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1989 Supreme(Del) 138
High Court Of Delhi
NAGORI AND COMPANY - Appellant
Versus
INDIAN SUGAR INDUSTRIES EXPORT CORPORATION LIMITED - Respondent
Suit 2271 of 1985
Decided On : 03/17/1989
M.G.RAMA CHANDRA RAO, P.NAGESH, R.K.P.SHANKAR DAS, V.B.JOSHI
The burden of proving that a party could have mitigated damages lies on the party asserting that the damages could have been mitigated.
Headnote:
ARBITRATION - AWARD - SETTING ASIDE - ERROR OF LAW ON THE FACE OF THE RECORD - DAMAGES - MITIGATION OF DAMAGES - BURDEN OF PROOF - SECTION 30 OF THE ARBITRATION ACT, 1940.
Fact of the Case:
The Indian Sugar Industries Export Corporation Limited (Corporation) entered into a contract with M/s Nagori and Company (Company) to transport 6260 metric tons of sugar. The Company failed to complete the transportation by the stipulated date, and the Corporation terminated the contract and employed another transporter at a higher rate. The Company claimed damages for breach of contract, while the Corporation counterclaimed for the additional expenses incurred. The arbitrator rejected the Corporation's claim for damages, holding that it had not taken steps to mitigate the damages.
Finding of the Court:
The court held that the arbitrator erred in dismissing the Corporation's claim for damages. The court found that the Corporation had proved that it had paid Rs. 145 per M.T. for transportation after the contract was terminated, and that the Company had not proved that the Corporation could have transported the sugar at a lesser rate. The court also found that the burden of proving that the Corporation could have mitigated the damages was on the Company, and that the Company had not discharged this burden.
Issues: 1. Whether the arbitrator erred in dismissing the Corporation's claim for damages? 2. Whether the award should be set aside or modified.
Ratio Decidendi: 1. The court held that the arbitrator erred in dismissing the Corporation's claim for damages because the Corporation had proved that it had paid Rs. 145 per M.T. for transportation after the contract was terminated, and the Company had not proved that the Corporation could have transported the sugar at a lesser rate. The court also found that the burden of proving that the Corporation could have mitigated the damages was on the Company, and that the Company had not discharged this burden. 2. The court held that the award should be modified to allow the Corporation's counterclaim for damages, as the error in the award related only to that issue and was severable from the rest of the award.
Final Decision: The court allowed the Corporation's objections to the award and modified the award to allow the Corporation's counterclaim for damages. The court also awarded interest on the damages at the rate of 18% per annum from the date of the decree till realization.
( 1 ) THE Indian Sugar Industries Export Corporation Limited (hereinafter referred to as the Corporation) was required to arrange transport of 6260 metric tons of sugar as handling agents for State Trading Corporation lor five different factories situated in the State of Gujarat. The Corporation entered into a contract to execute the job with M/s Nagori and Company, Shivaji Cross Road, Shirampur, District Ahmednagar, Maharashtra (hereinafter referred to as the Company ). It was agreed that a consideration of Rs. 891- per metric ton will be paid to the Company. Under the said agreement, the transportation had to be completed by 20th of February 1981. The Company lifted 1668. 6 M. T. of sugar from the factories and delivered 1558. 6 M. T. at the Bombay Port by the stipulated date. Other 1100 bags though removed from Chalthan Factory were not carried to the destination but were stored at the godowns of the transporters engaged by the Company. Though the stipulated time expired, the Company failed lo fulfil its commitment. The Corporation, therefore, extended the time upto 29th March 1981 and urged the Company to complete the job by that time. The Company failed to complete the transportation even before the extended time. The Corporation, therefore, terminated the contract with the Company on 2nd April 1981 and employed another transporter to carry the remainng quantity of sugar @ Rs. 145 per MT. at the risk and cost of the Company.
( 2 ) A dispute arose between the parties which was referred to arbitration. Shri M. S. Joshi, ex-Judge of Delhi High Court was appointed as sole arbitrator by the Indian Council of Arbitration to consider and decode the dispute between the parties under the rules of the Arbitration of the Council. A claim was lodged by the Company against the Corporation for recovery of Rs. 2,57,118. 40. According to the Company Rs. 1,49,705. 40 was due to it for transporting the sugar; Rs. 50,000 by way of refund of the security deposit Rs 40,000 as damages for the loss suffered in consequence of the termination of the contract. The Company claimed interest on this amount @ 18% per annum from 7th April 1981 till realisation of the amount. The Corporation did not deny the claim of the company for transportation charges @ Rs. 89 per M. T. for 1558. 6 M. T. of sugar actually carried i,e, Rs. 1,48,540. 40; Rs. 1200 paid by it as octroi duty on behalf of the Corporation and Rs. 50,000 on account of refund of the security deposit. However, the claim of the Company for Rs. 36. 000 stated to have been spent by the Company for storage, loading, unloading etc. in connection with 1100 bags of sugar and the alleged loss of Rs. 40,000 suffered by the Company was controverted by the Corporation. In addition, the Corporation made a counter claim for Rs. 2,57,180. 40 on account of the default of the Company for arranging transport of 4591. 4. M. T. of sugar at Rs. 145 per M. T as against Rs. 89 per M. T. payable to the Company i. e. damages of Rs. 56 per M. T. paid in excess by the Corporation. A further counter claim was made in respect of 24 bags which were received in stained condition which had to be re-packed in new bags costing Rs. 240. Thus, a claim was made for Rs. 2. 57. 358. with interest after adjusting a sum of Rs. 1,99,705. 40 claimed by the company.
( 3 ) THE arbitrartor on the claim and counter claim put forward by the parties framed the following issues :-
1. Whether the claimant committed breach of agreement by failing to transport the goods in dispute in time ? OR
2. In cape Issue no. I is proved, to what amount of damages is the respondent entitled ? OR
3. Whether a sum of Rs. 36,000 still remains to be paid by the respondent against the claimant s bill dated 7-4-1981 ? OR
4. Whether the respondent terminated the agreement on 2-4-1981 unlawfully and is, therefore liable to pay damages to the tune of Rs. 40,000 to the claimant ? OR
5. Whether the respondent is entitled to recover interest and cost
