Kerala & Anr Vs.
M.A. Mathai  Insc 373 (9 April 2007)
Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA
Dr. ARIJIT PASAYAT, J.
Challenge in this appeal is to the judgment rendered by a Division Bench of
the Kerala High Court dismissing the appeal filed by the appellant-State and
its functionary questioning legality of the judgment and decree in O.S. No.859
of 1988 on the file of the Sub Court, Trichur. The suit was filed for recovery
of money in connection with the award of work undertaken by the respondent-plaintiff
who is the contractor.
The High Court was of the view that the court below had fixed award of
damage of Rs.9,53,669/- and found that the plaintiff was entitled to damage
under other head and, therefore, restricted the decretal amount to
Rs.10,00,000/- The appeal was accordingly dismissed.
In support of the appeal learned counsel for the appellant submitted that
the letters on which reliance had been placed show that the contractor was not
doing the work within stipulated period and had been asked for to apply for
extension. The basic stand of the plaintiffrespondent was that the extensions
had been sought for and supplemental agreements were executed not on the free
will and free consent of the plaintiff but it was due to circumstances which
prevailed at that time which necessitated the plaintiff to agree to the
commands of the defendants. To put it differently as noted above the plaintiff
had contented that it was due to coercion that these supplemental agreements
The trial court concluded that on the threat of forfeiture, re- allocation
and re-arrangement at the cost of the plaintiff the execution of supplemental
agreement was done. It is pointed out that there was no clause for any
escalation. It was wrongly assumed by the trial court that the supplemental
agreements and declarations made by the plaintiff were not binding on him as it
was not obtained by free consent and free will and in the normal course of
In response, learned counsel for the respondent submitted that the amounts
awarded were not for damages and it was only in respect of extra work done that
the amounts has been awarded. It was submitted that the department itself had
recommended for payment for the extra work done and as per rates under the contracts
the amounts have been awarded. Though the Government did not agree to the
proposal, that itself shows about the genuineness of the respondent's claim. In
respect of another contract the extra amounts have been paid.
The trial court and the High Court appear to have been totally confused
about the nature of the suit. The plaint itself indicated that it was a
"suit for recovery of money for damages". In fact the High Court
itself observed at para 8 that the primary issue related to assessment of damages.
It also found that the plaintiff was entitled to damages under various heads.
Additionally, the trial court concluded that the supplemental agreements
(Ex. B-2 to Ex. B-6) and Declarations (B-10 to B-14) were not at all binding on
the plaintiff. If that was really so, there could not have been any extension.
The finding that these documents were not obtained by free will and free
consent and in the normal course of events, to say the least, is an inferential
conclusion not supported by any evidence.
As noted above, the trial court proceeded on the basis as to whether
plaintiff was entitled to damages and if so what is the amount and quantum is
to be fixed. It was noted that being a suit for damages, the plaintiff was
claiming so many items of damages in terms of money involving many
calculations. This is contrary to respondent's plea before us.
Their stand is that the amount was not for damages but for extra work done.
As noted above it was only a suit for damages. In General Manager, Northern
Railway and another v. Sarvesh Chopra [2002 (4) SCC 45] it was inter alia
observed as follows:
"In our country question of delay in performance of the contract is
governed by Sections 55 and 56 of the Indian Contract
If there is an abnormal rise in prices of material and labour, it may frustrate
the contract and then the innocent party need not perform the contract. So
also, if time is of the essence of the contract, failure of the employer to
perform a mutual obligation would enable the contractor to avoid the contract
as the contract becomes voidable at his option. Where time is "of the
essence" of an obligation, Chitty on Contracts (28th Edn., 1999, at p.
1106, para 22-015) states "a failure to perform by the stipulated time
will entitle the innocent party to (a) terminate performance of the contract
and thereby put an end to all the primary obligations of both parties remaining
unperformed; and (b) claim damages from the contract-breaker on the basis that
he has committed a fundamental breach of the contract ('a breach going to the
root of the contract') depriving the innocent party of the benefit of the contract
('damages for loss of the whole transaction')".
If, instead of avoiding the contract, the contractor accepts the belated
performance of reciprocal obligation on the part of the employer, the innocent
party i.e. the contractor, cannot claim compensation for any loss occasioned by
the non- performance of the reciprocal promise by the employer at the time
agreed, "unless, at the time of such acceptance, he gives notice to the
promisor of his intention to do so". Thus, it appears that under the Indian
law, in spite of there being a contract between the parties whereunder the
contractor has undertaken not to make any claim for delay in performance of the
contract occasioned by an act of the employer, still a claim would be
entertainable in one of the following situations: (1) if the contractor
repudiates the contract exercising his right to do so under Section 55 of the
Contract Act, (ii) the employer gives an extension of time either by entering
into supplemental agreement or by making it clear that escalation of rates or
compensation for delay would be permissible, (iii) if the contractor makes it
clear that escalation of rates or compensation for delay shall have to be made
by the employer and the employer accepts performance by the contractor in spite
of delay and such notice by the contractor putting the employer on terms."
In the instant case both the trial court and the High Court have without any
basis come to hold that the supplemental agreement was due to coercion etc. For
coming to such conclusion, material had to be placed, evidence had to be led.
Mere assertion by the plaintiff without any material to support the said stand
should not have been accepted by the trial court and the High Court.
Looked at from any angle the impugned judgment of the High Court is without
any basis and is set aside. The appeal is allowed but in the circumstances
without any order as to costs.
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