Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA No.596/2002
th
% 17 November, 2011
M/S. SICPA INDIA LIMITED ..... Appellant
Through: Mr. M.L. Mahajan, Advocate with
Mr. Gourav Mahajan, Advocate.
Versus
SHRI MANAS PRATIM DEB ..... Respondent
Through: Mr. Sandeep Bhuraria, Advocate.
CORAM:
HON’BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
VALMIKI J. MEHTA, J (ORAL)
1. The challenge by means of this Regular First Appeal under
Section 96 of Code of Civil Procedure, 1908 (CPC) is to the impugned
judgment of the trial Court dated 9.7.2002. By the impugned
judgment, the trial Court dismissed the suit of the appellant/plaintiff
filed for recovery by entitling the appellant to adjust an amount of
RFA No.596/02 Page 1 of 11
Rs.44,330/- payable to the respondent/defendant/employee and held
that the appellant was not entitled to recovery of Rs.3,95,170/- as
claimed in the plaint.
2. The facts of the case are that the
appellant/plaintiff/employer appointed the respondent/defendant as a
Sales Executive on 28.11.1994. The appellant/plaintiff company is
engaged in manufacture of specialized inks. The appellant/plaintiff
claims to have sent the respondent/defendant abroad for training twice
and for which two employment bonds dated 24.4.1995 and 24.1.1998
were got executed. As per the employment bonds, the
respondent/defendant was either bound to serve for a period of five
years or pay a sum of Rs.2 lacs if he left the services earlier. The
respondent/defendant tendered his resignation vide letter dated
21.2.2000 i.e. before the expiry of period of five years i.e. period of the
second bond dated 24.1.1998. The appellant/plaintiff therefore
enforced the two bonds and called upon the respondent/defendant to
make the payment of Rs.2 lacs for each of the bond besides claiming
an amount of Rs.17,290/- as notice period of 57 days and Rs.117/-
towards excess medical expenses reimbursed.
3. The respondent/defendant contested the suit and pleaded
that the clauses of the bonds in question were unfair, unjust and just
RFA No.596/02 Page 2 of 11
opposed to the public policy and therefore the same were not
enforceable. It was also pleaded that there was in fact no training
imparted to the respondent/defendant on both his trips which were
basically trips for dealing with the customers of the appellant/plaintiff.
It was also argued that bonds in question were taken just a few hours
before boarding in the plane and therefore the same were signed
without reading of the same and in a hurry. It is stressed that really
the so called training programmes were only business trips meant to
promote sales or deal with the customers. During the course of final
arguments, it was also argued that the period of first bond of five years
from 24.4.1995 had more or less come to an end because the period of
five years from the first bond would otherwise have come to an end on
24.4.2000 and the resignation was submitted on 21.2.2000. So far as
the second bond was concerned, it was argued that whatever were the
expenses incurred were more than fully recouped in the period of two
years of the service after the second bond was executed. It was
prayed that the suit be dismissed.
4. After the pleadings were complete, trial Court framed the
following issues:-
“1. Whether the plaintiff is entitled to a decree of a sum of
Rs.3,95,170/- with interest @ 18% p.a. pendente lite and
future? OPP
2. Whether the suit has not been signed and verified by a
RFA No.596/02 Page 3 of 11
competent person? OPD
3. Whether there is no cause of action? OPD
4. Reief.”
5. The trial Court has arrived at the following conclusions for
dismissal of the suit:-
(i) Clauses in question which are part of the employment
bonds are violative of Section 74 of the Contract Act, 1872 as they are
in the nature of penalty and hence the same cannot be enforced.
(ii) So far as the first bond is concerned, the same was more
or less complied with as the resignation is of February, 2000 and the
bond would have expired by April, 2000. So far as the second bond is
concerned, it was held that total expenses which were incurred for the
second trip were of Rs.67,596/- and which would have been recouped
by the period of two years of the service given after execution of the
second bond. In any case, the trial Court held that the
respondent/defendant was entitled to Rs.44,330/- as per the admitted
case of the appellant/plaintiff and which amount therefore can be
treated as adjusted for the claims against the second bond since the
expenses of the second trip were only Rs.67,596/-.
6. The trial Court has given the following conclusions and
findings in the impugned judgment and with which I completely agree:-
“It is further significant to note that for a period of 28 days
of training he was to serve the plaintiff for a period of 5
RFA No.596/02 Page 4 of 11
years and in default he was to pay a sum of Rs.2,00,000/-
with 18% p.a. interest in respect of breach of first bond.
Not only that Clause-8 of Bond dt.24.4.95 Ex.PW1/3 which
reproduced earlier provides that in case of subsequent
training the defendant has to execute a fresh bond to
serve the plaintiff company for a period of 36 months.
Though subsequent bond Ex.PW1/4 also provides that
defendant was to serve for another period of 5 years. On
second occasion when he was required to execute Bond
Ex.PW1/4 he was imparted the so called training of seven
days only which the defendant has refuted by saying that
he went there just to procure the business for the plaintiff
company.
It is submitted by the Ld. Counsel for the plaintiff
company that the defendant himself has submitted the bill
Ex.DW:1/P-1 when he went for training on 24.4.95 showing
the purpose of visit as Technical Training. He again
submitted the Bill Ex.DW:1/P-2 when he went for the
training for the second time on 24.1.98 again enumerating
the purpose of his visit as training. The defendant stated
in his statement that he mentioned these things in the bills
at the instance of Mr. N.K. Gupta the then President of the
plaintiff company. Thing remains that he was sent abroad
twice for the purpose of training on first occasion for 28
days and on second occasion for 7 days. But I have no
hesitation in coming to the conclusion that these bonds
were got executed from the defendant only on the date he
was to board the flight and was not given sufficient time to
go through these Bonds. These bonds amount to bonded
labour in perpetually where virtually an employee has no
bargaining power.
So far as the question regarding enforcibility of
these penalty clauses of the bonds are concerned, it is
appropriate to look into the legal position. There is no
doubt that these clauses are in the nature of the penalty
and Sec.74 of the Contract Act in applicable. The Hon’ble
Supreme Court in case Maula Bux Vs. Union of India 1969
(2) SCC 554 held that “if the forfeiture is of the nature of
penalty Sec.74 applies. Where-under the terms of contract
the party in breach has undertaken to pay a sum of money
or to forfeit a sum of money which he has already paid to
the party complaining of a breach of contract, the
RFA No.596/02 Page 5 of 11
undertaking is of a nature of a penalty.
xxxx xxxx xxxx xxxx
Ld. Counsel for the defendant also referred to AIR 1963
AP 312 and AIR 1987 SC 1260. The gist of the authorities
cited by the Ld. Counsel for the defendant is that while
invoking the penalty clause as per Sec.74 of the Indian
Contract Act, it is not necessary to award the
compensation stipulated in the agreement rather a
reasonable compensation is to be awarded irrespective
fact whether the party invoking the clause has actually
suffered the damages or not.
xxxx xxxx xxxx xxxx
Before proceeding further and taking clue from the
case of Narendra Singh (supra). I have no hesitation in
coming to the conclusion that these bonds were terrorem,
unconscionable and extravagant.
The first Employment Bond Ex.PW:1/3 was
executed on 24.4.95. As per this bond the defendant was
to serve the plaintiff company for a period of 5 years. The
period of 5 years came to an end on 23.4.2000. The
defendant served the plaintiff company upto 27.3.2000 so
virtually he has served the entire bond period and the
penalty clause cannot be invoked at all.
As per clause-8 of Employment Bond Ex.PW:1/3
in case the defendant undertakes another training when he
has executed the fresh Employment Bond which shall be
for a period of 36 months. The fresh Employment Bond is
Ex.PW:1/4, the same is dt. 24.1.98. In view of the terms
and conditions of Employment Bond Ex.PW:1/3 the
subsequent bond period should have been for 36 months
but this bond also was made for a period of 5 years
contrary to the terms and conditions stipulated in
Employment Bond Ex.PW:1/3.
Employment Bond Ex.PW:1/4 was executed on 24.1.98. It
could not have been for a period of 5 years in view of
clause-8 of Employment Bond Ex.PW:1/3. It should have
been for a period of 3 years that means this Bond would
have expired on 23.1.2001. The defendant served the
plaintiff company upto 27.3.2000 meaning thereby he was
to further serve for a period of 1 year.
In these circumstances it is to be seen as to what
reasonable compensation is to be awarded to the plaintiff
RFA No.596/02 Page 6 of 11
company. As I have already stated that there is no
question of invoking the penalty clause in respect of
Employment Bond Ex.PW:1/3 as the defendant has virtually
served the defendant for the entire period stipulated in
that bond. At the time of his second visit plaintiff company
incurred an expenditure of ` 67596/- as is proved from
Ex.DW:1/P-2. He was to serve for a period of 3 years
w.e.f.24.1.98. He served upto 27.3.2000 i.e. almost for a
period of 2 years. If this amount of ` 67596/- is divided by 3
then the amount for one year comes out to be ` 22532. He
has already served for 2 years meaning thereby that just
reasonable compensation shall be ` 22532/-.
Though there is no counter claim but in para-25 of the
plaint the plaintiff has himself stated that he has to pay to
the defendant a sum of ` 44330/-. Defendant tendered
resignation vide letter dt. 21.2.2000 and finally handed
over the charge on 27.3.2000. As per initial terms and
conditions of Employment Bond he was to give 3 months’
notice. So he has to pay 2 months’ pay which comes out to
be ` 12,000/- Approx. and if this amount of ` 12,000/- is
added to a sum of ` 22532/- then the total amount
defendant has to pay to the plaintiff by way of
`
compensation is 34532/-. On the other hand the plaintiff
`
had to pay a sum of 44330/- to the defendant. Though
there is no counter-claim but yet the plaintiff itself has
admitted in the plaint that he is to pay this amount to the
defendant. Hence the plaintiff is not entitled to a sum of
`
3,95,170/- with plaintiff is not entitled to a sum of
`
3,95,170/- with 18% interest pendente lite and future.
This issue is decided.” (underlining added)
7. In addition to the aforesaid reasoning, I may refer to the
three main judgments of the Supreme Court in this regard being the
cases of Fateh Chand Vs Balkishan Dass, AIR 1963 SC 1405,
Maula Bux Vs. UOI, 1969 (2) SCC 554 and Union of India Vs.
Raman Iron Foundry (1974) 2 SCC 231 . As per the ratio of these
cases, clauses of liquidated damages which are in the nature of
RFA No.596/02 Page 7 of 11
penalty are void and the liquidated damages are only the upper limit of
damages which are awarded once actual damages are proved. This
legal position applies when losses from the breach of contract can
otherwise be proved. When losses cannot be proved, then, of course
the liquidated damages specified can always be recovered vide Sir
Chunilal V. Mehta & Sons Ltd. Vs. Century Spinning and
Manufacturing Co. Ltd. AIR 1962 SC 1314 (1) and O.N.G.C. Vs.
Saw Pipes Ltd., 2003 (5) SCC 705.
8. An important aspect I must note is that there was really no
training abroad on both the trips because a reference to the two
vouchers Ex.DW1/P1 and Ex.DW1/P2 (not disputed by appellant in the
deposition of its witness) which were submitted by the
respondent/defendant to the appellant/plaintiff after the trips show
that there are no charges included in the same for any training
institute or training of any nature whatsoever. The bills are basically to
and fro cost of travel abroad alongwith expenses of stay abroad and
the related expenses. Really therefore there was no training which
was imparted to the respondent/defendant. In fact, in the entire trial
Court record i.e. whether in the pleadings of the appellant/plaintiff or in
the evidence led on behalf of the appellant/plaintiff there is not even a
whisper as to what was the nature of the training which was imparted
RFA No.596/02 Page 8 of 11
to the respondent/defendant in his trips abroad and by which institute
and where. I am therefore inclined to believe on balance of
probabilities the stand of the respondent/defendant that the trips were
basically commercial trips for dealing with the customers of the
appellant/plaintiff abroad.
9. Learned counsel for the appellant sought to argue that the
respondent has not pleaded a case in the written statement of the
claim in the suit being barred by Section 74 of the Contract Act, 1872
and no such issue was framed and therefore the trial Court erred in
disposing of the suit on that basis. At the first blush, this argument
may appear attractive, however, I am inclined to reject this argument
for several reasons:-
(i) Firstly to allow this argument would be to set the clock
back to 2001 when the suit was filed for de novo trial of the whole case
especially when the necessary evidence with respect to the expenses
incurred qua both the trips have already been filed on record and
proved as Ex.DW1/P1 and Ex.DW1/P2. In fact as stated above, these
are admitted documents and which documents would be the only
evidence to determine the loss caused to appellant which it would now
seek to prove.
(ii) Secondly, the issue which has been disposed of by the trial
RFA No.596/02 Page 9 of 11
Court of the claim being barred by Section 74 of the Contract Act, 1872
is though partially an issue of fact, however, really the issue is an issue
of law because it was for the appellant/plaintiff to plead in the plaint
that in spite of such clauses being bad and being hit by Section 74 of
the Contract Act, 1872, such clauses can be enforced because there
was no method of calculation of damages considering that it was
aware of cost incurred for the two trips of the respondent/defendant
abroad vide Ex.DW1/P1 and DW1/P2 in its possession. The
appellant/plaintiff however did not plead that no damages can be
calculated and therefore the bonds have to be enforced. Accordingly,
there was no such response in the written statement of Section 74 of
the Contract Act, 1872 by the respondent/defendant.
(iii) Finally, once the parties with complete knowledge go to
trial and the evidence has otherwise come on record, then, on the
admitted evidences which have otherwise come on record, a Court can
always mould the relief in accordance with Order 7 Rule 7 CPC, and
which in my opinion has been done by the trial Court in sum and
substance, dissuading me to interfere with the impugned judgment
and decree.
10. In view of the aforesaid and considering the fact that first
bond had more or less worked itself out, the second bond was towards
RFA No.596/02 Page 10 of 11
a trip of which expenses were only of about Rs.67,000/- and the
respondent/defendant had worked for two years besides the
impugned judgment allowing an adjustment of Rs.44,330/-, I do not
find any reason to exercise my powers in appeal for setting aside the
impugned judgment inasmuch as otherwise there will result grave
injustice to the respondent/defendant in the facts and circumstances of
the present case.
11. In view of the above, the appeal is dismissed, leaving the
parties to bear their own costs.
VALMIKI J. MEHTA, J
NOVEMBER 17, 2011
Ne
RFA No.596/02 Page 11 of 11
+ RFA No.596/2002
th
% 17 November, 2011
M/S. SICPA INDIA LIMITED ..... Appellant
Through: Mr. M.L. Mahajan, Advocate with
Mr. Gourav Mahajan, Advocate.
Versus
SHRI MANAS PRATIM DEB ..... Respondent
Through: Mr. Sandeep Bhuraria, Advocate.
CORAM:
HON’BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
VALMIKI J. MEHTA, J (ORAL)
1. The challenge by means of this Regular First Appeal under
Section 96 of Code of Civil Procedure, 1908 (CPC) is to the impugned
judgment of the trial Court dated 9.7.2002. By the impugned
judgment, the trial Court dismissed the suit of the appellant/plaintiff
filed for recovery by entitling the appellant to adjust an amount of
RFA No.596/02 Page 1 of 11
Rs.44,330/- payable to the respondent/defendant/employee and held
that the appellant was not entitled to recovery of Rs.3,95,170/- as
claimed in the plaint.
2. The facts of the case are that the
appellant/plaintiff/employer appointed the respondent/defendant as a
Sales Executive on 28.11.1994. The appellant/plaintiff company is
engaged in manufacture of specialized inks. The appellant/plaintiff
claims to have sent the respondent/defendant abroad for training twice
and for which two employment bonds dated 24.4.1995 and 24.1.1998
were got executed. As per the employment bonds, the
respondent/defendant was either bound to serve for a period of five
years or pay a sum of Rs.2 lacs if he left the services earlier. The
respondent/defendant tendered his resignation vide letter dated
21.2.2000 i.e. before the expiry of period of five years i.e. period of the
second bond dated 24.1.1998. The appellant/plaintiff therefore
enforced the two bonds and called upon the respondent/defendant to
make the payment of Rs.2 lacs for each of the bond besides claiming
an amount of Rs.17,290/- as notice period of 57 days and Rs.117/-
towards excess medical expenses reimbursed.
3. The respondent/defendant contested the suit and pleaded
that the clauses of the bonds in question were unfair, unjust and just
RFA No.596/02 Page 2 of 11
opposed to the public policy and therefore the same were not
enforceable. It was also pleaded that there was in fact no training
imparted to the respondent/defendant on both his trips which were
basically trips for dealing with the customers of the appellant/plaintiff.
It was also argued that bonds in question were taken just a few hours
before boarding in the plane and therefore the same were signed
without reading of the same and in a hurry. It is stressed that really
the so called training programmes were only business trips meant to
promote sales or deal with the customers. During the course of final
arguments, it was also argued that the period of first bond of five years
from 24.4.1995 had more or less come to an end because the period of
five years from the first bond would otherwise have come to an end on
24.4.2000 and the resignation was submitted on 21.2.2000. So far as
the second bond was concerned, it was argued that whatever were the
expenses incurred were more than fully recouped in the period of two
years of the service after the second bond was executed. It was
prayed that the suit be dismissed.
4. After the pleadings were complete, trial Court framed the
following issues:-
“1. Whether the plaintiff is entitled to a decree of a sum of
Rs.3,95,170/- with interest @ 18% p.a. pendente lite and
future? OPP
2. Whether the suit has not been signed and verified by a
RFA No.596/02 Page 3 of 11
competent person? OPD
3. Whether there is no cause of action? OPD
4. Reief.”
5. The trial Court has arrived at the following conclusions for
dismissal of the suit:-
(i) Clauses in question which are part of the employment
bonds are violative of Section 74 of the Contract Act, 1872 as they are
in the nature of penalty and hence the same cannot be enforced.
(ii) So far as the first bond is concerned, the same was more
or less complied with as the resignation is of February, 2000 and the
bond would have expired by April, 2000. So far as the second bond is
concerned, it was held that total expenses which were incurred for the
second trip were of Rs.67,596/- and which would have been recouped
by the period of two years of the service given after execution of the
second bond. In any case, the trial Court held that the
respondent/defendant was entitled to Rs.44,330/- as per the admitted
case of the appellant/plaintiff and which amount therefore can be
treated as adjusted for the claims against the second bond since the
expenses of the second trip were only Rs.67,596/-.
6. The trial Court has given the following conclusions and
findings in the impugned judgment and with which I completely agree:-
“It is further significant to note that for a period of 28 days
of training he was to serve the plaintiff for a period of 5
RFA No.596/02 Page 4 of 11
years and in default he was to pay a sum of Rs.2,00,000/-
with 18% p.a. interest in respect of breach of first bond.
Not only that Clause-8 of Bond dt.24.4.95 Ex.PW1/3 which
reproduced earlier provides that in case of subsequent
training the defendant has to execute a fresh bond to
serve the plaintiff company for a period of 36 months.
Though subsequent bond Ex.PW1/4 also provides that
defendant was to serve for another period of 5 years. On
second occasion when he was required to execute Bond
Ex.PW1/4 he was imparted the so called training of seven
days only which the defendant has refuted by saying that
he went there just to procure the business for the plaintiff
company.
It is submitted by the Ld. Counsel for the plaintiff
company that the defendant himself has submitted the bill
Ex.DW:1/P-1 when he went for training on 24.4.95 showing
the purpose of visit as Technical Training. He again
submitted the Bill Ex.DW:1/P-2 when he went for the
training for the second time on 24.1.98 again enumerating
the purpose of his visit as training. The defendant stated
in his statement that he mentioned these things in the bills
at the instance of Mr. N.K. Gupta the then President of the
plaintiff company. Thing remains that he was sent abroad
twice for the purpose of training on first occasion for 28
days and on second occasion for 7 days. But I have no
hesitation in coming to the conclusion that these bonds
were got executed from the defendant only on the date he
was to board the flight and was not given sufficient time to
go through these Bonds. These bonds amount to bonded
labour in perpetually where virtually an employee has no
bargaining power.
So far as the question regarding enforcibility of
these penalty clauses of the bonds are concerned, it is
appropriate to look into the legal position. There is no
doubt that these clauses are in the nature of the penalty
and Sec.74 of the Contract Act in applicable. The Hon’ble
Supreme Court in case Maula Bux Vs. Union of India 1969
(2) SCC 554 held that “if the forfeiture is of the nature of
penalty Sec.74 applies. Where-under the terms of contract
the party in breach has undertaken to pay a sum of money
or to forfeit a sum of money which he has already paid to
the party complaining of a breach of contract, the
RFA No.596/02 Page 5 of 11
undertaking is of a nature of a penalty.
xxxx xxxx xxxx xxxx
Ld. Counsel for the defendant also referred to AIR 1963
AP 312 and AIR 1987 SC 1260. The gist of the authorities
cited by the Ld. Counsel for the defendant is that while
invoking the penalty clause as per Sec.74 of the Indian
Contract Act, it is not necessary to award the
compensation stipulated in the agreement rather a
reasonable compensation is to be awarded irrespective
fact whether the party invoking the clause has actually
suffered the damages or not.
xxxx xxxx xxxx xxxx
Before proceeding further and taking clue from the
case of Narendra Singh (supra). I have no hesitation in
coming to the conclusion that these bonds were terrorem,
unconscionable and extravagant.
The first Employment Bond Ex.PW:1/3 was
executed on 24.4.95. As per this bond the defendant was
to serve the plaintiff company for a period of 5 years. The
period of 5 years came to an end on 23.4.2000. The
defendant served the plaintiff company upto 27.3.2000 so
virtually he has served the entire bond period and the
penalty clause cannot be invoked at all.
As per clause-8 of Employment Bond Ex.PW:1/3
in case the defendant undertakes another training when he
has executed the fresh Employment Bond which shall be
for a period of 36 months. The fresh Employment Bond is
Ex.PW:1/4, the same is dt. 24.1.98. In view of the terms
and conditions of Employment Bond Ex.PW:1/3 the
subsequent bond period should have been for 36 months
but this bond also was made for a period of 5 years
contrary to the terms and conditions stipulated in
Employment Bond Ex.PW:1/3.
Employment Bond Ex.PW:1/4 was executed on 24.1.98. It
could not have been for a period of 5 years in view of
clause-8 of Employment Bond Ex.PW:1/3. It should have
been for a period of 3 years that means this Bond would
have expired on 23.1.2001. The defendant served the
plaintiff company upto 27.3.2000 meaning thereby he was
to further serve for a period of 1 year.
In these circumstances it is to be seen as to what
reasonable compensation is to be awarded to the plaintiff
RFA No.596/02 Page 6 of 11
company. As I have already stated that there is no
question of invoking the penalty clause in respect of
Employment Bond Ex.PW:1/3 as the defendant has virtually
served the defendant for the entire period stipulated in
that bond. At the time of his second visit plaintiff company
incurred an expenditure of ` 67596/- as is proved from
Ex.DW:1/P-2. He was to serve for a period of 3 years
w.e.f.24.1.98. He served upto 27.3.2000 i.e. almost for a
period of 2 years. If this amount of ` 67596/- is divided by 3
then the amount for one year comes out to be ` 22532. He
has already served for 2 years meaning thereby that just
reasonable compensation shall be ` 22532/-.
Though there is no counter claim but in para-25 of the
plaint the plaintiff has himself stated that he has to pay to
the defendant a sum of ` 44330/-. Defendant tendered
resignation vide letter dt. 21.2.2000 and finally handed
over the charge on 27.3.2000. As per initial terms and
conditions of Employment Bond he was to give 3 months’
notice. So he has to pay 2 months’ pay which comes out to
be ` 12,000/- Approx. and if this amount of ` 12,000/- is
added to a sum of ` 22532/- then the total amount
defendant has to pay to the plaintiff by way of
`
compensation is 34532/-. On the other hand the plaintiff
`
had to pay a sum of 44330/- to the defendant. Though
there is no counter-claim but yet the plaintiff itself has
admitted in the plaint that he is to pay this amount to the
defendant. Hence the plaintiff is not entitled to a sum of
`
3,95,170/- with plaintiff is not entitled to a sum of
`
3,95,170/- with 18% interest pendente lite and future.
This issue is decided.” (underlining added)
7. In addition to the aforesaid reasoning, I may refer to the
three main judgments of the Supreme Court in this regard being the
cases of Fateh Chand Vs Balkishan Dass, AIR 1963 SC 1405,
Maula Bux Vs. UOI, 1969 (2) SCC 554 and Union of India Vs.
Raman Iron Foundry (1974) 2 SCC 231 . As per the ratio of these
cases, clauses of liquidated damages which are in the nature of
RFA No.596/02 Page 7 of 11
penalty are void and the liquidated damages are only the upper limit of
damages which are awarded once actual damages are proved. This
legal position applies when losses from the breach of contract can
otherwise be proved. When losses cannot be proved, then, of course
the liquidated damages specified can always be recovered vide Sir
Chunilal V. Mehta & Sons Ltd. Vs. Century Spinning and
Manufacturing Co. Ltd. AIR 1962 SC 1314 (1) and O.N.G.C. Vs.
Saw Pipes Ltd., 2003 (5) SCC 705.
8. An important aspect I must note is that there was really no
training abroad on both the trips because a reference to the two
vouchers Ex.DW1/P1 and Ex.DW1/P2 (not disputed by appellant in the
deposition of its witness) which were submitted by the
respondent/defendant to the appellant/plaintiff after the trips show
that there are no charges included in the same for any training
institute or training of any nature whatsoever. The bills are basically to
and fro cost of travel abroad alongwith expenses of stay abroad and
the related expenses. Really therefore there was no training which
was imparted to the respondent/defendant. In fact, in the entire trial
Court record i.e. whether in the pleadings of the appellant/plaintiff or in
the evidence led on behalf of the appellant/plaintiff there is not even a
whisper as to what was the nature of the training which was imparted
RFA No.596/02 Page 8 of 11
to the respondent/defendant in his trips abroad and by which institute
and where. I am therefore inclined to believe on balance of
probabilities the stand of the respondent/defendant that the trips were
basically commercial trips for dealing with the customers of the
appellant/plaintiff abroad.
9. Learned counsel for the appellant sought to argue that the
respondent has not pleaded a case in the written statement of the
claim in the suit being barred by Section 74 of the Contract Act, 1872
and no such issue was framed and therefore the trial Court erred in
disposing of the suit on that basis. At the first blush, this argument
may appear attractive, however, I am inclined to reject this argument
for several reasons:-
(i) Firstly to allow this argument would be to set the clock
back to 2001 when the suit was filed for de novo trial of the whole case
especially when the necessary evidence with respect to the expenses
incurred qua both the trips have already been filed on record and
proved as Ex.DW1/P1 and Ex.DW1/P2. In fact as stated above, these
are admitted documents and which documents would be the only
evidence to determine the loss caused to appellant which it would now
seek to prove.
(ii) Secondly, the issue which has been disposed of by the trial
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Court of the claim being barred by Section 74 of the Contract Act, 1872
is though partially an issue of fact, however, really the issue is an issue
of law because it was for the appellant/plaintiff to plead in the plaint
that in spite of such clauses being bad and being hit by Section 74 of
the Contract Act, 1872, such clauses can be enforced because there
was no method of calculation of damages considering that it was
aware of cost incurred for the two trips of the respondent/defendant
abroad vide Ex.DW1/P1 and DW1/P2 in its possession. The
appellant/plaintiff however did not plead that no damages can be
calculated and therefore the bonds have to be enforced. Accordingly,
there was no such response in the written statement of Section 74 of
the Contract Act, 1872 by the respondent/defendant.
(iii) Finally, once the parties with complete knowledge go to
trial and the evidence has otherwise come on record, then, on the
admitted evidences which have otherwise come on record, a Court can
always mould the relief in accordance with Order 7 Rule 7 CPC, and
which in my opinion has been done by the trial Court in sum and
substance, dissuading me to interfere with the impugned judgment
and decree.
10. In view of the aforesaid and considering the fact that first
bond had more or less worked itself out, the second bond was towards
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a trip of which expenses were only of about Rs.67,000/- and the
respondent/defendant had worked for two years besides the
impugned judgment allowing an adjustment of Rs.44,330/-, I do not
find any reason to exercise my powers in appeal for setting aside the
impugned judgment inasmuch as otherwise there will result grave
injustice to the respondent/defendant in the facts and circumstances of
the present case.
11. In view of the above, the appeal is dismissed, leaving the
parties to bear their own costs.
VALMIKI J. MEHTA, J
NOVEMBER 17, 2011
Ne
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