Case: SHRIPATI LAKHU MANE Vs. THE MEMBER SECRETARY, MAHARASHTRA WATER SUPPLY AND SEWERAGE BOARD &amp; ORS

3. The appellant is a registered contractor with the Government of Maharashtra. In a tender for the execution of the work of Regional Rural Piped Water Supply Scheme for Dabhol-Bhopan and other villages in Ratnagiri District, the appellant became the successful tenderer. He was issued with a work order on 03.07.1986, for the execution of the work at the cost of Rs.80,45,034/--, which was 47% above the estimated cost. The time for the completion of the work was stipulated as 30 months. But it appears that Respondent No.3 herein issued a letter dated 28.07.1986 informing the appellant that the work order was kept in abeyance. After a few representations, Respondent No.3 informed the appellant vide letter dated 17.12.1986 to start the work.       4. Though the appellant started executing the work from 29.12.1986, he was informed about the non--availability of C--1 pipes and cement pipes of the diameter stipulated in the contract. Later, the respondents wanted a change in the terms of the work order by substituting pipes of different diameter. Therefore, the appellant started demanding modified rate.        5. When the above dispute was brewing, Respondent No.3 instructed the appellant, vide letter dated 02.03.1987 to stop the pipeline work and start the work of construction of another work at a different place namely Panchanadi. By another letter dated 04.03.1987, the Respondent No.2 informed the appellant about a modification which involved the construction of one head--work at Karjai and another at Panchanadi. A work order dated 01.07.1987 was also issued in respect of these head--works.        6. Compounding the agony of the appellant, the bills raised by him were not honoured in time due to shortage of funds. Therefore, the appellant did not proceed with the work. As a result, Respondent No.2 issued a threat to withdraw the work order and also to levy a fine of Rs.10/-- per day from 01.03.1988. Ever since then, the parties were at loggerheads, which ultimately led to the appellant filing a suit for recovery of a sum of Rs.51,35,289/--.        7. The aforesaid claim of Rs.51,35,289/-- comprised of several heads of claim such as (i) value of the work done; (ii) release of the security deposit; (iii) compensation; and (iv) damages etc.        8. Before the Trial Court, the appellant examined himself as PW-1 and marked several documents as exhibits. On the side of the respondents, 5 witnesses were examined as DWs 1 to 5 and the respondents also marked several documents.        9. Eventually, the Trial Court, by a judgment and decree dated 02.02.1998 decreed the suit partially, directing the respondents to pay to the appellant, a sum of Rs. 24,97,077/-- together with interest at 10% per annum from the date of the suit till realization.        10. Aggrieved by the decree so granted, the respondents filed a regular civil appeal under Section 96 of the Code of Civil Procedure, 1908 on the file of the High Court of Judicature at Bombay. The appellant did not file any appeal though the suit was decreed partially.        11. By a judgment and decree dated 24.04.2009, impugned in this appeal, the High Court allowed the appeal partially and reduced the decree amount to Rs.7,19,412/--. Therefore, the plaintiff has come up with the above appeal.

Court's reasoning:
13. As could be seen from the above table, what was allowed by the Trial Court under three heads of claims namely, (i) the release of security deposit to the tune of Rs.2,21,000; (ii) over-heads for the period from January 1989 to 30.09.1990 to the tune of Rs. 5,63,115/--; and (iii) loss of profits to the tune of Rs.9,73,250/--, were disallowed by the High Court. Therefore, the appeal before us is actually confined only to these 3 heads of claims.14. The main and perhaps the only reason why the High Court rejected the claims under the aforesaid 3 heads, was that the appellant had abandoned the work under the main contract and that therefore neither the question of release of security deposit nor the question of payment of overheads nor the question of allowing a claim for loss of profit, did arise.16. The entire sequence of events narrated in the preceding paragraph would show that the appellant was not guilty of anything including abandonment. Admittedly, Clause 3(a) of the contract enabled the respondents to rescind the contract, forfeit the security deposit and entrust the work to another contractor at the risk and costs of the appellant. This clause was never invoked by the respondents. Therefore, we are surprised, especially in the light of the communications from February, 1988 up to October, 1989 as to how the High Court could have found the appellant guilty of abandonment.18. In the case on hand, the respondents issued the work order on 03.07.1986 but directed the work order to be kept in abeyance by a subsequent letter dated 28.07.1986. After this stalemate was lifted by a letter dated 17.12.1986, two things happened namely, (i) a change in the diameter of the pipes supplied by the respondents for carrying out the contract; and (ii) request for the performance of additional work without finalization of the modified rates. Therefore, the respondents cannot even accuse the appellant of non--performance of the contract.In this case, the appellant refused to perform his obligations under the work--order, for reasons stated by him. This refusal to perform the obligations, can perhaps be termed as breach of contract and not abandonment.20. It is interesting to note that the respondents did not choose, (i) to allege breach of contract against the appellant; and (ii) consequently to invoke the right to rescind the contract under clause 3(a). The respondents, if they were justified in doing so, could have taken recourse to the remedy available under Section 75 of the Contract Act and sought compensation for the damage sustained through the non--fulfillment of the contract. On the contrary they attributed abandonment to the appellant (without understanding the true purport of the word abandonment) and refused to honour the claims made by the appellant.21. The finding of the High Court that there was abandonment of contract, was on the basis that after the second bill was cleared in May, 1987, the work under the main contract did not progress. This finding goes completely contrary to yet another finding that the period of the contract was up to June, 1989 and that the respondents themselves granted extension of time to complete the contract up to 31.12.1989, despite there being no request from the appellant. We fail to understand as to how a person who abandoned the contract in May, 1987 could be granted extension of time up to December, 1989 on the very understanding of the respondents that the contract was up to June, 1989. In fact, the High Court recorded a finding in paragraph 9 of the impugned judgment that according to DWs 3, 4 and 5, the power to rescind under clause 3(a) of the tender was invoked and the security deposit forfeited. This was not how the respondents pitched their claim even in the written statement. In any case such a finding cannot co-exist with the specific stand of the respondents that the period of contract was extended up to December, 1989.The respondents did not choose the option of rescinding the contract and suing for damages in terms of clause 3 (a) and (b). It was the respondents who made it difficult for the appellant to execute the contract as per the terms originally agreed.