Tag Archives: damages

Damages – Arising out of Breach of Contract

Section 73 of the Indian Contract Act makes it clear that damages arising out of a breach of contract is treated separately from damages resulting from obligations resembling those created by contract. When a contract has been broken, damages are recoverable under Paragraph 1 of Section 73 of the Indian Contract Act. When, however, a claim for damages arises from obligations resembling those created by contract, this would be covered by Paragraph 3 of Section 73 of the Indian Contract Act. Mahanagar Telephone Nigam Ltd. v. Tata Communications Ltd., (2019) 5 SCC 341.

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Fraud and Misrepresentation

A perusal of the definition of the word “fraud”, as defined in Section 17 of the Contract Act, would reveal that the concept of fraud is very wide. It includes any suggestion, as a fact, of that which is not true, by a person who does or does not believe it to be true. It may be contrasted with Section 18(1) of the Contract Act which, inter alia, defines “misrepresentation”. It provides that it is misrepresentation if a positive assertion is made by a person of that which is not true in a manner which is not warranted by the information which he has. This is despite the fact that he may believe it to be true. In other words, in fraud, the person who makes an untruthful suggestion, does not himself believe it to be true. He knows it to be not true, yet he makes a suggestion of the fact as if it were true. In misrepresentation, on the other hand, the person making misrepresentation believes it to be true. But the law declares it to be misrepresentation on the basis of information which he had and what he believed to be true was not true. Therefore, the representation made by him becomes a misrepresentation as it is a statement which is found to be untrue. Fraud is committed if a person actively conceals a fact, who either knows about the fact or believes in the existence of the fact. The concealment must be active. It is here that mere silence has been explained in the Exception which would affect the decision of a person who enters into a contract to be not fraud unless the circumstances are such that it becomes his duty to speak. His silence itself may amount to speech. A person may make a promise without having any intention to perform it. It is fraud. The law further declares that any other act fitted to deceive, is fraud. So also, any act or omission, which the law declares to be fraudulent, amounts to fraud. Running as a golden trend however and as a requirement of law through the various limbs of Section 17 of the Contract Act, is the element of deceit. A person who stands accused of fraud be it in a civil or criminal action, must entertain an intention to commit deception. Deception can embrace various forms and it is a matter to be judged on the facts of each case. It is, apparently, on account of these serious circumstances that fraud has on a legal relationship or a purported legal relationship that the particulars and details of fraud are required if pleaded in a civil suit or a proceeding to which the CPC applies. Electrical Rengali Hydro Electric Project v. Giridhari Sahu, (2019) 10 SCC 695.

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Term Compensation – Under Motor Vehicles Act

The term “compensation” has not been defined in the Motor Vehicles Act, 1988. By interpretive process, it has been understood to mean to recompense the claimants for the possible loss suffered or likely to be suffered due to sudden and untimely death of their family member as a result of motor accident. Two cardinal principles run through the provisions of the Motor Vehicles Act of 1988 in the matter of determination of compensation. Firstly, the measure of compensation must be just and adequate; and secondly, no double benefit should be passed on to the claimants in the matter of award of compensation. Section 168 of the Motor Vehicles Act, 1988 makes the first principle explicit. Sub-section (1) of that provision makes it clear that the amount of compensation must be just. The word “just” means — fair, adequate and reasonable. It has been derived from the latin word “Justus”, connoting right and fair. In State of Haryana v. Jasbir Kaur, (2003) 7 SCC 484, it has been held that the expression “just” denotes that the amount must be equitable, fair, reasonable and not arbitrary. In Sarla Verma v. DTC, (2009) 6 SCC 121, it was held that the compensation “is not intended to be a bonanza, largesse or source of profit”. That, however, may depend upon the facts and circumstances of each case, as to what amount would be a just compensation. Reliance General Insurance Company Ltd. v. Shashi Sharma, (2016) 9 SCC 627.

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Section 43 of the Information Technology Act – Pre-requisites to Enforce Liability

Section 43 of the Information Technology Act, 2000, right at the outset provides for pre-requisites to enforce the liability under the section. The two requirements for invocation of this section are as follows:
(i) The acts committed under this section must have been committed without the permission of the owner or any person who is in charge of Computer, Computer System, Computer Network;
(ii) There must be some kind of damage caused to the person affected by such acts;

Section 43 of the act provides for certain set of acts, if committed by any person without the permission of the owner or person in charge of a Computer, Computer System or Computer Network, commits any of the acts provided under the sub-sections (a) to (j) of Section 43 of the Act, the person is liable to pay damages by way of compensation to the person affected. It provides for remedy in the form of compensation to the victim. But that is not the only remedy under the Act of 2000 for the victim.

The reference can also be made to Section 47 of the Information Technology Act which provides for factors to be taken into account by the Adjudicating Authority while adjudicating the quantum of compensation under Section 43 of the Act. Section 47 provides for three different factors which are as follows:
(a) The amount of gain or unfair advantage, wherever quantifiable, made as a result of the default;
(b) The amount of loss caused to any person as a result of default;
(c) Repetitive nature of the default.

Section 43 of the Act requires that the act of default must have been committed without the permission of the person who is owner or a person in charge of the Computer, Computer System or Computer Network. Secondly the act of the defendant must have caused some damage or loss to the person so affected. Amit Kumar Jadaun v. State of U.P., 2018 (130) ALR 877.

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Competition Act – No Requirement of Mens Rea under Section 43-A

There was no requirement of mens rea under Section 43-A or an intentional breach as an essential element for levy of penalty. The Act does not use the expression “the failure has to be wilful or mala fide” for the purpose of imposition of penalty. The breach of the provisions of the Act is punishable and considering the nature of the breach, it is discretionary to impose the extent of penalty. Mens rea is important to adjudge criminal or quasi-criminal liability, not in case of violation of the civil statutory provision.

In Hindustan Steel Ltd. v. State of Orissa [Hindustan Steel Ltd. v. State of Orissa, (1969) 2 SCC 627 : AIR 1970 SC 253] , with respect to the failure to comply with the civil obligation it was laid down thus:

mens rea is not an essential ingredient for contravention of the provision of a civil Act. The penalty is attracted as soon as a contravention of the statutory obligations as contemplated by the Act is established and, therefore, the intention of the parties committing such violation becomes immaterial. In other words, the breach of a civil obligation which attracts penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not. This apart that unless the language of the statute indicates the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred. The penalty has to follow and only the quantum of penalty is discretionary.

The penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulation is established and hence intention of the parties committing such violation becomes wholly irrelevant.

Unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not.

The imposition of penalty under Section 43-A is on account of breach of a civil obligation, and the proceedings are neither criminal nor quasi-criminal. Thus, a penalty has to follow. Discretion in the provision under Section 43-A is with respect to quantum. SCM Solifert Ltd. v. CCI, (2018) 6 SCC 631

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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.

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Composite Negligence and Contributory Negligence – Difference Between

Composite Negligence refers to the negligence on the part of two or more persons. Where a person is injured as a result of negligence on the part of two or more wrongdoers, it is said that the person was injured on account of the composite negligence of those wrongdoers. In such a case, each wrongdoer is jointly and severally liable to the injured for payment of the entire damages and the injured person has the choice of proceeding against all or any of them. In such a case, the injured need not establish the extent of responsibility of each wrongdoer separately. On the other hand where a person suffers injury, partly due to the negligence on the part of another person or persons, and partly as a result of his own negligence, then the negligence of the part of the injured which contributed to the accident is referred to as his contributory negligence. When the injured is guilty of some negligence, his claim for damages is not defeated merely by reason of the negligence on his part but the damages recoverable by him in respect of the injuries stands reduced in proportion to his contributory negligence. Khenyei v. New India Assurance Company Ltd., 2015 (3) AWC 2945.

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Reasonable Compensation – Liquidated Amount

Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the court cannot grant reasonable compensation. Kailash Nath Associates v. D.D.A., (2015) 4 SCC 136.

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Interest – Concept of

In the case of Hello Mineral Water (P) Ltd. v. Union of India, 2004 (174) ELT 422, a Division Bench of the court explained the concept of interest as under:
“Interest is normal accretion on capital.
If on facts of a case, the doctrine of restitution is attracted, interest is often the normal relief. Restitution in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order what has been lost to him in execution of decree or order of the court or in direct consequence of a decree or order. The term “restitution” is used in three senses, firstly, return or restoration of some specific thing to its rightful owner or status, secondly, the compensation for benefits derived from wrong done to another and, thirdly, compensation for the loss caused to another. Reference in this regard may be had to the Judgment of the Hon’ble Supreme Court in the case of South Eastern Coal Fields Ltd. v. State of M.P., (2003) 8 SCC 648.
In Hari Chand v. State of U.P., 2012 (1) AWC 316, the Court dealing with a stamp matter held that the payment of interest is a necessary corollary to the retention of the money to be returned under order of the appellate or revisional authority.
Thus, the concept of interest is that when a person is deprived of the use of his money, to which, he is legitimately entitled, he has a right to be compensated for the deprivation, which may be called interest or compensation. Interest is paid for the deprivation of the use of money in general terms, which is return or compensation for the use or retention by a person of a sum of money belonging to another. It is a consideration paid either for the use of money or for forbearance of the money. In this sense, it is a compensation allowed by law or fixed by parties, or permitted by custom or usage for use of money belonging to another or for the delay in paying money after it has become payable. Delayed payment normally attracts interest. Ansal Housing and Construction Ltd. v. State of U.P., 2015 (108) ALR 22.

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Interest and Compensation

The essence of interest in the opinion of Lord Wright, in Riches v. Westminitser Bank Ltd., 1947 AC 390 : (1947) 1 All ER 469 is that:
“….it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had the use of the money, or, conversely, the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation;
The money due to the creditor was not paid, or, in other words,
‘was withheld from him by the debtor after the time when payment should have been made, in breach of his legal rights, and interest was a compensation, whether the compensation was liquidated under an agreement or statute’.
A Division Bench of the High Court of Punjab in CIT v. Sham Lal Narula, AIR 1963 P&H 411 held as under :
“The words “interest” and “compensation” are sometimes used interchangeably and on other occasions they have distinct connotation. “Interest” in general terms is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another. In its narrow sense, “interest” is understood to mean the amount which one has contracted to pay for use of borrowed money………..
In whatever category “interest” in a particular case may be put, it is a consideration paid either for the use of money or for forbearance in demanding it, after it has fallen due, and thus, it is a charge for the use or forbearance of money. In this sense, it is a compensation allowed by law or fixed by parties, or permitted by custom or usage, for use of money, belonging to another, or for the delay in paying money after it has become payable.’ Tamil Nadu Generation and Distribution Corporation Ltd. V. PPN Power Generating Company Private Ltd. (2014) 11 SCC 53

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