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1962 Supreme(SC) 90

SUPREME COURT OF INDIA
B.P. SINHA, C.J.I., J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH AND J.R. MUDHOLKAR, JJ.
Sir Chunilal v. Mehta and sons Ltd., Appellants
Versus
Century. Spinning and Manufacturing Co. Ltd., Respondent.
Advocate General for the State of Maharashtra, Intervener.
Civil Appeal No. 417 of 1957.
5th March, 1962
Advocates appeared
Mr. N. A. Palkhivala, Senior Advocate, (Mr. J. B. Dadachanji, Advocate and M/s. S. N. Andley, Rameshwar Nath & P. L. Vohra, Advocates of M/s. Rajinder Narain and Co. with him), for Appellants; Mr. M. C. Setalvad, Attorney General for India, (M/s. R. J. Joshi and B. P. Maheshwari, Advocates with him), for Respondent; M/s. Porus A. Mehta and R. H. Dhebar, Advocates, for Intervener.

Advocates:
B.P.MAHESHVARI, J.B.DADACHAN, M.C.SETALVAD, N.A.PALKHIWALA, P.L.VOHRA, PORUS A.., R.H.Dhebar, R.J.JOSHI, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.N.ANDLEY

Headnote:SUBSTANTIAL QUESTION OF LAW - CONFLICT OF JUDICIAL OPINIONS

       -the proper test to determine would be whether it is of general public importance or whether it directly and substantially affects the right of the parties and if so whether it is either an open question in the sense that it is not finally settled by the Supreme Court or by the Privy Councilor by the Federal Court or is not free from difficulty or calls for discussing of alternative views. If the question is finally settled by the highest Court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd, the question would not be a substantial question of law - Chunnilal V. Mehta v. C.S. & M. Co. Ltd., AIR 1962 SC 1314; Mahindra and Mahindra Ltd. v. Union of India, 1979 (2) SCC 529; Santosh Hazari v. Purshottam Tiwari, 2001(1) Supreme 642

       -the appeal lies to the Supreme Court

       

Judgement Key Points

Key Points: - The test for a substantial question of law is whether it is of general public importance or directly and substantially affects the rights of the parties, and whether it is open or not free from difficulty (!) . - A question of law is substantial if it substantially affects the decision between the parties, even if of little public importance, but not if it is palpably absurd or well settled (!) . - The proper construction of a managing agency agreement must focus on the intent of the parties, and clauses specifying liquidated damages exclude claims for unascertained damages under general law (!) . - Words like "salary" and "remuneration" in the agreement are intended to mean the fixed monthly amount, not additional profit-based compensation, unless expressly provided (!) . - The High Court was found to have erred in refusing a certificate, as the question involved a substantial dispute over the amount of compensation payable (!) . - The appeal was dismissed with costs, affirming the High Court’s decree (!) . - The case was decided on March 5, 1962, by the Supreme Court of India (!) .

What is the proper test to determine whether a question of law is substantial under Article 133 of the Constitution?

What are the rights of the parties concerning compensation for wrongful termination of a managing agency agreement?

How should a clause specifying liquidated damages be interpreted when parties have already fixed the compensation amount?


Judgment

MUDHOLKAR, J. : This is an appeal by special leave against the judgment of the High Court of Bombay in an appeal from the judgment of a single judge of that Court. The claim in appeal before the High Court was for about 26 lakhs of rupees. Being aggrieved by the decision of the High Court, the appellant applied for a certificate under Art. 133 (1) (a) of the Constitution. The judgment of the High Court in appeal was in affirmance of the judgment of the learned single Judge dismissing the appellant s suit for damages and, therefore, it was necessary for the appellant to establish that a substantial question of law was involved in the appeal. On behalf of the appellant it was contended that the question raised concerned the interpretation to be placed on certain clauses of the managing agency agreement upon which their claim in the suit was founded and that its the interpretation placed by the appeal court on those clauses was erroneous and thus deprived them of the claim to a substantial amount the matter deserved to be certified by the High Court under Art. 133 (1)(a) of the Constitution. The learned judges dismissed the application without a judgment apparently following their previous decision in Kaikhushroo Pirojsha Ghiara v. C. P. Syndicate Ltd., 50 Bom LB 744 : . The appellants, therefore, moved this Court under Art. 136 of the Constitution for grant of special leave which was granted. In the application for special leave the appellant had raised a specific contention to the effect that the view taken by the High Court with regard to the application for certificate under Art. 133(1)(a) of the Constitution was wrong, that the appellant was entitled to appeal to this Court as a matter of right and that while considering the appeal this question should also be decided. The appellant pointed out that the view taken by the Bombay High Court on the point as to what is a substantial question of law runs contrary to the decision of the Privy Council in Raghunath Prasad Singh v. Deputy Commissioner of Partabgarh, 54 Ind App 126 and the decision of some High Courts in India and that therefore, it is desirable that this Court should pronounce upon the question in this appeal and set the matter at rest. We think that it is eminently desirable that the point should be considered in this appeal.

2. It is not disputed before us that the question raised by the appellant in the appeal is one of law because what the appellant is challenging is the interpretation placed upon certain clauses of the managing agency agreement which are the foundation of the claim in suit. Indeed it is well settled that the construction of a document of title or of a document which is the foundation of the rights of parties necessarily raises a question of law.

3. The next question is whether the interpretation of a document of the kind referred to above raises a substantial question of law. For, Art. 133(1) provides that where the judgment, decree or final order appealed, from affirms the decision of the court immediately below in any case other than a case referred to in sub-cl. (c) an appeal shall be to this Court if the High Court certifies that the appeal involves some substantial question of law. To the same effect are the provisions of S. 110 of the Code of Civil Procedure. In the old Judicial Commissioner s Court of Oudh the view was taken that a substantial question of law meant a question of general importance. Following that view its successor, the Chief Court of oudh, refused to grant a certificate to one Raghunath Prasad Singh whose appeal it had dismissed. The appellant, therefore, moved the Privy Council for special leave on the ground that the appeal raised a substantial question of law. The Privy Council granted special leave to the appellant and while granting it made the following observation in their judgment:

"Admittedly here the decision of the Court affirmed the decision of the Court immediately below and, therefore, the whole quest

























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