JUDGMENT
P.S. Narayana, J.
1. In both the above Appeals, the Central Wear-Housing Corporation, a Government of India undertaking, represented by its Regional Manger. Hyderabad, is the appellant A.S. No. 1213/89 is filed as against the Judgement and decree of the learned Subordinate Judge, Rajahmundry made in O.S, No. 154/78, a suit filed by the appellant/ plaintiff for recovery of Rs. 1,58,286-31 towards damages for breach of contract A.S. No. 611/89 is filed by the self-same Corporation, hereinafter referred to in short as “Corporation” for the purpose of convenience, the defendants in O.S, No. 165/78, a suit filed by one Namala Narayan Murthy who died pending litigation and the legal representatives were brought on record, for return of security deposit of Rs. 15,000/- with interest of 12% per annum and also for settlement of accounts, Thus, the legal representatives of the plaintiff Narayana Murthy in O.S. No. 165/78 on the file of Subordinate Judge, Rajahmundry are the defendants in the other suit filed by the Corporation i.e. O.S. No. 154/78 and the learned Subordinate Judge, Rajahmundry by a Common Judgment in both the suits had dismissed the suit filed by the Corporation and decreed the suit filed by the said Narayana Murthy directing refund of deposit amount of Rs. 15,000/- and also Rs. 30,000/- towards outstanding bills with 12% interest and costs and aggrieved by the said judgments and decrees, the Corporation had preferred the above appeals.
2. Inasmuch as common questions of fact and law arise in both these matters, the Trial Court had delivered a common judgment and in view of the same, both these Appeals also are being disposed of by this common judgment.
3. The pleadings of the respective parties in nut-shell may be narrated as follows:
The appellant/plaintiff-Corporation in O.S. No. 154/78 had pleaded that it is a Government of India undertaking and its main purpose is to provide wearhousing facilities and it has got ago-down at the outskirts of Rajahmundry which is within the jurisdiction of the Regional Director at Hyderabad and the goods to be kept in the wearhouse have to be transported from Railway goods shed and further the goods have to be loaded and unloaded at the goods shed and also at the wearhouse. It was also pleaded that such work of transport and handling is being entrusted to Contractors on the basis of tender system. The tender of the Narayana Murthy–defendant in the said suit, was accepted for 2 years upto and inclusive of 9.3.1972 and an agreement was entered into between the parties providing option to the appellant/ plaintiff to extent the contract for one year after the expiry of the period. It was further pleaded that in order to ascertain the market conditions in regard to the transport and handling of goods, the appellant/plaintiff-Corporation had called for fresh tenders for the period commencing from 10.3.1972, but however the said attempt was ultimately given up and before dropping the proposal of accepting the new tenders the authorities of the Corporation at Hyderabad called the tenders to Hyderabad for negotiations and during negotiations it was discovered that one Ranga Rao gave the lowest tender, but he had no previous experience and that he was set-up by the said Narayana Murthy and hence orders were issued extending the contract of Narayana Murthy for one more year from 10.3.1972 and the Corporation tried to serve the order on the said Narayana Murthy–defendant in the said suit, hut he had cleverly avoided to receive it and thereupon an extension order was sent to him by registered post and thus the contract of the said Narayana Murthy was extended by one year from 10.3.1972, but however he had committed default in the working of the contract for the extended period without any just cause or reason. This the Corporation had exercised its option and renewed the contract and communicated the extension order to the said Narayana Murthy and hence he was bound to carry out the work but he failed to do so and on account of me same the Corporation had suffered a loss of Rs. 1.06,125-31. It was also pleaded that since the said Narayana Murthy, hereinafter referred to as “contractor” failed to do the work, the appellant-Corporation invited fresh tenders and the new tenders quoted higher rates and hence the Corporation had to carry out the work with its Departmental staff and the Contractor had failed to make good the loss and on the contrary to Contractor had put forward a claim that security deposit and the bill amount which remained outstanding in his favour by 9.3.1972 should be paid to him by virtue of a clause in the contract and the dispute was referred to art arbitrator and the arbitrator proceeded with the inquiry and ultimately could not pass the award and on the other hand he filed O.P. No. 71/76 under Section 28 of the Arbitration Act to condone the delay in pronouncing the award and the said application was dismissed on 24.8.1978 but however the Court had granted two months’ time to both the parties to file suits based on their respective claims, and hence the suit was filed.
4. The Contractor had filed a written statement pleading that the contract between the parties came to an end by 9.3.1972 and the Corporation had not only called for new tenders but also held negotiations for a contract to be entered into from 10.3.1972 and there were some tenders offering lowest amount but the Corporation for reasons best known to it did not accept them. It was further pleaded that the Contractor and the staff were present till 6 p.m. on 9.3.1972 and the Corporation and the staff had not informed about the extension of the contract and since the contract came to an end by 9.3.1972 the Contractor started dismantling his establishment and winding up his business and settled his accounts with the Subcontractors and this was done to the knowledge of the staff of the Corporation. The allegation that though an attempt was made to serve the extension order on the Contractor, but he had cleverly avoided to receive the same had been specifically denied and it was also stated that the Contractor would have accepted the extension of contract by one more year if the Corporation had just given a communication atleast that the said contract was going to the extended. It was also stated that in the written statement that on 11.3.1972 the Contractor received a letter from the Corporation informing him that the contract was extended by one year and the letter was dated 9.3.1972 and it was posted during the night post office hours and hence there was no communication of extension of the contract within the stipulated time and therefore the Contractor was not obliged to accept the extension of the contract and in such a case the Corporation cannot raise a ground that the Contractor had committed breach of contract and hence he is liable to pay damages. The allegation that the Corporation suffered a loss of Rs. 1,06,631-31 had been specifically denied and it was also stated that the Corporation has no right to forfeit the deposit amount.
5. On the strength of the pleadings of the Corporation-plaintiff and the Contractor-defendant in O.S. No. 154/78 the following issues were settled:
(1) Whether the plaintiff exercised option to renew the contract beyond 9.3.72 in good time and whether the extension made is valid and binding on defendant?
(2) Whether loss, if any, plaintiff suffered on account of defendant not working the contract for one year beyond 9.3.72?
(3) Whether the defendant is liable to pay interest on the loss sustained by plaintiff on account of defendant’s default?
(4) Whether the suit claim is barred by limitation?
(5) To what relief?
During the pendency of the suit, the Contractor died and his legal representatives were brought on record who have adopted the written statement filed by the Contractor.
6. The Contractor as plaintiff had filed a suit for recovery of the security deposit and also for accounting the bills of the work done by him to the Corporation i.e. O.S. No. 165/78 and in the said suit also inasmuch as the original plaintiff died the legal representatives were brought on record. The allegations in the respective pleadings in the said suit O.S. No. 165/78. briefly are as follows:
7. The facts relating to the entering into the contract with the Corporation and the terms and conditions had been narrated in detail. The period of contract was from 10.3.1970 to 9.3,1972, or two years on the same terms and conditions and the Contractor agreed to the terms and executed the contract and commenced the work on 10.3.1970 depositing Rs. 15,000/- with the Corporation as security. Though the Contractor had transacted the contract work to the utmost satisfaction of the officers of the Corporation, the Corporation had not extended the contract period beyond 9.3.1972 and the Contractor also had not expressed any desire to continue the work for further period. In fact in 1972, the Corporation had called for fresh tenders for the work to be done from 10.3.1972 to 9.3.1974 instead of extending the contract in favour of the Contractor and thus an indication was given that the Corporation was not going to extend the contract period in favour of this Contractor and when fresh lenders were called for the Contractor also submitted his tender and thus made it clear that he was not going to do the contract work on the previous terms and conditions in this regard. In the month of February 1972, the Corporation’s Regional Director at Hyderabad called or tenders for the period 1972 to 1974 and had invited persons who had submitted their tenders for negotiations and certain other particulars had been narrated and the Contractor had taken a stand that by all these facts he was made to understand that his contract period would not be extended at all and thus it came to an end by 9.3.1972 and consequently he made arrangements to cancel his sub-contracts from 10.3.1972 and he also informed the Subcontractors that he would settle their accounts and he dismantled his establishment at Rajahmundry. The other allegations relating to the receipt of the letter issued by the Corporation on 11.3.1972 and the posting of the letter during night post office hours also had been pleaded and it was specifically stated that the Corporation having not exercised its option within the stipulated time with a mala fide intention to have wrongful gain had thought of sending this communication only with a view to put the Contractor into loss. In such circumstances, it was stated that the Contractor is entitled to the security deposit with interest thereon and also the outstanding bill amounts due to him. It was also pleaded that inasmuch as the Court had permitted the parties to file suits, the suit is within time.
8. The Corporation had filed a written statement stating that the suit was thought of by the Contractor in view of the fact that the Corporation filed O.S. No. 154/78 for recovery of damages for breach of contract. The deposit of amount Rs. 15,000/- as security by the Contractor with the Corporation was admitted. It was specifically pleaded that the Corpora-lion is entitled to exercise its option to extend the contract period from 10.3.1972 onwards and calling for fresh tenders was only with a view to test the market conditions. It was no doubt admitted that besides this Contractor some others also filed tenders for the period 1.3.1972 to 9.3.1974 and it was also admitted that those persons were called for negotiations which were held at Hyderabad and the quotation given by one such persons by name Ranga Rao also had been admitted. It was also specifically pleaded that even before 9.3.1972 the 1st defendant in the suit i.e., Regional Director had directed the 2nd defendant in the suit Superintendent, Central Wearhousing Corporation, Rajahmundry to notify the Contractor that his contract was being extended for a period of one year and with a view to avoid receipt of written order of extension of his contract, the Contractor had avoided receiving of the extension order and hence the extension order could not be served during the working hours on 9.3.1972 and the staff of the Contractor also deliberately refused to receive the said order when it was sought to be served on them under local Tappal and hence the same was sent by registered post. The mere fact that the Contractor received the intimation on 11.3.1972 has -no legal consequence. Since the same was sent on 9.3.1972 itself it is sufficient in the eye of law. Inasmuch as the Contractor had failed to do the contract work, he is not entitled In the refund of the security deposit and the same is liable to be forfeited for breach of contract. It was also pleaded that the Corporation suffered a loss of Rs. 1,06,125.31 on account of the Contractor’s failure to do the contract work for the extended period and hence in such circumstances the Contractor is not entitled to any of the reliefs prayed for.
9. On the strength of the respective pleadings of the parties, the following issues were
settled:
(1) Whether the forfeiture of the security deposit amount of Rs. 15,000/- by the defendants is valid?
(2) Whether the plaintiff is entitled to ask for an account from defendants in respect of any outstanding bills?
(3) If so, what are the amounts if entitled to recover from the defendants?
(4) To what relief?
Both the suits have been clubbed and the evidence was recorded in O.S. No. 154/78 and on behalf of the Corporation PW-1 to PW-4 were examined and Exs-A1 to A-59 were marked. On behalf of the Contractor, DW-1 to DW-5 were examined and Exs. B-1 to B-3 were marked and apart from it, by the Court Exs. C-l to C-5 also had been marked. On appreciation of the oral and documentary evidence the Trial Court had arrived at a conclusion that the Corporation is not entitled to any relief as prayed for any on the contrary the Contractor is entitled to the reliefs prayed for, which had been already referred to supra.
10. Mr. G. Ramachandra Rao, the learned Counsel representing the Corporation had drawn my attention to Exs. A-26 and A-27 and had pointed out that under the terms and conditions of the agreement no time had been stipulated for intimating about the exercise of option of extension of the contract but however it was contended that the Corporation had exercised its option within the stipulated time diligently even by 9.3.1972. The learned Counsel also would maintain that the Contractor with an ulterior motive had refused to receive the intimation and hence the same was dispatched and the Contractor had received the same on 11.3.1972. In view of the fact that the Contractor had declined to do the work during the extended period, the Corporation had incurred serious loss and this is due to the breach of the terms and conditions of the contract between the Corporation and the Contractor and hence the Corporation is entitled to recover the amount claimant in O.S. No. 154/78 from the Contractor. The learned Counsel also had pointed out that the Trial Court while answering Issue No. 4 in O.S. No. 154/78 had arrived at a conclusion that the suit claim is not barred by time and hence the learned Counsel had submitted that on the question of limitation elaborate arguments need not be advanced. The learned Counsel also had drawn my attention to Clause (9) of Ex. A-27 and had pointed out that there is no stipulation of condition that the exercise of option by the Corporation should be exercised even before the expiry of the stipulated time. But however the learned Counsel would maintain that the Corporation was diligent enough in exercising the said option within time. The learned Counsel also had contended that calling for tenders by the corporation is of no consequence. The learned Counsel also had contended that the principal question that has to be decided is whether in the light of the option exercised in pursuance of the terms and conditions of the contract agreed between the parties, can the Contractor recover the security deposit and also claim the relief of accounting or in such circumstances whether the Corporation is entitled to recover the amount claimed in its suit for breach of the terms and conditions of the contract. The learned Counsel also had commented that when the relief of accounting was prayed for, granting a decree for a specified amount without going into the particulars of the account also is bad in law and this is definitely beyond the scope of the pleadings.
11. On the contrary, Mr. Lakshmana Sharma, the learned Counsel representing the Contractor had made the following submissions. In a suit for accounts the amount will be tentatively estimated and in view of the demand made by PW-1 in stead of driving the parties for working out the other details a decree for Rs. 30,000/- had been granted. The learned Counsel had drawn my attention to the admission made by PW-1 to the effect that he made such a statement before the arbitrator. The learned Counsel also had drawn my attention to Section 145 and also Section 156 of the Indian Evidence Act in this regard. The learned Counsel further submitted that in cases of this nature it is to be seen whether the option was exercised before the expiry of the time and whether it was intimated within time to the Contractor and whether such exercise of option was made bona fide or not. It was further contended that the very fact that fresh tenders had been called for by the Corporation clearly goes to show that the alleged stand of the Corporation that it was inclined to exercise the right of option under the terms and conditions cannot be believed and this exercise was made mala fide only with a view to put the Contractor into trouble. The learned Counsel also had contended that in the light of the clear evidence available it cannot be said that the Corporation had made an attempt to serve the intimation letter even before the stipulated time and the office peon one Ramanjaneyulu through whom it was said that the letter was sought to be served had not been examined for reasons best known to the Corporation and hence an adverse inference has to be drawn in this regard. It was also contended that though the power to exercise the option is unilateral, the exercise of the power should be reasonable and it should be communicated within time though such specific clause had not been incorporated in the terms of the contract. The learned Counsel had further contended that the evidence of DW-1 to DW-5 is clear on this aspect and hence in the light of the findings which had been recorded by the Trial Court both the Appeals are liable to be dismissed.
12. Heard both the Counsels and also perused the material available on record.
13. In the light of respective contentions of the Corporation and the Contractor the following points arise for consideration:
(a) Whether the Corporation had exercised the option to renew the contract beyond 9.3.1972 as per the terms and conditions and whether the extension is valid and binding on the Contractor?
(b) Whether the Corporation had sustained the loss claimed by the Corporation on account of the breach of terms and conditions of the contract by the Contractor?
(c) Whether the Corporation is entitled to forfeit the security deposit amount of Rs. 15,000/- due to the Contractor?
(d) Whether the Contractor is entitled to the relief of rendition of accounts and if so whether the trial Court is justified in granting a specified sum towards the same.
(e) If so, to what relief the parties are entitled to?
Points (a) and (b) : These two points can be discussed together for the purpose of convenience. The fact that the Corporation and the deceased Contractor had entered into contract for a period of 2 years from 10.3.1970 to 9.3.1972 is not in dispute. It is also not in dispute that an option can be exercised by the Corporation relating to the extension of the contract. The original contract between the parties came to an end by 9.3.1972. It is also not in dispute that the Contractor had received the intimation of the extension of the contract period on 11.3.1972 only PW-1, the Regional Manager of the Corporation, had deposed that there was a concluded contract between the parties under Ex. A-26 and it was for a period of 2 years commencing from 10.3.1970 till 9.3.1972 and the Corporation has aright to extend the contract for a period of one year. PW-1 also deposed that the Superintendent of the Corporation sent a letter Ex. A-2 dated 9.3.1972 to the Contractor informing him that the contract period was extended by one year in his favour and the same was received by the Contractor on 11.3.1972 and subsequent thereto the Corporation was informed that the Contractor was not going to accept the offer and the correspondence and the exchange of the letters between the parties had been marked. The stand taken by the Corporation and also the other witnesses on behalf of the Corporation is to the effect that they made an attempt to contact the Contractor personally and communicate the aspect of the extension of period by one year as he was not available they made an attempt to serve the written order of extension on his agents and they refused and a letter was sent by registered post in night post office and the same was received by the Contractor on 11.3.1972.
14. Even according to the evidence of PW-1 to PW-4 the last date of the contract was 9.3.1972. PW-2 had deposed that on 9.3.1972 he had dispatched the letter to the Contractor through the office peon one Ramanjaneyulu for effecting personal service and he made an entry in the peon book to that effect which was marked as Ex. A-4 and Ramanjaneyulu had not served the letter but had returned the cover stating that the defendant and his people had refused to receive the same. But the said Ramanjaneyulu was not examined. When the crucial question is whether the Corporation had made any attempt to intimate about the exercise of option within the stipulated time, the non-examination of the said Ramanjaneyulu is really material and an adverse inference can be drawn for non-examination of such an important witness. Hence in the light of the same it cannot be said that there was any bonafide attempt on the part of the Corporation to serve the said intimation before the stipulated time.
15. PW-3R. Venkateswarlu also had deposed to the same effect and he had deposed that when the intimation on the fateful day referred to supra had not been served he had asked the peon again to try but he try but he returned by 7 p.m. with the same story that the Contractor was not available and his representatives refused to receive the letter. Exs. A-1 and A-2 are the copies of the letters sent to the Contractor on 9.3.1972 and his initials and stamp contained in the dispatch register are marked as Ex. A-35. It is relevant to note that in the pleading it was stated that when an attempt was made to serve the extension order on the Contractor, the Contractor managed and avoided to receive the same. But it was not specifically pleaded that the Contractor was available and yet he refused to receive the letter and had managed to avoid to receive the same. The evidence of PW-4 also is to the same effect and in view of the stand taken by PW-1 to PW-4 and also the correspondence and the several letters which had been marked as Exhibit A-series, there is no clear evidence placed before the Court to the effect [hat within the stipulated time there was really any bonafide attempt on the part of the Corporation 10 communicate the said order or exercising the option of extension of the contract. As against this evidence, there is the evidence of DW-1 to DW-5. DW-1, one Rajeswar Rao is the authorised representative of the Contractor, had deposed that it was his duty attend o the transport work both at the Wearhousing Corporation and also at the Railway Station and he used to attend to the work on behalf of the Contractor from 9 a.m. to 5.30 p.m. and on 9.3.1972 he was at the warehouse upto 6 p.m. and the Corporation staff never informed him about the extension of the contract period. Likewise, DW-2 another agent also had
deposed the same. DW-3, N. Ranga Rao, deposed that when the Corporation invited fresh tenders to undertake the contract work for a period of 2 years after the expiry of the contract of the Contractor he had also put up his tender and because his quotation was the lowest he was informed by the Corporation that his tender was likely to be accepted and in no case the contract of the then Contractor would be extended. DW-4 is the elder brother of the Contractor and also the power of attorney of the said Contractor and he had deposed that when fresh lenders were called for by the Corporation for the period of 2 years from 1972 to 1974, himself, his brother and also DW-3 and many others had submitted their tenders and he used to look after the work of his brother and on 9.3.1972 himself, his brother, DW-1 and DW-2 also remained in the office of their Brother till 9 p.m. and his brother in fact paid wages to his workers and told them that the contract period was over and his work was closed and though they remained upto 9 or 9.30 p.m. they were not informed either orally or in writing relating to the extension of the contract by the Corporation. The evidence of this witnesses is clear and consistent. Apart from the evidence of PW-1 to PW-4 and DW-1 to DW-5, Ex. A-8 also belies the stand taken by the Corporation relating to exercise of option.
16. As can be seen from the material available on record, the Corporation is taking two inconsistent stands to the effect that it had called for the tenders and also it had exercised its option relating to extension of the contract period and no doubt the Counsel for the Corporation had made a serious attempt to convince the Court that the mere fact that the tenders had been called for is of no consequence since the right had been exercised by the Corporation in accordance with the terms and conditions of the contract agreed between the parties. When the option was not exercised within the stipulated time, whether the Corporation is justified in taking such a stand on the ground that in fact it was communicated on a subsequent date? The answer to this question, as can be seen from the material available on record, should be in negative. The evidence of PW-1 to PW-4, DW-1 and DW-2 and DW-4 also is clear on this aspect and hence the Corporation not having exercised its option within the stipulated time and having called for the fresh tenders, cannot now take a stand that by virtue of the breach of the conditions of the contract by the Contractor the Corporation had sustained loss and hence the Corporation is entitled to recover the amount. Hence I am of the considered opinion that the Trial Court on appreciation of both oral and documentary evidence had arrived at the correct conclusion and had negatived the relief prayed for by the Corporation in this regard.
17. The next aspect that has to be considered falls under Points (c) and (d) which may be dealt with together. As already referred to supra, the question of limitation need not be answered in detail since it was held even by the Trial Court that the Suits are within limitation. It is not in dispute that the Contractor had deposited Rs. 15,000/- and he had entered into a contract with the Contractor under Ex. A-26 under the terms and conditions Ex. A-27 and it is also not in dispute that his deposit amount was not returned and he is entitled for recovery of the said amount. Further, a contention was advanced that on the return of the security deposit no interest is payable under the terms of the contract and hence the Contractor is not entitled to interest.
18. Here is a case where the Corporation had retained the amount on the ground that it had sustained loss and is entitled to recover some amount from the Contractor and in such a case when the amount had been retained in such an unjust fashion by the Corporation. I am of the considered opinion that the Contractor is entitled to claim interest also on the said amount. In the light of the clear findings recorded by me above that inasmuch as option was
not exercised in accordance with law by the Corporation, it cannot be said that there is any breach of the terms and conditions of the contract on the part of the Contractor and hence the Corporation is not entitled to forfeit the amount and in the light of the same the Trial Court was well justified in granting a decree for refund of Rs. 15,000/- with interest at 12% per annum.
19. Point (e) : Now coming to the relief of accounting it is no doubt true that in a suit for rendition of accounts, an amount will be tentatively valued. But, however, there is an admission on the part of PW-1 that even before the arbitrator it was admitted that the outstanding bills due to the Contractor will amount to Rs. 30,000/- and in the light of the said admission made by PW-1 the Trial Court had arrived at the conclusion that the parties need not be driven to the Court again for the purpose of working out the accounts when a specified amount is forthcoming even from the corporation side and in view of the same after recording the findings in detail the Trial Court had also granted the relief for Rs. 30,000/- towards outstanding bills with interest at 12% per annum and also directed the Contractor to pay the additional Court fee on the extra amount of Rs. 10,000/- granted to him in this regard. In the light of the same and especially in the light of the admission made by PW-1 in this regard, I do not see any illegality or legal infirmity in the said findings recorded or the relief granted by the Trial Court in this regard. The Corporation had not taken a bona fide stand and had made an attempt to retain the amounts lawfully due to the Contractor on totally unjustifiable grounds and in any view of the matter, absolutely there are no grounds to interfere with the well considered findings recorded in the common judgment made by the Trial Court in both the Suits.
20. In view of the findings recorded in detail supra, both the Appeals are devoid of merits and accordingly both the Appeals are dismissed, with costs.