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2016 Supreme(Del) 3063
IN THE HIGH COURT OF DELHI AT NEW DELHI
VALMIKI J. MEHTA, J.
SHRI DINESH BHARDWAJ AND ANOTHER – Appellants
Versus
SHRI JANARDHAN SINGH AND OTHERS – Respondents
RSA No. 31/2007
Decided On : 22-08-2016
For the Appellant :Mr. K. Sunil, Advocate.
The judgment establishes that the existence of a privity of contract depends on the facts of each case and can be inferred from the conduct of the parties. Non-production of relevant documents and non-reply to a legal notice can be considered as adverse evidence against a party.
Headnote:
Privity of Contract - Construction Dispute - Code of Civil Procedure, 1908 - Section 100 - 6
Fact of the Case:
The respondent filed a suit for recovery against the appellants, who were the architect and contractor of a construction project. The courts below held that only the appellants were liable to pay the suit amount as there was a privity of contract between the respondent and the appellants.
Finding of the Court:
The courts found that the respondent had indeed carried out construction work on the plot and had incurred costs for purchasing materials. The appellants failed to produce their books of accounts and income tax returns, and did not reply to the legal notice issued by the respondent, leading to an adverse inference against them.
Issues: The main issue was whether there was a privity of contract between the respondent and the appellants. The courts also considered the liability of the owners of the plot for the suit amount.
Ratio Decidendi: The courts concluded that there was a privity of contract between the respondent and the appellants, as evidenced by the construction work carried out, the involvement of the appellants' employee, and the failure of the appellants to produce relevant documents. The non-reply to the legal notice was also considered as an admission of the contents of the notice against the appellants.
Final Decision: The Regular Second Appeal was dismissed, but the rate of interest granted by the courts below at 18% per annum was reduced to 6% per annum.
Non-reply to a legal notice sent by the plaintiff to the defendants (architect and contractor) was held to be crucial evidence, amounting to an admission of the notice's contents against the defendants.[11000511550009] The notice (Ex.PW1/12, dated 26.8.1996) demanded payment for construction work, asserting the plaintiff was engaged as a sub-contractor by the defendants; proof of service via registered post receipts and UPC (Ex.PW1/13 and Ex.PW1/14) was established.[11000511550009] This non-reply gained significance alongside the defendants' failure to produce books of accounts and income tax returns, supporting an inference of privity of contract on preponderance of probabilities.[11000511550009][11000511550008] Such non-reply and non-production of documents constitute adverse evidence.[11000511550003]
VALMIKI J. MEHTA, J.
1. This Regular Second Appeal under Section 100 of the Code of Civil Procedure, 1908 (CPC) is filed by defendant nos.1 and 2 in the suit and against whom the courts below; the Trial Court dated 29.11.2005 and the First Appellate Court dated 30.5.2006; have passed a money decree for a sum Rs.1,18,674/- alongwith pendente lite and future interest @ 18% per annum simple.
2. The facts of the case are that the respondent no.1/plaintiff filed the subject suit for recovery against four defendants. Defendant nos.1 and 2 are the appellants before this Court and are said to be architect and contractor who sub contracted the work of construction to the respondent no.1/plaintiff. Defendant nos.3 and 4 were the owners of the plot bearing no.474, Patparganj Industrial Estate, Delhi and on which plot construction was made by the respondent no.1/plaintiff. Courts below have held that there was no privity of contract between the respondent no.1/plaintiff and the defendant nos.3 and 4/respondent nos.2 and 3 and that only the appellants/defendant nos.1 and 2 are liable to pay the suit amount on account of construction work having been undertaken by the respondent no.1/plaintiff on the plot in question as the appellants/defendant nos.1 and 2 had engaged the respondent no.1/plaintiff. Respondent no.1/plaintiff pleaded that he was the sole proprietor of business in the name of Janardhan and Company which was engaged in the contract of construction of buildings. Defendant no.1/appellant no.1 is an architect carrying on business in the name of defendant no.2/appellant no.2 and who appointed the respondent no.1/plaintiff as a sub-contractor to work on the plot in question of the defendant nos.3 and 4/respondent nos.2 and 3. Plaintiff executed the work of the amount of Rs.5,08,209.25/- of which the respondent no.1/plaintiff received a sum of Rs.3,10,000/- leaving a balance of Rs.1,40,209.25/-. Respondent no.1/plaintiff adjusted amount towards excess of shuttering material of Rs.21,535/- and thus sought to recover the suit amount being the balance due of Rs.1,18,674/- alongwith interest at 18% per annum.
3. The basic defence of both sets of defendants i.e. the defendant nos.1 and 2/appellant nos.1 and 2 and the defendant nos.3 and 4/respondent nos.2 and 3 was that they had no privity of contract with the respondent no.1/plaintiff.
4. The courts below have held that it has been found as a matter of fact that respondent no.1/plaintiff in fact did construction work on the plot in question. It was also found that the respondent no.1/plaintiff had incurred the costs for purchasing various materials. Respondent no.1/plaintiff had also proved on record the muster roll (Ex.PW1/11) showing engagement of labour for construction on the suit plot and respondent no.1/plaintiff also proved plans/drawings as Ex.PW1/1 to Ex.PW1/10 and which were given to him for construction. Most importantly, the courts below held that the appellants/defendant nos.1 and 2 being the professionals who admitted to maintaining books of accounts and filing of income tax returns, but in spite of opportunities granted, appellants/ defendant nos.1 and 2 failed to file their books of accounts and income tax returns and therefore adverse inference should be drawn against the appellants/defendant nos.1 and 2 with respect to dues claimed by the respondent no.1/plaintiff.
5. The following issues were framed on 14.9.1999 by the trial court:-
“1. If there is any privity of contract between the plaintiff and any of the defendant?
2. If any of the defendant is liable to pay the suit amount?
3. Relief.”
6. The main issue was issue no.1 and in this regard the trial court has rightly and exhaustively held as under:-
“ISSUE NO.1
It is the case of the plaintiff that he was appointed as a sub contractor by defendants no.1 & 2 to construct a factory over a plot owned by defendants no.3 & 4 and it was also assured by defendants no.3 & 4 that in case the work is executed expeditiously then
