The Steel Industrials Kerala Ltd. v. Mikasa Construction Company (P) Ltd.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE KURIAN JOSEPH & THE HONOURABLE MR. JUSTICE HARUN-UL-RASHID THURSDAY, THE 17TH JANUARY 2008 / 27TH POUSHA 1929 AS.No. 532 of 1994() -------------------OS.911/1991 of II ADDL.SUB COURT,ERNAKULAM .................... APPELLANT/DEFENDANT: ----------- THE STEEL INDUSTRIALS KERALA LTD., S.N.PURAM, CHERTHALA, ALAPPUZHA DISTRICT, REPRESENTED BY ITS CHAIRMAN AND MANAGING DIRECTOR. BY ADVS. SRI.U.K.RAMAKRISHNAN,E.K.MADHAVAN, SRI.E.M.JOSEPH RESPONDENT/PLAINTIFF: ------------- M/S. MIKASA CONSTRUCTION COMPANY (P)LTD., PALARIVATTOM, KOCHI-25, REPRESENTED BY ITS MANAGING DIRECTOR. BY ADV. SRI.P.G.PARAMESWARA PANICKER,P.GOPAL THIS APPEAL SUIT HAVING BEEN FINALLY HEARD ON 30.11.2007, THE COURT ON 17/01/2008, DELIVERED THE FOLLOWING: ORDER IN C.M.P. NO.3299 OF 1994 IN A.S. NO. 532 OF 1994. ## DISMISSED 17.1.2008 Sd/-(KURIAN JOSEPH, JUDGE) Sd/-(HARUN-UL-RASHID, JUDGE) ## **KURIAN JOSEPH & HARUN-UL-RASHID,JJ. ---------------------------------------------------------------A.S. NO. 532 OF 1994** ## **----------------------------------------------------------------** Dated this the 17[th] day of January, 2008 ## **JUDGMENT** ## **Harun-Ul-Rashid, J.** This appeal is filed by the defendant company against the judgment and decree dated 30.9.1993 in O.S. No.911 of 1991 on the file of the II Additional Sub Court, Ernakulam. The court below partly decreed the suit directing the appellant/defendant to pay an amount of Rs.1,92,625.90 together with interest at the rate of 12% per annum from 14.2.1989 till realisation, failing which the plaintiff was allowed to realise the same from the defendant and its assets with costs. 2. The parties herein are referred to as the plaintiff and defendant as in the suit. The suit is for money allegedly due on civil construction contract. According to the plaintiff, the plaintiff was a sub contractor for construction of a factory building at the site of Cochin Export Processing Zone, Kakkanad for M/s Sea world Nylons (P) Limited. At the time of negotiation, at the instance of the defendant, the originally quoted rates were reduced by 5% and the contract was formally signed on 15.1.1988. The total amount of the contract was Rs.17,57,642.60. It is further averred A.S.NO.532/1994 2 by the plaintiff that as per clause (5) of the agreement, the defendant had to supply the necessary cement and M.S. rods at the rate of Rs.1600/- and Rs. 7,200/- per M.T. respectively. The plaintiff started work on 15.1.1988 and furnished necessary security deposit by way of bank guarantee. While the work was going on, the plaintiff submitted five part bills for the quantity of work done and a final bill on 14.2.1989 after taking measurements and on being checked and found correct by the defendant and his authorised representatives. The work was temporarily stopped on 5.9.1998 due to non-availability of cement which was to be supplied by the defendant. It is also averred in the plaint that as per the request of the defendant, the plaintiff waited till 14.2.1989 for arrival of cement to continue the work and that since the defendant did not supply cement, the plaintiff stopped the work and submitted the final bill in addition to the five part bills for the work done. It is also pleaded that at the request of the defendant, the plaintiff carried out certain extra work at the site and also rectification work and the bills for the said work were also submitted to the defendant along with letter dated 14.2.1989. The plaintiff also claimed Rs. 1,36,493/- being the value of implements, equipments and tools like 4000 sq. feet wooden planks 1200 bamboo poles, 3000 metres wooden runner and 24 numbers of steel sheets stating that the above equipments and tools and the balance materials were not allowed to be removed from A.S.NO.532/1994 3 the work site. According to the plaintiff, the total amount due from the defendant is Rs.2,63,277.71 which was limited to Rs.2,00,000/- as on the date of the suit. 3. The suit was contested by the appellant/defendant. The defendant inter alia contended that the courts at Ernakulam had no jurisdiction to entertain the suit since all other courts except the courts at Alappuza are specifically excluded by agreement dated 1.3.1988. The defendant also contended that the five part bills sent by the plaintiff were paid completely and that the final bill is not acceptable since there is no justification to issue such a bill. It was further contended that no materials were left behind at the work site and that no extra work or rectification work were done by the plaintiff. The defendant prayed for dismissal of the suit contending that no amount was due from the defendant to the plaintiff. 4. On the side of the plaintiff PW.1 was examined and Exts.A1 to A9 were produced and marked. DW.1 was examined on the side of the defendant and Exts.B1 to B19(a) were marked. 5. Learned counsel appearing for the appellant/defendant contended A.S.NO.532/1994 4 before us that the court below had no jurisdiction to entertain the suit since all courts except the courts at Alappuzha were excluded as per Ext.A4 agreement. Counsel also contended that the suit is barred by limitation. The issue regarding jurisdiction was tried as a preliminary issue and the trial court as per order dated 11.11.1992 held that the court has jurisdiction to entertain the suit. The appellant/defendant has not taken up this matter before the appellate or revisional court. The question on that issue was decided and subsequently, the appellant also pursued the case before the same court. Therefore, as rightly found by the court below, the issue regarding jurisdiction does not arise for consideration at this stage. 6. Learned counsel appearing for the appellant contended that under Article 18 of the Limitation Act, 1983, the period of three years starts when the work is done . If the date of work done is fixed as the statutory point of limitation, the suit is barred by limitation. We have gone through the clauses in Ext.A4 conditions of agreement. Under clause 32 (6) of Ext.A4 it is stipulated that final measurements will be carried out within 30 days minimum or 90 days from the practical completion of the work. Clause 32(7) stipulates that payments will be returned for completed items only and that the Finance department required a reasonable time to check the measurement book and release payment. In A.S.NO.532/1994 5 the decision reported in **State v. Ram Kishan, A.I.R. 1977 Rajasthan 165,** a Full Bench of the Rajasthan High Court held that the words :''work done'' in Article 56 of the Limitation Act, 1908 (Article 18 in the new Act) include a works contract and that Article 56 covers a suit by a contractor for recovery of price for the work done and materials supplied. It was held that where a suit is based on a building contract, it is governed by Article 56 and the starting point of limitation would be the date when the Engineer-in-charge issues a certificate of completion and when the final measurements are made and that where such a suit is for breach of contract, the suit falls under Article 115 of the Limitation Act, 1908 and the period is to be reckoned from the date of breach of contract, i.e., the date of drawing up of the final bill. It was also held in the above decision that is not possible to lay down any rule of universal application and that each case must depend on its own facts. The Full Bench further held that the courts in India have given a wider meaning to the words 'work done' in Article 56 and treated a works contract as coming within its purview. 7. On a consideration of the provisions referred to above, we are of the view that on a general contract for work to be done, the cause of action accrues when the work is done. A contract to do work may, however, contain a condition that the price should be paid when a certain A.S.NO.532/1994 6 contingency has happened and in such a case the cause of action does not arise till the contingency happened. Unless the conditions laid down in Clause 32 (6) and (7) have been fulfilled, the contractor has no right to receive any payment of price for work done. It is the duty of the appellant company to carry out the measurements of the work done after completion of the work. Till the measurements are taken, the contractor cannot submit his bill and get payment and cause of action for payment in terms of the contract does not arise. In such cases where there are reciprocal obligations for submitting or scrutinising of bills before payment can be received, the cause of action for payment does not arise on the completion of works and time cannot run till the cause of action accrues. Till the final measurements are made , the contractor cannot place his claim for payment even after completion of the work. In the decision reported in **Gannon Dunkerley & Co. Ltd. v. Union of India (AIR 1970 SC 1433),** their Lordships while dealing with a claim by a contractor for payment of additional rate held that the claim in suit was not for the price of the additional work done, but for enhanced rate in view of the altered circumstances and, therefore, Article 56 was not applicable . Their lordships then held that that the additional work directed by the Engineerin-charge when carried out might be deemed to be done under the terms of the contract; but the claim for enhanced rates did not arise out of the A.S.NO.532/1994 7 contract; it was in any case not a claim for compensation for breach of contract and, therefore, Article 115 was not attracted. On that view, their Lordships held that the claim for enhanced rates must fall within the terms of Article 120. Ext.A3 is the work order dated 15.1.1988 issued by the defendant to the plaintiff. The suit was filed on 21.12.1991. The contract was executed on 1.3.1988. During the course of work, the plaintiff submitted five part bills for the quantity of work done and a final bill on 14.2.1989 after taking measurements and on being checked and found correct by the defendant and his authorised representatives. The starting point of limitation would be the date on which the defendant issued the certificate of completion after making the final measurement. If the period is reckoned from the date of presentation of the final bill and final measurement, the suit is well within the period of three years and, therefore, the same is not barred by limitation. 8. The defendant contended that the entire amount has been paid to the plaintiff and hence the company is not liable to make any payments whatsoever in respect of any of the bills mentioned in the plaint. The trial court noted the fact that though such a contention was raised, no evidence was adduced to show that the amounts covered by the bills were paid. As per clause (5) of the agreement, the defendant is duty bound to supply A.S.NO.532/1994 8 cement and M.S. rods at the rates mentioned therein. The plaintiff started work as agreed and furnished security deposit by way of bank guarantee. It is proved that during the course of work, the plaintiff submitted five part bills for the quantity of work done and the final bill on 14.2.1989 after taking measurements and on being checked and found correct by the defendant and his authorised representatives. It is seen that out of the total amount shown , the plaintiff has deducted a sum of Rs.30,400/- being the value of cement and M.S. rods. A negotiation was made at 5% discount, deduction amount was 5% and income tax was 1%. These amounts were deducted from the total amount. The court below also considered each part of the bill and the net amount due after deducting the amount of 5% deduction and 1% income tax. The plaintiff had also sent letters to the defendant along with the part bills. Exts.B1 and B2 are the original letters forwarding the first and second part bills. As per Ext.B2, the defendant was intimated regarding the deduction of 5% from the quoted rate and acceptance of the said rate. In the second part bill forwarded by the plaintiff along with Ext.B2 letter, the outstanding amount was shown as Rs.60,076.13 after deducting the cost of 785 bags of cement at the rate of Rs.80/- and 4.422 M.T. steel rods at the rate of Rs.7,200/per M.T. The Assistant Manager of the defendant/company who was examined as DW.1 stated that he had certified all the bills and accepted the A.S.NO.532/1994 9 measurement and that Ext.B6 bill which was submitted after the work was stopped was not certified. According to DW.1, the work was stopped because the business transaction between the defendant and Sea World Nylon Company was terminated due to some dispute between them. He further testified that because of the above termination of work, the defendant/company was not in a position to continue the contract with the plaintiff. 9. The plaintiff as per Ext.B6 bill claimed amount for the balance work. Plaintiff also claimed amount for the extra work as well as the rectification work and submitted necessary bills for the same on 14.2.1989. The plaintiff also claimed an amount of Rs.15,400.21 which was deducted towards retention when payments towards part bills were made. It is also admitted by the defendant that extra work and rectification work were done by the plaintiff after sending Ext.B5 bill. 10. After analysing the materials on record and discussing in detail in paragraphs 9 and 13 of the judgment, the court below came to the conclusion that from the available evidence, it was quite clear that the defendant had not paid the entire amount to the plaintiff and that the contract was terminated due to non-supply of cement and M.S. rods which A.S.NO.532/1994 10 the defendant was bound to supply to the plaintiff for completion of the work. The reasons stated by the court below for coming to such a conclusion is based on facts and evidence and there is no justifiable reason to reverse the findings. Therefore, we are in agreement with the court below that amounts are due to the plaintiff from the defendant. The finding that the plaintiff is entitled to amount for the extra work and the rectification work also does not call for any interference. The plaintiff has calculated an amount of Rs.2,44,668.58 as due from the defendant. This amount is inclusive of Rs.1,36,493/- being the value of implements, equipments and tools which were kept at the work site. The court below rejected the claim for implements, equipments and tools. Learned counsel for the appellant contended before us that the court below having rightly rejected the claim of Rs.1,36,493/-, ought not to have found that the plaintiff was entitled to get Rs.1,92,625.90 out of the limited claim of Rs.2,00,000/-. He invited our attention to paragraph 9 of the plaint which reads as follows: “Towards the first four part bills the defendant paid a total amount of Rs.1,81,502.92, after deducting a retention at 5% totalling Rs.15,400.21. The defendant also deducted an amount of Rs.3086.06 towards Income Tax deduction. Thus as per the said six bills the balance due is Rs.1,09,677.31.” A.S.NO.532/1994 11 It is seen that in the above paragraph, it is pleaded that the balance amount due to the plaintiff is Rs.1,09,677.31. Paragraph 14 of the plaint reads as follows: “Thus as on 14--2--1989 an amount of Rs.1,09,677.31 towards the balance of the bills for the work already done plus Rs.7636.40 towards the extra work, Rs.4071/- towards rectification work, Rs.15,400.21 towards retention money and Rs.1,36,493.00 towards cost of equipments and tools totalling Rs.2,63,277.71 is due to the plaintiff from the defendant company. Plaintiff is also entitled to 18% interest for the said amount from 14--2--1989 onwards. Inspite of several demands made on the defendant, the defendant has refused to pay the amounts.” 11. The court below directed the defendant to pay an amount of Rs. 1,92,625.90 to the plaintiff. There appears to be some mistake in the calculation. Excluding the amount of Rs.1,36,493/- being the value of equipments and tools, the plaintiff is entitled to an amount of Rs.1,36,784.92. The prayer in the plaint is to allow the plaintiff to realise the amount due with future at 12% from the defendant and its assets. The court below decreed the amount together with interest at the rate of 12% per annum from 14.2.1989 till realisation. We have noted that the plaintiff has claimed interest only from the date of the suit. Therefore, the plaintiff A.S.NO.532/1994 12 is not entitled to interest from 14.2.1989. In the result, the appeal is partly allowed. The judgment and decree of the court below is modified and the defendant is directed to pay an amount of Rs. 1,36,784.92 together with interest at the rate of 12% per annum from the date of the suit till realisation. In all other respects, the finding of the court below shall stand confirmed. There will be no order as to costs. ## **(KURIAN JOSEPH, JUDGE)** **(HARUN-UL-RASHID, JUDGE)** ## **sp/** A.S.NO.532/1994 13 **KURIAN JOSEPH & HAURN-UL-RASHID, JJ.** **A.S.NO532 OF1994** **JUDGMENT** **17TH JANUARY, 2008**