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State of Rajasthan Vs. Satya Nand Sardana - Court Judgment

LegalCrystal Citation
SubjectContract
CourtRajasthan High Court
Decided On
Case NumberS.B. Civil Regular First Appeal No. 62 of 1963
Judge
Reported in1971WLN573
AppellantState of Rajasthan
RespondentSatya Nand Sardana
DispositionAppeal dismissed
Cases ReferredIn Joshua Henshaw and Son v. Rochdale Corporation
Excerpt:
.....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 installments the chief engineer or other duly authorised engineer on behalf of the rajasthan government shall have power to adopt any of the following courses, as may deem best suited to the interest of the government. , delay in progress and failure to complete to time. failure to complete to time is not, generally, to be regarded as a continuing breach. but even after that the contractor was allowed to continue the work till 30th june, 1958, and that clearly shows that the contractor was permitted to complete the work within reasonable time and the order rescinding the contract had become inoperative when the contractor was allowed..........respondent had been made. the only dispute between them is that the appellant did not refund the security deposit of rs. 0393/-3. the appellant refused to return the security deposit chiefly on the ground that the work was not completed even by 15th march, 1957, and thereafter the contract was rescinded on 9th may, 1958, as a result of which the amount of security deposit stood forfeited to the government. it was also the case of the appellant that even on 30th june. 1958, the work was not completely finished and about 267386 cubic feet of earth work had to be done.4. although the case has been tried on several issues framed by the lower court, the real issue between the parties is whether the contract was lawfully rescinded by the executive engineer on 9th may, 1958, according to.....
Judgment:

C.B. Bhargava, J.

1. This is a defendant's appeal against the judgment and decree of the Senior Civil Judge, Bundi, dated 28th November, 1962.

2. The respondent is a P.W.D. contractor who by virtue of an agreement between the parties was given a contract for the construction of an earthen dam at village Talvas. It was a lump-sum contract and the work was to commence from 30th October, 1954, and was to be completed within a period of eight months. For some unavoidable reasons, the work could not be completed within the agreed time and the respondent applied for extension of time to the Chief Engineer and the latter vide Ex. A-2 dated 27th October, 1956 allowed extension of time upto 15th March, 1957 Even upto this date the work was not completed and it appears from Ex.3 dated 17th April, 1957, that the Executive Engineer gave directions to the Overseer to see that the work was finished before the rains set in. However, the work remained in progress even after the rains and continued upto 30th June, 1958, without any objection at least upto 9th May, 1958, when the Executive Engineer Irrigation Kota Division Bundi vide Ex. A-3 rescinded the contract under Clause (3) of the agreement and further gave directions that the work may be finalised at the same stage as it was and the remaining work may be got complete early before rains either departmental or on works basis. This letter was communicated to the respondent and there is no dispute about it. It is, however, admitted on behalf of the appellant in para 7 of the written statement that on the request of the respondent he was allowed to restart the work which he continued upto 36th June, 1958, inspite of the recision of his contract on 2th May, 1958 According to the appellant even on the 30th June, 1958, the work was left incomplete inasmuch as 267386 cubic feet of earth work of inner and outer slopes and of the top of the bundh from chains 15 to 21 still remained to be done. The respondent, however, does not admit that any portion of the work was left unfinished on 30th June, 1958. On the other hand, it is alleged in paragraphs 7 and 8 of the plaint that the work was completed as desired by the defendant within a reasonable time, that is by 30th June, 1958, and the defendant took over the work, duly completed on 30th June, 1958, and also the final bill of the work was prepared on 27th July, 1959 by the defendant's Engineer Incharge of the work and duly signed by him. There is no dispute between the parties that payment of all the bills of the respondent had been made. The only dispute between them is that the appellant did not refund the security deposit of Rs. 0393/-

3. The appellant refused to return the security deposit chiefly on the ground that the work was not completed even by 15th March, 1957, and thereafter the contract was rescinded on 9th May, 1958, as a result of which the amount of security deposit stood forfeited to the Government. It was also the case of the appellant that even on 30th June. 1958, the work was not completely finished and about 267386 cubic feet of earth work had to be done.

4. Although the case has been tried on several issues framed by the lower court, the real issue between the parties is whether the contract was lawfully rescinded by the Executive Engineer on 9th May, 1958, according to Clause 3(a) of the conditions of contract If the Executive Engineer rightly rescinded the contract, then as a consequence the security deposit of the contractor stands forfeited and in that case the appellant was justified in not refunding the security deposit. If, on the other hand, the order of recision of the contract was not justified, then the appellant was bound to refereed the security deposit. Therefore the decision of the case turns upon the question whether the contract was rightly rescinded.

5. The contention of the learned Additional Government Advocate is that time for the completion of the contract was extended only upon to 15th March, 1957, and thereafter no application in writing was made to the Chief Engineer for extension of time as provided by Clause 5 of the conditions of contract, and, therefore, the Executive Engineer was competent to rescind the contract at anytime after the 15th Match, 1957, because the respondent had rendered himself liable to pay compensation amounting to whole of his security deposit under Clause (3) of the conditions of contract.

6. The relevant portion of Clause (3) of the Conditions of contract is as follows:

In any case in which under any clause 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 installments the Chief Engineer or other duly authorised Engineer on behalf of the Rajasthan Government shall have power to adopt any of the following courses, as may deem best suited to the interest of the Government.

(a) To rescind the contract of which rescind notice in writing to the contractor under the hand of the Chief Engineer or other duly authorised Engineer shall be conclusive evidence, and in which case the security deposit of the contractor shall stand forfeited and be absolutely at the disposal of the Government.

According to the learned Additional Government Advocate, time was the essence of the contract on the part of the contractor as provided in Clause (3) and as such the work having net been completed on the 15th March, 1957, he could be asked to pay compensation by the Chief Engineer as provided in the said clause. On behalf of the respondent it is urged that time was not the essence of the contract between the parties in as much as the agreement itself contained a provision for extension of time and secondly even after the date of completion, the respondent was allowed to continue the work without any objection on the part of the Irrigation Department. Not only that but the respondent was further called upon on 17th April, 1957 vide Ex.3, to complete the work be fore the next rains. Even after the rainy season, the work was continued by the respondent without any objection on the part of the department. It is only on 9th May, 195-5, that the respondent was informed of the recision of the agreement by the Executive Engineer vide Ex. A-3. But even this order of recision was waived because the respondent was allowed to continue the work upto 30-7-1958. On the completion of the work, full payment of the bills was made by the department without any objection which further shows that the order of recision, the contract was waived. It is urged that the Executive Engineer had not been authorised on behalf of the Raj. Govt. to rescind the contract and as such the order Ex. A-3 is null and void and inoperative. It has also been urged that in order that Clause (3) of the Conditions of Contract may come into play, it has to be thrown that the contractor had rendered himself liable to pay compensation amounting to the whole of his security deposit. In the present case, it has not been shown as to how the contractor had become liable to pay compensation amounting to the whole of the security deposit. Clause (3) of the conditions of contract provides for compensation on two contingencies viz., delay in progress and failure to complete to time. In either of these contingencies the Chief Engineer is empowered to determine the amount of compensation at the rate of 1 per cent or such smaller amount as he may decide on the amount of the estimate cost of the whole work as shown in the tender that the work remained uncommented. That being so, the learned Additional Government Advocate contends that the work remained unfinished from 15th March, 1957 to 9th May, 1958, and, therefore, the respondent had rendered himself liable to pay compensation amounting to the whole of his security deposit because calculated at the rate of 1 per cent on the amount of the estimated cost of the whole work, he would have rendered himself liable for the whole of the security deposit only in ten days.

6. In the present case, there is no order of the Chief Engineer indicating as to what amount of compensation the respondent had rendered himself liable when his contract was rescinded on 9th May, 1958. But if the amount of compensation was to be determined for non-completion of the work on the stipulated date, the amount would be much more than the amount of security deposit. Therefore, I am of the view that action could betaken against the respondent under Clause (3) of the agreement.

7. The next question is as to whether the Executive Engineer had been duly authorised by the Rajasthan Government to rescind the contract. Under Clause (3), it is the Chief Engineer or other duly authorised Engineer on behalf of the Rajasthan Government who has the power to rescind the contract. Admittedly the contract in the present case was not rescinded by the Chief Engineer but it was done by the Executive Engineer. In order to show that the Executive Engineer was authorised to rescind the contract, the learned Additional Government Advocate has placed reliance upon the Finance Department Rules published in the Rajasthan Gazette Part IV(c) when at item No. 31, the Executive Engineer has been empowered to rescind contracts provided such cancellation does not result in any loss of Government. But it appears from the order that certain amendments were made in delegation of the powers exercised by various authorities in July, 1958. In the present case the order of rescinding the contract was made by the Executive Engineer on 9th May, 1958, that is, before the publication of this order. The learned Additional Government Advocate has not been able to show whether the Executive Engineer had authority to rescind the contract before 9th May, 1958.

8. From the order of rescinding the contract Ex. A-3, it appears that a copy of this cider was submitted to the Superintending Engineer, Irrigation, Jaipur, for information and approval of the action taken. Nothing seems to have been immediately done and it is only on 30th December, 1960, that the Superintending Engineer ordered that as the contractor could not complete the work even in the extended time and that the contract had to be rescinded and the remaining work was got to bi completed through other sources, the contractor had made himself liable to pay 10% which may please be deducted from his dues and the ca-se be finalised immediately. It cannot be inferred from this letter that the order passed by the Executive Engineer on 9th May, 1958, was approved as such The order Ex. A-7 only points out the consequences which have resulted due to recision of the contract. But that too is not factually correct, because there is no evidence to show that any remaining work was got completed through other sources by the department. The order Ex. A-7 also cannot be interpreted as an order for recision of the contract as contended by the learned Additional Government Advocate.

7. However, apart from the question whether the Executive Engineer had the authority to rescind the contract or not, the question is whether the order of recision was subsequently waived or not by the department. It is stated in the book relating to Building and Engineering Contracts in India by G.T. Gajria 1967 Edition at page 589:

When the time for exercising the right of forfeiture has elapsed without the right having been exercised the employer will be treated as having waived his right. Where waiver has once taken place the employer cannot go back on it and revive the right to forfeit.

A power of forfeiture must be exercised within a reasonable time after the occurrence of the breach on which the power of forfeiture is conditioned to arise; otherwise the breach will be deemed to have been waived, unless it is continuing.

But where a fresh right arises, or the breach is a continuing breech, the new right is unaffected by the waiver of the previous one.

Although the circumstances may have occurred, under which the right to forfeit arises by the terms of the contract, the employer may find himself precluded from enforcing the forfeiture, either because he has waived his right, or because he has, by his own actions, rendered it inequitable that he should do so, and is therefore estopped.

Failure to complete to time is not, generally, to be regarded as a continuing breach. If the building owner positively treats the contract as subsisting after the date when the right to forfeit accrues, he will be regarded, a fortiori, as having waived his right However, if the breach is a continuing one, the making of payments to the contractor after the breach does not amount to a waiver.

10. In Joshua Henshaw and Son v. Rochdale Corporation (1944) 1 K.B.D. 381 the view taken in Hudson's Building contracts 6th ed. P. 412 that

in the case of contracts giving a power of forfeiture for not proceeding with the work at the required rate, if the contract date for completion has caused to be binding, no forfeiture for delay in progress can be made, for there is no period in respect of which speed be gauged. The clause, therefore, can only be acted upon and enforced in respect of delay when there is a date fixed for completion, and confers no power of forfeiture after that date has passed or has ceased to be applicable.

was held to be too wide and it was held that 'the official referee was right in holding that after the contract date had passed without any extension the duty of the plaintiffs was to complete the contract within a reasonable date; and that all the terms of the contract, including Clause 28, continued to apply with such modifications as were necessary to make those terms applicable to the reasonable date.'

11. Similarly, in Exparte Newitt In re Garrud 16 Chancery Division 522 it was observed, though obiter, that:

if the ground of forfeiture was the omission of the builder to complete the buildings on the day appointed by the agreement, and the land owner had after that day made advances of money to the builder for the purposes of the agreement, or had in any other way treated the agreement as still subsisting, he would have waived tha forfeiture.

But as held in the first case, if no action was taken for rescinding the contract on the date on which the contract was to be completed, then the contractor could complete the work within reasonable time even though he had not applied for extension of time and that the action for recisnn of the contract or for forfeiting the security would apply to that reasonable date.

12. As already stated, no action was taken in the present case for rescinding the contract on 15th March, 1957. The work was allowed to continue till 9th May, 1958, when the order of recision of contract was passed. But even after that the contractor was allowed to continue the work till 30th June, 1958, and that clearly shows that the contractor was permitted to complete the work within reasonable time and the order rescinding the contract had become inoperative when the contractor was allowed to continue the work even after that order. There is nothing on the record to shows that it was on the basis of any fresh agreement that he was allowed to continue the work after 9th May, 1958.

13. There is yet another reason to hold that the department had waived its right to rescind the contract and to forfeit the security amount and that is that the contractor was paid for all the bills for the work which he had done up to 30th June, 1958.

14. The work was completed within reasonable time, that is, up to 30th June, 1958, then there could he no occasion for the department to invoke Clause (3) of the agreement. There is a dispute between the parties as to whether the work had been completed on 30th June, 1958. or not According to the appellant the work was unfinished while according to the respondent he had completed the entire work. Issue No. 2 relates to this controversy On behalf of the appellant, no evidence was given to show that on 30th June, 1958, earth work to the tune of 267386 cubic feet remained to be done.

15. However, reliance is placed on behalf of the appellant on the plaintiff's letter Ex. - A 4 dated 28th July, 1958, wherein it is said that he was unable to carry on further on account of the pits being filled with water although he had a keen desire to complete the Tal was work. In the second paragraph, it has been stated in Ex. A - 4 that the plaintiff had already done the work much more than what he had tendered for. It is, therefore, not very clear as to whether the contracted work had remained incomplete on 30th June 1958. But a already stated, no evidence was produced on behalf of the appellant in support of its contention that the work had remained unfinished. Nor was it shown that the remaining work was got completed from some other source.

16. In view of what has already been stated. I hold that the appellant had waived its right to rescind the contract in so far as tie work was allowed to be continued even after 15th March. 1957, and there-after also waived, its right to forfeit the security amount inasmuch as the work was allowed to be continued till 30th June, 1958, an 1 full payment had been made to the respondent for all his bills. Even if the order of recision of contract by the Executive Engineer was valid, it had become inoperative on account of the subsequent conduct on the part of the department. That being so the appellant was not justified in with holding payment of the security deposit to the respondent.

17. The learned Additional Government Advocate has also made an argument that the suit is barred by limitation. The suit is for recovery of the security deposit and the cause of action for the suit arises when the appellant refused to pay the amount on being demanded. The suit has rightly been held to be within time.

18. There is no force in this appeal and it is accordingly dismissed with costs.


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