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2001 Supreme(Bom) 879

IN THE HIGH COURT OF BOMBAY
R.J. Kochar, J.
Mahindra British Telecom Ltd. .... Plaintiffs.
Versus
Prabhat Gupta others.... Defendants.
Summons for Judgement No. 401 of 1999 in Summary Suit No. 5932 of 1998, decided on 25-9-2001.
Advocates appeared :
A.M. Vernekar with Sachin Shanbhag, for plaintiffs.
Birendra Saraf i/b. Verghese Joseph, for defendant Nos. 2 3.

No summary suit is maintainable for claiming liquidated damages. The claim for damages for breach of contract is not a claim for a sum presently due and payable, and the party claiming damages has to prove the extent of damages and establish the amount of damages.

Headnote:

LIQUIDATED DAMAGES - SERVICE CONTRACT - Clause 5(a) and (b) of the agreement - Section 74 of the Indian Contract Act - Order XXXVII, Rule 2 of the Code of Civil Procedure - The court held that no summary suit is maintainable for claiming liquidated damages. The claim for damages for breach of contract is not a claim for a sum presently due and payable, and the party claiming damages has to prove the extent of damages and establish the amount of damages. The amount named in the agreement as liquidated damages is merely an outside limit and not the exact amount to be claimed in the summary suit.

Fact of the Case:

The plaintiffs sought a decree against the defendants for a sum of Rs. 2,00,000/- as per the service contract and surety agreement. The defendants raised issues regarding the maintainability of the suit in the frame of a summary suit and whether the defendant No. 1 had abandoned the employment.

Finding of the Court:

The court found that no summary suit is maintainable for claiming liquidated damages and that both parties will have to go for a full-fledged trial. The defendants were granted unconditional leave to defend the suit.

Issues: The issues included the maintainability of the suit in the frame of a summary suit and whether the defendant No. 1 had abandoned the employment or was prevented from entering the company.

Ratio Decidendi: The court held that the claim for damages for breach of contract is not a claim for a sum presently due and payable, and the party claiming damages has to prove the extent of damages and establish the amount of damages. The amount named in the agreement as liquidated damages is merely an outside limit and not the exact amount to be claimed in the summary suit.

Final Decision: The defendants were granted unconditional leave to defend the suit, and the summons for judgment was dismissed accordingly.

JUDGMENT- R.J. KOCHAR, J.:---The plaintiffs have prayed for a decree against the defendants as under:---

"(a) that the defendants jointly and severally be ordered and decreed to pay to the plaintiffs a sum of Rs. 2,00,000/- as per the particulars of claim at Exhibit "F" to the plaint, together with interest thereon at the rate of 18% p.a. from the date of filing of the suit till payment or realisation.

(b) that the defendants jointly and severally be ordered and decreed to pay to the plaintiffs the costs of the suit."

2. From the averments in the plaint, the suit claim appears to have arisen from a service contract between the plaintiff company and the defendant No. 1, an employee of the plaintiffs under the contract dated 25th June, 1996 and the surety agreement between the plaintiffs and the defendant Nos. 2 and 3, whereby the sureties had ensured that the defendant No. 1 would abide by the agreement failing which the defendant Nos. 2 and 3 would be liable to pay to the plaintiffs an amount of Rs. 2 lakhs as "liquidated damages". It is alleged by the plaintiffs that the defendant No. 1 has committed breach of the service agreement as he had abandoned the employment and had not completed the service for a period of two years after he was confirmed in employment from 1-4-1998. According to the plaintiffs, he had abandoned the employment before completion of the said period of two years, and therefore, the plaintiffs have become entitled to claim liquidated damages from the defendants as per the agreement dated 25th June, 1996, separately entered into between the plaintiffs and the defendant No. 1 and between the plaintiffs and defendant Nos. 2 and 3.

3. On receipt of the writ of summons, defendants Nos. 2 and 3 have entered their appearance. The plaintiffs, thereafter, have taken out summons for judgment against the defendant Nos. 2 and 3 and have prayed for ex parte decree against the defendant No. 1. It appears that as far as the defendant No. 1 is concerned the suit has been decreed.

4. The defendant Nos. 2 and 3 have filed their affidavit in reply to the summons for judgment. The defendants have raised a triable issue as to the maintainability of the suit in the frame of a summary suit. Apart from the aforesaid substantial question of law, the defendants have also raised a question as to whether the defendant No. 1 had abandoned the employment or whether he was prevented from entering the company. On this point both the parties will have to adduce evidence to establish that there was no breach of the agreement on the part of the defendant No. 1, who had not abandoned his employment with the plaintiffs, but it was the plaintiffs who did not allow him to enter the premises on and from 14th August, 1999.

5. Shri Vernekar, the learned Counsel for the plaintiffs has neatly summarised his case as set out in the plaint. According to him, the suit claim is based on the written contract between the plaintiffs and the defendant No. 1 and the plaintiffs and the defendant Nos. 2 and 3 as sureties. The learned Advocate has pointed out from the clauses in the agreement that the plaintiffs were entitled to claim the amount of Rs. 2 lakhs from the defendant Nos. 1, 2 and 3 jointly and/or severally, as the defendant No. 1 had committed breach of the service agreement. Shri Vernekar, therefore, prayed for judgment in favour of his clients as the defendants have no defence whatsoever in nature. The last but not the least submission made by the learned Advocate was that no unconditional leave should be granted to the defendant Nos. 2 and 3 and some condition should be imposed upon them.

6. Shri Saraf, the learned Counsel for the defendants has pointed out from the plaint itself and from the agreement dated 25th June, 1996 that the plaintiffs were claiming liquidated damages of Rs. 2 lakhs. According to him, no summary suit would lie for a claim of liquidated damages. According to him, the plaintiffs will have to prove damages by adducing evidence in












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