United Commercial Bank v. Jawaharlal Mill — 1989 DIGILAW 231 (CAL)

JUDGMENT Banerjee, J. This is defendant's appeal and the same arising out of Title Suit No. 34 of 1985 of the 2nd Court of Assistant District Judge, Howrah is directed against the judgment and decrees dated 30.3.85. The facts of the case lie in a short compass. 2. The plaintiff Jawaharlal Mill brought a suit for specific performance of contract, permanent injunction and damages against the defendant United Commercial Bank (hereinafter referred to as the Bank) on the allegations inter alia, that by an agreement dated 18.8.81 entered into by and between the parties to the suit the plaintiff made substantial constructions over his land and that although the plaintiff was all along willing to perform his part of the contract in terms of the aforesaid agreement, the defendant illegally and without sufficient cause cancelled the agreement on 13.4.82. The defendant-Bank contested the suit by filling a written statement in which it was alleged that time was of the essence of the contract and as the construction could not be completed within a period of six months from the date of the agreement the Bank in its discretion cancelled the said agreement. The learned Assistant District Judge framed issues, recorded evidence, and upon consideration of the materials on record came to a finding that in the instant case time for performance was not of the essence of the contract and that the defendant did not suffer any loss for non-completion of the construction within the stipulated period of six months. The suit was accordingly decreed. Being aggrieved by and dissatisfied with the aforesaid judgment and decree the Bank has preferred the appeal. 3. Mr. Tarun Kumar Chatterjee, the learned advocate for the appellant took us through the agreement dated 18.8.81 Exb. T-4 and with particular reference to clause-6 of the said agreement argued before us that in the instant case time for completion of the construction work was of the essence of the contract and as the said construction could not be completed within the period of six months in terms of the agreement, the Bank was well within its power to cancel the contract Mr. Shyama Prasanya Roy Chowdhury, the learned Counsel for the plaintiff-respondent, on the other hand contended that although the specified time was fixed for the completion of the work the Bank forfeited the right to cancel the contract due to its failure to comply with certain other considerations which had prompted the plaintiff to enter into the agreement and to proceed with the construction work. It was next contended that the intention of the parties is to be gathered from the attending facts and circumstances and in this case it is not the form but the substance of the agreement as a whole which should be taken note of. In order to show that the plaintiff was not guilty of breach of contract, reference was made to section 55 of the Indian Contract Act and it was urged that under the aforesaid section of the Contract Act a contract becomes voidable at the option of the promisee and not void ab initio. Reliance was placed upon three rulings reported in (1) 43 Indian Appeals, page 26, (2) AIR 1977 SC page 1005 and (3) AIR 1977 SC page 720 respectively. In order to appreciate the respective contentions put forth by the learned Advocates of either side, let us examine the impugned agreement Exb, T-4 first. 4. The second party Bank was desirous of having a suitable and better accommodation and the first party plaintiff was agreeable to construct a building on his own land. Accordingly, the first party plaintiff agreed to construct a building providing a carpet area of 1900 sq.ft. in the ground floor as per plan, specification, design and the requirements of the Bank with other facilities of water supply, electrification, sanitary fittings etc. Clause-4 recites that the first party was in need of and required a sum of Rs. 60,000/- for the construction of the said building and the Bank had at the request of the first Party agreed to advance to the first party the said sum of Rs. 60.000/- for the aforesaid purpose subject to terms, conditions and covenants mentioned in the later part of the agreement. One such condition as incorporated in clause-6 was that the construction of the said premises shall be completed and possession will be delivered to the Bank within a period of six months from the date of agreement. 60.000/- for the aforesaid purpose subject to terms, conditions and covenants mentioned in the later part of the agreement. One such condition as incorporated in clause-6 was that the construction of the said premises shall be completed and possession will be delivered to the Bank within a period of six months from the date of agreement. With regard to the advance payment by the Bank to the plaintiff the covenant was like this...... "the Bank shall from time to time in its discretion, necessary progress being made in the said work and that the amount already advanced by the Bank to the first party has been fully utilized for the aforesaid purpose". Mr. Roy Chowdhury contended that as the Bank did not make any advance and as the full quota of cement was not allotted to the plaintiff within the stipulated period, the plaintiff could not complete the construction work and as the Bank did not insist on maintaining the time schedule strictly according to the terms of the agreement, the plaintiff was ruled into a sense of security and was under reasonable and honest impression that the Bank would permit the plaintiff to complete the construction work beyond the stipulated period of six months. It was next argued that as the Bank did not cancel the agreement till 13.4.82, the plaintiff did not take the time schedule seriously and the sudden rescission of the contract without notice took him by surprise. After giving anxious consideration to the arguments put forth by Mr. Roy Chowdhury we are of opinion that there is little substance in it. The plaintiff Jawaharlal Mill addressed a letter to’ the Manager, United Commercial Bank on 2nd July, 1981 Exb. T. 1(e) wherein he requested the Bank to arrange for the cement from the Government quota so that he "could complete the construction of the Bank building within the specified time of six months". There is no evidence as to whether the Bank gave any assurance to the plaintiff for procuring cement through Government quota and in the agreement Exb. T-4 no such condition was incorporated. It appears that inspite of the difficulties in procuring cement from open market which the plaintiff could visualise before hand he entered into the agreement within a short period and in the said agreement he agreed to complete the construction of the building within a period of six months. T-4 no such condition was incorporated. It appears that inspite of the difficulties in procuring cement from open market which the plaintiff could visualise before hand he entered into the agreement within a short period and in the said agreement he agreed to complete the construction of the building within a period of six months. The said period of six months was to expire on 17th February, 1982. Between 18.8.81 and 17.2.82 the plaintiff had only one correspondence with the Bank, that also on 15th February, 1982, when for the first time he prayed for a loan of Rs. 25000/- so that he could continue with the construction work. In that letter exbt-1 the plaintiff admitted that the progress of the construction work had been hampered due to non-availability of cement in the market. This letter was not replied to. After the expiry of the six months period the plaintiff wrote four letters in the month of March, 1982 addressed to the Divisional Manager and the Chairman and Managing Director of the Bank but in none of these letters be prayed for extension of the period beyond six months for the completion of the works (vide Exb. T-1 series). It may be noted that in terms of the clause-7 of the agreement the Bank was to advance the loan from time to time subject to the progress made in the work of construction. The plaintiff who has deposed as P.W.2 has not stated that at any point of time he invited the Bank Official to inspect the progress of the work within the period of six months. According to the plaintiff's own admission in paragraph 4 of the plaint, since the execution of the agreement, he made construction pending over Rs. 6,000/- only. The plaintiff's own witness P.W.1 S.N. De who was posted as the Branch Manager of the defendant Bank at the material time has categorically stated that the Bank did no accommodate any advance to the plaintiff because no progress in the construction work was reported or registered. That the plaintiff was well aware that time was of the essence of the contract would be evident from his own evidence. In his cross-examination P.W.2 (plaintiff) admitted "It was agreed that the construction was to be completed within six months. I could not complete the construction, within the prescribed period of six months. That the plaintiff was well aware that time was of the essence of the contract would be evident from his own evidence. In his cross-examination P.W.2 (plaintiff) admitted "It was agreed that the construction was to be completed within six months. I could not complete the construction, within the prescribed period of six months. The defendant Bank was compelled to cancel the agreement because of non-completion of the proposed building within the period of six months". After the above admission of the plaintiff himself, it does not lie in his wouth to agitate that time was not of the essence of the contract and that the cancellation of the agreement at the instance of the Bank was improper and illegal. 5. In the case reported in AIR 1977 SC page 1005 (Gobind Prosad Chaturbedi v. Hari Shastry and Another), the contract related to sale of immovable property and on the date of agreement Rs. 4,000/- were paid as earnest money and it was stipulated that the appellant should get the sale deed executed within two months from the date of agreement. It was held by the High Court that time was to be treated as essence of the contract and the appellant's suit for specific performance must fail. On facts and circumstances of the case it was held by the Supreme Court that the plaintiff (appellant) was always ready and willing to perform his part of the contract and that the defendants (vendors) were evading their responsibility. In the reported decision there was sufficient evidence on record on show that the parties did not intend to treat time as the essence of the contract. In the case of (4) Ram Kalpa Kundu v. Kashinath Dutta and Others reported in 54 CWN page 690 it was held that the intention of the parties which alone mattered to make time of the essence of the contract was apparent from the surrounding circumstances as also from the terms of the contract and accordingly the default entitled the judgment-debtor to no relief. In another case reported in 43 Indian Appeals page 26 (Jamshed Khodaram Irani v. Burlorji Dhunjibhai) there was an agreement for sale of land between the parties and the balance consideration money was to be paid within two months. In another case reported in 43 Indian Appeals page 26 (Jamshed Khodaram Irani v. Burlorji Dhunjibhai) there was an agreement for sale of land between the parties and the balance consideration money was to be paid within two months. From the correspondence that passed between the parties and from the attending facts and circumstances, their lordships concluded that the respondent was at fault and that time was not of the essence of the contract. In the event of the failure to put the dates assigned to it, relief could be granted if there was nothing in the express stipulations of parties treating time as of the essence of contract. It has been further held in that reported decision that the intention of the parties can be inferred from what passed between the parties before, and not after, the contract is made. The facts of the cases relied on by Mr. Roy Chowdhury are distinguishable from those in the instant case in that while in those reported decisions the attending facts and circumstances were strong enough to displace stipulation as to time within which the stipulation contained in the contract was to be carried out, in the instant case the conduct of the defendant Bank was not in any way indicative or suggestive of not treating time as of the essence of the contract. In terms of section 20 Specific Relief Act, 1963 the Court has discretion to grant the relief if the plaintiff has done substantial acts and if he has suffered losses. In this suit there is no convincing on dependable evidence to prove to what extent the plaintiff had completed the construction work and what was his actual losses. 6. It is true that although the defendant Bank could cancel the contract immediately with the expiry of the six months period, they did it on 13.4.82, that is one month twenty-six days after. But that itself would not entitle an extension of the period in favour of the plaintiff if there is no supportive evidence to that effect. In this, connection reliance may be placed upon a Division Bench judgment in the case of (5) The Papers Sales Limited v. Chokani Brothers reported in AIR 1946, Bombay p. 429. But that itself would not entitle an extension of the period in favour of the plaintiff if there is no supportive evidence to that effect. In this, connection reliance may be placed upon a Division Bench judgment in the case of (5) The Papers Sales Limited v. Chokani Brothers reported in AIR 1946, Bombay p. 429. In that case their Lordships held that mere for bearance from suing of giving a formal notice of recission does not amount to an extension of time for the performance of a contract within the meaning of sec. 63 of the Indian Contract Act so as to alter the relevant date on which the damages are to be assessed. It was further held that under section 55 the right of the promise to avoid the contract after breach is not circumscribed by any chronological limitation. In the case at hand, as already pointed out, from before the agreement the plaintiff was aware of the stipulation that time was of the essence of the contract and consequently failure on the part of the Bank to give any notice about the recission of the contract did not prejudice his cause, nor was, the plaintiff taken by surprise by any such decision. The learned Assistant District Judge failed to take note of all these facts and circumstances and the non-appreciation or mis-appreciation of the evidence led to an erroneous finding. The impugned judgment and decree cannot, therefore be sustained. The result is that the appeal succeeds. The appeal is allowed on contest with costs. The judgment and decree appealed against is set aside. The suit is dismissed on contest with costs. Ahmed, J. : I agree.