Case: Bombay Housing Board (Now The Maharashtrahousing Board) Vs. Karbhase Naik &amp; Co., Sholapur

the right which came into existence as result of the contract entered into between the plaintiff and the municipality and not a public duty cast upon the municipality by the statute, that in forfeiting the deposit, the municipality was not acting in pursuance to the powers given to it under the statute but was doing so in pursuance of a power given to it under the contract and, therefore, the suit to enforce rights under the contract entered into with. the municipality which the municipality was not under any obligation to enter into, cannot fall within the ambit of the section. We think that the decision lays down the law correctly and that the principle deducible from it is applicable to the facts here.28. Mr. Desai referred to the decision of the Madras High Court in Athimannil Muhammad v. Malabar District Board, ILR 58 Mad 746 = (AIR 1935 Mad 213 ) and said that the decision therein would govern the instant case. That was a case where a suit was filed against the District Board more than six months after the date of the accrual of the cause of action, claiming damages on the ground that its President improperly cancelled a contract of lease for one year of the tolls in certain places, which was stated to have been entered into by the plaintiff with the Board through its Vice President. The President in performance of what he thought was his duty under the Madras Local Boards Act accepted a higher offer by another person and the necessary consequence of it was the cancellation of the acceptance of the plaintiffs offer. It was held that though the distinction between actions on contract and actions independent of contract may be convenient enough as a working rule, the real test to be applied was whether what was complained of was some act done in pursuance of a statute. Varadachariar, J. in delivering the judgment of the Court said that the cancellation of the acceptance of the offer was the necessary result of what the President thought was his duty in accordance with the teens of the Act as he interpreted them namely to accept the highest tender and that he did this on the footing that the Vice Presidents acceptance of the plaintiffs tender was not in compliance with the Act. He further said that the right to collect tolls was a special privilege conferred upon local bodies by statute and that they were authorised either to manage the collection of the tolls themselves or through their own agency or to lease them out, and that in any case what the President as representing the Board did in connection with the leasing out of the right to levy tolls was undoubtedly an act done in execution of his powers or duties under the. Act.29. We need not consider the correctness of this decision as, even on the assumption that it is corrects it has no application to the facts here. There the Court found that the act complained of had reasonable connection with the discharge of his statutory duty as President, or at any rate, he thought that it was his statutory duty as President to accept the highest bid. The distinction between an act done with some semblance of authority or show of right and a prima facie illegal act in this context has been clearly pointed out in the decision in Jalgaon Borough Municipality v. Khandesh Spinning and Weaving Mills Co. Ltd., ILR (1953) Bom 590 = (AIR 1958 Bom 204 ) where the question was whether notice under Section 206 of the Bombay Municipal Boroughs Act, 1925, was necessary before filing a suit to recover a sum of money on the basis of a contract. The Court held that an act which is prima facie illegal is not within the category of acts done or purported to have been done in pursuance of that Act, and that it is only an act done under a vestige or semblance of authority or with some show of a right that would fall within the category. Bhagwati J. in the course of ha judgment said that the acts which would fall within the category of those done or purported to have been done in pursuance of the Act could only be those which were done under a vestige or semblance of authority, or with some show of a right and that the distinction between ultra vires and illegal acts on the one hand and wrongful acts on the other-wrongful in the sense that they purport to have been done in pursuance of the Act-is that they are intended to have been done in pursuance of the Act and are done with a vestige or semblance of authority or sort of a right invested in the party doing those acts.30. In the Trustees of Port of Bombay v. The. Premier Automobiles Ltd., AIR 1974 SC 923 Section 87 of the Bombay Port Trust Act, 1879, which is in pari materia with Section 64 of the Act fell for consideration and the question was whether short delivery by a statutory bailee was something done or purporting to have been done under the provisions of that Act. In the course of the judgment, Krishna Iyer, J., speaking for the Court, said that a suit for damages for breach of contract would not attract the section (see para 46 of the judgment).31. As we said, the act complained of in this case was the non-payment of the amount alleged to be due to the respondent on the basis of the breach of the contract between the parties. We do not think that the act complained of could be said to have been done or purported to have been done in pursuance of the Act. By no stretch of imagination could it be said that the breach complained of had any reasonable connection with any duty cast upon the appellant or its agents by the Act.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It is clear from the clause that where any additional or altered work is directed to be carried out and no rates are entered in the Schedule of Rates in the Division or agreed to, then, the contractor may, within seven days of the order, give notice of the rate he intends to charge. In such case, the Engineer-in-charge would be at liberty to cancel the order if he does not agree to the rate stated by the contractor and get the work done by any other agency. Where, however, the Engineer-in-charge has not cancelled the order for additional or altered work and the contractor has commenced work and incurred expenditure, the contractor shall only be entitled to be paid at such rate or rates as may be fixed by the Engineer-in-charge. In any such case if the contractor is dissatisfied, he may raise a dispute about the rate or rates so fixed by the Engineer-in-charge. Where such dispute is raised, the Superintending Engineer will decide the same and his decision will be final.10. We do not think that the respondent was bound to carry out the additions and alterations as there was no reply to the notice stating the rates it intended to charge. But it was free to commence and complete the work on the basis that since the rates quoted by it were not accepted, it would be paid at such rates to be fixed by the Engineer-in-charge and that if it was dissatisfied with the rate or rates fixed by the Engineer-in-charge, it could raise a dispute before the Superintending Engineer and that the time limit for completion would be extended in all cases of additions or alterations as stated n the last sub-para of clause 14.11. The High Court was of the view that clause 14 had no application because it thought that the respondent was bound to carry out the work as directed by the Engineer-in-charge even when there was no agreement as regards the rate to be charged for the extra work, as the nature of work in some cases would be such that if the work was not completed at the time when the work was to be completed, the contractor would have to do much extra work over and above the actual work involved. The Court also said that clause 14 gave the Engineer-in-charge an absolute power to fix the rate and that would: tee unjust and therefore the Court decreed in full the amount claimed under items A-3 and A-4.12. We think that until the .rates were settled by agreement the respondent was under no obligation to carry out the additional or altered work. The respondent could legitimately have said that in the absence of scheduled rates in the division for the type of work in question or an agreement in regard to the rates, it was not bound to carry out the additional or altered work. We are not satisfied that since the Engineer-in, charge did not exercise his liberty to cancel the order, there was a concluded contract between the parties. The failure to cancel the order for additional or altered work on receipt of the notice specifying the rate would not result in an agreement as to the rate to be charged. The clause only gave the Engineer-in-charge the liberty to cancel the order and get the work done by another contractor. The fact that an express power was given to the Engineer-in-charge by the clause to cancel the order if he did not agree to the rate would not mean that the failure to cancel the order would result in an agreement as to the rate or rates. The proviso in clause 14 was intended to cover cases where the notice specifying the rate was not given by the contractor, or where, even though the notice was given, the Engineer-in-charge did not cancel the order in the event of his not agreeing to the rate specified in the notice. We are of the view that in the absence of some positive act on the part of the Engineer-in-charge agreeing to the rate, there was no agreement as to the rate and that the respondent was not bound to carry out the work.13. In this view of the matter, we think that the High Court went wrong in allowing the claim in item A-4.14. The claim under Item A-3 stands on the same footing as the claim under item A-4 and, therefore, that claim has also to be rejected.We do not think that the High Court was in error. Clause 15 empowers the Engineer-in-charge to stop or to reduce the whole of the work specified in the tender if he thinks it necessary to do so and the contractor has no right to claim any compensation whatsoever on account of such stoppage or reduction in the work. The clause also provides that the contractor shall have no right to claim any pay. ment or compensation on account of any profit or advantage which he might have derived from the execution of the work in full but which he did not derive in consequence of the full amount of the work not having been carried out or on account of any loss that he may be put to on account of materials purchased or agreed to be purchased or for unemployment of labour recruited by him. The clause further provides that the contractor shall not also have any claim for compensation by reason of any alteration having been made in the original specifications, drawings, design or instruction which may involve curtailment of work as originally contemplated.18. In its evidence, the respondent stated that it put slabs of 4 1/2" thickness in an area measuring 24,000 sq. ft. out of an area of 61,000 sq. ft. and that it had to put 44,000 lbs. of reinforcement instead of 27,000 Lbs. and so it must be paid for the extra 17,000 lbs. a sum of Rs. 9,000/-.The High Court took the view that this involved no reduction or curtailment in the work and as the alteration involved additional cost to the respondent, it cannot be said that there was reduction or curtailment of work. In other words, the High Court was of the view that the nature of the work was such that there was not only no curtailment of work but an increase of work involving additional cost. We think the High Court was right in its conclusion that clause 15 has no application and that the claim was well founded.19. The respondent had claimed Rs. 9,097/- from the appellant in respect of item C-2. In the plaint the respondent stated that the appellant represented to it that the appellant would entrust the respondent with the pipeline work mentioned therein but that the appellant, contrary to representation, got the work done by another contractor and, therefore, the respondent was entitled to compensation for it.20. The High Court found that as it was provided in clause 15 that before the Engineer-in-charge could stop the work and get the work done by another contractor, he should give the respondent a written notice and as such a notice was not given, the respondent was entitled to damage.21. We see no reason to think that observance of the condition as regards the written notice was not mandatory. We see no force in the argument that the written notice was not necessary as that was specifically provided for in the clause.There can be no doubt that the act complained of by the respondent was the non payment of money as damages or compensation resulting from an alleged breach ofthink that the decision lays down the law correctly and that the principle deducible from it is applicable to the facts here.We need not consider the correctness of this decision as, even on the assumption that it is corrects it has no application to the facts here. There the Court found that the act complained of had reasonable connection with the discharge of his statutory duty as President, or at any rate, he thought that it was his statutory duty as President to accept the highest bid.As we said, the act complained of in this case was the non-payment of the amount alleged to be due to the respondent on the basis of the breach of the contract between the parties. We do not think that the act complained of could be said to have been done or purported to have been done in pursuance of the Act. By no stretch of imagination could it be said that the breach complained of had any reasonable connection with any duty cast upon the appellant or its agents by the Act.