# • ' HIND CONSTRUCTION CONTRACTORS v. THE STATE OF MAHARASHTRA /{]Jluary 30, 1979

- **Citation:** [1979] 2 S.C.R. 1147
- **Court:** Supreme Court of India
- **Decided:** 1979
- **Case number:** Civil Appeal Nos. 483 and 1769 of 1969
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hind-construction-contractors-v-the-state-of-maharashtra-jluary-30-1979-7478
- **Pages:** 13

## Headnote

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HIND CONSTRUCTION CONTRACTORS
v.
THE STATE OF MAHARASHTRA
/{]Jluary 30, 1979
1147
[Y. V. CHANDRACHUD, C. J., V. 0. TuLZAPURKAR AND A. P. SEN,
JJ.]
Contract Act-Contract not completed within stipulated time. No term in
contract making tin1e, the essence of contract-Tests for deciding if tin1e was
of essence.
A
B
The appellant entered into a contract with the respondent for the execution
of a work the essential term of which was that the contract should be comC
pleted in 12 months from the commencement of the work. On the ground that
the appellant had not completed the work within the stipulated time the respondent rescinded the contract.
In his suit for damages for illegal and wrongful recision of the contract the
appellant claimed that the date for commencement of the
work was merely
nominal and that in any case time was not of the essence of the contract. The
D
appellant also alleged that on account of several difficulties such as exce.ssive
rains in the area, lack of proper road and means of approach to the site, rejec~
tion of materials on improper grounds by the Government officers, completion
of the work was delayed, extension of time was
wrongfully. refused by the
officers of the Government, and that none of these factors
had been taken
into account by the Government while refusing to give extension of time, and
in ultimately rescinding the contract.
E
Holding that time was not of the essence of the contract the trial Court
de.creed the suit, but disallowed certain claims of the appellant.
On appeal by both sides the High Court, without deciding the question
whether time was of the essence of the contract, held thnt the recision of the
contract was not arbitrary and unreasonable or unjustified.
F
On further appeal to this Court it was contended on behalf of the appellant
that (i) the High Court was in error in not deciding the main question whether
or not time was essence of the contract; and (ii) it was not the appellant's
case that the recision was mala fide and that, therefore, the High Court erred
in considering that question.
Allowing the appeal,
G
HELD : The question whether or not time was of the essence of the 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 he.ve expressly provided that time is of the essence of the
contract such stipulation
would have to be read alongwith other provisions of the contract and such
other provisions may, on construction of the contract, exclude
the inference
H
that the completion of the work by a particular date was
intended
to be
fundamental.
For instance if the contract were to include clauses providing
1148
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[1979] 2 s.c.R.
A
for extension of time in certain contingencies 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 clause would be construed as rendering inefftctivc the express provision relating to the time being of the essence
of the cont1act.
fl155A-B]
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Halsbury', Laws of England, Vol. 4 p. 1174 referred to.
(1) In the instant case, having regard to the terms of the car.tract particularly the clauses pertaining to the imposition of penalty and extension of time~
time was never intended by the parties to be of the essence of the contract
The letter by which the contract was rescinded clearly waived the stipulation
of 12 months' period, the contractor having been allo,ved to do some more
work after th< expiry of the period. [1157B]
(ii) The approach adopted by the respondent and upheld by the High Court
WM not correct Long before the expiry of the period of 12 months the appellant bad requested for extension of the period
of completion.
Even if the
grounds made out by the appellant were not agreeable to the
Superintending
Engineer some reasonable time making it the essence of the contract ought to
have been granted.
Instead of making time of the essen

## Text

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HIND CONSTRUCTION CONTRACTORS
v.
THE STATE OF MAHARASHTRA
/{]Jluary 30, 1979
1147
[Y. V. CHANDRACHUD, C. J., V. 0. TuLZAPURKAR AND A. P. SEN,
JJ.]
Contract Act-Contract not completed within stipulated time. No term in
contract making tin1e, the essence of contract-Tests for deciding if tin1e was
of essence.
A
B
The appellant entered into a contract with the respondent for the execution
of a work the essential term of which was that the contract should be comC
pleted in 12 months from the commencement of the work. On the ground that
the appellant had not completed the work within the stipulated time the respondent rescinded the contract.
In his suit for damages for illegal and wrongful recision of the contract the
appellant claimed that the date for commencement of the
work was merely
nominal and that in any case time was not of the essence of the contract. The
D
appellant also alleged that on account of several difficulties such as exce.ssive
rains in the area, lack of proper road and means of approach to the site, rejec~
tion of materials on improper grounds by the Government officers, completion
of the work was delayed, extension of time was
wrongfully. refused by the
officers of the Government, and that none of these factors
had been taken
into account by the Government while refusing to give extension of time, and
in ultimately rescinding the contract.
E
Holding that time was not of the essence of the contract the trial Court
de.creed the suit, but disallowed certain claims of the appellant.
On appeal by both sides the High Court, without deciding the question
whether time was of the essence of the contract, held thnt the recision of the
contract was not arbitrary and unreasonable or unjustified.
F
On further appeal to this Court it was contended on behalf of the appellant
that (i) the High Court was in error in not deciding the main question whether
or not time was essence of the contract; and (ii) it was not the appellant's
case that the recision was mala fide and that, therefore, the High Court erred
in considering that question.
Allowing the appeal,
G
HELD : The question whether or not time was of the essence of the 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 he.ve expressly provided that time is of the essence of the
contract such stipulation
would have to be read alongwith other provisions of the contract and such
other provisions may, on construction of the contract, exclude
the inference
H
that the completion of the work by a particular date was
intended
to be
fundamental.
For instance if the contract were to include clauses providing
1148
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[1979] 2 s.c.R.
A
for extension of time in certain contingencies 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 clause would be construed as rendering inefftctivc the express provision relating to the time being of the essence
of the cont1act.
fl155A-B]
8
c
D
Halsbury', Laws of England, Vol. 4 p. 1174 referred to.
(1) In the instant case, having regard to the terms of the car.tract particularly the clauses pertaining to the imposition of penalty and extension of time~
time was never intended by the parties to be of the essence of the contract
The letter by which the contract was rescinded clearly waived the stipulation
of 12 months' period, the contractor having been allo,ved to do some more
work after th< expiry of the period. [1157B]
(ii) The approach adopted by the respondent and upheld by the High Court
WM not correct Long before the expiry of the period of 12 months the appellant bad requested for extension of the period
of completion.
Even if the
grounds made out by the appellant were not agreeable to the
Superintending
Engineer some reasonable time making it the essence of the contract ought to
have been granted.
Instead of making time of the essence at some stage or
the other, the respondent rescinded the contract which was clearly illegal and
wrongful.
[ 11 ~SC]
(iii) It was never the case of the appellant that the recision of the contract
was mala fide.
The various reasons given by the appellant for delay in executing the work were put forward merely for showing that the refusal to extend
time by the Superintending Engineer
was
unreasonable or unjustified.
The
question was not whether the recision of the contract was unreasonable and,
E
therefore, unjustified but whether the recision was wrongful and illegal.
If
time was not of the essence or if the stipulation as to the time fixed for completion had, by reason of the waiver, ceased to be
applicable then the only
course open to the respondent was to fix some time making it the essence and
if within the time 110 fixed the appellant had failed to complete the work, the
Jt!rC'nden.t could have rescinded the contr.o:ict.
[1 l57D-G]
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CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
483
and
1769 of 1969.
Appeal from the Judgment and Ord•or dated 9/10-9-1968 of the
Bombay High Court in First App,;al Nos. 844 of 1961 and 245 ot
1962.
M. C. Bhandare, J. S. Sinha and K. J. John for the Appellants.
R. H. Dhebar, B. V. Desai and M. N. Shroff for the Respondent.
The Judgment of the Court was delivered by
TULZAPURKAR, J.
These appeals by certificate of fitness granted
by the High Court of Judicature at Bombay are directed against that
Court's common judgment and decree dated September 9/10, 1968,
passed in two cross appeals being First Appeal Nos. 245 of 1962 and
844 of 1961.
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I!IND CONSTRUCTION CONTRACTORS V. MAHARASHTRA
114 9
(Tulzapurkar, J.)
A contract for the construction of an aqueduct across the Alandi
River at Mile No. 2 of the Nasik Left Bank Canal of the total value
of Rs. 1,07 ,000 /- was granted to the appellant-plaintiff (originally a
partnership but later a proprietary firm of contractors) by the respondent-defendant (the State of Maharashtra) after the farmer's tender
was accepted on June 17, 1955.
On July 2, 1955 the Executive
Engineer issned the work order to the appellant-plaintiff directing him
to commence the work by July 5, 1955 intimatihg in clear terms that
the stipulated date for starting the work would be reckoned from July
5, 1955. The formal vegular Contract in prescribed Form B-2/1 of
1955-56 (Ex. 34) containing the terms and conditions as well as the
Schedules, specifications etc. was executed by the parties on July 12,
1955. A security deposit of Rs. 4,936/- was kept by the appelJ,antplaintif! with the respondent-defendaht.
The period for completion
of work was fiioed as 12 months from the date stipulated for commencement of the work, that is to say, it was expected to be completed
on or before Ju;y 4, 1956.
It appears that on the ground that the
appdlarrt-plaintif! had not completed the work as expected within the
stipulated time the Executive Engineer by his letter dated August 27,
1956 (Ex. 78) rescinded the said contract with effect from August 16,
1956. After serving a 'notice under s. 80 of the Civil Procedure Code
the appellant-plaintiff filed a suit (being Special Civil Suit No. 23 of
1959) on August 28, 1959 in the Court of the Joint Civil Judge,
Senior Division, Nasik making a claim for Rs. 65,000/- in the aggregate against the respondent-defendant alleging wrongful and illegal r~
cisio'n of the contract on the part of the respondent-defendant. The
appellant-plaintiff's case was that the initial fixation of July 5, 1955
as the date for commencement of the work was nominal, that the area
where the work was to be done had usually heavy rainfall rendering it
impossible to carry out any work from July to November and that,
therefore, it was the practice of the Public Works Department to deduct the period of monsoon in case of such type of works and that the
appella'nt-plaintif! had been orally informed that this period would be
deducted or not taken into account for calculating the period of 12
months under the contract and that on this assurance he had commenced the work towards the end of December 1955. His case further was that in any event time was not of the essence of the contract,
that oh account of several difficulties, snch as excessive rains, lack of
proper road and means of approach to the site, rejection of materials
on improper grounds by Govermnent Officers, etc., over which he had
no control, the completion of the work was delayed and that the extension of the time which was permissible under the contract had been
wrongfully refused by the officers of the respondent-defe'ndant.
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[1979.1 2 s.c.R.
cording to him none of these factors had been taken into account b}
the Government while refusing the extension and the contract was
wrongfu1ly rescinded a'nd, therefore, the respondent-defendant
was
liable in damages.
The total claim of Rs. 65,000/- comprised six
items-(1) Rs. 4,936/- being the amount of security deposit wrongfully forfeited by the respondent-defendant, (2) Rs. 10,254/- being
the amount due to him for the actual work done by him under Bill
No. 1253 dated September 20, 1956 and which had not been paid for,
(3) Rs. 7,3751- being the value of the material collected by him on
the site for work but which had ree'n rendered useless on account of
wrongful recision, the 4th and 5th items sounded in damages, while
the last item was interest from date of recision to the date of the suit.
The State of Maharashtra resisted the claim contending that time
was of the essence of the contract, that the date fixed for commencement was real and not nominal and the 12 months period was fixed
after all aspects of the matter had been taken into account, it was further contended that the appellant-plaintiff knew the situation of the
site and the so-called difficulties, that there was no excuse for him for
not doing the work during the months of July to November, that the
appellant-plaintiff failed to carry out the proportionate work during
the periods fixed in the contract and that since the appellant-plaintifl
had rendered himself incompetent to complete the work
in
proper
time it had to rescind the contract and the recision was proper a'nd fo1
adequate reasons; it was further contended that the State was entitled
to forfeit the security deposit which it did on the date when the contract was rescinded.
The several items claimed by the
appellantplaintiff were denied by the State. It was denied that the material of
the value of Rs. 7,3751- remained on the site or that it was responsible
for its 'non-removal from the site. Regarding items 4 and 5 the State
denied its liability to pay the same as it was the appellant-plaintiff who
had committed the breach of the contract. As regards the amount due
under Bill No. 1253 dated September 20, 1956 for the actual work
done, it was contended that the State had to deduct the amount of
penalty leviable under the contract and for th~ actual cement supplied
to the appellant-plaintiff and after making deductions in that behalf
only a sum of Rs. 700/- would be due to the appellant-plaintiff.
On a consideration of the documentary evidenee including
the
terms and conditions of the contract (Ex. 34) and the oral evidence
ied by the parties, the learned trial Judge held that the date July 5,
1955 fixed as the date for commencement of the work was not nominal
but that time was not of the essence of the contract between
the
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HIND CONSTRUCTIO"I CONTRACTORS V. MAHARASHTRA
11 SI
( Tulzapurkar, J.)
parties, that the respondent-defendant (State Government) had wrongfully rescinded the contract, that the appellant-plaintiff was entitled to
damages but that he had not established the two items claimed
as
damages and he was entitled to a nominal sum of Rs. 120/- as damages. He further h·~ld that since the recisioil of the contract was wrongful the State was not entitled to forfeit the security deposit nor levy
any penalty.
He accordingly decreed the appellant-plaintiff's claim m
respect of refund of security deposits and as regards the amount of
Bill No. 1253 dated September 20, 1956 for actual work done he held
that a sum of Rs. 5,845/- only would be due to him after giving credit
A
B
for Rs. 4,409/- due from the appellant-plaintiff to
the
State.
He
accordingly decreed the appellant-plaintiff's suit to the extent
of
C
Rs. 10,901/- with interest thereon at 6% per annum from the date oL
recision till date of suit and allowed proportionate costs to him.
Two appeals w~re preferred against the aforesaid decree of the
trial court, one by the appellant-plaintiff in respect of the claims that
had been disallowed (First Appeal No. 245 of 1962) and the other
by the State in respect of the claims allowed against it (First App,al
No. 844 of 1961). Cnriously enough the High Court did not decide
the main issue that arose between the parties, namely, whether time
was of the essence of the contract, as it took the view that a decision
on that question was really unnecessary for disposal of the appeals.
Il proceeded to decide the appeals on the assumption that time was
not of the essence of the contract by considering the question whether
the recision of the contract by the State could be regarded as ma!a fide
or so unreasonable that it must in the place of the judgment of the
officers concerned substitute its own judgment and hold that tho recision was wrongful. The High Court observed that even the appeLantplaintiff had not alleged any mala fide on the part of any of the officers of the State but had pressed into service five or six factors the
non-consideration whereof by the rcspondent-defundant rendered !he
recision of the contract arbitrary, unreasonable and, therefore, unjusti-
·fied.
After discussing each one of those five or six factors the High
Court held that some of them had not been proved by the appellantplaintiff while others did not head to the inference that the recision of
the contraci was arbitrary, uilreasonable or unju&tified.
It found that
by about July 21, 1956 (vide Ex. Engineer's letter Ex. 74) the appellant-plaintiff had done only 1/3rd of the contract work and that in the
circumstances the appellant-plaintiff could not hav>~ completed the
work even within the next three months and, therefore, the respondent's officers had rightly rescinded the contract and, therefore, it was
the appellant-plaintiff and not the respondent-defendant who had committed a breach of the contract.
However, the High Court took the
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;icw that for such breach on the part of the appellant-plaintiff,
the
respondent-defendant, on a reading of the els. 2 and 3 of the Condi-
, tions of Contract, was not entitled both to levy compensation and also
to forfeit the security deposit.
Accordingly, the High Court upheld
the forfeiture of the S<Ccurity deposit made by the respondent-defendant
and while modifying the trial court's decree it confirmed it only to the
extent of Rs. 5,845/-, being the amount due to the appellant-plaintiff
for the work actually done by him under BilI No. 1253 and which had
not
been
paid.
In the result, the appellant-plaintiff's appeal
was dismissed and that of the State was partly al1ow~d with appropriate order of proportionate costs.
In support of the present appeal counsd for the appellant-plaintifl
raised two or three contentions. In the first place he contended that
the High Court was in error in not deciding the main issue whether
the time was of the essence of the contract or not ? He urged that
the said issue could 'no' be avoided in the manner done by the High
Court, for, if time was not of the essence of the contract then just before the expiry of the 12 months' period or immediately after its expiry
it was up to the respondent-defendant to gtant some reasonable time
to the appellant-plaintiff for completing the work undertaken and make
U1e same the essence of the contract a'nd only if the work was not
completed by the appellant-plaintiff within that
time the contract
could have beoen rescinded on the gtmrnd that the appel!ant-plaintifi
had committed a breach of a contract. According to him such course
of action on the part of the respondent-dcfe"ndant was obligatory, when
the initial period of 12 months was not of the essence, especially When
the request of the appellant-plaintiff for extension of time was pending
)_
before the concerned officers of the Government since before the
- fJ.___
expiry of the initial period.
He contended that instead of adopting
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the aforesaid course ilie respondent-defendant had without
making
,.-
time of the essence of the contract rescinded the same with effect from
August 16, 1956 by a letter dated Augnst 27, 1956 (Ex. 78), wluch
;·ecision must be regarded as wrongful a'nd illegal.
Secondly counsel·
contended that the High Court further erred in considering the question whether the recision of the contract by the State was either mala
fide or wholly unreasonable and, therefore, unjustified.
He pointed
out it was not the appellant-plaintiff's case that the recision was mala
fide and, according to him, the question was not whether the recision
of the contract on the part of the respondent-defendant was unreasonable, and, therefore, unjustified but whether the respondent-defendant
was entitled in law to rescind the contract in the manner done when
time was not of the essence of the contract. He further urge<d that the
High Court had clearly erred in assuming that the appeUant-plaiBtHl
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l!IND CONSTRUCTION CONTRACTORS V. MAHARASHTRA
1153
(Tulz.apurkar, !.)
could no.t have completed the work even within the next three months
and, therefore, the contract was rightly rescinded by the respondentdefendant. He, however, fairly stated that even if this Court held in
his favour that the recision was wrongful and, therefore, the respondent-defendant had connnitted a breach he would merely press for th~
restoration of the decree passed by the trial Court and not press any
other item forming the subject-matter of the original claim in the suit.
On the other hand, counsel for the respondent-defendant sought to
support the judgment P.nd decree of the High Court on
both the
grounds first that time was of the essence of the contract having regard
to the express provision contained in cl. (2) of the "Conditions of
Contract" and, therefoP", on appellant-plaintiff's failure to complete
the san1e \Vithin the stipula~cJ thne the recision of the contract \Vas
legal and justified and secondly, that even if time was
not of the
essence of the contract, having regard to the circumstances the Hish
Court rightly came to the conclusion that the recision of the contrnct
by the respondent-defendant could not be regarded as unreasonable
or unjustified and that, thernfore, the appellant-plaintiff being in breach
the security deposit had been rightly forfeited.
The first question that arises for our consideration, therefore, is
whether time was of the essence of the contract that was executed
between the parties on July 12, 1955 (Ex. 34). It cannot be di•puted
that question whether or not time was of the essence of the contract
would essentially be a question of the intention of the parties to be
gathered from the terms of the contract. The contract in the instant
case is for the construction of an aqueduct across the Alandi River
at Mile No. 2 of the Nasik Left Bank Canal and unquestionably 12
months' period commencing from the date of the commencem~rrt of
the work had been specified within which the construction had to b~
completed by the appellant-plaintiff.
Indisputably, in the work order
dated July 2, 1955 the Executive Engineer had directed the appellantplaintiff to commence the work by July 5, 1955 intimating in clear
terms that the stipulated date for starting the work would be reckoned
!i:om July 5, 1955. Both the trial court as well as the High Court
have found that mentioning of July 5, 1955 as the date for starting
the work was not nominal but was real date intended to be acted upon
by the parties.
It is, therefore, clear that 12 months' period mentioned for the completion of the work was to expire on July 4, 1956.
The
question is whether this period of 12 months so specified in the contract was of the essence of !he contract or not ? On the one hand,
counsel for the a~JX'.llant·plaintiff con~~nded that the contract being
analogous to a buildmg contract the period of 12 months would not
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ordinarily be of the essence of the contract as the subject-matter there·
of was not such as to make completion to time essential, that an agreement to complete it within reasonable time would be implied and that
reasonable time for completion would be allowed. On the other hand
counsel for the respondent-defendant contended that time had been
expressly made of the essence of the contract and in that behalf reliance was placed upon cl. (2) of the "Conditions of Contract" where
not only time was stated to be of the essence of the contract on the
part of the contractor but even for completion of proportionate works
specific periods had been specified and, therefore, the appellantplaintiff's failure to complete the work within the stipulated period
entitled the respondent-defendant to rescind it. In the latest 4th edn.
of Halsbury's Laws of England in regard to building and engineering
contracts the statement of law is to be found in Vol. 4, Para 1179,
which runs thus :-
" 1179. Where time is of the essence of the contract.
The expression time is of the essence means that a breach of
the condition as to the time for performance will entitle the
innocent party to consider the breach as a repudiation of
the contract. Exceptionally, the completion of the work by
a specified date may be a condition precedent to the contractor's right to claim payment. The parties may expressly
provide that time is of the essence of the contract and where
there is power to determine the contract on a failure to complete by the specified date, the stipu1atio'n as to time will be
fundamental.
Other provisions of the contract may, on the
construction of the contract, exclude an inference that the
completion of the works by a particular date is fundamenta~
time is not of the essence where a sum is payable for each
week that the work remains incomplete after the date fixed,
nor where the parties contemplate a postponement of completion.
Where time has not been made of the essence of the contract or, by reason of waiver, the time fixed has ceased to be
applicable, the employer may by notice fix a reasonable time
for the completion of the work and dismiss the contractor
on a failure to complete by the date so fixed."
(Emphasis supplied)
H
It will be clear from the aforesaid statement of law that even
where the parties have expressly provided that time is of the essence
of the contract such a stipulation will have to be read along with other
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HIND CONSTRUCTION CONTRACTORS v. MAHARASHTRA
1155
(Tulzapurkar, J.)
provisions of the contract and such other provisions ma.y, on construction of the contract, exclude the inference that the completion
-0f the work by a particular date was intended to be fundamentJl, for
instance, if the contract were to include causes providing for extension of time in certain contingencies or for payment of fine or penalty
for every day or week the work undertaken rel!'ains unfinished on
the expiry of the time provided in the contract suLh clauses would
be construed as rendering inctiective the express
pro~'sion relating
to the time being of the essence of contract. The emphas1' 'd portion
of the aforesaid statement of law is based on Lamprell v. Billericay
Union('), Webb v. Hughes(') and Charles Rickards Ltd. v. Oppenheim (3 ). It is in light of the aforesaid position in law that we will
have to consider the several clauses of the contract Ex. 34 in the
case.
The material clauses in this behalf are els. 2 and 6 of the
"Conditions of Contract" which run as follows :
"Clause 2 :-The time allowed for carrying
out
the
work as entered in the tender shall be strictly observed by
the contractor and shall be reckoned from the
date
on
which the order to commence work is given to the contractor.
The work shall throughout the stipulated period
of the
contract be proceeded with, with all due diligence (time being
deemed to be of the essence of the contract on the part of
the contractor) and the contractor shall pay as compensation an amount equal to one per cent or such smaller
amount as the Superintending Engineer (whose decision in
writing shall be final) may decide, of the amount of the
estimated cost of the whole work as shown by the tender
for every day that the work remains uncommenced, or unfinished, after the proper dates.
And further to ensure
good progress during the execution of the work, the. contractor shall be bound, in all cases in which the time allowed
for any work exceeds one month, to complete.
t of the work in t of the, time
t of the work in t of the time
t of the work in t of the time" .
"Cfause 6 :-If the contractor shall desire an extension of the time for completion of the work on the ground
of his having been unavoidably hindered in its execution or
(1) [184913 Exch 283 at 308.
(2) [1870] L.R. 10 Eq 281.
(3) [ 1950] l KB 616,
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SUPREME COURT REPORTS
[1979] 2 s.c.R.
on any other ground, he shall apply in writing to the Executive Engineer before the expiry of period stipulated in
the tender or before expiry of 30 days
from
the date
on which he was hindered as aforesaid or on which the
cause for asking for extension occurred, whichever is earlier
and the Executive Engineer, may if in his
opinion there
arc reasonable grounds for granting an
extension,
grant
such extension as he thinks necessary or proper. The decision of the Executive Engineer in this matter shall be
final."
Two aspects emerge very clearly from the aforesaid two clauses,
In the first place under cl. 6 power was conferred upon the
Executive Engineer to grant extension of time for completion of
~e work on reasonable grounds on an application being made by
the contractor (appellant•plaintifI) in that behalf; in other words,
in certain contingencies parties had contemplated that extension of
D
time would be available to the contractor.
Such a provision would
clearly be inconsistent with parties intending to treat the stipulated period of 12 months in cl. 2 as fundamental.
Similarly, in
cl. 2 itself provision was made for levying and recovering penalty I
compensation from the appellant-plaintiff at specified rates during the
period the work shall remain unfinished after the expiry of the fixed
E date.
Such provision also excludes the inference that
time
( 12
months period) was intended to be of the essence of the contract.
Further with regard to the provision that is to be found in c!. 2
whereunder a time schedule for proportionate work had been set out
(namely, t of the work in t of the time, t of the work in t of the
time and ! of the work in i of the time ) , the evidence of the
F
Superintending Engineer Pandit (D.W. 1) is very eloquent. In para
13 of his deposition this is what he has stated :
G
"In the agreement (Ex. 3· ~) the rate of work is based on
the valuation tth time mentioned means tth in
12
months.
The suit contract is for Rs. 1,07,000/-.
Hh
work means the work of about Rs. 27,000/-.
IL is not
possible to do the work of Rs. 27,000/- in tth time as the
days were rainy.
This was not reasonable."
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The witness in para 12 of his deposition has also given the following
,
admission :-
B
"It is not specifically mentioned in the agreement (Ex.
34), that the suit work was urgent and that it was to be completed within 12
months.
In this
agreement
(Ex. 34)
HIND CONSTRUCTION CONTRACTORS V. MAHARASHTRA
1 I 5 7
(Tulzapurkar, l.)
there are the clauses of imposing a penalty and extension
A
of time."
Having regard to the aforesaid material on recor;;, particularly the
<:lauses in the agreement pertaining to imposition of
penalty
and
extension of time it seems to us clear that time (12 months period)
was never intended by the parties to be of the essence of the contract.
Further from the correspondence on the record, particularly, the letter
(Ex. 78) by ,which the contract was rescinded it does appear that
the stipulation of 12 months' period was waived, the contractor having been allowed to do some more work after the expiry of the period,
albeit at his risk, by making the recision effective from August
16, 1956.
Once either of the aforesaid conclusions is reached it would be
difficult to accept the High Court's finding that the recision of the
contract on the part of the respondent-defendant was
proper
and
justified on the basis that the same was neither shown to be mala fide
nor unreasonable.
It must be observed that it was never the case
of the appellant-plaintiff that the recision of the contract on the part
of the respondent-defendant was ma/a fide. Counsel for the appellantplaintiff further pointed out and, in our view, rightly that the five or
six factors, namely, ( 1) the contract having been given at the threshold of monsoon, the period of monsoon ( 4 months) ought not to
have been reckoned, (2) absence of proper road and approach to
the work site during the rainy season and a couple of months there·
after, (3) unreasonable rejection by the
Government Officers
of
material brought on the site, which material was later on allowed to
be used, ( 4) difficulty in procuring labour due to malarious climate
at the site, (5) delay in issuing quarry permit and (6) extra time taken
for doing extra work that was entrusted ought to have been taken
into account_:_were put forward by the appellant-plaintiff merely for
the purpose of showing that the refusal to extend the time by the
Superintending Engineer although recommended by the S.D.O.
and
Executive Engineer was unreasonable and not for showing that the
·recision of the contract was unreasonable or unjustified. In our view,
the question would not be whether the recision of the contract was
unreasonable and, therefore, unjustified but whether the recision of
the contract in the circumstances of the case was wrongful and
illegal.
If time was not of the essence of the contract or if the
stipulation as to the time fixed for completion had, by reason of waiver,
ceased to be applicable then the only course open to the, respondent'
defendant was to fix some time making it the essence and if within
the' time so fixed the appellant-plaintiff had failed tr
~.omplete the
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A
B
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1158
SUPREME COURT RHPORT5
[1979 I 2 S.C.R.
work the respondent-defendant could have rescinded the contract.
The High Court has taken the view that the contract was rightly rescinded by the. respondent-defendant because by about July 21, 1956
(vide letter Ex. 74). the appellant-plaintiff had done work
of the
value of Rs. 35,000/- as against the tender value of Rs. 1,07,000/-,
that is to say, only I/3rd of the total work had been completed and,
therefore, even though time was not of the essence of the contract,
the appellant-plaintiff, in the circumstances, could not have completed
the work even within the next three months.
In our view,
this
approach adopted by the respondent-defendant and
upheld by the
High Court is not correct.
Long' before the expiry of the period of
12 months the appellant-plaintiff had by his letter dated June 6, 1956
(Ex. 68) requested for extension of period of completion up to the
end of December, 1956; this request was repeated by another letter
dated June 23, 1956 (Ex. 69). May be the reasons or grounds on
which the request was made may not have appealed to the Superintending Engineer but some reasonable time making it the essence ought
to have been granted. In this behalf it may be stated that the S.D.O.
by his letter (Ex. 69) had recommended extension upto December
1956 as sought while by his letter dated June 23, 1956 (Ex. 70)
addressed to the Superintending Engineer, the Executive Engineer had
recommended that extension of time up to October 30, 1956 may be
granted to the appellant-plaintiff with clear intimation that if he failed
to complete the work by then, the maximum penalty allowable under
cl. 2, namely, 10% of the cost of the work will be inflicted on him,
but the recommendation did not receive approval of the Superintending Engineer. It appean; that the appellant-plaintiff had an interview
with the Superintending Engineer on August 24, 1956 when a written
representation (Ex. 99) was handed over and the whole position was
sought to be explained to the Superintending Engineer but within
three days of the interview by the letter dated August 27, 1956 (Ex.
78) the contract was rescinded and the full security deposit was fof'-
feited to Government.
It will thus appear clear that though
time was not of the essence of the contract, the respondent-defendant
did not fix any further period making time the essence directing the
appellant-plaintiff to complete the work within such period; instead it
nscinded the contract straightaway by letter dated August 27, 1956.
Such recision on the part of the respondent-defendant
was
clearly
illegal and wrongful and thereby the respondent-defendant committed
a breach of contract, with the result that there could be no forfeiture
of the security deposit. In our view, therefore, the trial court was
right in coming to the conclusion that the appellant-plaintiff was entitled to a rdund of their full security deposit of Rs. 4,936/- as also
'
'
'
•
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.. _ .,_,HIND CONSTRUCTION CONTRACTORS V. MAHARASHTRA •
1159
(Tulzapurkar, J.)
to Rs. 5845/- being the balance of their Bill No. 1253 dated September 20, 1956 for work actually done by them and not paid for
and nominal damages of Rs. 120/-. The appellant-plaintiff was also
entitled to interest on the aforesaid sums and costs of suit as directed
by the trial court.
A
In the result we allow the appeal, set aside the common judgment
B
and decree in F.A. No. 844 of 1961 passed by the High Court and
rnstore that of the trial court. The appellant-plaintiff will get
costs
of this appeal as also costs of F.A. No. 844 of 1961. The High
Court's decree dismissing F.A. No. 245 of 1962 is confirmed.
P.B.R.
Appeal allowed.