Principle of – Business Efficacy

A commercial document cannot be interpreted in a manner to arrive at a complete variance with what may originally have been the intendment of the parties. Such a situation can only be contemplated when the implied term can be considered necessary to lend efficacy to the terms of the contract. If the contract is capable of interpretation on its plain meaning with regard to the true intention of the parties it will not be prudent to read implied terms on the understanding of a party, or by the court, with regard to business efficacy as observed in Satya Jain v. Anis Ahmed Rushdie, (2013) 8 SCC 131, as follows:
“The principle of business efficacy is normally invoked to read a term in an agreement or contract so as to achieve the result or the consequence intended by the parties acting as prudent businessmen. Business efficacy means the power to produce intended results. The classic test of business efficacy was proposed by Bowen, L.J. in Moorcock, (1889) LR 14 PD 64 (CA). This test requires that a term can only be implied if it is necessary to give business efficacy to the contract to avoid such a failure of consideration that the parties cannot as reasonable businessmen have intended. But only the most limited term should then be implied—the bare minimum to achieve this goal. If the contract makes business sense without the term, the courts will not imply the same. In Moorcock, (1889) LR 14 PD 64 (CA), it was held as under:
“In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both the parties who are businessmen; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances. Transmission Corporation of Andhra Pradesh Ltd. v. GMR Vemagiri Power Generation Ltd., (2018) 3 SCC 716.

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Existence of A Concluded Contract – Is a Sine Qua Non in a claim for compensation

Section 7 of the Contract Act, 1872 provides that in order to convert a proposal into a contract, the acceptance must be absolute and unqualified. The existence of a concluded contract is a sine qua non in a claim for compensation for loss and damages under Section 73 of the Contract Act arising out of a breach of contract. If instead of acceptance of a proposal, a counter – proposal is made, no concluded contract comes into existence.
In U.P. Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd., also related to a proposal and counter-proposal. Holding that no concluded contract had come into existence, the Hon’ble Apex Court held as under:
“As seen, the material alterations in the contract make a world of difference to draw an inference of concluded contract.” Vedanata Ltd. v. Emirates Trading Agency LLC, (2017) 13 SCC 243.

Jurisdiction of First Appellate Court – To accept additional evidence

As far as the principles governing the jurisdiction of the First Appellate Court to take/accept the additional evidence on record under Order XLI, Rule 27, CPC, the guidelines had been issued by the Apex Court in Union of India v. Ibrahim Uddin, (2012) 8 SCC 148 as under:
1. The general principle is that the Appellate court should not travel outside the record of the Lower Court and cannot take any evidence in appeal.
2. The powers under Order XLI, Rule 27 CPC given to the first appellate court to take additional evidence is in the nature of exception and has to be exercised in exceptional circumstances with due care and caution.
3. The Appellate court may permit additional evidence only and only if the conditions laid down in the said rule are found to exist. The parties are not entitled, as of right, to the admission of such evidence.
4. The matter is entirely within the jurisdiction of the court and is to be used sparingly as the discretion provided therein circumscribed by the limitations specified in the rule.
5. The court shall not ordinarily allow new evidence to be adduced in order to enable a party to raise a new point in appeal. Similarly, where a party on whom the onus of proving a certain issue lies fails to discharge the same, would not be entitled to a fresh opportunity to adduce evidence as in such a case the court can pronounce judgment against him and does not require any additional evidence to enable it to pronounce its judgment in appeal.
6. Under Order XLI, Rule 27, CPC, the power given to the appellate court to allow a document to be produced or a witness to be examined, is limited to those cases where it is found necessary to obtain such evidence for enabling it to pronounce judgment. It does not entitle the Appellate Court to allow a party to remove lacuna in the evidence or supplement the evidence adduced by one party.
7. In the absence of satisfactory reasons for the non production of the evidence in the trial court, additional evidence could not be admitted in appeal as a party guilty of remissness in the lower court is not entitles to the indulgence of being allowed to give further evidence under this rule. Thus a party who had ample opportunity to produce certain evidence in the lower court but failed to do so or chose not to do so, cannot have it admitted in appeal.
8. The inadvertence of the party or his inability to understand the legal issue involved or the wrong advice of the pleader or the negligence of the pleader or that the party did not realize the importance of the document does not constitute a “substantial cause” within the meaning of this rule. Mere fact that certain evidence is important, is not in itself a sufficient ground for admitting that evidence in appeal.
9. The words “for any other substantial cause” must be read with the word “requires” in the beginning of the sentence, meaning thereby the rule that the appellate court requires additional evidence for any substantial cause, will apply in such a case where it is felt by the appellate court that the evidence had been so imperfectly taken by the trial court that it cannot pass a satisfactory judgment.
10. Wherever the appellate court admits additional evidence, it should record its reasons for doing so, as per sub rule (2) of Rule 27 of Order XLI, CPC. The requirement in the said sub rule is with a view to put a check against too easy reception of evidence at a later stage of the litigation and further that the statement of reasons inspires confidence of the litigant and disarm objection. The omission to record the reasons must, therefore, be treated as a serious defect. However, the said provision is only directory and not mandatory, if the admission of such evidence can be justified under the rule.
11. The reasons so required, are not necessarily to be recorded in a separate order and may be embodied in the judgment of the Appellate Court.
12. Mere reference to the peculiar circumstance of the case or mere statement that the evidence is necessary to pronounce judgment or that the additional evidence is required to be admitted in the interest of justice, or there is no reason to reject the prayer for admission of the additional evidence, is not enough compliance with the requirement as to recording of reasons.
13. Where the additional evidence sought to be adduced removes the cloud of doubt over the case and the evidence has a direct and important bearing on the main issue in the suit and interest of justice clearly renders it imperative that it may be allowed to be permitted on record, such application may be allowed. Smt. Sendal (deceased) v. Smt. Hamida, 2018 (138) RD 535.

Essentials of an Agreement – To qualify as a mortgage

The essentials of an agreement, to qualify as a mortgage by conditional sale, can succinctly be broadly summarized. An ostensible sale with transfer of possession and ownership, but containing a clause for reconveyance in accordance with Section 58 (c) of the Transfer of Property Act, will clothe the agreement as a mortgage by conditional sale. The execution of a separate agreement for reconveyance, either contemporaneously or subsequently, shall militate against the agreement being mortgage by conditional sale. There must exist a debtor and creditor relationship. The valuation of the property, and the transactional value, alongwith the duration of time for reconveyance, are important considerations to decide the nature of the agreement. There will have to be a cumulative consideration of these factors, alongwith the recitals in the agreement, intention of the parties, coupled with other attendant circumstances, considered in a holistic manner. Vishal Tukaram Kadam v. Vamanrao Sawalaram Bhosale, 2017 (5) AWC 4821.

Final Decision – In A Partition Suit

In Venkata Reddy v. Pethi Reddy, AIR 1963 SC 992, it has been laid down that the preliminary decree for partition is final. It also embodies the final decision of the court. The question of finality has been discussed thus:
“The word ‘decision’ even in its popular sense means a concluded opinion (see Stroud’s Judicial Dictionary – 3rd Edition, Vol. I, P. 743). Where, therefore, the decision is embodied in the judgment which is followed by a decree finality must naturally attach itself to it in the sense that it is no longer open to question by either party except in an appeal, review or revision petition as provided for by law. It was further observed:
The mere declaration of the rights of the plaintiff by the preliminary decree would not amount to a final decision for it is well known that even if a preliminary decree is passed either in a mortgage suit or in a partition suit, there are certain contingencies in which such a preliminary decree can be modified or amended and therefore would not become final.” T. Ravi v. B. Chinna Narasimha, 2017 (123) ALR 305.

Principle of – Approbate and Reprobate

The law does not permit a person to both approbate and reprobate. The principle is based on the doctrine of election which postulates that no party can accept and reject the same instrument and that a person cannot say at one time that a transaction is valid and thereby obtain some advantage to which he could only be entitled on the footing that it is valid and then turn around and say that it is void for the purpose of securing some other advantage.

In the case of Zila Dastavej Lekhak Association v. State of U.P., (1996) 8 SCC 441, while considering the challenge to the validity of Rule 6(2) of the U.P. Document Writers License Rules, 1977 by the licencees, it was held as under:

“The members of the petitioner-Association, having become the licensees under the Rules, are bound thereby. Firstly, the petitioner – Association being consisting of the members who obtained license under the Rules, cannot challenge the Rules under which they come to operate. The very source under which they come to operate either survives or perishes under the Rules. They cannot challenge that part of the Rules which is unfavourable to them while at the same time, respecting the favourable part thereof since they have no independent right de hors the Rules. They cannot challenge the power of the Inspector General of Registration in making the rules regulating conditions of the document writers and the conditions under which they become eligibile to be document writers.”

In the cases of NCTE v. Shyam Babu Maheshwari, (2011) 2 SCC 412 and Krishna Kumar v. Union of India, (1990) 4 SCC 207 and Union of India v. Kailas, (1998) 9 SCC 721, Hon’ble Supreme Court held that once an employee has opted for the Contributory Provident Fund Scheme, his exercise of option was final and he is not entitled to change over to the pension scheme because the two schemes are entirely different. Janki Prasad v. State of U.P., 2017 (135) RD 525.

No Right Accrues – To Highest Bidder

In Laxmikant v. Satyawan, (1996) 4 SCC 208, it was held as under:
“The person making the highest bid shall have no right to take back his bid. The decision of the Chairman of the Board of Trustees regarding acceptance or rejection of the bid shall be binding on the said person. The acceptance of the highest bid shall depend on the Board of Trustees. The trust shall reserve to itself the right to reject the highest or any bid.”
In State of U.P. v. Vijay Bahadur Singh, (1982) 2 SCC 365 it was laid down that there is no obligation to accept the highest bid. The Government is entitled even to change its policy from time to time according to the demands of the time.
Thus, it is apparent and explicit that even if the public auction had been completed and the respondent was the highest bidder, no right had accrued to him till the confirmation letter had been issued to him. HUDA v. Orchid Infrastructure Developers (P) Ltd., (2017) 4 SCC 243.