2000 (2) TMI 851 - HC - Indian Laws

Contract Clause Limits Damages Claim, Court Dismisses Appeal

Maharashtra State Electricity Versus Sterlite Industries (India) Ltd.

The court held that Section 73 of the Indian Contract Act was inapplicable due to the specific provision of Clause 14(ii) in the contract, which allowed ... - Issues Involved:1. Applicability of Section 73 of the Indian Contract Act.2. Proof of loss suffered by the appellants.3. Necessity for appellants to purchase goods from the open market under Clause 14(ii) of the contract to claim damages.Issue-wise Detailed Analysis:1. Applicability of Section 73 of the Indian Contract Act:The appellants contended that they were entitled to claim damages under Section 73 of the Indian Contract Act for the difference between the contract price and the market price at the date of breach, without the necessity of purchasing the goods from the open market. They argued that Clause 14(ii) of the contract provided an additional right to purchase the goods and claim damages, but did not exclude their general right under Section 73. The respondents argued that Clause 14(ii) specifically provided the measure of damages and excluded the right under Section 73. The court held that Section 73 was inapplicable due to the special provision of Clause 14(ii) which reserved the right for the appellants to purchase materials from the market and claim damages, thus excluding the general right under Section 73. The court relied on the judgment of the Bombay High Court in Sitaram Bindraban's case, which recognized the right of parties to vary the ordinary incidence of a contract by express terms.2. Proof of Loss Suffered by the Appellants:The court noted that it is well settled law that a party claiming compensation must prove the loss suffered. The majority of the arbitrators found that the appellants had failed to prove the quantum of loss suffered. The court emphasized that Section 73 of the Contract Act does not give a cause of action unless damages are actually suffered. The appellants did not provide sufficient evidence to prove the loss suffered due to the breach of contract by the respondents. The court upheld the findings of the majority arbitrators and the learned Single Judge, stating that these findings were based on the appreciation of evidence and could not be disturbed in a proceeding under Section 30 of the Arbitration Act.3. Necessity for Appellants to Purchase Goods from the Open Market under Clause 14(ii) of the Contract to Claim Damages:The court observed that the appellants had not invoked Clause 14(ii) to purchase the goods not supplied by the respondents. Clause 14(ii) conferred a right upon the appellants to purchase the contracted goods from the open market after termination of the contract and claim damages for any additional costs. The majority arbitrators found that the appellants had failed to prove that they made additional purchases to make up for the short supply. The court held that it was incumbent upon the appellants to actually purchase the goods from the open market to claim damages under Clause 14(ii). The court found no fault with the findings recorded in the majority awards and approved by the learned Single Judge.Conclusion:The court concluded that the appellants had not made out a case for interference. The appeals were dismissed, and the majority awards were upheld. The court emphasized that even if there was an error of law or construction of the agreement, such an error was not amenable to correction in a proceeding under Section 30 of the Arbitration Act. The appeals were dismissed without any order as to costs, and the court placed special appreciation on record for the assistance rendered by Mr. Rustomji on behalf of the appellants.