To invoke section 73 of the Indian Contract Act, the claimant must have to prove that damage is caused due to the respondent’s breach of contract

To invoke section 73 of the Indian Contract Act, the claimant must have to prove that damage is caused due to the respondent’s breach of contract written by Avdhesh Parashar student of Maharashtra National Law University Aurangabad

MAHARASHTRA STATE ELECTRICITY BOARD, BOMBAY vs. STERKITE INDUSTRIES (IND.) LTD. AIR 2000 BOM 204

FACTS OF THE CASE:

Maharashtra State Electricity Board, Bombay, (hereinafter as M.S.E.B.) a statutory corporation established under Electricity (Supply Act, 1948) to provide, distribute and supply electricity within the state of Maharashtra. To explore the state schemes to distribute the electricity throughout the rural area of the state of Maharashtra, the M.S.E.B. Bombay required materials for the same, which includes conductors, wires, etc. the M.S.E.B. had floated tenders in the year 1983, and the respondents i) Sterlite Industries and ii) Pravin Trading Corporation accepted the tenders and contracted to supply the necessary materials by end of June in 1985. A general term, Clause 14(ii), of the contract, was that in the matter of termination of the contract by the purchaser, the purchaser reserves the right to purchase upon such terms and in such manner as he may deem appropriate and has the right to claim compensation for damages caused due to non-delivery of fixed contract material and reserves the right of the appellant to purchase the material from the open market. In both the contracts the i) Sterlite Industries ii) Pravin trading defaulted in the delivery of the subject material and did not deliver the sufficient material by the end of the time period of the contract. When the appellant came to know that the respondents were unwilling to perform their contractual obligation, they served demand notice of Rs. 77,66, 280/- and Rs. 52,16,945/- to Sterlite Industries Ltd. and Pravin Trading Corporation respectively for damages caused by respondents to the appellant. The matter went to Arbitration Bench according to Section 30 of the Arbitration Act where the majority gave judgment in favor of respondents by 2-1 and dismissed the application. Later appellant filed an appeal against the said decision of the Bench.

ISSUE:

Whether the appellant was entitled to invoke Section 73 of the Indian Contract Act, if yes, whether the appellant proves that they suffered the loss?

RULE OF LAW:

Section 73 of the Indian Contract Act
Section 62 of Sales of Goods Act
Section 30 of the Arbitration Act

JUDGEMENT:

The observation of the Hon’ble High Court was that the appellant has failed to prove any damage caused due to the non-performance of Sterlite Industries and Pravin Trading Corporation. The court relied on the judgment of Sitaram Bindraban vs. Chiranjilal Brijlal in which it was held that “the parties may exclude or implies any term and conditions which law attaches to contracts for the special rights and obligations that they please such as providing their own measure of damages in case of breach of contract and indeed the terms of Section 62 of the Indian Sale of Goods Act recognizes the right of parties to vary the ordinary incidence of a contract by express terms of the contract of sale of goods between them. Section 62 gives the right to parties of the contract to exclude the term and conditions according to them for the please of the parties. So, the view taken by the High Court was that Clause 14(ii) of the contract makes special provision for the appellants by reserving to the appellant’s rights to purchase materials and equipment from the open market and to claim damages from the respondents thus, the right to claim damages under section 73 of the Contract Act has been excluded. The appellant did not purchase any said material on account of the respondent from the open market after the termination of the contract as mentioned in Clause 14(ii) of the Contract signed between parties. Further-more the court mentioned that section 73 of the Contract Act does not give any cause of action otherwise if there is actual damage due to breach of contract.
The Hon’ble High Court reserved the decision of the Arbitration bench and dismissed the appeal of the appellant.