STATE OF GUJARATversusM/S KOTHARI AND ASSOCIATES

                    [2015) 10 S.C.R. 133


                    STATE OF GUJARAT                              A
                              v.
             M/S KOTHARI AND ASSOCIATES
               (Civil Appeal No. 1770 of 2005)
                                                                  B
                    OCTOBER 16, 2015
    [VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.)
      Limitation Act, 1963 - Art. 55 - Work contracts -
Successive breaches - Extension· of contract - Claim for          C
damages- Delay by appellant-State in handing over the site
to respondent resulting in non-completion of work within the
stipulated period by respondent - Extension of period from
time to time, though compensation sought by respondent
denied by the appellant - Final Bill signed under protest by      o
respondent- Issuance of notice u/s. 80 CPC by respondent
to appellant claiming damages-After period of three years,
respondent filing of suit for damages for additional costs -
Grant of compensation with 12% interest from the date of
statutory notice by trial court- In appeal, High Court granted    E
interest for an extended period and held that since there were
successive breaches by appellant, and the date of the last
breach was relevant, the suit was within limitation- On appeal,
held: The suit claims are damages incurred due to the
extension of the contract period and the resultant damages        F
are incurred by respondent, thus, suit would fall under Article
55 and not Article 113, which is a residuary provision - There
were successive or multiple breaches, rather than continuous
breach - Each breach was distinct and complete in itself and
gave rise to a separate cause of action for which respondent      G
could have rescinded the contract- Suit was required to be
filed within three years of the happening of each breach -
Period of limitation did not commence at the termination of
the contract period or the date of final payment - Suit was       H
                             133
134       SUPREME COURT REPORTS               [2015] 10 S.C.R.


A  filed after the limitation period of three years for even the
   final breach - Respondent made claim for compensation
   on every occasion - Appellant granted the extensions but
   rejected the claims, thus, the cause of action for making the
   claim for damages undoubtedly arose on each of those
B occasions - Fresh contract would be deemed to have been
   entered into between the parties on the grant of each of the
   extensions - Respondent should have initiated legal action
   on each of these occasions - Having not done so, it
   abandoned the claim - The suit is for damages for additional
C costs incurred, not on account of a debt or of interest on
   legacy, and thus s. 19 would not per se extend the period of
   limitation - There could be no extension uls. 18 on account
   of the acknowledgement in writing as each claim was
   specifically refuted by the Appellant- Notice perforce should
0
   have been issued before the suit became time barred, and
   only if so done would the period have been extended for a
   further two months under s. 80 CPC - Thus, respondent failed
   to file the suit for damages within the period prescribedand
E· the suit is dismissed.
         Union of India vs. British India Corporation Ltd
         (2003) 9 SCC 505; Lachhmi Sewak Sahu vs. Ram
         Rup Sahu AIR 1944 Privy Council 24; Gannon
         Dunkerley and Co. Ltd. vs. Union of India (1969)
F        3 SCC 607:1970 (3) SCR 47; Rohtas Industries
         Ltd vs. Maharaja of Kasimbazar China Clay Mines
         ILR (1951) 1 Cal 420; Union oflndia vs. Raman
         Iron Foundry 1974 (2) SCC 231:1974 (3) SCR
         556; J.C. Budharaja vs Chairman, Orissa Mining
G        Corporation Ltd. andAnr(2008) 2 SCC 444: 2008
         (1) SCR 821; Mis Disha Constructions vs. State
         of Goa (2012) 1sec690: 2011 (13) SCR 496-
         referred to.
H        Jones v. Thompson [1858) 27 L.J.Q.B. 234 -
         referred to.
        STATE OF GUJARAT v. M/S KOTHARI AND                         135
                    ASSOCIATES

                     Case Law Reference                             A

c2003) 9 sec 505                     referred to.      Para 6
AIR 1944 Privy Council 24            referred to.      Para 6
1970 (3) SCR 47                      referred to.      Para 8
                                                                    B
ILR (1951) 1 Cal 420                 referred to.      Para 9
1974 (3) SCR 556                     referred to.      Para 12
. 2008 (1) SCR 821                   referred to .     Para 12
2011 (13) SCR 496                    referred to.      Para 13      c
     CIVIL APPELLATE JURISDICTION : Civil Appeal No.
1770 of 2005

     Fram the Judgment and Order dated 30. 07 .2003 of the
                                                            0
High Court of Gujarat atAhmedabad in First Appeal No. 34 of
1992.

      Pritesh Kapur, Kabir Hathi, Jesal Wahi, Hemantika Wahi
for the Appellant.                                 ·
                                                                    E
     Meenakshi Arora, Shirish D. Patel, Bina Gupta, Ranjit
B. Raut for the Respondent.

     The Judgment of the Court was delivered by
                                                                    F
      VIKRAMAJIT SEN, J. 1. This Appeal lays siege to the
decision of the Division Bench of the High Court of Gujarat at
Ahmedabad which dismissed the appeal of the Appellant
before us while allowing the cross-objection filed by the Plaintiff/
Respondent by holding.it to be entitled to claim interest for an G
extended period. For the reasons which will follow, we have
set aside these concurrent findings against the Appellant State,
principally on the ground that the claim of the Respondent stood
barred by the principles of prescription as conta.ined in the
Limitation Act, 1963.                                                H
136        · SUPREME COURT REPORTS                  [2015) 10 S.C.R.


A            2. The Appellant State invited tenders for providing lining
      to the main canal line. The Respondent, a registered
      partnership, submitted a tender that was accepted by the
      Appellant State. Thereafter a regular agreement was entered
      into according to which the Respondent would have from 15t11
B     November to 141h June as its working period. Under the Work-
      Order dated 24.9.1976, the Respondent was required to
      complete the work within 18 months, i.e. on or before
      23.3.1978. The case of the Respondent, which we have no
      cause to disbelieve, is that there were repeated and
C     consecutive delays in handing over the site due to which the
      Respondent could not complete the work within the stipulated
      time. The first season was to extend from 15.11.1976 to
      14. 7 .1977, but the canal was only made available on 15.1.1977
      and even then the cement was not issued to the Respondent
0
      by the Appellant State till 31.1.1977. The second season was
      to extend from 15.11.1977 to 23.3.1978, but the canal was
      handed over on 15.3.1978. At the Respondent's request, the
      contract period was extended to 14.6.1978, buttheAppellant
E     State specifically stated that no compensation would be
      payable for the extension. Pursuant to a written request by the
      Respondent, a third season from 15.11.1978to14.6.1979was
      granted, but yet again the site was handed over as late as on
      15.3.1979. The Respondent sought further time to complete
F     the project, and was consequently granted a fourth season
      which was to extend from 15.11.1979 to 29.6.1980. The site
      was once again made available with delay only on 15.3.1980.
      The work was finally completed on 20.6.1980. It is noteworthy
      that in each request for an extension, the Respondent sought
G     compensation for monetary loss due to the extended time limit,
      but while allowing each extension the Appellant State denied
      the claim for compensation each time. The Respondent's case
      was that as per the contract period, 342 days should have
      been made available to it to conduct the stipulated work, but
H     as a result of the delay in handing over the site and the
        STATE OF GUJARAT v. M/SKOTHARIAND                           137
          ASSOCIATES [VIKRAMAJIT SEN, J.]

materials, the Respondent had to seek extensions, and A
nevertheless managed to complete the project in 288 working
days, thus indicating that there was no laxity on its part. The
Respondent signed the Final Bill under protest on 1.1.1982;
and the Security Deposit was refunded on 27 .1.1982.
Thereupon, the Respondent addressed a statutory notice B
under Section 80 of the C.P.C. dated 7.8.1983 to the Appellant
State, claiming damages as a result of the additional costs
incurred due to the abovementioned delays. The Respondent
eventually filed a suit on 25.1.1985 seeking damages under
thirteen different heads, including price escalation in labour C
due to the prolongation of the work, price escalation in fuel
lubricants etc., overstay of capital and machinery, and
overheads such as staff, kitchen, office etc.

      3. The Trial Court found that the delay was caused by the     D
Appellant State; that work was completed by the Respondent
well within the number of days contractually allocated to
complete it. Noting that under Section 73 of the Indian Contract
Act compensation is payable for any loss or damage for breach
of a contract, the Trial Court granted compensation under           E
twelve of the thirteen heads of claims itemised by the
Respondent. In terms of its Judgment dated 4.5.1991 the Trial
Court observed that the factual matrix pertaining to these
amounts claimed have remained uncontroverted, and                   F
accordingly decreed the suit. The Respondent was granted
~s.13,61,571/-with interest at 12 percent per annum with effect
from 7.8.1983 viz. the date of the statutory notice. Th~Appellant
State appealed against the decree and the Respondent filed
a counter-claim seeking interest from the date of written           G
demand of the suit claim instead of from the date of statutory
notice. The High Court, vide its judgment dated 30. 7.2003,
dismjssed the appeal filed by the Appellant State and allowed
the Respondent's cross objection, granting interest thereon
from 5.3.1982.                                                      H
138         SUPREME COURT REPORTS                    [2015] 10 S.C.R.


A           4. The Appellant State has contended thatthe High Court
      ignored its myriad objections/submissions in connection with
      the various different heads; that the bills paid from time to time
      by the Respondent including the Final Bill were accepted
      without any remonstration or reservation being raised, thereby
B     inexorably leading to the conclusion that the suit was clearly
      an afterthought; and that the suit was barred by limitation as
      the claims were raised after a lapse of more than three years
      from the arising of the causes of action. It is only the last
      contention to which we shall advert our attention.
c
            5. It would be pertinent to note that the issue of limitation
      was not pleaded as a ground before the Trial Court or the High
      Court. It was pressed for the first time in the course of oral
      arguments before the High Court. Nonetheless, it has been
D     discussed in the impugned Order. The High <;;ourt; noting the
      contention raised by the Respondent that the point of limitation
      was a mixed question of fact and law and could therefore not
      be adjudicated at this point, held that even if it could be
      adjudicated, the suit would not be barred by principles of
E     prescription as it was based on a series of successive
      breaches committed by the Appellant State, and in such
      circumstances the date of the last breach was relevant. The
      High Court was of the opinion that limitation ·need not
 F    mandatorily be computed on the basis of each cause of action.
      It held the date of return of the Security Deposit as the last
      date of payment for the work done, and concluded that the suit
      had been filed within three ye.ars from this date. The suit was
      therefore found to be within the prescribed period of limitation.
G
             6. Se;::tion 3 of the Limitation Act explicitly states that
      "every suit instituted, appeal preferred, and application made
      after the prescribed period shall be dismissed, altho~gh
      limitation has not been set up as a defence." It is thus incumbent
H     upon the Court to satisfy itself that the suit is not barred by
      limitation, regardless of whether such a plea has been raised
         STATE OF GUJARAT v. M/S KOTHARI AND                                      139
           ASSOCIATES [VIKRAMAJIT SEN, J.]

by the parties. In Union of India vs. British India Corporation A
Ltd (2003) 9 sec 505, it. has been opined that "the question
of limitation is a mandate to the forum and, irrespective of the
fact whether it was raised or not, the forum must consider and
apply it, if there is no dispute on facts." It is thus irrelevant that
the Appellant State had not raised the issue of limitation before B
the Trial Court. A duty was cast on the Court to consider this
aspect of law, even on its own initiative, and since it failed to
do so, the Appellant State was competent to raise this legal
question in appeal or indeed even in any successive appeal.
Close to a century ago, in Lachhmi Sewak Sahu vs. Ram Rup C
Sahu AIR 1944 Privy Council 24, it has been held that the point
of limitation is available to be urged even in the Court of last
resort. Furthermore, we are not confronted with a situation
where the plea of limitation is a mixed question of fact and
                                                                       0
law, or where additiona! evidence needs to be adduced. The
submissions of Learned Counsel for the Respondent to the
effect that the Appellant is foreclosed and precluded from urging
the plea of the bar of limitation are meretricious and are
rejected. We shall now proceed to consider whether the suit E
was in fact barred by limitation.

      7. The period of limitation would be computed under
either Article 55 or Article 113, both of which are laid out below
of the facility of reference:
                                                                                  F
  Descrip:ion cl Slit         Perialof   lirreframvich !Jlfiod
                                 Unitation   rnairstorun
  M55. For <XI I p:il isaliai fa lhrEeyeas   Wien the a:rtroct is l:xd<en rr i
  the l::ree::h of ar/ cmlra'.i,             (v\lle'e th:re are sux:essi\e •
  exµess or irrjlia:l, rd herein             treoches) Wa1 tre l:xea:h in :
  spe:::ia 1y pu.iida:l fa.                  resµn of vJlidl tre suit is          G
 .                                           irstitLta:l cm.us or (W'ere the 1

                                             trecrll is cx:rtinuing) W1en it •
                                             ceases.                         I'
  M. 113. AA/ sit fa vJlidl no lhrEeyeas     Wien the right to~ ro:rues.     '
                                                                             '
                                                                             '
  peiod cl lirritaion is pu.iidad                                            '

  elsevh::re in tlis &tedlle                                                 I
                                                                                  H
140        SUPREME COURT REPORTS                    [2015] 10 S.C.R.


A        8. It would be pertinent, at this point, to recall the decision
  of this Court in Gannon Dunkerley and Co. Ltd. vs. Union of
  India (1969) 3 SCC 607, though that matter dealt with the
  provisions of the Indian Limitation Act, 1908. The Appellants/
  Plaintiff therein filed a suit seeking an enhanced rate of
B compensation in light of the deviation in the nature of the work
  being rendered more complex, the increase in costs due to
  undue prolongation of the period of work, the increase in the
  quantity of work, and the grant of contracts to other competing
  parties at substantially higher rates. This Court held that the
C "suit filed by the appellant Company is not a suit for
  compensation for breach of contract express or implied: it is a
  suit for enhanced rates because of change of circumstances,
  and in respect of work not covered by the contract." The claim
  for enhanced rates was found to arise outside the contract
0
  and for this reason was not in the genre of an action for
  compensation for breach of contract. It was therefore held that
  the claim was not covered under Article 115 of the 1908 Act
  (which is in pari materia to Article 55 of the Limitation Act),
E and would have to fall within the ambit of Article 120 of the
  1908 Act (which is akin to Article 113 of the Limitation Act).
  The facts at hand are dissimilar to those in Gannon
  Dunkerley in that the damages sought by the present
  Respondent are for work covered by the contract, and the
F change in circumstances was directly caused by breaches
  ascribable to the Appellant State in not handing-over the site
  on time. Facially, the suit claims are damages incurred due to
  the extension of the contract period and the resultant damages
  are incurred by the Respondent. The suit would therefore fall
G within the ambit of Article 55. Article 113, which is a residuary
  provision, cannot be resorted to.                                     •

        9. It also appears to us that the contract was clearly not
   broken as the Respondents chose to keep it alive despite its
 H repeated breaches by the Appellant State. The factual matrix
        STATE OF GUJARAT v. M/S KOTHARI AND                           141
          ASSOCIATES [VIKRAMAJIT SEN, J.]

presents a situation of successive or multiple breaches, rather       A
than of a continuous breach, as each delay in handing over
the canal/site by the Appellant State constituted to a bread 1
that was distinct and complete in itself and gave rise to a
separate cause of action for which the Respondent could have
rescinded the contract or possibly claimed compensation due           B
to prolongation of time and resultant escalation of costs. Of
course the Respondent is enabled to combine all these causes
of action in one plaint, as postulated in the C.P.C provided
each claim is itself justiciable. Even the Respondent has argued
before the High Court that the suit was based on successive           C
breaches committed by the Appellant State. In our opinion, the
suit was required to be filed within three years of the happening
of each breach, which would constitute a distinct cause of
action. Article 55 specifically states that in respect of
                                                                      0
successive breaches, the period begins to run when the breach
in respect of which the suit is instituted, occurs. In this vein,
Rohtas Industries Ltd vs. Maharaja of Kasimbazar China Clay
Mines ILR (1951) 1 Cal 420 is apposite as it has held that
when a party agrees to deliver certain goods every month for          E
a duration spanning certain years, the cause of action for
breach for failure to deliver in a particular month arises at the
end of that month and not at the end of the period of the contract.
The situation before us is similar in that the cause of action
had arisen on each occasion when the Appellant State failed           F
to hand over the site at the contractually stipulated time.
Specifically, the limitation periods arose on 15.11.1976,
15.11.1977, 15.11.1978 and 15.11.1979, i.e. on the first day
of each season, when the Respondent State committed a
breach by failing to hand over the site. Thus the period of           G
limitation did not commenqe at the termination of the contract
period or the date offinal payment. The High Court's conclusion
that the last date of breach and last date of payment were
relevant, not each cause of action, was thus patently erroneous.
For each breach, a corresponding amount of damages for                H
142          SUPREME COURT REPORTS                   [2015] 105.C.R.


A     additional costs could have been sought. The suit, however,
      was filed on 25.1.1985, we.II after the limitation period of three
      years for even the final breach, as the various causes of action
      became time barred on 15.11.1979, 15.11.1980, 15.11.1981
      and 15 .11. 1982 respectively.
B
            10. There is another perspective on the method or
      manner in which limitation is to be computed. We have already
      narrated that the Respondent, on every occasion when the
      extension was sought by it, had requested to be compensated
C     for delay. The Appellant State had granted the extensions but
      had repudiated and rejected the Respondent's claims for
      damages. The effect of these events would be that the cause
      of action for making the claim for damages indubitably arose
      on each of those occasions. It is certainly argua~le that the
D     Appellant State may have also been aggrieved by the delay,
      although the facts of the case appear to be unfavourable to
      this prediction, since delay can reasonably be laid at the door
      of the Appellant. The Respondent, however, could prima facie
      be presumed to have accepted a renewal or extension in the
E     period of performance but with the rider that the claim for
      damages had been abandoned by it. If this assumption was
      not to be made against the Respondent, it would reasonably
      be expected that the Respondent should have filed a suit for
F     damages on each of these occasions. In a sense, a fresh
      contract would be deemed to have been entered into between
      the parties on the grant of each of the extensions. It is therefore
      not legally possible for the Respondent to contend that there
      was a continuous breach which could have been litigated upon
G     when the contract was finally concluded. In other words,
      contemporaneous with the extensions granted, it was essential
      for the Respondent to have initiated legal action. Since this
      was not done, there would be a reasonable presumption that.
      the claim for damages had been abandoned and given a go-
H     by by the Respondent.
       STATE OF GUJARAT v. M/S KOTHARI AND                        143
         ASSOCIATES [VIKRAMAJIT SEN, J.]

       1:1. In a works contract, more often than not, delays occur, A
and that is why it is assumed that time is not of the essence.
Where extensions are asked for and granted, there must be a
clear and discernable stand on behalf of either of the parties
that the extension is granted and/or accepted without prejudice
to the claim of damages. It has become commonplace that B
neither party lodges a claim for damages, but waits for the
end of the contract to raise these ·disputes, taking advantage
of the nebulous and equivocal nature of the transactions
between them. This, however, is not the position that obtains
before us since the Appellant State had categorically posited C
that the claim for damages for the alleged delay on its part
would not be entertained.
     12. The Respondent has sought to place reliance on
Section 19 of the Limitation Act. It would be apposite to          D
reproduce this Section:
     19. Effect of payment on account of debt or of interest on
     legacy.-Where payment on account of a debt or of
     interest on a legacy is made before the expiration of the
     prescribed period by the person liable to pay the debt or     E
     legacy or by his agent duly authorised in this behalf, a
     fresh period of limitation shall be computed from the time
     when the payment was made.
This Section would not come to the aid of the Respondent, as F
the suit before us is not for payment on account of a debt or of
interest on leg.acy, but is a suit for damages for additional costs
incurred as a result of the extension of the contract period.
This Court in Union of India vs. Raman Iron Foundry 1974 (2)
SCC 231 , afte·r placing reliance on Jones v. Thompson [1858) G
27 L.J.Q.B. 234, has opined that a claim for damages does
not give rise to a debt until the liabiiity is adjudicated and
damages have been assessed by a decree or any order of a
Court or any other adjudicatory authority or forum. Furthermore,
in J.C. Budharaja vs Chairman, Orissa Mining Corporation Lttj. H
144            SUPREME COURT REPORTS             [2015] 10S.C.R.


A and Anr (2008) 2 SCC 444, it has been held that the effect of
  Section 19 would be to allow a fresh period of limitation with
  regard to the 'existing debt' in respect of which
  acknowledgment and payment has been made. It would not
  extend the period of limitation for any fresh claim, or any amount
B not accepted by the other party. In the factual scenario before
  us, the payment of the Final Bill and Security Deposit could
  not be construed to accepf or acknowle~ge the damages
  raised by the Respondent and therefore Section 19 would not
  per se extend the period oflimitation .-Furthermore, there could
C be no extension under Section 18 on account of the
  acknowledgement in writing, as at each point that the
  Respondent raised a claim for damages, it was specifically
  refuted by the Appellant State, and the amounts that were
  accepted by the Appellant State were limited to the liabilities
0
  within the contract, not fresh liabilities for damages.
         13. The Respondent has also argued that since notice
  under Section 80 of the C.P.C. was served to the Appellant
  State claiming damages on 7.8.1983, a period of two months
E from the date of the notice would have to be excluded when
  calculating the period of limitation, as per Section 15(2) of the
  Limitation Act. It has relied on Mis Disha Constructions vs.
  State of Goa (2012) 1SCC690 to this end. However, since
  the limitation period for the last breach alleged by the
F Respondent itself ended on 15.11.1982 and the notice under
  Section 80 C.P.C. is dated 7.8.1983, this provision is
  irrelevant. The notice perforce should have been issued before
  the suit became time barred, and only if so done would the
  period have been extended for a further tWo months.
G
         14. It is thus clear that the Respondent failed to file the
  suit for damages within the period prescribed in the Limitation
  Act. The suit is required to be dismissed on this ground alone.
  The impugned Order is, therefore, set aside, and the Appeal
H is allowed, but with no order as to costs.
      Nidtii Jain                                     Appeal allowed.