/2022 INSC 0245/
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.556 of 2012
SHRIPATI LAKHU MANE                                       ... APPELANT(S)
VERSUS
THE MEMBER SECRETARY,              
MAHARASHTRA WATER SUPPLY
AND SEWERAGE BOARD    & ORS.                       
...RESPONDENT(S)
 
J U D G M E N T
V. Ramasubramanian
1. The plaintiff in a suit for recovery of money has come up with
the   above  appeal   challenging   the   judgment   and   decree   of  the   High
Court   of   Judicature   at   Bombay   in   a   regular   appeal   under   Section
96   of   the   Code   of   Civil   Procedure,   1908,   by   which   the   decree
granted   by   the   Trial   Court   for   recovery   of   Rs.24,97,077/­   together
with   interest   at   10%   per   annum   was   modified   into   a   decree   for
recovery of Rs.7,19,412/­ together with interest.

2. We   have   heard   Mr.Vinay   Navare,   learned   senior   counsel   for
the   appellant,   and   Mr.   Sunil   Murarka,   learned   counsel   for   the
respondents.
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 Dabhol­Bhopan 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 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,   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   head­work   at
Karjai and another  at Panchanadi. A work order  dated 01.07.1987
was also issued in respect of these head­works.
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.
12. Before   we   proceed   to   consider   the   grounds   of   attack   and   the
rival   contentions,   it   will   be   useful   to   see   the   different   heads   of
claims   made   by   the   appellant   before   the   Trial   Court,   the   heads   of
claims and the extent to which these heads of claims were allowed
by   the   Trial   Court,   and   the   heads   of   claims   allowed   by   the   High
Court   in   the   impugned   judgment.   For   easy   appreciation,   they   are
presented in a tabular column as follows:­
S.No. Heads of Claim Amount claimed 
in Plaint (Rs.) Amount awarded 
by Trial court (Rs.) Amount awarded   
by High Court Rs.)
1. Value   of  work   done   but   not
paid,   up   to   the   date   of
withdrawal of work 12,25,864 28,418 28,418
2. Value   of   work   done   under
extra item 5,82,250 4,42,944 4,42,944
3. Release of security deposit 2,21,000 2,21,000 Disallowed
4. Idle labour 1,57,000 1,57,000 1,57,000
5. Idle machinery    91,000    91,000    91,000
6. Overheads 5,63,115 5,63,115 Disallowed
7. Loss of Profit       11,55,000 9,73,250 Disallowed
8. Interest   at   18%   p.a.   up   to
date of Suit       11,38,860 Disallowed Disallowed
9. Notice Charges                 300         300 Not allowed
            TOTAL       51,34,389 24,77,027 1
7,19,362
1  Though the amount totals to Rs. 24,77,027/­, the decree of the trial court was for Rs. 24,97,077/­

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 )   over­heads   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.   Therefore,   the   only   issue   that
arises   for   consideration   in   this   appeal   before   us   is   as   to   whether
there was abandonment of work by the appellant.
15. In order to see whether there was abandonment on the part of
the   appellant,   it   is   necessary   to   have   a   look   at   the   timeline   of

events,   as   reflected   by   the   documentary   evidence   on   record.   The
timeline was as follows:­
(i) The   work   order   was   issued   to   the   appellant   on
03.07.1986   and   an   agreement   was   registered.   The   agreement
stipulated a period of 30 months for the completion of the work;
(ii) By   a   letter   dated   28.07.1986,   the   respondents   informed
the appellant that the execution of the work order  shall be kept in
abeyance.   Though   no   reason   was   indicated   in   the   letter,   the
respondents   took   a   stand   later   that   it   was   due   to   “administrative
exigencies”;
(iii) After   nearly   5   months,   a   letter   dated   17.12.1986   was
issued directing the appellant to commence work;
(iv) While the case of the appellant was that his obligation to
commence   the   execution   of   the   contract   came   into   effect   on
03.07.1986,   the   case   of   the   respondents   in   the   written   statement
was   that   the   date   of   commencement   of   the   work   should   be   taken
only   as   17.12.1986,   which   was   the   date   on   which   the   order   for
keeping the work­order in abeyance was lifted;
(v) Within a few days, the appellant notified the respondents,
about   the   non­availability   of   C­1   pipes   and   cement   pipes   of   the
diameter originally agreed. When the respondents wanted to replace
the pipes with pipes of different dimension, the appellant demanded

a fresh rate to be finalized, through a letter dated 20.02.1987. This
fact is admitted in paragraph 8 of the written statement;
(vi) Even   before   the   issue   raised   in   the   letter   dated
20.02.1987 could be resolved, the respondents issued another letter
dated   02.03.1987   instructing   the   appellant   to   stop   the   pipeline
work   and   start   the   work   at   Panchanadi.   Though   the   respondents
claimed   in   paragraph   9   of   their   written   statement   that   the   letter
dated   02.03.1987   merely   called   upon   the   appellant   to   concentrate
on   the   construction   of   head­work,   it   is   nevertheless   admitted   that
the said letter contained the words, “ please be stopped ”, in so far as
the pipeline work is concerned;
(vii) According   to   the   respondents,   they   issued   a   telegram
dated   02.04.1987   calling   upon   the   appellant   to   start   the   work   of
laying the pipelines;
(viii)  By   a   letter   dated   04.03.1987,   the   plaintiff   was   informed
that the Scheme was undergoing modifications. While the appellant
claimed   that   the   modification   involved   one   head­work   at
Panchanadi   and   another   head­work   at   Karjai,   the   respondents
claimed   in   paragraph   10   of   the   written   statement,   that   the   head­
work   at   Karjai,   was   already   included   in   the   original   tender   itself.
However,   the   respondents   admitted   that   there   was   at   least   one
modification, imposed by their letter dated 04.03.1987;
(ix) The   fact   that   the   appellant   sent   a   representation   dated
04.11.1987 raising 2 issues namely  [1]  the issue of non­payment of

bills due to paucity of funds and  [2]  the issue of delay in sanction of
the   modified   rate   already   proposed   on   20.02.1987   for   the   work   of
laying pipes of different dimension, is admitted by the respondents
in paragraph 11 of the written statement, though they disputed the
correctness   of   the   contents   of   the   said   letter.   Interestingly,   the
averments of the appellant in paragraph 11 of the plaint about the
reply   dated   02.12.1987   in   response   to   the   appellant’s
representation   dated   04.11.1987,   was   not   at   all   dealt   with   by   the
respondents in paragraph 11 of their written statement;
(x) It   was   at   this   juncture,   that   Respondent   No.3   issued   a
letter   dated   22.02.1988,   imposing   a   fine   of   Rs.10/­   per   day   w.e.f.
the   date   of   the   said   letter.   By   this   letter   the   appellant   was   also
called upon to start the work by 01.03.1988;
(xi) Despite   the   appellant’s   objections,   another   letter   dated
22.03.1988 was issued, reiterating the proposal for imposing a fine
and calling upon the appellant to start work;
(xii) In   fact,   in   the   letter   dated   22.03.1988,   the   respondents
admitted for the first time that the subject work was split into two
parts and that the proposed revised rates were as provided therein;
(xiii) Subsequently,   there   were   several   communications   in
April,   June,   July   and   August,   1988   all   of   which   pointed   to   a
disagreement   on   the   revised   rates   on   account   of   the   modifications
and the non­payment of bills;

(xiv) While   according   to   the   appellant   the   execution   of   the
work   under   the   contract   was   to   commence   on   03.07.1986   with   a
liability   to   complete   it   by   03.01.1989,   the   contention   of   the
respondents   was   that   the   execution   of   the   work   was   to   commence
only in December, 1986 and that therefore the liability to complete
the work expired only in June, 1989;
(xv) However,   admittedly,   the   respondents   increased   the   fine
amount   from   Rs.10/­   per   day   to   Rs.25/­   per   day   vide   their   letter
dated   19.04.1989.   By   another   letter   dated   06.10.1989,   the
respondents   informed   the   appellant   that   though   the   time   for
completion   of   the   project   expired   on   17.06.1989   and   though   the
appellant   did   not   ask   for   any   extension,   he   was   being   granted
extension up to 31.12.1989.
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.
17. In   fact,   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.  Section 67 together
with the illustration contained there under reads as follows:­
“67.   Effect   of   neglect   of   promisee   to   afford   promisor
reasonable   facilities   for   performance. —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 as to any non­performance caused thereby."
Illustration
A contracts with B to repair B’s house. 
B   neglects   or   refuses   to   point   out   to   A   the   places   in   which   his
house requires repair. 
A is excused for the non­performance of the contract, if it is caused
by such neglect or refusal.”
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
non­performance of the contract.
19. 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 of 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.   Moreover,   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. In this case, the appellant
refused to perform his obligations under the work­order, 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   non­fulfillment   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   co­exist   with   the
specific   stand   of   the   respondents   that   the   period   of   contract   was
extended up to December, 1989.
22. 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. Paragraph 694 of Volume 9, Fourth Edition
of   Halsbury’s   Laws   of   England ,   may   be   usefully   extracted   to
highlight   the   remedies   available   to   a   party   to   the   contract,   if   the
other party absolutely refuses to perform his part of the contract.

“ 694.     Work   done   under   a   contract   terminated   for   breach.
Where   one   party   has   absolutely   refused   to   perform,   or   has
rendered himself incapable of performing, his part of the contract,
he puts in the power of the other party either to sue for a breach of
it, or to rescind the contract and sue on a quantum meruit for the
work actually done.  Thus, where a publisher engaged an author to
write a work but abandoned the project, the author was entitled to
recover   reasonable   remuneration   without   tendering   the   completed
work;   and     where   a   defendant   wrongfully   revoked   the   plaintiff’s
authority   to   sell   his   land   after   the   latter   had   found   a   purchaser,
the   plaintiff   recovered   reasonable   remuneration   for   his   work   and
labour up to that date.
This type of quantum meruit claim is analogous to claims for
the repayment of money  on total failure of consideration.   In both
cases,   the   contract   must   be   at   an   end   before   the   claim   can   be
brought;   but   once   the   contract   is   at   an   end   there   is   a   logical
difficulty in saying that the claim is contractual.”
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.
23. In the light of the above, we are of the view that the High Court
was clearly  in  error  in  overturning  the  judgment of the Trial Court
with   regard   to   the   aforesaid   3   heads   of   claims,   on   a   wrong
understanding that there was abandonment of contract on the part
of   the   appellant.   Hence   this   appeal   is   allowed.   The   impugned
judgment   and   decree   of   the   High   Court   are   set   aside   and   the
judgment and decree of the Trial Court are restored.  It appears that

during   the   pendency   of   the   first   appeal   before   the   High   Court,   the
respondents   deposited   a   sum   of   Rs.42,98,168/­   towards   the
amount decreed by the Trial Court.   As seen from paragraph 16 of
the impugned judgment of the High Court, the amount deposited by
the   respondents   before   the   High   Court   was   withdrawn   by   the
appellant on 13.01.1999 by furnishing a bank guarantee. Therefore,
while modifying the decree, the High Court directed the appellant to
return   the   balance   amount,   failing   which   the   Trial   Court   was
empowered   to   encash   the   bank   guarantee   for   the   remainder
amount.   In   view   of   this,   while   ordering   the   issue   of   notice   in   the
special leave petition and granting interim stay, this Court directed
the   appellant   to   keep   the   bank   guarantee   alive.   Now   that   we   are
allowing   the   appeal   setting   aside   the   judgment   of   the   High   Court
and  restoring   the  judgment of  the  Trial  Court,  the  bank guarantee
shall stand discharged.
24. The appeal is allowed. There will be no order as to costs.
… ..…………....................J.
      (Hemant Gupta)

.…..………......................J.
(V. Ramasubramanian)
New Delhi
March 30, 2022