Case Note & Summary
The Government of India invited tenders for reinforced concrete work at Sindri Fertilizer Factory. The appellant company's tender was accepted on November 22, 1947, and a formal contract was executed on November 26, 1948. Clause 12 of the contract empowered the Engineer-in-charge to order alterations, additions or substituted work, with payment at specified rates or as determined. Due to delays in supplying drawings by M/s. Chemico Construction Corporation, the work became more complex and additional work was ordered. On September 20, 1950, the appellant made a demand for a 42.5% enhanced rate over the basic contract rates on grounds of substantial deviation in work nature, increase in material and labour costs, rise in transportation costs, higher rates paid to other contractors, and increase in quantities. The Additional Chief Engineer rejected the claim on September 13, 1950. Certain other disputes were referred to arbitration, but the claim for rate revision was not. The appellant filed a suit on August 9, 1956, for Rs. 3,62,674/9/6 at 42.5% above contract rate, alternatively lower amounts. The Union of India contended that the suit was barred by limitation. The Trial Court held the suit not barred and decreed Rs. 1,36,222/- as certified by the Superintending Engineer. On appeal, the High Court reversed, holding that the claim was governed by Article 56 or Article 115 of the Limitation Act, 1908, and was barred because filed more than three years after the work was done or the claim rejected. The legal issue before the Supreme Court was which provision of the Limitation Act applied. The appellant argued that the suit was not for price of work done or compensation for breach, but for enhanced rates due to changed circumstances, falling under residuary Article 120 with six-year limitation. The respondent argued it was either a suit for price of work (Article 56) or compensation for breach (Article 115) and time-barred. The Supreme Court analyzed the nature of the claim and held that Article 56 applies only when the suit is to recover the price of work done at the defendant's request; the present suit sought additional rates, not the price itself. Article 115 is for compensation for breach of contract; here there was no breach, and the claim did not arise out of the contract. The suit thus fell under residuary Article 120, which prescribes limitation from when the right to sue accrues. The Court emphasized that there is no right to sue until the right asserted is infringed or there is a clear and unequivocal threat of infringement. On the facts, the suit was filed within six years of the accrual of cause of action and was not barred. The Supreme Court allowed the appeals, set aside the High Court judgment, and restored the Trial Court decree for Rs. 1,36,222/-.
Headnote
A) Limitation Act - Suit for Price of Work Done - Article 56 of Limitation Act, 1908 - The claim was for payment at enhanced rates due to altered circumstances and complex nature of work, not for the price of work done at the defendant's request. The Court held that a suit is governed by Article 56 only if it arises from a contract to pay for work done; here the claim was for additional rates over the stipulated contract rate. Held: Article 56 did not apply. (Para 51F) B) Limitation Act - Compensation for Breach of Contract - Article 115 of Limitation Act, 1908 - Article 115 is a residuary article for compensation for breach of any contract express or implied not specially provided for. The suit was not for compensation for breach but for enhanced rates due to change of circumstances and additional work not covered by the contract. Held: Article 115 did not govern the suit. (Para 51H) C) Limitation Act - Residuary Provision - Article 120 of Limitation Act, 1908 - The claim did not fall under any specific article in the First Schedule and thus attracted the residuary Article 120, which prescribes a six-year limitation period. The period commences when the right to sue accrues, i.e., when there is an accrual of the right and its infringement or clear and unequivocal threat. Held: Suit was within limitation as the right to sue had not expired. (Para 52C)
Issue of Consideration
Whether the suit for enhanced rates is governed by Article 56, Article 115 or Article 120 of the Limitation Act, 1908, and consequently whether the suit was barred by limitation
Final Decision
Appeal allowed; judgment and decree of the High Court set aside and the decree of the Trial Court for Rs. 1,36,222/- restored.
Law Points
- Legal points not extracted
- Article 56 of Limitation Act
- 1908 applies only to suit for price of work done
- not enhanced rates
- Article 115 applies to compensation for breach of contract
- not to claim for enhanced rates due to changed circumstances
- Article 120 is residuary provision for suits not covered by other articles
- with limitation commencing when right to sue accrues
- right to sue accrues only upon infringement or clear threat to the right
- not merely upon rejection of claim
