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SUPREME COURT OF INDIA
VIKRAMAJIT SEN, SHIVA KIRTI SINGH, JJ.
STATE OF GUJARAT – APPELLANT
VERSUS
M/S KOTHARI AND ASSOCIATES – RESPONDENT
Civil Appeal No. 1770 Of 2005
Decided on : 16-10-2015
(2003) 9 SCC 505; AIR 1944 Privy Council 24 – Relied upon
(b) Limitation Act, 1963 – Article 55 and 113 – Successive or multiple breaches, rather than of a continuous breach, of contract – Each delay in handing over the canal/site by Appellant State constituting a distinct and complete breach giving rise to a separate cause of action – Respondent could have rescinded the contract or claimed compensation for each breach resulting in escalation of costs – Respondent could also combine all these causes of action in one plaint, I each claim was justiciable – Suit was required to be filed within three years of the happening of each breach constituting a distinct cause of action – Article 55. (Para 9)
(1969) 3 SCC 607 – Relied upon
ILR (1951) 1 Cal 420 – Cited with approval
(c) Limitation Act, 1963 – Section 3 – Respondent claiming compensation for each delay and rejected by the appellant – Respondent neither scrapping the contract not filing suit – Presumption of Respondent abandoning those claims. (Para 10)
(d) Limitation Act, 1963 – Section 19 – Suit for damages for additional costs incurred as a result of the extension of the contract period – Section 19 not attracted. (Para 12)
(1974) 2 SCC 231; (2008) 2 SCC 444 – Relied upon
[1858] 27 L.J.Q.B. 234 – Referred
(e) Code of Civil Procedure, 1908 – Section 80 – Limitation period for last breach of contract allegedly ending on 15.11.1982 – Notice u/s 80 issued on 7.8.1983 – Provisions of section 19 of Limitation Act, 1963 cannot be invoked. (Para 13)
(2012) 1 SCC 690 – Relied upon
Facts of the case:
The Appellant State invited tenders for providing lining to the main canal line. The Respondent, a registered partnership, submitted a tender that was accepted by the Appellant State. Thereafter a regular agreement was entered into according to which the Respondent would have from 15th November to 14th June as its working period. Under the Work-Order dated 24.9.1976, the Respondent was required to complete the work within 18 months, i.e. on or before 23.3.1978.
There were repeated and consecutive delays in handing over the site due to which the Respondent could not complete the work within the stipulated time. The work was finally completed on 20.6.1980.
In each request for an extension, the Respondent sought compensation for monetary loss due to the extended time limit, but while allowing each extension the Appellant State denied the claim for compensation each time.
The Respondent signed the Final Bill under protest on 1.1.1982; and the Security Deposit was refunded on 27.1.1982. Thereupon, the Respondent addressed a statutory notice under Section 80 of the C.P.C. dated 7.8.1983 to the Appellant State, claiming damages as a result of the additional costs incurred due to the abovementioned delays.
The Respondent eventually filed a suit on 25.1.1985 seeking damages under thirteen different heads, including price escalation in labour due to the prolongation of the work, price escalation in fuel lubricants etc., overstay of capital and machinery, and overheads such as staff, kitchen, office etc.
The Trial Court granted compensation under twelve of the thirteen heads of claims itemised by the Respondent and accordingly decreed the suit. The Respondent was granted Rs.13,61,571/-with interest at 12 per cent per annum with effect from 7.8.1983 viz. the date of the statutory notice.
The Appellant State appealed against the decree and the Respondent filed a counter-claim seeking interest from the date of written demand of the suit claim instead of from the date of statutory notice. The High Court dismissed the appeal filed by the Appellant State and allowed the Respondent’s cross objection, granting interest thereon from 5.3.1982.
Finding of the Court:
Respondent’s claim is barred by limitation.
Result: Appeal allowed.
The legal document emphasizes that the court must independently verify that a suit is not barred by limitation, regardless of whether the limitation defense has been raised by the parties (!) (!) . It clarifies that the limitation period is to be computed based on the date of each distinct breach, especially in cases involving successive or multiple breaches, rather than relying solely on the date of the final breach or last payment (!) (!) .
The document states that each delay or failure to perform constituting a breach gives rise to a separate and complete cause of action, which must be filed within a specified period from the date the breach occurs. If a suit is filed after this period, it is barred by limitation, even if the breach occurred earlier (!) (!) .
Furthermore, it discusses that extensions granted during the performance of a contract do not necessarily imply that claims for damages are waived or abandoned. The cause of action for damages arises at each breach, and the failure to initiate legal proceedings promptly can lead to presumption of abandonment of those claims (!) (!) .
The document also emphasizes that the effect of a notice under certain procedural provisions does not extend the limitation period for claims unrelated to debt or interest, such as damages for additional costs caused by delays (!) (!) .
Finally, it concludes that a suit filed after the expiry of the limitation period is liable to be dismissed, regardless of whether the limitation has been specifically raised as a defense. The court has a duty to ensure that the suit is within the prescribed time frame, and failure to do so results in dismissal of the claim (!) (!) (!) .
JUDGMENT :
VIKRAMAJIT SEN, J.
1. This Appeal lays siege to the decision of the Division Bench of the High Court of Gujarat at Ahmedabad which dismissed the appeal of the Appellant before us while allowing the cross-objection filed by the Plaintiff/Respondent by holding it to be entitled to claim interest for an extended period. For the reasons which will follow, we have set aside these concurrent findings against the Appellant State, principally on the ground that the claim of the Respondent stood barred by the principles of prescription as contained in the Limitation Act, 1963.
2. The Appellant State invited tenders for providing lining to the main canal line. The Respondent, a registered partnership, submitted a tender that was accepted by the Appellant State. Thereafter a regular agreement was entered into according to which the Respondent would have from 15th November to 14th June as its working period. Under the Work-Order dated 24.9.1976, the Respondent was required to complete the work within 18 months, i.e. on or before 23.3.1978. The case of the Respondent, which we have no cause to disbelieve, is that there were repeated and consecutive delays in handing over the site due to which the Respondent could not complete the work within the stipulated time. The first season was to extend from 15.11.1976 to 14.7.1977, but the canal was only made available on 15.1.1977 and even then the cement was not issued to the Respondent by the Appellant State till 31.1.1977. The second season was to extend from 15.11.1977 to 23.3.1978, but the canal was handed over on 15.3.1978. At the Respondent’s request, the contract period was extended to 14.6.1978, but the Appellant State specifically stated that no compensation would be payable for the extension. Pursuant to a written request by the Respondent, a third season from 15.11.1978 to 14.6.1979 was granted, but yet again the site was handed over as late as on 15.3.1979. The Respondent sought further time to complete the project, and was consequently granted a fourth season which was to extend from 15.11.1979 to 29.6.1980. The site was once again made available with delay only on 15.3.1980. The work was finally completed on 20.6.1980. It is noteworthy that in each request for an extension, the Respondent sought compensation for monetary loss due to the extended time limit, but while allowing each extension the Appellant State denied the claim for compensation each time. The Respondent’s case was that as per the contract period, 342 days should have been made available to it to conduct the stipulated work, but as a result of the delay in handing over the site and the materials, the Respondent had to seek extensions, and nevertheless managed to complete the project in 288 working days, thus indicating that there was no laxity on its part. The Respondent signed the Final Bill under protest on 1.1.1982; and the Security Deposit was refunded on 27.1.1982. Thereupon, the Respondent addressed a statutory notice under Section 80 of the C.P.C. dated 7.8.1983 to the Appellant State, claiming damages as a result of the additional costs incurred due to the abovementioned delays. The Respondent eventually filed a suit on 25.1.1985 seeking damages under thirteen different heads, including price escalation in labour due to the prolongation of the work, price escalation in fuel lubricants etc., overstay of capital and machinery, and overheads such as staff, kitchen, office etc.
3. The Trial Court found that the delay was caused by the Appellant State; that work was completed by the Respondent well within the number of days contractually allocated to complete it. Noting that under Section 73 of the Indian Contract Act compensation is payable for any loss or damage for breach of a contract, the Trial Court granted compensation under twelve of the thirteen heads of claims itemised by the Respondent.
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