State of Rajasthan Vs. Ram Kishan - Court Judgment

Sen, Actg. C.J.

1. This reference to the Full Bench raises a question of some importance, namely, whether a claim for damages by a contractor for nonpayment of the price of work done arising out of a works contract in standard form containing Clauses (6) and (7), falls within the purview of Article 56 of the First Schedule of the Indian Limitation Act. 1908 or comes within the ambit of Article 115.

2. The Division Bench before which the appeal came up for hearing felt that the point of limitation was one of frequent occurrence and, therefore, there was need for an authoritative decision. It noticed a diversity of opinion between the different High Courts on the question. It referred to two decisions of this Court in Bhawani Shanker v. State of Rajasthan (AIR 1970 Raj 268) and Tej Singh v. State of Rajasthan ((1971) 2 W LN 28), which, the Division Bench felt, expressed views which were irreconcilable and, therefore, it was desired that the point should be settled by a larger Bench.

3. The reference being on a point of law, there is no necessity of going into the facts in detail. The material facts briefly are these. By a contract in writing dated 9-12-1957 the State Government of Rajasthan in the Irrigation Department, granted to the plaintiff a work in connection with Baori irrigation Project in Bundi district i. e., lowering the waste-weir below F.T.L. by 5 to discharge surplus water of Guda Tank, at Pench-ki-Baori in district Bundi. The plaintiff gave a tender at 16% above the scheduled rates, but later reduced it to 11%. The work was to be completed within 4 months of the date of contract i. e. 9-12-1957. It involved cutting of rocks, deepening of waste-weir, earth work construction of face wall etc. Under the terms of the contract, the plaintiff was net only bound to supply labour, but also bear the costs of materials. During the execution of the work, the deepening of the waste-weir involved extra work. The work was completed on 7-1-1958. The plaintiff submitted his final bill on 22-9-1960.

4. The plaintiff alleges that the 'G' Schedule was prepared without any trial bore and on the assumption that the soil was soft and only required three leads and three lifts and. therefore, no site plan of borrow pit was supplied. At the time of the execution of work the plaintiff, however, came across hard soil mixed with moranda at an early stage and he brought this fact lo the notice of the Engineer-in-Charge by his letter dated 10-5-1955. The Engineer-in-charge realising the difficulty agreed that the plaintiff should be paid for this as an extra item. For the extra work done, the plaintiff claimed that he was entitled to receive payment of Rupees 85,218 but restricted his claim to Rupees 85,000.

5. The suit was brought on 24-10-1961. The plaintiff alleges that the cause of action in the suit arose in Bundi in the month of February 1960, the date on which he signed the final bill under protest, when the Chief Engineer disallowed his claim for payment of extra work done.

6. The State Government contested the plaintiff's claim on various grounds. It pleaded, inter alia, that the suit was barred by limitation.

7. The learned trial Judge, while negativing the plea of the defendant that the suit was barred by limitation decreed the plaintiff's claim to the extent of Rs. 56,309.15 and the defendant's counter claim for Rs. 17.228.64. The resultant decree in favour of the plaintiff was, therefore, for Rs. 39,080.51 with interest at the rate of 4% per annum.

8. Shri Shisodia, learned Additional Government Advocate, contends that the suit in a claim founded on a contract of this nature is, in a sense a suit to recover the price of the work done by the plaintiff for the defendant at his request, where no time is fixed for payment. His submission, therefore, is that the suit would be barred by limitation under Article 56, unless such suit is brought within 3 years from the date when the work is done. He points out the averment in para 5 of the plaint, wherein the plaintiff has stated that the work was completed on 1-7-1958. This allegation of his has been admitted by the defendant in para 5 of the written statement. It is stated that the parties accept the date of completion to be 7-1-1958. The Court cannot substitute another date as the starting point. In view of the pleadings, the learned Additional Government Advocate contends that the work was completed on 7-1-1958 and, therefore, the plaintiff's suit brought on 24-10-1961 was barred by limitation under Article 56. We are afraid, the contention cannot be accepted.

9. In reply, Shri Agrawal, learned counsel for the respondent, on the other hand, contends that Article 56 was inapplicable inasmuch as in such a case, the work, though done at the request of the defendant, was not done for the defendant. He further contends that a suit to recover money for work done and materials supplied for that work, being a claim which is indivisible cannot fall under Article 56 and being a suit for compensation for breach of contract comes within the ambit of Article 115.

10. The contention of Shri Agrawal, learned counsel for the respondent, that the work though at the request of the defendant, was not done for the defendant, can hardly be accepted. Merely because the parties have entered into an agreement or contract, it can hardly be disputed that no work in such cases would be deemed to have been carried out by the plaintiff at the request of the defendant. The words 'at his request' were added to exclude a case of work done by the plaintiff gratuitously for the defendant. They, therefore, include a work done in a contract: Mathura Prasad v. Chairman, District Board, Sitapur (AIR 1928 Oudh 297), Cantonment Board, Allahabad v. (Firm) Hazari Lal Ganga Prasad (AIR 1934 All 436), Abdul AH v. Mr. F. Von Goldstein, ((1909) 4 Ind Cas 902) (Lah), Zilla Partshad (District Board) v. Smt. Shanti Devi (AIR 1965 All 590) (FB), Subbaraju v. Village Panchayat (AIR 1965 Andh Pra 186) and the State of Punjab v. Shyamlal Gupta ((1971) 73 Pun LR 166).

11. The decision on the point of limitation must turn on the right construction of Article 56 of the Limitation Act in the context of Clauses (6) and (7) of the agreement.

12. The contract between the parties was a contract in the standard printed form of Building Contracts. It contains Clauses (6) and (7) reading as follows:--

'Clause 6.--Final certificate.--On completion of the work the contractor shall be furnished with a certificate by Chief Engineer or other duly authorised Engineer (hereinafter called the Engineer-in-charge) of such completion, but no such certificate be given, nor shall the work be considered to be completed until the contractor shall have removed from the premises on which the work shall be executed all scaffolding, surplus materials and rubbish, and cleaned off the dirt from all wood-work, doors, windows walls, floors or other parts of any building in, upon or about which the work is to be executed, or of which he may have had possession or the purpose of the execution thereof, nor until the works shall have been measured by the Engineer-in-charge or his subordinate which measurements after approval by the Engineer-in-charge if the measurements were taken by a subordinate shall be binding and conclusive against the contractor. If the contractor shall fail to comply with the requirements of this clause as to removal of 'scaffolding, surplus materials and rubbish and cleaning off dirt on or before the date fixed for the completion of the work the Engineer-in-charge may at the expense of the contractor remove such scaffolding, surplus materials and rubbish, and dispose of the same as he thinks fit and clean off such dirt as aforesaid, and the contractor shall forthwith pay the amount of all expenses so incurred and shall have no claim in respect of any such scaffolding or surplus materials as aforesaid except for any sum actually realised by the sale thereof.'

'Clause 7.-- Payment on intermediate certificate to be regarded as advances--No payment shall be made for works estimated to cost less than rupees one thousand till after the whole of the works shall have been completed and a certificate of completion given. But in the case of works estimated to cost more than rupees one thousand the contractor shall on submitting the bill therefor be entitled to receive a monthly payment proportionate to the part thereof then approved and passed by the Engineer-in-Charge whose certificate of such approval/ passing of the sum so payable shall be final and conclusive against the contractor. But all such intermediate payments shall be regarded as payments by way of advance against the final payments only and not as payments for work actually done and completed, and shall not preclude the requiring of a bad, unsound and imperfect or unskilful work to be removed and taken away and reconstructed, or re-erected, or be considered as an admission of the due performance of the contract, or any part thereof in any respect, or the accruing of any claim, nor shall it conclude, determine or affect in any way the powers of the Engineer-in-charge under these conditions or any of them as to the final settlement and adjustment of the accounts or otherwise, or in any other way vary or affect the contract. The final bill shall be submitted by the contractor within one month of the date fixed for completion of the work, otherwise the Engineer-in-charge's certificate of the measurement and of the total amount payable for the work accordingly shall be final and binding on all parties.'

13. On a plain construction of Clauses (6) and (7), it is clear that the parties by contract bound themselves of these terms:

(i) On completion of the work, the contractor is to be furnished a completion certificate by the Engineer-in-charge;

(ii) The work shall not be deemed to be completed until

(a) the contractor removes all scaffolding, surplus materials and rubbish from the work-site and cleans all dirt on or before the date fixed for the completion of the work. On his failure to do so, the Engineer-in-charge may at the expense of the contractor remove such scaffolding, surplus materials and rubbish;

(b) the work shall have been measured by the Engineer-in-charge and it shall be binding and conclusive against the contractor.

(iii) The monthly payments of the contract shall be regarded as payments by way of advance against the final payment and not as payment for work actually done and completed and shall not preclude requiring of a bad, unsound, imperfect or unskilful work to be removed or taken away, and reconstructed or re-erected.

(iv) The final bill shall be submitted by the contractor within one month of the date fixed for the completion of the work otherwise the Engineer-in-charge's certificate of the measurement and of the total amount payable for the work accordingly shall be final and binding on all parties.

Thus 'completion' means, in terms of the contract, certified completion and not completion in fact. Where a contract with a builder provides that payment is not to be made until the certificate approving the work and the materials is issued as well as the amount payable, the issue of such certificate is a condition precedent to a claim for payment; Shame v. San Paulo Railway Co., (1873) 8 Ch App 597.

14. Article 56 of the Limitation Act reads as follows.

'56.

For theprice of work done by the plaintiff for the defendant at hisrequest, where do time has been fixed for payment.

Threeyears.

When thework is done.'

'Work and Labour' in legal nomenclature is a term of precise legal import. In England, it is the name of one of the common counts in actions of assumpsit being for work and labour done and materials furnished by the plaintiff for the defendant: Black's Law Dictionary 4th Edn. p. 1780. The courts in India have, therefore, given a wider meaning to the words 'work done' in Article 56 and treated a works contract as coming within its purview. The starting point of limitation in each case must, however, depend on its own facts and circumstances.

15. In Halsbury's Laws of England 3rd Edn. Vol. 24 p. 218, the meaning of the expression 'work done' is given thus:

'On a general contract for work to be done, the cause of action accrues when the work is done. A contract to do work may, however, contain a condition that the price should be paid out of............when a certain contingency has happened, and in such a case the cause of action does not arise until the............ contingency has happened.'

That is precisely the case here. Unless the conditions laid down in Clauses (6) and (7) have been fulfilled, the contractor has no right to receive any payment of price for work done. The cause of action for a suit also does not arise till there is a repudiation of a liability.

16. Rustomji in his 'The Law of Limitation and Adverse Possession', 6th Edn. p. 436, explains the scope of Article 56 thus:

'Article 56 applies, it seems, to work or labour, whether mental or manual.' This restricted meaning cannot, in our view, be given to the words 'work done' in Article 56.

17. There is no uniformity in the views expressed by different High Courts. In Sundaram & Co. v. Sankara ((1886) ILR 9 Mad 334) the question was whether the zamindar's suit against ryots for recovery of the proportionate cost of repair of a tank effected through a contractor was barred by limitation. In repelling the contention, it was observed:--

'The question of limitation comes next. Being of opinion that the obligation rested upon the zamindar to do the work for the joint benefit of himself and the mahajanams, and that there was no time absolutely fixed for the re-payment to him of the sums so expended, the Article of the Limitation Act which will govern the suit will be Article 56 of Schedule II, and the law will imply under the circumstances that the work was done at the defendants' request. The time will therefore, run from the date when the work was done. The work was carried out under Government supervision, and the completion certificates are dated 1st March and 1st September 1881. The suit was brought on 25th January 1884 and is in time.'

18. In Radha Kishan v. Basantlal. 22 Ind Gas 576 : (AIR 1914 Lah 250) the suit was one for recovery of a certain sum alleged to be due for the work performed and materials supplied by the plaintiff to the defendant under a contract. The learned Judges of the Lahore High Court held that neither Article 52 nor Article 56 was applicable to the entire claim. They then made the following observations:

'There is no other Article specifically applicable, hence the only Article which can be applied is Article 120.'

19. In Mohomed Ghasita v. Sirajuddin, ILR (1921) 2 Lah 376 : (AIR 1922 Lah 198) (FB) the suit was for recovery of a certain sum of money alleged to be due to the plaintiff for materials supplied and work done. The plaintiff made no mention of the price of the materials as distinct from the price of the work and the plaint contained no reference whatsoever to two claims and there was only one indivisible claim and that was for the balance of the money due to the plaintiff on the basis of a contract. The Full Bench of the Lahore High Court referred to a well settled rule of law that the combination of several claims in one suit does not deprive each claim of its specific character and description, as laid down in Shriniwas v. Hanmant ((1900) ILR 24 Bom 260) (FB). Shadi Lal C. J. who delivered the judgment of the Full Bench, observed:--

'The question, however, is whether the action as brought by the plaintiff can be treated as combination of two distinct claims. Now the plaint makes no mention of the price of the materials as distinct from the price of the work and contains no reference whatsoever to two claims. There is only one indivisible claim, and that is for the balance of the money due to the plaintiff on the basis of a contract, by which he was to be paid for everything supplied and done by him in connection with the flooring of the building at a comprehensive rate. The claim as laid down in the plaint is an indivisible one; it cannot be split up into two portions. We must, therefore, hold that it falls neither under Article 52 nor under Article 56.'

That construction tacitly adopts Rustomji's view that Article 56 has a limited connotation.

20. Their Lordships overruled the decision in Radha Kishan v. Basant Lal, (AIR 1914 Lah 250) (supra) stating:

'Now, with all deference to the learned Judges, we are unable to hold that there is no other article governing a claim of that character. It seems that their attention was not drawn to Article 115, which governs every suit for compensation for the breach of a contract not in writing registered and not specially provided for in the Limitation Act. It is beyond doubt that this article is a general provision applying to all actions ex-contract not specially provided otherwise; and the present claim certainly arises out of a contract entered into between the parties.'

21. In Sitaram v. Mt. Mahmudi Begam (AIR 1934 Lah 475) where a contract for construction of a building was given but before the completion of the work the contract was entrusted to another person; on a suit by the original contractor, it was held following Mohomed Ghasita v. Sirajuddin. (AIR 1922 Lah 198) (FB) (supra), that the suit was governed by Article 115 and it had to be brought within 3 years from the date of the breach of the contract.

22. In the Secy. of State for India v. Gajjen Singh (AIR 1935 Lah 775) the Military Department gave a works contract for construction of certain building. The contract stipulated as here, that during the progress of the work payments were to be made to the contractor by way of advances to be adjusted at the time of the preparation of the final bill. The balance was to be paid after the final bills had been prepared by the Military Department. These bills had to be prepared after final measurements made in the presence of the contractor after the completion of the work. Soon after he had completed the work, the contractor requested the officers of the Engineering Department concerned to measure the work in his presence and prepare the final bill after taking the final measurements, but the request of his was not complied with. The contention that the suit was barred by limitation was negatived and it was observed:--

'The main contention of the Government Advocate is, and this proposition is not denied by the plaintiff's counsel, that the normal time within which a suit of this description should be brought is three years from the date of the accrual of the cause of action. The Government Advocate claims that this period of three years should begin from the date on which the final bill should have been prepared.

The plaintiff, on the other hand, claims that it should begin from the date on which the amount due to the plaintiff becomes payable and this date would be the date on which the contractor submits his final bill and failing his submission of a final bill, the date on which the Engineer-in-charge certifies the measurements and the total amount payable to the contractor. It is therefore contended that as no final bill was submitted by the contractor because the military authorities did not measure the work in his presence, nor did they give him a certificate of completion, as required by Clause 6 of the tender, and as the Engineer-in-charge did not sign the final measurements and the final bill till after the suit had been instituted, no question of limitation arises in the case.

The Government Advocate has practically no reply to this argument, and this is the view adopted by the learned Senior Subordinate Judge.'

23. The decision of the Calcutta High Court in M.L. Dalmiya and Co. v. Union of India (AIR 1963 Cal 277) is directly in point. There, the Court was concerned with interpreting Clauses (6) and (7) which were identically the same. That was a suit for compensation for breach of contract by the Government. Clause (6) provided for submission of running bills and for deduction of unsatisfactory work. The final bill was to be submitted for certification of completion of work. There was non-payment of the final bill. Thus the suit was based on breech of contract and, therefore, the Court held that Article 115 applied. In dealing with question of limitation, it was observed:--

'Clause (7) of the contract provides that the final bill shall be submitted by the contractor within one month of the date fixed for completion of works, otherwise the Engineer-in-charge's certificate of measurement and of the total amount payable for the works accordingly shall be final and binding on all parties. Clause (6) provides that a final certificate of completion of works shall be furnished to the contractor. Government will be entitled to withhold certificate till the contractor removes certain materials and scaffolding and does some cleaning up operation. In default of the contractor's removing the materials and doing the clearing up operation, the Government will be entitled to do it itself and the contractor is liable to pay the expenses incurred by the Government.

It follows that in cases where the contractor fails to remove materials end scaffolding etc. and to do clearing up operation, the penalty is that the contractor will not be entitled to a certificate of completion and without such certificate the contractor is not entitled to submit his bill for payment. In such cases, I apprehend, it is the duty of the Government, after doing the work departmentally, to give the contractor a certificate of completion. Till such certificate is given, the contractor cannot submit his bill and get payment and the cause of action for payment, in terms of the contract, does not arise. Looked at from this point of view, in the matter of presentation and determination of the contractor's claim, there are reciprocal obligations on either party. In such cases where there are reciprocal obligations for submitting or scrutinising of bills before payment can be received, the cause of action for payment does not arise on the completion of works and time cannot run till the cause of action accrues.'

XX XX XX

'Till the certificate of completion is given to the contractor, no claim for payment can be made by the contractor, even after the completion of works.' We are in respectful agreement with these observations.

24. In Bhawani Shankar v. State of Rajasthan (AIR 1970 Raj 268) Jagat Narayan C. J., delivering the judgment of the Division Bench, observed that Article 115 had no application to a case where the contract was for completed work. He accordingly held that the decisions in Mahomed Ghasita v. Sirajuddin, (AIR 1922 Lah 198) (FB) (supra), and Sita Ram v. Mt. Mahmudi Begam, (AIR 1934 Lah 475) (supra), were distinguishable on facts. He then referred to M.L. Dalmiya and Co. v. Union of India, (AIR 1963 Cal 277) (supra) and observed that even assuming that Article 115 is applicable, the time must begin to run from the date when the payment was made on the final bill to the plaintiff.

25. In Tej Singh v. The State of Rajasthan, (1971) 2 WLN 28, Jagat Narayan C. J., speaking for the same Division Bench reiterated his earlier view in Bhawani Shankar v. State of Rajasthan (AIR 1970 Raj 268) (supra) and held that since the suit was for the price of the work done by the plaintiff for the defendant and no time for payment was fixed Article 56 was applicable.

26. In Gannon Dunkerley & Co. Ltd. v. Union of India (AIR 1970 SC 1433) their Lordships, while dealing with a claim by a contractor for payment of additional rate above stipulated rate in view of change in circumstances, held that the claim in suit was not for the price of the additional work done, but for enhanced rate in view of the altered circumstances and, therefore, Article 56 was not applicable. Their Lordships then stated that the additional work directed by the Engineer-in-charge when carried out might be deemed to be done under the terms of the contract; but the claim for enhanced rates did not arise out of the contract; it was in any case not a claim for compensation for breach of contract and, therefore, Article 115 was not attracted. On that view, their Lordships held that the claim for enhanced rate must fall within the terms of Article 120.

27. With his usual fairness. Shri Shishodia, learned Additional Government Advocate frankly conceded that the plaintiff's claim for extra work fell within Article 120 of the Limitation Act and, therefore, was not barred by limitation, in view of the decision of their Lordships in Gannon Dunker'ey & Co. Ltd v. Union of India (AIR 1970 SC 1433) (supra).

28. To sum up: The decision of the Supreme Court in Gannon Dankerley & Co. Ltd. v. Union of India (AIR 1970 SC 1433) lays down, as a necessary corollary, that a suit of this nature may fall under Article 56 or Article 115, depending on the facts and circumstances of each case. Their Lordships' decision lends support to the view that Article 56 covers a suit by a contractor for recovery of price for the work done and materials supplied. They also recognised that in 'the event of a breach by the Government i. e., due to non-payment of the amount due the contractor has the remedy of filing a suit for compensation for breach and such a suit would be governed by Article 115.

29. Where a suit is based on a building contract containing Clauses (6) and (7),as here, is governed by Article 56 of the First Schedule of the Indian LimitationAct, 1908 the starting point of limitation would be the date when the Engineer-in-charge issues the certificate of completion and when the final measurementsare made. Where such a suit is for breach of contract, the suit falls under Article 115and the period is to be reckoned from the date of breach of contract, i.e., the.date of drawing up of the final bill.

30. We are bound by the decision of their Lordships. It is therefore, not possible to lay down any rule of universal application. Each case must depend on its own facts. The reference is answered accordingly.