowed
7. Loss of Profit 11,55,000 9,73,250 Disallowed
8. Interest at 18% p.a. up to
date of Suit
11,38,860 Disallowed Disallowed
9. Notice Charges 300 300 Not allowed
TOTAL 51,34,389 24,77,0271 7,19,362
1 Though the amount totals to Rs. 24,77,027/, the decree of the trial court was for Rs. 24,97,077/
13. As could be seen from the above table, what was allowed by
the Trial Court under three heads of claims namely, (i) the release of
security deposit to the tune of Rs.2,21,000; (ii) overheads for the
period from January 1989 to 30.09.1990 to the tune of Rs.
5,63,115/; and (iii) loss of profits to the tune of Rs.9,73,250/,
were disallowed by the High Court. Therefore, the appeal before us
is actually confined only to these 3 heads of claims.
14. The main and perhaps the only reason why the High Court
rejected the claims under the aforesaid 3 heads, was that the
appellant had abandoned the work under the main contract and
that therefore neither the question of release of security deposit nor
the question of payment of overheads nor the question of allowing a
claim for loss of profit, did arise. Therefore, the only issue that
arises for consideration in this appeal before us is as to whether
there was abandonment of work by the appellant.
15. In order to see whether there was abandonment on the part of
the appellant, it is necessary to have a look at the timeline of
events, as reflected by the documentary evidence on record. The
timeline was as follows:
(i) The work order was issued to the appellant on
03.07.1986 and an agreement was registered. The agreement
stipulated a period of 30 months for the completion of the work;
(ii) By a letter dated 28.07.1986, the respondents informed
the appellant that the execution of the work order shall be kept in
abeyance. Though no reason was indicated in the letter, the
respondents took a stand later that it was due to “administrative
exigencies”;
(iii) After nearly 5 months, a letter dated 17.12.1986 was
issued directing the appellant to commence work;
(iv) While the case of the appellant was that his obligation to
commence the execution of the contract came into effect on
03.07.1986, the case of the respondents in the written statement
was that the date of commencement of the work should be taken
only as 17.12.1986, which was the date on which the order for
keeping the workorder in abeyance was lifted;
(v) Within a few days, the appellant notified the respondents,
about the nonavailability of C1 pipes and cement pipes of the
diameter originally agreed. When the respondents wanted to replace
the pipes with pipes of different dimension, the appellant demanded
a fresh rate to be finalized, through a letter dated 20.02.1987. This
fact is admitted in paragraph 8 of the written statement;
(vi) Even before the issue raised in the letter dated
20.02.1987 could be resolved, the respondents issued another letter
dated 02.03.1987 instructing the appellant to stop the pipeline
work and start the work at Panchanadi. Though the respondents
claimed in paragraph 9 of their written statement that the letter
dated 02.03.1987 merely called upon the appellant to concentrate
on the construction of headwork, it is nevertheless admitted that
the said letter contained the words, “please be stopped”, in so far as
the pipeline work is concerned;
(vii) According to the respondents, they issued a telegram
dated 02.04.1987 calling upon the appellant to start the work of
laying the pipelines;
(viii) By a letter dated 04.03.1987, the plaintiff was informed
that the Scheme was undergoing modifications. While the appellant
claimed that the modification involved one headwork at
Panchanadi and another headwork at Karjai, the respondents
claimed in paragraph 10 of the written statement, that the headwork at Karjai, was already included in the original tender itself.
However, the respondents admitted that there was at least one
modification, imposed by their letter dated 04.03.1987;
(ix) The fact that the appellant sent a representation dated
04.11.1987 raising 2 issues namely [1] the issue of nonpayment of
bills due to paucity of funds and [2] the issue of delay in sanction of
the modified rate already proposed on 20.02.1987 for the work of
laying pipes of different dimension, is admitted by the respondents
in paragraph 11 of the written statement, though they disputed the
correctness of the contents of the said letter. Interestingly, the
averments of the appellant in paragraph 11 of the plaint about the
reply dated 02.12.1987 in response to the appellant’s
representation dated 04.11.1987, was not at all dealt with by the
respondents in paragraph 11 of their written statement;
(x) It was at this juncture, that Respondent No.3 issued a
letter dated 22.02.1988, imposing a fine of Rs.10/ per day w.e.f.
the date of the said letter. By this letter the appellant was also
called upon to start the work by 01.03.1988;
(xi) Despite the appellant’s objections, another letter dated
22.03.1988 was issued, reiterating the proposal for imposing a fine
and calling upon the appellant to start work;
(xii) In fact, in the letter dated 22.03.1988, the respondents
admitted for the first time that the subject work was split into two
parts and that the proposed revised rates were as provided therein;
(xiii) Subsequently, there were several communications in
April, June, July and August, 1988 all of which pointed to a
disagreement on the revised rates on account of the modifications
and the nonpayment of bills;
(xiv) While according to the appellant the execution of the
work under the contract was to commence on 03.07.1986 with a
liability to complete it by 03.01.1989, the contention of the
respondents was that the execution of the work was to commence
only in December, 1986 and that therefore the liability to complete
the work expired only in June, 1989;
(xv) However, admittedly, the respondents increased the fine
amount from Rs.10/ per day to Rs.25/ per day vide their letter
dated 19.04.1989. By another letter dated 06.10.1989, the
respondents informed the appellant that though the time for
completion of the project expired on 17.06.1989 and though the
appellant did not ask for any extension, he was being granted
extension up to 31.12.1989.
16. The entire sequence of events narrated in the preceding
paragraph would show that the appellant was not guilty of anything
including abandonment. Admittedly, Clause 3(a) of the contract
enabled the respondents to rescind the contract, forfeit the security
deposit and entrust the work to another contractor at the risk and
costs of the appellant. This clause was never invoked by the
respondents. Therefore, we are surprised, especially in the light of
the communications from February, 1988 up to October, 1989 as to
how the High Court could have found the appellant guilty of
abandonment.
17. In fact, Section 67 of the Indian Contract Act, 1872 makes it
clear that if any promisee neglects or refuses to afford the promisor
reasonable facilities for the performance of his promise, the
promisor is excused by such neglect or refusal. Section 67 together
with the illustration contained there under reads as follows:
“67. Effect of neglect of promisee to afford promisor
reasonable facilities for performance.—If any promisee neglects
or refuses to afford the promisor reasonable facilities for the
performance of his promise, the promisor is excused by such
neglect or refusal as to any nonperformance caused thereby."
Illustration
A contracts with B to repair B’s house.
B neglects or refuses to point out to A the places in which his
house requires repair.
A is excused for the nonperformance of the contract, if it is caused
by such neglect or refusal.”
18. In the case on hand, the respondents issued the work order on
03.07.1986 but directed the work order to be kept in abeyance by a
subsequent letter dated 28.07.1986. After this stalemate was lifted
by a letter dated 17.12.1986, two things happened namely, (i) a
change in the diameter of the pipes supplied by the respondents for
carrying out the contract; and (ii) request for the performance of
additional work without finalization of the modified rates.
Therefore, the respondents cannot even accuse the appellant of
nonperformance of the contract.
19. It is fundamental to the Law of Contract that whenever a
material alteration takes place in the terms of the original contract,
on account of any act of omission or commission on the part of one
of the parties to the contract, it is open to the other party not to
perform the original contract. This will not amount to
abandonment. Moreover, abandonment is normally understood, in
the context of a right and not in the context of a liability or
obligation. A party to a contract may abandon his rights under the
contract leading to a plea of waiver by the other party, but there is
no question of abandoning an obligation. In this case, the appellant
refused to perform his obligations under the workorder, for reasons
stated by him. This refusal to perform the obligations, can perhaps
be termed as breach of contract and not abandonment.
20. It is interesting to note that the respondents did not choose,
(i) to allege breach of contract against the appellant; and
(ii) consequently to invoke the right to rescind the contract under
clause 3(a). The respondents, if they were justified in doing so,
could have taken recourse to the remedy available under Section 75
of the Contract Act and sought compensation for the damage
sustained through the nonfulfillment of the contract. On the
contrary they attributed abandonment to the appellant (without
understanding the true purport of the word ‘abandonment’) and
refused to honour the claims made by the appellant.
21. The finding of the High Court that there was abandonment of
contract, was on the basis that after the second bill was cleared in
May, 1987, the work under the main contract did not progress. This
finding goes completely contrary to yet another finding that the
period of the contract was up to June, 1989 and that the
respondents themselves granted extension of time to complete the
contract up to 31.12.1989, despite there being no request from the
appellant. We fail to understand as to how a person who abandoned
the contract in May, 1987 could be granted extension of time up to
December, 1989 on the very understanding of the respondents that
the contract was up to June, 1989. In fact, the High Court recorded
a finding in paragraph 9 of the impugned judgment that according
to DWs 3, 4 and 5, the power to rescind under clause 3(a) of the
tender was invoked and the security deposit forfeited. This was not
how the respondents pitched their claim even in the written
statement. In any case such a finding cannot coexist with the
specific stand of the respondents that the period of contract was
extended up to December, 1989.
22. The refusal of a contractor to continue to execute the work,
unless the reciprocal promises are performed by the other party,
cannot be termed as abandonment of contract. A refusal by one
party to a contract, may entitle the other party either to sue for
breach or to rescind the contract and sue on a quantum meruit for
the work already done. Paragraph 694 of Volume 9, Fourth Edition
of Halsbury’s Laws of England, may be usefully extracted to
highlight the remedies available to a party to the contract, if the
other party absolutely refuses to perform his part of the contract.
“694. Work done under a contract terminated for breach.
Where one party has absolutely refused to perform, or has
rendered himself incapable of performing, his part of the contract,
he puts in the power of the other party either to sue for a breach of
it, or to rescind the contract and sue on a quantum meruit for the
work actually done. Thus, where a publisher engaged an author to
write a work but abandoned the project, the author was entitled to
recover reasonable remuneration without tendering the completed
work; and where a defendant wrongfully revoked the plaintiff’s
authority to sell his land after the latter had found a purchaser,
the plaintiff recovered reasonable remuneration for his work and
labour up to that date.
This type of quantum meruit claim is analogous to claims for
the repayment of money on total failure of consideration. In both
cases, the contract must be at an end before the claim can be
brought; but once the contract is at an end there is a logical
difficulty in saying that the claim is contractual.”
The respondents did not choose the option of rescinding the
contract and suing for damages in terms of clause 3 (a) and (b). It
was the respondents who made it difficult for the appellant to
execute the contract as per the terms originally agreed.
23. In the light of the above, we are of the view that the High Court
was clearly in error in overturning the judgment of the Trial Court
with regard to the aforesaid 3 heads of claims, on a wrong
understanding that there was abandonment of contract on the part
of the appellant. Hence this appeal is allowed. The impugned
judgment and decree of the High Court are set aside and the
judgment and decree of the Trial Court are restored. It appears that
during the pendency of the first appeal before the High Court, the
respondents deposited a sum of Rs.42,98,168/ towards the
amount decreed by the Trial Court. As seen from paragraph 16 of
the impugned judgment of the High Court, the amount deposited by
the respondents before the High Court was withdrawn by the
appellant on 13.01.1999 by furnishing a bank guarantee. Therefore,
while modifying the decree, the High Court directed the appellant to
return the balance amount, failing which the Trial Court was
empowered to encash the bank guarantee for the remainder
amount. In view of this, while ordering the issue of notice in the
special leave petition and granting interim stay, this Court directed
the appellant to keep the bank guarantee alive. Now that we are
allowing the appeal setting aside the judgment of the High Court
and restoring the judgment of the Trial Court, the bank guarantee
shall stand discharged.
24. The appeal is allowed. There will be no order as to costs.
…..…………....................J.
(Hemant Gupta)
.…..………......................J.
(V. Ramasubramanian)
New Delhi
March 30, 2022
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