REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1770 OF 2005
STATE OF GUJARAT … APPELLANT
VERSUS
M/S KOTHARI AND ASSOCIATES … RESPONDENT
J U D G M E N T
VIKRAMAJIT SEN, J.
1 This Appeal lays siege to the decision of the Division Bench of the
High Court of Gujarat at Ahmedabad which dismissed the appeal of the
Appellant before us while allowing the cross-objection filed by the
Plaintiff/Respondent by holding it to be entitled to claim interest for an
extended period. For the reasons which will follow, we have set aside
these concurrent findings against the Appellant State, principally on the
ground that the claim of the Respondent stood barred by the principles of
prescription as contained in the Limitation Act, 1963.
2 The Appellant State invited tenders for providing lining to the main
canal line. The Respondent, a registered partnership, submitted a tender
that was accepted by the Appellant State. Thereafter a regular agreement
was entered into according to which the Respondent would have from 15th
November to 14th June as its working period. Under the Work-Order dated
24.9.1976, the Respondent was required to complete the work within 18
months, i.e. on or before 23.3.1978. The case of the Respondent, which we
have no cause to disbelieve, is that there were repeated and consecutive
delays in handing over the site due to which the Respondent could not
complete the work within the stipulated time. The first season was to
extend from 15.11.1976 to 14.7.1977, but the canal was only made available
on 15.1.1977 and even then the cement was not issued to the Respondent by
the Appellant State till 31.1.1977. The second season was to extend from
15.11.1977 to 23.3.1978, but the canal was handed over on 15.3.1978. At the
Respondent’s request, the contract period was extended to 14.6.1978, but
the Appellant State specifically stated that no compensation would be
payable for the extension. Pursuant to a written request by the Respondent,
a third season from 15.11.1978 to 14.6.1979 was granted, but yet again the
site was handed over as late as on 15.3.1979. The Respondent sought further
time to complete the project, and was consequently granted a fourth season
which was to extend from 15.11.1979 to 29.6.1980. The site was once again
made available with delay only on 15.3.1980. The work was finally completed
on 20.6.1980. It is noteworthy that in each request for an extension, the
Respondent sought compensation for monetary loss due to the extended time
limit, but while allowing each extension the Appellant State denied the
claim for compensation each time. The Respondent’s case was that as per the
contract period, 342 days should have been made available to it to conduct
the stipulated work, but as a result of the delay in handing over the site
and the materials, the Respondent had to seek extensions, and nevertheless
managed to complete the project in 288 working days, thus indicating that
there was no laxity on its part. The Respondent signed the Final Bill under
protest on 1.1.1982; and the Security Deposit was refunded on 27.1.1982.
Thereupon, the Respondent addressed a statutory notice under Section 80 of
the C.P.C. dated 7.8.1983 to the Appellant State, claiming damages as a
result of the additional costs incurred due to the above mentioned delays.
The Respondent eventually filed a suit on 25.1.1985 seeking damages under
thirteen different heads, including price escalation in labour due to the
prolongation of the work, price escalation in fuel lubricants etc.,
overstay of capital and machinery, and overheads such as staff, kitchen,
office etc.
3 The Trial Court found that the delay was caused by the Appellant
State; that work was completed by the Respondent well within the number of
days contractually allocated to complete it. Noting that under Section 73
of the Indian Contract Act compensation is payable for any loss or damage
for breach of a contract, the Trial Court granted compensation under twelve
of the thirteen heads of claims itemised by the Respondent. In terms of its
Judgment dated 4.5.1991 the Trial Court observed that the factual matrix
pertaining to these amounts claimed have remained uncontroverted, and
accordingly decreed the suit. The Respondent was granted Rs.13,61,571/-
with interest at 12 per cent per annum with effect from 7.8.1983 viz. the
date of the statutory notice. The Appellant State appealed against the
decree and the Respondent filed a counter-claim seeking interest from the
date of written demand of the suit claim instead of from the date of
statutory notice. The High Court, vide its judgment dated 30.7.2003,
dismissed the appeal filed by the Appellant State and allowed the
Respondent’s cross objection, granting interest thereon from 5.3.1982.
4 The Appellant State has contended that the High Court ignored its
myriad objections/submissions in connection with the various different
heads; that the bills paid from time to time by the Respondent including
the Final Bill were accepted without any remonstration or reservation being
raised, thereby inexorably leading to the conclusion that the suit was
clearly an afterthought; and that the suit was barred by limitation as the
claims were raised after a lapse of more than three years from the arising
of the causes of action. It is only the last contention to which we shall
advert our attention.
5 It would be pertinent to note that the issue of limitation was not
pleaded as a ground before the Trial Court or the High Court. It was
pressed for the first time in the course of oral arguments before the High
Court. Nonetheless, it has been discussed in the impugned Order. The High
Court, noting the contention raised by the Respondent that the point of
limitation was a mixed question of fact and law and could therefore not be
adjudicated at this point, held that even if it could be adjudicated, the
suit would not be barred by principles of prescription as it was based on a
series of successive breaches committed by the Appellant State, and in such
circumstances the date of the last breach was relevant. The High Court was
of the opinion that limitation need not mandatorily be computed on the
basis of each cause of action. It held the date of return of the Security
Deposit as the last date of payment for the work done, and concluded that
the suit had been filed within three years from this date. The suit was
therefore found to be within the prescribed period of limitation.
6 Section 3 of the Limitation Act explicitly states that “every suit
instituted, appeal preferred, and application made after the prescribed
period shall be dismissed, although limitation has not been set up as a
defence.” It is thus incumbent upon the Court to satisfy itself that the
suit is not barred by limitation, regardless of whether such a plea has
been raised by the parties. In Union of India vs. British India Corporation
Ltd (2003) 9 SCC 505, it has been opined that “the question of
limitation is a mandate to the forum and, irrespective of the fact whether
it was raised or not, the forum must consider and apply it, if there is no
dispute on facts.” It is thus irrelevant that the Appellant State had not
raised the issue of limitation before the Trial Court. A duty was cast on
the Court to consider this aspect of law, even on its own initiative, and
since it failed to do so, the Appellant State was competent to raise this
legal question in appeal or indeed even in any successive appeal. Close to
a century ago, in Lachhmi Sewak Sahu vs. Ram Rup Sahu AIR 1944 Privy
Council 24, it has been held that the point of limitation is available to
be urged even in the Court of last resort. Furthermore, we are not
confronted with a situation where the plea of limitation is a mixed
question of fact and law, or where additional evidence needs to be adduced.
The submissions of Learned Counsel for the Respondent to the effect that
the Appellant is foreclosed and precluded from urging the plea of the bar
of limitation are meretricious and are rejected. We shall now proceed to
consider whether the suit was in fact barred by limitation.
7 The period of limitation would be computed under either Article 55 or
Article 113, both of which are laid out below of the facility of reference:
|Description of Suit |Period of |Time from which period |
| |Limitation |begins to run |
|Art 55. For |Three years |When the contract is |
|compensation for the | |broken or (where there |
|breach of any | |are successive |
|contract, express or | |breaches) when the |
|implied, not herein | |breach in respect of |
|specially provided | |which the suit is |
|for. | |instituted occurs or |
| | |(where the breach is |
| | |continuing) when it |
| | |ceases. |
|Art. 113. Any suit |Three years |When the right to sue |
|for which no period | |accrues. |
|of limitation is | | |
|provided elsewhere in| | |
|this Schedule | | |
8 It would be pertinent, at this point, to recall the decision of this
Court in Gannon Dunkerley and Co. Ltd. vs. Union of India (1969) 3 SCC 607,
though that matter dealt with the provisions of the Indian Limitation Act,
1908. The Appellants/Plaintiff therein filed a suit seeking an enhanced
rate of compensation in light of the deviation in the nature of the work
being rendered more complex, the increase in costs due to undue
prolongation of the period of work, the increase in the quantity of work,
and the grant of contracts to other competing parties at substantially
higher rates. This Court held that 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 rates because of change of circumstances, and in
respect of work not covered by the contract.” The claim for enhanced rates
was found to arise outside the contract and for this reason was not in the
genre of an action for compensation for breach of contract. It was
therefore held that the claim was not covered under Article 115 of the 1908
Act (which is in pari materia to Article 55 of the Limitation Act), and
would have to fall within the ambit of Article 120 of the 1908 Act (which
is akin to Article 113 of the Limitation Act). The facts at hand are
dissimilar to those in Gannon Dunkerley in that the damages sought by the
present Respondent are for work covered by the contract, and the change in
circumstances was directly caused by breaches ascribable to the Appellant
State in not handing-over the site on time. Facially, the suit claims are
damages incurred due to the extension of the contract period and the
resultant damages are incurred by the Respondent. The suit would therefore
fall within the ambit of Article 55. Article 113, which is a residuary
provision, cannot be resorted to.
9 It also appears to us that the contract was clearly not broken as the
Respondents chose to keep it alive despite its repeated breaches by the
Appellant State. The factual matrix presents a situation of successive or
multiple breaches, rather than of a continuous breach, as each delay in
handing over the canal/site by the Appellant State constituted to a breach
that was distinct and complete in itself and gave rise to a separate cause
of action for which the Respondent could have rescinded the contract or
possibly claimed compensation due to prolongation of time and resultant
escalation of costs. Of course the Respondent is enabled to combine all
these causes of action in one plaint, as postulated in the C.P.C provided
each claim is itself justiciable. Even the Respondent has argued before
the High Court that the suit was based on successive breaches committed by
the Appellant State. In our opinion, the suit was required to be filed
within three years of the happening of each breach, which would constitute
a distinct cause of action. Article 55 specifically states that in respect
of successive breaches, the period begins to run when the breach in respect
of which the suit is instituted, occurs. In this vein, Rohtas Industries
Ltd vs. Maharaja of Kasimbazar China Clay Mines ILR (1951) 1 Cal 420 is
apposite as it has held that when a party agrees to deliver certain goods
every month for a duration spanning certain years, the cause of action for
breach for failure to deliver in a particular month arises at the end of
that month and not at the end of the period of the contract. The situation
before us is similar in that the cause of action had arisen on each
occasion when the Appellant State failed to hand over the site at the
contractually stipulated time. Specifically, the limitation periods arose
on 15.11.1976, 15.11.1977, 15.11.1978 and 15.11.1979, i.e. on the first day
of each season, when the Respondent State committed a breach by failing to
hand over the site. Thus the period of limitation did not commence at the
termination of the contract period or the date of final payment. The High
Court’s conclusion that the last date of breach and last date of payment
were relevant, not each cause of action, was thus patently erroneous. For
each breach, a corresponding amount of damages for additional costs could
have been sought. The suit, however, was filed on 25.1.1985, well after the
limitation period of three years for even the final breach, as the various
causes of action became time barred on 15.11.1979, 15.11.1980, 15.11.1981
and 15.11.1982 respectively.
10 There is another perspective on the method or manner in which
limitation is to be computed. We have already narrated that the
Respondent, on every occasion when the extension was sought by it, had
requested to be compensated for delay. The Appellant State had granted the
extensions but had repudiated and rejected the Respondent’s claims for
damages. The effect of these events would be that the cause of action for
making the claim for damages indubitably arose on each of those occasions.
It is certainly arguable that the Appellant State may have also been
aggrieved by the delay, although the facts of the case appear to be
unfavourable to this prediction, since delay can reasonably be laid at the
door of the Appellant. The Respondent, however, could prima facie be
presumed to have accepted a renewal or extension in the period of
performance but with the rider that the claim for damages had been
abandoned by it. If this assumption was not to be made against the
Respondent, it would reasonably be expected that the Respondent should have
filed a suit for damages on each of these occasions. In a sense, a fresh
contract would be deemed to have been entered into between the parties on
the grant of each of the extensions. It is therefore not legally possible
for the Respondent to contend that there was a continuous breach which
could have been litigated upon when the contract was finally concluded. In
other words, contemporaneous with the extensions granted, it was essential
for the Respondent to have initiated legal action. Since this was not
done, there would be a reasonable presumption that the claim for damages
had been abandoned and given a go-by by the Respondent.
11 In a works contract, more often than not, delays occur, and that is
why it is assumed that time is not of the essence. Where extensions are
asked for and granted, there must be a clear and discernable stand on
behalf of either of the parties that the extension is granted and/or
accepted without prejudice to the claim of damages. It has become
commonplace that neither party lodges a claim for damages, but waits for
the end of the contract to raise these disputes, taking advantage of the
nebulous and equivocal nature of the transactions between them. This,
however, is not the position that obtains before us since the Appellant
State had categorically posited that the claim for damages for the alleged
delay on its part would not be entertained.
12 The Respondent has sought to place reliance on Section 19 of the
Limitation Act. It would be apposite to reproduce this Section:
19. Effect of payment on account of debt or of interest on legacy.—Where
payment on account of a debt or of interest on a legacy is made before the
expiration of the prescribed period by the person liable to pay the debt or
legacy or by his agent duly authorised in this behalf, a fresh period of
limitation shall be computed from the time when the payment was made.
This Section would not come to the aid of the Respondent, as the suit
before us is not for payment on account of a debt or of interest on legacy,
but is a suit for damages for additional costs incurred as a result of the
extension of the contract period. This Court in Union of India vs. Raman
Iron Foundry 1974 (2) SCC 231, after placing reliance on Jones v.
Thompson [1858] 27 L.J.Q.B. 234, has opined that a claim for damages does
not give rise to a debt until the liability is adjudicated and damages have
been assessed by a decree or any order of a Court or any other adjudicatory
authority or forum. Furthermore, in J.C. Budharaja vs Chairman, Orissa
Mining Corporation Ltd. and Anr (2008) 2 SCC 444, it has been held that the
effect of Section 19 would be to allow a fresh period of limitation with
regard to the 'existing debt' in respect of which acknowledgment and
payment has been made. It would not extend the period of limitation for any
fresh claim, or any amount not accepted by the other party. In the factual
scenario before us, the payment of the Final Bill and Security Deposit
could not be construed to accept or acknowledge the damages raised by the
Respondent and therefore Section 19 would not per se extend the period of
limitation. Furthermore, there could be no extension under Section 18 on
account of the acknowledgement in writing, as at each point that the
Respondent raised a claim for damages, it was specifically refuted by the
Appellant State, and the amounts that were accepted by the Appellant State
were limited to the liabilities within the contract, not fresh liabilities
for damages.
13 The Respondent has also argued that since notice under Section 80 of
the C.P.C. was served to the Appellant State claiming damages on 7.8.1983,
a period of two months from the date of the notice would have to be
excluded when calculating the period of limitation, as per Section 15(2) of
the Limitation Act. It has relied on M/s Disha Constructions vs. State of
Goa (2012) 1 SCC 690 to this end. However, since the limitation period for
the last breach alleged by the Respondent itself ended on 15.11.1982 and
the notice under Section 80 C.P.C. is dated 7.8.1983, this provision is
irrelevant. The notice perforce should have been issued before the suit
became time barred, and only if so done would the period have been extended
for a further two months.
14 It is thus clear that the Respondent failed to file the suit for
damages within the period prescribed in the Limitation Act. The suit is
required to be dismissed on this ground alone. The impugned Order is,
therefore, set aside, and the Appeal is allowed, but with no order as to
costs.
……………………………..J.
(VIKRAMAJIT SEN)
……………………………..J.
(SHIVA KIRTI SINGH)
New Delhi,
October 16, 2015.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1770 OF 2005
STATE OF GUJARAT … APPELLANT
VERSUS
M/S KOTHARI AND ASSOCIATES … RESPONDENT
J U D G M E N T
VIKRAMAJIT SEN, J.
1 This Appeal lays siege to the decision of the Division Bench of the
High Court of Gujarat at Ahmedabad which dismissed the appeal of the
Appellant before us while allowing the cross-objection filed by the
Plaintiff/Respondent by holding it to be entitled to claim interest for an
extended period. For the reasons which will follow, we have set aside
these concurrent findings against the Appellant State, principally on the
ground that the claim of the Respondent stood barred by the principles of
prescription as contained in the Limitation Act, 1963.
2 The Appellant State invited tenders for providing lining to the main
canal line. The Respondent, a registered partnership, submitted a tender
that was accepted by the Appellant State. Thereafter a regular agreement
was entered into according to which the Respondent would have from 15th
November to 14th June as its working period. Under the Work-Order dated
24.9.1976, the Respondent was required to complete the work within 18
months, i.e. on or before 23.3.1978. The case of the Respondent, which we
have no cause to disbelieve, is that there were repeated and consecutive
delays in handing over the site due to which the Respondent could not
complete the work within the stipulated time. The first season was to
extend from 15.11.1976 to 14.7.1977, but the canal was only made available
on 15.1.1977 and even then the cement was not issued to the Respondent by
the Appellant State till 31.1.1977. The second season was to extend from
15.11.1977 to 23.3.1978, but the canal was handed over on 15.3.1978. At the
Respondent’s request, the contract period was extended to 14.6.1978, but
the Appellant State specifically stated that no compensation would be
payable for the extension. Pursuant to a written request by the Respondent,
a third season from 15.11.1978 to 14.6.1979 was granted, but yet again the
site was handed over as late as on 15.3.1979. The Respondent sought further
time to complete the project, and was consequently granted a fourth season
which was to extend from 15.11.1979 to 29.6.1980. The site was once again
made available with delay only on 15.3.1980. The work was finally completed
on 20.6.1980. It is noteworthy that in each request for an extension, the
Respondent sought compensation for monetary loss due to the extended time
limit, but while allowing each extension the Appellant State denied the
claim for compensation each time. The Respondent’s case was that as per the
contract period, 342 days should have been made available to it to conduct
the stipulated work, but as a result of the delay in handing over the site
and the materials, the Respondent had to seek extensions, and nevertheless
managed to complete the project in 288 working days, thus indicating that
there was no laxity on its part. The Respondent signed the Final Bill under
protest on 1.1.1982; and the Security Deposit was refunded on 27.1.1982.
Thereupon, the Respondent addressed a statutory notice under Section 80 of
the C.P.C. dated 7.8.1983 to the Appellant State, claiming damages as a
result of the additional costs incurred due to the above mentioned delays.
The Respondent eventually filed a suit on 25.1.1985 seeking damages under
thirteen different heads, including price escalation in labour due to the
prolongation of the work, price escalation in fuel lubricants etc.,
overstay of capital and machinery, and overheads such as staff, kitchen,
office etc.
3 The Trial Court found that the delay was caused by the Appellant
State; that work was completed by the Respondent well within the number of
days contractually allocated to complete it. Noting that under Section 73
of the Indian Contract Act compensation is payable for any loss or damage
for breach of a contract, the Trial Court granted compensation under twelve
of the thirteen heads of claims itemised by the Respondent. In terms of its
Judgment dated 4.5.1991 the Trial Court observed that the factual matrix
pertaining to these amounts claimed have remained uncontroverted, and
accordingly decreed the suit. The Respondent was granted Rs.13,61,571/-
with interest at 12 per cent per annum with effect from 7.8.1983 viz. the
date of the statutory notice. The Appellant State appealed against the
decree and the Respondent filed a counter-claim seeking interest from the
date of written demand of the suit claim instead of from the date of
statutory notice. The High Court, vide its judgment dated 30.7.2003,
dismissed the appeal filed by the Appellant State and allowed the
Respondent’s cross objection, granting interest thereon from 5.3.1982.
4 The Appellant State has contended that the High Court ignored its
myriad objections/submissions in connection with the various different
heads; that the bills paid from time to time by the Respondent including
the Final Bill were accepted without any remonstration or reservation being
raised, thereby inexorably leading to the conclusion that the suit was
clearly an afterthought; and that the suit was barred by limitation as the
claims were raised after a lapse of more than three years from the arising
of the causes of action. It is only the last contention to which we shall
advert our attention.
5 It would be pertinent to note that the issue of limitation was not
pleaded as a ground before the Trial Court or the High Court. It was
pressed for the first time in the course of oral arguments before the High
Court. Nonetheless, it has been discussed in the impugned Order. The High
Court, noting the contention raised by the Respondent that the point of
limitation was a mixed question of fact and law and could therefore not be
adjudicated at this point, held that even if it could be adjudicated, the
suit would not be barred by principles of prescription as it was based on a
series of successive breaches committed by the Appellant State, and in such
circumstances the date of the last breach was relevant. The High Court was
of the opinion that limitation need not mandatorily be computed on the
basis of each cause of action. It held the date of return of the Security
Deposit as the last date of payment for the work done, and concluded that
the suit had been filed within three years from this date. The suit was
therefore found to be within the prescribed period of limitation.
6 Section 3 of the Limitation Act explicitly states that “every suit
instituted, appeal preferred, and application made after the prescribed
period shall be dismissed, although limitation has not been set up as a
defence.” It is thus incumbent upon the Court to satisfy itself that the
suit is not barred by limitation, regardless of whether such a plea has
been raised by the parties. In Union of India vs. British India Corporation
Ltd (2003) 9 SCC 505, it has been opined that “the question of
limitation is a mandate to the forum and, irrespective of the fact whether
it was raised or not, the forum must consider and apply it, if there is no
dispute on facts.” It is thus irrelevant that the Appellant State had not
raised the issue of limitation before the Trial Court. A duty was cast on
the Court to consider this aspect of law, even on its own initiative, and
since it failed to do so, the Appellant State was competent to raise this
legal question in appeal or indeed even in any successive appeal. Close to
a century ago, in Lachhmi Sewak Sahu vs. Ram Rup Sahu AIR 1944 Privy
Council 24, it has been held that the point of limitation is available to
be urged even in the Court of last resort. Furthermore, we are not
confronted with a situation where the plea of limitation is a mixed
question of fact and law, or where additional evidence needs to be adduced.
The submissions of Learned Counsel for the Respondent to the effect that
the Appellant is foreclosed and precluded from urging the plea of the bar
of limitation are meretricious and are rejected. We shall now proceed to
consider whether the suit was in fact barred by limitation.
7 The period of limitation would be computed under either Article 55 or
Article 113, both of which are laid out below of the facility of reference:
|Description of Suit |Period of |Time from which period |
| |Limitation |begins to run |
|Art 55. For |Three years |When the contract is |
|compensation for the | |broken or (where there |
|breach of any | |are successive |
|contract, express or | |breaches) when the |
|implied, not herein | |breach in respect of |
|specially provided | |which the suit is |
|for. | |instituted occurs or |
| | |(where the breach is |
| | |continuing) when it |
| | |ceases. |
|Art. 113. Any suit |Three years |When the right to sue |
|for which no period | |accrues. |
|of limitation is | | |
|provided elsewhere in| | |
|this Schedule | | |
8 It would be pertinent, at this point, to recall the decision of this
Court in Gannon Dunkerley and Co. Ltd. vs. Union of India (1969) 3 SCC 607,
though that matter dealt with the provisions of the Indian Limitation Act,
1908. The Appellants/Plaintiff therein filed a suit seeking an enhanced
rate of compensation in light of the deviation in the nature of the work
being rendered more complex, the increase in costs due to undue
prolongation of the period of work, the increase in the quantity of work,
and the grant of contracts to other competing parties at substantially
higher rates. This Court held that 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 rates because of change of circumstances, and in
respect of work not covered by the contract.” The claim for enhanced rates
was found to arise outside the contract and for this reason was not in the
genre of an action for compensation for breach of contract. It was
therefore held that the claim was not covered under Article 115 of the 1908
Act (which is in pari materia to Article 55 of the Limitation Act), and
would have to fall within the ambit of Article 120 of the 1908 Act (which
is akin to Article 113 of the Limitation Act). The facts at hand are
dissimilar to those in Gannon Dunkerley in that the damages sought by the
present Respondent are for work covered by the contract, and the change in
circumstances was directly caused by breaches ascribable to the Appellant
State in not handing-over the site on time. Facially, the suit claims are
damages incurred due to the extension of the contract period and the
resultant damages are incurred by the Respondent. The suit would therefore
fall within the ambit of Article 55. Article 113, which is a residuary
provision, cannot be resorted to.
9 It also appears to us that the contract was clearly not broken as the
Respondents chose to keep it alive despite its repeated breaches by the
Appellant State. The factual matrix presents a situation of successive or
multiple breaches, rather than of a continuous breach, as each delay in
handing over the canal/site by the Appellant State constituted to a breach
that was distinct and complete in itself and gave rise to a separate cause
of action for which the Respondent could have rescinded the contract or
possibly claimed compensation due to prolongation of time and resultant
escalation of costs. Of course the Respondent is enabled to combine all
these causes of action in one plaint, as postulated in the C.P.C provided
each claim is itself justiciable. Even the Respondent has argued before
the High Court that the suit was based on successive breaches committed by
the Appellant State. In our opinion, the suit was required to be filed
within three years of the happening of each breach, which would constitute
a distinct cause of action. Article 55 specifically states that in respect
of successive breaches, the period begins to run when the breach in respect
of which the suit is instituted, occurs. In this vein, Rohtas Industries
Ltd vs. Maharaja of Kasimbazar China Clay Mines ILR (1951) 1 Cal 420 is
apposite as it has held that when a party agrees to deliver certain goods
every month for a duration spanning certain years, the cause of action for
breach for failure to deliver in a particular month arises at the end of
that month and not at the end of the period of the contract. The situation
before us is similar in that the cause of action had arisen on each
occasion when the Appellant State failed to hand over the site at the
contractually stipulated time. Specifically, the limitation periods arose
on 15.11.1976, 15.11.1977, 15.11.1978 and 15.11.1979, i.e. on the first day
of each season, when the Respondent State committed a breach by failing to
hand over the site. Thus the period of limitation did not commence at the
termination of the contract period or the date of final payment. The High
Court’s conclusion that the last date of breach and last date of payment
were relevant, not each cause of action, was thus patently erroneous. For
each breach, a corresponding amount of damages for additional costs could
have been sought. The suit, however, was filed on 25.1.1985, well after the
limitation period of three years for even the final breach, as the various
causes of action became time barred on 15.11.1979, 15.11.1980, 15.11.1981
and 15.11.1982 respectively.
10 There is another perspective on the method or manner in which
limitation is to be computed. We have already narrated that the
Respondent, on every occasion when the extension was sought by it, had
requested to be compensated for delay. The Appellant State had granted the
extensions but had repudiated and rejected the Respondent’s claims for
damages. The effect of these events would be that the cause of action for
making the claim for damages indubitably arose on each of those occasions.
It is certainly arguable that the Appellant State may have also been
aggrieved by the delay, although the facts of the case appear to be
unfavourable to this prediction, since delay can reasonably be laid at the
door of the Appellant. The Respondent, however, could prima facie be
presumed to have accepted a renewal or extension in the period of
performance but with the rider that the claim for damages had been
abandoned by it. If this assumption was not to be made against the
Respondent, it would reasonably be expected that the Respondent should have
filed a suit for damages on each of these occasions. In a sense, a fresh
contract would be deemed to have been entered into between the parties on
the grant of each of the extensions. It is therefore not legally possible
for the Respondent to contend that there was a continuous breach which
could have been litigated upon when the contract was finally concluded. In
other words, contemporaneous with the extensions granted, it was essential
for the Respondent to have initiated legal action. Since this was not
done, there would be a reasonable presumption that the claim for damages
had been abandoned and given a go-by by the Respondent.
11 In a works contract, more often than not, delays occur, and that is
why it is assumed that time is not of the essence. Where extensions are
asked for and granted, there must be a clear and discernable stand on
behalf of either of the parties that the extension is granted and/or
accepted without prejudice to the claim of damages. It has become
commonplace that neither party lodges a claim for damages, but waits for
the end of the contract to raise these disputes, taking advantage of the
nebulous and equivocal nature of the transactions between them. This,
however, is not the position that obtains before us since the Appellant
State had categorically posited that the claim for damages for the alleged
delay on its part would not be entertained.
12 The Respondent has sought to place reliance on Section 19 of the
Limitation Act. It would be apposite to reproduce this Section:
19. Effect of payment on account of debt or of interest on legacy.—Where
payment on account of a debt or of interest on a legacy is made before the
expiration of the prescribed period by the person liable to pay the debt or
legacy or by his agent duly authorised in this behalf, a fresh period of
limitation shall be computed from the time when the payment was made.
This Section would not come to the aid of the Respondent, as the suit
before us is not for payment on account of a debt or of interest on legacy,
but is a suit for damages for additional costs incurred as a result of the
extension of the contract period. This Court in Union of India vs. Raman
Iron Foundry 1974 (2) SCC 231, after placing reliance on Jones v.
Thompson [1858] 27 L.J.Q.B. 234, has opined that a claim for damages does
not give rise to a debt until the liability is adjudicated and damages have
been assessed by a decree or any order of a Court or any other adjudicatory
authority or forum. Furthermore, in J.C. Budharaja vs Chairman, Orissa
Mining Corporation Ltd. and Anr (2008) 2 SCC 444, it has been held that the
effect of Section 19 would be to allow a fresh period of limitation with
regard to the 'existing debt' in respect of which acknowledgment and
payment has been made. It would not extend the period of limitation for any
fresh claim, or any amount not accepted by the other party. In the factual
scenario before us, the payment of the Final Bill and Security Deposit
could not be construed to accept or acknowledge the damages raised by the
Respondent and therefore Section 19 would not per se extend the period of
limitation. Furthermore, there could be no extension under Section 18 on
account of the acknowledgement in writing, as at each point that the
Respondent raised a claim for damages, it was specifically refuted by the
Appellant State, and the amounts that were accepted by the Appellant State
were limited to the liabilities within the contract, not fresh liabilities
for damages.
13 The Respondent has also argued that since notice under Section 80 of
the C.P.C. was served to the Appellant State claiming damages on 7.8.1983,
a period of two months from the date of the notice would have to be
excluded when calculating the period of limitation, as per Section 15(2) of
the Limitation Act. It has relied on M/s Disha Constructions vs. State of
Goa (2012) 1 SCC 690 to this end. However, since the limitation period for
the last breach alleged by the Respondent itself ended on 15.11.1982 and
the notice under Section 80 C.P.C. is dated 7.8.1983, this provision is
irrelevant. The notice perforce should have been issued before the suit
became time barred, and only if so done would the period have been extended
for a further two months.
14 It is thus clear that the Respondent failed to file the suit for
damages within the period prescribed in the Limitation Act. The suit is
required to be dismissed on this ground alone. The impugned Order is,
therefore, set aside, and the Appeal is allowed, but with no order as to
costs.
……………………………..J.
(VIKRAMAJIT SEN)
……………………………..J.
(SHIVA KIRTI SINGH)
New Delhi,
October 16, 2015.
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