Karnataka High Court
Sri. K Sudhakar Reddy vs Karnataka Neeravari Nigam Ltd on 11 January, 2013
Bench: H.N.Nagamohan Das, Aravind Kumar
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IN THE HIGH COURT OF KARNATAKA
CIRCUIT BENCH AT DHARWAD
DATED THIS THE 11TH DAY OF JANUARY, 2013
PRESENT
THE HON'BLE Mr. JUSTICE H.N. NAGAMOHAN DAS
AND
THE HON'BLE Mr. JUSTICE ARAVIND KUMAR
R.F.A. No. 3026/2010
BETWEEN :
----------------
Sri. K. SUDHAKAR REDDY
ENGINEERING CONTRACTOR
No. 53, SHRINAGAR COLONY
HYDERABAD - 500 073 (AP). ... APPELLANT
(BY Sri. S M KALWAD &
Sri. P HARISHCHANDRA REDDY, ADVS.)
AND :
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KARNATAKA NEERAVARI
NIGAM LTD., BANGALORE
REP. BY THE EXECUTIVE
ENGINEER, MALAPRABHA
RIGHT BANK CANAL
CONSTRUCTION
DIVISION No. 4, NAVALGUND
DHARWAD DIST. ... RESPONDENT
(BY Sri. RAMESH N MISALE, ADV.)
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THIS RFA IS FILED UNDER SECTION 96, ORDER 41, RULE 1
OF CPC AGAINST THE JUDGMENT AND DECREE DATED
23.01.2010 PASSED IN O.S. No. 56/2004 ON THE FILE OF THE ADDL.
CIVIL JUDGE (SR.DN.), GADAG, DECREEING THE SUIT FILED FOR
RECOVERY OF DAMAGES.
THIS RFA COMING ON FOR FINAL HEARING THIS DAY,
ARAVIND KUMAR J, DELIVERED THE FOLLOWING;
JUDGMENT
This is a defendant's appeal questioning the correctness and legality of the judgment and decree passed by Additional Civil Judge (Senior Division) Gadag in O.S. No. 56/2004 dated 23.01.2010 whereunder suit filed by plaintiff for recovery of damages came to be decreed as prayed for.
2. We have heard the arguments of learned advocates appearing for the parties. We have perused the judgment and decree passed by Trial Court and the records secured from the Trial Court. Parties are referred as per their rank in Trial Court.
BRIEF BACKGROUND OF THE CASE
3. Plaintiff called for a tender for construction of Right Canal to Malaprabha project at 112 and 113 KMs situated within the limits of Ron Taluka. and defendant was the successful bidder. Pursuant to the same an agreement came to be entered into on 04.11.1988 and thereafter work order was issued on 15.11.1988 stipulating time of 15 months for completing the work. Possession of the site was handed over to the defendant on 3 19.12.1988. On account of non-completion of the contract as agreed to within the stipulated period, same was terminated on 17.08.1991 and thereafter the work was retendered and it was awarded to M/s. Shankar Construction Company and Sri. V.S. Hegde by agreements dated 19.01.1993 and 02.06.1992 respectively. Work orders were also issued to these successful bidders on 18.11.1993 and 07.02.1993 respectively. Plaintiff contended it had to spend extra amount of Rs.75,20,440/- to these two contractors and based its claim on a chart prepared and produced along with plaint showing the quantum of work done by the defendant and the quantum of work done by two contractors who were subsequently entrusted with the work and to recover the said cost, suit in question came to be filed against the defendant for a sum of Rs.81,12,940/-. Defendant on service of suit summons appeared and filed his written statement and denied the averments made in the plaint. On the basis of the pleadings of the parties trial court framed following issues for its adjudication.
i. Whether plaintiff proves that the defendant has failed to perform and complete the work entrusted to him as per tender agreement entrusted to him as per tender agreement No. AB/CE/IRC/88-89/16 dt: 4.11.1988 pertaining to M.R.B.C.K.M.112 and another tender agreement No. 4 AB/CE/9RC/88-89/17, dt: 4.11.1988 pertaining to M.R.B.C.K.M.113 as alleged?
ii. If so, whether plaintiff proves that, due to failure on the part of the defendant to perform and complete the work entrusted to him he has suffered a loss of Rs.81,12,940-00 by entrusting the remaining work to different contractors as pleaded under paragraph Nos. 6 to 9 of the plaint?
iii. Whether the defendant proves that, suit filed by the plaintiff is barred by limitation?
iv. Whether the defendant proves that, he could not complete the work entrusted to him as the plaintiff did not complete the acquisition proceedings of all lands required for excavation as pleaded under paragraph No. 7 of his written statement? v. Whether the defendant proves that, this court has no territorial jurisdiction to try the suit?
vi. Whether the plaintiff proves that, he is entitled for damages of Rs.81,12,940-00 along with future interest at the rate of Rs.12% p.a., as claimed?
vii. What order or decree?
4. In order to substantiate the contentions raised in the suit, plaintiff examined two officers as its witness and in all produced 87 documents and 5 got them marked as Ex.P.1 to Ex.P.87. Defendant got himself examined as D.W.1 and produced 39 documents and got them marked as Ex.D.1 to Ex.D.39. After considering the pleadings of the parties, scrutinizing the evidence on record, both oral and documentary, and after hearing the arguments advanced by respective learned advocates, trial court by its judgment and decree dated 23.01.2010 decreed the suit for a sum of Rs.81,12,940/- with interest at the rate of 6% p.a. payable from the date of suit till its realisation. It is this judgment and decree which is assailed in the present appeal by the defendant.
5. It is the contention of learned counsel appearing for defendant that trial court could not have decreed the suit and it ought to have considered the fact that suit in question was barred by limitation in as much as the contract came to be terminated on 17.08.1991 and work was entrusted on being retendered in the year 1993 and inturn the two contractors completed the work on 10.06.2001 and as such the suit filed on 05.04.2004 was barred by limitation and as such trial court committed a serious error in decreeing the suit. He would elaborate his submissions by contending that trial court erred in not considering the fact that plaintiff had failed to prove as to what steps it took to mitigate the losses and there being no quantification of the amount in this regard suit could not have been decreed as prayed for. He would also contend that trial court erred in not considering the material 6 evidence available on record mainly documents Ex.P.71 and Ex.P.86 namely awards passed in respect of lands coming under KM 112 to KM 113 which were acquired on 31.05.1989 which clearly indicate that the lands in which defendant had to undertake the work could not be used or put into use on account of resistance made by the owners of the land on the ground that they have not received the compensation yet and Court below has not taken note of this fact. He would also submit that trial court erred in coming to a conclusion that plaintiff was entitled to relief sought for as per Ex.P.83 and Ex.P.84 though defendant had demonstrated that as per Ex.P.79 and Ex.P80 rates awarded to subsequent contractors were abnormally high and as such conclusion arrived at while deciding issue No. 6 was contrary to records. As to whether plaintiff was entitled for damages at abnormally high rates when plaintiff itself was ready to execute the said work within the schedule rates for the relevant years as per Ex.D.14 was not considered by trial court and without considering these aspects namely, the steps taken by plaintiff to mitigate the losses and the actual losses if any that is caused to plaintiff it could not have decreed the suit and as such the judgment and decree passed by trial court is liable to be set aside and suit be dismissed.
6. Per contra Sri. Ramesh N. Misale, learned counsel appearing for the respondent -caveator would not only support the judgment and decree 7 passed by Trial Court but would also contend that suit was rightly held to be on time by applying Article 112 of the Limitation Act and suit in question having been filed by the successor in interest of Government of Karnataka, namely, M/s. Karnataka Neeravari Nigama Limited, Bangalore, Article 112 of the Indian Limitation Act, 1963 was applicable and as such Trial Court was fully justified in applying the said article to the facts on hand, to hold that the suit was within time and said finding does not suffer from any infirmity whatsoever. He would also submit that suit in question was filed seeking recovery of the amount namely the estimated excess cost likely to be incurred and the penalty of 7-½% and it was based on the retendered amount and same was sought to be recovered from the defendant as receivables to other project works of the Government. It is also further contended that on account of non-completion of the work by defendant within the stipulated time, plaintiff had to retender the work on account of which it had to expend excess amount and it is the difference amount, namely, the original cost of tender and excess amount it had to pay to these two contractors towards the bills raised by the retendered contractors the suit in question was filed to recover the said difference amount and as such he contends the decree passed by trial court does not call for interference. On these grounds he seeks for dismissal of the appeal and confirming the judgment and decree passed by trial court.
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7. Having heard the learned advocates appearing for the parties and on perusal of judgment and decree passed by the trial court and also on reappreciation of evidence tendered by parties, both oral and documentary, we are of the considered view that following points would arise:
i. Whether the Trial Court was correct and justified in holding that the suit in question which was filed for damages was within time?
ii. Whether the judgment and decree passed by Trial Court suffers from any infirmity either in law or on facts calling for our interference?
iii. What order?
8. Facts as narrated herein above are not in dispute and as such they are not delved upon as it would be repetition of facts.
RE. POINT NO. (I)
9. On the one hand the learned counsel appearing for defendant contends that Article 55 of the Indian Limitation Act would apply since it is a suit for breach of contract and admittedly even according to the plaintiff the contract in question was terminated on 17.08.1991 and as such the suit should have been filed within 3 years from the said date. In the alternate he would submit that the work was re-entrusted to successful bidders after retendering of the work on 17.11.1993 and as such the suit should have 9 been filed atleast within 3 years from the said date by applying Article 55. Per contra plaintiff's counsel has relied on Article 112 of the Limitation Act to contend that when the tender was called for and on defendant being successful bidder an agreement was executed in favour of the defendant and same was executed by the Government of Karnataka and present suit having been filed by the successor in interest of the Government of Karnataka Article 112 of the Limitation Act would apply namely suit can be filed within 30 years from the date of cause of action arose and as such suit filed on 06.04.2001 is on time.
10. In order to consider the rival contentions raised in this regard we are of the considered view that these two articles namely 55 and 112 of the Indian Limitation Act, 1963 are required to be examined and as such they are extracted herein below:
55. For compensation Three years When the contract is for the breach of any broken or ) where there are contract, express or successive breaches) when implied not herein the breach in respect of specially provided for which the suit is instituted occurs or (where the
112. Any suit (except Thirty years When the period of a suit before the limitation would begin to Supreme Court of its run under this Act against original jurisdiction) a like suit by a private by or on behalf of the person.
Central Government or any State Government, including the 10 Government of the State of Jammu and Kashmir.
11. A perusal of Article 55 of the Limitation Act would clearly indicate that a suit for breach of contract has to be filed within 3 years 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 continued and when it ceases then the period of limitation commences or starts. The period of limitation fixed for companies for recovery of compensation for breach of contract would be 3 years. There cannot be any dispute with regard to this understanding of Article 55 of the Limitation Act. However, in the instant case the suit in question has been filed by Karnataka Neeravari Nigama Limited which is the successor in interest of Government of Karnataka and when the tender was called for in the year 1988 and when the work order was issued in the year 1988 and thereafter when possession of the lands were delivered to the defendant which was also in the year 1988 it is not in dispute that said agreement was entered into between defendant and Government of Karnataka. It is subsequently on account of creation of plaintiff company which is also a Government company as defined under Section 617 of the Indian Companies Act, 1956 the plaintiff has stepped into the shoes of Government of Karnataka and the interest of the Government of Karnataka devolved upon the plaintiff 11 company. Article 112 overrides all other articles in the Limitation Act. The limitation prescribed for suits by Government under Article 112 of the schedule to the Limitation Act, is thirty years from the date on which the period of limitation would begin to run against a like suit by a private person and the only exception carved out to the applicability of that Article is in respect of suits before the Supreme Court in exercise of its original jurisdiction. This would be the only Article under which Government can take umbrage in any suits filed by it of whatever description to salvage the limitation point and filing it within 30 years from the date of accrual of cause of action. In the case of Government if a claim becomes time barred the consequential loss that occurs to the exchequer will have to shouldered by the general public at the cost of a private individual and to salvage such a situation the law makers have consciously brought in Article 112 by providing a longer period of limitation for filing of suits by Government so that larger public interest is safeguarded. The plaintiff company being a Government of Karnataka undertaking and contract in question originally having been entered into between the defendant and Government of Karnataka and the present suit having been instituted by its successor in interest within 30 years from the date of accrual of cause of action we are of the considered view that Article 112 of the Limitation Act would be attracted which stipulates that the period of limitation would be 30 years and it would commence in any suit except the suit filed before the Supreme 12 Court in exercise of its original jurisdiction by or on behalf of the Central Government or any other State Government including the Government of State of Jammu and Kashmir.
12. As noticed by us herein above the agreement between the parties was entered into between the defendant and Government of Karnataka and work order was also issued by Government of Karnataka in favour of defendant way back in the year 1988 itself. Article 112 of the Indian Limitation Act would be attracted and it is not Article 55 as canvassed by the learned counsel appearing for the defendant. In fact at this juncture it would be appropriate to note the judgment in the matter of Government of Kerala Vs. Kumaran Nair, MANU/KE/0521/1991 [1999 (2) KLT 200 :
1992 (2) KLJ 212] whereunder the judgments of Hon'ble Supreme Court in the matter of Nav Rattanmal Vs. State of Rajasthan reported in AIR 1961 SC 1704 as also off-repeated judgment of the Hon'ble Supreme Court in the case of Collector Land Acquisition Vs. Katiji reported in AIR 1987 1353 came to be followed and it was held that in suits filed by Government Article 112 would be attracted which we are in full agreement and as such we hold point No. (i) formulated herein above has to be answered in the affirmative namely in favour of plaintiff and against the defendant.
RE. POINT NO. (II) 13
13. Suit in question was filed seeking for recovery of money namely claiming damages on account of non-completion of the work entrusted to defendant within the stipulated period and on account of non-completion of the work entrusted within stipulated period the plaintiff had to entrust this work to third parties and had to incur more expenditure and as such it sought for recovery of the said difference amount from the defendant on the basis of the new contracts entered into and work orders issued on 18.11.1993 and 07.02.1993 Ex.D.52 and Ex.D.53 respectively. It is not in dispute that plaintiff had stipulated a period of 15 months to the defendant to complete the contract. It is also not in dispute that on account of non- completion of the contract within the stipulated time it came to be rescinded by issuance of letter dated 17.08.1991 as per Ex.D.22. Thereafter for a period of 2 years plaintiff did not take any steps. As to the reason for not taking steps and as to why it slept over for a period of 2 years neither the pleadings would disclose the reasons nor there has been any discussion on this issue by Trial Court. After retendering the work in the year 1993 contract was awarded to 2 contractors namely M/s. Shankar Construction Company and Sri. V.S. Hegde. The difference in cost was known to the plaintiff even at that point of time namely when work orders were issued. It did not choose to take steps to recover the said amount. Thereafter the Executive Engineer estimated the alleged excess cost and levied a penalty of 7½% and in all demanded from the defendant a sum of Rs.7,23,000/- by 14 issuance of notice dated 17.06.1995 which amount was determined on the basis of retendered amount. A perusal of the said letter dated 17.06.1995 Ex.D.37 would indicate that it was based on retendered amount. Plaintiff was fully aware of the difference amount to which it was entitled to. The defendant got issued notice under Section 80 CPC to the plaintiff allegedly rescinding the contract and to file a suit against the plaintiff from recovering said amount demanded under letter dated 17.06.1995. Thereafter defendant filed a suit in O.S. No. 104/1997 which admittedly came to be decreed in part and plaintiff was restrained from recovering the said amount of Rs.72.34 lakhs from defendant until its liability was assessed and fixed by a decree or order of the Court or any other competent authority. Accordingly the plaintiff was restrained from recovering the said amount as arrears of land revenue by judgment and decree dated 03.01.2007 till the liability of the plaintiff was quantified. Admittedly appeal filed by the State in R.A.No. 4/2001 came to be dismissed in the year 2002, i.e. on 06.11.2002. Subsequently the assets and liabilities of this project along with two other projects are said to have been transferred in favour of plaintiff by Government of Karnataka by a Government order dated 31.05.2001 and it is thereafter on 05.04.2004 present suit has been filed.
14. A perusal of the judgment and decree passed by Trial Court would go to indicate that issue No. 6 was framed by Trial Court on the 15 basis of a plea put forward by plaintiff claiming damages of Rs.81,12,940/-. Said issue has already been noticed by us herein above and the discussion on this issue is at paragraph 30 of the judgment of trial court. To arrive at conclusion that plaintiff is entitled for damages of Rs.81,12,940/- trial court held that the difference in amount of the original contract and retendered contract is the amount to which the plaintiff is entitled to. It is required and incumbent upon plaintiff under Section 73 of the Contract Act, when a suit for recovery of damages for breach of contract is filed to demonstrate that it had taken all reasonable steps as expected of a prudent person to mitigate the losses. The judgment and decree passed by trial court would not indicate as to whether such consideration has been taken note by trial court since reasons given by the trial court does not depict such consideration having gone in to decision making process. Plaintiff also does not seems to have demonstrated before the Trial Court as to what steps it took from the date of recession of contract, that is 17.08.1991 as per Ex.D.22 to the date of institution of the suit on 05.04.2004 to mitigate such loss. It can be noted that even according to the plaintiff recession took place on 17.08.1991 and retendering of the same work was called for and awarded to M/s. Shankar Construction Company and V.S. Hegde on 19.01.1993 and 02.06.1992. Work orders came to be issued in their favour on 18.11.1993 and 07.02.1993 vide Ex.D.52 and Ex.D.53 respectively. This time gap of 2 years would naturally stare at the plaintiff and it was incumbent upon the 16 plaintiff to explain the reasonable steps it took during this period to mitigate the losses. In fact trial court while adjudicating O.S. No. 104/1997 which suit came to be filed by the defendant herein against the plaintiff therein from recovering a sum of Rs.72.34 lakhs it held that until and unless the liability is quantified and assessed either by a decree or order of the Court or by any other competent authority it cannot recover the same as penalty. This order of perpetual injunction undisputedly has reached finality. Thus, burden was cast heavily on the plaintiff to plead and prove issue No. 6 by demonstrating with a positive evidence and establish as to what steps it took from the date of recession of the contract till the date of retendering of the work to mitigate the losses and it was also required to establish from the date of retendering of the work and entrustment of the work to the successful bidders till the completion of the work in the year 2001 that it had taken all reasonable steps to reduce the loss or in other words mitigate the losses. This fact having neither proved nor considered by the Trial Court we are of the considered view that judgment and decree passed by Trial Court on this ground alone cannot be sustained and it has to be set aside and matter requires to be remitted back to the trial court for adjudication afresh on this issue.
15. As per the terms of the contract plaintiff was entitled to recover the difference in cost arising out of the tender issued in favour of the 17 defendant and the subsequent tender in favour of M/s. Shankar Construction Company and V.S. Hegde. But in the instant case the plaintiff's claim is based on final payment made in favour of these two contracts in the year 2001. Trial Court has not examined the question whether the plaintiff was entitled for difference in tender rate but has proceeded to decree the suit on the basis of final payment made to these two contractors. This approach is erroneous in law. The final payment made to new contractors including the tender cost and non-tendered items, extra tender items and escalated prices paid to these two contractors and also the extension of time granted to them were circumstances which would have weighed in favour of defendant and ascertainment of loss if any that had occurred to plaintiff to seek for recovery from defendant were aspects which have not been considered and examined by trial court and as such judgment and decree passed by trial court cannot be sustained. We also reserve liberty to the parties to tender further evidence if so advised and in the event of such an application is filed Trial Court would be at liberty to consider the same and afford opportunity to both the parties to tender evidence.
16. This Court by way of interim arrangement by order dated 06.04.2011 had directed the appellant to deposit 30% of the decreetal amount within a period of 8 weeks and accordingly it has been deposited. 18 In view of the appeal having been allowed, matter having been remanded back to the trial court we are of the considered view that ends of justice would be met if this amount is ordered to be transmitted to the jurisdictional Court to be deposited in any nationalised bank initially for a period of one year in a Fixed Deposit in the name of the Court and to be renewed from time to time till disposal of suit. It is made clear that the successful party would be entitled to the proceeds of the fixed deposit with accrued interest thereon. Insofar as the guarantee or security furnished by defendant in this appeal to the extent of 70% would stand discharged in the view of the appeal having been allowed in part. It is also made clear that Trial Court while adjudicating the matter afresh will not be influenced by any observations made by us in this judgment it shall be construed that any observations made are only for the limited purpose of disposing of this appeal.
17. In the result we pass the following;
ORDER
i. Appeal is hereby allowed.
ii. Judgment and decree passed by Trial Court in O.S. No.
56/2004 dated 23.01.2010 is hereby set aside.
iii. Matter is remanded back to Trial Court for adjudication afresh as observed by us herein above.
19iv. Registry is directed to transmit the amount in deposit to the Court of Additional Civil Judge (Senior Division), Gadag, in O.S. No. 56/2004 and said Court on receipt of the amount shall deposit the said amount in any nationalised Bank initially for a period of one year in a Fixed Deposit in the name of the Court and shall be renewed from time to time if necessary till the disposal of the suit. The successful party would be entitled to the proceeds of the deposit inclusive of the interest accrued thereon.
18. In view of the appeal having been allowed and judgment and decree of the Trial Court having been set aside appellant will be entitled for refund of the Court fee and Registry shall refund the admissible Court fee to the appellant on proper identification. Parties to bear the costs of this appeal.
(Sd/-) JUDGE.
(Sd/-) JUDGE.
LRS.