𝗜𝗳 𝗻𝗼 𝗹𝗼𝘀𝘀 𝗰𝗮𝘂𝘀𝗲𝗱 𝘁𝗼 𝘁𝗵𝗲 𝗖𝗹𝗮𝗶𝗺𝗮𝗻𝘁, 𝗹𝗶𝗾𝘂𝗶𝗱𝗮𝘁𝗲𝗱 𝗱𝗮𝗺𝗮𝗴𝗲𝘀 𝘄𝗶𝗹𝗹 𝗻𝗼𝘁 𝗯𝗲 𝗽𝗮𝘆𝗮𝗯𝗹𝗲 𝗲𝘃𝗲𝗻 𝗶𝗳 𝘁𝗵𝗲 𝗥𝗲𝘀𝗽𝗼𝗻𝗱𝗲𝗻𝘁 𝗶𝘀 𝗵𝗲𝗹𝗱 𝘁𝗼 𝗯𝗲 𝗶𝗻 𝗯𝗿𝗲𝗮𝗰𝗵 𝗼𝗳 𝘁𝗵𝗲 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁.

 As per the crystallized legal position, sum ascertained as liquidated damages in the contract is not in the nature of penalty, but is a pre-estimate of loss estimated by the parties likely to be suffered by a party in the event of breach of contract by the other party. Loss must be incurred by a party in order to claim the same. Liquidated damages are not payable merely as a penalty for breach of contract, if no loss is suffered. It is the quantification of loss that would require no further ascertainment by court/tribunal, which would quantify the same as per the pre-estimated loss or formula agreed to by the parties as liquidated damages in the contract. In view of the same, AT's rejection of claim No 3 is consistent with the prevalent legal position. {Para 20}

Ratio: Hon'ble Mr. Justice Manoj Kumar Ohri of the Hon’ble High Court of Delhi upheld the award of the Arbitral Tribunal wherein the inter alia claim for the balance rent for the lock in period was sought by the Claimant on the pre-mature termination of the Contract by the Respondent.

The claim was not granted to the Claimant even though the Respondent was held to be in breach of the Contract as the Claimant could not demonstrate the loss caused to it. The Respondent, rather, demonstrated that the Claimant was able to put the property up for rent the day after the Respondent vacated the premises.

 IN THE HIGH COURT OF DELHI

O.M.P. (Comm.) 266/2023, CAV 377/2023, I.A. 13723/2023, I.A. 13724/2023, I.A. 13725/2023 and I.A. 13726/2023

Decided On: 18.09.2023

Vivek Khanna Vs. OYO Apartments Investments LLP

Hon'ble Judges/Coram:

Manoj Kumar Ohri, J.

Citation: MANU/DE/6307/2023,2023/DHC/6763

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Whether domestic violence case can be settled in mediation?

The learned counsel for the petitioner next contended

that the default clause in Ext.P2 does not contemplate the

recovery of `25,00,000/- promised to be paid, but instead

contemplates the continuance of the proceedings. The counsel

further submitted that since the petitioner herein has expressed

his inability to comply with the settlement, the default clause

would come into operation and in such a case, the court cannot

make an order based on the settlement and can make an order

only after sufficient enquiry is carried out. Without conducting

any enquiry, the court below went wrong in ordering the

petitioner to pay a sum of `25,00,000/-, argued the counsel. I

cannot subscribe to the said argument. Once a settlement has

been arrived at between the parties in a lis, that concludes the

dispute resolved in the settlement and the parties are bound by

it. Based on the settlement arrived at the mediation, the parties

cannot be directed to invoke the original jurisdiction of the court

to ensure that the compromise is worked out. Such a procedure

would be against the spirit of the mediation process itself. In

Salkia Businessmens' Association (supra), the Apex Court has

held that viewing breach of the terms of the compromise as a

matter of mere contract between the parties and disregarding it

has a disastrous effect on rule of law. As stated already, the

Magistrate exercising jurisdiction under the DV Act has the power to refer the matter before it to mediation, record the compromise and pass an order in terms of the settlement. The order so passed in respect of the matters that fall within Sections 18 to 22 of the DV Act can be enforced in accordance with the law. As far as the settlement that falls outside the ambit of Sections 18 to 22 is concerned, the parties are bound to follow the terms of the settlement. {Para 13}

 IN THE HIGH COURT OF KERALA AT ERNAKULAM

OP(CRL.) NO. 390 OF 2020

MATHEW DANIEL Vs  LEENA MATHEW, 

PRESENT

 DR. JUSTICE KAUSER EDAPPAGATH

Dated: 16th day of August, 2022

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Whether Breach Of Contract U/S 74 of The Contact Act is Applicable At Pre-Formation of contract Stage?

The writ petitioner has approached this Court aggrieved by the action of the second respondent in forfeiting the bid security which was submitted by it in the course of a process for award of contract initiated by that respondent. The challenge essentially is to the communication of 18 March 2019 & 28 May 2019 pursuant to which the second respondent apprised the petitioner of its decision to forfeit the bid security which had been submitted.

 40. In the light of the foregoing discussion, we are of the considered opinion that the appellant did not commit any breach of the term(s) and condition(s) of the notice inviting bids and on the other hand, it was the respondents who committed breaches. In these circumstances, the State had no right to forfeit the security amount and instead it should have been returned when demanded by the appellant.”

 Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application.”

 IN THE HIGH COURT OF DELHI AT NEW DELHI

Judgment pronounced on: 31 March 2022 

 W.P.(C) 8779/2019, 

CM APPLs. 36308/2019 & 44738/2019

 THE INDIAN HOTELS COMPANY LTD. Vs  UNION OF INDIA AND ORS.

CORAM:  MR. JUSTICE YASHWANT VARMA 

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What is difference between abandonment of contract and breach of the contract?

 It is fundamental to the Law of Contract that whenever a material alteration takes place in the terms of the original contract, on account of any act of omission or commission on the part of one of the parties to the contract, it is open to the other party not to perform the original contract. This will not amount to abandonment. Moreover, abandonment is normally understood, in the context of a right and not in the context of a liability or obligation. A party to a contract may abandon his rights under the contract leading to a plea of waiver by the other party, but there is no question of abandoning an obligation. In this case, the Appellant refused to perform his obligations under the work-order, for reasons stated by him. This refusal to perform the obligations, can perhaps be termed as breach of contract and not abandonment. {Para 19}

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 556 of 2012

Decided On: 30.03.2022

 Shripati Lakhu Mane Vs.  The Member Secretary, Maharashtra Water Supply and Sewerage Board and Ors.

Hon'ble Judges/Coram:

Hemant Gupta and V. Ramasubramanian, JJ.

Author: V. Ramasubramanian, J.

Citation: MANU/SC/0382/2022

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When should a party prove loss or damages for breach of contract if there was a contract for grant of liquidated damages?

 Mr. Raheja's contention that HPCL was not required to either plead or prove any loss is difficult to accept. In Kailash Nath Associates v. Delhi Development Authority (supra), the Supreme Court had referred to Section 74 of the Indian Contract Act, 1872 and had held as under:—

“43. On a conspectus of the above authorities, the law on compensation for breach of contract under Section 74 can be stated to be as follows:

43.1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the court cannot grant reasonable compensation.

43.2. Reasonable compensation will be fixed on well-known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.

43.3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the section.

43.4. The section applies whether a person is a plaintiff or a defendant in a suit.

43.5. The sum spoken of may already be paid or be payable in future.

43.6. The expression “whether or not actual damage or loss is proved to have been caused thereby” means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.

43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application.”  {Para 52}

53. HPCL had neither pleaded that it was not feasible to establish the loss nor had led any material to establish that it had suffered loss on account of non-supply of ethanol by DSM. There is also no pleading to the effect that ethanol was otherwise not readily available or available at a price higher than as agreed between DSM and HPCL. DSM's contention that HPCL had failed to establish any loss was contested on an erroneous premise that HPCL was not required to establish the same.

54. In the given circumstances, this Court is of the view that the award of Rs. 88,14,785/- in favour of HPCL, is not sustainable.

In the High Court of Delhi at New Delhi

(Before Vibhu Bakhru, J.)

O.M.P. (COMM) 164/2020 and I.A. No. 2870/2015

Hindustan Petroleum Corporation Ltd.  Vs Dhampur Sugar Mills Ltd.

O.M.P. (COMM) 164/2020, I.A. No. 2870/2015 and O.M.P. (COMM) 190/2020

Decided on January 6, 2022

Citation: 2022 SCC OnLine Del 42

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Whether a party is entitled to recover liquidated damages for breach of contract if waived it at the time of the first extension?

This brings us to the waiver. It may be noted that ONGC waived liquidated damages twice before giving extension with pre-estimated damages. The approach of the Arbitral Tribunal was to hold that once liquidated damages were waived in the first extension, subsequent extension could not be coupled with liquidated damages unless a clear intention flowed from the contract; while this Court recognizes the autonomy of the party to engage in contractual obligation. Such obligation must be contracted in clear terms. From the aforesaid discussion, it is clear that the promisee (ONGC) waived the liquidated damages initially and the same cannot be imposed, unless such imposition was clearly accepted by parties. In this case, the interpretation of the Arbitral Tribunal could not be faulted as being perverse, for the reasons stated above.

 In the Supreme Court of India

(Before N.V. Ramana, C.J. and Surya Kant, J.)

Civil Appeal Nos. 2826-2827 of 2016

Welspun Specialty Solutions Limited (Formerly Known As Remi Metals Gujarat Ltd.) VsvOil and Natural Gas Corporation Ltd.

Decided on November 13, 2021

Citation: 2021 SCC OnLine SC 1053

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Whether the aggrieved party can claim specific performance in case of anticipatory breach of contract?

It is settled in law that where a party to a contract commits an anticipatory breach of the contract, the other party to the contract may treat the breach as putting an end to the contract and sue for damages, but in that event he cannot ask for specific performance. The other option open to the other party, namely, the aggrieved party, is that he may choose to keep the contract alive till the time for performance and claim specific performance but, in that event, he cannot claim specific performance of the contract unless he shows his readiness and willingness to perform the contract.

Supreme Court Of India

SABYASACHI MUKHARJI, M. H. KANIA AND S. RANGANATHAN, JJ.

Jawahar Lal Wadhwa and anotherAppellants v.Haripada ChakrobertyRespondent.

Civil Appeal No. 2678 of 1985

14th October, 1988.

 Citation: AIR1989SC 606, 1989(1)ARBLR403(SC ), JT1988(4)SC 138, 1988(2)SC ALE1033, (1989)1SC C 76, [1988]Supp3SC R513,MANU/SC/0208/1988,1988 ALLMR ONLINE 577 (S.C.)

1989(1)UJ111

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Whether housing society can terminate development contract with developer if he fails to pay transit rent?

  The defaults by the Developer have undoubtedly caused immense prejudice and harm to the members of the Society. The hardship to the members is real and immediate; the so-called hardship to the Developers is notional. When it spent in the

project, this was no altruism or charity. It was an investment toward great profit. Every investment involves risk. The Developer gambled on the project. Receiving monthly rent is not a sop, not a matter of ‘convenience’. It is a matter of survival. Therefore, the non-payment of dues, the delays in project completion, and not paying transit rent for months together speaks to an inherent, and constantly growing, social injustice. It should not be allowed to continue. Therefore, apart from the exceptionally strong prima facie case that the Society makes

out, the ‘balance of convenience’ is decidedly in its favour.

 The society’s members

agree to this upheaval, to move out altogether, to separate from each

other while their new homes are built. The promise to them is that

they will be looked after and provided for while their new homes are

being built. Days, weeks, months and years pass; the members do not

receive the promised rent. Thus begins the downward slide. The

promised homes are delayed, then delayed further, and then delayed

even further. This cuts at the root of the initial entrustment. A

development project for a society demands commitment, fidelity,

respect and honesty. When these begin to disappear, the contractual

relationship collapses. Where there was anticipation and confidence,

there is now just bitterness, disappointment and despair. There is a

breakdown of confidence, and there is only distrust. Loss of faith and

confidence on account of contractual violations and breaches by a

developer are sufficient grounds to find for the society and against the developer. Gopi Gorwani v Ideal Cooperative Housing Society Ltd & Ors, 2013 SCC OnLine Bom 1967. Indeed, I would go a step further. There is urgency for  the society. Therefore, the slightest delay in project completion, unless specifically accepted by the society, and even one single default in payment of transit rent or other dues is actually sufficient to warrant a termination. There is no such thing in these matters as ‘substantial compliance’. That is not the principle of obligations in the realm of private law.

REPORTABLE

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

IN ITS COMMERCIAL DIVISION

COMM ARBITRATION PETITION (L) NO. 74 OF 2020

Rajawadi Arunodaya Co-op Hsg Soc Ltd Vs  Value Projects Pvt Ltd.,

CORAM : G.S.Patel, J.

DATED : 15th March 2021

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Whether promisee will have the right to put an end to contract if the contract is executed and there is no fundamental breach of contract?

 What is at once clear is that this clause provides for the promisee's right to put an end to the contract. The breach referred to therein, since it provides for the consequence of cessation of the contract, must be a breach of a fundamental or essential term of the contract. First of all, this right can be availed of by the promisee only so long as the contract remains "executory" and not when the contract is "executed". So long as the promisor is yet to perform any of his obligations under the contract or make good his representation or assurance given in the contract, the promisee retains his right to terminate the contract or treat it as having come to an end; and this right he can exercise only when the failure of the promisor is in respect of either performance of an essential obligation or making good of an essential representation or assurance. In the present case, the promisor, i.e. the Petitioner, had fully performed his obligations under the contract; he had carried out and fulfilled each of his commitments made in clause 5 of the deed. No doubt, as we have noted above, there was a further assurance on his part (clause 3) that he would not in future "write any letter or communication or complaint to any police authority/ies and/or any other judicial, quasi-judicial authority or statutory authority or any person or entity complainant about the subject matter of the present deed." The essence of this term was that the matter of the Petitioner's original complaint before EOW regarding the alleged forgery by the Respondent of the former's signature on the Placement Instruction of 15 November 2005 was finally closed and not reopened. It can, in the first place, be hardly said that this matter was reopened when the emails insinuating the Respondent's earlier 'not so straight' dealing or calling him a "forger" were addressed by the Petitioner's wife. This was, assuming that it could at all be called a breach of the settlement, no fundamental breach or failure to perform an essential obligation or make good an essential representation or assurance, entitling the Respondent to treat the contract of settlement as having come to an end.

 IN THE HIGH COURT OF BOMBAY

Arbitration Petition No. 167 of 2015

Decided On: 19.05.2020

 Jackie Kukubhai Shroff  Vs.  Ratnam Sudesh Iyer

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Whether seller can forfeit earnest amount on breach of contract without pleading and proving loss?

In view of the above and having regard to the fact that a huge amount has been paid under the Agreement to Sell, it cannot be treated as earnest money. Besides in Kailash Nath (supra), the Supreme Court has held that forfeiture of earnest money has to be in accordance with Section 74 of the Indian Contract Act. The Court has held that without any loss, forfeiture of a huge amount would be arbitrary. Under Section 74, forfeiture of entire earnest money can be upheld only if the damage or loss is difficult or impossible to prove. This is not the case here. Defendants claim that they are entitled to forfeit as the Plaintiff is in breach and the terms of the contract allow forfeiture. The earnest money cannot also be considered to a genuine pre-estimation of damages, as it cannot be said that damage or loss is incapable of being proved. Notably, damage or loss has not even been pleaded and therefore, even if the amount received by the Defendants is accepted to be earnest money, the forfeiture of the entire amount is impermissible. The Defendants contention that the question of damage and loss requires to be proved by leading evidence, cannot be accepted. It is settled law that evidence can be permitted only for the facts stated in the pleadings. Since, the Defendants have not pleaded any loss caused to them on account of breach of Contract by the Plaintiff; there is no ground for framing issues in the present case and affording an opportunity to the Defendants to lead evidence.

IN THE HIGH COURT OF DELHI

CS (OS) 143/2018

Decided On: 22.04.2019

 Versatile Commotrade Private Limited  Vs. Kesar Devi and Ors.

Hon'ble Judges/Coram:

Sanjeev Narula, J.

Citation: AIR 2019 Delhi 155

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Whether a plea can be taken in argument in appeal in absence of pleading?

As far as argument of discrimination is concerned, there are no foundational facts in support of this argument. No such plea was taken either before the AFT or in the instant appeal. Only with the additional documents, communication dated February 6, 2014 is enclosed which the Appellant has received under the Right to Information Act, 2005 in respect of Surg Cdr Haresh Maini. On the basis of this document, oral submission was made at the time of arguments. It is not known as to under what circumstances recovery of proportionate cost was made in his case. Moreover, in the absence of pleadings, the Respondents did not have any opportunity to explain the same. Therefore, such a plea cannot be allowed in the facts of this case.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 1491 of 2018 (Arising out of Diary No. 35797 of 2017)

Decided On: 01.02.2018

Ashwini Kumar Handa Vs. Union of India (UOI) and Ors.

Hon'ble Judges/Coram:

A.K. Sikri and Ashok Bhushan, JJ.

Citation: 2018(6) MHLJ 25

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Whether court should grant compensation for breach of contract if there is no loss to other side?

 In my opinion there is also a legal issue on the basis of which this appeal has to be allowed and the suit for recovery filed by the appellant/plaintiff has to be decreed. This is because of the provisions of Sections 73 and 74 of the Indian Contract Act, 1872. In law merely because there is a breach of contract such breach is not actionable unless because of the breach loss is caused to the aggrieved party. There can be forfeiture of an amount paid under a contract only when the aggrieved party is caused loss. Two relevant judgments in this regard are the judgments of the Constitution Bench of the Supreme Court in the case of Fateh Chand Vs. Balkishan Dass AIR 1963 SC 1405 and the recent judgment of the Supreme Court in the case of Kailash Nath Associates Vs. Delhi Development Authority and Another, (2015) 4 SCC 136. The relevant paras in the judgment in the case of Kailash Nath Associates (supra) are paras 34, 43 and 43.1 to 43.7 and these paras read as under:-

"34. In Fateh Chand v. Balkishan Das, this Court held: "The section is clearly an attempt to eliminate the somewhat elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages andstipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty.....

* * * Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty. We are in the present case not concerned to decide whether a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of "actual loss or damages"; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach.(At page 526, 527) * * *Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties pre-determined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrieved party claims relief as a Plaintiff. The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for forfeiture of any property by way of penalty, the court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The jurisdiction of the court is not determined by the accidental circumstance of the party in default being a Plaintiff or a Defendant in a suit. Use of the expression "to receive from the party who has broken the contract" does not predicate that the jurisdiction of the court to adjust amounts which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract. The court has to adjudge in every case reasonable compensation to which the Plaintiff is entitled from the Defendant on breach of the contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach."

xxxxx xxxxx xxxxx

43. On a conspectus of the above authorities, the law on compensation for breach of contract Under Section 74 can be stated to be as follows:

43.1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.

43.2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.

43.3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.

43.4. The Section applies whether a person is a Plaintiff or a Defendant in a suit.

43.5. The sum spoken of may already be paid or be payable in future.

43.6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded. 43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application."

(underlining added)

8. In the present case as is seen from the admitted facts on record that the respondent/defendant neither as per its written statement nor as per its evidence led, ever pleaded and proved that any loss has been caused to the respondent/defendant on account of the failure by the appellant/plaintiff to take dealership of the respondent/defendant. Therefore even assuming that there is some breach of contract on the part of the appellant/plaintiff, yet since no loss has been caused to the respondent/defendant which is pleaded and proved, therefore in accordance with the ratio of the judgments of the Supreme Court in the cases of Fateh Chand (supra) and Kailash Nath Associates (supra), the respondent/defendant could not have forfeited the total amount of Rs.6,25,000/- deposited by the appellant/plaintiff with the respondent/defendant.

Delhi High Court

M/S Grover Tankers Investment vs M/S Otc Exchange Of India on 15 October, 2018

CORAM:

HON'BLE MR. JUSTICE VALMIKI

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Whether person aggrieved by breach of contract is required to prove that actual loss or damage was suffered by him?

 It can thus be seen that, in every case of breach of a contract, the person aggrieved by the breach, is not required to prove the actual loss or damage suffered by him, before he can claim a decree and the Court is competent to award reasonable compensation in case of breach, even if, no actual damage is "proved", to have been suffered in consequence of the breach of contract. But the expression "whether or not actual damage or loss is proved to have been caused thereby", as appearing in the said section is intended to cover different types of contracts, which come before the Courts. In case of some contracts, it may be impossible for the Courts to asses compensation, arising from such breach. In such cases, the section dispenses with the proof of such loss or damage and the Court can grant the compensation in terms of the liquidated damages, if the sum named by the parties is regarded as a genuine pre-estimate of such loss. 

IN THE HIGH COURT OF BOMBAY AT GOA

Appeal Under Arbitration Act No. 8 of 2016

Decided On: 10.04.2018

Titagarh Wagons Limited Vs. Chowgule and Company Private Limited

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Supreme Court: Basic principles for ascertaining limitation for filing of counter claim

10. A perusal of the said section clearly shows that a counter claim is required to be treated as a separate suit and therefore the period of limitation would be three years from the date of accrual of the cause of action.

11. Similarly, Order VIII Rule 6-A of the Code of Civil Procedure provides that a counter claim shall be treated as a plaint and is governed by the rules applicable to plaints.

12. We may also draw attention to Jag Mohan Chawla and Anr. v. Dera Radha Swami Satsang and Ors. MANU/SC/0565/1996 : 1996 (4) SCC 699 wherein it has been held by this Court in paras 4 & 5 that the purpose of introducing Order VIII Rule 6-A was to avoid multiplicity of proceedings and a counter claim expressly is treated as a cross-suit with all the indicia of pleadings as a plaint including the duty to aver the cause of action and also payment of the requisite court fee.

13. From a reading of the decision rendered by this Court as well as the provisions of the Limitation Act and the Code of Civil Procedure, it is quite clear that in so far as the present appeal is concerned, the cause of action had accrued in favour of the Respondent on the date of the breach of contract i.e. 06.03.1996 or before that. For the purposes of deciding the present appeal, we are taking the later date i.e. 06.03.1996 as the date of accrual of the cause of action in favour of the Respondent.

IN THE SUPREME COURT OF INDIA

C.A. No. 5886 of 2006

Decided On: 22.09.2016

Thomas Mathew Vs. The Construction Engineer, K.L.D.C. Ltd.

Hon'ble Judges/Coram:

Madan B. Lokur and N.V. Ramana, JJ.

Citation:(2018) 12 SCC 560

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Whether damages for breach of contract can be assessed on basis of unilaterally projected profitability in loan application?

Exhibit 'C' was a loan application, submitted by the Appellant to the WBIDC. There is no evidence that it was prepared together with the Respondent. The intent and purpose of a loan application is entirely different, relevant only for the purpose of the borrower vis-à-vis the lender. The most fundamental characteristic a prospective lender will want to examine in a loan application are assessment of the Credit History of the Borrower, Cash Flow History and Projections for the Business, Collateral that is Available to Secure the Loan and Character of the Borrower. The profitability projections in such an application are only broad estimates based on assumptions and presumptions of the borrower intended to convince the lender of the viability of its project, in absence of which the loan application itself may not be considered. The Appellant's projections in it of assumed estimated profitability for viability of the project also went completely awry from its own admission that there was no likelihood of profit in the next 5 to 6 years. Viability of the project for sanction of loan cannot lead to an automatic presumption of profits, in the facts of the case, especially when there is evidence that the Appellant did not even deploy manpower in accordance with the projections made by it in the loan application. It was not sanctioned on basis of the assumption of the Appellant for earning profits. The loan was sanctioned by the WBIDC on basis of the techno-economic feasibility report by WEBCON Exhibit 'F1'. The loan application, after consideration, lost its independent identity and got subsumed in Exhibit 'F1'. Annexure 'M' to the plaint containing the projected estimated profitability was only a reproduction of Exhibit 'C'. The primary document was Exhibit 'F1', which took into consideration Exhibit 'C' also. The former being inadmissible in evidence, as not having been proved in accordance with law, the Appellant cannot seek to prove indirectly what it has been unable to prove directly. The conclusion of the appellate court that Exhibit 'F-1' being the primary document, the claim for loss of anticipated profits on basis of Exhibit 'C' was unsustainable, cannot be faulted with.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 1168 of 2007

Decided On: 19.06.2017

 Kanchan Udyog Limited Vs.  United Spirits Limited

Hon'ble Judges/Coram:

Ranjan Gogoi and Navin Sinha, JJ.

Citation :(2017) 8 SCC 237

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Whether one party to contract can be granted damages for both reliance loss and expectation loss?

 That leaves the question with regard to reliance loss and the expectation loss. Whether the two could be maintainable simultaneously or were mutually exclusive? In Pullock & Mulla, 14th Edition, Volume II, page 1174, the primary object for protection of expectation interest, has been described as to put the innocent party in the position which he would have occupied had the contract been performed. The general aim of the law being to protect the innocent party's defeated financial expectation and compensate him for his loss of bargain, subject to the Rules of causation and remoteness. The purpose of protection of reliance interest is to put the Plaintiff in the position in which he would have been if the contract had never been made. The loss may include expenses incurred in preparation by the innocent party's own performance, expenses incurred after the breach or even pre-contract expenditure but subject to remoteness. The following passage from the same is considered appropriate for extraction:

No Recovery for Both, the Expectation Loss and the Reliance loss.

Although the Rules as to damages seek to protect both the expectation and the reliance interests, the innocent party cannot ordinarily recover both expectation loss, viz., loss of profit, and reliance loss, viz., expenses incurred in reliance on the promise; that would involve double counting. He has to choose between the two measures.

However, he cannot claim reliance losses to put himself in a better position that if the contract had been fully performed: else, the award of damages for reliance losses would confer a windfall on the Plaintiff, and would increase the damages in proportion to the claimant's inefficiency in performance, rather than in proportion to the gravity of the breach, and probably of normal principles of causation. In such cases, therefore, the Plaintiff can recover the loss on account of the wasted expenditure or outlay only to the extent of the expected gain; and the onus of proving lies on the party committing the breach to show that the reliance costs (or any part of them) would not have been recouped, and would still have been wasted, had the contract been performed.

29. In C & P Haulage (supra), which considers Cullinane (supra) also, it has been observed as follows:

The law of contract compensates a Plaintiff for damages resulting from the Defendant's breach; it does not compensate a Plaintiff for damages resulting from his making a bad bargain. Where it can be seen that the Plaintiff would have incurred a loss on the contract as a whole, the expenses he has incurred are losses flowing from entering into the contract, not losses flowing from the Defendant's breach. In these circumstances, the true consequence of the Defendant's breach is that the Plaintiff is released from his obligation to complete the contract-or in other words, he is saved from incurring further losses. If the law of contract were to move from compensating for the consequences of breach to compensating for the consequences of entering into contracts, the law would run contrary to the normal expectations of the world of commerce. The burden of risk would be shifted from the Plaintiff to the Defendant. The Defendant would become the insurer of the Plaintiff's' enterprise. Moreover, the amount of damages would increase not in relation to the gravity or consequences of the breach but in relation to the inefficiency with which the Plaintiff carried out the contract. The greater his expenses owing to inefficiency, the greater the damages.

30. In view of the conclusion, that the Appellant was not entitled to any expectation loss towards anticipated profits, for reasons discussed, any grant of reliance loss would tantamount to giving a benefit to it for what was essentially its own lapses. There are no allegations of any deficiency in the plant. 

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 1168 of 2007

Decided On: 19.06.2017

 Kanchan Udyog Limited Vs.  United Spirits Limited

Hon'ble Judges/Coram:

Ranjan Gogoi and Navin Sinha, JJ.

Citation :(2017) 8 SCC 237

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Whether it is permissible to recover compensation in case of void contract?

“6. ….. The principle is that the provisions of Section 175(3) of the Government of India Act, 1935 or the corresponding provisions of Article 299(1) of the Constitution of India are mandatory in character and the contravention of these provisions nullifies the contracts and makes them void. There is no question of estoppel or ratification in such a case. The reason is that the provisions of Section 175(3) of the Government of India Act and the corresponding provisions of Article 299(1) of the Constitution have not been enacted for the sake of mere form but they have been enacted for safeguarding the Government against unauthorised contracts. The provisions are embodied in Section 175(3) of the Government of India Act and Article 299(1) of the Constitution on the ground of public policy — on the ground of protection of general public —and these formalities cannot be waived or dispensed with. If the plea of the respondent regarding estoppel or ratification is admitted, that would mean in effect the repeal of an important constitutional provision intended for the protection of the general public. That is why the plea of estoppel or ratification cannot be permitted in such a case. But if money is deposited and goods are supplied or if services are rendered in terms of the void contract, the provisions of Section 70 of the Indian Contract Act may be applicable. In other words if the conditions imposed by Section 70 of the Indian Contract Act are satisfied then the provisions of that section can be invoked by the aggrieved party to the void contract. The first condition is that a person should lawfully do something for another person or deliver something to him; the second condition is that in doing the said thing or delivering the said thing he must not intend to act gratuitously; and the third condition is that the other person for whom something is done or to whom something is delivered must enjoy the benefit thereof. If these conditions are satisfied, Section 70 imposes upon the latter person the liability to make compensation to the former in respect of, or to restore, the thing so done or delivered. The important point to notice is that in a case falling under Section 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract, nor ask for damages for the breach of the contract, for the simple reason that there is no contract between him and the other person for whom he does something or to whom he delivers something. So where a claim for compensation is made by one person against another under Section 70 it is not on the basis of any subsisting contract between the parties but on a different kind of obligation. The juristic basis of the obligation in such a case is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or restitution. In Bibrosa v. Fairbairn, 1943 AC 32 Lord Wright has stated the legal position as follows: “... any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English Law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution”.

Reportable

Supreme Court of India

Orissa Industrial Infra.Dev. ... vs M/S Mesco Kalinga Steel Ltd. & Ors on 14 February, 2017

Bench: Arun Mishra, Amitava Roy

Citation:(2017) 5 SCC 86

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When it can not be presumed that plaintiff has committed breach of contract in suit for specific performance of contract?

We also do not find any merit in the
submission of the learned counsel for the appellant
when he contended that since the plaintiff was
insisting for execution of sale deed in relation to

some more portions, which did not form part of the
agreement and hence it should have been held that
the plaintiff committed the breach of the agreement
and not the defendant.
48) In our view, the two Courts below rightly
repelled this submission by holding that the plaintiff
did not claim any relief in relation to the property
which was not the subject matter of agreement and
confined his relief only in relation to the property
which formed the subject matter of agreement dated
05.03.1989. We thus find no good ground to differ
with this finding of the two Courts below. It was
rightly recorded.
 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No.2714 OF 2008
Mrs. A. Kanthamani
V
Mrs. Nasreen Ahmed 
Citation: AIR 2017 SC 1236

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Leading Supreme court judgment on Damages

Justice Bhagwati (as His Lordship then was)
speaking for the Bench examined the issue in great
detail in the light of law laid down by English and
Indian Courts. The learned Judge in his distinctive
style of writing after examining the entire case law on
the subject held that an expression "sum due"
occurring in Clause 18 would mean a sum for which
there is an existing obligation to pay in praesenti or in

other words which is presently payable and due and,
therefore, recovery of only such sums can be made
subject matter of Clause 18 which is presently payable
and due. It was held that a claim, which is neither
due and nor payable, cannot be made subject matter
of Clause 18. It was further held that Clause 18 does
not create a lien on other sums due to the contractor
or give to the purchaser a right to retain such sums
until his claim against the contractor is satisfied. It
was also held that a claim for damages for breach of
contract is not a claim for a sum presently due and
payable and the purchaser is not entitled in exercise of
the right conferred upon it under Clause 18 to recover
the amount of such claim by appropriating other sums
due to contractor.
39) Their Lordships approved the view taken by
Chagla C.J. in the case of Iron and Hardware (India)
Co. vs. Firm Shamlal and Bros., AIR 1954 Bom.423
by observing in para 11 as under.

“11. ………………………………………………….The same
view has also been taken consistently by different
High Courts in India. We may mention only a few
of the decisions, namely, Jabed Sheikh v. Taher
Mallik,AIR 1941 Cal 639 S. Milkha Singh v. N.K.
Gopala Krishna Mudaliar, AIR 1956 Punj 174 and
Iron and Hardware (India) Co. v. Firm Shamlal
and Bros., AIR 1954 Bom 423. Chagla, C.J. in the
last mentioned case, stated the law in these terms:
(at pp. 425-26)
In my opinion it would not be true to
say that a person who commits a breach of
the contract incurs any pecuniary liability,
nor would it be true to say that the other
party to the contract who complains of the
breach has any amount due to him from the
other party.
As already stated, the only right which
he has is the right to go to a Court of law and
recover damages. Now, damages are the
compensation which a Court of law gives to a
party for the injury which he has sustained.
But, and this is most important to note, he
does not get damages or compensation by
reason of any existing obligation on the part
of the person who has committed the breach.
He gets compensation as a result of the fiat
of the Court. Therefore, no pecuniary liability
arises till the Court has determined that the
party complaining of the breach is entitled to
damages. Therefore, when damages are
assessed, it would not be true to say that
what the Court is doing is ascertaining a
pecuniary liability which already existed. The
Court in the first place must decide that the
defendant is liable and then it proceeds to
assess what that liability is. But till that
determination there is no liability at all upon
the defendant.

This statement in our view represents the correct
legal position and has our full concurrence. A claim
for damages for breach of contract is, therefore,
not a claim for a sum presently due and payable
and the purchaser is not entitled, in exercise of the
right conferred upon it under clause 18, to recover
the amount of such claim by appropriating other
sums due to the contractor. On this view, it is not
necessary for us to consider the other contention
raised on behalf of the respondent, namely, that on
a proper construction of clause 18, the purchaser
is entitled to exercise the right conferred under
that clause only where the claim for payment of a
sum of money is either admitted by the contractor,
or in case of dispute, adjudicated upon by a court
or other adjudicatory authority. We must,
therefore, hold that the appellant had no right or
authority under clause 18 to appropriate the
amounts of other pending bills of the respondent in
or towards satisfaction of its claim for damages
against the respondent and the learned Judge was
justified in issuing an interim injunction
restraining the appellant from doing so.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.4814 OF 2016

M/s Gangotri Enterprises Ltd.  V Union of India & Ors. 
Dated:May 05, 2016.

Citation:(2016) 11 SCC 720

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Whether court should grant interest on damages for breach of contract of professional services?

The extent of damages for the breach of the contract of professional services agreed and failed to be rendered and for the consequent mental agony, distress and anguish would be analogous to the damages which are grantable for similar effects upon a tort.

 Courts have also granted interest upon the damages awarded. Under Section 3 of the Interest Act, 1978 interest can be allowed as much in proceedings for recovery of damages as in proceedings for recovery of debts. The interest which is allowable is at a rate not exceeding the current rate of interest from the date of the notice till the date of institution of the proceedings. Further interest from the institution of the Suit is payable under Section 34 of the Code of Civil Procedure at the reasonable rate on the principal sum from the date of Suit until the date of the decree and at the rate not exceeding 6% per annum from the date of decree until payment.

167. Interest has been granted on the amount of damages even under common law. In the case of Perry v. Sidney (supra) it has been observed the compensation for inflation be also accounted for "because damages carry interest". In the case of Hayes v. James (supra) a rough estimate of the true value of the property at the time of the sale which resulted in the action for damages itself came to be granted by way of interest. The rough estimate made by the trial Judge was upheld by the appeal Court as a fair assessment. The relevant portion of the Judgment at page 818 shows how the interest on the property came to be calculated roughly assessing the property's value thus:

The judge awarded the Plaintiffs 80% of the interest because of the true value of the marionette at the time of sale, and the Defendants argue that the proportion should have been much less. The judge was making a rough estimate which should not readily be criticized. However, the Defendants submit that it was wholly wrong. In my opinion the judge's assessment is fair. In considering how to apportion the original price of 65,000, he has deducted the 10,000 paid by the Plaintiffs from the overpayment for the marionette, leaving 55,000. 10,000 of that is the balance of the overpayment, which leaves 45,000 as the amount for which the Defendants are responsible. 45,000 is near enough 80% of 55,000.

168. In the case of Watts v. Morrow (supra) interest at the rate of 15% per annum on the award of damages based on the cost of the repairs was held appropriate.

169. Those interest rates are on the principal amount of damages for breach of contract calculated under all the heads including mental distress from the date of the Suit till the date of Judgment.

170. In the case of Nizam's Institute (supra) a lump sum payment of Rs. 10 lakhs only for pain and suffering came to be made with interest at 6% per annum from the date of the Judgment which is the interest allowable under Section 34 of the Code of Civil Procedure.

171. The claim of interest of 18% is at the usual commercial rate prevailing at the time of the filing of the Suit. Judicial notice must be taken of the fact that that rate prevailed until the end of 2007 after which the rate of commercial interest was lower. A reasonable rate of interest is required to be granted to the Plaintiffs for the 22 years period during which the Plaintiffs' Suit remained on the docket of this Court and the Plaintiffs remained indemnified. In this case interest @ 16% p.a. for the entire period from the date of the surgery of the original Plaintiff No. 2 till the date of this Judgment and thereafter @ 6% p.a. till payment/realization would meet ends of justice.

IN THE HIGH COURT OF BOMBAY

Suit No. 1101 of 1989

Decided On: 02.09.2011

 Padam Chandra Singhi and Ors.Vs. Dr. P.B. Desai and Ors.

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