Delhi District Court
I.T.C. Ltd vs Solomon Francis Abroao on 11 February, 2008
I.T.C. LTD VS SOLOMON FRANCIS ABROAO
IN THE COURT OF PAWAN KUMAR JAIN
ADDITIONAL DISTRICT JUDGE, FAST TRACK COURT,
DELHI
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Old Suit No. : 497/92
New Suit No. : 641/06
Date of Institution of case : 24.01.92
Date of transfer to this court : 14.12.06
Judgment reserved on : 28.01.08
Date of decision : 11.02.08
IN THE MATTER :
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I.T.C. LIMITED,
Welcomgroup,
Hotel Maurya Sheraton,
Diplomatic Enclave,
New Delhi ..... PLAINTIFF
VERSUS
1. Sh. Solomon Francis Abroao,
Old Railway Station Road,
Cochin-682018
2. Sh. Paul Solomon Abrao,
s/o Sh. B.Paul Abroa,
r/o Old Railway Station Road,
Cochin-682018 ....... DEFENDANTS
`SUIT FOR RECOVERY OF RS. 3,14,000/-`
RERERERERERERER
Page 1 of 39
I.T.C. LTD VS SOLOMON FRANCIS ABROAO
Present: Sh. V.K. Raina, Ld. Counsel for plaintiff
Sh. Ranjan Kumar, Ld. Counsel for defendants
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J U D G M E N T
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1. Originally suit was filed under order XXXVII CPC and decree was passed vide order dated 20.5.1995. However the same was set aside by the Hon'ble High court vide order dated 2.3.2001 and leave to contest the suit was granted unconditionally.
2. Admitted facts of the case are that defendant No.1 had applied for Kitchen Training Programme conducted by the plaintiff and entered into an agreement dated 1.7.1987 with the plaintiff. He also executed a Promissory note in favour of plaintiff on the same day and defendant No.2, father of defendant No.1 also furnished the surety bond in favour of Page 2 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO plaintiff. The said training was for a period of two years commencing from 01.07.1987.
(i) As per the terms and conditions of the agreement dated 1.7.1987, defendant No.1 agreed to serve the plaintiff company for a period, not less than five years after completion of the training and further agreed, in case of breach of the contract, defendant No.1 would pay liquidated damages to the sum of Rs.
1 lac. Under the said agreement, it was further agreed that plaintiff would incur the expenses of Rs. 1 lac on the training and the said amount would be treated as a loan to the defendant No.1 and in case of breach of the contract, defendant No.1 would re-pay the said loan amount in addition to the liquidated damages.
(ii) It is also undisputed fact that defendant No.1 had resigned from the service by tendering his resignation letter dated 4.2.1991, which was accepted by the plaintiff vide letter dated 7.5.1991.
Page 3 of 39
I.T.C. LTD VS SOLOMON FRANCIS ABROAO
3. The controverted facts of the case are that according to the plaintiff the resignation letter was accepted subject to the terms and conditions of agreement dated 1.7.1987. As per plaintiff's version, since defendant No.1 had breached the terms and conditions of the said agreement, thus is liable to pay Rs. 1 lac, which was spent on his training and also liable to pay interest amounting Rs. 72,000/- on the said amount @ 18 % p.a. for a period of four years. Plaintiff also claimed refund of Rs. 42,000/- which was paid as stipend during the training. Besides the above amount, plaintiff also claimed Rs. 1 lac towards liquidated damages. On the other hand, the defendants plea is that the resignation letter was submitted at the advise of plaintiff company because plaintiff company refused to grant medical leave to the defendant No.1, thus defendants are not entitled to pay any amount to the plaintiff.
(i) Defendants challenged the validity and legality of the said agreement on the ground that the same was in-contravention of the provisions of Indian Contract Act and was also against the Public Policy and further took the plea that the said agreement Page 4 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO was between two unequal parties, thus defendants are not bound by the terms and conditions of the agreement, which were totally in favour of the plaintiff company.
(ii) Defendants further took the plea that no effective training was ever imparted to the defendant No.1 as promised by the plaintiff at the time of entering into the contract. On the contrary defendant No.1 was forced to do menial work for 12-16 hours in a day which was excruciating and harrowing experiences to the defendant No.1 and the resulted in deterioration in the health of defendant No.1. Consequently, defendant No.1 had to admit in hospital initially in Chennai thereafter at his home town in Ernakulam. It is further stated that doctor had advised him for three months rest on 20.1.1991.
(iii) In addition to the above, defendants further took the plea that this Court has no territorial jurisdiction to try the present suit and the present suit is barred by the period of limitation and the suit is not filed by the duly authorized person.
4. Vide order dated 1.4.2003 & 31.7.03, following issues Page 5 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO were framed:-
(i) Whether the agreement is void ?
OPD.
(ii) Whether the suit is barred by
limitation? OPD.
(iii) Whether this court has no territorial
jurisdiction to try and entertain the
suit ? OPD.
(iv) Whether the plaintiff has no cause of
action to file the present suit ? OPD.
(v) Whether the suit has been signed,
filed and verified by a proper person ?
OPD.
(vi) Whether the plaintiff is entitled for
the suit amount ? OPP.
(vii) Whether the plaintiff is entitled for
interest, if so, then at what rate and to
what extent ? OPP.
(viii) Relief.
(i)A Whether the suit is liable to be
dismissed on the grounds of
principles of estoppal and
acquiescence ? OPD.
(ii)B Whether any specialized and
technical management training was
given to the defendant No.1 and any
money was spent on the training of
Page 6 of 39
I.T.C. LTD VS SOLOMON FRANCIS ABROAO
the defendant No.1 as claimed and
also promised by the plaintiff under
the contract, if so, its effect ? OPP.
5. To prove its case, plaintiff has examined Sh. Brig.
Manoranjan Singh as PW1. In counter defendants examined Sh. Soloman Francis Abrao as DW1.
6. I have heard Ld. Counsel for the plaintiff, Ld. Counsel for the defendants, perused the record carefully & gave my thoughtful consideration to their contentions. My issue-wise findings are as under:
7. ISSUE No.2.
Onus to prove the said issue was upon the defendants. But during the course of arguments, Ld. Counsel for the defendants did not press for the same, thus this issue is decided against the defendants and in favour of the plaintiff.
8. ISSUE No.3 Onus to prove the said issue was upon the defendants. Page 7 of 39
I.T.C. LTD VS SOLOMON FRANCIS ABROAO
(i) Ld. Counsel for the defendants energetically contended that both the defendants are residing in Ernakulum, thus this Court has no territorial jurisdiction. It is further contended that even defendant no.1 had joined his duty after training in Chennai, thus the contract was performed in Chennai, hence this Court has no territorial jurisdiction.
(ii) Ld. Counsel for the plaintiff repudiated the said contentions by arguing sagaciously that the agreement in question was executed in Delhi and even training was also imparted in Delhi in pursuance of the agreement, thus this Court has territorial jurisdiction to try the present suit.
9. It is undisputed fact that defendant no.1 had executed the service bond, which is exhibited as PW1/4. The same was executed on 1st July 1987. During his cross-examination DW1 unequivocally admitted that he was in Delhi in July 1987 and remained in Delhi till July 1989. His deposition corroborates the plaintiff's version that the said agreement was executed in Delhi and in pursuance of that agreement training of two years was Page 8 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO imparted in Delhi. It is undisputed fact that plaintiff has claimed the suit amount on the basis of breach of the said service bond. It is argued by Ld. Counsel for the defendants that the stamp paper for the said bond was purchased from Cochin, thus this Court has no jurisdiction to try the present suit. Admittedly, the agreement on the stamp paper, which was purchased from Cochin does not bear the signature of plaintiff company. It bears the signature of defendants only. Thus, it is not a contract as it does not bears the signature of both the parties. It may be the copy of defendants. Secondly, merely the fact that the stamp paper was purchased by the defendants from Cochin does not prove that the contract was also executed in Cochin especially when DW1 himself admitted in his cross-examination that he was in Delhi from July 1987 to July 1989. If he was in Delhi, how can the documents be executed in Cochin. Thus, to my mind said contention is untenable.
(i) Sir D. Mulla in his commentaries on Civil Procedure Code states:
"In a suit for damages for breach of contract the cause of Page 9 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO action consists of the making of the contract, and of its breach; so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. (i) Thus, if a contract is made in Poona to be performed in Poona the whole cause of action arises in Poona and the suit for breach can only be filed in the Poona Court. But if the contract is made in Poona to be performed in Belgaum the suit for its breach can be filed either in the Poona or the Belgaum Court." (Mulla on CPC 14th Ed. Vol.1 page 207)
(ii) Applying the above settled proposition of law in the facts of the present case, I am of the considered opinion that this Court has territorial jurisdiction to try the present case as in the instant case not only the service bond was executed in Delhi but in pursuance of that bond training of two years was also imparted in Delhi.
10. Pondering the on-going discussion, I decide this issue against the defendants and in favour of the plaintiff. 11. ISSUE No. 5
Onus to prove the said issue was upon the defendants. Page 10 of 39
I.T.C. LTD VS SOLOMON FRANCIS ABROAO
(i) Ld. Counsel for the defendants vigorously contended that the present suit was not instituted by the duly authorized person, thus liable to be dismissed. On the other hand, Ld. Counsel for the plaintiff urged that the present suit was instituted by the duly authorized person.
12. As per plaint, the suit was instituted by Sh. K Vaidyanath, who was attorney of the Company and was competent to sign & verify the pleadings on behalf of the plaintiff company. During the trial, plaintiff's sole witness relied upon the two documents, which are marked Ex. PW1/2 & PW1/3. Ex. PW1/2 is a general power of attorney in favour of Sh. K. Vaidyanath, which was executed by Sh. Nirmal Kumar Ghoshal. However, it is not cleared from the said attorney under which resolution, passed in the meeting of Board of Directors, he was appointed as attorney of the plaintiff company. Needless to say that only the Board of Directors have a right to appoint any person as attorney on behalf of the company. During the trial, plaintiff failed to produce the minutes book of the meeting of Board of Directors of the plaintiff company to establish that Sh. Page 11 of 39
I.T.C. LTD VS SOLOMON FRANCIS ABROAO Nirmal Kumar was appointed as attorney of the company. In the absence of any admissible evidence on record, it is not proved that Sh. Nirmal Kumar was attorney of the company.
(i) Further perusal of the said document, reveals that it is merely a photocopy and further reveals that the attorney in favour of Mr. Nirmal Kumar had already been cancelled as each page of the said attorney has been struck out with the endorsement "cancelled". But again it is not cleared when the said attorney was cancelled.
(ii) Admittedly, said attorney was executed on 14.10.80 and the present suit was filed only on 24.01.92. In other words, the present suit was filed after 12 years from the date of execution of the said attorney. It is quite possible that during said period the alleged attorney might have been cancelled. The onus was upon the plaintiff to establish that the said attorney was in operation at the time of filing of the present suit but unfortunately plaintiff failed to adduce any evidence in this regard. Even plaintiff did not think it appropriate to produce the original GPA before the Page 12 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO court.
(iii) Considering the above discussion, I am of the opinion that the said document is not helpful to the plaintiff to establish that Sh. K. Vaidhyanath had any authority to file the present suit on behalf of the company.
(iv) Another document Ex.PW1/3 is a attorney in favour of PW1 executed by Sh. Bishwa Behari Chatterjee. Perusal of the same reveals that it was executed on 12th April 1994. By no stretch of imagination, PW1 can acquire a right to institute a suit on behalf of the company in 1992. Admittedly, in the said attorney even the acts of Sh. K. Vaidhyanath had not been ratified by the company. Moreover, there is nothing on record to prove that Board of Directors had passed any resolution to appoint Sh. Bishwa Behari Chatterjee as an attorney of the company with a right to further appoint any person as attorney on behalf of the company. Thus, to my mind said document is also not helpful to the plaintiff to prove that the present suit was instituted by duly authorized person.
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I.T.C. LTD VS SOLOMON FRANCIS ABROAO
13. Mulling over the entire discussion, I am of the opinion that plaintiff failed to prove that the suit was instituted by duly authorized person. Accordingly, I decide this issue against the plaintiff and in favour of the defendants.
14. ISSUE No. 1B Onus to prove the said issue was upon the parties.
(i) Ld. Counsel for the plaintiff vehemently contended that plaintiff company had spent more than Rs. 1 Lac on the specialized training of the defendant no.1 and it was also agreed in the service bond that the amount mentioned in the bond, which was to be spent on the training would be conclusive proof that the said amount was spent on the training. It is thus argued that defendants now can not dispute about the said amount.
(ii) Ld. Counsel for the defendants confuted the said contention by arguing sagaciously that the onus was upon the plaintiff to prove that the plaintiff company had spent any such Page 14 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO amount on the training. It is urged that since plaintiff company failed to produce any such evidence, thus it can not be said that any specialized training was imparted to the defendant no.1.
15. In the service bond, which is Ex. PW1/4 it is recited that plaintiff company would spend Rs.1 Lac on the training of defendant no.1. This itself by no stretch of imagination proves that plaintiff company in fact had spent such amount on the training. Onus was upon the plaintiff company to establish that the said amount was spent on the defendant no.1 but plaintiff company even did not deem it appropriate to lead any evidence to prove the said fact. Admittedly, plaintiff is a well-known established company, thus it can be presumed that plaintiff company must be maintaining the account of expenses, which it had incurred on the training of new trainees including defendant no.1. On the other hand, ff plaintiff company was not maintaining any such account, in that situation, it is just impossible for any company to ascertain how much amount, it had spent on such training. Admittedly, plaintiff company had not given the said amount actually to the defendant no.1. The Page 15 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO said amount was nothing but an approximate amount. In all these circumstances, onus was upon the plaintiff company to establish by adducing concrete evidence that plaintiff company had actually spent the said amount on the training given to the defendant no.1. But plaintiff company miserably failed to discharge its onus. In the absence on any admissible evidence on record, it can not be said that plaintiff company had incurred any such expenses in imparting the training to the defendant no.1.
(i) According to the defendants' version, no specialized training was even given by the plaintiff. On the contrary in the name of training, plaintiff had asked the defendant no.1 to do menial work like chopping, cutting vegetables, to clean the utencils etc. in the kitchen. Thus, onus was again on the plaintiff to prove that the imparted training was specialized and plaintiff company had incurred substantial amount on such training. Though PW1 deposed that he was looking after the entire training programme of the company yet he failed to disclose the detail of the training like how much time theoretical training was given and how much time practical training was given. In the Page 16 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO absence of any such evidence, it can not be said that any specialized training was given to the defendant no.1.
(ii) Pondering the above discussion, I am of the view that plaintiff company failed to prove that any specialized training was given to the defendant no.1 and plaintiff company had spent a sum of Rs.1.00 Lac on such training. Accordingly, I decide this issue against the plaintiff and in favour of the defendants. 16. ISSUES No. 1, 1A, & 6
Since all the issues are inter-connected, thus are taken together.
Onus to prove the issues except issue no.6 was upon the defendants.
(i) Ld. Counsel for the defendants astutely contended that the agreement dated 1st July 1987 was void as it became impossible to perform under section 56 of the Indian Contract Act due to the illness of the defendant no.1 and strongly relied upon the illustration (e) appended to the said section. Page 17 of 39
I.T.C. LTD VS SOLOMON FRANCIS ABROAO
(ii) Ld. Counsel for the plaintiff transversed the said contention by arguing energetically that there is no evidence on record to establish that defendant no.1 was too ill to perform his part of the contract, thus it is urged that said provision is not applicable in the facts of present case.
17. It is admitted case of the plaintiff that defendant no.1 vide his letter dated 4th February 1991 requested the company to grant medical leave and also sent the medical certificate in support of his request. It is also admitted case of the plaintiff that vide letter dated 26th February 1991, plaintiff company informed the defendant no.1 that it was not possible for the company to accept his request and further informed him that defendant no.1 would be treated absent from his duties since 13.12.90. Plaintiff company further advised the defendant no.1 that if he wished to resign, he was asked to submit his resignation. In pursuance of that letter, defendant no.1 had sent his resignation letter, which is Ex. DW1/18 and the same was accepted by the plaintiff company vide letter dated 7th May 1991. It is also undisputed Page 18 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO fact that plaintiff company had sent the legal notice dated 20th July 1991, which was replied by the defendant no.1 on 11th August 1991 and same is Ex.DW1/19. Reply to the legal notice is also admitted document. In his reply, defendant no.1 recited that after medical treatment he had recovered from his illness and interested and willing to join the plaintiff company if he is permitted by the plaintiff company.
(i) In the light of these admitted facts, let me analysis as to whether illustration (e) appended to section 56 of Indian Contract Act would apply or not. It is pertinent to mention here that during the trial, PW1 has not disputed the illness of the defendant no.1. No plea has been taken that defendant no.1 was not ill during the relevant period. Similarly, no plea has been taken that the defendant no.1 had submitted any forged medical certificate just to create an evidence of his illness. It is also not the case of the plaintiff that defendant no.1 had joined any other company during the said period. In all these circumstances, there is no reason to disbelieve the medical certificate submitted by the defendant no.1 wherein he was advised rest at home for a Page 19 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO period of three months.
(ii) Under section 56 of the Indian Contract Act, a contract which was valid at the time of execution but became impossible to perform subsequently, such contract becomes void when the agreement becomes impossible to perform. Illustration (e) to the said section reads as under:
"A contract to act at a theatre for six months in consideration of a sum paid in advance by B. On several occasions A is too ill to act. The contract to act on those occasions becomes void."
(iii) Applying the said illustration in the facts of present case, it becomes abundantly clear that defendant no.1 failed to perform his duties since 13.12.90 due to his illness. It becomes further clear that doctor had advised him to take a rest at home for a period of three months. This proves that defendant no.1 could not perform his duties due to illness, thus it can not be said that he had breached the terms of the agreement. From the Ex. DW1/19, it emerges that defendant no.1 had offered himself to join his duties after recovering from the illness but it appears that plaintiff company had not accepted the said offer. No doubt it Page 20 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO was the prerogative of the plaintiff company to accept or not to accept the said offer but simultaneously it is also true that plaintiff company can not claim damages from the defendant on the ground that defendant no.1 had resigned the service in violation of the terms & conditions of the agreement dated 1st July 1987.
18. Considering the above discussion, I am of the opinion that the contract of service became void during the period of illness of the defendant no.1 and the defendant no.1 had resigned from the service at the advice of plaintiff due to his illness and not for any other ground. Accordingly, issue no.1 is decided against the plaintiff and in favour of defendants.
19. Ld. Counsel for the defendants vehemently contended that the contract dated 1st July 1987 was void as it was against the public policy because in the said contract the amount spent on the training & even the stipend amount had been treated as a loan. It is argued that loan is an amount which is given generally on interest with an intention to receive bank from the person to Page 21 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO whom the loan was given but in the present case the training was imparted to the defendant no.1 to avail his service subsequently by polishing him so that he could serve the plaintiff in most suitable manner. It is further urged that to ensure that defendant no.1 could not leave the company after obtaining the training, plaintiff company had taken a bond to ensure that defendant would serve the plaintiff for a particular period otherwise would compensate the plaintiff by paying liquidated damages. It is thus argued that the amount, which plaintiff had spent on the alleged training can not be termed as loan.
(i) Ld. Counsel for the plaintiff refuted the said contentions by arguing that the contract dated 1st July 1987 was not void as it was mutually agreed between the parties that the amount, which would be spent on the training and the stipend amount would be treated as a loan. It is urged that now defendants can not be allowed to take a contrary plea.
20. First polemical question arises as to whether in the facts of the present case, can it be said that the amount spent on Page 22 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO training & stipend was a loan as alleged by the plaintiff?
(i) The etymology meaning of word 'loan' as defined in Webster's Third New International Dictionary is as under:
"1a money lent at interest, was authorized to make upon farm commodities, a bond issue is a typical form of major business, b:something lent for the borrower a temporary use on condition that it or its equivalent returned, to be repaid, 2a:the grant of temporary use made by a lender, b:the temporary duty of a person transferred by a superior to the service of another for a limited time."
The word "stipend" is defined as under:
"1:a fixed sum of money typically modest in amount that is paid periodically in compensation for services, 2:a regular allowance paid to defray living expenses esp:a sum paid to a student under the terms of fellowship or scholarship, may carry a large enough to take care of student's entire college expenses."
(ii) It emerges that loan means that money lent at interest.
Thus to prove that plaintiff company had given a loan to defendant no.1, onus was upon the plaintiff to establish that plaintiff had given a sum of Rs.1.00 Lac actually to the defendant no.1 with an intention to receive back from him and it Page 23 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO was carrying any interest.
(iii) It is admitted case of the plaintiff that the amount of Rs.1.00 Lac was not given actually to the defendant no.1 but the amount which plaintiff company would incur on the training of defendant no.1 was agreed to be treated as loan. According to the plaintiff, the said amount would be Rs.1.00 Lac. As already discussed that during the trial, plaintiff failed to produce any evidence to establish that plaintiff company in fact had spent such amount on the training of defendant no.1. Thus in other words, the amount was not fixed at the time of executing the said bond, it was merely an approximate amount.
(iv) Further as per the terms & conditions of the bond, the amount was not refundable if the defendant no.1 had undergone the training & comply with the terms & conditions of the bond. This reflects that the intention of the plaintiff company was not to take back the said amount from the trainees including defendant no.1. On the converse, it appears that the intention of the plaintiff company was to utilize the service of such trained Page 24 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO personnel for a particular period.
(v) Similarly, the word "stipend" means a sum of money paid periodically in compensation of service. DW1 categorically deposed in his testimony that plaintiff company used to take work 12 to 16 hours in a day in the name of training. On the contrary PW1 even failed to disclose the timings of training and did not deny that plaintiff company was not used to take the service from the defendant no.1. In these circumstances, there is no reason to disbelieve the testimony of DW1. It means that plaintiff company was paying stipend to the defendant no.1 for the services rendered by the defendant no.1 to the plaintiff company. There is nothing on record to prove that the said amount was gratuitous payment. On the contrary from the terms & conditions of the bond it manifests that it was on the basis of performance of the trainee i.e. defendant no.1. Thus, the said amount by no stretch of imagination can be termed as loan.
(vi) If the plaintiff company was treating the amount to be incurred on training as loan, there was no occasion for the Page 25 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO plaintiff company to bound trainee to serve the plaintiff company for a period not less than five years from the date of completing the training. If the amount was treated as loan, the agreement should be that trainees have option either to refund the amount along with interest during the period of training or even after the training and if they do not want refund the said amount, they had to serve the plaintiff company for a particular period because plaintiff company had spent some amount on their training. Similarly, plaintiff company could also make a condition that if the trainee left the service prior to the fixed period, such trainee would be liable to pay the amount, which plaintiff company had incurred on his training. But plaintiff company can not impose both the condition that the amount spent on the training & stipend would be treated as loan and the trainee had to serve the company for a period not less than five years from the date of completion of training and in case of violation such person has to pay the amount spent of training with interest, stipend amount and in addition to that he has to pay Rs.1 Lac as liquidated damages. This shows that plaintiff had tried to impose the terms & conditions, which were one sided and favouable to the Page 26 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO plaintiff only. This is nothing but the exploitation of the unemployed peoples.
(vii) Considering the unrealistic terms & conditions of the bond and the fact that the interest of the trainee was not protected in the said bond, I am of the opinion that the said bond was against the public policy, thus is void.
21. Next conundrum issue arises for adjudication is as to whether plaintiff company is entitled to claim Rs.1.00 lac as liquidated damages ?
(i) Damages/compensation can be claimed on breach of the contract under section 73 of the Indian Contract Act, which reads as under:
Compensation for loss or damage caused by breach of contract: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 from such breach, or which the parties knew, when they made the contract to be likely to result from breach of it.Page 27 of 39
I.T.C. LTD VS SOLOMON FRANCIS ABROAO Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
(ii) Section 74 of the Act comes into picture if the quantum of damages is prescribed in the contract and same reads as under:
Compensation for breach of contract where penalty stipulated for: When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.
(iii) It illuminates from the said sections that the compensation/damages can be claimed by the plaintiff for the loss or damage caused to him due to breach of the contract or for the loss or damage, which party knew at the time of entering into the contract, would be caused to the plaintiff on breach of the contract. But such compensation/damages does not include any remote or indirect damage/loss caused to the plaintiff and if any amount is agreed in the contract to pay as damages, such amount Page 28 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO will be treated as an upper limit. In other words, plaintiff can claim the reasonable damages not exceeding the said upper limit provided plaintiff succeeds to prove his case.
(iv) To seek the claim of Rs.1.00 Lac towards liquidated damages, plaintiff is duty bound to prove by adducing cogent evidence that plaintiff company is entitled to claim damages and further has to prove that company had suffered a loss to the tune of Rs.1.00 Lac on breach of the bond by the defendants.
(v) In case Union of India v/s Raman Iron Foundry reported in AIR 1974 SC 1265 held that there is no difference between liquidated & unliquidated damages in India. Relevant portion is reads as under:
"....... so far as the law in India is concerned, there is no qualitative difference in the nature of the claim whether it be for liquidated damages or for unliquidated damages Section 74 of the Indian Contract Act eliminates the somewhat elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual Page 29 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO agreement is regarded as a stipulation naming liquidated damages and binding between the parties; a stipulation in a contact in terrorem if a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty, and according to this principle, even if there is a stipulation by way of liquidated damages, a party complaining of breach of contract can recover only reasonable compensation for the injury sustained by him, the stipulated amount being merely the outside limit. It, therefore makes no difference in the present case that the claim of the appellant is for liquidated damages. It stands on the same footing as a claim for unliquidated damages. Now the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not an actionable claim and this position is made amply clear by the amendment in Section 6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred. This has always been the law in England and as far back as 1858 we find it stated by Wightman, J., in Jones v. Thompson, (1858) 27 LJQB 234. "Ex parte Charles and several other cases decide that the amount of a verdict in an action for unliquidated damages is not a debt till judgment has been signed." It was held in this case that a claim for damages does not become a debt even after the jury has written a verdict in favour of the plaintiff till the judgment is actually Page 30 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO delivered. So also in O'Driscoll v. Manchester Insurance Committee, (1915) 3 KB 499. Swinfen Eady, L., J., said in reference to cases where the claim was for unliquidated damages "....... in such cases there is no debt at all until the verdict of the jury is pronounced assessing the damages and judgment is given". The same view has also been taken consistently by different High Court in India. We may mention only a few of the decisions, namely, Jabed Sheikh v. Taher Mallik, 45 Cal WN 519 = (AIR 1941 Cal 639); S. Milkha Singh v. M/s. N. K. Gopala Krishna Mudaliar, AIR 1956 Punj 174 Iron and Hardware (India) Co. v. Firm Shamlal and Bros, AIR 1954 Bom 423. Chagla, C. J., in the last mentioned case, stated the law in these terms:
"In my opinion it would not be true to say that a person who commits a breach of the contract incurs any pecuniary liability, nor would it be true to say that the other party to the contract who complains of the breach has any amount due to him from the other party.
As already stated, the only right which he has is the right to go to a Court of law and recover damages. Now, damages are the compensation which a Court of law gives to a party for the injury which he has sustained. But, and this is most important to note, he does not get damages or compensation by reason of any existing obligation on the part of the person who has committed the breach. He gets compensation as a result of the fiat of the Court. Therefore, no pecuniary liability arises till the Court has determined that the party complaining of the breach is entitled to damages. Therefore, when damages are assessed, it would not be true to say that what the Court is doing is ascertaining a pecuniary liability which already existed. The Court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till that determination there is no liability at all upon the defendant."
This statement in our view represents the correct legal position and has our full concurrence. Page 31 of 39
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(vi) Seeking guidance from the above settled proposition of law, the facts of the present case will be analyzed to ascertain as to whether plaintiff is entitled to claim Rs.1.00 Lac as damages, which was stipulated in the bond as liquidated damages. In the present case, plaintiff has claimed damages to the tune of Rs.1.00 Lac on the ground that defendants had agreed to pay in the bond in case of breach of the contract. In other words, plaintiff is claiming the said damages as liquidated damages. Assuming for the sake of arguments that defendants had agreed to pay the said amount on breach of the contract. Even then, the amount stipulated in the bond is merely an upper limit of compensation. It only means that plaintiff can not claim damages exceeding Rs.1.00 Lac provided plaintiff succeeds to establish that defendants had breached the contract and due to their act plaintiff company had sustained any loss or damage. But by no stretch of imagination, plaintiff can claim damages to the tune of Rs.1.00 Lac merely on the ground that the said amount is mentioned in the bond.
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(vii) During the trial, plaintiff failed to produce any scintilla of evidence to establish that plaintiff company had sustained any loss or damage due to the alleged breach of the contract. In the absence of any evidence, I am of the considered opinion that plaintiff miserably failed to establish that plaintiff company had sustained any loss or damage.
(viii) Pondering the on-going discussion, I am of the opinion that plaintiff company is not entitled to recover Rs.1.00 Lac as damages, which plaintiff has claimed as liquidated damages.
22. Next moot question for adjudication is as to whether defendants had breached the alleged bond?
(i) Before adjudicating on this question, the terms & conditions of the bond are needed to be scrutinized. Relevant terms of the bond are re-produced as under:
"...........the trainee hereby agrees and undertakes to serve Page 33 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO the company for a period of not less than five years after the completion of the said training, on the company's requiring the trainee to do so, in its sole and absolute discretion."
"That the company hereby further agrees to release the trainee and the guarantor from their liability to repay the full amounts so advanced as loan in terms of expenses incurred by the company in providing the trainee, the training, for the fee, material and stipend etc., on satisfactory completion of five years' service if so required by the company as mentioned herein above."
(ii) It emerges from the above terms that it was the discretion of the plaintiff company to employ the trainee after completion of the training or not and if the company desired, had a right to invoke the said clause that trainee would serve the company for a period not less than five years.
(iii) Admittedly, plaintiff company had employed the defendant no.1 on completion of the training vide appointment letter dated 31.08.89. Relevant clause of the same is as under:
Clause 4 " Your service with the company will be governed by the terms & conditions set out in this contract and its Annexure 1 and also by the company's Rules and Regulations as applicable at the time being in force,and Page 34 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO your duties will be laid down by the Management of the Company."
Clause 9 (i) "If you are considered suitable in every respect by the Management, you will be advised in writing regarding your confirmation in service. Unless you are advised in writing by us, your employment on probation shall stand automatically terminated."
Clause 9 (ii) "If you are confirmed in service, your employment will be subject to termination at any time by either party serving to the other, notice in writing of one month, or pay in lieu of such notice."
(iv) It elucidates from the above terms & conditions of the appointment letter that the service of defendant no.1 after confirmation was liable to be terminated after giving one month's advance notice from either side or one month's salary in lieu of notice. And during probation the service was liable to be terminated automatically without notice if he was not informed in writing about the confirmation of service. According to the said appointment letter, defendant no.1 was not even put on probation. There is no evidence to prove that he was ever put on probation or was confirmed in service, thus even no notice was required to terminate the service of defendant no.1.Page 35 of 39
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(v) Appointment letter dated 31st August 1989 was an independent contract between the plaintiff company & defendant no.1 and parties are bound by the terms & conditions enumerated therein. In the entire said contract, it was not pressed by the plaintiff company that defendant no.1 would serve the company for any particular period as mentioned in the earlier contract dated 1st July 1987.
(vi) It was the sole discretion of the plaintiff company as per agreement dated 1st July 1987, to impose the condition that the trainee i.e. defendant no.1 would serve the company for a period not less than five years on completion of the trainee. But plaintiff company to its wisdom had not invoked the said discretion at the time of employing the defendant no.1 vide appointment letter dated 31st August 1989. If plaintiff company had any intention to invoke the said condition, it could easily incorporate the said condition in the appointment letter but it had not incorporated the same. The said condition can not be read impliedly in the appointment letter because the said condition is contrary to clause 9 (ii) of the appointment letter. In the Page 36 of 39 I.T.C. LTD VS SOLOMON FRANCIS ABROAO appointment letter, new condition was imposed on both the parties for termination of the service. If earlier clause of five years service is treated as a part of condition of the present appointment letter, it would mean that defendant no.1 had no right to terminate the contract as stipulated in clause 9 (ii) of the appointment letter. But the same would be contrary to the clause 9 (ii) of the appointment letter.
(vii) The harmonious construction of both the contracts is that it was the sole discretion of the plaintiff company to invoke the condition as to whether the trainee was to be bound to serve the plaintiff company for a particular period on completion of the training and if plaintiff company decided to invoke the same, defendant no.1 had no option but to accept the same as he had agreed in the bond. But at the time of appointing defendant no.1 in service vide appointment letter dated 31st August 1989, plaintiff company had not invoked its discretion and new clause regarding termination of the service was incorporated in the said contract.
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(viii) Admittedly, there was no clause of five years service in the new contract dated 31st August 1989, thus the question of breach of the contract does not arise. According to appointment letter, plaintiff company had a right to claim only one month's salary from the defendant no.1 if it considered that no advance notice was given by him. But admittedly plaintiff has not claimed any such amount in the present suit.
23. Mulling over the entire on-going discussion, I am of the opinion that plaintiff company is not entitled to recover the suit amount from the defendants. Accordingly, I decide issue no. 1, 1A and 6 in favour of the defendants and against the plaintiff company.
24. ISSUE No. 7
Onus to prove the said issue was upon the plaintiff. Since the plaintiff company is not entitled to recover the suit amount from either of the defendants, question of interest does not arise. Accordingly, I decide this issue against the plaintiff and in favour of the defendants.
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25. ISSUE No.4 Onus to prove the said issue was upon the defendants but during the course of arguments, Ld. Counsel for the defendants did not press for the same. Accordingly, I decide this issue against the defendants and in favour of the plaintiff.
26. RELIEF In the light of my findings on the issues above, I am of the opinion that plaintiff is not entitled for any relief. Accordingly, I hereby dismiss the present suit. No order as to cost. Decree-sheet be prepared accordingly. File be consigned to record room.
Announced in the open court on this 11th day of February, 2008 ( Pawan Kumar Jain) Additional District Judge, Fast Track court, Delhi Page 39 of 39