Dismissed

Uday Builders v. Gujarat Industrial Developmentcorporation

Gujarat HC25 Jan 2021FA/5266/1999

Case brief

AI extract

What is this about?

An appeal against a decree where the trial court partly allowed a suit for breach of contract and granted a counter-claim. The High Court dismissed the appeal, confirming the trial court's finding that time was not of the essence of the contract and the plaintiff failed to prove loss of profit, while validating the refund of excess security advance.

What did the court decide?

The appeal is dismissed, and the judgment and decree of the City Civil Court No.18 are confirmed.

Uday Builders Vs Gujarat Industrial… — Contract and Commercial Disputes | Gujarat HC (2021)

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C/FA/5266/1999 JUDGMENT

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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R/FIRST APPEAL NO. 5266 of 1999

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FOR APPROVAL AND SIGNATURE:

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HONOURABLE DR. JUSTICE A. P. THAKER

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1 Whether Reporters of Local Papers may be allowed No to see the judgment ?

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2 To be referred to the Reporter or not ? Yes 3 Whether their Lordships wish to see the fair copy No of the judgment ?

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4 Whether this case involves a substantial question No of law as to the interpretation of the Constitution of India or any order made thereunder ?

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UDAY BUILDERS

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Versus GUJARAT INDUSTRIAL DEVELOPMENTCORPORATION

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Appearance:

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MR KG SUKHWANI(871) for the Appellant(s) No. 1 MR UDAY R BHATT(192) for the Defendant(s) No. 1

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CORAM: HONOURABLE DR. JUSTICE A. P. THAKER

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Date : 25/01/2021

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ORAL JUDGMENT

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The present Appeal has been filed under the provisions of Section 96 of the Code of Civil Procedure, 1908 against the judgment and decree dated 20.11.1998 passed in Civil Suit No. 106 of 1988 whereby the plaintiff-appellant's suit has been partly allowed as well as counter claim put up by the defendant-

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Page 1 of 18

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C/FA/5266/1999 JUDGMENT

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respondent is also allowed by the learned City Civil Court No.18.

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Being aggrieved and dissatisfied with the impugned judgment and decree, the original plaintiff has filed the present appeal on the ground that the trial Court has not appreciated the oral as well as documentary evidences rendered by both the sides in proper perspective and has committed serious error in exercising the jurisdiction vested in it and has exceeded its jurisdiction. It is also contended that the learned trial Court has wrongly come to the conclusion that the Appellant is guilty of breach of contract. According to him, the learned trial Court ought to have held that the plaintiff-appellant has not left the work unfinished. It is also contended that the contention of the plaintiff regarding non-supply of cement and steel by the defendant-respondent is ought to have been believed by the trial Court and thereby has committed serious error. It is further contention of the appellant that though there was no item-wise programme given by the respondent to the plaintiff, this fact is not considered by the learned trial Court and has wrongly come to the conclusion that due to alleged breach on the part of the appellant, contract could not be completed. It is also the contention that the trial Court has wrongly relied upon the various Clauses of the contract and has wrongly held against the plaintiff that he was not ready and willing to perform his part of the contract. The other contention is that in granting relief to the respondent, in a counter-claim is also not proper. It is further submitted that the impugned judgment and decree passed by the learned trial Court to the extent which is not allowed by the trial Court, be set-aside and at the same time, the counter-claim put up

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C/FA/5266/1999 JUDGMENT

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by the respondent be dismissed.

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Heard Mr. K.G.Sukhwani, learned advocate for the appellant and Mr. Uday Bhatt, learned advocate for the defendant at length through video-conferencing.

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Mr. K.G.Sukhwani, learned advocate for the appellant has vehemently submitted that the plaintiff has filed suit before the trial Court for damages as there was a breach of contract by the respondent. He has also contended that the defendant has not provided the site as well as not supplied requisite material and other items as per the Clause of the contract and due to the delay on the part of the defendant, the plaintiff could not complete the work of the contract in stipulated period. According to him, the contract was repudiated by the defendant. He has also contended that the plaintiff has put up his case regarding return of security as well as loss of profit and other ancillary benefit. He has further submitted that though there was ample evidence on record to substantiate the claim of the plaintiff, the trial Court has not properly appreciated and has wrongly held against the plaintiff and has wrongly observed that at the instance of the plaintiff, the contract has been breached. He has also contended that the counter-claim put up by the defendant has not basis and it ought to have been rejected by the trial Court instead of granting it. He has submitted that considering the material placed on record, the impugned judgment and order of the trial Court granting the counter-claim of the defendant and rejecting the amount on various heads in favour of the plaintiff, be set-aside and entire suit amount

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be awarded to the appellant-plaintiff and the counter-claim be rejected. He has also prayed that cost be awarded to the respondent throughout.

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Per contra, Mr. Uday Bhatt, learned advocate for the defendant has submitted that the trial Court has not committed any serious error of facts and law in granting the counter-claim in favour of the defendant. While referring to the evidence on record, he has submitted that at the instance of plaintiff-appellant, the contract work is not completed and there is a clear breach of contract on the part of the plaintiff-appellant. He has also submitted that non-granting of prayer on various items as claimed by the plaintiff-appellant is proper on the part of the learned trial Court. He has also submitted that the learned trial Court has not committed any serious error of facts and law in passing the impugned judgment and decree.

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For the brevity and convenience, the parties are referred to in the present order as per the status assigned to them in trial Court as plaintiff and defendant.

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On perusal of the pleadings of the parties before the trial Court, it appears that on invitation to the tender sought by the defendant GIDC for providing work of construction of W.B.M Road including Surface Dressing and CD Works in Phase-III at Sarigam Industrial Area, Vapi, the plaintiff submitted his tender quoting 22.25% lower than the estimated cost of the work in the amount of Rs. 11,86,451/- and that the tender of the plaintiff was accepted

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on 11.2.1986, as per the letter of Executive Engineer Sari Division, G.I.D.C Vapi. It is also submitted that as agreed to between the parties, the security deposit in the amount of Rs. 31,064/- was furnished by the plaintiff and the contract was duly executed between the parties on 4.3.1986. According to the contract, work was to be completed within the period of 9 months from the date of written order to commence the work and accordingly, work order on the same day i.e. on 4.3.1986 was given to the plaintiff.. During the existence of the contract, certain issues arose between the parties and due to that the plaintiff rescinded the contract imputing that the time was essence of the contract. Thereafter, the plaintiff filed the aforesaid suit for claim of Rs.3,28,512/- by way of damages and loss of expected profits as well as for the extra work done and not paid.

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The defendant-G.I.D.C resisted the suit on various grounds, inter alia, contending in its counter-claim filed at Exh-8, that the suit is not maintainable at law as well as on the facts. It is also contended that the defendant corporation is a statutory corporation established with an object to provide infrastructural facilities in the industrial estate for assisting small scale and large scale enterpriser of the State of Gujarat. The defendant has accepted that the tender was accepted and accordingly the work was to be executed within the period of 9 months. However, according to the defendant, plaintiff had not commenced the work as a result of which letters were addressed on 29.3.1986 and 7.5.1986, requesting the plaintiff to begin the work and make the required progress so as to complete it within the time schedule as given in clause 2 of the Agreement. It

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is further contended by the defendant that the plaintiff worked only upto 30.6.1986 and after the time limit was over on 4.12.1986,, a letter came to be written by the plaintiff to the defendant on 8.12.1986 requesting the defendant to relieve him of the suit obligation under the contract. It is also contended by the defendant that the plaintiff has committed various breaches while the contract was subsisting and therefore the defendant has become entitled to recover the sum of Rs. 26,829/- from the plaintiff and excess amount paid to the plaintiff. The defendant has sought the counterclaim of Rs.26,829.00 coupled with 18% interest therefrom.

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The plaintiff has filed his reply to the counter-claim at Exh-11 wherein it has denied all the contention raised by the defendant and has submitted that it has not committed any breach of contract. The plaintiff has also stated that the plaintiff has given full credit of security amount of Rs. 22,957/-. It is also contended that therefore the defendant has nothing to recover from the plaintiff for the security advance. It is further stated by the plaintiff that it is for the first time that the defendant has sought for such amount before the Court and never raised this point while replying the notice given by the plaintiff. The plaintiff has prayed to dismiss the counter-claim.

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On the basis of the pleadings of the parties, the following issues have been framed by the trial Court at Exh-46:

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Whether the plaintiff proves that it is the registered partnership firm?

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Whether the plaintiff proves that time was the essence of the contract, as averred?

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Page 6 of 18

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Which of the parties has failed to carry out the contractual obligation?

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Whether the plaintiff is entitled to the sum of Rs.3,28,512.00, with interest at the rate of 18%, per anum, as prayed for?

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Whether the defendant proves that the advance given and excess payment made to the plaintiff could not be adjusted as a result of abandoning of the contract by the plaintiff?

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Whether the defendant proves the counter claim?

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Whether the defendant is entitled to the interest as contended?

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What order and decree?

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10.1 After perusing the oral and documentary evidence and having heard both the sides, the trial Court has answered all the aforesaid issues as under:

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In affirmation.

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In negation.

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As discussed hereinafter.

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In negation.

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In affirmation.

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In affirmation.

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In affirmation.

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In negation.

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The following points arise for determination of the present Appeal:

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Whether the learned trial Court has committed serious error of facts and law in partly allowing the Suit to the tune of

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Page 7 of 18

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C/FA/5266/1999 JUDGMENT

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Rs.31,064/- along with accrued interest to the plaintiff?

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Whether the learned trial Court has erred in facts and law by granting counter-claim to the tune of Rs.26,829/- in favour of the defendant along with interest at the rate of 12% per annum thereon?

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What order?

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11.1 The finding on the aforesaid points, for the reasons given below, are as under:

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In negative.

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In negative.

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As per final order.

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It appears from the record that the plaintiff has examined its one of the partners namely Shri Jashbhai Patel at Exh-23 and has filed documents at Exh-24 to 41, which are as under:

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Sr. No.	Exhibit No.	Description	Date
1	24	Defendant's letter to Plaintiffs. original No. 867	4.3.86
2.	25	Defendant's letter to Plaintiffs. original No. 1187	29.3.86
3.	26	Defendant's letter to Plaintiffs. original No. 1611	7.5.86
4.	27	Defendant's test report No.290	21.5.86
5	28	Copy of plaintiff's letter to defts	10.6.86
6.	29	Copy of plaintiff's letter to defts	12.8.86
7.	30	Copy of plaintiff's letter to defts	24.9.86

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8.	31	Copy of plaintiff's letter to defts	23.10.86
9.	32	Copy of plaintiff's letter to defts	15.11.86
10.	33	Defendant's letter to Plffs. original No.4275	24.11.86
11.	34	Copy of plaintiff's letter to Defts	8.12.86
12.	35	Copy of plaintiff's letter to defts	5.1.87
13.	36	Copy of plaintiff's notice to Defts	11.2.87
14.	37	Defendant's letter to Plffs. original No.854	9.3.87
15.	38	Deft's reply of Sr. No.15	23.7.87
16.	39	Deft's letter to plffs. original No.3412	28.9.87
17.	40	Defts. letter to plffs.	25.11.87
18.	41	Xerox copy of firm's Registration Certificate

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The defendant side has examined Shri Bhupendra Shah at Exh-43 and has relied on the following documentary evidence:

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Sr. No.	Exhibit No.	Description
1.	15	Suit Agreement executed between the parties.
2.	16	1st. R.A. Bill dt. 31.03.1986
3.	17	2nd R.A. Bill dt. 20.5.1986
4.	18	3rd R.A. Bill dt. 3.7.1986
5	19	Letter of XEN to the plaintiff dt. 7.12.1986
6	20	Letter written by the contractor (Original) dt. 8.12.1986
7.	21	Letter written by the contractor (Original) dt. 5.1.1987
8	22	Letter of S.E. to XEN dt. 1.1.1988.

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C/FA/5266/1999 JUDGMENT

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As the facts and evidence lead into both these points are interwoven, both the points are dealt with jointly. On perusal of the oral evidence of both the sides it appears that there is no dispute regarding the execution of the contract between the parties for the alleged contract. It also appears that the contract work is not completed. As per the contract, the contractor has to carry out the work and has to complete within a period of 9 months. It also reveals from the evidence that the contract is not completed within specific period.

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Now, according to the plaintiff, as the possession of the site was not given to them and due to non-supply of plan drawn, the contractor could not complete the work within a stipulated period. Now, the plaintiff is claiming the compensation from the defendant and defendant is claiming refund of excess payment made to plaintiff. Therefore, provisions of Section 73 and Section 74 of the Indian Contract Act would be applicable. It is worthwhile to reproduce Section 73 and 74 of the Indian Contract Act as under:

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"73. Compensation of loss or damage caused by breach of

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contract

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When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

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Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

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Compensation for failure to discharge obligation resembling those created by contract : When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.

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74.Compensation for breach of contract where penalty

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stipulated for

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When a contract has been broken, if a sum is named in the contract as the amount be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.

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In view of the provisions made in Section 73 of the Indian Contract Act, the following three factors are to be established:-

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1. The contract has been breached and as a result one party has suffered loss;

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1. that loss is capable of being computed in terms of money; and

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1. in the contract there is pre-estimate of damages. Once these factors are established, matter is governed by section 73 of Act and party who has suffered loss becomes entitled to

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amount of pre-estimated damages mentioned in contract. At the same time, Section 73 of the Contract Act bars to grant of damages for remote or indirect loss and cast an obligation on party (claimant) to mitigate the loss. The three principles may be summarised as under:

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(a) the damages must be such as may fairly and reasonably be considered as rising naturally that is, according to the usual course of things from the breach; b) the damages must fairly be such as could have been in contemplation of both parties at the time they made the contract and cannot include compensation for remote or indirect loss; and

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c) the party complaining of breach owes the duty to take all reasonable steps to mitigate the loss consequent upon the breach and should show that he did not process the means of remedying the inconvenience caused by the non-performance the claimant plaintiff cannot claim compensation for loss which was due to his own failure to behave reasonably after the breach of contract.

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The general principle which is embodied in Section 73 is that when there is a breach of contract, the party who suffers by the breach is entitled to recover compensation from the other party for the loss caused to him by the said breach.

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Now, so far as the provisions of Section 74 is concerned, to attract this provision, it is not necessary that entire contract should

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come to an end, the breach of each term thereof can be visualised in advance and taken care of by providing an adequate clause for liquidated damages so that parties to contract can proceed to work out the contract in future and settle the question that have accrued on basis of rate that has been put as pre-estimate at commencement of contract.

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Now, on the basis of catena of decisions, the legal position with regard to a claim for liquidated damages can be summarised as follows: -

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1. no claim for such damages is maintainable unless the promise is proved to have sustained loss due to the default of the promisor;

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1. whatever the quantum of the loss so sustained, the claim cannot exceed the sum stipulated in the contract;

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1. only reasonable sum can be awarded as damages which in a given situation may be less than the sum stipulated;

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1. what is reasonable sum depends on facts;

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1. Court may proceed on the assumption that the sum stipulated reflects the genuine pre-estimate of the parties as to the probable loss and such clause was intended to dispense with the proof thereof and

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1. it will always be open to the promisor to show that no loss was suffered or that the estimate so made is falsified by the change in the situation or that the loss suffered was less.

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Considering the aforesaid legal position in respect of the claim of compensation under the provisions of the Contract Act, as

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referred to above, on perusal of impugned judgment, it is found that while dealing with the points as to whether time was essence of the Contract, the leaned trial Court has considered, while relying upon the decision of the Hon’ble Apex Court in case of M/s. Hind Construction Contractors v. State of Maharashtra, reported in AIR 1979 SC 720 , and has concluded by referring the factual aspect that time was not the essence of the contract. Now on perusal of the Clauses of the Contract and the evidence on record it clearly transpires that the contract agreement specifically provides of such clause whereby the extension of time is made permissible. Clause 6 of the Contract agreement (Exh-15) specifically provides for extension by the contractor to be applied to the Engineer-in-charge in writing before the expiration of the stipulated period in the contract or before the expiration of 30 days from the date he was hindered and on reasonable grounds having been made out, he could be granted extension. Similarly, Clause-15 of the alleged contract agreement further provides that in the event of contingency, incorporated in the said clause, the Engineer-incharge can give notice of stoppage and on receiving such a notice for stoppage, the contractor is required to suspend or stop the work totally or partially and he cannot make any claim on that count. All these provisions of the alleged contract shows that time was not made to be essence of contract.

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The Hon’ble Supreme Court in case of M/s. Hind Construction Contractors v. State of Maharashtra (Supra) has specifically observed in Para-7 and 8 that the question whether or not time was

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essence of contract would essentially be a question of the intention of the parties to be gathered from the terms of the contract. Even where the parties have provided that time is essence of the contract, such a stipulation have to be read along with other provisions of the contract and such other provisions may, on the construction of the contract, exclude the inference that the completion of the work by a particular date was intended to be fundamental, for instance, if the contract were to include clause provided for extension of time in certain contingency or for payment of fine or penalty for every day or week the work undertaken remains unfinished on the expiry of the time provided in the contract such clauses would be construed as rendering ineffective the express provision relating to the time being of the essence of contract.

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Considering this decision of the Hon’ble Apex Court and the clauses of the alleged contract, it is rightly held by the trial Court that time was not essence of the contract.

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While dealing with the claim of the plaintiff for profit and of damages, the learned trial Court has considered the oral evidence of both the sides and considering the evidence on record, the trial Court has held this point against the plaintiff on the basis of fact came out during the cross-examination of the plaintiff's witness wherein he could not produce any written proof. It also reveals from the evidence of the plaintiff that witness of the plaintiff has conceded that if he would have completed the entire work of construction, the same might have resulted into loss to him and

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otherwise his rate of profit is 20%. Now, according to the plaintiff, since the work to the tune of Rs.1,39,176/- could not be completed at the rate of 20% he has demanded the loss of profit on the said amount. However, no satisfactory evidence regarding the loss of profit or damages came to be proved by the plaintiff.

¶130

It also reveals from the oral and documentary evidence that the plaintiff has not carried out the contract in accordance with the Agreement between the parties and, therefore, the defendant was within its right to direct the plaintiff to suspend the work for the specific reason. It also reveals that there is specific admission on the part of the defendant about the change of zone and about the suspension of the work during the heavy rain would not help the plaintiff in as much as the contractual agreement specifially provided for such kind of contigencies and there is a specific bar to demand any amount towards any loss or loss of profit in such circumstances as referred to above.

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It also reveals from the oral and documentary evidence that there is provision regarding the payment of security advance which may be recovered from the plaintiff by the defendant. In view of the admission on the part of plaintiff, the excess payment of security advance is required to be refunded to the defendant by the plaintiff.

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It also appears from the evidence tha the defendant has already conveyed the plaintiff for stoppage of the work and final measurement on the basis of the measurement book to be carried

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out. These facts have not been denied by the plaintiff. Of course, the plaintiff did not remain present for such final measurement which was in consonance with the provisions contained in the contract. Therefore, the advance payment which has been made to the plaintiff, which is permissible under Clause 73, after recording the final measurement, the defendant has found to have made advance payment, more than value of the work, the plaintiff could have refunded all excess amount as claimed. It also reveals that on measurement of the total work carried out by the plaintiff, it is found that the monetary value thereof is of Rs.1,56,545/- whereas total payment made by the defendant was Rs.1,60,417/-. This fact proves the claim of the defendant for refund of the excess payment.

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Now, considering the entire evidence on record coupled with the reasoning given by the learned trial Court in passing the impugned judgment and decree, this Court is of the considered opinion that the learned trial Court has properly appreciated the facts and applied the legal aspects thereof and it has not committed any error of facts and law in passing the impugned judgment and decree. This Court is in complete agreement with the reasoning and ultimate decision of the learned trial Court and therefore, the present Appeal is liable to be dismissed.

¶137

Resultantly, the Appeal stands dismissed. The Judgment and decree dated 20.11.1998 passed in Civil Suit No. 106 of 1988 by the learned City Civil Court No.18, Ahmedabad are hereby confirmed. No order as to costs. Necessary decree be drawn.

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Registry is directed to send a copy of this judgment along with copy of decree to the Trial Court. R&P be sent back to the Trial Court.

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(DR. A. P. THAKER, J)

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SAJ GEORGE

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Uday Builders v. Gujarat Industrial Developmentcorporation

Case brief

What is this about?

What did the court decide?

Uday Builders v. Gujarat Industrial Developmentcorporation

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

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