STATE OF GUJARAT Vs. KOTHARI & ASSOCIATES

JUDGEMENT

(1.) THIS Appeal lays siege to the decision of the Division Bench of the High Court of Gujarat at Ahmedabad which dismissed the Appeal of the Appellant before us while allowing the Cross -Objection filed by the Plaintiff/Respondent by holding it to be entitled to claim interest for an extended period. For the reasons which will follow, we have set aside these concurrent findings against the Appellant -State, principally on the ground that the claim of the Respondent stood barred by the Principles of Prescription as contained in the Limitation Act, 1963.

(2.) THE Appellant -State invited tenders for providing lining to the main Canal line. The Respondent, a registered Partnership, submitted a Tender that was accepted by the Appellant -State. Thereafter a regular Agreement was entered into according to which the Respondent would have from 15th November to 14th June as its working period. Under the Work -Order dated 24.9.1976, the Respondent was required to complete the work within 18 months, i.e. on or before 23.3.1978. The case of the Respondent, which we have no cause to disbelieve, is that there were repeated and consecutive delays in handing over the site due to which the Respondent could not complete the work within the stipulated time. The first season was to extend from 15.11.1976 to 14.7.1977, but the Canal was only made available on 15.1.1977 and even then the cement was not issued to the Respondent by the Appellant -State till 31.1.1977. The second season was to extend from 15.11.1977 to 23.3.1978, but the Canal was handed over on 15.3.1978. At the Respondent 's request, the Contract period was extended to 14.6.1978, but the Appellant -State specifically stated that no Compensation would be payable for the extension. Pursuant to a written request by the Respondent, a third season from 15.11.1978 to 14.6.1979 was granted, but yet again the site was handed over as late as on 15.3.1979. The Respondent sought further time to complete the project, and was consequently granted a fourth season which was to extend from 15.11.1979 to 29.6.1980. The site was once again made available with delay only on 15.3.1980. The work was finally completed on 20.6.1980. It is noteworthy that in each request for an extension, the Respondent sought Compensation for monetary loss due to the extended time limit, but while allowing each extension the Appellant -State denied the claim for Compensation each time. The Respondent 's case was that as per the Contract period, 342 days should have been made available to it to conduct the stipulated work, but as a result of the delay in handing over the site and the materials, the Respondent had to seek extensions, and nevertheless managed to complete the project in 288 working days, thus indicating that there was no laxity on its part. The Respondent signed the Final Bill under protest on 1.1.1982; and the Security Deposit was refunded on 27.1.1982. Thereupon, the Respondent addressed a Statutory Notice under Section 80 of the C.P.C. dated 7.8.1983 to the Appellant -State, claiming damages as a result of the additional costs incurred due to the abovementioned delays. The Respondent eventually filed a Suit on 25.1.1985 seeking damages under thirteen different heads, including price escalation in labour due to the prolongation of the work, price escalation in fuel lubricants, etc., overstay of capital and machinery, and overheads such as staff, kitchen, office, etc.

(3.) THE Trial Court found that the delay was caused by the Appellant -State; that work was completed by the Respondent well within the number of days contractually allocated to complete it. Noting that under Section 73 of the Indian Contract Act, Compensation is payable for any loss or damage for breach of a Contract, the Trial Court granted Compensation under twelve of the thirteen heads of claims itemised by the Respondent. In terms of its Judgment dated 4.5.1991 the Trial Court observed that the factual matrix pertaining to these amounts claimed have remained uncontroverted, and accordingly decreed the Suit. The Respondent was granted Rs. 13,61,571 with interest at 12 per cent per annum with effect from 7.8.1983 viz. the date of the Statutory Notice. The Appellant -State appealed against the Decree and the Respondent filed a Counter -claim seeking interest from the date of written demand of the Suit claim instead of from the date of Statutory Notice. The High Court, vide its Judgment dated 30.7.2003, dismissed the Appeal filed by the Appellant -State and allowed the Respondent 's Cross -Objection, granting interest thereon from 5.3.1982.