SHRIPATI LAKHU MANE versus THE MEMBER SECRETARY, MAHARASHTRA WATER SUPPLY AND SEWERAGE BOARD & ORS. on 30 March 2022

1. The plaintiff in a suit for recovery of money has come up withthe above appeal challenging the judgment and decree of the High Courtof Judicature at Bombay in a regular appeal under Section 96 of theCode of Civil Procedure, 1908, by which the decree granted by the TrialCourt for recovery of Rs.24,97,077/- together with interest at 10% perannum was modified into a decree for recovery of Rs.7,19,412/- togetherwith interest.

2. We have heard Mr.Vinay Navare, learned senior counsel forthe appellant, and Mr. Sunil Murarka, learned counsel for the respondents.

3. The appellant is a registered contractor with the Governmentof Maharashtra. In a tender for the execution of the work of RegionalRural Piped Water Supply Scheme for Dabhol-Bhopan and other villagesin Ratnagiri District, the appellant became the successful tenderer. Hewas issued with a work order on 03.07.1986, for the execution of thework at the cost of Rs.80,45,034/-, which was 47% above the estimatedcost. The time for the completion of the work was stipulated as 30 months.But it appears that Respondent No.3 herein issued a letter dated28.07.1986 informing the appellant that the work order was kept inabeyance. After a few representations, Respondent No.3 informed theappellant vide letter dated 17.12.1986 to start the work.

4. Though the appellant started executing the work from29.12.1986, he was informed about the non-availability of C-1 pipes andcement pipes of the diameter stipulated in the contract. Later, therespondents wanted a change in the terms of the work order bysubstituting pipes of different diameter. Therefore, the appellant starteddemanding modified rate.

5. When the above dispute was brewing, Respondent No.3instructed the appellant, vide letter dated 02.03.1987 to stop the pipelinework and start the work of construction of another work at a different

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Aplace namely Panchanadi. By another letter dated 04.03.1987, theRespondent No.2 informed the appellant about a modification whichinvolved the construction of one head-work at Karjai and another atPanchanadi. A work order dated 01.07.1987 was also issued in respectof these head-works.

B6. Compounding the agony of the appellant, the bills raised by himwere not honoured in time due to shortage of funds. Therefore, theappellant did not proceed with the work. As a result, Respondent No.2issued a threat to withdraw the work order and also to levy a fine ofRs.10/- per day from 01.03.1988. Ever since then, the parties were atloggerheads, which ultimately led to the appellant filing a suit for recoveryCof a sum of Rs.51,35,289/-

7. The aforesaid claim of Rs.51,35,289/- comprised of severalheads of claim such as (i) value of the work done; (ii) release of thesecurity deposit; (iii) compensation; and (iv) damages etc.

8. Before the Trial Court, the appellant examined himself as PW-1 and marked several documents as exhibits. On the side of therespondents, 5 witnesses were examined as DWs 1 to 5 and therespondents also marked several documents.

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9. Eventually, the Trial Court, by a judgment and decree datedE02.02.1998 decreed the suit partially, directing the respondents to pay tothe appellant, a sum of Rs. 24,97,077/- together with interest at 10% perannum from the date of the suit till realization.

10. Aggrieved by the decree so granted, the respondents filed aregular civil appeal under Section 96 of the Code of Civil Procedure,F1908 on the file of the High Court of Judicature at Bombay. The appellantdid not file any appeal though the suit was decreed partially.

11. By a judgment and decree dated 24.04.2009, impugned in thisappeal, the High Court allowed the appeal partially and reduced thedecree amount to Rs.7,19,412/-. Therefore, the plaintiff has come upwith the above appeal.G

12. Before we proceed to consider the grounds of attack and therival contentions, it will be useful to see the different heads of claimsmade by the appellant before the Trial Court, the heads of claims andthe extent to which these heads of claims were allowed by the TrialCourt, and the heads of claims allowed by the High Court in the impugnedH

judgment. For easy appreciation, they are presented in a tabular columnAas follows:- B

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13. As could be seen from the above table, what was allowed bythe Trial Court under three heads of claims namely, (i) the release ofsecurity deposit to the tune of Rs.2,21,000; (ii) over-heads for the periodfrom 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 HighCourt. Therefore, the appeal before us is actually confined only to these3 heads of claims.

14. The main and perhaps the only reason why the High Courtrejected the claims under the aforesaid 3 heads, was that the appellanthad abandoned the work under the main contract and that thereforeneither the question of release of security deposit nor the question ofpayment of overheads nor the question of allowing a claim for loss ofprofit, did arise. Therefore, the only issue that arises for consideration inthis appeal before us is as to whether there was abandonment of workby the appellant.

15. In order to see whether there was abandonment on the partof the appellant, it is necessary to have a look at the timeline of events,as reflected by the documentary evidence on record. The timeline wasas follows:- DE

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1 Though the amount totals to Rs. 24,77,027/-, the decree of the trial court was for Rs.24,97,077/- H

A(i) The work order was issued to the appellant on 03.07.1986 andan agreement was registered. The agreement stipulated a period of 30months for the completion of the work;

(ii) By a letter dated 28.07.1986, the respondents informed theappellant that the execution of the work order shall be kept in abeyance.BThough no reason was indicated in the letter, the respondents took astand later that it was due to “administrative exigencies”;

(iii) After nearly 5 months, a letter dated 17.12.1986 was issueddirecting the appellant to commence work;

(iv) While the case of the appellant was that his obligation toCcommence 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 ofcommencement of the work should be taken only as 17.12.1986, whichwas the date on which the order for keeping the work-order in abeyancewas lifted; D

(v) Within a few days, the appellant notified the respondents, aboutthe non-availability of C-1 pipes and cement pipes of the diameteroriginally agreed. When the respondents wanted to replace the pipeswith pipes of different dimension, the appellant demanded a fresh rate tobe finalized, through a letter dated 20.02.1987. This fact is admitted inEparagraph 8 of the written statement;

(vi) Even before the issue raised in the letter dated 20.02.1987could be resolved, the respondents issued another letter dated 02.03.1987instructing the appellant to stop the pipeline work and start the work atPanchanadi. Though the respondents claimed in paragraph 9 of theirFwritten statement that the letter dated 02.03.1987 merely called uponthe appellant to concentrate on the construction of head-work, it isnevertheless admitted that the said letter contained the words, “pleasebe stopped”, in so far as the pipeline work is concerned;

(vii) According to the respondents, they issued a telegram dated02.04.1987 calling upon the appellant to start the work of laying theGpipelines;

(viii) By a letter dated 04.03.1987, the plaintiff was informed thatthe Scheme was undergoing modifications. While the appellant claimedthat the modification involved one head-work at Panchanadi and anotherhead-work at Karjai, the respondents claimed in paragraph 10 of theH

written statement, that the head- work at Karjai, was already included inthe original tender itself. However, the respondents admitted that therewas at least one modification, imposed by their letter dated 04.03.1987;

(ix) The fact that the appellant sent a representation dated04.11.1987 raising 2 issues namely [1] the issue of non-payment of billsdue to paucity of funds and [2] the issue of delay in sanction of themodified rate already proposed on 20.02.1987 for the work of layingpipes of different dimension, is admitted by the respondents in paragraph11 of the written statement, though they disputed the correctness of thecontents of the said letter. Interestingly, the averments of the appellantin paragraph 11 of the plaint about the reply dated 02.12.1987 in responseto the appellant’s representation dated 04.11.1987, was not at all dealtwith by the respondents in paragraph 11 of their written statement;

(x) It was at this juncture, that Respondent No.3 issued a letterdated 22.02.1988, imposing a fine of Rs.10/- per day w.e.f. the date ofthe said letter. By this letter the appellant was also called upon to startthe work by 01.03.1988;

(xi) Despite the appellant’s objections, another letter dated22.03.1988 was issued, reiterating the proposal for imposing a fine andcalling upon the appellant to start work;

(xii) In fact, in the letter dated 22.03.1988, the respondents admittedfor the first time that the subject work was split into two parts and thatthe 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 onthe revised rates on account of the modifications and the non-paymentof bills;

(xiv) While according to the appellant the execution of the workunder the contract was to commence on 03.07.1986 with a liability tocomplete it by 03.01.1989, the contention of the respondents was thatthe execution of the work was to commence only in December, 1986and that therefore the liability to complete the work expired only in June,1989;

(xv) However, admittedly, the respondents increased the fineamount from Rs.10/- per day to Rs.25/- per day vide their letter dated19.04.1989. By another letter dated 06.10.1989, the respondents informed A

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Athe appellant that though the time for completion of the project expiredon 17.06.1989 and though the appellant did not ask for any extension, hewas being granted extension up to 31.12.1989.

16. The entire sequence of events narrated in the precedingparagraph would show that the appellant was not guilty of anythingBincluding abandonment. Admittedly, Clause 3(a) of the contract enabledthe respondents to rescind the contract, forfeit the security deposit andentrust the work to another contractor at the risk and costs of theappellant. This clause was never invoked by the respondents. Therefore,we are surprised, especially in the light of the communications fromFebruary, 1988 up to October, 1989 as to how the High Court could haveCfound the appellant guilty of abandonment.

17. In fact, Section 67 of the Indian Contract Act, 1872 makes itclear that if any promisee neglects or refuses to afford the promisorreasonable facilities for the performance of his promise, the promisor isexcused by such neglect or refusal. Section 67 together with the illustrationDcontained there under reads as follows:- “67. Effect of neglect of promisee to afford promisorreasonable facilities for performance.—If any promiseeneglects or refuses to afford the promisor reasonable facilities forthe performance of his promise, the promisor is excused by suchEneglect or refusal as to any non-performance 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 hisFhouse requires repair.

A is excused for the non-performance of the contract, if it is causedby such neglect or refusal.”

18. In the case on hand, the respondents issued the work order on03.07.1986 but directed the work order to be kept in abeyance by aGsubsequent letter dated 28.07.1986. After this stalemate was lifted by aletter dated 17.12.1986, two things happened namely, (i) a change in thediameter of the pipes supplied by the respondents for carrying out thecontract; and (ii) request for the performance of additional work withoutfinalization of the modified rates. Therefore, the respondents cannot evenHaccuse the appellant of non-performance of the contract.

19. It is fundamental to the Law of Contract that whenever amaterial alteration takes place in the terms of the original contract, onaccount of any act of omission or commission on the part of one of theparties to the contract, it is open to the other party not to perform theoriginal contract. This will not amount to abandonment. Moreover,abandonment is normally understood, in the context of a right and not inthe context of a liability or obligation. A party to a contract may abandonhis rights under the contract leading to a plea of waiver by the otherparty, but there is no question of abandoning an obligation. In this case,the appellant refused to perform his obligations under the work-order,for reasons stated by him. This refusal to perform the obligations, canperhaps 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) consequentlyto invoke the right to rescind the contract under clause 3(a). Therespondents, if they were justified in doing so, could have taken recourseto the remedy available under Section 75 of the Contract Act and soughtcompensation for the damage sustained through the non-fulfillment ofthe 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 ofcontract, was on the basis that after the second bill was cleared in May,1987, the work under the main contract did not progress. This findinggoes completely contrary to yet another finding that the period of thecontract was up to June, 1989 and that the respondents themselves grantedextension of time to complete the contract up to 31.12.1989, despitethere being no request from the appellant. We fail to understand as tohow a person who abandoned the contract in May, 1987 could be grantedextension of time up to December, 1989 on the very understanding ofthe respondents that the contract was up to June, 1989. In fact, the HighCourt recorded a finding in paragraph 9 of the impugned judgment thataccording to DWs 3, 4 and 5, the power to rescind under clause 3(a) ofthe tender was invoked and the security deposit forfeited. This was nothow the respondents pitched their claim even in the written statement.In any case such a finding cannot co-exist with the specific stand of therespondents that the period of contract was extended up to December,1989.

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A22. The refusal of a contractor to continue to execute the work,unless the reciprocal promises are performed by the other party, cannotbe termed as abandonment of contract. A refusal by one party to acontract, may entitle the other party either to sue for breach or to rescindthe contract and sue on a quantum meruit for the work already done.Paragraph 694 of Volume 9, Fourth Edition of Halsbury’s Laws ofBEngland, may be usefully extracted to highlight the remedies availableto a party to the contract, if the other party absolutely refuses to performhis part of the contract.

“694. Work done under a contract terminated for breach.Where one party has absolutely refused to perform, or has renderedChimself incapable of performing, his part of the contract, he putsin the power of the other party either to sue for a breach of it, orto rescind the contract and sue on a quantum meruit for the workactually done. Thus, where a publisher engaged an author to writea work but abandoned the project, the author was entitled toDrecover reasonable remuneration without tendering the completedwork; and where a defendant wrongfully revoked the plaintiff’sauthority to sell his land after the latter had found a purchaser, theplaintiff recovered reasonable remuneration for his work and labourup to that date.

EThis type of quantum meruit claim is analogous to claimsfor the repayment of money on total failure of consideration. Inboth cases, the contract must be at an end before the claim canbe brought; but once the contract is at an end there is a logicaldifficulty in saying that the claim is contractual.”FThe respondents did not choose the option of rescinding the contractand suing for damages in terms of clause 3 (a) and (b). It was therespondents who made it difficult for the appellant to execute the contractas per the terms originally agreed.

23. In the light of the above, we are of the view that the HighGCourt was clearly in error in overturning the judgment of the Trial Courtwith regard to the aforesaid 3 heads of claims, on a wrong understandingthat there was abandonment of contract on the part of the appellant.Hence this appeal is allowed. The impugned judgment and decree of theHigh Court are set aside and the judgment and decree of the Trial Courtare restored. It appears that during the pendency of the first appealH

before the High Court, the respondents deposited a sum of Rs.42,98,168/A- towards the amount decreed by the Trial Court. As seen from paragraph16 of the impugned judgment of the High Court, the amount depositedby the respondents before the High Court was withdrawn by the appellanton 13.01.1999 by furnishing a bank guarantee. Therefore, while modifyingthe decree, the High Court directed the appellant to return the balanceBamount, failing which the Trial Court was empowered to encash thebank guarantee for the remainder amount. In view of this, while orderingthe issue of notice in the special leave petition and granting interim stay,this Court directed the appellant to keep the bank guarantee alive. Nowthat we are allowing the appeal setting aside the judgment of the HighCourt and restoring the judgment of the Trial Court, the bank guaranteeCshall stand discharged.

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24. The appeal is allowed. There will be no order as to costs.

Devika Gujral

Appeal allowed.

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