Case Note & Summary
The case involves a First Appeal filed by the original defendants (contractor) against the judgment and decree dated 30.9.2002 passed by the learned Civil Judge (Senior Division), Mehsana in Special Civil Suit No.59 of 1992. The respondent-plaintiff, Mehsana District Panchayat, had filed a suit for recovery of Rs.4,53,049.60 as damages for breach of contract. The Panchayat had floated a tender for construction of Jornang-Lodhnaj Road, and the contractor's tender was accepted. An agreement was executed on 11.5.1982, with a completion period of 18 months ending on 10.11.1983. The contractor completed work worth Rs.3,31,569.97 by the deadline but failed to complete the remaining work despite notices. The Panchayat's construction committee terminated the contract vide resolution No.42 dated 27.2.1989 and appointed another contractor, Ambika Construction Company, to complete the remaining work at a higher price, resulting in a loss of Rs.4,83,460.60. The Panchayat filed the suit on 25.2.1992. The contractor appeared and filed a written statement with a counterclaim at Exhibit 7, denying the Panchayat's case and contending that the suit was barred by limitation. The trial court decreed the suit in favor of the Panchayat for Rs.4,53,049.60 with interest at 12% per annum from the date of suit till realization, and dismissed the counterclaim. The contractor appealed. The High Court framed the issue of limitation. It held that the suit was within limitation because the contract was terminated on 27.2.1989, which is the date of breach under Article 55 of the Limitation Act, 1963, and the suit was filed on 25.2.1992, within three years. The trial court's finding that the breach occurred on 10.11.1983 was erroneous. The High Court also held that the counterclaim was within limitation under Article 113, as the right to sue accrued on termination. The High Court allowed the appeal in part, setting aside the dismissal of the counterclaim and remanding the matter to the trial court for fresh adjudication on the counterclaim and quantum of damages.
Headnote
A) Limitation Act, 1963 - Article 55 - Suit for Damages for Breach of Contract - Date of Breach - The suit for damages for breach of contract is governed by Article 55 of the Limitation Act, 1963, which provides a period of three years from the date when the contract is broken. In the present case, the contract was terminated on 27.2.1989, which is the date of breach, and the suit filed on 25.2.1992 is within limitation. The trial court erred in holding that the breach occurred on 10.11.1983 (the date of completion) and that the suit was barred by limitation. (Paras 5-10) B) Limitation Act, 1963 - Article 113 - Counterclaim - Limitation - A counterclaim is governed by Article 113 of the Limitation Act, 1963, which provides a period of three years from the date when the right to sue accrues. The contractor's counterclaim for unpaid work done was filed on 25.2.1992, and the right to sue accrued on 27.2.1989 (termination of contract). Hence, the counterclaim is within limitation. The trial court's dismissal of the counterclaim as barred by limitation was erroneous. (Paras 11-15) C) Indian Contract Act, 1872 - Section 73 - Damages for Breach of Contract - Entitlement - The plaintiff Panchayat is entitled to damages for breach of contract under Section 73 of the Indian Contract Act, 1872, as the contractor failed to complete the work within the stipulated time and the contract was terminated. However, the quantum of damages must be proved. The trial court's decree for Rs.4,53,049.60 with interest is upheld, but the counterclaim of the contractor for Rs.1,50,000 is also allowed. (Paras 16-20)
Issue of Consideration
Whether the suit for damages filed by the Panchayat was barred by limitation, and whether the counterclaim of the contractor was within limitation.
Final Decision
The High Court allowed the appeal in part. The judgment and decree of the trial court were set aside. The suit of the plaintiff (Panchayat) was held to be within limitation, but the counterclaim of the defendant was also held to be within limitation. The matter was remanded to the trial court for fresh adjudication on the counterclaim and quantum of damages, if any.
Law Points
- Limitation period for suit for damages for breach of contract runs from date of termination of contract
- not from date of breach
- Limitation Act
- 1963
- Article 55
- Article 113
- Section 3
- Section 14
- Specific Relief Act
- Section 55
- Indian Contract Act
- 1872
- Section 73
