@JUDGMENTTAG-ORDER
S.N. Satyanarayana, J.—This revision is by defendant 2 in O.S. No. 1683 of 2014 on the file of VIII Additional City Civil and Sessions Judge (CCH-15), Bengaluru, impugning the order dated 11-4-2016, wherein application in I.A. No. 2 filed by it under Order 7, Rule 11 (a) read with Section 151 of the Code of Civil Procedure, 1908 seeking rejection of plaint on the ground that it is barred by Article 55 of the Limitation Act, 1963, is rejected.
2. Admittedly, the aforesaid suit is filed by respondent no. 1 herein for the relief of a decree directing defendants 1 and 2 jointly and severally to: pay a sum of Rs. 43,46,36,407/- as damages for the alleged loss said to have suffered by the plaintiff and refund a sum of Rs. 6,31,18,224/-, which is inclusive of Rs. 45,70,800/- paid by the plaintiff to defendants under invoices mentioned in the plaint and Rs. 5,85,47,424/- paid by United India Insurance Company Limited (UIIC) directly to defendants. Plaintiff has also sought for consequential relief of awarding pendente lite and future interest at the rate of 18% per annum from the date of the suit till the date of realisation.
3. Defendant 1 in the suit - SSP Sirius Limited, who is arrayed as respondent no. 2 in this proceedings, is a formal party and it is sailing with revision petitioner, who is defendant no. 2 in the Court below. Revision petitioner has not sought for any relief against respondent no. 2, who is served with notice and represented by Counsel in this proceedings.
4. Admittedly, the plaintiff has entered into a contract with United India Insurance Company Limited ("UIIC"), which is not party to this proceedings, on 31-10-2007 in connection with providing Comprehensive Online Real-Time Environment (CORE) Insurance Solution to UIIC. As per the said prime contract, plaintiff was required to provide complete turnkey solution including but not limited to procurement, supply, installation and maintenance of hardware, system software, application software and support service as per Statement of Work (SOW) appended to the prime contract. In terms of the prime contract, the plaintiff was entitled to appoint sub-contractors to carry out various aspects of the works envisaged therein.
5. The fact that plaintiff has entered into a sub-contract with defendant 1 on 6-12-2007 in Bengaluru is not in dispute. In terms of the said sub-contract, defendant 1 was required to deliver, install and implement certain software and provide certain services in connection with providing CORE Insurance solution to UIIC, details of which is stated in Statement of Work-Exhibit ''A'' appended to the sub-contract. It is stated that the said SOW was modified subsequently.
6. Admittedly, parties to the suit have entered into a deed of Novation dated 28-8-2009, under which defendant 1 has agreed to transfer all its rights, benefits and obligations under the sub-contract dated 6-12-2007 to its Associate Company - SSP Limited, which has preferred this revision petition.
7. It is stated that under the said sub-contract dated 6-12-2007, defendant 1 was required to deliver software products and provide certain services within time frames stipulated in the Statement of Work. It is seen that the said sub-contract is not with reference to development of one particular software, but pertains to a series of software products to implement CORE Insurance Solution, which was subject-matter of main contract between plaintiff and UIIC. According to the plaintiff, the software products developed by defendants lacked certain functionalities and they were not in compliance with the requirements specified in the Statement of Work and there was delay on their part in delivering software products and thereby, the plaintiff is said to have suffered loss as it had to procure a new contractor to complete the project. Therefore, it is contended that defendants have committed breach of the sub-contract dated 6-12-2007 and are liable to pay damages.
8. Admittedly, the sub-contract was commenced on 6-12-2007 and it continued till it was terminated by notice of termination issued by plaintiff on 8-3-2011. In the interregnum, there is also a notice, which is said to have issued by the plaintiff to defendants 1 and 2 on 3-2-2011 calling upon them to rectify breaches alleged to have taken place with reference to delivery and functionalities of software. It is seen that in the subsequent notice dated 8-3-2011, there is further allegation that defendants have not complied with the demand made in the notice dated 3-2-2011, which has resulted in the plaintiff invoking Clause 15.4.1 of the sub-contract. The said clause deals with the termination of contract, wherein it is stipulated that the agreement may be terminated by issuing a notice by either party if the other party is in material breach of any of its obligations under the agreement and fails to remedy the breach for a period of 30 days after issuance of such notice. The second notice issued by plaintiff on 8-3-2011 appears to be in compliance of the said clause.
9. When the matter stood thus, it is seen that a suit in O.S. No. 1683 of 2014 is filed by respondent no. 1 herein for the aforesaid reliefs against defendants 1 and 2. The said suit is filed on 28-2-2014. On service of summons, defendants 1 and 2 have entered appearance and they have filed their respective written statement. The suit is complete as to pleadings and is at the stage of framing of issues. At this stage, application in I.A. No. 2 under Order 7, Rule 11 (a) and 11(d) read with Section 151 of the Code of Civil Procedure is filed by defendant 2 contending that the suit, which was filed by the plaintiff in the above terms on 28-2-2014, does not survive for consideration on the point of limitation inasmuch as the breach, which was identified in notice dated 3-2-2011 having come into place on that day is a full-fledged breach, which was required to be attended to within 30 days, nevertheless, breach by itself had given cause of action to the plaintiff for recovery of damages, if any, and the suit filed on 28-2-2014 i.e., beyond three years from the 3-2-2011 is barred by limitation.
10. Plaintiff filed objections to application in I.A. No. 2 stating that since the contract was terminated on 8-3-2011, the suit filed on 28-2-2014 is within time and since it was required to give defendants 30 days time from the date of issue of notice to remedy the alleged breaches as per clause 15.4 of the contract, the cause of action for the suit could not have occurred within 30 days from 3-2-2011. As the 30 days period came to an end on 2-3-2011, the suit filed on 28-2-2014 is within the period of limitation.
11. Defendant no. 2, who is revision petitioner, filed rejoinder to I.A. No. 2 stating that the breaches alleged by plaintiff are not continuing in nature. The contract provides for rectification of breach within 30 days from the date of notice. If the breach is complied within 30 days, the same ceases to exist. It is not open for the plaintiff to contend that the alleged breach of contract continued until the defendants failed to remedy the said breach. Therefore, it is contended that there is no cause of action available to the plaintiff to seek damages.
12. In the instant case, what is required to be looked into is application of the provisions of Article 55 of the Limitation Act, 1963, which governs the right of the plaintiff to file suit within the time prescribed therein.
13. Learned Senior Counsel appearing for the revision petitioner in support of his contention that the suit is barred by limitation, tried to rely upon a catena of decisions rendered by Apex Court and High Courts in the following cases:
1. Balakrishna Savalram Pujari Waghmare and Others v. Shree Dhyansehwar Maharaj Sansthan and Others, AIR 1959 SC 798.
2. Rajagopal Naidu v. Aiyyaswamy Chettiar and Others, AIR 1965 Mad. 532; and
3. Mahavir Spinning Mills Limited v. HB Leasing and Finances Company Limited, (2013) 199 DLT 227 (DB).
14. Per contra, learned Senior Counsel appearing for contesting respondent no. 1 in this proceedings, who is plaintiff in the Court below, tried to justify the order impugned by relying upon the following judgments:
1. Hari Ram v. Jyoti Prasad and Another, (2011) 2 SCC 682;
2. Sunil Krishna Ghosh and Another v. Calcutta Improvement Trust, AIR 2001 Cal. 199;
3. Syndicate Bank v. Channaveerappa Beleri and Others, (2006) 11 SCC 506;
4. Food Corporation of India and Others v. Bahulal Agrawal, (2004) 2 SCC 712; and
5. Delta Foundation and Constructions, Kochi and Others v. Kerala State Construction Corporation Limited, Ernakulam, AIR 2003 Ker. 201.
15. After hearing learned Senior Counsel Sri Sajan Poovayya, appearing for revision petitioner and Sri Dhyan Chinnappa, appearing for contesting respondent no. 1-plaintiff and on perusing the aforesaid judgments relied upon by them, what is to be considered in this case is application of Article 55 of the Limitation Act. Admittedly, the suit of the plaintiff is for two reliefs: one seeking damages from defendants 1 and 2 jointly and severally with reference to non-performance of terms of the sub-contract dated 6-12-2007 entered into between plaintiff and defendant 1 with reference to delivery of software products on time bound basis, providing services and maintenance of software as specified in Statement of Work and another seeking refund of the amount, which is inclusive of advance amount paid by plaintiff to defendants 1 and 2 for development of software as per the terms and conditions of the sub-contract under the invoices stated in the plaint as also the amount paid directly by UIIC to defendants. It has come on record that under deed of novation entered into between the parties to the suit on 28-8-2009, defendant 1 has transferred all its rights and obligations under the sub-contract dated 6-12-2007 to defendant 2-revision petitioner herein.
16. There are two aspects to the suit i.e., one seeking damages from defendants, which is an independent claim, which will have to be decided if the plaintiff establishes that breach of terms of the sub-contract dated 6-12-2007 by defendants has resulted in an enforceable damage. The relief with reference to refund of the amount claimed in the plaint is a consequential relief, which is on the basis of termination of the sub-contract dated 6-12-2007 for non-performance of the same by defendants. The provisions of Article 55 of the Limitation Act, 1963, read as under:
|
Description of Suit |
Period of Limitation |
Time from which period begins to run |
|
55. For compensation for the breach of any contract, express or implied not herein specially provided for. |
Three years |
When the contract is broken or (where there are successive breaches) when the breach in respect of which the suit is instituted occurs or (where the breach is continuing) when it ceases. |
If the provisions of Article 55 is applied to the aforesaid facts, it is clear that de hors the findings rendered by several judgments relied upon by both the parties, if the problem on hand is approached directly from the point of facts as emanating from the pleadings in the suit and the grounds urged in the application filed under Order 7, Rule 11 (a) and 11(d) of CPC, in the Court below, claim of the plaintiff is with reference to non-performance of the sub-contract by defendants and failing to deliver software products on time bound basis and not attending to shortcomings in performance of the software, which is already developed, is continuous in nature and the same will not come to an end until either defendants cure the defects or express their inability to do so.
17. In the instant case, learned Senior Counsel for contesting respondent no. 1 would bring to the notice of this Court that the relationship between the parties in entrusting the work of developing software and also maintaining it continues from 6-12-2007 till the same was terminated on 8-3-2011 after issuing notice dated 3-2-2011 to defendants. Therefore, it could be seen that even after issuing notice dated 3-2-2011 calling upon the defendants to cure the defects in the software and remedy the material breaches, the work in the contract continued and the breach, if any, was not a conclusive breach. It was a subjective breach in the same being amenable to rectification and the same being amenable to be set right within the time stipulated in the sub-contract i.e., 30 days from the date of notice. When that being the stand taken by the plaintiff in the suit for recovery of damages as well as refund of the amount stated in the plaint on termination of the sub-contract by notice dated 8-3-2011, the plaintiff is required to demonstrate by adducing evidence during trial in the Court below with reference to the nature of damages as notified in the letter dated 3-2-2011 that has resulted due to breach of obligations of sub-contract by defendants. Plaintiff is also required to satisfy the Court below as to whether the said lapses on the part of defendants in development and maintenance of software products could be rectified within the time frame stated in the sub-contract and the date, when the right accrued to it to seek not only the damages, but also refund of the amount that was paid to defendants by way of advance under the sub-contract dated 6-12-2007 and certain payment stated to have made by UIIC directly to defendants. These matters are in the realm of dispute with reference to facts as well as the legal principles and the same cannot be decided by reading Article 55 of the Limitation Act or few terms of the sub-contract, which is the basis for filing the suit and which has come into place on 6-12-2007 and admittedly, continue to be in place till 8-3-2011. Therefore, to decide the question of limitation on the basis of terms of contract, notices dated 3-2-2011 and 8-3-2011 cannot alone be considered unless evidence is adduced in that behalf. The said aspect of the matter is rightly appreciated by the Trial Judge while considering the application under Order 7, Rule 11 (a) and 11(d) of CPC.
18. Therefore, in the fact situation, even if the point which was sought to be made out by the revision petitioner by placing reliance upon the judgment rendered by the Full Bench of Apex Court in the matter of Balakrishna (supra) and other two judgments with reference to breach of contract referred to above, is accepted, the nature of damages is required to be established by the plaintiff in a full-fledged trial to be conducted before the Court below and merely on that basis, the question of dismissing the suit for damages does not arise. What is sought in the Court below is rejection of plaint, which cannot be done in piecemeal, more particularly, when there is more than one prayer sought in the plaint, which is not only with reference to damages for breach of sub-contract dated 6-12-2007, but also seeking refund of the amount paid under the sub-contract, which admittedly has come to an end on 8-3-2011. If that is taken into consideration, the suit, which is filed on 28-2-2014 being well within the period of limitation of three years from termination of the contract, the plaint cannot be rejected in part. Therefore, prayer for rejection of plaint sought in the application in I.A. No. 2 is rightly rejected by the Court below. However, liberty is reserved to the parties to take up all the contentions legal as also with reference to factual matrix in the trial to be conducted in the suit in O.S. No. 1683 of 2014 and if necessary, to seek for framing of an issue with reference to limitation. With such liberty, the revision petition is dismissed confirming the order passed by the Court below rejecting I.A. No. 2 filed by revision petitioner.
