STATE OF MAHARASHTRA Vs. DIGAMBAR BALWANT KULKARNI

JUDGEMENT

(1.) The facts giving rise to this appeal by the two defendants (who are the State of Maharashtra and one of its Executive Engineers) on certificate granted by the High Court of Bombay against its judgment dated 11th July 1968 may be briefly stated. In the year 1955, defendant No. 1 decided to construct an aqueduct over Kulthi Nala situated in Malegaon Sub-Division of Nasik district. The Executive Engineer, Nasik Irrigation Division, invited tenders for the work which was entrusted to the plaintiff in acceptance of his tender on conditions reduced to writing in the from of exhibit 66. The estimated cost of the work was Rs. 1, 55,854-00 and it was to be completed within 12 months from the date of the written order to commence it which happened to be the 16th of May 1955. The plaintiff paid a sum of Rs. 1.558 as earnest-money and another of Rs. 3,896 as security deposit to defendant No. 1. Clauses (2) and (3) of the contract in accordance with which the work was to be executed provided as follows:-

(2.) Learned counsel for the appellants has challenged the correctness of the observations made by the High Court and reproduced above. Those observations, according to him, run counter to the tenor of clauses (2) and (3) of the contract governing the execution of the work and we are of the opinion that his criticism thereof is justified. Although in clause (2) of the contract it was specifically mentioned that time was of the essence of the agreement between the parties, all that was meant was that in case the work was not completed within the time originally specified in that behalf, the plaintiff would be liable to pay such compensation for delay in execution as was fixed by the Superintending Engineer within the limits laid down in the clause. This becomes clear not only from the provision appearing in cl. (2) and stating that 'the contractor shall pay as compensation an amount equal to 1 per cent or such smaller amount as the Superintending Engineer may decide for every day that the work remains uncommenced, or unfinished after the proper dates' but also from the contents of clause (3) of the contract, which would become operative only if the plaintiff renders himself liable to pay compensation (in accordance with clause (2)) or abandons the work either on account of serious illness or death or for any other cause and it is then that the contract would become liable to rescission. Cls. (2) and (3) have to be read together and interpreted with reference to each other and their provisions, read as one single whole, clearly mean that the contract was to continue to be in force till the completion of the work or its abandonment. The time was of the essence of the contract only in the sense that if the plaintiff completed it within the original period of one year, he would not be liable to pay any compensation but that in case he overstepped the said time limit he would have to compensate the defendants for every day of the delay in completing the work and that the right to rescission would accrue to the defendant No. 2 only when the compensation due exceeded the amount of the security deposit or the plaintiff abandoned the work. Till the time the contract was rescinded therefore, it was fully in force and the rescission was consequently well-founded, being squarely covered by clause (3) of the contract, sub-clause (a) of which conferred on the Executive Engineer the right to forfeit the security deposit. Far from being illegal, the forfeiture was fully justified and the High Court's finding to the contrary is liable to be reversed.

(3.) In the result the appeal succeeds and is accepted. the decree of the High Court is set aside and the suit of the plaintiff is dismissed in its entirety. In accordance with the undertaking given by defendant No. 1 on the 9th June 1969 to the High Court when it certified the case to be a fit one for appeal to this court, the plaintiff shall be entitled to the costs incurred by him in this Court. In respect of costs in the two courts below, we make no order.