IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE PIUS C.KURIAKOSE THURSDAY, THE 7TH AUGUST 2008 / 16TH SRAVANA 1930 AS.No. 638 of 1995(C) --------------------- OS.46/1991 of SUB COURT, QUILANDY .................... APPELLANT/PLAINTIFF: ----------- THE PLANTATION CORPORATION OF KERALA LTD. KOTTAYAM. BY ADV. SRI JOSEPH MARKOSE, RESPONDENT/DEFENDANT: ------------- E.A.JOSEPH JANARD, ERAVOOCHIRA HOUSE, PERUVANNAMUZHI, PILLAPERUVANNA DESOM, CHAKKITTAPARA VILLAGE, KOYILANDY TALUK. BY ADV. SRI.GRASHIOUS KURIAKOSE THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 07/08/2008, ALONG WITH AS NO. 663 OF 1995 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: PIUS C. KURIAKOSE, J. ----------------------------------------------- AS. Nos. 638 & 663 of 1995 ----------------------------------------------- Dated this the 8th day of August, 2008 J U D G M E N T These appeals have been filed by the Plantation Corporation of Kerala, the plaintiffs against the judgments and decrees of the Koyilandy Sub Court in O.S. Nos. 49 of 1991 and 46 of 1991. Though the learned Subordinate Judge disposed of the suits by separate judgments since it is seen that the pleadings were identical and the issues and the evidence adduced by the parties in both the suits were identical and the reasoning and the conclusions of the learned Sub Judge in both the suits were also identical these appeals are being disposed of by this common judgment. 2. I shall refer to the facts in O.S.49 of 1991 pertaining to A.S. No. 663 of 1995. The plaint margin property is part of a larger area admeasuring 248.0639 hectares obtained by the plaintiff corporation from the Government by allotment. Out of the entire area an extent of 145.5566 hectares was full of secondary tree growth. The area is divided into 12 blocks and tenders were invited for clear felling as per tender-cum-auction notice dated 26-11-1987 with intention of planting rubber seedlings in June – July 1988. The tender proposed by the defendant was accepted and agreement was entered into between the AS. Nos. 638 & 663 of 1995 -2- parties on 20-2-1988. On the terms of the agreement a work order was issued to the defendant. As per the work order the defendant was expected to complete the work by 21-4-1988. The defendant did not carry out the work within the stipulated time, instead he applied for extension of time. Extension was granted on condition of payment of penalty. In the first instance extension was granted up to 15-5-1988. Since the work was not completed even during the extended period further extension was granted till 31-5-1988. Thereafter, all contractors including the present defendant (and also the defendant in O.S. 46 of 1991) were allowed extension of time till 21-6-1988. The defendant did not avail the said time and did not complete the work. The block concerning the defendant is 12. The defendant committed breach of contract and the plaintiff caused notice to the defendant rescinding the contract asper clause 4(b) of the contract. The plaintiff also informed the defendant that the security amount deposited by him has been forfeited. No reply was sent by the defendant. Therefore the work was completed by the plaintiff itself by making alternate arrangements. In that process the plaintiff suffered damages for clearing of land which is assessed at Rs.1500/- per hectare. The production loss to the plaintiff on account of inability to carry out AS. Nos. 638 & 663 of 1995 -3- rubber planting in 1988 by reason of the breach of contract committed by the defendant was estimated at Rs.900/- per hectare. The total damages per hectare was assessed at Rs.2400/- and on that basis it is claimed that a total loss of Rs.50,592/- had been incurred by the plaintiff. Registered notice claiming the amount was sent to which a reply notice was sent by the defendant denying the liability. The suit O.S.49/91 is for recovery of a sum of Rs.50,522/- with interest at 6% per annum and costs. 3. More or less on the same averments O.S.46 of 1991 was also instituted claiming a sum of Rs.46,077.22. Written statements were filed by the defendants in both the suits. It was contended that the suits were not maintainable in law. It was admitted in O.S. 49/91 that the defendant was successful bidder in respect of block No.12 and that an agreement as alleged had been executed, but time was not the essence of the contract. The defendant was not expected to complete the work by 21-4-1988 as alleged. The allegations of breach of contract by the defendant are denied. Defendant never committed breach of contract. He completed the work as per the terms and conditions. There was no residual tree growth and weed growth as alleged by the plaintiff. The assessment of the plaintiff is baseless. AS. Nos. 638 & 663 of 1995 -4- Plaintiff has not spent any amount for clearing land as alleged. The inability to do rubber planting in 1988 is due to administrative reasons and financial difficulties of the plaintiff and not due to the breach of contract by the defendant. Actual planting was done much later by the plaintiff. The claims regarding production loss and other damages are unfounded. The inability to carry out the work on time was due to the illegal obstruction caused by the local residents for removing timber, labour unrest and also because of the early monsoon. There was difficulty in getting pass for transportation of timber. These facts were known to the officials of the plaintiff. This is why they were inclined to extend the period originally fixed. Illegal and arbitrary conditions were imposed for extending the period. The defendant was made to pay Rs.42,160/- under duress towards penalty. The earnest money deposited by the defendant was not returned. The work was almost completed by the defendant. The plaintiff had also sold the timber staked by the defendant in the premises for a value of Rs.12,000/- and thus the plaintiff had made huge illegal gain. The attempt of the plaintiff is to make illegal enrichment. The plaintiff is liable to return the earnest money. Alternatively it is contended that the defendant may be permitted to set off the amounts due to the plaintiff by way of AS. Nos. 638 & 663 of 1995 -5- security and fine against the plaint claim. The plaintiff filed a reply statement denying the allegations made in the written statement. In O.S.46/91 also similar contentions were raised. On the basis of the pleadings the following were the issues raised by the court for trial. 1. Whether the defendant is liable to pay any amount to the plaintiff? 2. Whether the defendant had violated the terms of the contract as stated in the plaint? 3. What is the correct amount due? 4. What is the proper order as to costs? 4. The evidence in O.S.49/91 consisted of oral testimony of PW- 1 and documents Exts.A1 to A7 on the side of the plaintiff and the oral testimony of DW-1 on the side of the defendant. Evidence in O.S.46/91 consisted of oral testimonies of Pws.1 and 2 on the side of the plaintiff and Exts.A1 to A14 series. On the side of the defendant it consisted of oral testimony of DW-1 alone. Learned Subordinate Judge appreciated the evidence and materials on record and would consider the issue Nos.1 to 3 in both the cases together. The learned Judge noticed that issues framed notwithstanding, the question which first arose was whether time was the essence of the contract which has been entered into between the parties. Relying on the judgment of AS. Nos. 638 & 663 of 1995 -6- the Supreme Court in Hind Construction Contractor v. State of Maharashtra, AIR 1979 SC 720 and the circumstances that the contract itself contains a specific clause for extension of time on payment of penalty and that the plaintiff was ever willing to extend the period of contract by receiving penalty the learned Subordinate Judge concluded that time was not the essence of the contract between the parties. The learned Subordinate Judge noticed that further extension was granted till 23-6-1988 by the plaintiff on condition that the further penalty unilaterally fixed by the plaintiff should be paid by the defendant and that defendant was not agreeable for paying the further penalty so unilaterally fixed. Learned Judge noticed that there was no clause in the agreement empowering the managing director of the plaintiff to unilaterally fix the penalty and accepted the defence case that the defendants were not able to comply with the remaining part of the contract within the extended period because of the illegal penalty imposed against them. The learned Judge also noticed that the oral evidence adduced by the plaintiff was not sufficient to assess the extent of work left unfinished by the defendant. This according to the learned Judge was an aspect on which the plaintiff could have taken out a commission and obtain a report. The failure to take out a AS. Nos. 638 & 663 of 1995 -7- commission and get a report on the basis of local inspection is viewed by the learned Judge as a vital omission to the plaintiff's case regarding the extent of work left unfinished by the defendant. Lastly it was found by the court below that the recovery of penalty and forfeiture of security by the plaintiff was illegal and would observe that in the absence of any counter claim by the defendant the court is not obliged to consider the defence contentions regarding the illegality of the penalty imposed and forfeiture of security. In the light of the findings the suits were dismissed but without any order as to costs. The learned counsel for the appellants would address me extensively on all the grounds in the memorandum of appeal. He submitted that the court below went wrong in appreciating the evidence and that the findings entered on the issue raised were the result of a misreading of the evidence. I have considered the submissions and I have gone through the entire evidence which is available. Having considered the submissions and re-appreciated the evidence I am of the view that the learned Subordinate Judge was justified in her conclusion that time was not the essence of the contract in these two cases. The learned Judge was supported in her view by the judgment of the Supreme Court in Hind Construction AS. Nos. 638 & 663 of 1995 -8- Contractor v. State of Maharashtra, AIR 1979 SC 720. I notice that the judgment of the Supreme Court have been followed by a Division Bench of this Court in KSEB v. M/s. A.L.Jacob and Sons, 1995(2) KLJ 518. The above finding that time was not the essence of the contract is only to be upheld, in this case where as rightly noticed by the learned Sub Judge the appellant was always inclined to extend the period for performance of the respondent's obligations under the contract on condition that the appellant shall pay penalty. As noticed by the learned Sub Judge penalty had been imposed and collected once. When penalty was imposed once again as a condition for further extension, the respondent resisted. On going through the agreement I do not find any clause which empowers the managing director of the appellant to impose penalty unilaterally to that extent. The learned Sub Judge was correct in her view that the imposition of penalty unilaterally by the managing director of the appellant on the respondent was irregular. It is seen that the learned Sub Judge noticed that through the illegal action of imposing penalty and forfeiting the security amounts the appellant company has been able to recover substantial portion of the so called damages sustained by the company due to breach of contract committed by the respondent. The AS. Nos. 638 & 663 of 1995 -9- learned Subordinate Judge in my opinion was also justified in her view that a commission report on the basis of local inspection could have offered best evidence regarding the extent of work actually done by the respondents. In short, I do not find any warrant for interfering with the judgment of the court below. Both the appeals will stand dismissed. In the circumstances the parties are directed to suffer their costs through out. (PIUS C.KURIAKOSE, JUDGE) ksv/-