# GANNON DUNKERLEY & CO. LTD v. UNION OF INDIA

- **Citation:** [1970] 3 S.C.R. 47
- **Court:** Supreme Court of India
- **Decided:** 1969-10-28
- **Case number:** Civil Appeals Nos. 2584 and 2585 of 1966
- **Bench:** J. C. Shah, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gannon-dunkerley-co-ltd-v-union-of-india-5046
- **Pages:** 6

## Headnote

Limitation Act, 1908-Suit for payment at an additional rate
over
contract rate in view of altered circumstances and co1nplex nature_ of
work-Claim ;., not one for price of work done nor /or comtunsuiion
for breach of contract-Therefore Art. 56 and Art. 115 of First Schedule
noti applicable-Suit governed by Art. 120----Commencement of period of
/imitation under Article.
The appellant-comp'!lly filed a suit agafust the Union of India demanding payment at an .~nhanced rate over the basic rate stipulated in a construction contract
with theUnion of India. The clailn
related to
revision of rates due to the complex nature and increase in the quantity
of work and in respect of work not covered by the contract. The additional work was done at the request of the Engineer-in-charge who m1der
the terms of the contract was competent to give instructions for work not
covered by the ten:.-.s of the contract and fix the rate at which-remuneration was to be P"'<l in respect of such work. The Union of India contended that the claim was barred by the law of limitation. The
trial
court decreed the suit fur the amount certified by the Superintending
Engineer. On. appeal the High Court held that the claim was governed
eithe·r by Art. 56 or by Art. 115 of the First Schedule to the Limitation
Act, 1908, and a suit, more than three years of the date on which the
work was done and in any event of the date on which the claim was
rejected, was barred. Allowing the apeal to this Court and restoring the
decree for the trial court,
HELD : (i) Article 56 of the First Schedule to the Indian Limitation
Act, 1908, prescribes a period of three years for a suit for the price of
the work done by the plaintiff for the defendant at his request. where no
time has been fixed for payment, and the period of limitation commences
to run from the date when the work is done. A suit is governed by Art.
5 6 if it arises out of a contract to pay the pric.e of work done at the
request of the defendant. The claim in the present case is for pavment
lllOt an additiolllll rate over the stipulated rate in view of change
in
circumstances and not for the price of work done by the appellant. even
though the additional work was done at the. request of the Engineer-incharge. [51 Fl
(ii) Article 115 of the First Schedule to the Limitation Act is a residuary article dealing with the claim for compensation for the breach of
any oontract, express or implied, not in writing registered and not specially provided for in the 'first schedule. The period of limitation in 'uch
cases . is three years
and
it commences to run when the contract is
broken,. or where there are &uccessive breaches whe.n the breach in respect
of which the suit is instituted occurs or where the breach is continuing when
it ceases. The suit filed by the appellant company is not a suit for ccmpensation for breach of contract express or implied; it is a suit for enhanced rate because of change of circumstances, and in respect of work
not CQ\>ered
by the contract. The additional work directed bv
the.
Engineer-in-charge whe.n carried out may be deemed to be done under the
48
SUPREME COURT REPORTS
(1970] 3 S.C.R.
terms of the IX)nb:act; but the claim for enhanced rates does not arise
A
out of the contract : it is in any case not a .claim for compensation for
breach of contract. [51 HJ
(iii) The claim is, therefore, not covered by any specific article under
the First Schedule and must fall within the terms of Art. 120. Under
this Article the period of six years commences to run when the right
to sue accrues.
There is no right .to sue until there is an accrual of the
right asserted in the suit and its infringement or at least a clear and 'unR
equivocal threat to infringe the right by the defendant against whom the
suit is instituted. [52 CJ
Bolo v .. Kokao 9nd Others, L.R. 87 I.A. 325, referred to.

## Text

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47
GANNON DUNKERLEY & CO. LTD.
v.
UNION OF INDIA
October 28, 1969
[J. C. SHAH AND K. S. HEGDE, JJ.)
Limitation Act, 1908-Suit for payment at an additional rate
over
contract rate in view of altered circumstances and co1nplex nature_ of
work-Claim ;., not one for price of work done nor /or comtunsuiion
for breach of contract-Therefore Art. 56 and Art. 115 of First Schedule
noti applicable-Suit governed by Art. 120----Commencement of period of
/imitation under Article.
The appellant-comp'!lly filed a suit agafust the Union of India demanding payment at an .~nhanced rate over the basic rate stipulated in a construction contract
with theUnion of India. The clailn
related to
revision of rates due to the complex nature and increase in the quantity
of work and in respect of work not covered by the contract. The additional work was done at the request of the Engineer-in-charge who m1der
the terms of the contract was competent to give instructions for work not
covered by the ten:.-.s of the contract and fix the rate at which-remuneration was to be P"'<l in respect of such work. The Union of India contended that the claim was barred by the law of limitation. The
trial
court decreed the suit fur the amount certified by the Superintending
Engineer. On. appeal the High Court held that the claim was governed
eithe·r by Art. 56 or by Art. 115 of the First Schedule to the Limitation
Act, 1908, and a suit, more than three years of the date on which the
work was done and in any event of the date on which the claim was
rejected, was barred. Allowing the apeal to this Court and restoring the
decree for the trial court,
HELD : (i) Article 56 of the First Schedule to the Indian Limitation
Act, 1908, prescribes a period of three years for a suit for the price of
the work done by the plaintiff for the defendant at his request. where no
time has been fixed for payment, and the period of limitation commences
to run from the date when the work is done. A suit is governed by Art.
5 6 if it arises out of a contract to pay the pric.e of work done at the
request of the defendant. The claim in the present case is for pavment
lllOt an additiolllll rate over the stipulated rate in view of change
in
circumstances and not for the price of work done by the appellant. even
though the additional work was done at the. request of the Engineer-incharge. [51 Fl
(ii) Article 115 of the First Schedule to the Limitation Act is a residuary article dealing with the claim for compensation for the breach of
any oontract, express or implied, not in writing registered and not specially provided for in the 'first schedule. The period of limitation in 'uch
cases . is three years
and
it commences to run when the contract is
broken,. or where there are &uccessive breaches whe.n the breach in respect
of which the suit is instituted occurs or where the breach is continuing when
it ceases. The suit filed by the appellant company is not a suit for ccmpensation for breach of contract express or implied; it is a suit for enhanced rate because of change of circumstances, and in respect of work
not CQ\>ered
by the contract. The additional work directed bv
the.
Engineer-in-charge whe.n carried out may be deemed to be done under the
48
SUPREME COURT REPORTS
(1970] 3 S.C.R.
terms of the IX)nb:act; but the claim for enhanced rates does not arise
A
out of the contract : it is in any case not a .claim for compensation for
breach of contract. [51 HJ
(iii) The claim is, therefore, not covered by any specific article under
the First Schedule and must fall within the terms of Art. 120. Under
this Article the period of six years commences to run when the right
to sue accrues.
There is no right .to sue until there is an accrual of the
right asserted in the suit and its infringement or at least a clear and 'unR
equivocal threat to infringe the right by the defendant against whom the
suit is instituted. [52 CJ
Bolo v .. Kokao 9nd Others, L.R. 87 I.A. 325, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2584
and 2585 of 1966.
Appeals from the judgment and decrees dated January 19,
1965 of the Patna High Court in First Appeals Nos. 190 and 213.
of 1960.
H. R. Gokhale, G. L. Sanghi, J. B. Dadachanji and Ravinder
.Narain, for the appellant (in both the appeals).
Jagdish Swarup, Solicitor-General, V. A. Seyid Muhammad,
B. D. Sharma and S. P. Nayar, for the respondent (in both the
appeals).
The Judgment of the Court was delivered by
Shah, J. The Government of India invited tenders for "reinforced concrete work relating to the foundation and superstructure of the Fertilizer Factory building at Sindri" in the State
of Bihar.
The tender submitted by the appellant Company was
accepted on November 22, 1947 and a formal contract in that
behalf was executed on November 26, 1948. By cl .. 12 of the
~ontract. insofar as it is relevant, it was provided :
"The Engineer-in-charge shall have power to make
any alterations in, omissions from, additions to, or substitutions for,
the
original specifications,
drawings,.
designs artd insiructlons, ...... , and the :::<>ntractor
shall be bound to carry out the work in accordance with
any i,nstructions which may be given to him ....... .
and any altered, additional or substituted work which
the contractor may be directed' to . do in the manner
above specified as part of the work shall be carried out
by the contractor on the same conditions in all respects
on which he agreed to do the main work, and at the
same rates as are specified in that tender for the main
work.
. . . . . . And if the altered, additional or substi·
tuted work includes any class of work, for which ncnate
is specified in this contract, then such class of work shall
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GANNON DUNKERLEY I', UNION (Shah, J.)
49
be carried out at the rates entered in the current schedule of rates of the Hazaribagh P.W.D. district which
was in force at the time of the acceptance of the contract minus/plus the percentage which the total tendered
amount bears to the estimated cost of the entire work
put to tender, and if the altered, additional or substituted
work is not entered in the said schedule of rates, then
the contractor shall within seven days of the date of his
receipt of the order to carry out tht; work inform the
Engineer-in-charge of the rate which it is his intention to
charge for such class of work, and if the Engineer-incharge does not agree to this rate he shall, by notice in
writing, be at liberty to cancel his order to carry out
such class of work, ...... provided ...... that if the
contractor shall commence work or incur any expenditure in regard thereto before the rates shall have been
determined . . . . . . then . . . . he shall only be entitled
to be paid in respect of the work carried out or expenditure incurred . . . . . . according to such rates as shall
be fixed by the Engineer-in-charge. In the event of a
dispute, the decision of tlfe Superintending Engineer of
the Circle shall be final."
Clause 25 of the agreement provided, insofar as it is relevant :
"Except where otherwise provided in the contract all
questions and disputes relating to the meaning of the
·specifications, designs, drawings, and instructions, hereinbefore mentioned and as to the quality of workmanship,. or mat~rial~ used on the work, or as to any other
quest10'.1•. claim, n~ht, matte~ or thing whatsoever, in any
way ansmg out of, or relatmg to the contract, designs,
drawmgs, specifications, estimates, instructions, orders
or these conditions, or otherwise concerning the works,
or tlie execution, or failure to execute the same, whether
arising during the progress of the work or after the com'
pletion or abandonment thereof shall be referred to a
Superintending Engineer ...... to be nominated by the
Chief Engineer for arbitration in thQ manner provided
by law relating to arbitration ....... , "
.·
The Sindri Factory Buildings were to be constructed under the
advice and guidance of M/s. Chemical Construction Corporation
of New York.
That Firm made delay in supplying the drawings
and specifications which involved work of a complicated nature
not included m the original contract.
Time for completion of the
work was on that account eii:tended till February 26, 1950.
On September 20, 1950 the appellant Company made a
demand for payment at an enhanced rate of 421% over the basic
so
SUPREME COURT REPORTS
fl 970] 3 s.c.R.
rates s1ipulated under the original contract. This claim was made
on five grounds :
·
1. That there was a "substantial deviation" in the
nature of work of which the detailed work drawings were supplied to the appellant Company after
the date of the contract.
The work involved was
of a complex nature requiring highly skilled
Jabour, and that additional labour and materials
not covered by the contract rates were required;
2. That there was "great increase in the price of
materials 'and labour on account of undue prolongation of the period of work;"
3. That there was increase in the cost of transportation on account of rise in the price of petrol and
mcrease in railway freight;
4. That the Government of India entered into other
contracts incidental to the construction of the
Sindri Factory at substantially higher rates which
directly affected the cost of labour and materials
of the appellant Company who had to compete
with the other contractors;
5. That additional work ordered to be done involved
in many instances quantity of work several times
the work set out in the contract.
By his letter dated September 13, 1950, the Additional Chief
Engineer rejected the claim.
In September 1954 the disputes
relating to the claim for rise in cost of material and labour due to
delay in supplying detailed work drawings, the claim .·arising from
rise in price of petrol and for increase in the cost of material and
labour due to other contractors working on the site, were referred
to arbitration, but northe claims for revision of rates due to
complex nature of the work ·and increase in the quantity of work.
The arbitrator rejected the claims of the Company m respect of
the matters which were referred.
Thereafter the appellant Company filed a suit on August
9, 1956, against the Union of India, for a decree for
Rs. 3,62,674/9/6 being the amount cfaimed at the rate of 42!%
above the contract
ra~ in the alternative, a , decree for
Rs. 2,44,000/, being the amount ch1imed at the rate of 28.l %
above the contract rate as recommended by the Executive Engimeer, and in the further aiternative, a decree for Rs. 1,36,222/-
at the rate of 18 .17 % above the contract rate as certified by the
Superintending Engineer.
The Union of India contended, inter
alia, that the claim was barred by the law of limitation.
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GANNON DUNKERLEY V. UNION (Shah, J.)
51
The Trial Court held that the claim was not. barred by the law
of limitation and decreed the claim for Rs. 1,36,222/- as certified
by the Superintending Engineer.
Agins! the decree passed by the
Trial Court the appellant Company as well as the Union of India
appealed to the High Court.
Before the High Court, in support of the appeal only the plea
of limitation was pressed on behalf of the Union of India.
In the
view of the High Court the claim was governed either by Art. 5 6
or by Art. 115 of the First Schedule to the Limitation Act, 1908,
and the suit not having been filed within three years of the Jate
on which the work was done and in any event of the date on which
the claim was rejected was barred.
The appellant Company has
appealed to this Court with certificate.
The appellant Company had undertaken under the terms of the
contract to do specific construction work at "basic rates".
The
Engineer-in-charge was by the terms of cl. 12 of the agreement
competent to give instructions for work not covered by the tenns
of the contract, and it was provided that remuneration shall be
paid at the rate fixed by the Engineer-in-charge for such additional
work, and in case of dispute the decision of the Superintending
Engineer shall be final.
It is common ground that the claim
made by the appellant Company was not covered by the arbitration agreement, and on that account it was not referred to the
arbitrator.
The claim in suit related to the revision of rates due
to the complex nature of the work and due to increase in the
quantity of work and also grant of contracts to other competing
parties at substantially higher rates and other related matters.
Article 56 of the First Schedule to the Indian Limitation Act.
1908, prescribes a period of three years for a suit for the price of,
work done b)' the plaintiff for the defendant at his request, where
no time has been fixed for payment, and the period of limitation
commences to run from the date when the work is done.
A suit
is governed by Art. 56 if it arises out of a contract to pay the
price of work done at the request of the defendant. The claim in
the present case is for payment at an additional rate over the
stipulated rate in view of change in circumstances, and not for
price of work done by the appellant Company. It is true that
additional work was done at the request of the Engineer-in-charge,
but the claim in suit was not for the price of work done but for
enhanced rates in view of altered circumstances.
Article 115 of the First Schedule to the Limitation Act is a
residuary article dealing with the claim for compensation for the
breach of any contract, express or implied, not in writing registered and not specially provided for, in the First Schedule. The
period of limitation in such cases is three years and it commences
\
52
SUPREME,COURT REPORTS
[1970] 3 s.c.R.
to run when the contract is broken, or where there are successive
breaches when the breach in respect of which the suit is instituted
occurs, or where the breach is continuing when it ceases.
The
suit filed by the appellant Comp11.ny is not a suit for compensation
for breach of contract express or implied : it is a suit for enhanced
rate because of change of circumstances, and in respect of work
not covered by the contract. The additiQnal work directed by the
Engineer-in-charge when carried out may be deemed to be done
under the terms of the contract : bat the claim for enhanced rates
·does not arise out of the contract : it is in any case not a claim for
compensation for breach of contract.
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The claim is therefore not covered by any specific article under
the First Schedule, and must fall within the terms of Art. 120.
C
The Solicitor-General appearing on behalf of the Union of India
contended that even if the claim falls within the terms of Art. 120
of the Limitation Act, it was barred, for, the appellant Company
had in the suit made a claim for work done more than six years
before the institution of the suit.
Counsel submitted that under
Art. 120 the period of limitation commences to run from the date
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on which the defendant obtains the benefit of the work done by
the plaintiff.
But under Art. 120 of the Limitation Act the period
of six years for suits for which no period of limitation is provided
elsewhere in the Schedule commences to run when the right to sue
accrues.
In our judgment, tliere is no right to sue until there is
an accrual of the right asserted in the suit, and .its infringement, or
E
at least a clear and unequivocal threat to infringe that right by the
defendant against whom the suit is instituted : Bolo v. Kokan and·
Others('). ·
The appeals are allowed and the decree passed by the Trial
Court is restored with costs in the High Court and in this Court.
One hearing fee.
The appellant will be entitled to ihterest on the
F'
amount decreed at the rate of 6% per annum from the date of the
suit till payment.
R.KP.S.
Appeals allowetf_
(I l L.R. 57 I.A. 325 at p. 331.