Kerala High Court · 2008

KURIAN JOSEPH & HARUN-UL-RASHID,JJ.----------------------------------------------------------------A.S. NO. 532 OF 1994----------------------------------------------------------------Dated this the 17th day of January, 2008JUDGMENTHarun-Ul-Rashid, J.This appeal is filed by the defendant company against the judgmentand decree dated 30.9.1993 in O.S. No.911 of 1991 on the file of the IIAdditional Sub Court, Ernakulam. The court below partly decreed the suitdirecting the appellant/defendant to pay an amount of Rs.1,92,625.90together with interest at the rate of 12% per annum from 14.2.1989 tillrealisation, failing which the plaintiff was allowed to realise the samefrom the defendant and its assets with costs. 2. The parties herein are referred to as the plaintiff and defendantas in the suit. The suit is for money allegedly due on civil constructioncontract. According to the plaintiff, the plaintiff was a sub contractor forconstruction of a factory building at the site of Cochin Export ProcessingZone, Kakkanad for M/s Sea world Nylons (P) Limited. At the time ofnegotiation, at the instance of the defendant, the originally quoted rateswere 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.532/19942by the plaintiff that as per clause (5) of the agreement, the defendant hadto supply the necessary cement and M.S. rods at the rate of Rs.1600/- andRs. 7,200/- per M.T. respectively. The plaintiff started work on15.1.1988 and furnished necessary security deposit by way of bankguarantee. While the work was going on, the plaintiff submitted five partbills for the quantity of work done and a final bill on 14.2.1989 after takingmeasurements and on being checked and found correct by the defendantand his authorised representatives. The work was temporarily stopped on5.9.1998 due to non-availability of cement which was to be supplied by thedefendant. It is also averred in the plaint that as per the request of thedefendant, the plaintiff waited till 14.2.1989 for arrival of cement tocontinue the work and that since the defendant did not supply cement, theplaintiff stopped the work and submitted the final bill in addition to thefive part bills for the work done. It is also pleaded that at the request of thedefendant, the plaintiff carried out certain extra work at the site and alsorectification work and the bills for the said work were also submitted to thedefendant along with letter dated 14.2.1989. The plaintiff also claimedRs. 1,36,493/- being the value of implements, equipments and tools like4000 sq. feet wooden planks 1200 bamboo poles, 3000 metres woodenrunner and 24 numbers of steel sheets stating that the above equipmentsand tools and the balance materials were not allowed to be removed from A.S.NO.532/19943the work site. According to the plaintiff, the total amount due from thedefendant is Rs.2,63,277.71 which was limited to Rs.2,00,000/- as on thedate of the suit. 3. The suit was contested by the appellant/defendant. Thedefendant inter alia contended that the courts at Ernakulam had nojurisdiction to entertain the suit since all other courts except the courts atAlappuza are specifically excluded by agreement dated 1.3.1988. Thedefendant also contended that the five part bills sent by the plaintiff werepaid completely and that the final bill is not acceptable since there is nojustification to issue such a bill. It was further contended that no materialswere left behind at the work site and that no extra work or rectificationwork were done by the plaintiff. The defendant prayed for dismissal ofthe suit contending that no amount was due from the defendant to theplaintiff. 4. On the side of the plaintiff PW.1 was examined and Exts.A1 toA9 were produced and marked. DW.1 was examined on the side of thedefendant and Exts.B1 to B19(a) were marked. 5. Learned counsel appearing for the appellant/defendant contended A.S.NO.532/19944before us that the court below had no jurisdiction to entertain the suit sinceall courts except the courts at Alappuzha were excluded as per Ext.A4agreement. Counsel also contended that the suit is barred by limitation.The issue regarding jurisdiction was tried as a preliminary issue and thetrial court as per order dated 11.11.1992 held that the court hasjurisdiction to entertain the suit. The appellant/defendant has not taken upthis matter before the appellate or revisional court. The question on thatissue was decided and subsequently, the appellant also pursued the casebefore the same court. Therefore, as rightly found by the court below, theissue regarding jurisdiction does not arise for consideration at this stage. 6. Learned counsel appearing for the appellant contended thatunder Article 18 of the Limitation Act, 1983, the period of three yearsstarts when the work is done . If the date of work done is fixed as thestatutory point of limitation, the suit is barred by limitation. We have gonethrough the clauses in Ext.A4 conditions of agreement. Under clause 32(6) of Ext.A4 it is stipulated that final measurements will be carried outwithin 30 days minimum or 90 days from the practical completion of thework. Clause 32(7) stipulates that payments will be returned forcompleted items only and that the Finance department required areasonable time to check the measurement book and release payment. In A.S.NO.532/19945the decision reported in State v. Ram Kishan, A.I.R. 1977 Rajasthan165, a Full Bench of the Rajasthan High Court held that the words :''workdone'' 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 contractorfor recovery of price for the work done and materials supplied. It washeld that where a suit is based on a building contract, it is governed byArticle 56 and the starting point of limitation would be the date when theEngineer-in-charge issues a certificate of completion and when the finalmeasurements are made and that where such a suit is for breach ofcontract, the suit falls under Article 115 of the Limitation Act, 1908 andthe period is to be reckoned from the date of breach of contract, i.e., thedate of drawing up of the final bill. It was also held in the above decisionthat is not possible to lay down any rule of universal application and thateach case must depend on its own facts. The Full Bench further held thatthe courts in India have given a wider meaning to the words 'work done' inArticle 56 and treated a works contract as coming within its purview.7. On a consideration of the provisions referred to above, we are ofthe view that on a general contract for work to be done, the cause of actionaccrues 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.532/19946contingency has happened and in such a case the cause of action does notarise till the contingency happened. Unless the conditions laid down inClause 32 (6) and (7) have been fulfilled, the contractor has no right toreceive any payment of price for work done. It is the duty of the appellantcompany to carry out the measurements of the work done after completionof the work. Till the measurements are taken, the contractor cannot submithis bill and get payment and cause of action for payment in terms of thecontract does not arise. In such cases where there are reciprocalobligations for submitting or scrutinising of bills before payment can bereceived, the cause of action for payment does not arise on the completionof works and time cannot run till the cause of action accrues. Till thefinal measurements are made , the contractor cannot place his claim forpayment even after completion of the work. In the decision reported inGannon Dunkerley & Co. Ltd. v. Union of India (AIR 1970 SC 1433),their Lordships while dealing with a claim by a contractor for payment ofadditional rate held that the claim in suit was not for the price of theadditional work done, but for enhanced rate in view of the alteredcircumstances and, therefore, Article 56 was not applicable . Theirlordships then held that that the additional work directed by the Engineer-in-charge when carried out might be deemed to be done under the terms ofthe contract; but the claim for enhanced rates did not arise out of the A.S.NO.532/19947contract; it was in any case not a claim for compensation for breach ofcontract and, therefore, Article 115 was not attracted. On that view, theirLordships held that the claim for enhanced rates must fall within the termsof Article 120. Ext.A3 is the work order dated 15.1.1988 issued by thedefendant to the plaintiff. The suit was filed on 21.12.1991. The contractwas executed on 1.3.1988. During the course of work, the plaintiffsubmitted five part bills for the quantity of work done and a final bill on14.2.1989 after taking measurements and on being checked and foundcorrect by the defendant and his authorised representatives. The startingpoint of limitation would be the date on which the defendant issued thecertificate of completion after making the final measurement. If the periodis reckoned from the date of presentation of the final bill and finalmeasurement, 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 tothe plaintiff and hence the company is not liable to make any paymentswhatsoever in respect of any of the bills mentioned in the plaint. The trialcourt noted the fact that though such a contention was raised, no evidencewas adduced to show that the amounts covered by the bills were paid. Asper clause (5) of the agreement, the defendant is duty bound to supply A.S.NO.532/19948cement and M.S. rods at the rates mentioned therein. The plaintiff startedwork as agreed and furnished security deposit by way of bank guarantee.It is proved that during the course of work, the plaintiff submitted five partbills for the quantity of work done and the final bill on 14.2.1989 aftertaking measurements and on being checked and found correct by thedefendant and his authorised representatives. It is seen that out of thetotal amount shown , the plaintiff has deducted a sum of Rs.30,400/- beingthe value of cement and M.S. rods. A negotiation was made at 5%discount, deduction amount was 5% and income tax was 1%. Theseamounts were deducted from the total amount. The court below alsoconsidered each part of the bill and the net amount due after deducting theamount of 5% deduction and 1% income tax. The plaintiff had also sentletters to the defendant along with the part bills. Exts.B1 and B2 are theoriginal letters forwarding the first and second part bills. As per Ext.B2,the defendant was intimated regarding the deduction of 5% from thequoted rate and acceptance of the said rate. In the second part billforwarded by the plaintiff along with Ext.B2 letter, the outstanding amountwas shown as Rs.60,076.13 after deducting the cost of 785 bags of cementat 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 wasexamined as DW.1 stated that he had certified all the bills and accepted the A.S.NO.532/19949measurement and that Ext.B6 bill which was submitted after the work wasstopped was not certified. According to DW.1, the work was stoppedbecause the business transaction between the defendant and Sea WorldNylon Company was terminated due to some dispute between them. Hefurther testified that because of the above termination of work, thedefendant/company was not in a position to continue the contract with theplaintiff. 9. The plaintiff as per Ext.B6 bill claimed amount for the balancework. Plaintiff also claimed amount for the extra work as well as therectification 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 deductedtowards retention when payments towards part bills were made. It is alsoadmitted by the defendant that extra work and rectification work weredone by the plaintiff after sending Ext.B5 bill.10. After analysing the materials on record and discussing in detailin paragraphs 9 and 13 of the judgment, the court below came to theconclusion that from the available evidence, it was quite clear that thedefendant had not paid the entire amount to the plaintiff and that thecontract was terminated due to non-supply of cement and M.S. rods which A.S.NO.532/199410the defendant was bound to supply to the plaintiff for completion of thework. The reasons stated by the court below for coming to such aconclusion is based on facts and evidence and there is no justifiable reasonto reverse the findings. Therefore, we are in agreement with the courtbelow that amounts are due to the plaintiff from the defendant. Thefinding that the plaintiff is entitled to amount for the extra work and therectification work also does not call for any interference. The plaintiff hascalculated an amount of Rs.2,44,668.58 as due from the defendant. Thisamount is inclusive of Rs.1,36,493/- being the value of implements,equipments and tools which were kept at the work site. The court belowrejected the claim for implements, equipments and tools. Learned counselfor the appellant contended before us that the court below having rightlyrejected the claim of Rs.1,36,493/-, ought not to have found that theplaintiff was entitled to get Rs.1,92,625.90 out of the limited claim ofRs.2,00,000/-. He invited our attention to paragraph 9 of the plaint whichreads as follows:“Towards the first four part bills thedefendant paid a total amount of Rs.1,81,502.92,after deducting a retention at 5% totallingRs.15,400.21. The defendant also deducted anamount of Rs.3086.06 towards Income Taxdeduction. Thus as per the said six bills thebalance due is Rs.1,09,677.31.” A.S.NO.532/199411It is seen that in the above paragraph, it is pleaded that the balance amountdue to the plaintiff is Rs.1,09,677.31. Paragraph 14 of the plaint reads asfollows:“Thus as on 14--2--1989 an amount ofRs.1,09,677.31 towards the balance of the billsfor the work already done plus Rs.7636.40towards the extra work, Rs.4071/- towardsrectification work, Rs.15,400.21 towardsretention money and Rs.1,36,493.00 towards costof equipments and tools totalling Rs.2,63,277.71is due to the plaintiff from the defendantcompany. Plaintiff is also entitled to 18% interestfor the said amount from 14--2--1989 onwards.Inspite of several demands made on thedefendant, the defendant has refused to pay theamounts.”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 thecalculation. Excluding the amount of Rs.1,36,493/- being the value ofequipments and tools, the plaintiff is entitled to an amount ofRs.1,36,784.92. The prayer in the plaint is to allow the plaintiff to realisethe amount due with future at 12% from the defendant and its assets. Thecourt 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 plaintiffhas claimed interest only from the date of the suit. Therefore, the plaintiff A.S.NO.532/199412is not entitled to interest from 14.2.1989.In the result, the appeal is partly allowed. The judgment and decreeof the court below is modified and the defendant is directed to pay anamount of Rs. 1,36,784.92 together with interest at the rate of 12% perannum from the date of the suit till realisation. In all other respects, thefinding of the court below shall stand confirmed. There will be no orderas to costs.(KURIAN JOSEPH, JUDGE)(HARUN-UL-RASHID, JUDGE)sp/ A.S.NO.532/199413KURIAN JOSEPH &HAURN-UL-RASHID, JJ.A.S.NO532 OF1994JUDGMENT17TH JANUARY, 2008