SUPREME COURT OF INDIA
Y.V. CHANDRACHUD, CJI., V.D. TULZAPURKAR AND A.P. SEN, JJ.
Advocates appeared
Mr.M.C. Bhandare, Sr. Advocate (M/s. J.S. Sinha and K.J. John, Advocates with him), for Appellants; Mr.R.H. Dhhebar, Mr. B.V. Desai and Mr.M.N. Shroff, Advocates, for Respondents.
Indian Contract Act – Damages – Appellant-plaintiffs case was that the initial fixation of July 5, 1955 as the date for commencement of the work was nominal, that the area where the work was to be done had usually heavy rainfall rendering it impossible to carry out any work from July to November and that , therefore, it was the practice of the public Works Department to deduct the period of monsoon in case of such type of works and that the appellant-plaintiff had been orally informed that this period would be deducted or not taken into account for calculating the period of 12 months under the contract and that on this assurance he had commenced the work towards the end of December 1955 – His case further was that in any event time was not of the essence of the contract, that on account of several difficulties, such as excessive rains, lack of proper road and means of approach to the site, rejection of materials on improper grounds by Government Officers, etc., over which he had no control, the completion of the work was delayed and that the extension of the time which was permissible under the contract had been wrongfully refused by the officers of the respondent-defendant – According to him none of these factors had been taken in to account by the government while refusing the extension and the contract was wrongfully rescinded and therefore, the respondent-defendant was liable in damages – Total claim of Rs. 65,000 comprised six items- (1) Rupees 4,936 being the amount of security deposit wrongfully forfeited by the respondent-defendant, (2) Rs. 10,254 being the amount due to him for the actual work done by him under Bill No. 1253 and which had not been paid for, (3) Rs. 7,375 being the value of the material collected by him on the site for work but which had been rendered useless on account of wrongful, recision, the 4th and 5th items sounded in damages, while the last item was interest from date of recision to the date of Suit – Whether time was of the essence of the contract that was executed between the parties – Held, It appears that the appellant-plaintiff had an interview with the Superintending Engineer when a written representation (Ex.99) was handed over and the whole position was sought to be explained to the Superintending Engineer but within three days of the interview by the letter contract was rescinded and the full security deposit was forfeited to Government – It will thus appear clear that though time was not of the essence of the contract, the respondent-defendant did not fix any further period making time the essence directing the appellant-plaintiff to complete the work within such period instead it rescinded the contract straightway by letter – Such recision on the part of the respondent-defendant was clearly illegal and wrongful and thereby the respondent defendant committed a breach of contract, with the result that there could be no forfeiture of the security deposit – Trial Court was right in coming to the conclusion that the appellant-plaintiff was entitled to a refund of their full security deposit of Rs. 4,936 as also to Rs. 5845 being the balance of their Bill No. 1253 for work actually done by them and not paid for and nominal damages of Rs. 120 – Appellant-plaintiff was also entitled to interest on the aforesaid sums and costs of suit as directed by the trial Court – Appeal Allowed
Key Points:- The court analyzes whether time was of the essence of the contract and how extensions or waivers affect that status. (!) (!) (!) - It considers that if time is not of the essence or has been waived, the employer may fix a reasonable time and rescind for breach; otherwise rescission may be unjustified. (!) (!) - The presence of extension provisions (Clause 6) and penalty provisions (Clause 2) influence whether time is fundamental and whether forfeiture is permissible. (!) (!) - The decision holds that rescission was wrongful and demands refund of security deposits and unpaid amounts plus interest, given time was not essential and extension could have been granted. (!) (!) - The contractor sought extension prior to expiry; the lack of timely extension contributed to the breach analysis. (!) (!) - The High Court’s approach differed from the trial court by assuming non-essence of time; the Supreme Court restored the trial court’s view and allowed recovery. (!) (!) - The contract included differential treatment for progress and penalties that bear on the time-essence analysis. (!) (!) (!) - The court notes that waivers or extensions can render time non-essential, altering the remedy from forfeiture to breach with damages. (!) (!) - The judgment emphasizes evaluating intent from contract terms and surrounding correspondence, including rescission letters. (!) (!)
Judgment
TULZAPURKAR, J.:- These appeals by certificate of fitness granted by the High Court of Judicature at Bombay are directed against that Courts common judgement and decree dated September 9/10, 1968, passed in two cross appeals being First Appeals Nos. 245 of 1962 and 844 of 1961.
2. A contract for the construction of an aqueduct across the Alandi River at Mile No. 2 of the Nasik Left Bank Canal of the total value of Rs.1,07,000 was granted to the appellant-plaintiff (originally a partnership but later a proprietary firm of contractors) by the respondent-defendant (the State of Maharashtra) after the formers tender was accepted on June 17, 1955. On July 2, 1955 the Executive Engineer issued the work order to the appellant-plaintiff directing him to commence the work by July 5,1955 intimating in clear terms that the stipulated date for starting the work would be reckoned from July 5, 1955. The formal regular contract in prescribed Form B-2/1 of 1955-56 (EX.34)containing the terms and conditions as well as the Schedules, Specifications etc. was executed by the parties on July 12, 1955. A security deposit of Rs.4,936 was kept by the appellant-plaintiff with the respondent-defendant. The period for completion of work was fixed as 12 months from the date stipulated for commencement of the work, that is to say, it was expected to be completed on or before July 4, 1956. It appears that on the ground that the appellant-plaintiff had not completed the work as expected within the stipulated time the Executive Engineer by his letter dated August 27, 1956 (Ex.78) rescinded the said contract with effect from August 16, 1956. After serving a notice under S. 80 of the Civil Procedure Code the appellant-plaintiff filed a suit (being Special Civil Suit No. 23 of 1959) on August 28, 1959, in the Court of the Joint Civil Judge, Senior Division, Nasik making a claim for Rs. 65,000 in the aggregate against the respondent-defendant alleging wrongful and illegal rescision of the contract on the part of the respondent-defendant. The appellant-plaintiffs case was that the initial fixation of July 5, 1955 as the date for commencement of the work was nominal, that the area where the work was to be done had usually heavy rainfall rendering it impossible to carry out any work from July to November and that , therefore, it was the practice of the public Works Department to deduct the period of monsoon in case of such type of works and that the appellant-plaintiff had been orally informed that this period would be deducted or not taken into account for calculating the period of 12 months under the contract and that on this assurance he had commenced the work towards the end of December 1955. His case further was that in any event time was not of the essence of the contract, that on account of several difficulties, such as excessive rains, lack of proper road and means of approach to the site, rejection of materials on improper grounds by Government Officers, etc., over which he had no control, the completion of the work was delayed and that the extension of the time which was permissible under the contract had been wrongfully refused by the officers of the respondent-defendant. According to him none of these factors had been taken in to account by the government while refusing the extension and the contract was wrongfully rescinded and therefore, the respondent-defendant was liable in damages. The total claim of Rs. 65,000 comprised six items- (1) Rupees 4,936 being the amount of security deposit wrongfully forfeited by the respondent-defendant, (2) Rs. 10,254 being the amount due to him for the actual work done by him under Bill No. 1253 dated september 20, 1956 and which had not been paid for, (3) Rs. 7,375 being the value of the material collected by him on the site for work but which had been rendered useless on account of wrongful, recision, the 4th and 5th items sounded in damages, while the last item was interest from date of recision to the date
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