HIND CONSTRUCTION CONTRACTORS PETITIONER: Vs. THE STATE OF MAHARASHTRA RESPONDENT
DATE OF JUDGMENT30/01/1979
BENCH:
TULZAPURKAR, V.D.
BENCH:
TULZAPURKAR, V.D.
CHANDRACHUD, Y.V. ((CJ)
SEN, A.P. (J)
CITATION:
1979 AIR 720 / 1979 SCR (2)1147 / 1979 SCC (2)70
ACT:
Contract Act-Contract not completed within stipulated
time. No term in contract making time, the essence of
contract-Tests for deciding if time was of essence.
HEADNOTE:
The appellant entered into a contract with the
respondent for the execution of a work the essential term of
which was that the contract should be completed in 12 months
from the commencement of the work. On the ground that the
appellant had not completed the work within the stipulated
time the respondent rescinded the contract.
In his suit for damages for illegal and wrongful recision of the contract the appellant claimed that the date for commencement of the work was merely nominal and that in any case time was not of the essence of the contract. The appellant also alleged that on account of several difficulties such as excessive rains in the area, lack of proper road and means of approach to the site, rejection of materials on improper grounds by the Government officers, completion of the work was delayed, extension of time was wrongfully refused by the officers of the Government, and
that none of these factors had been taken into account by the Government while refusing to give extension of time, and in ultimately rescinding the contract.
Holding that time was not of the essence of the contract the trial Court decreed the suit, but disallowed certain claims of the appellant.
On appeal by both sides the High Court, without deciding the question whether time was of the essence of the contract, held that the recision of the contract was not arbitrary and unreasonable or unjustified.
On further appeal to this Court it was contended on behalf of the appellant that (i) the High Court was in error in not deciding the main question whether or not time was essence of the contract; and (ii) it was not the appellant's case that the recision was mala fide and that, therefore,the High Court erred in considering that question.
Allowing the appeal,
^
HELD: The question whether or not time was of the essence of the contract would essentially be a question of the intention of the parties to be gathered from the terms of the contract. Even where the parties have expressly provided that time is of the essence of the contract such stipulation would have to be read along with other provisions of the contract and such other provisions may, on
construction of the contract, exclude the inference that the completion of the work by a particular date was intended to be fundamental. For instance if the contract were to include clauses providing for extension of time in certain contingencies or for payment of fine or penalty for every day or week the work undertaken remains unfinished on the expiry of the time provided in the contract such clause would be construed as rendering ineffective the express provision relating to the time being of the essence of the contract. [1155A-B]
Halsbury's Laws of England, Vol. 4 p. 1174 referred to.
(i) In the instant case, having regard to the terms of the contract particularly the clauses pertaining to the imposition of penalty and extension of time, time was never intended by the parties to be of the essence of the contract. The letter by which the contract was rescinded clearly waived the stipulation of 12months' period, the
contractor having been allowed to do some more work after the expiry of the period. [1157B]
(ii) The approach adopted by the respondent and upheld by the High Court was not correct. Long before the expiry of the period of 12 months the appellant had requested for extention of the period of completion. Even if the grounds made out by the appellant were not agreeable to the Superintending Engineer some reasonable time making it the essence of the contract ought to have been granted. Instead of making time of the essence at some stage or the other,
the respondent rescinded the contract which was clearly illegal and wrongful. [1158C]
(iii) It was never the case of the appellant that the recision of the contract was mala fide.The various reasons given by the appellant for delay in executing the work were put forward merely for showing that the refusal to extend time by the Superintending Engineer was unreasonable or unjustified. The question was not whether the recision of the contract was unreasonable and, therefore, unjustified but whether the recision was wrongful and illegal. If time was not of the essence or if the stipulation as to the time fixed for completion had, by reason of the waiver, ceased to be applicable then the only course open to the respondent was to fix some time making it the essence and if within the time so fixed the appellant had failed to complete the work,the respondent could have rescinded the contract. [1157D-G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 483 and
1769 of 1969.
Appeal from the Judgment and Order dated 9/10-9-1968 of
the Bombay High Court in First Appeal Nos. 844 of 1961 and
245 of 1962.
M. C. Bhandare, J. S. Sinha and K. J. John for the
Appellants.
R. H. Dhebar, B. V. Desai and M. N. Shroff for the
Respondent.
The Judgment of the Court was delivered by
TULZAPURKAR J. These appeals by certificate of fitness granted by the High Court of Judicature at Bombay are directed against that Court's common judgment and decree dated September 9/10, 1968, passed in two cross appeals being First Appeal Nos. 245 of 1962 and 844 of 1961.
A contract for the construction of an aqueduct across the Alandi River at Mile No. 2 of the Nasik Left Bank Canal of the total value of Rs. 1,07,000/- was granted to the appellant-plaintiff (originally a partnership but later a proprietary firm of contractors) by the respondent-defendant (the State of Maharashtra) after the former's tender was accepted on June 17, 1955. On July 2, 1955 the Executive Engineer issued the work order to the appellant-plaintiff
directing him to commence the work by July 5,1955 intimating in clear terms that the stipulated date for starting the work would be reckoned from July 5, 1955. The formal regular Contract in prescribed From B-2/1 of 1955-56 (Ex. 34) containing the terms and conditions as well as the Schedules, specifications etc. was executed by the parties on July 12, 1955. A security deposit of Rs. 4,936/- was kept by the appellant plaintiff with the respondent-defendant.
The period for completion of work was fixed as 12 months from the date stipulated for commencement of the work, that is to say, it was expected to be completed on or before July 4, 1956. It appears that on the ground that the appellant-plaintiff had not completed the work as expected within the stipulated time the Executive Engineer by his letter dated August 27, 1956 (Ex. 78) Rescinded the said contract with effect from August 16, 1956.
After serving a notice under s.80 of the Civil Procedure Code the appellant-plaintiff filed a suit (being Special Civil Suit No. 23 of 1959) on August 28, 1959 in the Court of the Joint Civil Judge, Senior Division, Nasik making a claim for Rs. 65,000/- in the aggregate against the respondent-defendant alleging wrongful
and illegal recision of the contract on the part of the
Respondent-defendant. The appellant-plaintiff's case was
that the initial fixation of July 5, 1955 as the date for
commencement of the work was nominal, that the area where
the work was to be done had usually heavy rainfall rendering
it impossible to carry out any work from July to November
and that, therefore, it was the practice of the Public Works
Department to deduct the period of monsoon in case of such
type of works and that the appellant-plaintiff had been
orally informed that this period would be deducted or not
taken into account for calculating the period of 12 months
under the contract and that on this assurance he had commenced the work towards the end of December 1955. His
case further was that in any event time was not of the
essence of the contract, that on account of several
difficulties, such as excessive rains, lack of proper road
and means of approach to the site, rejection of materials on
improper grounds by Government Officers, etc., over which he
had no control, the completion of the work was delayed and
that the extension of the time which was permissible under
the contract had been wrongfully refused by the officers of
the respondent-defendant. According to him none of these factors had been taken into account by the Government while refusing the extension and the contract was wrongfully rescinded and, therefore, the respondent-defendant was liable in damages. The total claim of Rs. 65,000/- comprised six items-(1) Rs. 4,936/- being the amount of security deposit wrongfully forfeited by the
respondent-defendant, (2) Rs. 10,254/- being the amount due
to him for the actual work done by him under Bill No. 1253
dated September 20, 1956 and which had not been paid for,
(3) Rs. 7,375/- being the value of the material collected by
him on the site for work but which had been rendered useless
on account of wrongful recision, the 4th and 5th items
sounded in damages, while the last item was interest from
date of recision to the date of the suit.
The State Maharashtra resisted the claim contending
that time was of the essence of the contract, that the date
fixed for commencement was real and not nominal and the 12
months period was fixed after all aspects of the matter had
been taken into account, it was further contended that the
appellant-plaintiff knew the situation of the site and the
so-called difficulties, that there was no excuse for him for
not doing the work during the months of July to November,
that the appellant-plaintiff failed to carry out the
proportionate work during the periods fixed in the contract
and that since the appellant-plaintiff had rendered himself
incompetent to complete the work in proper time it had to
rescind the contract and the recision was proper and for
adequate reasons; it was further contended that the State
was entitled to forfeit the security deposit which it did on
the date when the contract was rescinded. The several items
claimed by the appellant plaintiff were denied by the State.
It was denied that the material of the value of Rs. 7,375/-
remained on the site or that it was responsible for its non-
removal from the site. Regarding items 4 and 5 the State
denied its liability to pay the same as it was the
appellant-plaintiff who had committed the breach of the
contract. As regards the amount due under Bill No. 1253
dated September 20, 1956 for the actual work done, it was
contended that the State had to deduct the amount of penalty
leviable under the contract and for the actual cement
supplied to the appellant-plaintiff and after making
deductions in that behalf only a sum of Rs. 700/- would be
due to the appellant-plaintiff.
On a consideration of the documentary evidence
including the terms and conditions of the contract (Ex. 34)
and the oral evidence led by the parties, the learned trial
Judge held that the date July 5, 1955 fixed as the date for
commencement of the work was not nominal but that time was
not of the essence of the contract between the
1151
parties, that the respondent-defendant (State Government)
had wrongfully rescinded the contract, that the appellant-
plaintiff was entitled to damages but that he had not
established the two items claimed as damages and he was
entitled to a nominal sum of Rs. 120/- as damages. He
further held that since the recision of the contract was
wrongful the State was not entitled to forfeit the security
deposit nor levy any penalty. He accordingly decreed the
appellant-plaintiff's claim in respect of refund of security
deposits and as regards the amount of Bill No. 1253 dated
September 20, 1956 for actual work done he held that a sum
of Rs. 5,845/- only would be due to him after giving credit
for Rs. 4,409/- due from the appellant-plaintiff to the
State. He accordingly decreed the appellant-plaintiff's suit
to the extent of Rs. 10,901/- with interest thereon at 6%
per annum from the date of recision till date of suit and
allowed proportionate costs to him.
Two appeals were preferred against the aforesaid decree
of the trial court, one by the appellant-plaintiff in
respect of the claims that had been disallowed (First Appeal
No. 245 of 1962) and the other by the State in respect of
the claims allowed against it (First Appeal No. 844 of
1961). Curiously enough the High Court did not decide the
main issue that arose between the parties, namely, whether
time was of the essence of the contract, as it took the view
that a decision on that question was really unnecessary for
disposal of the appeals. It proceeded to decide the appeals
on the assumption that time was not of the essence of the
contract by considering the question whether the recision of
the contract by the State could be regarded as mala fide or
so unreasonable that it must in the place of the judgment of
the officers concerned substitute its own judgment and hold
that the recision was wrongful. The High Court observed that
even the appellant-plaintiff had not alleged any mala fide
on the part of any of the officers of the State but had
pressed into service five or six factors the non-
consideration whereof by the respondent-defendant rendered
the recision of the contract arbitrary, unreasonable and,
therefore, unjustified. After discussing each one of those
five or six factors the High Court held that some of them
had not been proved by the appellant-plaintiff while others
did not head to the inference that the recision of the
contract was arbitrary, unreasonable or unjustified. It
found that by about July 21, 1956 (vide Ex. Engineer's
letter Ex. 74) the appellant-plaintiff had done only 1/3rd
of the contract work and that in the circumstances the
appellant-plaintiff could not have completed the work even
within the next three months and, therefore, the
respondent's officers had rightly rescinded the contract
and, therefore, it was the appellant-plaintiff and not the
respondent-defendant who had committed a breach of the
contract. However, the High Court took the
1152
view that for such breach on the part of the appellant-
plaintiff, the respondent-defendant, on a reading of the
cls. 2 and 3 of the Conditions of Contract, was not entitled
both to levy compensation and also to forfeit the security
deposit. Accordingly, the High Court upheld the forfeiture
of the security deposit made by the respondent-defendant and
while modifying the trial court's decree it confirmed it
only to the extent of Rs. 5,845/-, being the amount due to
the appellant-plaintiff for the work actually done by him
under Bill No. 1253 and which had not been paid. In the
result, the appellant-plaintiff's appeal was dismissed and
that of the State was partly allowed with appropriate order
of proportionate costs.
In support of the present appeal counsel for the
appellant-plaintiff raised two or three contentions. In the
first place he contended that the High Court was in error in
not deciding the main issue whether the time was of the
essence of the contract or not ? He urged that the said
issue could not be avoided in the manner done by the High
Court, for, if time was not of the essence of the contract
then just before the expiry of the 12 months' period or
immediately after its expiry it was up to the respondent-
defendant to grant some reasonable time to the appellant-
plaintiff for completing the work undertaken and make the
same the essence of the contract and only if the work was
not completed by the appellant-plaintiff within that time
the contract could have been rescinded on the ground that
the appellant-plaintiff had committed a breach of a
contract. According to him such course of action on the part
of the respondent-defendant was obligatory, when the initial
period of 12 months was not of the essence, especially when
the request of the appellant-plaintiff for extension of time
was pending before the concerned officers of the Government
since before the expiry of the initial period. He contended
that instead of adopting the aforesaid course the
respondent-defendant had without making time of the essence
of the contract rescinded the same with effect from August
16, 1956 by a letter dated August 27, 1956 (Ex. 78), which
recision must be regarded as wrongful and illegal. Secondly
counsel contended that the High Court further erred in
considering the question whether the recision of the
contract by the State was either mala fide or wholly
unreasonable and, therefore, unjustified. He pointed out it
was not the appellant-plaintiff's case that the recision was
mala fide and, according to him, the question was not
whether the recision of the contract on the part of the
respondent-defendant was unreasonable, and, therefore,
unjustified but whether the respondent-defendant was
entitled in law to rescind the contract in the manner done
when time was not of the essence of the contract. He further
urged that the High Court had clearly erred in assuming that
the appellant-plaintiff
1153
could not have completed the work even within the next three
months and, therefore, the contract was rightly rescinded by
the respondent defendant. He, however, fairly stated that
even if this Court held in his favour that the recision was
wrongful and, therefore, the respondent-defendant had
committed a breach he would merely press for the restoration
of the decree passed by the trial Court and not press any
other item forming the subject-matter of the original claim
in the suit. On the other hand, counsel for the respondant-
defendant sought to support the judgment and decree of the
High Court on both the grounds first that time was of the
essence of the contract having regard to the express
provision contained in cl. (2) of the "Conditions of
Contract" and, therefore, on appellant-plaintiff's failure
to complete the same within the stipulated time the recision
of the contract was legal and justified and secondly, that
even if time was not of the essence of the contract, having
regard to the circumstances the High Court rightly came to
the conclusion that the recision of the contract by the
respondent-defendant could not be regarded as unreasonable
or unjustified and that, therefore, the appellant-plaintiff
being in breach the security deposit had been rightly
forfeited.
The first question that arises for our consideration,
therefore, is whether time was of the essence of the
contract that was executed between the parties on July 12,
1955 (Ex. 34). It cannot be disputed that question whether
or not time was of the essence of the contract would
essentially be a question of the intention of the parties to
be gathered from the terms of the contract. The contract in
the instant case is for the construction of an aqueduct
across the Alandi River at Mile No. 2 of the Nasik Left Bank
Canal and unquestionably 12 months' period commencing from
the date of the commencement of the work had been specified
within which the construction had to be completed by the
appellant-plaintiff. Indisputably, in the work order dated
July 2, 1955 the Executive Engineer had directed the
appellant-plaintiff to commence the work by July 5, 1955
intimating in clear terms that the stipulated date for
starting the work would be reckoned from July 5, 1955. Both
the trial court as well as the High Court have found that
mentioning of July 5, 1955 as the date for starting the work
was not nominal but was real date intended to be acted upon
by the parties. It is, therefore, clear that 12 months'
period mentioned for the completion of the work was to
expire on July 4, 1956. The question is whether this period
of 12 months so specified in the contract was of the essence
of the contract or not ? On the one hand, counsel for the
appellant-plaintiff contended that the contract being
analogous to a building contract the period of 12 months
would not
1154
ordinarily be of the essence of the contract as the subject-
matter there of was not such as to make completion to time
essential, that an agreement to complete it within
reasonable time would be implied and that reasonable time
for completion would be allowed. On the other hand counsel
for the respondent-defendant contended that time had been
expressly made of the essence of the contract and in that
behalf reliance was placed upon cl. (2) of the "Conditions
of Contract" where not only time was stated to be of the
essence of the contract on the part of the contractor but
even for completion of proportionate works specific periods
had been specified and, therefore, the appellant-plaintiff's
failure to complete the work within the stipulated period
entitled the respondent-defendant to rescind it. In the
latest 4th edn. of Halsbury's Laws of England in regard to
building and engineering contracts the statement of law is
to be found in Vol. 4, Para 1179, which runs thus:-
"1179. Where time is of the essence of the
contract. The expression time is of the essence means
that a breach of the condition as to the time for
performance will entitle the innocent party to consider
the breach as a repudiation of the contract.
Exceptionally, the completion of the work by a
specified date may be a condition precedent to the
contractor's right to claim payment. The parties may
expressly provide that time is of the essence of the
contract and where there is power to determine the
contract on a failure to complete by the specified
date, the stipulation as to time will be fundamental.
Other provisions of the contract may, on the
construction of the contract, exclude an inference that
the completion of the works by a particular date is
fundamental, time is not of the essence where a sum is
payable for each week that the work remains incomplete
after the date fixed, nor where the parties contemplate
a postponement of completion.
Where time has not been made of the essence of the
contract or, by reason of waiver, the time fixed has
ceased to be applicable, the employer may by notice fix
a reasonable time for the completion of the work and
dismiss the contractor on a failure to complete by the
date so fixed."
(Emphasis supplied)
It will be clear from the aforesaid statement of law
that even where the parties have expressly provided that
time is of the essence of the contract such a stipulation
will have to be read along with other
1155
provisions of the contract and such other provisions may, on
construction of the contract, exclude the inference that the
completion of the work by a particular date was intended to
be fundamental, for instance, if the contract were to
include causes providing for extension of time in certain
contingencies or for payment of fine or penalty for every
day or week the work undertaken remains unfinished on the
expiry of the time provided in the contract such clauses
would be construed as rendering ineffective the express
provision relating to the time being of the essence of
contract. The emphasised portion of the aforesaid statement
of law is based on Lamprell v. Billericay Union, Webb v.
Hughes and Charles Rickards Ltd. v. Oppenheim. It is in
light of the aforesaid position in law that we will have to
consider the several clauses of the contract Ex. 34 in the
case. The material clauses in this behalf are cls. 2 and 6
of the "Conditions of Contract" which run as follows:
"Clause 2:-The time allowed for carrying out the
work as entered in the tender shall be strictly
observed by the contractor and shall be reckoned from
the date on which the order to commence work is given
to the contractor. The work shall throughout the
stipulated period of the contract be proceeded with,
with all due diligence (time being deemed to be of the
essence of the contract on the part of the contractor)
and the contractor shall pay as compensation an amount
equal to one per cent or such smaller amount as the
Superintending Engineer (whose decision in writing
shall be final) may decide, of the amount of the
estimated cost of the whole work as shown by the tender
for every day that the work remains uncommenced, or
unfinished, after the proper dates. And further to
ensure good progress during the execution of the work,
the contractor shall be bound, in all cases in which
the time allowed for any work exceeds one month, to
complete.
1/4 of the work in 1/4 of the time
1/2 of the work in 1/2 of the time
3/4 of the work in 3/4 of the time".
"Clause 6:-If the contractor shall desire an
extension of the time for completion of the work on the
ground of his having been unavoidably hindered in its
execution or
1156
on any other ground, he shall apply in writing to the
Executive Engineer before the expiry of period
stipulated in the tender or before expiry of 30 days
from the date on which he was hindered as aforesaid or
on which the cause for asking for extension occurred,
whichever is earlier and the Executive Engineer, may if
in his opinion there are reasonable grounds for
granting an extension, grant such extension as he
thinks necessary or proper. The decision of the
Executive Engineer in this matter shall be final."
Two aspects emerge very clearly from the aforesaid two
clause. In the first place under cl. 6 power was conferred
upon the Executive Engineer to grant extension of time for
completion of the work on reasonable grounds on an
application being made by the contractor (appellant-
plaintiff) in that behalf; in other words, in certain
contingencies parties had contemplated that extension of
time would be available to the contractor. Such a provision
would clearly be inconsistent with parties intending to
treat the stipulated period of 12 months in cl. 2 as
fundamental. Similarly, in cl. 2 itself provision was made
for levying and recovering penalty/compensation from the
appellant-plaintiff at specified rates during the period the
work shall remain unfinished after the expiry of the fixed
date. Such provision also excludes the inference that time
(12 months period) was intended to be of the essence of the
contract. Further with regard to the provision that is to be
found in cl. 2 whereunder a time schedule for proportionate
work had been set out (namely, 1/4 of the work in 1/4 of the
time, 1/2 of the work in 1/2 of the time and 3/4 of the work
in 3/4 of the time), the evidence of the Superintending
Engineer Pandit (D.W. 1) is very eloquent. In para 13 of his
deposition this is what he has stated:
"In the agreement (Ex. 3.1) the rate of work is
based on the valuation 1/4th time mentioned means 1/4th
in 12 months. The suit contract is for Rs. 1,07,000/-.
1/4th work means the work of about Rs. 27,000/-. It is
not possible to do the work of Rs. 27,000/- in 1/4th
time as the days were rainy. This was not reasonable."
The witness in para 12 of his deposition has also given the
following admission:-
"It is not specifically mentioned in the agreement
(Ex. 34), that the suit work was urgent and that it was
to be completed within 12 months. In this agreement
(Ex. 34)
1157
there are the clauses of imposing a penalty and
extension of time."
Having regard to the aforesaid material on record,
particularly the clauses in the agreement pertaining to
imposition of penalty and extension of time it seems to us
clear that time (12 months period) was never intended by the
parties to be of the essence of the contract. Further from
the correspondence on the record, particularly, the letter
(Ex. 78) by which the contract was rescinded it does appear
that the stipulation of 12 months' period was waived, the
contractor having been allowed to do some more work after
the expiry of the period, albeit at his risk, by making the
recision effective from August 16, 1956.
Once either of the aforesaid conclusions is reached it
would be difficult to accept the High Court's finding that
the recision of the contract on the part of the respondent-
defendant was proper and justified on the basis that the
same was neither shown to be mala fide nor unreasonable. It
must be observed that it was never the case of the
appellant-plaintiff that the recision of the contract on the
part of the respondent-defendant was mala fide. Counsel for
the appellant-plaintiff further pointed out and, in our
view, rightly that the five or six factors, namely, (1) the
contract having been given at the thresh old of monsoon, the
period of monsoon (4 months) ought not to have been
reckoned, (2) absence of proper road and approach to the
work site during the rainy season and a couple of months
thereafter, (3) unreasonable rejection by the Government
Officers of material brought on the site, which material was
later on allowed to be used, (4) difficulty in procuring
labour due to malarious climate at the site, (5) delay in
issuing quarry permit and (6) extra time taken for doing
extra work that was entrusted ought to have been taken into
account-were put forward by the appellant-plaintiff merely
for the purpose of showing that the refusal to extend the
time by the Superintending Engineer although recommended by
the S.D.O. and Executive Engineer was unreasonable and not
for showing that the recision of the contract was
unreasonable or unjustified. In our view, the question would
not be whether the recision of the contract was unreasonable
and, therefore, unjustified but whether the recision of the
contract in the circumstances of the case was wrongful and
illegal. If time was not of the essence of the contract or
if the stipulation as to the time fixed for completion had,
by reason of waiver, ceased to be applicable then the only
course open to the respondent-defendant was to fix some time
making it the essence and if within the time so fixed the
appellant-plaintiff had failed to complete the
1158
work the respondent-defendant could have rescinded the
contract. The High Court has taken the view that the
contract was rightly rescinded by the respondent-defendant
because by about July 21, 1956 (vide letter Ex. 74) the
appellant-plaintiff had done work of the value of Rs.
35,000/- as against the tender value of Rs. 1,07,000/-, that
is to say, only 1/3rd of the total work had been completed
and, therefore, even though time was not of the essence of
the contract, the appellant-plaintiff, in the circumstances,
could not have completed the work even within the next three
months. In our view, this approach adopted by the
respondent-defendant and upheld by the High Court is not
correct. Long before the expiry of the period of 12 months
the appellant-plaintiff had by his letter dated June 6, 1956
(Ex. 68) requested for extension of period of completion up
to the end of December, 1956; this request was repeated by
another letter dated June 23, 1956 (Ex. 69). May be the
reasons or grounds on which the request was made may not
have appealed to the Superintending Engineer but some
reasonable time making it the essence ought to have been
granted. In this behalf it may be stated that the S.D.O. by
his letter (Ex. 69) had recommended extension upto December
1956 as sought while by his letter dated June 23, 1956 (Ex.
70) addressed to the Superintending Engineer, the Executive
Engineer had recommended that extension of time up to
October 30, 1956 may be granted to the appellant-plaintiff
with clear intimation that if he failed to complete the work
by then, the maximum penalty allowable under cl. 2, namely,
10% of the cost of the work will be inflicted on him, but
the recommendation did not receive approval of the
Superintending Engineer. It appears that the appellant-
plaintiff had an interview with the Superintending Engineer
on August 24, 1956 when a written representation (Ex. 99)
was handed over and the whole position was sought to be
explained to the Superintending Engineer but within three
days of the interview by the letter dated August 27, 1956
(Ex. 78) the contract was rescinded and the full security
deposit was forfeited to Government. It will thus appear
clear that though time was not of the essence of the
contract, the respondent-defendant did not fix any further
period making time the essence directing the appellant-
plaintiff to complete the work within such period; instead
it rescinded the contract straightaway by letter dated
August 27, 1956. Such recision on the part of the
respondent-defendant was clearly illegal and wrongful and
thereby the respondent-defendant committed a breach of
contract, with the result that there could be no forfeiture
of the security deposit. In our view, therefore, the trial
court was right in coming to the conclusion that the
appellant-plaintiff was entitled to a refund of their full
security deposit of Rs. 4,936/- as also
1159
to Rs. 5845/- being the balance of their Bill No. 1253 dated
September 20, 1956 for work actually done by them and not
paid for and nominal damages of Rs. 120/-. The appellant-
plaintiff was also entitled to interest on the aforesaid
sums and costs of suit as directed by the trial court.
In the result we allow the appeal, set aside the common
judgment and decree in F.A. No. 844 of 1961 passed by the
High Court and restore that of the trial court. The
appellant-plaintiff will get costs of this appeal as also
costs of F.A. No. 844 of 1961. The High Court's decree
dismissing F.A. No. 245 of 1962 is confirmed.
P.B.R. Appeal allowed.
1160
