V. R. Sejbramanyam vs B. Thayappa And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 321 and 322 of 1956

Decision Date: 1 February, 1961

Coram: J.C. Shah, J.L. Kapur

In the matter of V. R. Sejbramanyam versus B. Thayappa and others, the Supreme Court of India delivered its judgment on 1 February 1961. The judgment was authored by Justice J. C. Shah, who sat with Justice J. L. Kapur. The case is reported in 1966 AIR 1034 and 1961 SCR (3) 663. The dispute arose under the Indian Contract Act, 1872, specifically section 70, and concerned a building contract involving defective and additional work and the question of when compensation could be awarded.

The appellant, V. R. Sejbramanyam, had entered into a written agreement with the respondent, B. Thayappa, who was a building contractor, to construct a house and several shops. The contractor commenced the work but, before its completion, disputes emerged. The appellant asserted that the contractor had performed defective work and sought compensation for the cost of repairing that work. Conversely, the contractor claimed that he had performed additional work not expressly covered by the written agreement and sought remuneration at rates he had established for such extra work. Separate suits were filed: the appellant pursued a claim for repair costs, and the contractor pursued a claim for payment for the additional work. The trial court issued partial decrees in both suits. On appeal, the High Court dismissed the appellant’s suit in its entirety and remanded the contractor’s suit, directing that a qualified engineer be appointed to assess, in accordance with the High Court’s directions, the amount payable for the work done beyond the contract’s scope. The appellant contended that the contractor had failed to prove any oral agreement and therefore his suit should also have been dismissed, arguing that no quantum‑meruit claim had been made and therefore no such compensation should be awarded.

The Supreme Court held that when a party to a contract provides services to the other party without intending to do so gratuitously and the other party derives a benefit, the service‑providing party is entitled to compensation for the value of those services. Accordingly, the contractor, who did not intend to perform the extra work gratuitously, was entitled to compensation for the additional work that was not covered by the written agreement. Even though the contractor could not substantiate an oral agreement for market‑rate compensation, the Court affirmed that under section 70 of the Indian Contract Act the court possessed jurisdiction to award compensation for work performed. The Court also observed that the appellant’s suit had been dismissed by the High Court and that no appeal had been lodged against that dismissal; therefore, the appellant could not revive the same issue of compensation in the related companion suits where no equitable set‑off was claimed.

The appeal arose under civil appellate jurisdiction, specifically Civil Appeals Nos. 321 and 322 of 1956, filed by special leave from the Mysore High Court’s judgment dated 21 September 1951 in Regular Appeals Nos. 3, 24, 13 and 25 of 1948, as well as from the Principal District Judge of Bangalore’s judgment dated 9 January 1948 in Original Suits Nos. 55 of 1946‑47 and 117 of 1945‑46. Counsel for the appellant were S. K. Venkataranga Aiyangar and S. K. Aiyangar; counsel for the respondents were B. K. Naidu. The Court’s final order affirmed the High Court’s direction that the contractor could be awarded compensation for the additional work pursuant to section 70 of the Contract Act, while the appellant’s claim for compensation for rectifying defective work was not revived.

Counsel for the respondents appeared before the Court on 1 February 1961, when Justice Shah delivered the judgment. The appellant, V. R. Subramanyam, owned plot No. 29 situated on Subedar Chattram Road in Bangalore. The respondent, B. Thayappa, was a building contractor hired by the appellant to erect a house and a set of shops on that plot. Their contractual relationship was defined by a written agreement dated 1 October 1942, which was later amended on 6 October 1942. Under the terms of that agreement the contractor was required to construct six shops fronting a public road, a main building set back behind the shops, an out‑house and a garage, all in accordance with a site plan supplied by the appellant.

The agreement specified separate remuneration rates for different types of construction: for structures using reinforced cement concrete roofing the rate was Rs 4‑2‑0 per square foot, and for tiled construction the rate was Rs 3‑2‑0 per square foot. The original site plan was not approved by the Bangalore Municipality; consequently the plan was modified and subsequently sanctioned. The modifications included the deletion of the six shops, an increase in the area of the out‑house, the addition of a puja room on the ground floor, an extra room on the first floor, and the requirement to construct a compound wall.

Despite these alterations, the contractor executed a substantial portion of the construction work as per the sanctioned plan. During this period the appellant made several payments to the contractor and also supplied building materials, resulting in the contractor receiving a total sum of Rs 20,200. Before the work could be completed, disagreements emerged between the parties. The appellant asserted that the work performed was defective and claimed a right to compensation for the cost of repairing those defects. The respondent, on the other hand, demanded compensation calculated at rates he had established for the additional work that was not covered by any express term in the written agreement.

Both parties alleged that they had reached oral agreements concerning the remuneration for the extra work beyond the scope of the original contract. To resolve the dispute, the appellant instituted suit No. O.S. 54 of 1946‑47 in the Subordinate Court of Bangalore, which was later transferred to the Principal District Judge of Bangalore. In that suit the appellant sought a decree of Rs 8‑515‑4‑0, representing the amount he claimed as compensation for the alleged defective workmanship and for the delay in completing the construction. In response, the respondent instituted his own suit, later transferred to the same Principal District Judge and recorded as suit No. 55 of 1946‑47. In that counter‑suit the respondent claimed a decree of Rs 5‑988‑12‑0, which he stated represented the remuneration owed to him for the work he had performed, reduced by the Rs 20,200 he had already received from the appellant.

In the earlier proceedings, the respondent had received a sum of Rs. 20,200 from the appellant, which formed part of the financial disputes between the parties. Subsequently, the respondent instituted another suit, identified as suit number 117 of 1945‑46, seeking a decree for Rs. 15,001‑10‑9 together with interest and notice charges. The amount claimed represented remuneration for the construction of an out‑house, a godown, a first‑floor room, and a flight of steps. It also covered the value of certain building materials that the respondent alleged he had left at the appellant’s premises and that the appellant had subsequently removed without authority. The trial court, acting on suit number 54 of 1946‑47, granted a decree in favour of the appellant for Rs. 3,000. In the companion suit numbered 55 of 1946‑47, the same court awarded the respondent a decree for Rs. 2,989‑6‑0, and in suit number 117 of 1945‑46 it granted the respondent a decree for Rs. 13,329‑10‑9. Both parties expressed dissatisfaction with the respective decrees and together filed six appeals before the High Court of Judicature of Mysore at Bangalore challenging the orders. The High Court, after review, set aside the decree in suit number 54 of 1946‑47 and dismissed the appellant’s claim in its entirety. It also reversed the decrees in suits number 55 of 1946‑47 and number 117 of 1945‑46, remanding the matters to the District Court. The remand carried a specific direction that a qualified engineer be appointed as Commissioner to ascertain the amounts due to the respondent for work performed beyond the scope of the written contract. Further, the High Court instructed that the determination be made in accordance with the directions contained in its judgment. The appellant subsequently sought special leave to appeal to this Court against the decisions in suits numbers 55 of 1946‑47 and 117 of 1945‑46, invoking Article 136 of the Constitution. He also contested the procedural directions that had been issued in the remand order, arguing that they were improper and required clarification.

The underlying dispute concerned the construction of several structures, including an out‑house, a garage, a puja room, a first‑floor room, a staircase leading to the upper floor room, and a compound wall. For all these constructions except the compound wall, the District Judge awarded compensation to the respondent at the rate of Rs. 4‑2‑0 per square foot. Regarding the compound wall, the District Judge fixed compensation at the rate of Rs. 5 per running foot, together with certain additional charges. The High Court subsequently held that the respondent was entitled to receive compensation calculated at the prevailing market rate for any construction work that was not covered by the agreements dated 1 October 1942 and 6 October 1942. The High Court rejected the respondent’s claim that the appellant had promised to pay extra rates for deviations and additions that were not specifically contained in the original agreement. It further observed that for the construction of the out‑house, the puja room and the upper‑floor room, the respondent should receive compensation at the rate of Rs. 4‑2‑0 per square foot. In addition, the High Court stated that for the out‑house the respondent was also entitled to receive a certain extra amount for the additional constructions. According to the High Court, there was no material deviation from the original plan in these items, and the compensation should reflect the market value of the work performed.

In the judgment of the High Court it was held that there was no material deviation from the original plan. The Court further directed that compensation for the flight of stairs should be paid either as a lump‑sum amount or on the basis of cubic content, whichever method proved more practicable or customary, and that the rates to be applied should be those the Court proposed to indicate for such additional work. However, the Court found that the construction of the garage involved a substantial variation from the original contract; consequently the garage could not be covered by the contracted rate and its compensation had to be measured at the rates prevailing at the end of the year 1943. The Court also ordered that if any extra items not covered by Exhibits VII and VII(a) had been constructed or supplied by the defendants as claimed in the bills marked as Exhibits XXI, XXII and XXIII, those items should be paid for in addition to the flat rate, and that the basis for payment of those items could be fixed in accordance with the rates contained in Exhibit II. Counsel for the appellant argued that, in view of the High Court’s finding that the respondent had failed to prove the oral agreement he alleged, the suit should have been dismissed and the Court should not have awarded compensation on a quantum meruit basis which had not been claimed. It was further contended that the respondent should succeed or fail on the case he had pleaded, and should not be allowed to rely on a cause of action that had not been pleaded. The Court rejected this contention, observing that there was no substance in the argument. As the Court had already noted, regarding the additional work performed by the respondent, both parties had produced conflicting oral agreements, and those agreements had not been accepted by the High Court. The Court explained that when a party to a contract renders services to the other without intending to do so gratuitously and the other party obtains a benefit, the service‑providing party is entitled to compensation for the value of those services. It was clear that the respondent had undertaken additional constructions on the building and that those works were not performed gratuitously; therefore he was entitled to compensation for the work that was not covered by the original agreement. The respondent claimed compensation at prevailing market rates under an oral agreement; even though he failed to prove an express agreement, the Court held that compensation could still be awarded under section 70 of the Contract Act. By granting a decree for compensation under the statute rather than under the unproven oral contract, the Court found that there was no substantial departure from the respondent’s claim. The appellant further urged that the High Court erred in directing that compensation for the additional work be assessed in accordance with the rates mentioned in Exhibit II. The plaintiff’s witness, T. S. Narayana Rao, admitted that the rates in Exhibit II represented the current market rates for building construction work similar to that of the appellant’s building. In view of this admission, the Court considered the rates appropriate for assessing the additional compensation.

The High Court examined the schedule of rates that had been annexed to the bill and concluded that those rates were not excessive in the circumstances of the case. In order to confine the scope of the inquiry to the matters that were properly before it, the learned judges issued a specific direction to the Commissioner. That direction required the Commissioner to calculate the compensation for the additional work on the basis of the rates that had been accepted by the plaintiff’s witness, who had testified that those rates reflected the prevailing market price for similar construction work. The Court noted that the direction was formulated on the basis of evidence that had been placed on record and that it did not depart from the material submissions made by the parties. Consequently, the Court held that the direction did not involve any serious error of law or fact that would justify its own interference with the assessment ordered by the High Court. The Court therefore found that the direction was a permissible exercise of judicial discretion, aimed at ensuring that the compensation assessment would be grounded in rates that were demonstrably appropriate, and that there was no basis to set aside the High Court’s order on this point.

The appellant further contended that he was entitled to recover the loss he alleged to have suffered because of defective work by invoking an equitable set‑off against the claim brought by the respondent in two earlier suits, identified as suits numbers 55 of 1946‑47 and 117 of 1945‑46. In reality, the appellant had originally pursued a separate substantive suit in which he sought monetary compensation for the damage he claimed arose from the respondent’s alleged defective workmanship. That primary suit had been dismissed by the High Court. The Court emphasized that, once a suit seeking compensation for a particular grievance has been decided, the same grievance cannot be revived in other companion suits unless a proper appeal has been filed against the decree. In the present case, no appeal had been lodged against the decree rendered in suit number 54 of 1946‑47, and none of the written statements filed in the companion suits contained any plea of an equitable set‑off. Accordingly, the Court found that the appellant’s attempt to re‑litigate the same issue was untenable. The Court concluded that none of the appellant’s contentions possessed any substantive merit. As a result, the appeals were dismissed, the appellant was ordered to pay the costs, and a single hearing fee was assessed against him.