In a recent decision critical of the coercive tactics of government departments the Supreme Court said the court cannot reject a legitimate claim that is made by a contractor, just because he had issued a no-claim certificate.
The origins of the dispute in RL Kalathia & Co v State of Gujarat lie in a dam built in the 1970s in Gujarat. The appellant, Kalathia, a contractor who began working on the project in November 1970, had carried out additional work from time to time. In July 1976, Kalathia submitted a consolidated statement of their claims for the additional work, but received no payment. They filed a civil suit and in December 1982 obtained a favourable order.
In 1983 the government filed an appeal in Gujarat High Court and in October 2002 they obtained a ruling that dismissed Kalathia’s claims. In doing so the high court accepted the government’s claim that by accepting the final bill, the contractor was barred by the principle of estoppel from filing a suit for recovery of the differential amount.
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Considering an appeal by Kalathia, the Supreme Court asked if their acceptance of the final payment, which was clearly done “under protest”, can be treated as accord and satisfaction. Answering the query in negative, the Supreme Court held, “merely because Kalathia had accepted the final bill, it cannot be deprived of its right to claim damages if it had incurred additional amount and able to prove the same by acceptable materials”.
The court observed that it is common that unless the contract gives a discharge certificate in advance, payment of bills is generally delayed. As such, a clause in a contract would not be a bar to a contractor raising claims that are genuine at a later date even after submitting a no-claim certificate.
The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
