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PETITIONER: GANNON DUNKERLEY & CO.  LTD.

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT: 28/10/1969

BENCH: SHAH, J.C. BENCH: SHAH, J.C. HEGDE, K.S.

CITATION:  1970 AIR 1433            1970 SCR  (3)  47  1969 SCC  (3) 667  CITATOR INFO :  R          1992 SC 111  (4)

ACT: Limitation Act, 1908-Suit for payment at an additional  rate over  contract  rate in view of  altered  circumstances  and complex  nature of work--Claim is not one for price of  work done  nor for compensation or breach of  contract--Therefore Art. 56 and Art. 115 of First Schedule not  applicable--Suit governed  by Art. 120--Commencement of period  of  imitation under Article.

HEADNOTE: The  appellant-company  filed a suit against  the  Union  of India  demanding payment at an enhanced rate over the  basic rate stipulated in a construction contract with the Union of India.   The claim related to revision of rates due  to  the complex  nature and increase in the quantity of work and  in respect  of  work not covered by the, contract.   The  addi- tional  work  was done at the request  of  the  Engineer-in- charge who under the terms of the contract was competent  to give  instructions for work not covered by the terms of  the contract  and fix the rate at which remuneration was  to  be paid in respect of such work.  The Union of India  contended that  the claim was barred, by the law of  limitation.   The trial court decreed the suit for the amount certified by the Superintending Engineer.  On appeal the High Court held that the  claim was governed either by Art. 56 or by Art. 115  of the First Schedule, to the Limitation Act, 1908, and a suit, more than three years of the date on which the work was done and  in  any  event  of the, date on  which  the  claim  was rejected, was barred.  Allowing the appeal to this Court and restoring the decree for the trial court, HELD  : (i) Article 56 of the First Schedule to  the  Indian Limitation Act, 1908, prescribes a period of three years for a  suit for the price of the work done by the plaintiff  for the  defendant at his request, where no time has been  fixed for payment, and the, period of limitation commences to  run from the date when the work is done.  A suit is governed  by Art.  56 if it arises out of a contract to pay the price  of work done at the request of the defendant., The claim in the present  case is for payment at an additional rate over  the

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stipulated ’rate in view of change in circumstances and  not for  the, price of work done by the appellant,  even  though the  additional  work  was  done  :at  the  request  of  the Engineer-incharge. [51 F]      (ii)  Article  115-  of  the  First   Schedule  to  the Limitation Act is a residuary article dealing with the claim for compensation for the breach of      any        contract, express  orimplied,  not  in  writing  registered  and,  not specially provided for in the first schedule. The period  of limitation in such cases is three years and it commences  to ran  when  the  contract  is  broken,  or  where  there  are successive breaches when the breach in respect of which  the suit is instituted occurs or where the breach is  continuing when it ceases.  The suit filed by the appellant company  is not a suit for compensation for breach of’ contract  express or  implied;  it  is: a suit for enhanced  rate  because  of change of circumstances, and in respect of work not  covered by  the  contract.   The additional  work  directed  by  the Engineer-in-charge when carried out May be deemed to be done under the 48 terms of the contract; but the claim for enhanced rates does not aris out of the contract : it is in any case not a claim for compensation for beach of contract. [51 H] (iii)The  claim is, therefore, not covered by  any  specific article  under the First Schedule and must fall  within  the terms  of  Art. 120.  Under this Article the period  of  six years commences to run when the right to sue accrues.  There is  no right to sue until there is an accrual of  the  right asserted  in  the suit and its infringement or  at  least  a clear  and unequivocal threat to infringe the right  by  the defendant against whom the suit is instituted. [52 C] Bolo v. Kokao and Others, L.R. 87 I.A. 325, referred to.

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos. 258,  and 2585 of 1966. Appeals from the judgment and decrees dated January 19  1965 of the Patna High Court in First Appeals Nos. 190 and 21  of 1960. H.R.  Gokhale,  G. L Sanghi, J. B. Dadachanji  and  Ravinde, Narain, for the appellant (in both the appeals). Jagdish Swarup, Solicitor-General, V. A. Seyid Muhammad,  B. D.  Sharma and S. P. Nayar, for the respondent (in both  the appeals). The Judgment of the Court was delivered by Shah,  J. The Government of India invited tenders for  "rein forced  concrete work relating to the foundation  and  super structure  of the Fertilizer Factory building at Sindri"  in the  State of Bihar.  The tender submitted by the  appellant Company  was  accepted  on November 22, 1947  and  a  formal contract  in that behalf was executed on November 26,  1948. By cl. 12 of the contract, insofar as it is relevant, it was provided :               "The  Engineer-in-charge shall have  power  to               make  any  alterations  in,  omissions   from,               additions   to,  or  substitutions  for,   the               original specifications, drawings, designs and               instructions     and the contractor  shall  be               bound  to-  carry out the work  in  accordance               with  any instructions which may be  given  to               him and any altered, additional or substituted               work  which the contractor may be directed  to

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             do  in the manner above specified as  part  of               the   work  shall  be  carried  out:  by   the               contractor  on  the  same  conditions  in  all               respects  on  which he agreed to do  the  main               work,  and at the same rates as are  specified               in  that tender for the main work      And  if               the  altered, additional or  substituted  work               includes any class of work, for which no  rate               is specified in this contract then such  class               of work shall               49               be  carried  out at the rates entered  in  the               current  schedule of rates of  the  Hazaribagh               P.W.D. district which was in force at the time               of  the acceptance of the contract  minus/plus               the percentage which the total tendered amount               bears to the estimated cost of the entire work               put to tender, and if the altered,  additional               or substituted work is not entered in the said               schedule  of rates, then the contractor  shall               within  seven days of the date of his  receipt               of the order to carry out the work inform  the               Engineer-in-charge of the rate which it is his               intention  to charge for such class  of  work,               and if the Engineer-incharge does not agree to               this  rate he shall, by notice in writing,  be               at  liberty to cancel his order to  carry  out               such class of work     provided   that if  the               contractor  shall commence work or  incur  any               expenditure in regard thereto before the rates               shall have been determined then .... he  shall               only be entitled to be paid in respect of  the               work  carried  out  or  expenditure   incurred               according  to such rates as shall be fixed  by               the  Engineer-in-charge.   In the event  of  a               dispute,  the decision of  the  Superintending               Engineer of the Circle shall be final."               Clause  25 of the agreement provided,  insofar               as it is relevant               "Except   where  otherwise  provided  in   the               contract  all questions and disputes  relating               to the meaning of the specifications, designs,               drawings,   and   instructions,   hereinbefore               mentioned  and as to the qualify  of  workman-               ship, or materials used on the work, or as  to               any  other question, claim, right,  matter  or               thing  whatsoever, in any way arising out  of,               or   relating   to  the   contract,   designs,               drawings,      specifications,      estimates,               instructions,  orders or these conditions,  or               otherwise   concerning  the  works,   or   the               execution,  or  failure to execute  the  same,               whether  arising  during the progress  of  the               work  or after the completion  or  abandonment               thereof shall be referred to a  Superintending               Engineer to be nominated by the Chief Engineer               for arbitration in the manner provided by  law               relating to arbitration The  Sindri Factory Buildings were to be  constructed  under the,  , advice and guidance of M/s.   Chemic  Construcetion, Corporation of New York.  That Firm made delay in  supplying the  drawings  and specifications which involved work  of  a complicated  nature not included in the  original  contract. Time for completion of the work was on that account extended till February 26, 1950.

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On  September 20, 1950 the appellant Company made  a  demand for payment at an enhanced rate of 421 % over the basic 50 rates  stipulated under the original contract.   This  claim was made on -five grounds :               1 .   That there was a "substantial deviation"               in  the nature of work of which  the  detailed               work  drawings were supplied to the  appellant               Company  after the date of the contract.   The               work   involved  was  of  a   complex   nature               requiring  highly  skilled  labour,  and  that               additional labour and materials not covered by               the contract rates were required;               2.    That  there was "great increase  in  the               price  of materials and labour on  account  of               undue prolongation of the period of work;"               3.    That  there was increase in the cost  of               transportation on account of rise in the price               of petrol and increase in railway freight;               4.    That  the  Government of  India  entered               into   other  contracts  incidental   to   the               construction   of   the  Sindri   Factory   at               substantially  higher  rates  which   directly               affected  the cost of labour and materials  of               the appellant Company who had to compete  with               the other contractors;               5.    That additional work ordered to be  done               involved  in many instances quantity of  -work               several   times  the  work  set  out  in   the               contract. By his letter dated September 13, 1950, the Additional Chief Engineer rejected the claim.  In September 1954 the disputes relating  to  the  claim for rise in cost  of  material  and labour due to delay in supplying detailed work drawings, the claim arising from rise in price of petrol and for  increase in the cost of material and labour due to other  contractors working  on the site, were referred to arbitration, but  not the  claims for revision of rates due to complex  nature  of the  work  and  increase  in  the  quantity  of  work,   The arbitrator rejected the claims of the Company in respect -of the matters which were referred. Thereafter  the appellant Company filed a suit on August  9, 1956,  against  the  Union of India, for a  decree  for  Rs. 3,62,674/9/6  being the amount claimed at the rate  of  421% above  the contract rate, in the alternative, a  decree  for Rs. 2,44,000/- being the amount claimed at the rate of 28.1% above  the  contract rate as recommended  by  the  Executive Engineer, and in the -further ’alternative, a decree for Rs. 1,36,222/-at the rate of 18  17% above the contract rate  as certified  by  the Superintending Engineer.   The  Union  of India  contended, inter alia, that the claim was  barred  by the law of limitation. 51 The  Trial Court held that the claim was not barred  by  the law  of limitation and decreed the claim for Rs.  1,36,222/- as  certified  by the Superintending Engineer.   Aginst  the decree  passed by the Trial Court the appellant  Company  as well as the Union of India appealed to the High Court. Before  the  High Court, in support of the appeal  only  the plea  of  limitation was pressed on behalf of the  Union  of India.  In the view of the High Court the claim was governed either  by Art. 56 or by Art. 115 of the First  Schedule  to the Limitation Act, 1908, and the suit not having been filed within  three years of the date on which the work  was  done and  in  any  event  of the date on,  which  the  claim  was

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rejected was barred.  The appellant Company has appealed  to this Court with certificate. The appellant Company had undertaken under the terms of  the contract to do specific construction work at "basic  rates". The  Engineer-in-charge  was by the terms of cl. 12  of  the agreement  competent  to  give  instructions  for  work  not covered  by the terms of the contract, and it  was  provided that  remuneration  shall be paid at the rate fixed  by  the Engineer-in-charge for such additional work, and in case  of dispute the decision of the Superintending Engineer shall be final.   It  is  common ground that the claim  made  by  the appellant  Company  was  not  covered  by  the   arbitration agreement,  and on that account it was not referred  to  the arbitrator.   The claim in suit related to the  revision  of rates  due  to  the complex nature of the work  and  due  to increase in the quantity of work and also grant of contracts to other competing parties at substantially higher rates and other related matters. Article  56 of the First Schedule to the  Indian  Limitation Act. 1908, prescribes a period of three years for a suit for the price of work done by the plaintiff for the defendant at his  request, where no time has been fixed for payment,  and the period of limitation commences to run from the date when the  work  is  done.  A suit is governed by Art.  56  if  it arises  out of a contract to pay the price of work  done  at the  request  of the defendant.  The claim in  ,the  present case  is  for  payment  at  an  additional  rate  over   the stipulated rate in view of change in circumstances, and  not for price of work done by the appellant Company.  It is true that  additional  work  was  done  at  the  request  of  the Engineer-in-charge,  but the claim in suit was not  for  the price  of  work  done but. for enhanced  rates  in  view  of altered circumstances. Article 115 of the First Schedule to the Limitation Act is a residuary  article dealing with the claim  for  compensation for  the breach of any contract, express or implied, not  in writing  registered and not specially provided for,  in  the First  Schedule.  The period of limitation in such cases  is three years and it commences 52 to  run  when  the contract is broken, or  where  there  are successive breaches when the breach in respect of which  the suit is instituted occurs, or where the breach is continuing when it ceases.  The suit filed by the appellant Company  is not  a suit for compensation for breach of contract  express or  implied  :  it is a suit for enhanced  rate  because  of change of circumstances, and in respect of work not  covered by  the  contract.   The additional  work  directed  by  the Engineer-in-charge when carried out may be deemed to be done under the terms of the contract : but the claim for enhanced rates does not arise out of the contract : it is in any case not a claim for compensation for breach of contract. The  claim is therefore not covered by any specific  article under the First Schedule, and must fall within the terms  of Art. 120.  The Solicitor-General appearing on behalf of  the Union of India contended that even if the claim falls within the terms of Art. 120 of the Limitation Act, it was  barred, for, the appellant Company had in the suit made a claim  for work done more than six years before the institution of  the suit.   Counsel submitted that under Art. 120 the period  of limitation  commences  to  run from the date  on  which  the defendant  obtains  the  benefit of the  work  done  by  the plaintiff.   But  under Art. 120 of the Limitation  Act  the period  of  six  years  for suits for  which  no  period  of limitation  is provided elsewhere in the Schedule  commences

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to run when the right to sue accrues. In our judgment, there is  no right to sue until there is  an accrual of the  right asserted  in  the suit, and its infringement,  or  at  least clear  and unequivocal threat to infringe that right by  the defendant  against  whom the suit is instituted  :  Bolo  v. Kokan and, Others(1). The  appeals are allowed and the decree passed by the  Trial Court  is restored with costs in the High Court and in  this Court.  One hearing fee.  The appellant will be entitled  to intereston  the amount decreed at the rate of 6%  per  annum from the date of the suit till payment. R.K.P.S. Appeals allowed. (1) L.R. 57 I.A. 325 at p. 331, 53