Case: Hind Construction Contractors Vs. State of Maharashtra

07, 000/-. 1/4th work means the work of about Rs. 27, 000/-. It is not possible to do the work of Rs. 27, 000/- in 1/4th time as the days were rainy. This was not reasonable." The witness in para 12 of his deposition has also given the following admission:-"It is not specifically mentioned in the agreement (Ex. 34), that the suit work was urgent and that it was to be completed within 12 months. In this agreement (Ex. 34) there are the clauses of imposing a penalty and extension of time." 6. Having regard to the aforesaid material on record, particularly the clauses in the agreement pertaining to imposition of penalty and extension of time it seems to us clear that time (12 months period) was never intended by the parties to be of the essence of the contract. Further from the correspondence on the record, particularly, the letter (Ex. 78) by which the contract was rescinded it does appear that the stipulation of 12 months period was waived, the contractor having been allowed to do some more work after the expiry of the period, albeit at his risk, by making the recision effective from August 16, 1956. 7. Once either of the aforesaid conclusions is reached it would be difficult to accept the High Courts finding that the recision of the contract on the part of the respondent- defendant was proper and justified on the basis that the same was neither shown to be mala fide nor unreasonable. It must be observed that it was never the case of the appellant-plaintiff that the recision of the contract on the part of the respondent-defendant was mala fide. Counsel for the appellant-plaintiff further pointed out and, in our view, rightly that the five or six factors, namely, (1) the contract having been given at the thresh old of monsoon, the period of monsoon (4 months) ought not to have been reckoned, (2) absence of proper road and approach to the work site during the rainy season and a couple of months thereafter, (3) unreasonable rejection by the Government Officers of material brought on the site, which material was later on allowed to be used, (4) difficulty in procuring labour due to malarious climate at the site, (5) delay in issuing quarry permit and (6) extra time taken for doing extra work that was entrusted ought to have been taken into account-were put forward by the appellant-plaintiff merely for the purpose of showing that the refusal to extend the time by the Superintending Engineer although recommended by the S.D.O. and Executive Engineer was unreasonable and not for showing that the recision of the contract was unreasonable or unjustified. 8. In our view, the question would not be whether the recision of the contract was unreasonable and, therefore, unjustified but whether the recision of the contract in the circumstances of the case was wrongful and illegal. If time was not of the essence of the contract or if the stipulation as to the time fixed for completion had, by reason of waiver, ceased to be applicable then the only course open to the respondent-defendant was to fix some time making it the essence and if within the time so fixed the appellant-plaintiff had failed to complete the work the respondent-defendant could have rescinded the contract. The High Court has taken the view that the contract was rightly rescinded by the respondent-defendant because by about July 21, 1956 (vide letter Ex. 74) the appellant-plaintiff had done work of the value of Rs. 35, 000/- as against the tender value of Rs. 1, 07, 000/-, that is to say, only 1/3rd of the total work had been completed and, therefore, even though time was not of the essence of the contract, the appellant-plaintiff, in the circumstances, could not have completed the work even within the next three months. In our view, this approach adopted by the respondent-defendant and upheld by the High Court is not correct. Long before the expiry of the period of 12 months the appellant-plaintiff had by his letter dated June 6, 1956 (Ex. 68) requested for extension of period of completion up to the end of December, 1956; this request was repeated by another letter dated June 23, 1956 (Ex. 69). May be the reasons or grounds on which the request was made may not have appealed to the Superintending Engineer but some reasonable time making it the essence ought to have been granted. In this behalf it may be stated that the S.D.O. by his letter (Ex. 69) had recommended extension upto December 1956 as sought while by his letter dated June 23, 1956 (Ex. 70) addressed to the Superintending Engineer, the Executive Engineer had recommended that extension of time up to October 30, 1956 may be granted to the appellant-plaintiff with clear intimation that if he failed to complete the work by then, the maximum penalty allowable under cl. 2, namely, 10% of the cost of the work will be inflicted on him, but the recommendation did not receive approval of the Superintending Engineer. It appears that the appellant- plaintiff had an interview with the Superintending Engineer on August 24, 1956 when a written representation (Ex. 99) was handed over and the whole position was sought to be explained to the Superintending Engineer but within three days of the interview by the letter dated August 27, 1956 (Ex. 78) the contract was rescinded and the full security deposit was forfeited to Government. It will thus appear clear that though time was not of the essence of the contract, the respondent-defendant did not fix any further period making time the essence directing the appellant- plaintiff to complete the work within such period; instead it rescinded the contract straightaway by letter dated August 27, 1956. Such recision on the part of the respondent-defendant was clearly illegal and wrongful and thereby the respondent-defendant committed a breach of contract, with the result that there could be no forfeiture of the security deposit.

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

Explanation:
1[ds]It will be clear from t he aforesaid statement of law that even where the parties have expressly provided that time is of the essence of the contract such a stipulation will have to be read along with other provisions of the contract and such other provisions may, on construction of the contract, exclude the inference that the completion of the work by a particular date was intended to be fundamental, for instance, if the contract were to include causes providing for extension of time in certain contingencies or for payment of fine or penalty for every day or week the work undertaken remains unfinished on the expiry of the time provided in the contract such clauses would be construed as rendering ineffective the express provision relating to the time being of the essence of contractOnce either of the aforesaid conclusions is reached it would be difficult to accept the High Courts finding that the recision of the contract on the part of the respondent- defendant was proper and justified on the basis that the same was neither shown to be mala fide nor unreasonable. It must be observed that it was never the case of the appellant-plaintiff that the recision of the contract on the part of the respondent-defendant was mala fide. Counsel for the appellant-plaintiff further pointed out and, in our view, rightly that the five or six factors, namely,(1) the contract having been given at the thresh old of monsoon, the period of monsoon (4 months) ought not to have been reckoned,(2) absence of proper road and approach to the work site during the rainy season and a couple of months thereafter,(3) unreasonable rejection by the Government Officers of material brought on the site, which material was later on allowed to be used,(4) difficulty in procuring labour due to malarious climate at the site,(5) delay in issuing quarry permit and(6) extra time taken for doing extra work that was entrusted ought to have been taken into account-were put forward by the appellant-plaintiff merely for the purpose of showing that the refusal to extend the time by the Superintending Engineer although recommended by the S.D.O. and Executive Engineer was unreasonable and not for showing that the recision of the contract was unreasonable or unjustified.In our view, the question would not be whether the recision of the contract was unreasonable and, therefore, unjustified but whether the recision of the contract in the circumstances of the case was wrongful and illegal. If time was not of the essence of the contract or if the stipulation as to the time fixed for completion had, by reason of waiver, ceased to be applicable then the only course open to the respondent-defendant was to fix some time making it the essence and if within the time so fixed the appellant-plaintiff had failed to complete the work the respondent-defendant could have rescinded the contract. The High Court has taken the view that the contract was rightly rescinded by the respondent-defendant because by about July 21, 1956 (vide letter Ex. 74) the appellant-plaintiff had done work of the value of Rs. 35, 000/- as against the tender value of Rs. 1, 07, 000/-, that is to say, only 1/3rd of the total work had been completed and, therefore, even though time was not of the essence of the contract, the appellant-plaintiff, in the circumstances, could not have completed the work even within the next three months. In our view, this approach adopted by the respondent-defendant and upheld by the High Court is not correct. Long before the expiry of the period of 12 months the appellant-plaintiff had by his letter dated June 6, 1956 (Ex. 68) requested for extension of period of completion up to the end of December, 1956; this request was repeated by another letter dated June 23, 1956 (Ex. 69). May be the reasons or grounds on which the request was made may not have appealed to the Superintending Engineer but some reasonable time making it the essence ought to have been granted. In this behalf it may be stated that the S.D.O. by his letter (Ex. 69) had recommended extension upto December 1956 as sought while by his letter dated June 23, 1956 (Ex. 70) addressed to the Superintending Engineer, the Executive Engineer had recommended that extension of time up to October 30, 1956 may be granted to the appellant-plaintiff with clear intimation that if he failed to complete the work by then, the maximum penalty allowable under cl. 2, namely, 10% of the cost of the work will be inflicted on him, but the recommendation did not receive approval of the Superintending Engineer. It appears that the appellant- plaintiff had an interview with the Superintending Engineer on August 24, 1956 when a written representation (Ex. 99) was handed over and the whole position was sought to be explained to the Superintending Engineer but within three days of the interview by the letter dated August 27, 1956 (Ex. 78) the contract was rescinded and the full security deposit was forfeited to Government. It will thus appear clear that though time was not of the essence of the contract, the respondent-defendant did not fix any further period making time the essence directing the appellant- plaintiff to complete the work within such period; instead it rescinded the contract straightaway by letter dated August 27, 1956. Such recision on the part of the respondent-defendant was clearly illegal and wrongful and thereby the respondent-defendant committed a breach of contract, with the result that there could be no forfeiture of the security deposit.