TaxTMI 
TaxTMI 
2018 (5) TMI 2036
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....e Contracts (AMC's) dated 5.6.2004, 24.11.2004 and 3.11.2005 for the said handsets. The petitioner also gave three Performance Bank Guarantees (PBG's) of even dates amounting to a total of Rs. 1,13,99,500/-. It is the case of the petitioner that with the advent of new technology the use of handsets was decreasing. Out of a total of 95,000 handsets about 19,000 to 20,000 customers of the respondent were stated to be using the old handsets. It is also the case of the petitioner that on account of the fact that only limited number of handsets was being used, the petitioner sent a proposal dated 11.12.2006 to the respondent proposing that the petitioner would provide repair service through eight service centers on chargeable basis. With dissolution/termination of the AMC's the respondent need not pay a sum of Rs. 70 lacs which was payable to the petitioner as fixed AMC charges and the petitioner in return would benefit by way of waiver, of liquidated damages and release of PBG's of the petitioner. According to the petitioner the respondent by letter dated 30.3.2007 conveyed its acceptance to the proposal. It is also stated that there were no communications from the resp....
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....tioner led the evidence of Shri Pramod Kumar Jain who was examined as RW-1. He placed reliance on Ex. RW1/1 to RW1/11. Issues 3, 4 and 5 being inter-connected were adjudicated upon together. The learned Arbitrator held on these issues that it is clear that the original AMC's was dissolved w.e.f. 14.2.2007 and that the petitioner was to extend repair facility to the customer of the respondent through its Authorised Service Centers in Delhi on chargeable basis alongwith extended Warranty Support to the customer of the respondent till actual date of expiry of the AMC's. The Award holds that Section 62 of the Contract Act applies to the present case. The entire original contract does not terminate and rather a new alternate contract has come into force. The alteration of the contracts took place w.e.f. 14.2.2007 and therefore, liquidated damages remained leviable by the respondent upto the said date i.e. 14.2.2007. On issues No. 1, 6 and 7 the learned Arbitrator held that on perusal of the supporting documents the claim of the respondent for Rs. 2,47,43,500/- is on account of penalty for late repairing of the handsets for the period upto 14.2.2007. It noted the relevant claus....
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....rgue that the demand was raised on the petitioner for the first time. She further submits that nature of damages suffered by the respondent was such that no evidence could be led by the petitioner. She relies upon pleadings and evidence to stress that the respondent was entitled to the said amount on account of the acts of the petitioner. She has relied upon the judgment of this court in Saisudhir Energy Ltd. vs. NTPC Vidyut Vyapar Nigam Ltd. 7. I will now deal with the pleas of the learned senior counsel for the petitioner. As far as the first plea is concerned, it is clear that the same is absolutely without merits. It is a fact recorded by the learned Arbitrator based on the agreement and documents placed on record that a sum of Rs. 2,47,43,500/- became payable on account of the delays by the petitioner. 8. The relevant clause of the contract reads as follows: "TERMS & CONDITIONS OF THE AGREEMENT: 1. If the contractor fails to repair the faulty WLL terminals (Handheld Type) and deliver the same in the concerned MTNL office within stipulated period of 14 days as mentioned above, the contractor shall be liable to pay penalty for the entire period counted from the....
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....ty, 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. 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. 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. 4. The Section applies whether a person is a Plaintiff or a Defendant in a suit. 5. The sum spoken of may already be paid or be payable in future. 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. 7. Section 74 will apply to cases of forfeiture of ea....
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..... Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach, therefore, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him. Burden is on the other party to lead evidence for proving that no loss is likely to occur by such breach. Take for illustration: if the parties have agreed to purchase cotton bales and the same were only to be kept as a stock-in-trade. Such bales are not delivered on the due date and thereafter the bales are delivered beyond the stipulated time, hence there is breach of the contract. Question which would arise for consideration i....
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.... the respondent. A: The customer will lodge complaints only with MTNL and doesn't even know as to from where we were getting the defective sets repaired. Therefore, the suggestion is wrong. In reality the blames for non repair comes on the respondent. ...... Q99: Did MTNL pay any compensation to any of its customers for the alleged delay in handing over of the handsets? A: I do not know because the compensation, if any, might have been given by the service department of the MTNL. (Vol.) However, MTNL suffered loss for the period the customer remained deprived of the telephone service because of delay by the respondent. Q100: I put it to you that you have not filed any documents to show that MTNL had paid any compensation to its customers for the alleged delay in handing over of handsets. A: It is correct. We have not filed any such document." 18. A perusal of the above cross-examination of Shri Ramesh Singh shows that he has clearly pointed out that the customers of the respondent had to suffer as there was delay in return of the handsets. It is manifest that the reputation of the respondent suffered. In an industry disgruntled c....
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....y entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him. Burden is on the other party to lead evidence for proving that no loss is likely to occur by such breach. Take for illustration: if the parties have agreed to purchase cotton bales and the same were only to be kept as a stock-in-trade. Such bales are not delivered on the due date and thereafter the bales are delivered beyond the stipulated time, hence there is breach of the contract. The question which would arise for consideration is -- whether by such breach the party has suffered any loss. If the price of cotton bales fluctuated during that time, loss or gain could easily be proved. But if cotton bales are to be purchased for manufacturing yarn, consideration would be different......................... ... 66. In Maula Bux case the Court has specifically held that it is true that in every case of br....
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....uch compensation and that is what is provided in Section 73 of the Contract Act. (3) Section 74 is to be read along with Section 73 and, therefore, in every case of breach of contract, the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree. 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 a contract. (4) In some contracts, it would be impossible for the court to assess the compensation arising from breach and if the compensation contemplated is not by way of penalty or unreasonable, the court can award the same if it is genuine pre-estimate by the parties as the measure of reasonable compensation............" 20. In my opinion, this was clearly a case where the respondent had suffered damages. The nature of damages suffered would be such where it would not be easy to lead evidence to assess the nature of damages suffered. The damages quantified in the contract can be said to be a genuine pre-estimate of the damages. The learned Arbitrator rightly concluded that award of the said dam....