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In case a party refuses 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, held the Supreme Court on Wednesday.

"It is fundamental to the Law of Contract that whenever a material alteration takes place in the terms of the original contract, on account of any act omission or commission on the part of one of the parties to the contract, it is open to the other party not to perform the original   contract. This will not amount to abandonment.", observed a bench of Justices Hemant Gupta and V Ramasubramaniam.

The bench further clarified that abandonment is normally understood, in the context of a right and not in the context of a liability or obligation. A party to a contract may abandon his rights under the contract leading to a plea of waiver by the other party, but there is no question of abandoning an obligation, said the Court.

Shripati Lakhi Mane, the plaintiff in a suit for recovery of money filed an appeal challenging the judgment of the Bombay High Court whereby in a regular appeal under Section 96 of Code of Civil Procedure, 1908, the High Court modified the decree of the Trial Court  for recover of Rs. 24, 97,077 together with interest at 10% per annum into a decree for recovery of Rs.7,19,412/­ together with interest.

Facts:

Mane was a registered contractor with the Government of Maharashtra. He was awarded a tender for the execution of the work of Regional Rural Piped Water Supply Scheme for Dabhol-Bhopan and other villages in Ratnagiri District.

A work order was issued on 3rd July, 1986, at the cost of Rs.80,45,034/­, which was 47% above the estimated cost.

The Respondent issued a letter dated 28th July, 1986 informing Mane that the work order was kept in abeyance. After a few representations, mane was informed on 17th December, 1986 to start the work.

On 29th December, Mane was informed about the non­availability of C­1 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, Mane started demanding modified rate.

When the said dispute was brewing, the Respondent instructed Mane to stop the pipeline work and start construction at a different place namely Panchanadi. Later, Mane was informed about a modification which involved the construction of one head­work at Karjai and another at Panchanadi. A work order was also issued in respect of these head­works in 1987.

Since the bills raised by him were not honoured in time due to shortage of funds, Mane did not proceed with the work.

He then filed a suit for recovery of a sum 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.

Court’s analysis:

The top court noted that the three heads which were allowed by the Trial Court under claims namely, (i) the release of security deposit to the tune of Rs.2,21,000; (ii) over­heads for the period   from January 1989 to September 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.

High Court had noted that since Mane abandoned the work under the main contract. 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.

It was found that as per Clause 3(a) of the contract the respondents could rescind the contract, forfeit the security deposit and entrust the work to another contractor at the risk and costs of the   appellant but the same was never invoked.

“….Section 67 of the Indian Contract Act, 1872 makes it clear that if any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal”, noted the division bench.

Interestingly, the respondents did not choose, to allege breach of contract and consequently invoke the right to rescind the contract under clause 3(a), but they attributed abandonment to the appellant and refused to honour the claims made by the him, the bench further said.

“The refusal of a contractor to continue to execute the work, unless the reciprocal promises are performed by the other party, cannot be termed as abandonment of contract. A refusal by one party to a contract, may entitle the other party either to sue for breach or to rescind the contract and sue on a quantum meruit for the work already done…”, the Court held.

Holding that It was the respondents who made it difficult for Mane to execute the contract as per the terms originally agreed, the bench allowed the appeal.

Case Title: SHRIPATI LAKHU MANE vs. THE MEMBER SECRETARY, MAHARASHTRA WATER SUPPLY AND SEWERAGE BOARD & ORS.