Highway Engineering Pvt. Ltd. vs Union Of India And Anr. on 9 August 1996

Delhi High Court
Highway Engineering Pvt. Ltd. vs Union Of India And Anr. on 9 August, 1996
Equivalent citations: 1997(1)ARBLR128(DELHI), 63(1996)DLT833
JUDGMENT

Anil Dev Singh, J.

(1) The award dated 8th September, 1988 in the arbitration matter between the petitioner and the first respondent was filed in this Court by the Sole Arbitrator Dr. B.N. Mani.

(2) The petitioner and respondent No. I entered into a contract dated 8th July,1985 (for short “original contract”) by virtue of which the petitioner was to deliver 15 Hercules Industrial Platform trucks to Cos Southern Railway (for short ‘the contracted stores’). The contract was to be completed by 10th November, 1985. At the request of the petitioner, however, delivery period was extended up to 31st January, 1986. Inspite of the extension in the delivery period, the petitioner could supply only two platform trucks. Since the petitioner failed to supply the remaining 13 platform trucks by the extended date, the contract was terminated by the first respondent on 26th June,1986 and the remaining work was reentered at the risk and cost of the petitioner. The petitioner, however, did not submit its tender. On 31st July, 1986 the risk purchase contract was placed on M/s Josts Engineering Company Limited, Bombay which had offered the lowest rates. As per the aforesaid contract the respondent received the remaining 13 platform trucks from M/s Josts Engineering Company at the risk and cost of the petitioner. As a result thereof the first respondent had to allegedly suffer an extra expenditure of Rs. 1,76,646. Pursuant to the risk purchase the first respondent issued a demand notice to the petitioner for the said amount but the demand was turned down by the latter. As a consequence of the petitioner’s failure to pay the amount, the Directorate General of Supplies and Disposal, New Delhi, appointed Dr. B.R. Mani, Additional Legal Adviser to the Government of India, Ministry of Law, as the sole Arbitrator. The Arbitrator upon hearing the parties disallowed the claim of the first respondent in respect of risk purchase loss for twin reasons, namely, the Union of India was not able to show that it had taken all reasonable steps for the mitigation of damages on account of risk purchase, and that the risk purchase store actually supplied was similar to the stores for which order was placed on the petitioner under the “original contract”. Despite the rejection of the claim based on risk purchase, the Arbitrator awarded “token damages” of Rs. 25,000 in favour of the first respondent as against the petitioner on the ground that the petitioner had committed breach of the contract and the Union of India had to incur loss for the re-purchase of the stores. Accordingly the Union of India was also held entitled to adjust the said amount of Rs. 25,000 from the security deposit of the contractor amounting to Rs. 27,618.36 but directed that the balance amount of Rs. 2618.36 be paid by the Union of India to the petitioner.

(3) Both the parties filed objections to the award, the objections of the petitioner being I A No. 3209/89 and of the Union of India being Ia No. 1344/91. The petitioner in his objections challenged the award of the Arbitrator with regard to the finding that it was liable to pay Rs. 25,000 to Union of India as token damages. On the other hand, the Union of India in its objections to the award challenged the finding of the Arbitrator to the extent that the Union of India failed to show that it had taken all reasonable steps for the mitigation of loss and the risk purchase stores actually supplied were similar to the ones which the petitioner was required to supply under the “original contract”.

(4) By order dated 2nd of September,1993, the following issues were framed : 1. Whether the award is liable to be set aside in view of the objections mentioned in I As 3209/89 and 1344/91 ? 2. Relief.

Issue Nos. 1 and 2 : From the reading of the award it is clear that the Arbitrator found that the petitioner had committed breach of the contract but at the same time dismissed the claim of the Union of India for risk purchase of the contracted stores on the ground that the Union of India had not shown that it had taken all reasonable steps for the mitigation of damages. Learned Counsel appearing for the Union of India submitted that the finding of the Arbitrator suffers from an error apparent on the face of the award. According to the learned Counsel for the first respondent the Union of India had selected the lowest tenderer for getting the risk purchase contract executed and had taken all reasonable steps for the mitigation of the loss.

(5) I have considered the submissions of the learned Counsel for the first respondent. The finding of the Arbitrator that the respondent failed to show that it had taken all reasonable steps for the mitigation of the loss consequent on the breach committed by the petitioner and that the risk purchase ‘stores’ actually supplied to it by Josts Engineering Company were similar to the contracted stores is a finding of fact. This Court cannot reappraise the evidence produced before the Arbitrator and come to its own conclusion. It is within the jurisdiction of the Arbitrator to draw inferences and conclusions from the evidence on record and the Court cannot sit in appeal over the same. The Arbitrator is the master of fact and the law and unless there is an error apparent on the face of the award or the Arbitrator has misconducted himself or the proceedings or the award was made after the Court superseded the arbitration or after the arbitration proceedings had been declared invalid under Section 35 of the Arbitration Act or award has been improperly processed or otherwise invalid, the Court has no power to set aside the award. The petitioner has failed to show any error apparent on the face of the award. There is also nothing to show that the Arbitrator has misconducted himself or the proceedings or the award is otherwise invalid. When a party claims damages two principles have to be kept in view. The first is that, as far as possible, he who has proved a breach of a bargain to supply what he contracted to get is to be placed, as far as money can do it, in as good a situation as if the contract had been performed; but this principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach [scc M/s. Murlidhar Chiranjilal v. M/s. Harishchandra Dwarkadas and Another, ].

(7) Keeping in view the aforesaid principles the first respondent was required to show that it not only suffered loss due to the failure on the part of the petitioner to supply the stores but it had also to show that it had taken every possible step to mitigate the loss consequent on the breach of the contract by the petitioner. Since before the Arbitrator the first respondent failed to show that it had taken all reasonable steps for mitigating the damages, the Arbitrator was justified in rejecting its claim based on risk purchase of the contracted stores. The Arbitrator has also held that the first respondent was not entitled to claim damages on account of risk purchase of stores as it had failed to prove that the stores actually supplied by M/s Josts Engineering Company Limited were similar to the one which were to be supplied by the petitioner under the original contract. Therefore I find no illegality in the award of the Arbitrator in so far as it relates to the claim of the first respondent based on risk purchase of stores.

(8) As regards the award of Rs. 25,000 as “token damages” in favour of the Union of India is concerned, learned Counsel for the petitioner submitted that the Arbitrator was not entitled to award the same in view of the finding that the Union of India had failed to establish that it had taken all reasonable steps for mitigating the damages. I have considered the submission of the learned Counsel for the petitioner. It is true that one who has suffered loss from a breach of contract must take reasonable steps that are available to him to mitigate the extent of damages but in case he fails to take such steps he may still be entitled to receive nominal damages from the defaulting party. There is good authority to hold that where a person has suffered loss due to breach of contract by the other party he is entitled to nominal damages in case he fails to prove actual or special damage.

(9) Situation for awarding nominal damages arises in the event of the infringement of the contract by the defendant which has in fact caused no loss to the plaintiff and it also arises when the plaintiff fails to prove the loss that he may have suffered from the breach of the contract.

(10) The principle relating to award of nominal damages has been stated in the treatise ‘Chitty on Contracts’, Twenty-fourth Edition, Vol.1, at page 1554, thus : “WHEREVER a party is liable for a breach of contract, either express or implied, the plaintiff is in general entitled to nominal damages although no actual damage is proved; the violation of a right at common law will often entitle the plaintiff to nominal damages, even without proof of special damage. Usually this situation arises when the defendant’s breach of contract has in fact caused no loss to the plaintiff, but it may also arise when the plaintiff, although he has in fact suffered loss, fails to prove any loss flowing from the breach of contract, or fails to prove the actual amount of his loss….See Columbus & Co. Ltd. v. Clows, [1903] 1 K.B. 244; Weld-Blundell v. Stephens [1920] A.C. 956; Taylor & Sons Ltd. v. Bank of Ahtnes, (1922) 91 L.J. K.B. 776; James v. Hutton and J. Cook & Sons Ltd., [1950] I K.B. 9; Sykes v. Midland Bank Executor and Trustee Co. Ltd., [1917] 1 Q.B. 113. Erie County Natural Gas and Fuel Co. Ltd. v. Carroll, [1911] A.C. 105; Cf. Government of Ceylon v. Chandris, [1965] 3 All E.R. 48.”

(11) In Brahmdeo Narain Singh v. Members of the Notified Area Committee, , it was held that in a case of breach of contract the plaintiff is entitled to at least nominal damages which does not mean that a trifling amount is always to be assessed. The principle relating to the award of nominal damages was stated by the Court as follows : “IN that view, the plaintiff entitled to at least nominal damages. Nominal damages do not connote that a trifling amount is always to be assessed. In the cases of Rolin v. Steward, (19.54) 14 Cb 595, and Wilson v. United Counties Bank Ltd., (1920) Ac 102, substantial nominal damages were awarded. The Calcutta High Court, in the above mentioned case, adopted that principle and awarded Rs. 8,000.00 as nominal damages to the plaintiff of that case. The measure of damages will vary according to the special circumstances of a particular case. Contracts may be of different types. When it is not possible to calculate accurately or in a reasonable manner the actual amount of loss incurred or when the plaintiff has not been able to prove the actual loss suffered, he (the plaintiff) will be, at the same, entitled to recover nominal damages for a breach of contract.”

(12) In Pravadayal Agarwala v. Ramkumar Agarwala, , the Calcutta High Court held that where the plaintiff suffered damages as a direct consequence of the breach of contract by the defendant and it is difficult to calculate the same, the plaintiff is to be presumed to have sustained damage, it may be liquidated damages or in some cases nominal damages. It was further held that while awarding nominal damages substantial amount can also be awarded, and what is to be the amount of nominal damages depends on the facts of each particular case.

(13) In view of the foregoing discussion, I am of the view that the Arbitrator was justified in awarding the nominal damages in favour of the respondent for the breach of the contract committed by the petitioner. Accordingly, the objections raised against the award are hereby rejected and the award is made a rule of the Court. A decree in terms of the award is hereby passed.