Delhi High Court
M/S D.C.M.Limited & Anr. vs Mahabir Singh Rana on 17 December, 2009
Author: Hima Kohli
Bench: Hima Kohli
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA No. 453/1996
Reserved on : 20.11.2009
Pronounced on: 17.12.2009
IN THE MATTER OF :
M/S D.C.M.LIMITED & ANR. ..... Appellants
Through: Mr.Harvinder Singh and
Ms.Sapna, Advocates
versus
MAHABIR SINGH RANA ..... Respondent
Through: Nemo
CORAM
* HON'BLE MS.JUSTICE HIMA KOHLI
1. Whether Reporters of Local papers may
be allowed to see the Judgment? Yes.
2. To be referred to the Reporter or not? Yes.
3. Whether the judgment should be
reported in the Digest? Yes.
HIMA KOHLI, J.
1. The present appeal is filed by the appellants against the judgment and decree dated 9.9.1996 passed by the learned Additional District Judge, decreeing the suit for declaration, mandatory injunction and recovery of damages/compensation of Rs.99,500/- filed by the respondent/employee against the appellants/management. RFA No. 453/1996 Page 1 of 18
2. The facts of the case are largely undisputed. The respondent was working in the mill of the appellants/management since 17.7.1952. He initially joined as a Weaving Apprentice and was promoted from time to time. At the time relevant for the purposes of present appeal, the respondent/employee was working as an Assistant Weaving Master with the appellants/management. Though there is no dispute about the fact that the age of superannuation of the respondent/employee was 58 years, as per him, he would have attained the age of 58 years on 15.7.1930, whereas as per the appellants/management, the respondent/employee would have attained the age of 58 years on 1.12.1928. It is undisputed that the last salary drawn by the respondent/employee was Rs.1,750/-, besides conveyance and other benefits.
3. As per the averments made in the plaint by the respondent/employee (plaintiff in the trial court), the cause of action for instituting the aforesaid suit arose on 27.9.1984, when the appellants/management terminated his services. The aforesaid action of the appellants/management was stated to be illegal and arbitrary on the ground that it was in breach of the terms of the contract and the termination order was issued without giving three months‟ notice to the respondent/employee or paying him the salary in lieu of notice, in advance. As the appellants/management refused to pay to the respondent/employee his dues, as demanded by him in his letter dated RFA No. 453/1996 Page 2 of 18 3.10.1984 reiterated in the legal notice dated 31.12.1984, the respondent/employee instituted the aforesaid suit in the trial Court on 22.03.1985.
4. Summons were issued in the suit on 26.03.1985.
Thereafter, the appellants/management entered appearance and contested the suit. After the pleadings were completed, the following issues were framed:
"1.Whether the suit is maintainable against defendant No.1?
2.Whether the plaint lacks material particulars and is liable to be rejected? OPD.
3.Whether the suit is properly valued for purposes of court-fee and jurisdiction? OPP
4.Whether the suit for declaration is not maintainable as alleged in the W/S?
5.Whether the suit for recovery of damages beyond three months is maintainable? OPP
6.Whether the terms and conditions of the compromise have been violated? OPP
7.Whether the plaintiff is entitled to any damages? If so, to what extent?
8. Relief."
5. Both the parties adduced oral and documentary evidence, whereafter, arguments were heard by the trial court and the suit of the respondent/employee was ultimately decreed on 09.09.1996, for a sum of Rs.99,500/- with interest payable @ 6% p.a. from the date of RFA No. 453/1996 Page 3 of 18 the decree, till realization alongwith costs on the decretal amount and a mandatory injunction to the appellants/management to pay the decretal amount within a period of three months from the date of the decree.
6. Aggrieved by the aforesaid judgment and decree dated 9.9.1996, the appellants/management preferred the present appeal. The appeal was admitted on 28.1.1997. Despite the fact that respondent/employee was initially represented in the present appeal, after the order of admission, none has appeared on his behalf.
7. It is also relevant to note that though the appellants/management had prayed for an interim order seeking stay of the execution of the impugned decree, vide order dated 1.4.1997, the Division Bench directed that the decretal amount, if deposited, would be paid to the respondent/employee on furnishing security for restitution to the satisfaction of the trial court. Counsel for the appellants/management submitted that the appellants had subsequently deposited a sum of Rs.1,08,893/- in the Executing Court on 24.10.1993 and upon offering adequate security, the amount was released in favour of the respondent/employee on 7.4.1998.
8. Mr. Harvinder Singh, learned counsel for the appellants/ management submitted that the appellants are aggrieved by the findings returned by the trial court, in respect of issues No.5 and 7. He stated that the trial court failed to appreciate the fact that no effort RFA No. 453/1996 Page 4 of 18 was made by the respondent/employee for seeking gainful employment elsewhere, as per the requirement of the Explanation to Section 73 of the Indian Contract Act, 1872 (hereinafter referred to as „the Act‟). In support of the aforesaid argument, he relied on the following judgments:
(i) Workmen of the Bangalore Woollen, Cotton and Silk Mills Co. Ltd. vs Its management 1962 1 LLJ 213
(ii) M.Nanjappa Vs. M.P.Muthuswamy AIR 1975 Karnataka 146
(iii) Smt.J.Twari Vs. Jawala Devi Vidya Mandir and Ors.
1979 (1) SLR 614
(iv) S.M.Murray Vs. M/s Fenner (India) Ltd. 1986 (11) DRJ 12
(v) Kendriya Vidyalaya Sangathan and Another Vs. S.C.Sharma (2005) 2 SCC 363
9. Apart from the above argument, it was submitted on behalf of the appellants/management that on account of failure on his part to seek mitigation of damages, the respondent/employee could have at best claimed three months‟ salary as damages from the appellants/management. It was lastly urged that as the respondent/employee had himself stated in his deposition that he had become physically unfit to do any work, the sight of his one eye having been completely lost, he could not claim the wages for the remaining period of employment beyond three months‟ salary, which was adequate for compensating him.
RFA No. 453/1996 Page 5 of 18
10. I have heard the counsel for the appellants/management and have carefully perused the trial court record and the judgments relied upon by him.
11. Heavy reliance was placed by the counsel for the appellant on the Explanation to Section 73 of the Act, which lays down what may be called the measure of damages in case of breach of contract. The relevant extract of the section is reproduced hereinbelow:
"73. 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 the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
xxx Explanation - In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account."
12. The Explanation to the aforesaid Section stipulates that in estimating the loss or damage arising from a breach of contract, "the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account." The RFA No. 453/1996 Page 6 of 18 aforesaid Explanation is commonly referred to as the rule of mitigation of damages. The contention of the counsel for the appellants/management is that a duty was cast on the respondent/employee to mitigate the damages and the onus of proving that he made efforts to obtain alternative employment was on him as the plaintiff. He further submitted that the respondent/employee had not made any averments in the plaint that he really made any effort to mitigate the damages and hence he failed to discharge the onus placed upon him. Having failed to discharge the said onus, the same could not have shifted to the appellants/management and in such circumstances, the trial court ought not to have directed payment of full wages under the contract to the respondent/employee.
13. This Court is unable to persuade itself to agree with the submission of the counsel for the appellants/management that the respondent/employee was duty bound to mitigate the damages. In this regard, the judgment of a Single Judge of the Bombay High Court in the case of K.G.Hiranandani vs. Bharat Barrel and Drum Mfg.Co.Pvt.Ltd. reported as AIR 1969 Bombay 373, followed by a Single Judge of this Court in the case of S.M.Murray Vs. M/s Fenner (India) Ltd. 1986 (11) DRJ 12 is relevant. After discussing the Explanation to Section 73 of the Act, it was noted in the aforesaid judgment that the Explanation was not enacted as a sub-section or a RFA No. 453/1996 Page 7 of 18 separate paragraph to Section 73, but only appended as an "Explanation to the substantive rule in the first part of Section 73". Hence, no duty, which is actionable, can be cast on a party to claim entitlement to damages by first establishing that he had made efforts to obtain alternative employment to mitigate the damages. Reference to para 4 for the purpose of construction of Explanation to Section 73 is necessary and is reproduced hereinbelow:
"4.Before I proceed to deal with the rival contentions of the learned counsel on either side, it would be convenient refer to material portions of Section 73 of the Contract Act which is the section which lays down what may be called the measure of damages in case of breach of contract. The substantive portion of that section lays down the basic rule that a party who suffers by the breach is entitled to receive from the party in breach "compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach". The Explanation to the section lays down that in estimating the loss or damage arising from the breach of a contract, "the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account".
Though what the Explanation enacts is popularly called the "rule" in regard to mitigation of damages, and has been so referred to even in some decided cases and standard works, and though it is loosely called a "duty" to mitigate, the position really is, as out legislature has rightly stated, merely this, that what the Explanation enacts is not in the nature of an independent rule or duty but is merely a factor to be taken into account in assessing the damages naturally arising from the breach, for the purpose of the main part of RFA No. 453/1996 Page 8 of 18 Section 73. That is precisely the reason why it is enacted, not as a sub-section or a separate paragraph, as an "Explanation" to the substantive rule in the first part of Section 73. Support is to be found for this view which I am taking in a passage in Mayne on damages (12th ed.) para 149, point (2), in which it is stated that the expression "duty to mitigate"
is the common and convenient way of stating the position, but that expression is a somewhat loose one, since there is no duty which is actionable or which is owed to any one by the plaintiff. It is further pointed out in the said message that the plaintiff cannot owe a duty to himself, and that the position is similar to that of a plaintiff whose damages are reduced because of his contributory negligence. If means existed of remedying the inconvenience caused by the breach of contract which have not been availed of by the plaintiff, the damages claimed by him cannot be said to arise "naturally" from the breach within the main part of Section 73 of the Contract Act or, to put it in another way, the means, if any, of remedying the inconvenience caused by the breach of contract are factors that go to reduce the damages that might otherwise have been said to have arisen "naturally" from the breach, that, in my opinion, is the proper construction that should be placed upon, what is popularly called the rule in regard to mitigation of damages." (emphasis added)
14. Coming to the case in hand, it is not denied by the counsel for the appellants/management that the duration of the contract with the respondent/employee was for a definite period and binding upon both the parties to the master and servant relationship, till the end of that period and that the same could be terminated only for a cause or justification such as misconduct or inefficiency (Ref.: India RFA No. 453/1996 Page 9 of 18 International Centre vs. S.N. Pandit, reported as ILR (1976) I Delhi
60). The contract of employment of the respondent/employee in the present case was to expire on his attaining the age of 58 years. As per the respondent/employee, at the time of service of notice of termination dated 27.9.1984, he had 46 months of employment left whereas, as per the appellants/management, the respondent/ employee had 27 months of employment left before being superannuated.
15. A perusal of the pleadings and the evidence, which has come on the record shows that though the appellants/management mentioned in their written statement that no effort had been made by the respondent/employee to mitigate the damages by seeking suitable employment elsewhere, no positive evidence was led by the appellants/management to prove that the respondent/employee had means at hand for mitigating the damages and despite the same, he had not availed himself of them. Having failed to discharge the said onus by showing that the respondent/employee ought to have reasonably taken certain mitigating steps, the appellants/management cannot claim that normal measure of damages ought to have been cut down while granting relief to the respondent/employee. This Court therefore is not inclined to follow the judgment of a Single Judge of Karnataka High Court the case of M. Najappa (supra) that Explanation to Section 73 of the Act requires that for an order to grant relief by RFA No. 453/1996 Page 10 of 18 way of damages in an action of wrongful dismissal, the respondent/employee ought to have proved that other jobs were not available. The Court would prefer to be guided by the judgment of the Bombay High Court in the case of K.G.Hiranandani (supra) followed by a Single Judge of this Court in the case of S.M.Murray (supra). The case of Kendriya Vidyalaya Sangathan (supra) also has no application to the facts of the present case. In the aforesaid case, while examining the orders of the CAT, affirmed by the Punjab and Haryana High Court, directing the respondent/employee therein to be reinstated in service with all consequential benefits from the date of dismissal from service, the Supreme Court made an observation as to the claim of back wages in the case of reinstatement of an employee and held that it was for him to show that he was not gainfully employed for the relevant period. In the present case, the respondent/employee had filed a civil suit for recovery of damages/compensation after his services were terminated. The yardstick applied for discharging the onus in such a case cannot be equated with the above case and has to be tested on a different anvil.
16. Even the second limb of the argument raised on behalf of the appellants/management that at best the respondent/employee could have claimed and be held entitled to grant of three months‟ salary in lieu of notice pay as damages, is devoid of merits. It is undisputed that the appellants/management did not tender even the RFA No. 453/1996 Page 11 of 18 three months‟ pay to the respondent/employee while issuing the notice of termination. Rather, the correspondence placed on the record shows that the appellants/management chose not to reply to the demand notices issued by the respondent/employee to them. Counsel for the appellants/management submitted that notice pay could very well have been collected by the respondent/employee by approaching the office of the appellants/management. The said plea is taken note of only to be rejected. It was for the appellants/management to ensure that the notice pay for three months was enclosed with the termination notice and/or forwarded to the respondent. It was not for the respondent/employee to run from pillar to post for collecting the same after receiving the termination notice. Therefore, the termination notice was itself improper.
17. The records reflect that the appellants/management terminated the services of the respondent/employee on 27.9.1984. Thereafter, the respondent/employee issued a letter dated 30.10.1984 to the appellants/management informing them that he had approached the Accounts Manager and other authorities to receive the notice pay for three months on two occasions, but was denied payment. The appellants/management however did not respond to the said letter. This was followed by a legal notice dated 31.12.1984 issued on behalf of the respondent/employee to the appellants/management which was also not replied to by the latter. RFA No. 453/1996 Page 12 of 18 Thus, the party who is in the wrong and in breach of the terms of the contract, cannot claim an additional right to impose an onerous duty on the aggrieved party for claiming damages.
18. Coming to the next submission of the counsel for the appellants/management that as the respondent/employee himself stated in his testimony that he became physically unfit to do any work, he could not claim wages beyond a period of three months, a perusal of the testimony of the respondent/PW-1 shows that in the course of his cross-examination, he had stated on 3.4.1987 that he did not try to find any alternative job because his eye sight was weak and he had lost his one eye. It is not the case of the appellants/management that the services of the respondent/employee were terminated on account of any physical disability or ill health. A perusal of the termination letter shows that the same was completely silent on the reasons of termination. Hence reliance placed by the counsel for the appellants/management on the judgment of the Supreme Court in the case of Workmen of Bangalore(supra) is completely misplaced. In the aforesaid case, while dealing with the definition of „retrenchment‟ under the provision of Section 2(oo) of the Industrial Disputes Act, 1947, the Supreme Court observed that when a workman is discharged on the ground that he is medically unfit, it cannot be said that he had been discharged on the ground that his services were no longer required and his physical condition prevented him from RFA No. 453/1996 Page 13 of 18 rendering the service for which he had been employed. It was in the aforesaid context that the Supreme Court noted further that service cannot be said to be terminated unless it was capable of being continued, i.e., the contract requires certain physical fitness in a workman and the absence thereof, means that he would not be offered re-employment.
19. As noted above, in the present case, physical fitness was not the ground for terminating the services of the respondent/employee. The statement made on behalf of the respondent/employee in his deposition, in answer to a query posed on behalf of the appellants/management in the cross-examination, to the effect that he did not try to find out any alternative employment due to his weak eye sight and on account of his having lost one eye, has to be seen in the context of the relevant time when such a statement was made. The said statement was made by the respondent/employee on 03.04.1987. By that time, a period of two and a half years had already lapsed since the date of termination of his services. As per the appellants/management, had the respondent/employee continued in service, he would have attained the age of retirement of 58 years on 15.07.1988, which was only about 14 months down the line from the date of recording the testimony of the respondent/employee in the suit proceedings. Even if the submission made by the appellants/management that when the respondent/ employee‟s RFA No. 453/1996 Page 14 of 18 services were terminated, only 27 months of his service remained, is accepted, it is clear that his termination was at the very fag end of his career.
20. As noted in the case of S.M.Murray(supra), one has to see the period of employment, the nature of job, availability of suitable job etc. The appellants/management had not set out any case in the trial court that though suitable employment was available with the respondent/employee, he did not make any effort to get the same. Trial court record reveals that no evidence whatsoever was led by the appellants/management to show that any suitable job was available to the respondent/employee. Apart from a bald averment made in the written statement to the effect that the respondent/employee had failed to seek mitigation of damages by seeking alternative employment, the appellants/management remained completely silent on this aspect of the matter. It is no secret that on the eve of the attaining the age of retirement, it is extremely difficult for an employee to secure alternative employment in the market and that jobs at that age become hard to come by. In view of the aforesaid facts and circumstances, this Court is not inclined to accept the submissions made by the counsel for the appellants for seeking reversal of the decree. The statement made by the respondent/employee can be considered as sufficient to conclude that given his physical condition, he could not have secured any suitable RFA No. 453/1996 Page 15 of 18 alternative employment. As the termination of service of the respondent/employee was not on the ground of his physical condition, the appellants/management cannot be permitted to gain any benefit on the said count. The judgment of the Supreme Court in the case of Smt.J.Twari (supra) relied upon by learned counsel for the appellants/management is also distinguishable for the reason that in the said case, the Supreme Court took notice of the fact that the appellant/employee therein had made no effort to seek alternative employment for 20 long years. In the present case, the remaining term of employment of the respondent/employee was at best, 46 month.
21. The last submission made on behalf of the appellants/management was that while granting relief under issues No.7 & 8, the trial court ought to have reduced the damages assessed as the respondent/employee could not have been held entitled to salary for a period of 50 months along with other benefits. In this regard, he draws the attention of this Court to Annexures A & B, enclosed with the plaint by the respondent/employee. Annexure-A reflects that the salary of respondent/employee was Rs.1,740/-. The respondent/employee calculated that the sum total of the wages payable to him from September 1984 to 30.6.1988, was Rs.86,610/-.
22. In Annexure-B to the plaint, the respondent/employee had set out his claim for damages on account of entitlement to medical RFA No. 453/1996 Page 16 of 18 allowance, book subsidiary, earned leave, medical leave and conveyance allowance, which as per the respondent, totalled to Rs.26,359/-. He however stated that he had restricted his claim to Rs.12,890/- in the plaint.
23. As far as the damages claimed by the respondent/employee in Annexure-B to the plaint towards medical allowance, book subsidiary, earned leave are concerned, in the opinion of this Court, the respondent/employee could not be held entitled to the same as the conveyance was intended to be for the purposes of discharging his duties under the appellants/management. Similarly, earned leave, medical leave and medical allowance could only be claimed and granted to the respondent/employee had he remained in service. Same is the position with regard to book subsidiary. Hence, no amount could be held to be payable to the respondent/employee on the heads reflected in Annexure B, restricted by him in the plaint to a sum of Rs.12,890/-.
24. Further, the respondent/employee is not entitled to claim salary for a period of more than 46 months for the reason that even as per him, he was to retire at the age of 58 years which period as per his calculation, would have got completed on 27.07.1988. The wages granted by the trial court for a period of additional three months, apart from 46 months is not permissible as the same would take the respondent/ employee beyond the age of superannuation as claimed RFA No. 453/1996 Page 17 of 18 by him. The notice pay period of three months would have to form a part and parcel of the entire remaining period of service and not exclusive thereof. The compensation thus payable to the respondent/employee for the remaining period of his service would be for a period of 46 months and not of 50 months merely because notice pay compensation was not tendered to him by the appellants/management while terminating his service. Accordingly, the wages payable to the respondent/employee are scaled down from Rs.96,500/- to Rs.86,610/-, with interest payable @ 6% p.a., as granted by the trial court.
25. For the aforesaid reason, the present appeal is disposed of by holding that the impugned judgment and decree is required to be modified to the extent that the respondent/employee is entitled to a decree of Rs.86,610/- with interest payable @ 6% p.a. from the date of decree till realization along with costs. The Registry is directed to prepare a modified decree sheet on the aforesaid lines. There shall however be no orders as to costs in the present appeal. The trial court record be released forthwith.
(HIMA KOHLI)
DECEMBER 17, 2009 JUDGE
mk
RFA No. 453/1996 Page 18 of 18