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Atma Das Vs. Suriya Prasad - Court Judgment

LegalCrystal Citation
SubjectContract
CourtSupreme Court of India
Decided On
Case NumberCivil Appeal No. 1706 of 1967
Judge
Reported in(1969)3SCC616
ActsRepresentation of People Act, 1951 (43 of 1951) - Section 9-A
AppellantAtma Das
RespondentSuriya Prasad
DispositionAppeal Allowed
Excerpt:
.....as a building contractor and had in 1954 entered into a contract for the execution of works undertaken by the government of india.  under the terms of the contract the appellant had undertaken to raise the height of the burj to 46 feet. by letter, dated july 23, 1958 exh. 8. by letter, dated august 13, 1958, exh. the letters do not evidence a subsisting contract; they emphasise that the contract was treated as determined. - the court held that failure to settle the claims of the parties does not mean that the original contract continues to subsist and even inaction on the part of the government and the appellant is evidence of the abandonment of the contractual relation......been carried out by the contractor under the terms of his contract;….(c) to measure up the work of the contractor, and to take such part thereof as shall be unexecuted out of his hands and to give it to another contractor to complete, in which case any expenses which may be incurred in excess of the sum which would have been paid to the original contractor, if the whole work had been executed by him … shall be borne and paid by the original contractor and may be deducted from any money due to him by government under the contract or otherwise, or from his security deposit or otherwise, or from his security deposit or the proceeds of sale thereof, or a sufficient part thereof.”the three conditions mentioned in clause 3 of the contract merely indicate the action which.....
Judgment:

J.C. SHAH, J.

1. By order, dated March 20, 1968, we called for findings from the High Court of Madhya Pradesh on the following three issues:

“(1) Whether the work undertaken by the appellant under the contract, dated February 25, 1954, had been completed before January 19, 1967, departmentally or through other contractors?

(2) If the work was not completed on January 19, 1967, has the project in respect of the incomplete work been abandoned?

(3) If the project was not abandoned, was it intended to get the same completed through the appellant under the terms of the contract, dated February 25, 1954?”

The parties were given liberty to lead evidence on those issues. Accordingly the parties led oral evidence and produced a mass of documentary evidence.

2. The learned Judge found the first issue against the appellant; on the second issue he held that the project was abandoned; and recorded on finding on the third issue.

3. The contest between the parties now centres round the second issue. Counsel for the respondent contended that the evidence led before the High Court cannot be considered because there was no clear plea raised in the reply to the election petition about abandonment or renunciation of the contract between the Government and the appellant, and that in any even the evidence does not justify a finding in favour of the appellant on that issue. In the judgment under appeal the High Court had observed that “the case in which neither party has insisted on the performance of the contract for an inordinate length of time and in such cases it may be said that the parties have mutually abandoned the contract. In such a case, the contract may be treated as terminated or discharged by abandonment but a party relying on abandonment must expressly plead and give its particulars”, and since the appellant “did not canvass in this case that there was mutual abandonment of the contract in question by the parties,” the contention could not be accepted. But a person is disqualified from offering himself as a candidate at an election if at the date of the nomination there subsists a contract entered into by him in the course of his business with the appropriate Government for the supply of goods or for the execution of any work undertaken by that Government within the meaning of Section 9-A of the Representation of the People Act, 1951. The appellant was carrying on business as a building contractor and had in 1954 entered into a contract for the execution of works undertaken by the Government of India. To make out a case of disqualification it had to be established that the contract subsisted on January 19, 1967, when the nomination was filed by the appellant. The burden of proving that issue lay upon the respondent. By merely proving that the candidates had at some time in the past entered into a contract to execute works, the burden was not discharged; it had further to be established that the contract was subsisting at the crucial date. In making that enquiry it was necessary to decide whether the contract was completed, or, if not completed, it was renounced. Whether there was a subsisting contract being the issue to be decided, the trial necessarily included an inquiry, even in the absence of an express plea, whether the contract was completed or determined at the crucial date. This Court has after hearing the parties called for a finding on the question whether there subsisted a contract on January 19, 1967, between the appellant and the Government of India and for that purpose to determine whether the contract of the year 1954 was renounced or abandoned. The parties have led evidence and the issue whether there existed a contract on the crucial date which disqualified the appellant must be decided.

4. Under the terms of the contract the appellant had undertaken to raise the height of the Burj to 46 feet. It is common ground that he did not raise the height of the Burj above 35 feet. The authorities were dissatisfied with the work done by him till the end of March 1956. Work was inspected by the Archaeological Engineer in 1957 and was found to be “defective, unsatisfactory and incomplete”. The Archaeological Engineer made adverse remarks against the appellant and further work was discontinued. The Director General visited the site in July 1958 and found the work incomplete, unsatisfactory and defective. He remarked that the contractor may “be categorically told that he is not to proceed with the work”, and that “the remaining work which may include the heightening of the Burj by not more than two feet, filling up its interior and rendering its top water-tight may be done by departmental labour”. Accordingly the appellant was informed by letter, dated August 13, 1958, that he was “not to proceed with the work any more”. The appellant was clearly informed that he was not to raise the height of the Burj up to 46 feet as originally agreed: he was only asked to rectify the defects in the construction work executed by him. This was unmistakable evidence of determination of the contract.

5. But counsel for the respondent relying upon certain documents contended that the intimation by letter, dated August 13, 1958, was according to the terms of the contract and the subsequent conduct of the parties established that the appellant did not treat the letter as deteriminative of the contract, and offered to complete the contract. Counsel for the respondent submitted that the appellant having declined to accept the termination of the contract, subsequent inaction on the part of the appellant did not have the effect of either determining the contract or renunciation or abandonment of the contract.

6. Counsel relied upon the terms of the contract in support of the plea that there was no rescission on the part of the Government or any intention to abandon the contract. He relied upon the terms of clause 3 of the contract between the appellant and the Government that:

“In any case in which under any clause or clauses of this contract the contractor shall have rendered himself liable to pay compensation amounting to the whole of his security deposit whether paid in one sum or deducted by instalments or committed a breach of any of the terms contained in clause 19-B, the Divisional Officer, on behalf of the Governor-General of India, shall have power to adopt any of the following courses, as he may deems best suited to the interests of Government:

(a) To rescind the contract (of which rescission notice in writing to the contractor under the hand of the Divisional Officer shall be conclusive evidence), and in which case the security deposit of the contractor shall stand forfeited, and be absolutely at the disposal of Government.

(b) To employ labour paid by the Public Works Department and to supply materials to carry out the work, or any part of the work, debiting the contractor with the cost of the labour and price of the materials (of the amount of which cost and price a certificate of the Divisional Officer shall be final and conclusive against the contractor) and crediting him with the value of the work done, in all respects in the same manner and at the same rates as if it had been carried out by the contractor under the terms of his contract;….

(c) To measure up the work of the contractor, and to take such part thereof as shall be unexecuted out of his hands and to give it to another contractor to complete, in which case any expenses which may be incurred in excess of the sum which would have been paid to the original contractor, if the whole work had been executed by him … shall be borne and paid by the original contractor and may be deducted from any money due to him by Government under the contract or otherwise, or from his security deposit or otherwise, or from his security deposit or the proceeds of sale thereof, or a sufficient part thereof.”

The three conditions mentioned in clause 3 of the contract merely indicate the action which the Government may take if the contractor commits default. If the conditions of the contract are not fulfilled it is open to the Government to rescind the contract and to forfeit the deposit, or to allow the contract to remain outstanding and to complete the work departmentally as if the contract remains outstanding and charge the contractor with all the expenditure incurred or completing the worker to rescind the contract and to appoint another contractor to complete the unexecuted work.

7. The sequence of events may be examined to determine, whether after the intimation, dated August 13, 1958 the contract remained outstanding. By letter, dated July 23, 1958 Exh. D-1, the Director General of Archaeology wrote to the Superintendent, Department of Archaeology, Bhopal, that a joint inspection of the work done by the appellant at the site had led him to believe that certain course of action should be taken in the matter and he suggested that: (1) the contractor may be informed that he was liable to pay certain sums of money; (2) that the contractor should be informed that he was not to proceed with the work and (3) that the remaining work, which may include the heightening of the Burj by not more than 2 feet, filling up its interior and rendering its top water-tight, may be done by departmental labour. The Archaeological Department clearly abandoned the project of increasing the height of the Burj up to 46 feet as originally intended; it was satisfied with raising the height of the Burj up to 35 feet only. The Director General of Archaeology intimated that the Government did not intend to remain bound by the terms of the contract and he was terminating the contract.

8. By letter, dated August 13, 1958, Exh. D-11, the Superintendent, Department of Archaeology, wrote to the appellant that he was liable to pay for cement and stone supplied and unless the tools supplied to him were returned to pay the cost of the tools also. The appellant was called upon to deposit the amount demanded and the letter proceeded to state:

“Further more, you are hereby informed that you have not to proceed with the work any more.”

By letter, dated June 27, 1958, the Superintendent, Department of Archaeology, addressed a memorandum to the appellant in continuation of the letter, dated August 13, 1958, reiterating that the cost of cement and stones may be reimbursed, and the tools may be returned. The appellant was informed that he “will be paid for the cost of RCC work done by him”, but that he was bound to rectify the defects in the work executed by him, as pointed out at the site.

9. By letter, dated July 19, 1959, the appellant wrote to the Superintendent, Department of Archaeology, that he was willing to carry out the orders regarding the repairs to the Burj, and that arrangements may be made to send the “work in-charge” at the site so that the work may be done according to his instructions. He also stated that he had never refused to comply with the orders. By letter, dated September 27, 1959, the appellant again reiterated his desire to rectify the defects pointed out to him.

10. It appears, however, that nothing concrete was done, and on April 12, 1961, the appellant's lawyer addressed a letter to the Director General, Department of Archaeology, asserting that the appellant had completed his “part of the work almost entirely” and that he was shown certain defects which he had also removed, but when the appellant demanded payment for the work done the Department asked him to do certain other things which were not to be done by him. He denied that the work done by him was defective. He also stated that if the defects were not intimated to him in writing and their photographs were not supplied within a month from the receipt of the letter, it will be presumed that there were no defects in the work done and that he will be entitled to receive the full amount for the work done.

11. This correspondence clearly evidences an intention to treat the original contract as determined. The appellant was told that the amount payable to him if he returned the building materials and the tools supplied to him, and rectified the defects pointed. The letters do not evidence a subsisting contract; they emphasise that the contract was treated as determined.

12. After April 12, 1961, there is on the record no correspondence between the appellant and the Government. The Government had claimed damages against the appellant for defective work executed by him and for return of certain materials supplied and the value of the tools and had called upon the appellant to carry out the repairs. The appellant's claim was that he was entitled to payment for the work done by him, and that he had carried out the repairs. The security deposit had not been returned to the appellant, nor has he been paid the amount claimed by him. The amount alleged to be due by the appellant on account of defective workmanship and for the value of the materials supplied to him has also not been demanded by the Government. Failure to settle the respective claims does not evidence an intention to keep the original contract as subsisting. For more than 5 years 8 months the appellant and the Government of India have not taken steps for settlement of their respective claims The alience was evidence of acquiescence in the abandonment of the contract, and not of a subsisting contract. Even if the demand that the defects pointed out in the work executed by the appellant be repaired and the offer made by the appellant to carry out the repairs establish a contractual relation, inaction for nearly six years on the part of the Government and the appellant is evidence of abandonment of the contractual relation.

13. The learned Trial Judge observed in his report in para 33 that:

“No paper whatsoever, either from Bhopal Office or Delhi Office has been produced on record by the parties to this litigation showing that the Government expressly abandoned this part of the work at any time after the lawyer's notice, dated April 12, 1961 till Shri Atma Das filed his nomination paper on January 19, 1967. So there was no express abandonment on the part of the Government as far as this part of the incomplete work is concerned. But the position seems to have been altered because of the attendent circumstances, conduct of the parties and inordinate delay during which neither party insisted on the performance of this part of the incomplete work.”

The learned Judge concluded:

“Accordingly where, as here, neither party has insisted on the performance of this part of the work, namely, the rectification of the defects for more than 5¼ years which is undoubtedly an inordinate length of time, it is reasonable to infer that the parties i.e. the Government and Shri Atma Das have mutually abandoned its performance before Shri Atma Das filed his nomination paper.”

The two letters, dated July 23, 1958 and August 13, 1958, clearly evince an intention on the part of the Government to determine the contract, and the demand for rectification of the defects did not evidence an intention either to keep the original contract outstanding or to enter into a fresh contract for carrying out the repairs in the work already executed. Even if insistence upon rectification of the defects be treated as an offer, and the willingness of the appellant to carry out the repairs be treated as acceptance of the offer, studied inaction for nearly six years by the appellant as well as by the Government in our judgment leads to an inference of abandonment. We accordingly agree with the finding recorded by the High Court on the second issue.

14. The appeal is allowed and the order passed by the High Court set aside. The respondent will pay the costs in the trial court as well as this Court including costs of the hearing for recording findings on the issues.


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