IMPORTANT POINTS
Damages cannot be awarded for loss of anticipated/assumed profits.
Novation of contract sub silentio.
Waiver involves voluntary relinquishment of a known legal right, evincing awareness of the existence of the right and to waive the same. It can be deduced from acquiescence.
Reliance loss and expectation loss both cannot be recovered simultaneously.

Headnote:(a) Indian Contract Act, 1872 – Section 62 – Award of damages – Claim made on the basis of loan application to WBIDC (C); and a techno-economic feasibility report by WEBCON (F1) for WBIDC and a report prepared by one Dr. R.K. Baisya the then technical survey manager of the respondent (W1) – (C) merging in F1 – F1 not proved – Appellant not examining Dr. R.K. Baisya, thus W1 also not proved – Cannot be admitted in evidence and no damages could be awarded on its basis – Moreover, loan application is merely an assumption – Appellant itself admitting loss projection for initial six years – Damages cannot be awarded for loss of anticipated/assumed profits. (Para 13, 16, 24)
       (b) Indian Contract Act, 1872 – – Section 62 – Respondent originally supplying concentrates to appellant under Bottlers’ agreement – Changing supply arrangement and making supplies through M/s VEC and terminating Bottlers’ agreement – Majority of bottlers agreeing to the change – Appellant also receiving supplies from M/s VEC – Continuing to avail marketing services from the respondent – Appellant’s loss not due to breach by respondent. (Para 14, 15, 17, 24, 25)
       (2015) EWCA Civ 1146; (1919) 2 KB 581 – Relied upon
       (1980) 4 SCC 636; (1962) 1 SCR 653 – Referred
       (1994) 1 WLR 1360 – Distinguished
       (c) Indian Contract Act, 1872 – Section 8 and 62 – Bottler’s agreement – Clause 7 and 5 – Appellant suffering financial crunch resulting in inadequate investment, non deployment of man power etc – Not taking any steps to mitigate of damages – Not acting as per respondent’s advice – Amounting to novation of contract sub silentio. (Para 20)
       (2006) 11 SCC 181; (2008) 13 SCC 597 – Relied upon
       (d) Words and Phrases – Waiver – Contract Act – Section 63 – Voluntary relinquishment of a known legal right – Requiring awareness of the existence of the right and to waive the same – Can be deduced from acquiescence. (Para 22, 23)
       (1974) 2 SCC 725; 1959 Supp (2) SCR 21 – Relied upon
       (e) Indian Contract Act, 1872 – Section 62 – Reliance loss and expectation loss – Both cannot be recovered simultaneously – One has to choose – Appellant held not entitled to any expectation loss towards anticipated profits – Any grant of reliance loss would tantamount to giving a benefit to it for what was essentially its own lapses. (Para 28, 30,
       (1983) 3 All ER 94; (1954) 1 QB 292 – Relied upon
       Facts of the case:
       The appellant’s suit for damages and wrongful termination of contract was decreed by the Single Judge. It has been reversed in appeal preferred by the respondent on and the suit dismissed.
       Finding of the Court:
       The appellant had failed to establish its claim that the breach by the respondent was the cause for loss of anticipated profits, that the profitability projection in its loan application was a reasonable basis for award of damages towards loss of anticipated profits. The appellant had failed to abide by its own obligations under Exhibit ‘C’ and lacked adequate infrastructure, finances and manpower to run its business. It also failed to take reasonable steps to mitigate its losses.
       Result: Appeal dismissed.

JUDGMENT

NAVIN SINHA, J.

The appellant’s suit, C.S. No.839 of 1990, for damages and wrongful termination of contract, was decreed by the learned Single Judge on 02.12.1999. It has been reversed in appeal preferred by the respondent, on 14.01.2005 in APD No.14 of 2000, and the suit dismissed.

2. The appellant entered into an agreement with the respondent for establishment of a non-alcoholic beverages bottling plant at Dankuni, West Bengal, and sale under the respondent’s trade mark, 'Thrill', 'Rush', 'Sprint', and 'McDowell’s Sparkling Soda.' The respondent provided technical consultancy for establishment of the plant, incorporated in the Project Engineering Services Agreement dated 11.09.1985. A Bottler’s agreement dated 26.10.1985 was separately executed, valid for ten years with a renewal option, containing the respective rights and obligations of the parties, along with a Marketing agreement. The concentrate (Essence), for preparation of the non-alcoholic beverage, was to be supplied by the respondent. The beverage was to be sold in specified districts of West Bengal, as provided for in the marketing agreement.

3. The appellant, on 15.12.1985 applied for loan, Exhibit ‘C’, to the West Bengal Industrial Development Corporation (hereinafter referred to as 'the WBIDC') for establishment of the bottling plant at an estimated cost of Rs.226.80 lakhs. In accordance with procedures, it was processed by the West Bengal Consultancy Organisation Ltd. (hereinafter referred to as 'WEBCON'), which independently prepared a techno-economic feasibility report, ‘Exhibit F1’. Loan was then advanced to the appellant by the WBIDC, and the West Bengal State Financial Corporation. Commercial production commenced on 01.01.1987. The bottler’s agreement was terminated by the respondent on 16.03.1988. Commercial production at the plant ceased in May, 1989, and the suit was instituted by the appellant in 1990.

The learned Single Judge decreed the Suit, awarding damages for Rs.2,73,38,000/-towards loss of anticipated profits, and a sum of Rs.1,60,00,000/-towards costs for installation of the plant, after deducting Rs.9.05 lakhs payable by the appellant to the respondent as consultancy charges. The respondent was held liable to pay to the appellant a sum of Rs.4,24,33,000/-with interest @ 10% from the date of suit till payment. The Division Bench in appeal reversed the decree, and dismissed the Suit.

4. Sri Paras Kuhad, learned senior counsel appearing for the appellant, submitted that the bottler’s agreement valid for ten years, was terminated unilaterally and prematurely by the respondent on 16.03.1988, contrary to clause 26 of the agreement. The appellant had never denied performance of its obligations under the agreement. The appellant had not signed and returned the termination letter, in acceptance, as reiterated by the respondent on 25.07.1988. The appellant did not sign any fresh agreement with M/s. Venkateswara Essence & Chemicals Pvt. Ltd. (hereinafter referred to as ‘VEC’) for supply of concentrates by it, in lieu of the respondent. The acceptance of concentrates by the appellant directly from M/s. VEC for a short time span, under clause 5 of the agreement, cannot be construed either as novation of the original contract under Section 62 of the Indian Contract Act (hereinafter referred to as ‘the Act’), or acquiescence to any new arrangement by substitution of a new contract. It was an act done under compulsion, and not voluntarily. A novation of contract, can take place only by mutual consent in a tripartite arrangement. In absence of any fresh tripartite agreement executed between the parties, it is futile to contend novation. The respondent also continued to deal with the appellant under the original agreement, even while it sought to persuade the appellant to sign the fresh agreement.

5. The respondent was the domain expert. Relying on its assurance, the appellant had made a business investment. A reasonable profit was, therefore, naturally expe

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2017 Supreme(SC) 594

SUPREME COURT OF INDIARANJAN GOGOI, NAVIN SINHA, JJ.KANCHAN UDYOG LIMITED – APPELLANTVERSUS UNITED SPIRITS LIMITED – RESPONDENTCIVIL APPEAL No.1168 OF 2007Decided on : 19-06-2017

Cases Referred (6)

SUPREME COURT OF INDIA
RANJAN GOGOI, NAVIN SINHA, JJ.
KANCHAN UDYOG LIMITED – APPELLANT
VERSUS
UNITED SPIRITS LIMITED – RESPONDENT
CIVIL APPEAL No.1168 OF 2007
Decided on : 19-06-2017