Case: State Of Gujarat Vs. M/S. Kothari &amp; Associates

filed on 25.1.1985, well after the limitation period of three years for even the final breach, as the various causes of action became time barred on 15.11.1979, 15.11.1980, 15.11.1981 and 15.11.1982 respectively. 10. There is another perspective on the method or manner in which limitation is to be computed. We have already narrated that the Respondent, on every occasion when the extension was sought by it, had requested to be compensated for delay. The Appellant State had granted the extensions but had repudiated and rejected the Respondent’s claims for damages. The effect of these events would be that the cause of action for making the claim for damages indubitably arose on each of those occasions. It is certainly arguable that the Appellant State may have also been aggrieved by the delay, although the facts of the case appear to be unfavourable to this prediction, since delay can reasonably be laid at the door of the Appellant. The Respondent, however, could prima facie be presumed to have accepted a renewal or extension in the period of performance but with the rider that the claim for damages had been abandoned by it. If this assumption was not to be made against the Respondent, it would reasonably be expected that the Respondent should have filed a suit for damages on each of these occasions. In a sense, a fresh contract would be deemed to have been entered into between the parties on the grant of each of the extensions. It is therefore not legally possible for the Respondent to contend that there was a continuous breach which could have been litigated upon when the contract was finally concluded. In other words, contemporaneous with the extensions granted, it was essential for the Respondent to have initiated legal action. Since this was not done, there would be a reasonable presumption that the claim for damages had been abandoned and given a go-by by the Respondent. 11. In a works contract, more often than not, delays occur, and that is why it is assumed that time is not of the essence. Where extensions are asked for and granted, there must be a clear and discernable stand on behalf of either of the parties that the extension is granted and/or accepted without prejudice to the claim of damages. It has become commonplace that neither party lodges a claim for damages, but waits for the end of the contract to raise these disputes, taking advantage of the nebulous and equivocal nature of the transactions between them. This, however, is not the position that obtains before us since the Appellant State had categorically posited that the claim for damages for the alleged delay on its part would not be entertained. 12. The Respondent has sought to place reliance on Section 19 of the Limitation Act. It would be apposite to reproduce this Section: 19. Effect of payment on account of debt or of interest on legacy.—Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made. This Section would not come to the aid of the Respondent, as the suit before us is not for payment on account of a debt or of interest on legacy, but is a suit for damages for additional costs incurred as a result of the extension of the contract period. This Court in Union of India vs. Raman Iron Foundry 1974 (2) SCC 231 , after placing reliance on Jones v. Thompson [1858] 27 L.J.Q.B. 234, has opined that a claim for damages does not give rise to a debt until the liability is adjudicated and damages have been assessed by a decree or any order of a Court or any other adjudicatory authority or forum. Furthermore, in J.C. Budharaja vs Chairman, Orissa Mining Corporation Ltd. and Anr (2008) 2 SCC 444 , it has been held that the effect of Section 19 would be to allow a fresh period of limitation with regard to the existing debt in respect of which acknowledgment and payment has been made. It would not extend the period of limitation for any fresh claim, or any amount not accepted by the other party. In the factual scenario before us, the payment of the Final Bill and Security Deposit could not be construed to accept or acknowledge the damages raised by the Respondent and therefore Section 19 would not per se extend the period of limitation. Furthermore, there could be no extension under Section 18 on account of the acknowledgement in writing, as at each point that the Respondent raised a claim for damages, it was specifically refuted by the Appellant State, and the amounts that were accepted by the Appellant State were limited to the liabilities within the contract, not fresh liabilities for damages. 13. The Respondent has also argued that since notice under Section 80 of the C.P.C. was served to the Appellant State claiming damages on 7.8.1983, a period of two months from the date of the notice would have to be excluded when calculating the period of limitation, as per Section 15(2) of the Limitation Act. It has relied on M/s Disha Constructions vs. State of Goa (2012) 1 SCC 690 to this end. However, since the limitation period for the last breach alleged by the Respondent itself ended on 15.11.1982 and the notice under Section 80 C.P.C. is dated 7.8.1983, this provision is irrelevant. The notice perforce should have been issued before the suit became time barred, and only if so done would the period have been extended for a further two months.14. It is thus clear that the Respondent failed to file the suit for damages within the period prescribed in the Limitation Act. The suit is required to be dismissed on this ground alone. Th

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

Explanation:
1[ds]5. It would be pertinent to note that the issue of limitation was not pleaded as a ground before the Trial Court or the High Court. It was pressed for the first time in the course of oral arguments before the High Court. Nonetheless, it has been discussed in the impugned Order. The High Court, noting the contention raised by the Respondent that the point of limitation was a mixed question of fact and law and could therefore not be adjudicated at this point, held that even if it could be adjudicated, the suit would not be barred by principles of prescription as it was based on a series of successive breaches committed by the Appellant State, and in such circumstances the date of the last breach was relevant. The High Court was of the opinion that limitation need not mandatorily be computed on the basis of each cause of action. It held the date of return of the Security Deposit as the last date of payment for the work done, and concluded that the suit had been filed within three years from this date. The suit was therefore found to be within the prescribed period of limitation.The Respondent has also argued that since notice under Section 80 of the C.P.C. was served to the Appellant State claiming damages on 7.8.1983, a period of two months from the date of the notice would have to be excluded when calculating the period of limitation, as per Section 15(2) of the Limitation Act. It has relied on M/s Disha Constructions vs. State of Goa (2012) 1 SCC 690  to this end. However, since the limitation period for the last breach alleged by the Respondent itself ended on 15.11.1982 and the notice under Section 80 C.P.C. is dated 7.8.1983, this provision is irrelevant. The notice perforce should have been issued before the suit became time barred, and only if so done would the period have been extended for a further two months.14. It is thus clear that the Respondent failed to file the suit for damages within the period prescribed in the Limitation Act. The suit is required to be dismissed on this ground alone.