STATE OF MAHARASHTRA & ANR. versus DIGAMBAR BALWANT KULKARNI

Citation: [1979] 3 S.C.R. 188 · Decided: 13-02-1979 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
188 
STATE OF MAHARASHTRA & ANR. 
V• 
DIGAMBAR BALWANT KULKARNI 
February 13, 1979 
[P. N. BHAGWATI AND AD. KoSHAL, JJ.J 
Contract-Stipulated titne as essence of contract-Meaning of -Right to 
rescind the contract-When accrues. 
• 
Clause (2) of a works contract entered into by the plaintiff (respond'ent) with 
1 
" 
the defendant (appellant) stipulated that time was of th~ essence of the contract,_ ~ 
that time (of one year) allowed for carrying out the \\'ork shall be strictly ob~ 
c 
served by the contractor, and that the contractor shall pay compensation at a 
i 
D 
certain percentage for every day when the work re1nained unfinished after the 
proper dates. One of the three courses open to the defendant under cl. (3) was 
to rescind the contract in case the contractor rendered himself liable to pay 
con1pensation or O·bandoned the work owing to serious illness or death of the 
contractor or any other cause and in that event security deposit of the contrac-
tor was to stand forfeited. 
It was also provided in that clause that in the event 
of any of the above courses being adopted by the defendant the contractor 
shell have no claim to compensation for any loss sustained by him. 
The work remained unfinished beyond the stipulated time. 
The defendant 
rejected the contractor's request for extension of time and eventually rescinded 
the contract under cl. (3) and forfeited the security deposit. 
E 
In the plaintiff's suit for refund of security deposit and payment of certain 
F 
other sums, the trial court, holding that the forfeiture of security deposit was 
legal, granted a decree for its refund. 
O~ appeal the High Court held that the right to rescind n contract being a 
right to put an end to it, it could not exist after the date for its performance had 
expired and that in this case the right of re_scission having been exercised after 
the expiry of the date of contract, the impugned action of the defendant in res-
cinding the contract ..vtls unjustified. 
Allowing the appeal, 
HELD : I. The rescission of the contract was well-founded and the forfeiturt 
of the security deposit woo justified. [193 F] 
G 
2. Although cl. (2) specifically mentioned that time was of the essence of the 
contract, all that was meant was that in case the work was not completed within 
the originally specified time, the plaintiff would be liable to pay such compensa~ 
tion for delay in execution as was fixed within the limits of that clause. 
This 
is clear not only from clause (2) but also from clause (3). These two clauses 
must be read together. 
So read, the contract was to continue to be in force till 
the completion of the work or its abandonment. Time was of the essence only 
H 
in the sense that if the plaintiff completed it within the originti1 period of one 
year, he would not be liable to pay any con1pensation but in case he overstepped 
that limit he would have to compensate for every day of de-lay and that the right 
·-
• 
• 
• 
• 
' 
. ' 
MAHARASHTRA v. D. B. KULKARNI (Koshal, J.) 
189 
to rescission would accrue only when compensation due exceeded the amount 
of the security d'eposit or the plaintiff aba.ndoned the \1/0rk. Till the time it was 
rescined, the contract was in force. [193 A~C] 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2010 of 1969. 
(From the Judgment and Decree dt. 11-7-68 of the Bombay High 
Court in Appeal No. 534 of 1960) . 
Girish Chandra and M. N. Shroff for the appellant. 
A. G. Ratnaparkhi for the respondent. 
The Judgment of the Court was delivered by 
KosHAL, J. The facts giving rise to this appeal by the two defen-
dants (who are the State of Maharashtra and one of its Executive 
Engineers) on certificate granted by the High Court of Bombay against 
its judgment dated 11th July 1968 may be briefly stated. In the year 
1955, defendant No. 1 decided to construct an aqueduct over Kulthi 
Nala situated in Malegaon Sub-Division of Nasik district. The Execu-
tive Engineer, Nasik Irrigation Division, invited tenders for the work 
which was entrusted to the plaintiff in acceptance of his tender on 
conditions n.duced to writing in the form of exhibit 66. The estimated 
cost of the work was Rs. 1,55,854.00 and it was to be completed within 
12 months from the date of the written order to commence it which 
happened to be the 16th of May 1955. The plaintiff paid a sum of 
Rs. 1558/- as earnest money and another of Rs. 3896/- as security 
deposit to defendant No. 1. Clauses (2) and (3) of the 

Excerpt shown. Read the full judgment & AI analysis in Lexace.