SECRETARY OF STATE Vs. SURENDRA MOHAN LAHIRI

JUDGEMENT

(1.) This appeal arises out of a suit instituted by the plaintiffs respondents against the Secretary of State and his officer (defendant 2) for recovery of Rs. 7916 odd as damages for breach of a contract for building an inspection bungalow at Brahmagiri in the interior of the district of Puri. The contract of the work was given to the plaintiffs on 29 September 1928. They were required to finish it within eighteen months, time being of the essence of the contract. The plaintiffs finished the manufacture of bricks before March 1929, but the construction of the building was not commenced till some time in January 1930. There was a payment on account of Rs. 1500 before March 1929 which included Rs. 711 for the price of the bricks stacked at the site. In March 1930 difference arose between the Executive Engineer (defendant 2) and the plaintiffs about the quality of the bricks to be used in the construction. It is not disputed that the plaintiffs had burnt about 300,000 bricks in the locality though the quantity actually required was only about 150,000. They had prepared .more bricks to be on the safe side so that only good bricks might be used. On 16 March 1930, when the foundation wall had reached the plinth level, defendant 2 visited the site and was of opinion that the bricks stacked and used till then in the construction were bad and under burnt. It is clear from his letter to the Superintending Engineer, dated 28 March 1930 (Ex. Z-8) that the defects in the bricks were to some extent due to the nature of the local soil itself. He asked the contractors to use better bricks. Correspondence ensued between the plaintiffs and the Department and I shall refer to some of them later. On 28 August 1930, as directed by the Superintending Engineer, the plaintiffs produced six bricks before the Executive Engineer (defendant 2) as samples of good bricks and expressed their readiness to complete the work with bricks of the samples produced by them. The Executive Engineer approved four of the bricks, kept two of those four with him, gave the other two to the plaintiffs, and rejected the remaining two as not being according to the standard required. There is nothing on the record to show the quality of the two bricks rejected and why they were found below the standard. Be that as it may, the plaintiffs were ordered to sort out the bricks according to the samples approved. It is clear from the correspondence that the plaintiffs did not agree to this proposal and were only willing to complete the work if all the six samples of bricks were approved and not only with the class of bricks selected by the Executive Engineer.

(2.) The plaintiffs case, as their petitions show, was that the Executive Engineer selected only first class bricks and the contract did not provide that only first class bricks were to be used. The objections of the plaintiffs were rejected and they were repeatedly asked to sort out bricks according to the samples given to them. This they admittedly failed to do with the result that the contract was rescinded on 13 December 1930. Afterwards the amount of work which had been completed was measured and. after giving credit for Rs. 1500 which had already been paid to the plaintiffs, the Department offered them Rs. 559, obviously forfeiting their security deposit of Rs. 650. The plaintiffs refused to accept the sum and instituted the present suit claiming the amount stated above, which includes the Rs. 650, the security deposit, and their estimated profit in the work. The defendants pleaded that the suit was not maintainable and justified the cancellation of the contract. The learned Subordinate Judge has passed a modified decree for a sum of Rs. 4960. This includes Rs. 1957-8-0 the price of 135,000 bricks which the defendants were allowed to take away according to their own selection within six months from the date of the decree. It was provided that in case the defendants failed to exercise this option it would be open to the plaintiffs to select 135,000 bricks, leave them for the defendants and to dispose of the remainder as they thought fit. The defendants have preferred this appeal, and there is a cross, appeal on behalf of the plaintiffs against the reduction of the amount claimed by them.

(3.) The first point raised on behalf of the appellants is about the maintainability of the suit on the basis of Clause 30 of the agreement. This clause, provided that in case of dispute between the parties the matter was to be referred to arbitrators one to be selected by each party. It is contended that as the plaintiffs did not seek to have the dispute settled by arbitrators the suit was barred. In my opinion this objection is untenable. The position has been clearly stated by Mulla in his commentary on Para. 18, Schedule 2, Civil P.C. The position as explained by him is this: By Section 28, Contract Act, agreements in restraint of legal proceedings are declared void. To that Section there was a proviso that if the parties agreed to refer their dispute to arbitration, the existence of the agreement would be a bar to seeking redress in the ordinary Courts, and that a party had a right to sue for specific performance of the agreement to refer the dispute to arbitration. Then came the Specific Relief Act of 1877 which by Section 21 superseded the proviso to Section 28, Contract Act, and in those territories where the Specific Relief Act. is in force though a contract to refer disputes to arbitration barred suits in ordinary Courts, but the right to sue for specific performance of such a contract was taken away. The relevant provision of Section 21, Specific Belief Act, ran as follows: And, save as provided by the Civil Procedure Code, no contract to refer a controversy to arbitration shall be specifically enforced, but if any person who has made such a contract and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit.