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State of Punjab Vs. Hindustan Development Board Ltd. - Court Judgment

LegalCrystal Citation
CourtPunjab and Haryana High Court
Decided On
Case NumberFirst Appeal No. 119 of 1954 with cross objections
Reported inAIR1960P& H585
ActsIndian Contract Act - Sections 70 and 73; Code of Civil Procedure (CPC), 1908 - Sections 80 - Order 41, Rule 22
AppellantState of Punjab
RespondentHindustan Development Board Ltd.
Cases ReferredRhodes v. Rhodes
.....was done on 26-5-1948. the executive engineer recommended to the superintending engineer that the rates of the new work be enhanced from rs. it was also alleged that the executive engineer advised the plaintiff to carry on with the supply like a good contractor and that this would be in his own interest. he recommended that the rate should be enhanced to rs. but the company was advised 'to carry on with the supply like a good contractor. 70, it was held, that the plaintiff having lawfully supplied grain for the horses belonging to the secretary of state, not intending to do so gratuitously and the latter having enjoyed the benefit therefore, the former was entitled to compensation. and thirdly the party receiving them had enjoyed benefit thereof. ' (12) in a case like the present where..........with the company nor agreed upon by it. the difference in costs in the opinion of the executive engineer worked out approximately to re. 1/- per sq. ft. he recommended that the rate should be enhanced to rs. 2/10/- per square prompt action appears to have been taken by the superintending engineer on receiving this communication from his executive engineer. on 6-11-1948, nearly four months after the plaintiff had demanded a higher rate, a brief communication was received from the executive engineer, informing the plaintiff-company, that if it had any grievances regarding the rates, the company might, if it so desired, refer the case to the superintending engineer under clause 25-a of the contract for his arbitration. but the company was advised 'to carry on with the supply like.....

Tek Chand, J.

(1) This regular first appeal has been preferred by the State of Punjab and cross-objection have been filed by the respondent. This appeal arose out of a suit filed by the plaintiff for the recovery of Rs. 46,000/-. The plaintiff is a Company engaged in building work. By a notice dated 9-2-1948 the Superintending Engineer, Development Circle (North) Ambala invited tenders for supply of windows and C-windows (Clerestory Windows) for 500 houses at Jagadhri Township. A contractor Dewan Raj Paul Nanda submitted his tender which was accepted and work was allotted to him at the flat rate of Rs.1/12/- per square foot but later on he could not perform the contract which was cancelled by the Superintending Engineer and the Executive Engineer was directed to have the work carried out by negotiation through some other contractor.

The Executive Engineer negotiated with the plaintiff-company and it agreed to carry out the work at the same rate, that is at Rs. 1/12/- per square foot. It is the case of the plaintiff-company that it had undertaken to supply glazed windows in accordance with the plan and designs given to them by the Government. These windows were to be glazed but the costs of glass panes and fixing charges were to be borne by the Government. After the plaintiff had manufactured windows covering 2000 cft. In accordance with the original designs, the plan was revised and the plaintiff-company was required to manufacture and supply panelled windows, and panels were to be made by the plaintiff from other timber paid for them and with their labour. As a result of the revised plan higher costs were entailed as the work required more timber and labour.

The plaintiff-company on 5-5-1948 asked the Executive Engineer Incharge for enhancement of the flat rate from Rs. 1/12/- per sq. ft. to Rs. 2/12/- per sq. ft. The Executive Engineer Incharge required the plaintiff to supply detailed analysis in support of the plaintiff's demand for enhanced rate which was done on 26-5-1948. The Executive Engineer recommended to the Superintending Engineer that the rates of the new work be enhanced from Rs. 1/12/- to Rs. 2/10- per sq. ft. It was also alleged that the Executive Engineer advised the plaintiff to carry on with the supply like a good contractor and that this would be in his own interest.

The plaintiff consequently completed the supply as per new design but the Superintending Engineer did not agree to the enhanced rates and the matter had to be referred to arbitration. The arbitrator who was the Superintending Engineer himself, allowed only Rs. 6720/- to the plaintiff under the terms of the award dated 15-2-1950. Both the award and the reference was later on set aside by the Senior Sub-Judge on objections having been preferred by the plaintiff-company. The plaintiff after serving notice as required under S. 80 of the Civil Procedure Code has instituted the present suit for recovery of Rs. 46,000/-. This sum has been arrived at in the following manner as stated in the plaint.

'The windows which had been supplied by the plaintiff measured 52617.25 sq. ft. for which he had already been paid at the rate of Rs. 1/12/- per sq. ft. leaving a balance of Rs. 52,617/4/- at the rate of Re. 1/- per sq. ft. claimed in addition to the agreed rate. After deducting a sum of Rs. 6,720/- which had already been received by the plaintiff under terms of the award, the plaintiff was due Rs. 45,897/4/- as the balance of the principal and further a sum of Rs. 413/1/- as interest at 6 per cent per annum. Thus the total claim comes to Rs. 46,310/5/- but the plaintiff having given up his claim for Rs. 310/5/- has sued for the recovery of Rs. 46,000/- only.'

(2) The defendant denied the plaintiff's claim, and averred that after the plaintiff had supplied some windows the Superintending Engineer asked for the supply of panelled windows and on this the plaintiff requested to be paid Rs. 2/12/- instead of Rs. 1/12/- per sq. ft. Though the plaintiff did not at first agree to be paid at the rate of Rs. 1/12/- per square foot but loter on consented to receiving the remuneration at the old rate previously agreed upon, on 28-3-1949, executed and signed the agreement and, therefore, the plaintiff-company was bound by the terms, embodied therein. The plaintiff filed a replication reiterating what had been pleaded in the plaint. The pleadings between the parties gave rise to the following issues:

1. What was the rate at which the plaintiff agreed to work, after the change of design?

2. If no agreement is proved at what rate the plaintiff is entitled to claim for the work done?

3. To how much money is the plaintiff entitled for the work done?

4. Is the plaintiff entitled to any interest on the amount due and if so, how much and at what rate?

After the above issues had been framed on 6-7-1953 a further issue was framed on 22-1-1954.

5. What is the effect of the findings of the Senior Sub Judge in his order dated 17-4-1952 on this suit?

No finding was given by the trial Court on the last issue and no arguments have been addressed to us on this issue in appeal. This issue seems to be redundant and does not require any further reference. On the first issue, the trial Court held that there was no agreement between the parties as to the rates at which the plaintiff was to be paid for the revised work. On the second issue it was held that both the plaintiff and the defendant had been guilty of over and under estimation respectively and the trial Court considered that a flat rate of Rs. 2/3/- per sq. ft. would be a reasonable rate for all the work. At this rate the plaintiff's claim came to Rs. 23,019/13/- and as the plaintiff had already received under the award a sum of Rs. 6,720/-, a decree for Rs. 16, 299/13/- with proportionate costs was awarded in favour of the plaintiff and against the defendant.

(3) Under issue No. 1 the learned Advocate-General has argued that the rate of Rs. 1/12/- per sq. ft. was the agreed rate not only for glazed windows, which the plaintiff was required to make at first, but also for the panelled windows which the Company was subsequently required to make. The oral and the documentary evidence to which our attention has been drawn by the Advocate-General and which will presently be referred to does not bear out the appellant's contention.

(4) On 29-3-1948 the plaintiff addressed a communication to the Superintending Engineer agreeing to supply windows and C-windows required for 500 houses at Jagadhri at the rate of Rs. 1/12/- per sq. ft. on the terms and conditions mentioned in the tender notice dated 9-2-1948 vide, Exhibit D.1. On 30-3-1948 the Executive Engineer sent a letter to the Company, replying that the Company's offer was accepted vide Exhibit D.2. On 3-5-1948 the Superintending Engineer gave his approval to the allotment of the work by the Executive Engineer to the plaintiff-Company at the rate of Rs. 1/12/- per sq. ft.

The above three communications do not mention any specification of the windows, but it has not been denied by the Advocate General that plans of the windows had been supplied to the plaintiff. Exhibit D. 3 is a copy of memorandum from the Chief Engineer addressed to the Superintending Engineer dated 20-4-1948 mentioning that 12 copies of the final design were being sent and that all plans previously supplied in this connection should be withdrawn and returned to his office with a view to ensure that there should be no mistake.

Two copies of the ferros (Sic) were sent to the contractors and another to the Sub Divisional Officer at Jagadhri, when the designs were changed. On 5-5-1948 the plaintiff-company addressed a letter to the Executive Engineer (Exhibit P. 3) stating that in accordance with the order they started construction of windows according to the altered design, which was for panelled shutters whereas the previous design was for glazed shutters. The Company requested that the rate of wood work allotted to them should be increased from Rs. 1/12/- per sq. ft. to Rs. 2/12/- per sq. ft. The Executive Engineer asked the plaintiff-company to submit details of the comparative costs between the old and new designs of wood work, which were furnished, vide Exhibit P. 5 dated 26-5-1948.

On receiving these details the Executive Engineer addressed a communication, Exhibit P. 24 dated 30-5-1948 to the Superintending Engineer, stating that in view of the change in the design of windows and C-windows from glazed to panelled, the plaintiff was being asked to do something which had neither been negotiated with the company nor agreed upon by it. The difference in costs in the opinion of the Executive Engineer worked out approximately to Re. 1/- per sq. ft. He recommended that the rate should be enhanced to Rs. 2/10/- per square foot.

No prompt action appears to have been taken by the Superintending Engineer on receiving this communication from his Executive Engineer. On 6-11-1948, nearly four months after the plaintiff had demanded a higher rate, a brief communication was received from the Executive Engineer, informing the plaintiff-company, that if it had any grievances regarding the rates, the Company might, if it so desired, refer the case to the Superintending Engineer under Clause 25-A of the contract for his arbitration. But the Company was advised 'to carry on with the supply like a good contractor. This would be in your interest'. This communication was tantamount to refusal on the part of the Superintending Engineer to accede to the plaintiff's demand for enhancement of rates.

(5) On 28-3-1949 a draft agreement, Exhibit P. 7 was prepared. It was signed on behalf of the plaintiff by Dharam Singh, but not by the Superintending Engineer. The principal reason appears to be that the Superintending Engineer objected to the following remarks given to the contractor over his signatures;

'As per plan shown to us while negotiating and which has been verified by us.'

The Superintending Engineer in his letter dated 28-5-1949, Exhibit P. 36, addressed to the Executive Engineer, thought that the above remarks were objectionable and the contractor could not make such an addition without first obtaining the approval of his office. The attention of the Executive Engineer was also drawn to certain other items which required correction, but no reference to them is material for purposes of deciding the present controversy. The draft agreement was consequently returned.

It may be mentioned at this stage that the work which had been entrusted to the plaintiff-company was being continued and the new design windows as they are manufactured were being accepted by the defendant. On 21-12-1949 the Government forfeited the plaintiff's security under the orders of the Superintending Engineer. On 15-4-1950, the matter was referred to arbitration. The Superintending Engineer himself being the arbitrator awarded a sum of Rs. 6,720/- to the plaintiff. This award was set aside by the Senior Sub Judge, Ambala, at the instance of the plaintiff and the reference was superseded. This led to the present suit having been filed.

(6) The parties have also led some oral evidence. Neither the documentary evidence referred to above nor any oral evidence shows that the plaintiff had agreed to work after the change of the design at the rate of Rs. 1/12/- per sq. ft., which had been originally agreed upon the glazed windows. The argument of the learned Advocate General that the rate of Rs. 1/12/- per sq. ft. should be deemed to be the rate also for panelled window or as a matter of that, for any type of window simply because, there was no mention in the correspondence of any specific window, is erroneous.

In this case when the contractors started work of the windows, designs of glazed windows were given, vide Exhibit P. 1. When the plaintiff was required to make panelled windows, then new designs of panelled type of windows were given vide Exhibit P. 2. It is the case of both parties that the plaintiff-company was originally required to make glazed windows, and it was later on, when the design was changed, and the plaintiff was asked to make panelled windows instead. When settling the rate of glazed windows it was not within the contemplation of the defendant that panelled windows would have to be made and, therefore, it cannot be said that the rate of Rs. 1/12/- per sq. ft. should also govern panelled windows.

It is of the essence of a contract that there should be an aggregatio mentium, the meeting of the minds of the contracting parties. In this case there was no consensus ad idem as to the making charges of windows of altered design. Rates for new type of windows were not settled and there was neither any offer by the one nor acceptance by the other. No sooner the design was revised, the plaintiff demanded enhanced rates to which the Government never agreed. I, therefore, concur with the conclusion of the trial Court on the first issue.

(7) This takes me to the second issue which relates to the determination of the rate at which the plaintiff is entitled to be paid for the work done by him and accepted by the defendants. The plaintiff has placed reliance upon the provisions of S. 70 of the Indian Contract Act, which is reproduced below:

'70. Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of or to restore, the thing so done or delivered.'

Below the section following illustration is given in the Indian Contract by F. Pollock and D. F. Mulla (8th Edition):

(A furnishes supplies for Government service to the order of an officer who has not authority for the purpose. The supplies are in fact accepted and used. A can recover the value from the Secretary of State according to the market rate.')

This illustration is based upon a decision of Bench of Lahore High Court in Secy. of State v. G. T. Sarin and Co., ILR 11 Lah 375: (AIR 1930 Lah 364). In that case the plaintiff had entered into a contract for the supply of horses' food with the Officer Commanding the Depot of a Cavalry Regiment, but he was not one of the officers authorised by the Governor-General in Council to enter into contracts on behalf of the Secretary of State. The contract sued upon was ultra vires and therefore could not be enforced against the Secretary of State, but in view of the provisions of S. 70, it was held, that the plaintiff having lawfully supplied grain for the horses belonging to the Secretary of State, not intending to do so gratuitously and the latter having enjoyed the benefit therefore, the former was entitled to compensation.

The provisions of S. 70 are based on the doctrine of quantum meruit of English Common law but the rule as embodied in the Indian Contract Act admits of liberal interpretation. When a rule of English law receives a statutory recognition by Indian Legislature it is the language of the Act which determines the scope, uninfluenced by the manner in which the analogous provision is construed in English law.

The language of the provisions of Indian Contract Act cannot be enlarged, or construed narrowly, or, otherwise modified, in order to bring the construction in accord with the scope and limitation of the rule governing the English doctrine vide ILR 11 Lah 375: (AIR 1930 Lah 364) Chhunna Mal Ram Nath v. Mool Chand Ram Bhagat, ILR 9 Lah 510 at p. 518: (AIR 1928 PC 99 at p. 102) Ramandandi Kuer v. Kalawati Kuer, ILR 7 Pat 221 at p. 227: (AIR 1928 PC 2 at p. 4) Damodara Mudaliar v. Secy. of State ILR 18 Mad 88 and Ram Nagina Singh v. Governor-General in Council, AIR 1952 Cal 306. It was held in the Lahore case that the amount of compensation payable to the plaintiff under S.70 must be assessed at the market rate prevailing on the date on which the supplies were made.

(8) In B. N. Rly. Co. Ltd., v. Ruttanji Ramji AIR 1938 PC 67 the parties had by agreement be done by the contractor, but had not agreed upon the new rates. The work was done by the contractor for the Railway and the Railway had accepted that work. It was held by the Privy Council that the amount, which the contractor was entitled to recover from the Railway, should be determined on the basis of fair and reasonable rates.

(9) Before the provisions of S. 70 can be successfully invoked, the plaintiff has to show firstly that the delivery of the articles in question has been lawfully made; secondly, the person delivering the goods was not intending to do so gratuitously; and thirdly the party receiving them had enjoyed benefit thereof. All these elements co-exist in this case. The principle has been explained by Denning L. J. in Davis Contractors v. Fareham, (1955) 1 Q. B. 302 (307):

'If in the course of carrying out a contract, a fundamentally different situation--different, that is, from anything which the parties had in contemplation--is brought about by the conduct of one of them, then, seven though his conduct may not be a breach of contract, he will not be allowed to take advantage of new situation to the detriment of the other party when it would be unjust to allow him to do so.'

(10) In Steven v. Bromley and Son, (1919) 2 K. B. 722, the chatterers of a ship had agreed to load her with a full cargo of steel billets at a specified rate of freight. A cargo was loaded, consisting in part of general merchandise, the current rate of freight for which was higher than the specified rate. The shipowners claimed payment for the excess at the current rate outside the charter party. It was held that there was implied an offer by the chatterers, to load general merchandise, at the current rate of freight and there was an acceptance by the shipowners of that offer; and, therefore, the shipowners were entitled to freight at the current rate in respect of the general merchandise loaded Atkin L. J. illustrated this principle in these words:

'If I order from a wine merchant twelve bottles of whisky at so much a bottle and he send me ten bottles of whisky and two of brandy and I accept them, I must pay a reasonable price for the brandy. That is the position here.'

(11) Story in his Treatise on the Law of Contracts, Vol. I, page 11, para 18 has illustrated the doctrine of quantum meruit in the following words:

'Yet if the special contract be wholly abandoned, or its terms be varied by the mutual consent of the parties, the law implies a new promise. Thus if work additional to that contemplated in the original contract be done at the request of the party benefited by it, he will be liable therefor, upon and implied promise to pay for it. So, also, where either party to an express contract is injured, or the labor or expense sustained by him in doing the work is enhanced by the neglect or omission of he other, an implied promise of indemnity therefor will arise, additional to the express agreement. So, also, if entire performance, according to the express agreement, be rendered impossible through the fault of either party, the party in fault will be liable on a quantum meruit, or other action on the case, the compensation being graduated as far as possible by the terms of the express contract.'

(12) In a case like the present where the defendant received goods from the plaintiff, the later is entitled to judgment for the reasonable value of the goods at the time when they were received by the defendant. A person, who does work or supplies goods under a contract, express or implied, if no price is fixed, is entitled to be paid a reasonable sum of his labor and the materials supplied. If the work is outside the contract, the terms of the contract can have no application; and the contractor, in the absence of any new agreement is entitled to be paid a reasonable price for such work as was done by him. Of course, it is necessary in all such cases, that the extra work outside the contract has been ordered or accepted by the defendant.

In this case, however, the subsequent requirement of the defendant, to supply panelled windows, instead of glazed windows, was in the nature of a novation; and the defendant was bound in law to compensate the plaintiff for the panelled windows, the obligation to supply which was do hors the original undertaking. In such a case, the plaintiff can claim a fair and reasonable price for the work done, or the goods supplied on the basis of quantum meruit that is, so much as is deserved or merited. Here the original contract had been superseded by a new undertaking; and the new work was not complementary to the work originally contemplated, but outside its scope. The defendant cannot avoid payment of the extra cost involved in the new type of the work which was required to be done. In this connection the oft-quoted dictum of Lord Cairns in Thorn v. Mayor and Commonalty of London L. R. (1876) 1 A. C. 120 (127) may be reproduced with advantage:

'If it is the kind of additional or varied work contemplated by the contract he must be paid for it, and will be paid for it according to the prices regulated by the contract. If, on the other hand, it was additional or varied work, so peculiar, so unexpected, and so different from what any person reckoned or calculated upon, that it is not within the contract at all; the, it appears to me, one of two courses might have been open to him, he might have said: 'I entirely refuse to go on with the contract, non haec in foedera veni: I never intended to construct this work upon this new and unexpected footing, or, he might have said, I will go on with this, but this is not the kind of extra work contemplated by the contract and if I do it, I must be paid a quantum meruit for it.'

(13) There is a traditional division between contracts which are express and those which are implied. The contracts, the terms of which, are stated by the parties, fall in the first category. When the terms are not so stated contracts are said to be implied. Both types of these contracts assume mutual assent of the contracting parties. Though the mutual agreement and understanding between the parties in an implied contract is not expressed in words, there is nevertheless a consensus, regarding its terms and conditions. In order to avoid confusing implied contracts, with quasi-contracts, the former are more specifically called 'implied contracts in fact', and the latter 'implied contracts in law'.

The conduct of the parties may be viewed as professing their mutual assent. An inference in favour of an 'implied contract in fact', is raised when intendment of the parties can fairly be inferred from their unspoken conduct or from the pertinent circumstances. Quasi-contracts are not strictly speaking, contracts at all, because there is no meeting of the minds aggregatio mentium. In the absence of the any mutual consent or intendment the relationship cannot be styled as contractual despite certain obligations of a contractual character imposed by law.

Quasi-contracts or constructive contracts, as they are sometimes called, are contracts implied in law, but not in fact. They are contracts only in the sense that redress is given by contractual remedies. The promise is purely fictitious and has no existence in reality. The liability is imposed by law and is independent of any mutual accord of the parties. In the case of a quasi-contract intention of the parties is not of the essence of the transaction. In the case of actual contracts it can be said that the contract defines the duty, while in the case of quasi-contracts, the duty defines the contract. In the case of a quasi-contract the agreement is a mere fiction imposed, in order to adapt cases to given remedy.

In the case of an implied contract the implication is of the fat based upon the parties' intention. In the case of a quasi-contract, the Courts do not take notice of parties' intention, sometimes they act even in disregard of their known intention. In such cases the liability exists, independent of the agreement, and rests upon the equitable doctrine of unjust enrichment. Quasi-contract gives rise to a situation where an obligation or duty is cast upon the parties by law, but not by the terms of the contract to which they had given their assent.

If services are rendered which are neither gratuitous nor forbidden by law, the party at fault will be required by law to disgorge the benefit. In the case of quasi-contracts law imposes an obligation in utter disregard of the parties' intention. Such a relationship does not appeal upon a promise or privity. The obligation stems, not from parties' consent, express or ascertainable, but rests upon the immutable law of natural justice and equity.

(14) It may very often happen that one party is incapable of giving consent due to immaturity of mind or because of infancy or lunacy. Whenever necessaries are supplied to a person, suffering from such a disability, the law implies an obligation on his part to pay for it. In a case where the claim arose for the price of necessaries supplied to a lady of unsound mind, Cotton L. J., in Rhodes v. Rhodes, (1890) 44 Ch D 94 at p. 105 said:

'Now the term 'implied contract' is a most unfortunate expression, because there cannot be a contract by a lunatic. But whenever necessaries are supplied to a person who by reason of disability cannot himself contract, the law implies an obligation on the part of such person to pay for such necessaries out of his own property. It is asked, can there be an implied contract by a person who cannot himself contract in express terms? The answer is, that what the law implies on the part of such a person is an obligation, which has been improperly termed a contract, to repay money spent in supplying necessaries. I think that the expression 'implied contract' is erroneous and very unfortunate.'

(15) Section 73 of the Indian Contract Act contemplates a remedy, where there has been a breach of contract; and S. 70, imposes a similar obligation on a party resting, on a basis, which is equitable rather than contractual. In either case the plaintiff is entitled to be compensated, the measure being a just and reasonable remuneration for the labour expended, work done or the goods supplied.

(16) (Portion merely relating to assessment of the amount of compensation and not involving any question of law, omitted).

At this rate the plaintiff is entitled to be paid a sum of Rs. 11,509/14/6 in all. Allowing a deduction of Rs. 6,720/- already received by the plaintiff under the award the balance comes to Rs. 4,789-14-6 for which amount the plaintiff's suit is decreed with proportionate costs. The appeal of the Punjab State is allowed to the extent that the decretal amount payable to the plaintiff is reduced from Rs. 16,299/13/- to Rs. 4,789-14-6.

(17) On behalf of the plaintiff cross-objection under Order 41, r. 22 had been filed claiming that his rate should be increased from Rs. 2-3-0 to Rs. 2-12-0 per sq. ft. These cross-objections fail and are dismissed.

Shamsher Bahadur, J.

(18) I agree.

(19) Decree modified.

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