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2009 Supreme(Del) 997
IN THE HIGH COURT OF DELHI AT NEW DELHI
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
M/S ARYAVART OVERSEAS (P.) LTD. .... Plaintiff
Versus
M/S KAY AAR BISCUITS (P.) LTD. ..... Defendant
CS(OS) 1161/1982
Decided on : 14.09.2009
Mr. Janendra Lal and Ms. Yasmin Tarapore, Advocates.
Nemo.
Headnote:Contract Act, 1872—Section 73—Recovery of amount as damages for breach of contract—Damages cannot be awarded on hypothesis—Plaintiff has to prove real loss— Plaintiff cannot put forward any claim for damages on mere assumption that he would have derived benefit if the contract had been performed in full—Plaintiff is an under legal obligation to mitigate its damages to the minimum possible limit—Plaintiffs failure to mitigate its losses disentitles it to claim compensation towards loss of profit, for entire quantity—Suit decreed—Amount of damages modified [Paras 12 to 19]
Based on the provided legal document, here are the key points:
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The case involves a breach of contract concerning the supply of biscuits between the plaintiff, a marketing company, and the defendant, Kay AAR Biscuits, with a focus on damages for short supply and breach of contractual obligations (!) (!) .
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The original agreement was entered into on June 8, 1978, with a subsequent settlement on June 7, 1979, which guaranteed minimum supplies and set terms for payments, delivery, and market restrictions (!) (!) (!) .
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The contract stipulated that Kay AAR would supply a minimum of 100 tonnes of biscuits per month, with an obligation to increase supply progressively, and the plaintiff invested heavily in marketing and reputation-building based on this agreement (!) (!) (!) .
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The defendant defaulted on supply commitments, supplying only nominal quantities after a certain point and selling biscuits in the open market, which constituted breach of the contractual terms (!) (!) (!) .
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The court found that the plaintiff suffered damages due to short supply, calculated at Rs. 768.75 per tonne for approximately 220 tonnes, based on the net profit loss per tonne (!) (!) (!) .
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The court emphasized that damages should be based on actual loss and market value, and noted the plaintiff's failure to mitigate damages by purchasing from alternative sources or taking reasonable steps to reduce losses (!) (!) (!) .
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The court concluded that the plaintiff's claim for damages should be reduced proportionally, considering the duty to mitigate, and awarded damages calculated at Rs. 768.75 per tonne for approximately 988.58 tonnes, which is half of the shortfall, amounting to Rs. 7,59,969.72 (!) (!) .
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Additionally, the plaintiff was awarded a sum of Rs. 20,030.25, which was withheld, along with interest at 15% pendente lite and future interest on this amount (!) (!) .
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The suit was decreed in favor of the plaintiff, with costs quantified at Rs. 75,000, and the damages and interest awarded as detailed above (!) .
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The legal principles reinforce that damages aim to place the injured party in the position they would have been if the contract had been fully performed, but the plaintiff must act reasonably to mitigate losses and cannot claim damages for losses that could have been avoided through reasonable efforts (!) (!) (!) .
Please let me know if you need further analysis or specific legal advice related to this case.
HON’BLE MR. JUSTICE S.RAVINDRA BHAT, J.
1. The plaintiff, a private limited company carrying on business in marketing biscuits, sues for damages in the sum of Rs.39,74,344.25 P (Rupees thirty Nine lakhs Seventy four thousand hundred and forty and paise twenty five only).
2. The plaintiff is a private limited company incorporated under the Companies Act, 1956 and carries on business inter alia of selling and marketing biscuits and other food products in various part of India. It is averred that in 1978 the defendant (hereafter “Kay Aar”) approached it (the plaintiff) at New Delhi requesting assistance to it (the defendant) for setting up a factory to manufacture biscuits,and also for its sale. The plaintiff agreed; this led to the parties entering into a rate contract on the 8th of June 1978. The original of that agreement was filed on record of suit No.5 of 1980 and marked as Exhibit P-1; a certified copy of the agreement together with its annexures is filed in this suit. It is produced, and marked as Exhibit PW-1/1.
3. The parties, by the said contract agreed that Kay Aar would supply to the plaintiff biscuits, (as described in its Anenxures) under the Plaintiff’s trade names of “Swady’, Salona, “Krispee” and “Saltene”. Kay Aar agreed to supply a minimum of 100 MT (tonnes) of those biscuits, per month according to the plaintiff’s requisition to be (and which were) placed from time to time. Kay Aar was permitted to use the said trade names only for the supplies made to the plaintiff. The agreement further stipulated that payment would be made within two days of the bills raised during the previous week.
4. The plaintiff contends that Kay Aar was unable to meet its (plaintiff’s requirements); owing to short supplies, disputes arose between the parties. To settle those disputes, a settlement was arrived at on 7th June, 1979 by which Kay Aar guaranteed the supply of a minimum of fifty tons in the month of June, 1979 with a progressive increase of ten tons per month till the minimum agreed contracted supply of one hundred tons a month was reached. It was agreed that the payment (for the supplies) would be made on the third day after the supply. With a view to cover past accounts and disputes, the parties also agreed that they would prepare an “up to date” account which would take into consideration various payments made between the parties to outsiders. Parties agreed to a third party liability of Rs.97,000/-to be borne by the plaintiff, provided that Kay Aar maintained the regular, minimum guaranteed supply. It was also agreed that if on taking final accounts, any amount was found due from the plaintiff to the Defendant, the former would pay the same in installments of Rs.10,000/-per month, provided the minimum guaranteed supply was maintained as stated in the settlement. The certified copy of the said settlement dated 7th June, 1979 is marked as Exhibit PW1/2.
5. The plaintiff says that thereafter, although Kay Aar started supplying the goods, it started defaulting in making regular supplies thereby committing breach of the agreement. It is alleged that Kay Aar, instead of selling the biscuits to the plaintiff, also started selling them in the open market through other parties. Resultantly the plaintiff filed an Arbitration Petition being Suit No. 1057-A of 1979, under Section 20 of the Arbitration Act, 1940. Kay Aar expressed its disinterest in having the disputes resolved through arbitration; the Plaintiff therefore withdrew the said arbitration petition. The Plaintiff thereafter filed Suit No.5 of 1980 in this Court for the recovery of a sum of Rs. 5,01,084/-as damages on account of short supply of 334.056 tones of biscuits by Kay Aar, up to 31st December, 1979 and for an injunction. A certified copy of the plaint is marked as Exhibit PW1/3. That suit was partly decreed by the court on 17th February, 1982. The court granted to the plaintiff, damages calculated at the rate of Rs.768.75 per tonne. A certified copy of t
