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Shripati Lakhu Mane vs The Member Secretary, Maharashtra Water Supply and Sewerage Board & Ors.

Civil Appeal · 2022 INSC 368Decided 30 Mar 2022
Civil Appeal No. 556 of 2012
Hemant Gupta · V. Ramasubramanian

Background

A registered government contractor was awarded a water supply pipeline project in Maharashtra in 1986, but the work order was repeatedly put on hold, modified, and disrupted by the awarding authority, including a change in pipe specifications, a directive to switch work to a different site, and delayed payment of bills due to fund shortages. When the contractor's work slowed amid these disputes, the authority accused him of "abandoning" the contract and refused to pay several of his claims. The trial court awarded the contractor about Rs. 24.97 lakh with interest, but the Bombay High Court, on appeal by the authority, cut this down to about Rs. 7.19 lakh, chiefly by disallowing claims linked to the alleged "abandonment."

Decision Breakdown

The Supreme Court reviewed the entire correspondence timeline and found that it was the authority, not the contractor, that repeatedly disrupted performance of the contract, including keeping the work order in abeyance, changing specifications without finalizing new rates, and failing to pay bills on time. Citing Section 67 of the Indian Contract Act, the Court held that when a party neglects to give the other side reasonable facilities to perform, the other party is excused from non-performance, and this could not be labelled "abandonment." The Court also noted the authority's own conduct was inconsistent with an abandonment theory, since it later granted the contractor a further extension of time rather than terminating the contract for breach. Finding the High Court had erred in law, the Supreme Court restored the trial court's original, larger award in favour of the contractor.

Lesson Learnt

A contractor cannot be blamed for "abandoning" a contract when it is the other party's own delays, changed specifications, or non-payment that prevented performance, under contract law, a party who is denied reasonable facilities to perform is legally excused for resulting non-performance.

Official source (sci.gov.in)View Judgment (PDF)

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