A contractor’s claim accrues upon final rejection of demands, not later security-deposit release.

The appellant-plaintiff’s offer for laying, lowering, and jointing RCC drainage pipelines was accepted under Agreement No. B-2/44 of 1972–73.

The work order was issued on 6 March 1973, with a stipulated completion period ending on 5 September 1975.

The completion period was subsequently extended up to 23 May 1980, and the work was completed on 30 May 1980.

The appellant claimed damages and compensation for alleged unpaid bills and losses said to have accrued between 30 September 1980 and 30 July 1988.

The final bill was prepared and signed on 30 July 1988, on which date the appellant’s remaining demands were treated as rejected.

The appellant instituted Special Civil Suit No. 116 of 2003, originally numbered as Suit No. 323 of 1991, on 19 September 1991, seeking recovery of damages and compensation.

The Trial Court dismissed the suit as barred by limitation by judgment and decree dated 31 March 2010.

The present appeal was filed under Section 96 of the Code of Civil Procedure, 1908.

Whether the appellant’s cause of action arose on 30 July 1988, when the final bill was settled and the remaining claims were rejected, or on 1 October 1988, when the security deposit was allegedly released?

Whether the suit instituted on 19 September 1991 was barred by the applicable three-year limitation period?

Whether, in view of the suit being barred by limitation, the High Court was required to examine the appellant’s remaining claims on merits?

The Court exercised appellate jurisdiction under Section 96 of the Code of Civil Procedure, 1908, recognising that an appeal is a continuation of the original proceedings and that the appellate court may reconsider the material and legal issues on record.

The Court applied the limitation rule that a claim must be instituted within three years from the accrual of the cause of action; where the final demand is rejected on 30 July 1988, the suit had to be filed by 29/30 July 1991.

The Court further relied on State of Uttar Pradesh & Ors. v. M/s. Satish Chand Shivhare and Brothers, SLP (Civil) No. 5301 of 2022, for the principle that limitation law is substantive law and, once an appeal or action is barred by limitation, the court is not legally obliged to examine the merits.

The Court treated 30 July 1988 as the operative date because the final bill was prepared and signed on that date and the appellant’s outstanding demands were thereby finally rejected.

The appellant’s attempt to shift the commencement of limitation to the alleged release of the security deposit on 1 October 1988 was inconsistent with its own Exhibit 189, which acknowledged receipt of the final-bill amount on 30 July 1988.

The Court also found no factual basis establishing that the security deposit had been deducted from the final bill, and therefore distinguished the authority relied upon by the appellant concerning commencement of limitation from release of security deposit.

Since the three-year period expired on 29/30 July 1991 and the suit was filed only on 19 September 1991, the claim was time-barred.

Consequently, examination of the remaining contractual and compensation claims would have been futile and was unnecessary.

The suit filed on 19 September 1991 was beyond the prescribed three-year limitation period and was therefore barred by limitation.

The First Appeal was dismissed, the Trial Court’s judgment and decree dated 31 March 2010 were affirmed, and the Record and Proceedings were directed to be returned to the Trial Court.