Gaurav Monga vs Premier Inn India Pvt Ltd & Ors on 6 January, 2017

[Cites 15, Cited by 1]

Delhi High Court

Gaurav Monga vs Premier Inn India Pvt Ltd & Ors on 6 January, 2017

Bench: Rajiv Sahai Endlaw

*IN THE HIGH COURT OF DELHI AT NEW DELHI

% Date of decision: 6th January, 2017

+ CS(OS) 548/2016 & IAs No.13285/2016 (u/O 38 R-1&5 CPC) &
13286/2016 (u/O 39 R-1&2 CPC)
GAURAV MONGA ..... Plaintiff
Through: Mr. Ashim Sood and Mr. Dhruv
Sood, Advs.
Versus
PREMIER INN INDIA PVT LTD & ORS ..... Defendants
Through: None.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1. This suit accompanied with applications under Order XXXIX Rules

1&2 CPC and under Order XXXVIII Rules 1&5 CPC came up before this

Court first on 25th October, 2016 for admission when the following order

was passed:

―3. The plaintiff has instituted the present suit (i) for declaration that
the defendants acted falsely and deceitfully in inducing the plaintiff to
accept employment of the defendant No.1 and thereby violated their legal
duties to the plaintiff; (ii) for declaration that the defendants acted
negligently in inducing the plaintiff to accept employment with the
defendant No.1; (iii) for declaration that the employment of the defendant
No.1 was wrongly terminated by the defendants; and (iv) for recovery of
an amount of Rs.4,50,00,000/- as and by way of compensation for
damages and losses.

CS(OS) No.548/2016 Page 1 of 41
4. It is inter alia the case of the plaintiff:

(a) that the plaintiff is an experienced and highly qualified
investment professional;

(b) that the defendant No.1 is a company registered in India and
is a wholly owned subsidiary of defendant No.3 Whitbread
PLC, UK and an affiliate / associate of defendant No.2
Whitbread Hotels & Restaurants International, Dubai;

(c) that the defendant No.4 Mr. RatneshVerma resident of Dubai
is the President and Managing Director of the defendant No.2
and Director of the defendant No.1;

(d) that the defendants No.7,8&9 namely Mr. Matthew Yates,
Mr. Rakesh Garg and Mr. Sanjeev Kumar Jain, all resident of
New Delhi are Directors on the Board of Directors of the
defendant No.1;

(e) that the defendant No.5 Mr. Aly Shariff also resident of
Dubai is the Brand Officer of the defendant No.2 and the
defendant No.6 Ms. Tanya Bateman also resident of Dubai is
the Head of Human Resources of defendant No.2;

(f) that in or around October, 2015, HVS Executive Search, not a
party to the suit, acting on behalf of the defendants
approached the plaintiff for recruitment for the position of
Vice-President, Development of defendant No.1 and
represented that the defendant No.1 targeted to have 50 hotels
across Middle East, India and Southeast Asia and the post for
which the plaintiff was approached would be responsible for
expansion of Premier Inn Hotels portfolio in the said region;

CS(OS) No.548/2016 Page 2 of 41
(g) that thereafter several meetings were held and in which also
similar representations were made to the plaintiff and
believing the said representations, the plaintiff agreed to join
the defendant No.1 as Vice-President, Development and an
appointment letter dated 19th January, 2016 was issued to the
plaintiff;

(h) that however the defendants did not make the investments
promised and on the contrary have decided to withdraw from
India and have terminated the employment of the plaintiff.

5. Finding, that the appointment letter admittedly issued to the
plaintiff provided for a probation of six months and of termination of
employment by notice of three months thereafter, it has been enquired
from the counsel for the plaintiff, as to how the suit is maintainable and
how can the plaintiff be said to be entitled to damages in the sum of
Rs.4,50,00,000/- as claimed and owing to which claim the pecuniary
jurisdiction of this Court has been invoked.

6. The counsel for the plaintiff has argued:

(i) that the claim of the plaintiff is based on ‗duty to care' owed
by the defendants to the plaintiff and not on contract;

(ii) that the representations made by the defendants to the plaintiff
to lure the plaintiff to join the employment of the defendant
No.1 were deceitful and if not deceitful, negligent;

(iii) that the plaintiff has made the claim under the Law of Torts;

(iv) under the Law of Contract, the plaintiff has only sought the
relief of declaration that the termination of employment of the
plaintiff was illegal;

CS(OS) No.548/2016 Page 3 of 41
(v) on specific query, the counsel for the plaintiff reiterates that
the plaintiff is not claiming any consequential relief pursuant
to the declaration of the termination of employment of the
plaintiff by the defendant No.1 being illegal;

(vi) that on enquiry, as to the basis of the claim for
Rs.4,50,00,000/-it is stated that the same is the amount of
emoluments which the plaintiff would have earned for a period
of three years employment.

7. To my mind, once the representations, even if any made by the
defendants to the plaintiff in the context of employment of the plaintiff
with the defendant No.1 and which employment ultimately fructified and
terms whereof recorded in writing, there could be no claim under the Law
of Torts.

8. Had the plaintiff acting on the said representations joined the
employment of the defendants, the plaintiff who claims to be a highly
qualified and highly qualified investment professional, would have insisted
upon the same being recorded in the appointment letter and the defendant
No.1 assuring employment at least for three years to the plaintiff and / or
payment of the said sum of Rs.4,50,00,000/-. On the contrary, the plaintiff
accepted to be on probation and after which period of probation, the
services of the plaintiff were to be confirmed and were not confirmed and
thereafter termination of the agreement by a three months' notice.

9. Thus, to my mind, the claim in the suit is misconceived and the suit
is liable to be dismissed at threshold.

10. The counsel for the plaintiff seeks time till tomorrow to search case
law that notwithstanding such a contract, a claim under the Law of Torts is
maintainable, as made in the present suit.

CS(OS) No.548/2016 Page 4 of 41
11. The said search should have been carried out before drafting the
plaint and not after institution of suit.

12. The counsel for the plaintiff, at this stage, states that he will also
show that misrepresentation proceeding (sic for preceding) a contract gives
cause of action for claim for damages de hors the written contract.

13. List tomorrow i.e. 26th October, 2016.‖

2. Thereafter on 26th October, 2016, the following order was passed:

―1. This order is in continuation of the yesterday's order.

2. The counsel for the plaintiff has been heard at length.

3. Orders reserved.

4. However for the sake of avoiding any confusion, the propositions which
have emerged in today's hearing are being recorded in the presence of
the counsel for the plaintiff, inasmuch as they do not find place in the
plaint.

5. The counsel for the plaintiff has firstly stated that the grouse of the
plaintiff is not that the defendants did not invest £100 million in hotels in
India as they had represented to the plaintiff before the plaintiff agreed to
join the employment of the defendant No.1.

6. The counsel for the plaintiff has stated that whether or not the
representations made by the defendants and as pleaded in the plaint
which have turned out to be false resulted in an agreement or a
contractual relationship or not, the plaintiff has a claim for damages on
the basis of misrepresentation and even if the same resulted in a contract,
then irrespective of the terms of the contract.

CS(OS) No.548/2016 Page 5 of 41
7. It has been enquired from the counsel, as to what would be the situation,
if the terms of the contract were to be contrary.

8. The counsel states that according to him the contract in the subject case is
silent on the aspect on which representations were made but concedes
that if this Court were to hold that the contract is to the contrary, then the
plaintiff would not have any cause of action on the misrepresentation.

9. It has also been argued that a pre-contract representation furnishes a
cause of action in tort.

10. During the hearing, attention of the counsel has been invited to Sections
91&92 of the India Evidence Act, 1872 and particularly to the second
Proviso to Section 92.

11. The counsel for the plaintiff states that he will file written submissions,
including on the said aspect. The same be filed within one week, as
sought.

12. The counsel for the plaintiff also states that the plaintiff is alternatively
claiming for breach of contract with the representations aforesaid
forming implied terms of contract.‖

3. The counsel for the plaintiff during the hearing relied on:

(a) The following passage in Chitty on Contracts, Thirty-Second
Edition:
―1-159 Representations. Even at the time when it was
doubtful whether a party to a contract could claim in tort against
the other party in respect of matters relating to the performance of
the contract, it was established that such a party could rely on
established liabilities in tort arising from facts which occur in the
course of the dealings of the parties before contract. A party to a

CS(OS) No.548/2016 Page 6 of 41
contract can therefore claim damages for a pre-contractual
statement which induced him to contract under various headings:
in the tort of deceit, where the statement was made fraudulently, in
the tort of negligence, if the claimant can establish the conditions
for the existence of a duty of care under Hedley Byrne & Co. Ltd.
Vs. Heller & Partners Ltd. under the provisions of the
Misrepresentation Act, 1967, or as a right to redress under the
Consumer Protection from Unfair Trading Regulations 2008. It is
also clear that these rights to damages in tort may exist whether or
not the misrepresentation has been incorporated into the contract
thereby giving rise to a claim for breach of contractual warranty,
and whether or not the claimant chooses to exercise any right of
rescission of the contract on the grounds of misrepresentation.‖

(b) The judgment of the Supreme Court of Canada in Douglas J.
Queen Vs. Cognos Incorporated 1993 SCC OnLine Can SC
10.

(d) ESSO Petroleum Co. Ltd. Vs. Mardon1976 1 Q.B. 801.

4. The counsel for the plaintiff in the written submissions has contended:

(i) That the defendants wrongfully and / or negligently misstated
their plans to invest 100 million pounds in the Indian business,
thereby inducing the plaintiff to take up employment offer to
his detriment.

CS(OS) No.548/2016 Page 7 of 41
(ii) Pre-contractual misrepresentation and mis-statements furnish an
independent cause of action in torts consequent to which
damages can be claimed.

(iii) The claim of the plaintiff in the present suit is also for post-
contractual misrepresentations and mis-statements which
continued from the day of singing of the contract right upto the
wrongful termination of the plaintiff.

(iv) The defendants owed a duty of care to the plaintiff at the time
of making the wrongful and / or negligent mis-statements.

(v) Concurrent liability can arise in both contract and tort from the
same set of facts.

(vi) Contract does not exclude a tortuous duty of care in any class of
case.

5. I have considered the aforesaid contentions. At this stage, it is

expedient to notice some of the terms of the letter dated 19 th January, 2016

of appointment of the plaintiff. They are reproduced herein below:

"3. Emoluments

3.1 Annual Fixed Salary of Rs.71,00,000/- (Rupees Seventy-One
Lakhs only). This includes Basic, House Rent Allowance,
Flexible Allowance and Retirals.

3.2 You will also be entitled to an Annual variable Incentive of up to
Rs.50,00,000/- (Rupees Fifty Lakhs Only).

CS(OS) No.548/2016 Page 8 of 41
The Annual Variable Incentive is based on the achievement of
annual deal targets and paid in accordance with the payment
schedule.

3.3 In addition to the above, you will be entitled to a Corporate
Incentive of up to Rs.29,00,000/- (Rupees Twenty Nine Lakhs
Only) per annum based upon WINcard (KPI's) and business
profitability targets.

The Corporate Incentive is a discretionary scheme, details of which
are provided annually under separate cover. Incentive applies to
the annual Basic Salary and excludes other allowances and
payments in its calculation.

3.4 The company will also provide you with a Comprehensive Medical
Cover for yourself, your Spouse, Two dependent Children and Two
dependent Parents. You would also be covered for a Personal
Accident Insurance only for yourself. These benefits will be
arranged by the Company but adjusted against your Annual Fixed
Gross Salary as per the current company policy.

3.4 Location - Gurgaon, India.

4. ...........

5. ..........

6. Place of Work

Your initial place of work will be at Gurgaon, however, your
services are transferable, and can be seconded or deputed by the
Company to:

CS(OS) No.548/2016 Page 9 of 41
i. Any operation in India or Abroad of the company and its
subsidiaries; whether existing as on date of your
appointment or to be established thereafter.

ii. You may be transferred to any location or office or
associate company as per the requirement.

iii. HR shall inform you of your report structure in the course
of your employment with the company.

7. Probation and Confirmation

7.1 Your services will be on probation for a period of six months from
the date of joining. During and at the end of your said probation
period, your performance will be assessed and it will be open to the
Management either to confirm your services in writing or extend
your probationary period. If no confirmation letter is received by
you in writing at the end of the probationary period, including the
extended period of probation, if any, you shall be deemed to be on
probation till you receive a written confirmation letter from the
Company or till your services are terminated. Either party can
terminate the services at any time during the probationary period,
including the extended period of probation, if any, with 15 (fifteen)
day's notice or pay in lieu of such notice and without assigning any
reason thereof.

7.2 After confirmation, your services may be terminated by either side
giving three months' notice in writing or payment of Basic Salary
in lieu thereof. The Company may immediately terminate your
services without any compensation or notice thereof, if you are
found involved in material breach of any obligation,

CS(OS) No.548/2016 Page 10 of 41
responsibilities or in case of misconduct in terms of the violation of
the Code of Conduct or policies of the Company.

8. Termination after Confirmation and Resignation

After confirmation, the Management reserves the right to terminate
your appointment without assigning any reason whatsoever by
giving you three months' notice in writing or giving three month's
Basic Salary in lieu of the notice. Same conditions will apply to
you when you wish to resign from the services of the Organization.
In the event of your decision to resign and leave the services of the
Organization, you are required to do so in writing to the
management. You will be relieved only after your resignation is
formally accepted in writing by the authorized representative of the
Management. Upon your resignation being accepted you will be
responsible for handing over charge of all pending work, papers,
files and property of the Company which are in your possession, in
an orderly and systematic manner. In the event of any failure to
comply with the above you shall be liable to make good the
consequent damage or loss caused, of which the Management shall
be the sole judge and you shall not be entitled to receive any dues,
arrears or terminal benefits from the Company.

However, the Company may immediately terminate your services
without any compensation or notice thereof, if you are found
involved in material breach of any obligation, responsibilities or in
case of misconduct in terms of the violation of the Code of Conduct
or policies of the Company.

9. ......

10. ......

CS(OS) No.548/2016 Page 11 of 41
11. ......

12. ......

12.6 Code of Conduct: Your services and behaviour in the Company
while performing your duties and even otherwise shall be governed
by the Code of Conduct and all other prevalent policies of the
Company. Any breach of the Code and or the policies will be
treated as a serious breach and misconduct which could lead to
termination of your services without any notice and / or
compensation of any nature.‖

6. The employment of the plaintiff was terminated vide letter dated 22 nd

July, 2016 in exercise of right under Clause 7.1 of the appointment letter

aforesaid and 15 days annual fixed salary in lieu of notice period was

tendered to the plaintiff.

7. The defendants in their response dated 25th August, 2016 to the legal

notice preceding the suit, while denying any misrepresentation or

inducement, stated:

―......Any suggestion today of Mr. Monga's reliance on any particular fact
about our organization and its goals is completely something that Mr.
Monga independently made without our knowledge or has today created for
his own ulterior motives. We categorically state that no specific
representations were made to Mr. Monga, and any representations that we or
any specific individuals within our organization made to anyone in general
were absolutely true at that time and not designed or intended to induce Mr.
Monga either directly or indirectly in any manner.

CS(OS) No.548/2016 Page 12 of 41
Mr. Monga's assertions of specific individuals within our
organization making any representations to him are false, libelous and
slanderous and we reserve the right to pursue legal remedies against Mr.
Monga for casting such aspersions.

Mr. Monga well knows or should have known, given his touted
―experience and high qualifications‖, that businesses operate in a dynamic
global environment which changes from time to time and businesses need to
adapt to such changing global environment promptly. Any decision that we
took about our future business plans was strictly in accordance with our
need to adapt to changing business environment and not targeted towards
Mr. Monga or any other employee.‖

8. Though the plaint does not appear to have been drafted with

knowledge thereof and the same did not come up during the hearings

aforesaid also but I find Sections 19 & 19A of the Contract Act, 1872 to be

providing as under:

―19. Voidability of agreements without free consent.--When
consent to an agreement is caused by coercion, fraud or
misrepresentation, the agreement is a contract voidable at the
option of the party whose consent was so caused.
A party to a contract, whose consent was caused by fraud or
misrepresentation, may, if he thinks fit, insist that the contract
shall be performed, and that he shall be put in the position in
which he would have been if the representation made had been
true.
Exception.--If such consent was caused by misrepresentation
or by silence, fraudulent within the meaning of section 17, the
contract, nevertheless, is not voidable, if the party whose

CS(OS) No.548/2016 Page 13 of 41
consent was so caused had the means of discovering the truth
with ordinary diligence.
Explanation.--A fraud or misrepresentation which did not
cause the consent to a contract of the party on whom such fraud
was practised, or to whom such misrepresentation was made,
does not render a contract voidable.
Illustrations
(a) A, intending to deceive B, falsely represents that five
hundred maunds of indigo are made annually at A's factory,
and thereby induces B to buy the factory. The contract is
voidable at the option of B.
(b) A, by a misrepresentation, leads B erroneously to believe
that five hundred maunds of indigo are made annually at A's
factory. B examines the accounts of the factory, which show that
only four hundred maunds of indigo have been made. After
this B buys the factory. The contract is not voidable on account
of A's misrepresentation.
(c) A fraudulently informs B that A's estate is free from
incumbrance. B thereupon buys the estate. The estate is subject
to a mortgage. B may either avoid the contract, or may insist on
its being carried out and the mortgage debt redeemed.

(d) B, having discovered a vein of ore on the estate of A, adopts
means to conceal, and does conceal, the existence of the ore
from A. Through A's ignorance B is enabled to buy the estate at
an under-value. The contract is voidable at the option of A.

(e) A is entitled to succeed to an estate at the death
of B; B dies: C, having received intelligence of B's death,
prevents the intelligence reaching A, and thus induces A to sell
him his interest in the estate. The sale is voidable at the option
of A.

19-A. Power to set aside contract induced by undue
influence.--When consent to an agreement is caused by undue

CS(OS) No.548/2016 Page 14 of 41
influence, the agreement is a contract voidable at the option of
the party whose consent was so caused.
Any such contract may be set aside either absolutely or, if the
party who was entitled to avoid it has received any benefit
thereunder, upon such terms and conditions as to the Court may
seem just.‖

and Section 64 providing the consequences of rescission of a voidable

contract as under:

―64. Consequences of rescission of voidable contract.--When
a person at whose option a contract is voidable rescinds it, the
other party thereto need not perform any promise therein
contained in which he is the promisor. The party rescinding a
voidable contract shall, if he had received any benefit
thereunder from another party to such contract, restore such
benefit, so far as may be, to the person from whom it was
received.‖

and Section 66 providing the mode of rescinding of a voidable
contract as under:

―66. Mode of communicating or revoking rescission of
voidable contract.-- The rescission of a voidable contract may
be communicated or revoked in the same manner, and subject
to the same rules, as apply to the communication or revocation
of the proposal.‖
9. Thus, as far as India is concerned, the aforesaid provisions provide for

the consequences of a pre-contract misrepresentation, which is the basis of

the plaintiff's suit. Such misrepresentation makes the contract voidable at

CS(OS) No.548/2016 Page 15 of 41
the option of the party whose consent to the contract was caused by

misrepresentation and entitles that party to insist that the contract be

performed and he should be put in a position in which he should have been,

if the representation made had been true. However, the exception to Section

19 clarifies that if the party, whose consent to contract was caused by

misrepresentation, had the means of discovering the truth by ordinary

diligence, the contract is not voidable. It thus follows that even if the

plaintiff's consent to accepting employment with the defendant No.1 was

caused by representations made by the defendants to the plaintiff as

reproduced in the plaint and which at this stage have to be accepted as true

and which have turned out to be misrepresentation, under the Indian Law,

such a contract is voidable at the instance of the plaintiff and the remedy of

the plaintiff is to rescind the contract of employment in accordance with

Section 66 of the Contract Act or to insist that the contract be performed and

that the plaintiff be put in the position in which he would have been, if the

representation made had been true.

10. Misrepresentation is defined vide Section 18 of the Contract Act as,

a) the positive assertion, in a manner not warranted by the information of the

person making it, of that which is not true, though he believes it to be true;

CS(OS) No.548/2016 Page 16 of 41
or, b) breach of duty which, without an intent to deceive, gains an advantage

of the person committing it, by misleading another to his prejudice; or,c)

causing, howsoever innocently, a party to an agreement, to make a mistake

as to the substance of the thing which is subject of the agreement. For the

representations claimed by the plaintiff to have been made by the defendants

to qualify as misrepresentation, they have to fall in either of the said

categories.

11. The plaintiff, in the plaint has in this respect pleaded that it was

represented to him:

that the defendants ―international expansion will be across the
3 Regions of Middle East, India and Southeast Asia (which is
the newest region). The company's target is for 50 hotels
across these 3 Regions by 2020‖....that ―the incumbent will be
responsible for expansion of Premier Inn hotels portfolio in the
region through a combination of owned and managed
hotels‖....that the plaintiff was given an overview of
defendants' ―business plans for the Indian market, which
included an investment in India to the tune of £100 million
(approximately Rs.1000 crores) which was to be invested over
the next three years‖.... that the plaintiff was referred to ―a
presentation to be made in London to the Board of Directors of
defendant No.3 to demonstrate that the defendants perceived
India to be a high growth market with great opportunity‖....
that ―the defendant No.4 stated to the plaintiff that capital to
the tune of £100 million had been allocated and made available
for investment in India by defendants No.2&3 through
defendant No.1‖....―on the basis of the business plan of
defendants No.1, 2 and 3 as stated and represented to the

CS(OS) No.548/2016 Page 17 of 41
plaintiff by defendants No.4&5, the plaintiff came to believe
that the employment opportunity, as presented, was unique with
excellent market timing and was worth considering‖.... that
―the defendant No.6 led the plaintiff to believe that the
representations made to him by defendants No.2 - 5 were all
true‖....in another meeting ―defendant No.4, inter alia,
enquired with the plaintiff as to his views on implementing the
defendants' business plans, in particular, the manner in which
the plaintiff intended to utilize the £100 million allocated for
investment in India over the next three years by defendants
No.2&3 through defendant No.1‖....during a telephone call, the
defendant No.5 said ―that approval from defendant No.3's
Board for making the £100 million investment in India had been
received by defendants No.1&2 only recently and that
defendant No.1 was therefore now in a position to make a
formal offer to the plaintiff‖

12. Thereafter, the plaintiff, to label the aforesaid representations made to

him as misrepresentations, has pleaded:

that ―the defendants No.1 to 5 had secured the plaintiff's
services for a consideration that was made largely contingent
upon the availability and utilization of the £100 million fund.
Had the plaintiff been aware that in fact such a fund was not or
may not be available, there would naturally have been no
question of, or basis for, the plaintiff agreeing to such a
significant variable incentive component: without the money
there would be no acquisitions, and without such acquisitions
none of the criteria for assessing the plaintiff's performance
would be triggered, let alone fulfilled‖....that ―because
defendants No.1 to 5 had consistently represented and stated
the immediate availability of the £100 million fund, the plaintiff
accepted the remuneration package as set forth above. The
plaintiff's acceptance of this large component of variable
performance-linked-pay was therefore solely due to this
reliance on the defendants' representations and statements

CS(OS) No.548/2016 Page 18 of 41
about their plans for acquisitions and developments of
properties in India using the £100 million fund stated by them
to be available for immediate investment‖....that from the very
joining of the plaintiff of the defendant No.1's employment ―it
became apparent that the representations and statements made
to the plaintiff regarding defendants No.1&2's plans for India,
including its supposed investment of £100 million over the next
three years, were false and completely removed from reality
and that in fact, rather than growing its India business,
defendant No.2 was planning to exit this business‖....that
though the plaintiff finalised the investment memorandum for
purchase of a hotel and sought the approval of the defendant
No.3 therefor but ―did not get any response‖....that in the
meeting held on 15th February, 2016, the defendant No.4
―informed the plaintiff that defendants No.1, 2 and 3 did not
have enough funds available to make such a capital
investment‖....that in another meeting, the defendant No.4
informed that ―the financial condition of defendant No.3 in the
previous quarter was such that it did not justify making an
investment of this magnitude....it was also represented to the
plaintiff that defendant No.3's debt to EBITDAR ratio was 3.3-
3.4‖....―this was in complete contradiction to what had been
stated to the plaintiff before, and when, the plaintiff joined
defendant No.1‖....―thereafter, defendant No.4 approached the
plaintiff with a proposal to send the plaintiff to defendant
No.2's office in Dubai for a period of three months‖.... that the
plaintiff ―expressed his concern that investments in the Middle
East may also be put on hold in the manner that they were put
on hold in India‖....in response, the defendant No.4 ―assured
the plaintiff, and once again represented, that defendants
No.1&2 were continuing to pursue capital deals in
India‖....and ―were continuing to make investments in India by
utilizing the amount of £100 million allocated by the defendants
for investment in India over the next three years‖....that the
plaintiff declined the offer....―on April 26, 2016, a presentation
was made to the market by the CEO of defendant No.3, where it
was represented that the debt to EBITDAR ratio of defendant

CS(OS) No.548/2016 Page 19 of 41
No.3 was 3.1, as opposed to 3.3 - 3.4 that was represented to
the plaintiff by defendant No.4 in the meeting held on February
23, 2016. This fact suggests some financial misdealing on part
of defendant No.3‖....thereafter in June-July, 2016, defendant
No.6 informed the plaintiff that ―defendants No.1&2 had
sufficient capital prior to, and at the time of, hiring the plaintiff,
however, due to a purported change in circumstances, capital
was no longer available with them. She also stated that the
defendants were making efforts to allocate more capital to their
India business, however, till such time, everything was on
standby. She further went on to state that as and when capital
was made available, targets would be re-set and incentives
would be adjusted accordingly‖....that the defendant No.6 in
email dated July 12, 2016, stated ―we entered the hiring
process for this role on the basis that we wanted the growth, the
business and with the understanding of available capital‖....on
July 13, 2016, ―defendant No.3 issued a press-release stating
that defendant No.2 was planning a phased withdrawal from
defendant No.1 in India. It is evident from this press release
that contrary to its representations to the plaintiff, defendant
No.2 had in fact identified India as a market where not to invest
its capital and management time‖

13. I have analyzed, whether the aforesaid amount to a misrepresentation

within the meaning of Section 18 supra. The plaintiff has not pleaded that

the information of the defendants, who made representations to the plaintiff,

did not warrant the representations. The plaintiff has also not pleaded as to

what advantage any of the defendants who made the representations gained

by misleading the plaintiff to his prejudice. The plaintiff has yet also not

pleaded that the aforesaid representations made the plaintiff commit a

CS(OS) No.548/2016 Page 20 of 41
mistake as to the substance of the thing which is the subject of the

agreement. The subject of the agreement was acceptance by the plaintiff of

employment with the defendant No.1 on the terms offered by the defendant

No.1. I may in this regard record that the plaintiff along with the plaint has

filed a copy of the letter of offer dated 4th December, 2015, on acceptance

whereof by the plaintiff, the appointment letter dated 19 th January, 2016 was

issued by the defendants to the plaintiff. The said letter of offer is on the

same lines as the appointment letter, relevant terms whereof have been

reproduced hereinabove. All that the plaintiff pleads is that because of the

representations made, he agreed to an annual variable pay of upto Rs.50

lakhs based upon achievement of annual targets. The plaintiff has however

not pleaded that his total assured annual emoluments were agreed to be

inclusive of the said component of Rs.50 lakhs and he agreed to make the

said component variable on the representations aforesaid. It appears that the

plea of misrepresentation in the plaint is also without reference to Section 18

of the Contract Act.

14. The plaint, as aforesaid, drafted in ignorance of the aforesaid

provisions, does not contain any averment of the plaintiff having issued any

communication to the defendants of rescinding the contract. The plaintiff, in

CS(OS) No.548/2016 Page 21 of 41
the plaint also has not pleaded that the contract of employment be declared

void. I may also notice that as per the Full Bench of the High Court of

Allahabad in Official Receiver, Jhansi Vs. Jugal Kishore Lachhi Ram

Jaina, Hyderabad AIR 1963 All. 459, section 19 of the Contract Act gives

to the plaintiff the right either to treat the contract as void or to affirm it if he

thinks fit to do so; no rights have been conferred to the person who practices

fraud; all that the Legislature intended to provide was that whereas the

person defrauding would have no rights under the agreement if rescinded,

the person defrauded could either treat the agreement as void or affirm it

either by declaring it as such or by passive act of not declaring it void and by

purporting to act under it. Though the plaintiff has claimed damages but has

in the pleadings not laid any foundation as to how they satisfy the

requirement of putting him in the position in which he would have been if

representation made had been true. I have also wondered that even if it were

to be so, the remedy of the plaintiff under Section 19 in any case is to insist

that the contract shall be performed and that the plaintiff be put in the

position in which he would have been, if the representations made had been

true.

CS(OS) No.548/2016 Page 22 of 41
15. However, when we look at the contract admittedly entered into by the

plaintiff with the defendant No.1, it is found that (i) the services of the

plaintiff were on probation for a period of six months from the date of

joining; and (ii) even thereafter, were terminable by the defendant No.1

without assigning any reason whatsoever by giving to the plaintiff three

months notice in writing or giving three months basic salary in lieu of

notice. It is thus not as if the employment of the plaintiff with the defendant

No.1 was for any fixed tenure. There is no averment that there was any

misrepresentation in this respect. Thus, even if the representation as to

investments proposed by the defendants had been true, the plaintiff would

have been on probation and his services thereafter could have been

terminated as aforesaid without any reason.

16. The services of the plaintiff were never confirmed and were

terminated during probation only and in accordance with Clause 7.1 of the

appointment letter. Thus, even if a case of the defendants having caused the

consent of the plaintiff to accept the variable pay of upto Rs.50 lakhs per

annum by misrepresentation were to be made out and the plaintiff were to

insist that the defendant No.1 perform the contract of employment, the

plaintiff under such performance also does not get anything more, as claimed

CS(OS) No.548/2016 Page 23 of 41
in this suit, than what he has already got. Even if the representations which

are pleaded by the plaintiff to be misrepresentations were to be true, the

same did not entitle the plaintiff to employment with the defendants for any

fixed term and the defendants could have still not confirmed the employment

of the plaintiff and terminated the same during probation and/or even if had

confirmed the employment, could have terminated it thereafter without

assigning any reason. I am therefore totally at a loss to understand as to on

what basis the claim for compensation in the sum of Rs.4,50,00,000/- has

been made.

17. The plaintiff has not pleaded any basis for the claim in the sum of

Rs.4,50,00,000/-. All that the plaintiff has pleaded about his pre-contract

status is that at the time when he was approached by the defendants for

employment, he ―was working with a large North American Real Estate

Fund. His role in that Organisation involved raising funds for investments‖

and that he ―gave up his engagement with a North American Real Estate

Fund‖ to join employment of defendant no.1. The plaintiff has shied from

even pleading the name of ―large North American Real Estate Fund‖ with

whom he claimed to be working. The plaintiff has hesitated from even

pleading that he was in ‗employment' of the said ―large North American

CS(OS) No.548/2016 Page 24 of 41
Real Estate Fund‖ or from disclosing the emoluments earned therefrom. In

the documents filed along with the plaint also no document in that respect is

included. It is also not pleaded that claim of the plaintiff for

Rs.4,50,00,000/- is, to be put in the position in which the plaintiff would

have been if the representations made had been true. Had the case of the

plaintiff been so, the plaintiff was required to plead that he would have in six

months within which time his services were terminated by the defendant

No.1, earned the said sum of Rs.4,50,00,000/- from the ―large North

American Real Estate Fund‖.

18. I have also wondered whether the representations claimed to have

been made constitute a ground for the plaintiff to claim under Section 19

supra of the Contract Act. The exception thereto provides that the contract is

not voidable thereunder, if the party whose consent is caused by

misrepresentation had the means of discovering the truth with ordinary

diligence.

19. Investments across international borders are dependent upon a number

of variables and factors and no person who is a highly qualified investment

professional with a bachelor degree in engineering and an MBA and who has

CS(OS) No.548/2016 Page 25 of 41
worked with various Blue Chip Companies including banks, both in India

and internationally, with expertise in mergers, acquisitions, deal structuring

and financing, as the plaintiff claims himself to be, can with ordinary

diligence be expected to believe that a plan for expansion / investment will

definitely fructify. Such variables / factors depend on the venue of proposed

investment, the internal economy and political stability of the country of

investment, the laws of the country where the investment is proposed,

fluctuations in international currency, other competing investment avenues

etc and all of which change on a day to day basis. Any person of the stature

of which the plaintiff claims to be, could with ordinarily diligence not have

believed that the representations, even if any made of the plans for

investment including of a resolution of a Board of Directors of a foreign

company, have any certainty or that the investor company could be bound

therewith and on failure thereof a claim for damages would lie. The decision

of the plaintiff to join the defendants or to accept the annual variable pay of

Rs.50 Lakhs could not thus with ordinary diligence have been caused on the

basis of certainty of the investments which the defendants claimed to be

planning. The plaintiff, with ordinary diligence ought to have known that

CS(OS) No.548/2016 Page 26 of 41
there was a huge gap between planning in investment of Rs.1000 crores in

India and the actual investment.

20. Not only so, the annual variable incentive of upto Rs.50 lakhs only to

which the plaintiff was entitled was based on achievement of annual deal

targets and the plaintiff was not to become entitled thereto till the target was

achieved. The plaintiff has not even pleaded as to what was the target. The

said annual variable incentive was payable ―in accordance with the payment

schedule‖; no payment schedule has been disclosed. The other corporate

incentive of upto Rs.29 lakhs per annum to which the plaintiff was entitled,

was discretionary, details whereof were to be provided annually under

separate cover. No such details also are pleaded to have been provided.

Suffice it is to state that a highly educated professional as the plaintiff claims

to be, could not have consented to the employment on the basis of the said

variables or could not have with ordinary diligence considered himself to be

assured thereof.

21. The plaintiff has not pleaded or filed any document addressed by the

defendants to him in which the defendants made any such representations as

claimed. The plaintiff, besides the appointment letter, has filed copy of the

CS(OS) No.548/2016 Page 27 of 41
‗Letter of Offer' dated 4th December, 2015 preceding the appointment letter

and which is also not found to contain any such representation. The plaintiff

before conveying his acceptance to the letter of offer without containing any

such representations, did not insist upon the defendants confirming what the

plaintiff claims to have been represented to him. The only logical deduction

can be that the consent of the plaintiff to the acceptance of the Letter of

Offer was not caused by the representations, even if any.

22. Once, a proposal for international investment is found to be dependent

on variables, as aforesaid, in my view, a representation of a proposal for

such investment can never qualify as misrepresentation within the meaning

of Section 18 supra of the Contract Act, for it to constitute a ground for

making a contract voidable.

23. The field of pre-contract misrepresentation having been covered by

Section 19 of the Contract Act, there can be no claim in tort on the basis

thereof. Supreme Court in Rajkot Municipal Corporation Vs. Manjulben

Jayantilal Nakum (1997) 9 SCC 552 was concerned with a claim for

damages in tort on account of death owing to a roadside tree falling on the

pedestrian on the way to his office. It was held that if the statute creates a

CS(OS) No.548/2016 Page 28 of 41
right and remedy, damages are recoverable by establishing the breach of

statute as the sole remedy available under the statute; but where a statute

merely creates a duty without providing any remedy for breach, appropriate

remedy, is inter alia the action for damages in respect of special damage

suffered by an individual. It was further held that where special remedy is

expressly provided, it is intended to be the only remedy and by implications

excludes the resort to common law and that an action for damages will not

lie if the damage suffered is not a type intended to be guarded against. A

claim in tort cannot, in my opinion, be contrary to the statutory law of the

land. The Legislature of our country having provided for the remedy for pre-

contract representation, no claim for damages for pre-contract

misrepresentation can be maintained under the law of tort. A Division

Bench of High Court of Bombay also, in Sorabshah Pestonji Vs. The

Secretary of State for India AIR 1928 Bom 17 (followed by me in Sikka

Promoters Pvt. Ltd. Vs. National Agricultural Co-operative Marketing

Federation of India Ltd. (2013) 202 DLT 49, appeal whereagainst was

dismissed by Division Bench of this Court vide National Agricultural Co-

operative Marketing Federation of India Ltd. Vs. Sikka Promoters Pvt.

Ltd. 2016 SCC OnLine Del. 5037) held that the only remedy of a party to a

CS(OS) No.548/2016 Page 29 of 41
contract for omission of a material fact is one under Section 19 of the

Contract Act and finding that the plaintiff therein had waited too long, the

remedy of rescission was held to be no longer available and finding that the

plaintiff had already been put in a position as if the representation had been

true, the plaintiff was also not held entitled to relief in that regard. The

judgment of the Supreme Court of Canada in Douglas J. Queen supra on

which strong reliance was placed by the counsel for the plaintiff does not

show the existence, in law prevalent in Canada, of a provision as Section 19

of the Contract Act. Douglas J. Queen supra turned on a finding of

existence of duty. However because of Section 19 of Contract Act there is

no such duty qua matters which could have been discovered with ordinary

diligence.

24. That brings me back to the queries which were raised during the

hearing and as recorded in the orders reproduced hereinabove.

25. A Division Bench of this Court in India International Centre Vs.

S.N. Pandit ILR (1976) 1 Delhi 60 was concerned with a suit for damages

for breach of contract of employment. The respondent Mr. S.N. Pandit

therein, while applying for employment to India International Centre had CS(OS) No.548/2016 Page 30 of 41 stated that he will be leaving an institution like the Reserve Bank of India which offered him fairly good prospects and security for joining employment and suggested that his employment be protected to some reasonable extent. The Division Bench held (i) that it is well settled that the meaning of the contract documents cannot be varied or influenced by what happened during the pre-contract negotiations; (ii) that though the normal presumption is that an ordinary contract is not terminable at the will of the parties unless it is discharged by performance, the contract of service stands in a special class; (iii) the unenforceability of such a contract by specific performance inclines the Court to view such a contract as of an uncertain or indefinite duration; (iv) the inevitable consequence is that it must be terminable by a reasonable notice; (v) terminability at will cannot be read as an implied term in a contract the duration of which is fixed; (vi) an employment contract of a fixed duration does not mean that the parties must stick to it at all events; (vii) it only means that none of the parties can terminate it at his sweet will or whim; (viii) it is always terminable for justification such as misconduct or inefficiency of the employee or some other objectionable conduct of the employer; (ix) if the contract of employment is for a specific term, the employee, in the event of early CS(OS) No.548/2016 Page 31 of 41 termination would be entitled to damages in the amount he was deprived of, subject to the rule of mitigation- the employee would be entitled to the whole of the salary, benefits, which he would have earned had he continued the employment for the full term of the contract, subject to mitigation of damages by way of seeking alternative employment.

26. It is also the settled principle of law that when a party has entered into a formal contract, the contract must be construed according to its own terms and not be explained or interpreted by antecedent communication which led upto it. The resort to evidence as to previous negotiations is impermissible to the extent the contract is unambiguous. Section 91 of the Evidence Act, 1872 relates to evidence of terms of contract, grants and other dispositions of property reduced to form of documents and forbids proving the contents of a writing otherwise than by writing itself. Supreme Court in Roop Kumar Vs. Mohan Thedani (2003) 6 SCC 595 held (i) that Section 91 of the Evidence Act in reality declares a doctrine of the substantive law, namely, in the case of a written contract, all proceedings and contemporaneous oral expressions of the thing are merged in writing or displaced by it; it does not exclude certain data because they are for one or another reason untrustworthy or undesirable--what the rule does is to declare that certain kinds of facts are CS(OS) No.548/2016 Page 32 of 41 legally ineffective in the substantive law; (ii) that the practical consequence of integration of a contract in a document is that the scattered parts of the contract in their former and inchoate shape, have no longer any jural effect--they are replaced by a single embodiment of the act; (iii) that in other words, when a jural act is embodied in a single memorial all other utterances of the parties on the topic are legally immaterial for the purpose of determining what are the terms of their act; (iv) that this rule is based upon an assumed intention on the part of the contracting parties, evidenced by the existence of the written contract, to place themselves above the uncertainties of oral evidence; (v) that when persons express their agreements in writing, it is for the express purpose of getting rid of any indefiniteness and to put their ideas in such shape that there can be no misunderstanding, which so often occurs when reliance is placed on oral statements; (vi) that written contracts presume deliberation on the part of the contracting parties and it is natural that they should be treated with careful consideration by the Courts and with a disinclination to disturb the conditions of matters as embodied in them by the act of the parties; (vii) that vide Section 92 of the Evidence Act, the legislature has prevented oral evidence being adduced for the purpose of varying the contract as between CS(OS) No.548/2016 Page 33 of 41 the parties to the contract but no such limitations are imposed under Section 91 of the Evidence Act; (viii) that Sections 91 & 92 of the Evidence Act apply when the document on the face of it contains or appears to contain all the terms of the contract.

27. Applying the said principles also, it has to be held that even if any representations as claimed by the plaintiff had been made by the defendants to the plaintiff, the same were not given any effect to, inasmuch as, the plaintiff and the defendants agreed that the plaintiff is joining the employment of the defendant No.1 on probation and during which time, the defendant No.1 would have a right to not confirm the services of the plaintiff and even if confirmed the services of the plaintiff, could terminate the services of the plaintiff at any time with notice or salary in lieu thereof as agreed. There was thus no certainty of the term of employment of the plaintiff with the defendants and of which breach can be alleged by sooner termination entitling the plaintiff to any compensation from the defendants. The judgment of the Supreme Court of Canada in Douglas J. Queen supra on which strong reliance was placed by the counsel for the plaintiff does not show the existence in the law prevalent in Canada, of a provision as Sections 91 & 92 of the Evidence Act either.

CS(OS) No.548/2016 Page 34 of 41

28. I am thus unable to agree with the view taken by the Supreme Court of Canada in Douglas J. Queen supra. My research also does not show the judgment to have been discussed or followed either in Canada or in any other jurisdiction. On the contrary, I find that the Court of Appeal (UK) in Reid Vs. Rush & Tompkins Group PLC. (1990) 1 W.L.R. 212, concerned with a claim by an employee against the employer in tort for damages on account of injury suffered in a road accident abroad with no possibility of recovering any compensation abroad therefor held (i) that the employer could not be held negligent in failing to discharge its duty of care as employer to protect the employee's economic welfare by providing appropriate insurance cover or by advising him to obtain such cover; (ii) that it was impossible to imply into every contract under which an employee was engaged to work abroad and thereby exposed to a special risk of which he was ignorant, a specific duty on the employer to provide, or to advise the employee to obtain specific insurance cover in respect of that risk; (iii) that in the light of express terms of the contract of employment which deal with the economic welfare of the employee, such duties could not be implied into it as terms which the parties must have agreed; (iv) that though the ordinary duty of care owed at law by a master to his servant might extend to warning CS(OS) No.548/2016 Page 35 of 41 him of unavoidable risk of physical injury which would arise in the course of his employment, if did not require the employer to take care to protect the employee from economic loss and that duty could not be extended by imposing duties in tort which went beyond those contained in the express terms of the contract of employment; (v) that no duty of care in tort would arise from voluntary assumption of responsibility by one party to another where that responsibility had been assumed at the time of the making, and by reason only, of a contract between them.

29. Reference in this regard may also be made to the judgment of the Privy Council in Tai Hing Cotton Mill Ltd. Vs. Liu Chong Hing Bank Ltd. (1986) 1 AC 80 where, though in the context of a bank and customer, it was held (i) that implied obligations should be read into the contract as the nature of the contract itself requires, no more, no less; imposition is apt to describe a duty arising in tort, but inapt to describe the necessary incident arising from a contractual relationship; (ii) the relationship between banker and customer is a matter of contract--if the bank desires that their customer should make certain promises, they must expressly stipulate so; (iii) the submission of implied term of the contract thus could not be accepted; (iv) no liability in tort arises when the parties are in a contractual relationship CS(OS) No.548/2016 Page 36 of 41 particularly a commercial relationship; (v) that in a relationship between employer and employee also there is no real distinction between the two sources of obligation--in modern time, the relationship between master and servant, between employer and employee is inherently one of contract; (vi) that the mutual obligations of the parties to a contract cannot be greater in tort than those found expressly or by necessary implication in their contract.

30. I entirely concur with the aforesaid and hold that there can be no claim in tort where the relationship of employer and employee is contractual. Our Supreme Court also in Canara Bank Vs. Canara Sales Corporation (1987) 2 SCC 666 approved of the aforesaid judgment as applicable to law in India also and held that no reliance could be placed on the American law which is not in consonance with the law in this country.

31. Reference may also be made to C.B.S. Songs Ltd. Vs. Amstrad Consumer Electronics Plc. (1988) A.C. 1013, Caparo Industries Plc. Vs. Dickman (1990) 2 A.C. 605 and Murphy Vs. Brentwood District Council (1991) 1 A.C. 398, all warning against the danger of extending the ambit of negligence so as to supplant or supplement other torts, contractual obligations, statutory duties or equitable rules in relation to every kind of CS(OS) No.548/2016 Page 37 of 41 damage including economic loss. It was held that if the defined equitable duties attaching to mortgagees and to receivers and managers appointed by debenture holders are replaced or supplemented by a liability in negligence, the result will be confusion and injustice.

32. ESSO Petroleum Co. Ltd. supra relied on by the counsel for plaintiff also cannot thus be said to be representing the law as today prevalent. I may in this regard also state that Chitty on Contracts (32nd Edition, Vol.-I) also in para I-162 authors as under:

―Liability for non-disclosure. As will be seen, the courts draw a clear line between cases of misrepresentation or of non-disclosure for the purposes of deciding the availability of rescission for the other party. While in general the courts have echoed this distinction in the context of liability in damages, they have accepted that in principle a contractor may be liable in the tort of negligence for a failure to speak, but the modern approach has been to restrict liability in these circumstances to cases where the defendant has ―voluntarily accepted responsibility‖. Indeed, even in a case where the law exceptionally imposes a duty of pre- contractual disclosure on a party to a contract, the courts have refused to impose liability in damages in tort to sanction its breach.‖ While this result was reached before the House of Lords in Henderson v. Merrett Syndicates Ltd. had disapproved the idea that the existence of a contract between the parties is in itself a reason for denying a claim in tort, it may well be that a future court would hold that a person cannot be said to ―assume responsibility‖ for a matter in relation to which he owes a legal duty. Moreover, the idea that the law of tort should not be allowed to ―cut across the principles of contract law‖ could be considered as a consideration of policy arguing against the CS(OS) No.548/2016 Page 38 of 41 existence of a duty of care in the tort of negligence, even where this was based on an ―assumption of responsibility‖.

The reliance placed by the counsel for plaintiff on Imperial Match Co.

(India) Ltd. supra is also not found to have noticed Section 19 of the Contract Act and has not considered a situation of a contract contrary to the representation alleged. Reliance thereon also does not advance the case of the plaintiff any further.

33. I am therefore of the view that the plaint, on the pleaded facts, even on a demurrer, does not disclose any cause of action for the reliefs claimed and the reliefs claimed are barred by law as discussed above.

34. I have wondered whether to reject the plaint under Order VII Rule 11 of CPC or to dismiss the suit under Order XII Rule 6 of CPC. A rejection of the plaint under Order VII Rule 11 of CPC does not preclude the plaintiff from presenting a fresh plaint in respect of the same cause of action. Order XII Rule 6 of CPC empowers the Court to pass judgment ―at any stage of the suit‖ ―on its own motion‖, where on admissions made either in pleading or otherwise no determination is required. The reasons aforesaid would also qualify for the suit to be dismissed at the threshold only under Order XII Rule 6 CPC. Supreme Court in Pearlite Liners (P) Ltd. Vs. Manorama Sirsi CS(OS) No.548/2016 Page 39 of 41 (2004) 3 SCC 172 was concerned with a suit for specific performance of a contract of personal service. The same was dismissed by the trial court and the first appellate court on a preliminary issue as to the maintainability thereof but was in second appeal restored by the High Court and remanded for trial. Supreme Court held that once the reliefs claimed of, declaration that the transfer order was illegal and void and of declaration that the plaintiff continued to be in service of the defendant could not be granted by the Court, such a suit should not be allowed to continue and go for trial and should be thrown out at the threshold on the ground of want of jurisdiction of a Court to grant the reliefs prayed for. Accordingly, the orders of the trial court and the first appellate court were upheld and restored and the order of the High Court of restoring the suit and remanding it for trial was set aside. Though in the facts of that case, the suit was dismissed after notice to the defendant and after framing a preliminary issue but the fact remains that in holding the suit to be barred, no notice of any plea of the defendant was taken. If that is so, then, in my opinion, the suit can also be dismissed without notice to the defendant, if the Court finds that it has no jurisdiction to grant the reliefs claimed. The same is the position here. Thus, the suit has to be dismissed.

CS(OS) No.548/2016 Page 40 of 41

35. No purpose will be served in entertaining the suit which is doomed to fail. A suit cannot be entertained to allow the plaintiff to, as it proceeds, keep on developing its case. If the plaintiff, on the date of institution of the suit, fails to disclose a cause of action and a right to the relief claimed, the suit has to be dismissed at the threshold.

36. This suit has to suffer the same fate and is dismissed. However, no order as to costs.

RAJIV SAHAI ENDLAW, J JANUARY 06, 2017 ‗gsr/bs'..

CS(OS) No.548/2016 Page 41 of 41

Unlock Advanced Research with PRISMAI

Delhi High Court