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V. Alagar thevar Vs. the Madurai Municipality - Court Judgment

LegalCrystal Citation
SubjectCommercial;Limitation
CourtChennai High Court
Decided On
Case NumberAppeal No. 611 of 1968
Judge
Reported inAIR1975Mad77
ActsLimitation Act, 1963 - Sections 22 - Schedule - Article 113; Code of Civil Procedure (CPC) , 1908 - Sections 34
AppellantV. Alagar thevar
RespondentThe Madurai Municipality
Appellant AdvocateR.S. Venkatachari and ;V. Muthuperumal, Advs.
Respondent AdvocateK. Aagirisami, Adv.
DispositionAppeal partly allowed
Excerpt:
.....be possible for court which administers both justice and equity to uphold claim for interest on damages claimed - no justification for claim for interest on damages as it is not supported by contract and not maintainable in equity - interest is not claimable either in law or in equity - municipality not entitled to interest at rate of 12 per cent. - - action of the commissioner was approved by the council in its resolution dated 3-5-1962. an appeal by the defendant as provided for against such cancellation to thecouncil of the maduiai municipality was unsuccessful. an attempt was made by the madurai municipality to reauction the right to collect fees in the same market by conduct-ing an auction on 16-5-1962, but this proved abortive in the sense thai the defendant caused a writ..........he hesitantly contended that it was a claim made since the municipality was deprived of the suit claim during the period of the contract.6. when the commissioner of the municipality, in his proceedings dated 25-4-1962, cancelled the contract with effect from 26-4-1962, and when that was duly approved by a resolution of the council, an independent cause of action arose for the defendant to agitate for his rights if he was aggrieved. but the defendant took the cancellation without any objection and hesitation and on the other hand he was anxious that the municipality should not even re-auction the rights to collect the fees from the market as is seen from the fact that he came to court under article 226 of the constitution seeking for an appropriate writ against the municipality and.....
Judgment:

Ramaprasada Rao, J.

1. TheMadurai Municipality farmed out its right to collect fees in connection with the weekly shandies and annual cattle fair held within its jurisdiction for the year 1902-63. The auction was held on 6-3-1962 and the Council of the Madurai Municipality accepted the defendant's bid of Rs. 70,000 as it was the highest, by its resolution dated 16-3-1062. Admittedly the defendant was put in possession of the market from 1-4-1062. The defendant executed the agreement Ex. A-1, on 7-4-1962. The period during which the defendant could remain in the market for purposes of collecting the fees therefrom is admittedly one year commencing from 1-4-1962 and ending with 3-1-3-1963. For purposes of this case one or two salient clauses of the contract may be referred to. In particular, if the contractor fails to perform or observe any of the covenants in the said agreement it shall be lawful for the Municipal Council in addition to and without prejudice to its other rights and remedies, by notice in writing, to determine the agreement or the contract and on such determination the licence granted to the defendant shall cease. It is also provided that it is open to the Executive Authority of the Municipality or the Council of its own volition, on such cancellation, to resell or manage the market departmentally at the risk and cost of the licensee and the licensee (defendant) shall be liable to compensate all losses and damages arising therefrom as per Municipal accounts. It is the common case that the defendant in violation of the terms of Ex. A-1 collected a fee far in excess of the schedule of rates prescribed by the plaintiff and this gave a cause of action to the plaintiff to determine the licence and cancel the contract. Accordingly, the Commissioner, by his proceedings dated 25-4-1962, cancelled the contract with effect from 26-4-1062, and gave notice to the defendant that the caution deposit of Rs. 590 was being forfeited. Subsequently th? action of the Commissioner was approved by the Council in its resolution dated 3-5-1962. An appeal by the defendant as provided for against such cancellation to theCouncil of the Maduiai Municipality was unsuccessful. Thereafter the defendant did not question the right of me Council to so cancel the contract as above. An attempt was made by the Madurai Municipality to reauction the right to collect fees in the same market by conduct-ing an auction on 16-5-1962, but this proved abortive in the sense thai the defendant caused a writ petition to be filed in this court and thwarted the subsequent auction purchaser from effectively conduct-ing the weekly shandy and annual cattle fair. The fact, however, remains that notwithstanding the so-called reduction on 16-5-1962, the auction-purchaser, one Karuppanna Thevar, did not run the market which was run departmentally by the Municipality itself. In those circumstances the Municipality had to run the market till the period of the contract was over and at the end of the contract period the damages were reckoned as per the Municipal accounts in the following manner :

particulars of ClaimLease amount due from the defendant LessRs. 70.000-00Less 1.Amount remitted by the defendant as per M. R. No. 36653/3-3-62Rs.1,000-00 -do- as per M. R. No 26655/3-3-62Rs.1,000-00 -do- as per M. R. No. 40607/28-3-62Rs. 16,003-00 2.Amount collected departmentallyRs. 35,640-62Less; 10% departmental collection chargesRs. 3,563-05

BalanceRs.32,073-05

Net total of items 1 and 2Rs. 50,079-47 Less caution deposit forfeitedRs.500-00

Rs. 49.579-47BalanceRs. 20,420-53 Interest for the same from 1-4-63 to 10-6-65 for 2 yeare 2 months and ten days at 12% per annumRs. 5,377-53

TotalRs. 25,798-06

The Municipality after appraising the defendant of such damages sustained by it as a result of the wrong committed by the defendant claimed a sum of Rupees 20,420-53 as and towards actual damages and also interest thereon at the rate of 12 per cent per annum for a period of 2 years 2 months and 10 days amounting to Rs. 5,377-53. The suit is for the recovery of the said amount with interest.

2. The defendant in his written statement raised various contentions. He would state that the Commissioner had no right to cancel the lease and the contract itself was void because it was not signed by the Commissioner and that ir, any event the cancellation of the agreement was illegal, void and inoperative. The defendant's case is that far from he being liable to pay any amount by way of damages he is entitled to a refund of the sum of Rs. 17,505 which he paid in the course of his obtaining the contract as above. He has also made a counter claim for this and has paid the necessary court-fee thereon. In any event, the deduction of 10 per cent, as collection charges is said to be a claim without legal basis. The defendant also resisted the elain. for interest. On all these grounds the suit was existed.

3. The plaintiff filed a reply statement denying once again the contentions of the defendant and in particular the right to counter claim in the sum of Rs. 17,506 and maintaining that the account was proper.

4. On the above pleadings the following issues were framed :

1. Whether the contract between the plaintiff and defendant is a lease or licence?

2. Whether the contract is void for the reasons mentioned in the written statement?

3. Whether the Commissioner has got the right to terminate the contract in favour of the defendant?

4. Whether the defendant has committed breach of the terms of the contract?

5. Whether the cancellation of contract is legal and valid?

6. Whether the forfeiture of amountsdue to defendant is legal? 7.

Whether the suit as framed is notmaintainable?

8. Whether the plaintiff is entitled tothe interest?

9. Whether the plaintiff is entitled toany amount, if so. to what amount?

10. Whether the defendant is entitled to the amount claimed in the written statement?

11. Whether the plaintiff is not entitled to the collection charges of 10 per cent?

12. To what relief are the parties entitled?

Issue No. 1 was not pressed. On issues 2 to 6 the trial Judge held that the contract is valid and enforceable and found all the issues in favour of the plaintiff. On the question whether the cancellation of the contract was legal and whether the Municipality could forfeit the caution deposit, the learned Judge was of the view that the Municipality was in order in having cancelled the contract and forfeited the caution deposit. The 7th issue as regards the maintainability of the suit was not pressed. On the question whether the Municipality was entitled to interest, the learned Judge observed that as the learned counsel for the defendant did not argue that the plaintiff was not entitled to interest or collection charges, he was decreeing the suit for the amounts claimed under such heads as well. In the end, therefore, he decreed the suit with costs. As against this, the defendant has come up to this court in appeal.

5. Mr. R. S. Venkatachari, learned counsel for the appellant raised three contentions. The first one is that the cancellation of the contract was not in order and that in any event the suit is barred by limitation as it was filed on 10-6-1965, beyond a period of three years from the date of the cancellation of the contract, namely, 26-4-1962, and that in any event, the claim for interest which would be tantamount to damages over damages cannot be claimed. Mr. K. Alagiri-swami, the learned counsel for the Municipality, contended that it is not open to the defendant now to urge that the proceedings of the Commissioner and later ratified by the Council resulting in the cancellation of the contract, could again be agitated as proceedings resulting in an illegal order as the defendant did not take independent proceedings questioning the right of the Council to cancel the contract or its competency in the matter. Secondly, it was said that the suit is not barred by limitation as the period of the contract ended with 31-3-1963 and that the damages were reckoned as on the last date when the defendant ought to have performed his obligation under the contract and thus reckoned the suit filed on 10-6-1965 is well within time. As regards the claim for interest he hesitantly contended that it was a claim made since the Municipality was deprived of the suit claim during the period of the contract.

6. When the Commissioner of the Municipality, in his proceedings dated 25-4-1962, cancelled the contract with effect from 26-4-1962, and when that was duly approved by a resolution of the Council, an independent cause of action arose for the defendant to agitate for his rights if he was aggrieved. But the defendant took the cancellation without any objection and hesitation and on the other hand he was anxious that the Municipality should not even re-auction the rights to collect the fees from the market as is seen from the fact that he came to court under Article 226 of the Constitution seeking for an appropriate writ against the Municipality and injuncting it from re-auctioning the right to farm out the collections. This specific attitude of the defendant obviously would estop him from contending that the cancellation of the contract was not within the power and the statutory capacity of the executive authority of the Municipality, namely, the Commissioner or the Council of the Madurai Municipality. We are unable, therefore, to accept the first contention of Mr. R. S. Venkatachari that it is open to the defendant in this action filed by the Municipality for recovery of damages, to raise a contention which he ought to have raised in another independent action, which he failed to avail of in the appropriate forum and at the appropriate time.

7. If, therefore, the Municipality had the right to cancel, it had two venues of action open to it. Firstly, it could either re-auction the right to collect the fees from the market or conduct the market departmentally itself. It is seen from the record that the Municipality attempted to re-auction the right by conducting such an auction on 16-5-1962. But, as we have already stated, it was at the instance of the defendant the said attempt was thwarted and the defendant is unable to state whether any other person did conduct the weekly shandy under any authority known to law and with the express or implied consent of the Municipality. As a matter of fact, it is not disputed that it was the Municipality which departmentally ran the market for the unexpired portion of the contract and it is in this sense the contention of Mr, R. S. Venkatachari that the offer of Rs. 30,500 made by the second bidder at the auction held on 16-5-1962, should also be taken into consideration for purposes of reckoning the quantum of damages, sinks into insignificance. There is of course some force in the contention of Mr. R. S. Venkatachari that if the Municipality deemed it fit to run the market by itself auctioning the right for a second time, then the amount realised in that second auction should also enter into thecomputation for purposes of arriving at the quantum of damages which the Municipality could claim ultimately from the defendant. But such is not the situation in the instant case. It is therefore unnecessary for us to go into the contention for hypothetical purposes.

8. The second contention of Mr. R. S. Venkatachari is that the suit is barred by limitation. This again is an argument which does not see the realities of the jural relationship between the parties before us. The contract in question is the result of an attempt on the part of the Municipality to farm out the right to collect fees from the weekly shandy and annual cattle fair in the market owned and possessed by the Municipality. Such contract enures for a period of one financial year. It is not disputed that the financial year during which the defendant could have otherwise gained the right to collect the fees but for his lach and non-observance of the covenants of the contract would be for the year commencing from 1-4-1962 and ending with 31-3-1963. We have already referred to the fact that it was due to an act of omission or commission on the part of the defendant in the matter of working out of the agreement Ex. A-1 that resulted in the cancellation of the contract by the Municipality. Nevertheless such contracts cannot be understood and interpreted as contracts which automatically give rise to the other party to institute an action for recovery of damages based on that singular act of omission or commission on the part of the wrongdoer. There is a marked difference between actions for damages and civil actions for damages for breach of contract which do not range over a particular period during which period certain obligations are on the shoulders of the performing party to do and see that he complies with such obligations till the period of the contract is over. In case where action for damages is laid, the act or omission complained of, no doubt, gives rise to a prima facie cause of action. But in some cases the damage consequent upon the act or omission is actionable forthwith. There is a decipherable difference between the two actionable claims as above. To illustrate, wrongs such as trespass on immovable property, infringement of copyright or trade mark or any other conceivable privilege etc. are actionable per se and the cause of action for a suit for damages accrues at that time and in that situation. But when the purpose of a contract is spread over a period and during such a period the injury which is continuing inflicts damages on the party who flies the suit ultimately for realisation of damages, then the action is maintainable only in respect of thetotal damage suffered by that person by reason of the wrong of the wrongdoer at the end of the period of the contract. Undoubtedly an action will lie every time damage accrues from the act. The normal test which courts may adopt to differentiate between an ordinary wrong and a continuous wrong is often attributed to the contractual responsibility of the wrongdoer for the state of things from which the damage arises. In the instant case the period of the contract ends with 31-3-1963. One cannot speculate whether the Municipality will sustain damages or not until the Municipal accounts are looked into and settled by the end of the financial year. This is one reason why in cases where continuing injury is perceptible and if for such injury a person is responsible as a wrongdoer, then the initial wrong committed by him in the matter would not automatically spring a cause of action and compel the other party prejudiced to institute an action straightway. The other party who expects performance of the contract during the period of the contract suffers the damage during the whole time, reckons it at the end of the period of contract and quantifies it with reference to the relevant data available at the end of such period.

9. If the above principle is borne in mind, then the contention of Mr. R. S. Venkatachari that the suit is barred by limitation cannot be countenanced. The period of the contract ends with 31-3-1963. It is only on that date, as is seen even from the covenants in Ex. A-1, the Municipality, with reference to its accounts, can reasonably ascertain the actual damage suffered by it. It is not impossible to imagine that at the end of that period the Municipality might gain as well by collecting more fees than the bid amount of the wrongdoer. In such cases the Municipality cannot have the right to sue, since it has not suffered any damage. This also is another feature which aids the principle already referred to by us that it is only on 31-3-1963, which is the ultimate end of the period of performance of the contract, that vests in the Municipality the real and effective cause of action for it to sue for damages if any suffered by it. Time, therefore, begins to run against the Municipality not on the date when the contract was cancelled, as alleged by the learned counsel for the appellant, but on the date of expiry of the period of contract, namely, the end of the financial year. Thus reckoned, the suit filed on 10-6-1965 is well within time and the plea as to bar of limitation is therefore not sustainable.

10. The last contention of the learned counsel for the appellant has some force. Mr. Alagiriswami is unable tojustify the claim of the Municipality to recover interest on damages at the rate of 12 per cent per annum on the reckoned amount, which obviously has reference to the actual damage suffered by the Municipality in relation to its Municipal accounts. The entire principle on which actions for damages could be initiated and ultimately sustained by courts of law is to avoid unjust enrichment of either of the parties to the litigation, Unless there was consensus ad idem between the parties in the matter of payment of such interest over such hypothetical damages which a party might suffer by reason of the breach of the same by one or the other it would not be possible for a court which administers both justice as well as equity to uphold the claim for interest on the damages claimed. Mr. Alagiri-swami was unable to point out to us any authority to sustain the claim under this head. He has not even referred to any express covenant in Ex. A-1, nor has he referred us to any such agreement by necessary implication which would entitle the Municipality to claim a large sum of Es. 5,377-53 by way of interest. We are satisfied that there is no justification for the claim for interest on damages as it is not supported by contract and as it is not maintainable in equity. The learned Subordinate Judge peripherily considered this item and awarded interest on the ground that the learned counsel for the defendant did not argue that the plaintiff was not entitled to interest or collection charges. But having regard to the fact that the learned counsel for the appellant argued before us that such interest is not claimable either in law or in equity, we are satisfied that the Municipality is not entitled to such interest. The appeal is therefore partly allowed. Each party will pay and receive costs according to their success in the appeal.


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