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2009 Supreme(Mad) 3035
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE P.K. MISRA & THE HONOURABLE MR. JUSTICE D. HARIPARANTHAMAN
Union of India rep. by Secretary & Others
Versus
The Registrar & Another
Writ Petition No.38737 of 2005
Decided on: 07-08-2009
For the Petitioners:P.H. Aravind Pandian, Advocate. For the Respondents:Parthiban, M/s. Paul & Paul, Advocates.
The central legal point established in the judgment is the application of Section 74 of the Contract Act and the principles of reasonable compensation in cases of breach of contract.
Headnote:
Service Bond - Employment Dispute - Section 74 of the Contract Act, AIR 1963 SC 1405, AIR 2003 SC 2629
Fact of the Case:
The case involves a dispute over a service bond where the applicant, appointed under the Talent Scouting Scheme, was required to serve the Railways for a specified period. Upon resigning to join another employer, the Railways demanded a sum equivalent to three years' salary as compensation.
Finding of the Court:
The Tribunal found that the bond did not specify the amount payable in case of default, and relying on Section 74 of the Contract Act and legal precedents, held that no amount was payable in the absence of a stipulated sum for infringement or violation of the condition. The Tribunal directed the Railways to refund the sum paid by the applicant with interest.
Issues: The key issue was the determination of reasonable compensation under the service bond and the validity of the demand for payment by the Railways.
Ratio Decidendi: The court emphasized the principles of reasonable compensation under Section 73 and Section 74 of the Contract Act, highlighting that the party suffering from a breach of contract is entitled to receive reasonable compensation, even if no actual loss is proved. The court also considered the terms of the contract and the genuineness of the pre-estimate of damages.
Final Decision: The writ petition was allowed in part, and the Tribunal's direction was modified. The Railways was directed to refund a reduced sum to the applicant within a specified period, with the possibility of interest if the refund was delayed.
P.K. Misra, J
The present writ petition has been filed by Union of India and two others challenging the order passed by the Central Administrative Tribunal (in short "Tribunal), whereunder the Tribunal has allowed the Original Application filed by the present Respondent No.2 and directed refund of Rs.2,40,800/- with interest at the rate of 9% to Respondent No.2.
2. The facts giving rise to filing of such O.A.No.30 of 2005 and thereafter the present writ petition are recounted in a nutshell.
The present Respondent No.2, who was the applicant before the Tribunal, was appointed under Railways under Talent Scouting Scheme as he was an eminent Table Tennis player. He served Railways from 7. 2001 to 7. 2004. At the time of employment, a service bond has been executed stipulating a condition that he should serve the Railways for a period of three years. While the applicant was so serving, he was offered with better employment by Indian Oil Corporation (I.O.C.). At that time, when the applicant wanted to resign from the post and to be relieved, he was advised as per the Railway Board Letter R.B.E.No.120/85 dated 24. 1985 to remit the salary for a period of three years as per the conditions of the bond executed by him at the time of his initial appointment. Thereafter, the applicant paid the said amount of Rs.2,40,800/-and was relieved from the Railways enabling him to join I.O.C. In the Original Application, the applicant claimed that he was forced to sign the service bond stipulating a condition that he would serve the Railways for a period of five years. It is stated by him "At the time of appointment the applicant was made to sign the printed service bonds with several blanks on it. Without understanding the legal implications and the consequences, the applicant signed the service bond and later on the officials filled up the blanks by themselves". It has been further stated that since the latter job offered by I.O.C. was at stake ". . . the applicant was forced to remit the entire amount demanded on 25.03.2003", representing three years salary of the applicant.
3. The Department in its reply had stated that the applicant was selected in Sports quota and at the time of entering into service, a bond was executed, wherein it was indicated that the applicant was required to serve the Railways for five years. As the applicant had applied to I.O.C., without the knowledge and consent of the Railways and subsequently when the applicant wanted that he should be relieved, it has called upon to pay three years salary as compensation as per the bond. In normal course, he would have been required to pay equivalent to five years salary, but taking a lenient view he was called upon to remit salary for three years and after such amount was paid, he was relieved.
4. The Tribunal found that a bond had been executed wherein it was indicated that the applicant had undertaken to serve the Railways for five years. The Tribunal, however, found that in Clause 5 of the bond, the amount required to be paid had been left blank.
The Tribunal, therefore, concluded that as the amount had not been quantified, it is not clear as to how the Department had arrived at a figure of Rs.2,40,800/-. The Tribunal by relying upon Section 74 of the Contract Act and the decision of the Supreme Court in AIR 1963 SC 1405 (Fateh Chand V. Balkishan Dass), held that in the absence of any legal injury suffered by the Railways, no amount was payable, particularly when the amount payable had not been stipulated in case of infringement or violation of the condition. Accordingly, the Tribunal directed that a sum of Rs.2,40,800/- shall be refunded to the applicant with 9% interest. The aforesaid order is in question in the present writ petition filed by the Department.
5. It is of course true that in the bond no amount has been specifically indicated as the amount payable in case of default or infringement of the bond. As observed by the Supreme Court in AIR 1963 SC 1405 (ci
