IN THE HIGH COURT OF KERALA AT ERNAKULAM

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE SHIRCY V.** **THURSDAY, THE 13TH DAY OF JUNE 2019 / 23RD JYAISHTA, 1941** ## **RFA.No.417 of 2003** **AGAINST THE JUDGMENT AND DECREE IN OS 134/1991 of SUB COURT, MUVATTUPUZHA DATED 21-05-2003** ## **APPELLANT/PLAINTIFF:** **K.P.GEORGE KALLUNGAL HOUSE, KOLENCHERY P.O.,ERNAKULAM DISTRICT. BY ADV. SRI.BABU THOMAS K.** ## **RESPONDENTS/DEFENDANTS 1 TO 3:** |**1**|**STATE OF KERALA**| |---|---| ||**REP. BY THE SECRETARY, PUBLIC WORKS DEPARTMENT,**| ||**GOVERNMENT SECRETARIAT, TRIVANDRUM.**| |**2**|**THE CHIEF ENGINEER**| ||**PWD PROJECTS II,O/O CHIEF ENGINEER, PROJECTS II**| ||**TRIVANDRUM.**| |**3**|**THE SUPERINTENDING ENGINEER,**| ||**MUVATTUPUZHA VALLY IRRIGATION PROJECT CIRCLE,**| ||**MUVATTUPUZHA.**| |**4**|**THE DISTRICT COLLECTOR**| ||**COLLECTORATE, ERNAKULAM.**| **BY GOVERNMENT PLEADER SMT.N.S REHANA** **THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 13.06.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** RFA.No.417 of 2003 2 ## **JUDGMENT** The appellant is the plaintiff in O.S.No.134/1991 on the file of Sub Court, Muvattupuzha. The suit was one filed for declaration, injunction as well for realization of money. The court below dismissed the suit by a decree and judgment dated 21.5.2003. Feeling aggrieved by the dismissal of the suit, the plaintiff has filed this appeal. The plaintiff is hereinafter referred to as the 'contractor' and the defendants are referred to as the 'Department'. 2. In order to appreciate the issue involved in this appeal, few facts need mention infra: The plaintiff is a contractor engaged with the works of the Public works department. The contractor on 21.6.1979 entered into an agreement undertaking the work of “M.V.I.P. LB Main Canal from Ch 15655 m. to 15741 m”. He had deposited an amount of Rs.20,000/towards the security deposit. The time stipulated for completion of the work was 12 months from handing over of the site of the work. The site was handed over to the contractor on 21.8.1979. So the period of the contract expired by 20.8.1980. The site was not free of impediments though it was handed over on 21.8.1979. The trees were not cut and removed by the department. So the contractor was reluctant to take over the site but under the promise that the site RFA.No.417 of 2003 3 would be cleared without much delay the possession of the site was taken over on 21.8.1979. Since the work was entrusted for formation of a canal, excavation of earth was necessitated and the contractor had started the work of excavation. The initial level was taken by the department and got it approved only by 17.10.1979 and so the work commenced only on 19.10.1979. When the earth was excavated the presence of hard rock was found which required blasting for general formation of canal. As per the agreement, the contractor had to remove the earth of 20330 M3 for the work. But when he excavated the soil upto 11000 M3, the presence of hard rock was detected. So he spent an amount of Rs.1,44,540/- for the excavation work alone. The department paid only Rs.1,20,000/ and the balance is due. During the course of excavation of the earth the plaintiff had to blast and remove 300M3 of rock and boulders and that was stacked on the side of the alignment of the canal for measurement. When extensive area of rock surface was exposed, the contractor requested the department to take the initial level measurements of rock blasted and removed so as to enable him to commence and carry out blasting operations. It resulted in suspension of work for considerable time. There was failure to take initial measurement of the rocks by the department, as a result the contractor could not carry out the work in its entirety. The RFA.No.417 of 2003 4 contractor had to wait till 8.12.1980 awaiting taking of the initial level measurements of rocks to be blasted to proceed with the construction of the canal. The monthly part payments were not effected by the department in terms of the contract. But all on a sudden on 8.12.1980 the Superintending Engineer, Irrigation, Project Circle terminated the contract at his risk and cost and forfeited the security deposit. The order of termination is wrong and hence liable to be declared as void ab initio. Later, the department resorted to revenue recovery proceedings after the issuance of a demand notice for Rs.10,94,683/-. When recovery proceedings initiated O.P.No.6529/84 was filed, though it was disposed of directing to settle the dispute in arbitration Chief Engineer has not acted upon within the statutory period and clause in the agreement became ineffective. In fact the department is liable to compensate the contractor under various heads narrated in the plaint. In total the department is liable to pay Rs.4,47,280/- to the contractor and hence the suit. 3. The department filed the written statement inter alia contending that the plaintiff is not entitled to realize the amount claimed in the plaint. An amount of Rs.20,000/- was deposited by the contractor as security amount at the time of execution of the agreement. The site was immediately handed over to the contractor RFA.No.417 of 2003 5 but in fact he took possession of the site only on 21.8.1979 though the agreement was dated 21.6.1979. There was absolutely no hindrance in carrying out the work. There was no delay in taking initial levels as the initial levels were taken on 1.9.1979 and got it approved by the Superintending Engineer on 17.10.1979. Though the site was handed over to the contractor on 21.8.1979 the work was actually commenced only on 19.10.1979. Payments were actually made for the actual quantity of works executed by the contractor. Though he worked up-to 22.8.1980, failed to complete the earth work. The work done by the contractor were actually measured and recorded in the measurement book and full payment at the rate stipulated in the agreement were paid. 4. The contractor in fact did not blast rocks and therefore, there was no variation in the quantity of the hard rock found at the site. Blasting of boulders were expected to be done after conducting three measurements of the boulders and all the work done by the contractor were measured and entered in the measurement book. For taking initial levels of earth work, excavation should have been completely done and the surface of the rock should be cleared of earth. But the contractor failed to complete the earth work excavation and all on a sudden the work was stopped on 3.11.1979 without any valid reason RFA.No.417 of 2003 6 and resumed excavation only on 7.3.1980 after repeated letters from the department. The contractor had willfully delayed the work for more than four months and hence, the department is not responsible for the delay in execution of the work. As he was a class one contractor he was duty bound to make arrangements to collect men and machinery, tools etc for proper execution of the work as per the agreement. But as he abandoned the work, notice was served on him to resume the work but there was no response and hence, the agreement was terminated on 8.12.1980. The department had to rearrange the work and hence, the department is not liable to pay any amount to the contractor. The security deposit was intended to ensure due performance of the contract and since breach was committed the department is entitled to forfeit the same. The arbitration clause was deleted from the agreement. In short, the department had contended that the contractor had abandoned the work without any valid reason and hence not entitled for the reliefs claimed in the plaint. 5. Before the court below, PW1 was examined on behalf of the contractor and Exts.A1 to A19 were marked. The department did not adduce any oral evidence. But Exts.B1 to B12(a) were marked. 6. The court below on the finding that the suit is barred by limitation as it was not filed within three years of the termination of RFA.No.417 of 2003 7 the contract, dismissed the suit. Feeling aggrieved by the said finding of the court below the contractor has come up with this appeal. 7. Heard Sri.Babu Thomas, the learned counsel for the appellant and Smt.N.S.Rehana the learned Government Pleader for the department. 8. Admittedly, the work entrusted to the contractor was formation of a canal for irrigation purpose. So the contractor was supposed to excavate the earth first as well remove hard stones if found in the site. It was not in dispute that the agreement was executed on 21.6.1979 and the site was handed over on 21.8.1979. The time stipulated for completion of the work was 12 months from the date of handing over of the site. So that was over by 20.8.1980. 9. The definite case of the contractor was that after removal of the earth from the site, boulders were found beneath the earth and so he had to blast those boulders to do the excavation work. It is also the case of the contractor that the department has not actually evaluated and ascertained the nature and type of work before signing the agreement as the presence of bolders was not expected by the department and hence, the contractor had to blast the rocks found at the site and blasting operation was commenced. According to the contractor instead of removal of 20330 M3 of earth the actual quantity RFA.No.417 of 2003 8 of earth removed was only 11000 M3 due to the presence of boulders at the site. But the department has not taken the initial measurement so as to enable the contractor to continue with the work. The formation of canal can be only after removal of the earth, the boulders as well the sheet rock found beneath the boulders. But the department has contended that after the initial measurement was taken, the contractor has abandoned the work. It is pertinent to note that even though rival contentions were raised by the parties and evidence was adduced by the respective parties, the court below failed to evaluate the same but dismissed the suit only on the finding that the plaint claim was barred by limitation as no suit was filed within the period of three years from the date of termination of the contract by the department on 8.12.1980. 10. The learned counsel for the contractor has contended that the termination of the contract itself was wrong as it was done by the Superintending Engineer who had absolutely no authority to do so. 11. Placing reliance on Clause 60 of the Madras Detailed Standard Specification (MDSS for short) the learned counsel for the contractor would point out that the Executive Engineer was the competent authority to determine the contract. Therefore termination by the Superintending Engineer was without authority. For easy RFA.No.417 of 2003 9 ## reference the relevant portion of Clause 60 is extracted here under. **“** 60. Delays in commencement or progress or neglect of work and forfeiture of earnest money, security deposit and withheld amounts:- (a) Time shall be considered as of the essence of the contract. If, at any time, the Executive Engineer shall be of the opinion that the contractor is delaying commencement of the work or violating any of the provisions of the contract or is neglecting or delaying the progress of the work as defined by the tabular statement “Rate of Progress” in the “Articles of Agreement,” he shall so advise the contractor in writing and at the same time demand compliance. If the contractor neglects to comply with such demand within seven days after receipt of such notice, it shall then, or at any time thereafter, be lawful for the Executive Engineer to determine the contract, which determination shall carry with it the forfeiture of the security deposit and the total of the amount withheld under clause 68 below, together with the value of such work as may have been executed and not paid for, or such proportion of such total sums, as shall be assessed by the Executive Engineer. (b) ************” Hence, as per clause 60(a) the competent authority to terminate the contract is the Executive Engineer. Here, Ext.A8 termination notice was issued by the Superintending Engineer. 12. The learned counsel has also invited my attention to the decision reported in **K.Abdulkhader v. State and others [1993 (2)** RFA.No.417 of 2003 10 **KLJ 977]** wherein it was held that as per the Madras Detailed Standard Specifications the authority competent to determine the contract, is the Executive Engineer and not the Superintending Engineer. As the relationship of the parties are governed by the terms of contract only the officers mentioned in the agreement can exercise the powers. On that basis the termination effected in that case was found not in terms of the contract between the parties and so, it was held as illegal and ineffective. 13. The learned Government Pleader has pointed out that as the Superintending Engineer is the superior officer of the Executive Engineer he is competent to issue the termination notice. But in view of clause 60 (a) of MDSS the argument advanced by the learned counsel for the contractor that the Superintending Engineer has no authority to issue the termination notice is justified. Clause 8 of MDSS deals with the delegation of powers of the officials. Clause 8(b) reads thus: “8(b): No delegation by Executive Engineer, Superintending Engineer or higher authority, which affects agreement – It is, however, to be distinctly understood that the Executive Engineer or the Superintending Engineer or the Higher authority who is vested with the powers of acceptance of the particular agreement under reference will make no RFA.No.417 of 2003 11 delegation of powers to such assistants or subordinates which in any way affects the agreement and its contract conditions when such agreement is to be or has been accepted by the Executive Engineer or by the other higher authority respectively. The duties of such assistants or subordinates will be solely duties of supervision to ensure compliance with contract conditions.” 14. Therefore, the argument advanced by the learned counsel for the contractor that the authority competent to determine the contract is the Executive Engineer and not the Superintending Engineer though he is a superior officer as the relationship of the parties is governed by terms of the contract. Here, such an evaluation was not made by the trial court. Whether the Superintending Engineer had the authority to terminate the contract was not looked into by the court below in view of the terms of the agreement. 15. It is admitted that the entire work could not be completed by the contractor as per the agreement. According to the contractor it was because of the non cooperation of the department. Even for the actual work done by him,measurement was not taken and payment was not effected though some part payments were made to the contractor. So it is argued by the learned counsel that the right to sue did not accrue so as to hold that the plaint is barred by limitation on the basis of the termination notice. The right to sue accrues only when RFA.No.417 of 2003 12 the department has taken the measurement of the actual work done by him. Here, the records would reveal that no such measurement was taken and hence, the dismissal of the suit on the mere ground that the suit was filed beyond the period of three years from the date of termination of the contract is difficult to accept. 16. The learned counsel has also invited my attention to the decision of the Apex Court in **Gannon Dunkerley and Co. Ltd. Union of India [1969 3 SC 607]** wherein **i** t has been observed in paragraph Nos. 10 and 11 as follows: “10. Article 115 of the First Schedule to the Limitation Act is a residuary article dealing with the claim for compensation for the breach of any contract, express or implied, not in writing registered and not specifically provided for, in the First Schedule. The period of limitation in such cases is three years and it commences to run when the contract is broken, or where there are successive breaches when the breach in respect of which the suit is instituted occurs or where the breach is continuing when it ceases. The suit filed by the appellant Company is not a suit for compensation for breach of contract express or implied; it is a suit for enhanced rate because of change of circumstances, and in respect of work not covered by the contract. The additional work directed by the Engineer-in-charge when carried out may be deemed to be done under the terms of the contract; but the claim for enhanced rates does not arise out of the contract, it is in any case not a claim for compensation for breach of contract. 11. The claim is therefore not covered by any specific articles under the First Schedule, and must fall within the terms of RFA.No.417 of 2003 13 Article 120. The Solicitor-General appearing on behalf of the Union of India contended that even if the claim falls within the terms of Article 120 of the Limitation Act, it was barred, for, the appellant Company had in the suit made a claim for work done more than six years before the institution of the suit. Counsel submitted that under Article 120 the period of limitation commences to run from the date on which the defendant obtains the benefit of the work done by the plaintiff. But under Article 120 of the Limitation Act the period of six years for suits for which no period of limitation is provided elsewhere in the Schedule commences to run when the right to sue accrues. In our judgment, there is no right to sue until there is an accrual of the right asserted in the suit, and its infringement, or at least a clear and unequivocal threat to infringe that right by the defendant against whom the suit is instituted.” ## 17. The learned counsel for the contractor has also invited my attention to the decision reported in **Aries and Aries v. Tamil Nadu Electricity Board [AIR 1917 SC 1897]** wherein it has been held in para 11 as follows: **“** In the present case, dehors the correspondences that had been exchanged by and between the parties after the date of final payment i.e. 13[th] January, 1981, the aforesaid date of final payment would have been crucial for determination of the period of limitation for filing the instant suit. However, in the present case, from the correspondences that had been exchanged after the date of final payment it clearly appears that the plaintiff after receipt of the payment on 13[th] January, 1981, reiterated its claim for additional payment on different counts including escalation RFA.No.417 of 2003 14 and for extra works done. The defendant instead of rejecting the said claim entertained the same and kept the matter pending. Finally on 6[th] November, 1981 (Exhibit P2) the said claims were rejected. If the claims raised by the plaintiff were entertained and rejected finally on 6[th] November, 1981, it would be reasonable to assume that the cause of action for the suit in respect of the said rejected claims arose on 6[th] November, 1981 and the suit could have been filed at any point of time prior to the expiry of three years from the said date ie;6[th] November, 1981 in view of the Article 113 of the Limitation Act,1963. The suit having been filed on 6[th] November, 1984, the same, therefore, will have to be considered to be within the period of limitation. The High Court, therefore, was not justified in holding the contrary.” 18. In the case referred above, the work was completed by the contractor and in such a situation, the Apex Court has held that the period of limitation will start only from the date of payment of the final bill. But here the situation is different. Admittedly, the contractor has not completed the work entrusted to him as per the agreement. According to the learned counsel measurement of the actual work done was not taken by the department and payment was also not effected for the said work. It was also pointed out by the learned counsel for the contractor that the security amount has not been disbursed. 19. It is pertinent to note that the contractor has approached RFA.No.417 of 2003 15 this Court with a Writ O.P.No.6529/84 when revenue recovery proceedings were initiated against him. By Ext.A11 judgment dated 4.7.1988 this Court has directed to decide the dispute in arbitration to be conducted by the Chief Engineer, PWD. The department has contended that the clause for arbitration in the agreement was deleted. But it is significant to note that in spite of the direction of this court no action was seen taken within the statutory period by the Chief Engineer. The court below has not considered that aspect also in the suit. 20. As referred above, the contractor has adduced oral evidence as well documentary evidence to substantiate his case. Though the department has not adduced any oral evidence Exts.B1 to B12(a) were produced and marked which includes the measurement book, agreement etc. to substantiate its case. But the trial court has not verified the same or appreciated the evidence before the court. In my opinion, the dismissal of the case merely on the ground that it is barred by limitation especially on the basis of a notice by the Superintending Engineer terminating the contract is not good so as to hold that the suit is liable to be dismissed on the sole ground of limitation. A dismissal of the suit at the threshold on the ground that it is barred by limitation is not correct. Hence in view of the foregoing RFA.No.417 of 2003 16 discussion, the appeal succeed and I find that to decide the issue in dispute on merits a remand is inevitable. Therefore,the impugned judgment and decree under challenge are set aside and the case is remanded to the court below for fresh trial. So the court below is directed to evaluate the entire evidence available on record including the question whether the termination of contract is legal or not and dispose of the case on merits. In short, all the points are left open to be decided by the trial court The parties shall appear before the court below on 1.8.2019. Being a case of the year 1991, the court below shall take all endeavor to dispose of the same, at the earliest, at any rate, within a period of eight months from the date of receipt of a copy of this judgment. The contractor/appellant is entitled to get refund of the court fee as per rules. Both parties are at liberty to adduce further evidence, if necessary. Both parties shall cooperate with the trial court to dispose of the suit within the period fixed as above. Accordingly, the appeal is allowed with no order as to costs. **Sd/-** ## **SHIRCY V.** **JUDGE** smm RFA.No.417 of 2003 17