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Saraya Distillery Vs. Union of India and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration;Contract
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 4 of 1980
Judge
Reported inAIR1984Delhi360; 26(1984)DLT256; 1985RLR15
ActsIndian Contract Act, 1872 - Sections 73; Arbitration Act, 1940 - Sections 14
AppellantSaraya Distillery
RespondentUnion of India and anr.
Advocates: B.D. Dhawan and; Rekha Sharma, Advs
Cases ReferredUnion of India v. Tribhuwan Dass.
Excerpt:
.....- it was held that plaintiff was entitled to the difference between the contract price and the market price without accepting the factual purchase of the goods. - - he failed to supply the remaining stores inspire of extension of time on his request and and thus committed a breach of the contract. the arbitrator bad failed to determine the date of breach of the contract, the market rate prevalent on that date at the place of the breach, the award was, thereforee, erroneous and unsustainable. m/s harishchandra dwarkadas and another [1962]1scr653 :the two principles on which damages in such cases are calculated are well settled. as far (r)g possible, he who has proved a breach of a bargain to supply what be contract to get is to be placed, as far as money can do it, in as good a..........damages for noneupply of the goods would be the difference between the contract price and the market price of such goods at the time when the contract is broken. if there is no available market, at the place of delivery, the market, price at the nearest place or the price prevailing in the controlling market may be taken into consideration. (7) learned counsel for the contractor contended that before a party could claim damages he must go to the market, purchase the goods not supplied or short supplied and suffer actual loss. only then, argued the learned counsel, he would be entitled to damages. we do not agree. (8) section 73 of the indian contract act prescribes the method of assessing compensation due to a plaintiff suing upon a breach of contract. it says: 'when a contract has.....
Judgment:

G.C. Jain, J.

(1) This appeal is directed against the judgment of a learned single Judge of this court dated September 21, 1979. It was dismissed by us by means of a short order dared February 27, 1984. Now we proceed to give reasons for the said decision.

(2) M/S Saraya Distillery, the contractor agreed to supply 3, 87, 666 litres of rum to the respondent-Union of [email protected] Rs. 2. 13 per litre vide agreement dated August 14, 1972. The stores were to be delivered in 5 Installments-90,000 litres rum by 21-9-1972, 90,000 litres rum by 21-10-1972, 90,000 litres rum by 21-11-1972 80 21-11-1972 80 ,000 litres rum by 21-12-1972, and 37, 666 litres rum by 21-1-1973. The contractor supplied only 45,000 litres of rum out of the first lot. He failed to supply the remaining stores inspire of extension of time on his request and and thus committed a breach of the contract.

(3) The Union of India claimed a sum of Rs. 3, 35, 888.00 as damages. Out of this amount a sum of Rs. 4005.00 was claimed for loss suffered on account of repurchase of 16,020 litres of rum and the remaining amount as general damages. The contractor admittedly refuted this claim. In pursuant to an arbitration clause the dispute was referred to the decision of Dr. Bakhshish Singh, the sole arbitrator. He made an award on August 12, 1977 holding that the Union of India was entitled to recover only Rs. 72,600.66 from the contractor.

(4) Union of India thereafter made a petition (Suit No. 798-A of 1977) under sections 14 and 17 of the Arbitration Act for directing the arbitrator to file the award and the proceedings in the court and making the award a rule of the court. The award and proceedings were duly filed. On receipt of the notice of the filing of award the contractor filed objections (IA 196 of 1978) under sections 20 and 33 of the Arbitration Act for setting aside the award. It was averred that the Union of India had gone for the repurchase of the cancelled quantity and had thus elected to claim only repurchase loss which amounted to Rs. 4005.00 and thereforee, the claim for general damages was not maintainable. Even otherwise the Union of India having not actually purchased the remaining stores was not entitled to any damages. The arbitrator bad failed to determine the date of breach of the contract, the market rate prevalent on that date at the place of the breach, the award was, thereforee, erroneous and unsustainable. It was also averred that the arbitrator was guilty of judicial misconduct in taking upon the record certain documents filed by the Union of India after the conclusion of the arbitration proceedings.

(5) Union of India denied the averments. The objections did not find favor with the learned single judge who dismissed the same vide his impugned judgment and made the award a rule of the court.

(6) The normal rule for computing damages for noneupply of the goods would be the difference between the contract price and the market price of such goods at the time when the contract is broken. If there is no available market, at the place of delivery, the market, price at the nearest place or the price prevailing in the controlling market may be taken into consideration.

(7) Learned counsel for the contractor contended that before a party could claim damages he must go to the market, purchase the goods not supplied or short supplied and suffer actual loss. Only then, argued the learned counsel, he would be entitled to damages. We do not agree.

(8) Section 73 of the Indian Contract Act prescribes the method of assessing compensation due to a plaintiff suing upon a breach of contract. It says:

'WHEN a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things for such breach.'

(9) What the buyer is deprived of in the usual course of things by non delivery is the value of the goods at the time and place of the delivery, less price payable by him under the contract. This loss of value is the only natural result of the breach, the only kind of damage that ensues in the usual course of things. The quantum of damages on account of the breach of such contract would be difference between the contract price and the market price of the goods in question at the time when the contract is broken. The provisions contained in Section 73 do not envisage that the buyer must resort to actual purchase and suffer loss before claiming damages. It was so held in Ismail Sait & Sons v.Wilson & Co. Air 1919 Mad 1053. Similar view was taken in Vishwanath v. Amarlal Air 1957 M.B 190.

(10) The Supreme Court in the case of M/S Murlidhar Chiranjilal v. M/s Harishchandra Dwarkadas and another : [1962]1SCR653 :

'THE two principles on which damages in such cases are calculated are well settled. The first is that. as far (r)g possible, he who has proved a breach of a bargain to supply what be contract to get is to be placed, as far as money can do it, in as good a situation as if the contract had been performed; but this principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps : (British Westing house Electric and Manufacturing Company Limited v. Underground Electric Ry. Co. of London (1912) Ac 673. These two principles also follow from the law as laid down in S. 73 read with the Explanationn thereof. If, thereforee, the contract was to be performed at Kanpur it was the respondent's duty to buy the goods in. Kanpur and rate them to Calcutta on the date of the breach and if it suffered any damage thereby because of the raise in price on the date of the breach as compared to the contract price, it would be entitled to be reimbursed for the loss. Even if the respondent did not actually buy them in the market at Kanpur on the date of breach it would be entitled to damages on proof of the rate for similar canvas prevalent in Kanpur on the date of breach, if that rate was above the contracted rate resulting in loss to it. But the respondent did not any attempt to prove the rate for similar canvas prevalent in Kanpur on the date of breach. thereforee, it would obviously be not entitled to any damages at all, for on this state of the evidence it could not be said that any damage naturally arose in the usual course of things.'

(11) Learned counsel for the Contractor relied on a judgment of a learned single Judge of this court in Union of India v. M/S Tribhuwan Dass Lalji Patel : AIR1971Delhi120 . In this case it was observed that the Government can recover the loss only sustained by it and could not claim damages, if no loss was sustained. With respect we do not agree with this view. This is contrary to the observations made by the Supreme Court in M/s Murlidhar Chiranjilal (supra). A division bench of this court in All India Institute of Medical Sciences'^. Mis American Refrigeration Co. Ltd. AIR. 1982 Del 273 came to the conclusion that the case Union of India v. Tribhuwan Dass. (supra) was wrongly decided. We hereby overrule the decision in Union of India v. Tribhuwan Dass.

(12) Learned counsel for the contractor then contended that under clause XIV(7)(B) of the Conditions of contract Union of India was entitled to claim only the loose which it suffered on account of the repurchase of the stores not delivered and was not entitled to any general damages. We have examined clause XIV(7)(B). The right of repurchase under this clause is without prejudice to the right of the purchaser to recover damages for breach of the contract. thereforee, it cannot be said that damages were limited only to the amount of loss suffered on repurchase.

(13) Learned counsel for the contractor also urged that the breach took place on 31-3-1972 at Sardar Baggar Distt. Gorakhpur and there was not evidence before the arbitrator regarding the rate prevalent on that date at that place and, thereforee, the learned arbitrator erred in awarding the damages. A perusal of the award shows that the evidence was produced before the arbitrator showing the rates prevalent on various dated between 6th October 1972 and 28-1-1974. The learned arbitrator awarded the damages treating the lowest price as the market price. We find no illegality in the approach. Admittedly the breach took place on 31-3-1973. On 1-2-1972 the price as per award was Rs. 2.90 per litre. It related to Shri Krishan Goyndoya. This was a very good piece of evidence. inspire of this evidence the arbitrator fixed the market price at Rs. 2.34 per litre. The contractor can have no grievance.

(14) It was pointed out that Shri Krishan Goyndoya was not in Gorakhpur and thus there was no evidence to prove the price prevalent at Gorakhpur The arbitrator in the absence of any evidence regarding the prevalent price at Gorakhpur could take into consideration the market price at the nearest place.

(15) We find no merit in the appeal and dismiss the same with costs.


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