STATE OF GUJARAT versus DAHYABHAI ZAVERBHAI

Citation: [1997] 2 S.C.R. 469 · Decided: 24-02-1997 · Supreme Court of India · Bench: K. RAMASWAMY, G.T. NANAVATI · Disposal: Appeal(s) allowed

Judgment (excerpt)

STATE OF GUJARAT 
A 
v. 
DAHYABHAIZAVERBHAI 
FEBRUARY 24, 1997 
[K. RAMASWAMY AND G.T. NANAVATI, J.1.J 
B 
Contract : 
Rescission of Contract-Forfeiture of secwity deposit-Held, was per-
! ectly valid as the Contractor had abandoned execution of contract work in C 
spite of opportunity having been given to him to complete the work. 
Mis. Hind Construction Contractors v. State of Maharashtra, A.l.R. 
(1979) SC 720, held inapplicable. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1821 of D 
1997. 
From the Judgment and Order dated 21.8.95 of the Gujarat High 
Court in F.A. No. 3875 of 1995. 
Adhyaru Yashank Pravin, H. Wahi and N. Mukherjee for the Appel- E 
I ant 
KL. Janjani for the Respondent. 
The following Order of the Court was delivered : 
Delay condoned. 
F 
Leave granted. We have heard learned counsel on both sides. 
This appeal by special leave arises from the judgment of the Gujarat 
High Court, dated August 21, 1995 passed in First Appeal No. 3875/95. 
G 
Admittedly, the respondent-contractor had entered into an agree-
ment No. B-1/17 of 1981-82 to complete the work of protective measures 
for the road bridge across river Ambica. The appellant had issued the work 
order on June 3, 1981. It is true that there was a delay in handing over the 
work sheet and the specifications. But the trial Court after considering the H 
469 
470 
SUPREME COURT REPORTS 
[1997] 2 S.C.R. 
A entire evidence had noted its finding thus : 
B 
c 
"In the present ease the land on which the construction work was 
required to be made was a land of the Government and not of 
private party or private owner, so there was no hurdle in the 
construction work of the plaintiff but the plaintiff himself has left 
the construction and hence, in the present case, only the plaintiff 
can be held a person who has· revoked the contract. Before revok-
ing the contract, the plaintiff was given sufficient time and 
reasonable opportunity to complete the work but the plaintiff has 
not done anything to complete the work and left the work and the 
site so we have no option, the deft/Department to take the decision 
for revocation of the contract." 
In view of the above finding, the inevitable conclusion is that the 
respondent had abandoned the execution of the work in spi'4i of the 
opportunity having been given to him to complete the work. ci~use 3 of 
D the Contract reads as under : 
E 
F 
G 
"Clause-3 : In any case, in which under any clause or clauses of 
this contract, the contractor shall have rendered himself liable to 
pay compensation amounting to the whole of his security deposit 
(whether paid in the sum or deducted by instalments) or in the 
case of abandonment of the work owing to serious illness or death 
of the contractor or any othe·r cause, the Executive Engineer, on 
behalf of the Government of Gujarat shall have power :-
(a) to rescind the contract (of which recession notice in writing to 
the Contractor under the hand of the Executive Engineer shall be 
conclusive evidence) and in that case the security deposit of the 
Contractor shall stand forfeited and be absolutely at the disposal 
of Government. 
That in view of this express provision the Hon'ble High Court 
erred in holding that the petitioner/State is not entitled to forfei-
ture the deposit." 
A reading thereof would clearly indicate that in any case, under any 
clause or clauses of the contract, the contractor would. have rendered 
H himself liable to pay compensation amounting to the whole of his security 
STATE v. DAHYABHAI 
471 
whether paid in the sum or deducted by instalments; in the case of A 
abandonment of the work owning to serious illness or death of the contrac-
tor or a11y other cause, the Executive Engineer is empowered to have the 
contract rescinded; in that case the security deposit of the contractor shall 
stand forfeited and be absolutely at the disposal of the Government.· In 
consequence, forfeiture of the security deposit, on account of abandonment B 
of the work by the appellant, was perfectly valid. The High Court, there-
fore, was not right in directing the appellant to refund the security deposit. 
Learned counsel for the respondents contends that time was not the 
essence of the contract, and therefore, the recession of the contract was 
not for valid reason. We are, however, not on the validity of the recession 
of the contract on the ground of time being the essence of contract but on C · 
the question whether the respondent had abandoned the c

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