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India Trades Corporation Vs. Union of India (Uoi) - Court Judgment

LegalCrystal Citation
SubjectLimitation
CourtKolkata High Court
Decided On
Case NumberSpecial Case No. 4 of 1954
Judge
Reported inAIR1957Cal153
ActsLimitation Act, 1908 - Schedule - Articles 115 and 120; ;Government of India Act - Section 175(3)
AppellantIndia Trades Corporation
RespondentUnion of India (Uoi)
Appellant AdvocateA.K. Sen and ;S. Roy, Advs.
Respondent AdvocateS.P. Mitra, Adv.
Cases ReferredChaturbhuj Vithaldas v. Moreshwar Parashram
Excerpt:
- .....out what article will apply in a suit or matter the proper thing to do is to look to the first column of article. the first column of article 115 reads as follows :'for compensation for the breach of any contract, express or implied, not in writing registered and not herein specially provided for.'clearly a suit for breach of contract comes within the language of the first column of article 115 of the limitation act and the instant case must be governed by article 115 of the said act. if article 115 of the limitation act applies there is no question, that the case would not come under article 120.12. the next point to be considered is, what would be the starting point of limitation in a suit for damages in this case would starting point of limitation be before 5-7-1944 when the.....
Judgment:

Mallick, J.

1. This is a special case stated by the arbitrator under Section 13, Arbitration Act, for the opinion o this Court on a question of law involved in the proceedings now pending before the arbitrator. The question of law involved is whether the claim in dispute is barred by limitation.

2. The case originally stated by the arbitrator came for consideration before Bachawat J. Bachawat J. felt that the case stated did not contain sufficient facts to enable the Court to give its opinion on the point of law raised and directed the arbitrator to restate the case. Pursuant to such direction the arbitrator has restated the present case on which this Court is called upon to give its opinion.

3. Mr, Roy appearing for the claimant made a grievance that the arbitrator stated the present case without giving his client any opportunity to make his submission as to the correctness of the facts stated. It is not for me in the present proceeding to adjudicate on the correctness of the facts stated by the arbitrator. I am to give my opinion on the basis of facts stated by the arbitrator. If the facts are not correct or if the arbitrator is guilty of misconduct in not giving an opportunity to Mr. Roy's ' client to make his submission on the correctness of facts stated the right of Mr. Roy's client to challenge the award that may be passed hereafter remains unaffected.

4. The arbitration proceeding relates to a claim for damages for breach of contract. Messrs. India Trades Corporation (for convenience 'referred to as a contractor) entered into three several contracts with the Government for the manufacture and supply of bricks. As is usual in case of Government contracts there was in each case what may be characterised as a provisional agreement of an informal character entered into by one of the officer of the Government which was subsequently embodied in a formal document in compliance with the formalities provided by Section 175(3), Government of India Act. The first of such provisional agreement was entered into on 12-11-1942 and the formal document evidencing the contract was executed on 31-1-1943. The second provisional agreement was enter ed into on 25-2-1943. This was finally embodied in two formal documents executed on 12-12-1947 in compliance with the formalities provided by Section 175(3), Government of India Act. It is said that under the second and third contracts the Government was under an obligation to supply coal in order to enable the contractor to manufacture and supply bricks. It is stated that the Government supplied coal in terms of the agreement during January, February and March 1944 but did not supply any coal thereafter.

On 5-7-1944 the contractor submitted a claim to the Superintending Engineer, Eastern Aviation Circle of compensation for the loss alleged to have been suffered by the contractor. The case does not state on what basis this claim has been made by the contractor. Learned counsel of both sides stated, however, that the claim was by way of compensation for breaches of contract alleged to have been committed by Government mostly for not supplying coal in terms of the contract, though the Government is alleged to have committed other breaches as well.

5. Be that as it may, all the breaches alleged to have been committed by the Government and on the basis of which the contractor preferred its claim for damages took place prior to 5-7-1944. Certain payments were made by the Government on account of the price of bricks sold and delivered but not on account of damages. Mr. Roy appearing for the contractor stated that his client does not contend'that limitation is saved by reason of these payments. Nor does Mr. Roy contend that limitation is saved by reason of any acknowledgment of liability made on behalf of the Government.

6. On 6-8-1949 the contractor asked the Government to refer the dispute arising out of the claim submitted on 5-7-1944. Pursuant thereto the present arbitration proceedings are pending. Before the arbitrator the Government in its statement contended inter alia that the claim of the contractor was barred by limitation. The arbitrator is seeking the opinion of this Court on this point of law raised by the Government.

7. I cannot help expressing my regret that in spite of clear direction given by Bachawat J. the case stated by the learned arbitrator is not satisfactory. It should have been self-contained containing all the material facts. Unfortunately it is not so. I had to refer to other papers and statements made by learned counsel to understand the nature of breach complained of, the obligation of the Government under three several contracts and the claim of the contractor under each of the three contracts.

8. It would be proper to consider the point of limitation with reference to the first contract separately from the second and third contracts. With reference to the first contract there is no difficulty at all. The formal contract was signed on 13-1-1943. Breaches giving rise to the cause of action for damages took place before 5-7-1944. Reference to arbitration was made on 6-8-1949, that is long after three years from the date of breach. I have no doubt that Article 115 of the Limitation Act will govern the case and there is no difficulty in applying the said article to the facts of this case. I, therefore, hold that the claim of the contractor for damages under the first contract dated 13-1-1943 is barred by limitation.

9. Claim under the second and third contract presents some difficulty. It will appear from the facts stated before that the breaches of tae said contracts are alleged to nave taken place before 5-7-1944 whereas formal contracts were executed only on 25-12-1947, As I stated before the provisional contract covering these contracts was, however, entered into on behalf of the Government by the Superintending Engineer Aviation Circle with the contractor as far back as 25-2-1943. Such provisional contract, not in compliance with the provisions of Section 175(3), Government of India Act, was formerly considered to be void contract. In the case of Chaturbhuj Vithaldas v. Moreshwar Pareshram, : [1954]1SCR817 , it has been held by the Supreme Court that such a contract is not void but the Government cannot be sued on such contract. The position, therefore, seems to be that prior to the execution of a formal contract in strict compliance with Section 175(3), Government of India Act, there may be a contract and a breach thereof but no suit for damages can be maintained against the Government until the contract is embodied in a formal document in terms of Section 175(3), Government of India Act, In the instant case breaches were committed in any event before 5-7-1944 that is more than three years before the date of the forma] agreement, namely, 25-12-1947. In other words the breaches were committed more than three years before the contractor acquired the cause of action to institute a suit against the Government under the contract. It is submitted by Mr, Roy that by reason of this fact Article 115, Limitation Act, becomes inapplicable and Article 120 is the proper article to be applied in this case. This is a point of first impression and both the learned counsel appearing before me confessed that they have not been able to find any case directly on the point.

10. The first point to be decided is which of the two articles of the Limitation Act, namely. Article 115 or Article 120 would govern the case. Mr. Mitter appearing for the Government suggested that Article 115 would be the proper article whereas Mr. Roy contended that Article 115 is not at all applicable to this case and there being no other article the residuary Article 120 would apply.

11. The first column of the schedule of the Limitation Act states the class of cases to be governed by each article. The second column states the period and the third column states the starting point of limitation. For the purpose of finding out what article will apply in a suit or matter the proper thing to do is to look to the first column of article. The first column of Article 115 reads as Follows :

'For compensation for the breach of any contract, express or implied, not in writing registered and not herein specially provided for.'

Clearly a suit for breach of contract comes within the language of the first column of Article 115 of the Limitation Act and the instant case must be governed by Article 115 of the said Act. If Article 115 of the Limitation Act applies there is no question, that the case would not come under Article 120.

12. The next point to be considered is, what would be the starting point of limitation in a suit for damages in this case Would starting point of limitation be before 5-7-1944 when the breaches are alleged to have been committed by the Government? Or would limitation act begin to run till 12-12-1947, when the formal agreement was executed? It cannot be denied that before 12-12-1947, the contractor had not the full cause of action to institute a suit for damages against the Government even though the breaches were committed as far back as before 5-7-1944. The answer to this question will depend on the true and proper construction ot the third column of Article 115, Limitation Act.

13. The third column of Article 115 reads as follows :

'When the contract is broken, or (where there are successive breaches) when the breach in respect ot which the suit is instituted occurs, or (where the breach is continuing) when it ceases.'

14. If the third column of Article 115, as statedabove, is to be construed literally according to language, the starting point must be before 5-7-1944because that is the time when breaches of contractare alleged to have taken place. It is elementarythat the cause of action in a suit tor damages forbreach of contract arises at the date of the breach.In ordinary cases, therefore, the date of breach andthe date of the cause of action for damages forbreach of contract synchronise. But it may notsynchronise as in the instant case when cause ofaction to institute a suit becomes complete after thecontract is signed in compliance with the provisionsof Section 175(3), Government of India Act, and thisdate is long after the date of breach. In such casescould it possibly have been the intention of theLegislature that limitation would begin to run andcomplete its full course even before the accrual ofthe cause of action? To my mind the answer mustdearly be in the negative. The whole object of theLimitation Act is to prevent a suit being filed aftera certain time. It was never intended to preventa suit being filed at all, i.e., to take away the rightof suit. Yet if the third column of Article 115 is to beconstrued literally, that would be the result in caseslike the one we are considering now. That in myjudgment could not have been the intention of theLegislature. The Court, therefore, must have to goBehind the language of the third column to get theintention of the Legislature and to give effect to it.It has been held that the third column of the schedule of the Limitation Act, has been loosely wordedand the Court is entitled by way of construction togo behind the language to find out the intention ofthe Legislature and to give effect to it. This hasbeen done by the Courts in India as well as by theJudicial Committee. Otherwise it would be notmerely an inconvenient state of law but absurd statewhen a suit becomes time barred even before theright to sue accrues.'

15. In the case of Hari Mohan Dalal v. Parmeshwar Shau : AIR1928Cal646 , heard by a Special Bench of three Judges of this Court consisting of Rankin, C. J., C.C. Ghose J. and Buckland J. Rankin J. makes the following observation at p. 979 (of Cal WN): (at p. 648 of AIR):

'The broad scheme of the Indian Limitation Act is that so far as possible the terminus a quo of the period of limitation shall be stated specifically with reference to each class of suit, appeal or application. The old. English statutes of limitation had been content to prescribe the period by putting as the limit so many years after the cause of action.

The Indian Legislature endeavours in detail by the Indian Limitation Act to state in the third column of the schedule, the event which is to be taken as completing a cause of action, that is the date from which time begins to run. The language of the third column of the schedule should in general if not indeed always, be so interpreted as to carry out the true intention of the legislature, that is to say, to date, the cause of action from the date on which the remedy is available to the party.' (Underline here into single inverted commas is mine).

16. In the case of Muthu Korakki Chetty v. Md. Madar Animal, ILR 43 Mad 185: (AIB 1920 Mad 1) (C), and heard by a Full Bench of the Madras High Court, Sheshagiri Ayer, J. after an exhaustive review of the cases heard by the Judicial Committee and other High Courts recorded the following observation at p. 213 (of ILR Mad): (at p. 13 of AIR):

'All of them may be said to go to some extent, behind the actual words of the third column and to import into the decisions consideration based on the intention of the legislature; but none of them introduces a principle which adds to or subtracts from the statutory exemptions. That is my view of the decisions of the Judicial Committee. Therefore in my opinion, the true rule deducible from these various decisions of the Judicial Committee is this : 'that subject to the exemptions, exclusion, mode of computation and the excusing of delay, etc., which are provided in the Limitation Act, the language of the third column of the first schedule should be so interpreted as to carry out the true intention of the Legislature, that is to say, by dating the cause of action from a date when the remedy is available to the party'.' (Underline here into single inverted commas is mine).

17. In the case of Sarat Kamini Dasi v. Nagendra Nag Pal heard by a Division Bench of this Court and reported in 29 Cal WN 973 : (AIR 1926 Cal 65) (D), M.N. Mukherjee J. makes the following observations :

'In the case of such of the articles of the Limitation Act in which the starting point of time synchronises with the cause of action I am prepared to hold that the test is to ascertain the time when the plaintiff could have maintained his action to a successful issue. If in such a case, at the time when the cause of action arises there is no person capable of suing upon it the statute does not run; similarly it is necessary that there shall be a person to be sued; and it is also necessary that the cause of action should be complete, that is, all the facts must have happened which are material to be proved in order to entitle the plaintiff to succeed. This should of course be borne in mind in interpreting the intention of the Legislature as expressed in the articles of the Act itself or rather in such of them as admit of a consideration of the question as to when a cause of action arises and in such a case I am in entire accord with the view expressed by Seshagiri Ayyar J., at p. 213 (of ILR Mad): (at p. 13 of AIR) of the Madras' Full Bench case to which I have referred.''

18. With all these above observations made by eminent Judges, I respectfully agree. I, therefore, hold that in the case of a suit against the Government in respect to a contract which is required to comply with the formalities provided by Section 175(3), Government of India Act, time does not begin to run till the date the contract is signed as required , by the Act even though the provisional contract and the breach thereof took place prior thereto.

19. Mr. Mitter appearing for the Government strongly urged that the Supreme Court has held in the case of Chaturbhuj Vithaldas v. Moreshwar Parashram (A), cited before that the provisional contract is a good contract and when the formal contract is executed under Section 175(3), Government of India Act, it amounts to nothing more than a ratification by the Government of an unauthorised act of one of its employees. He argues that it is well known that the ratification relates back to the act ratified. Hence the contract even though signed later on must be ante-dated to the date of the provisional agreement. Assuming that the analogy of ratification taken recourse to by the Supreme Court in the above case be made applicable with full force to case of this description, it does not help us in determining what would be the starting point of limitation, viz., what would be the starting point of limitation against principals who have ratified unauthorised contract entered into on behalf of the principal long before? No case has been cited to show that in such a case limitation runs from the date of the breach even against the ratifier.

20. In my judgment the principle of ratification relied on by Mr. Mitter does not help us very much in determining the question of limitation that has to be decided in this case. In the result, I hold that while the claim under the first contract dated 31-1-1943 is time barred the claim under 2nd and 3rd contracts dated 12-12-1947 is not time barred.

21. Costs of this special case will be costs inthe arbitration proceedings. Certified for twoCounsel.


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