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sec.74 of contract Act- The scope of Section 74 has been the subject matter of several pronouncements of this Court including the Constitution Bench decisions in Fateh Chand v. Balkishan Das AIR 1963 SC 1405, Union of India v. Ramam Iron Foundry (1974) 2 SCC 231 and SAIL v. Gupta Brother Steel Tubes (2009) 10 SCC 63. The common thread that runs through all these pronouncements is that an aggrieved party is entitled to receive compensation from the party who has broken the contract whether or not actual damage or loss is proved to have been caused by the breach and that the Court has, subject to the outer limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to the circumstances of the case. This would essentially be a mixed question of law and fact that a Writ Court could not possibly decide. The appellant could and indeed ought to have sought its remedies in a proper civil action if it questioned the reasonableness of the amount recoverable by the appellant in terms of the contractual stipulations.

Page 1

English: Madhya Pradesh Vidhan Sabha

English: Madhya Pradesh Vidhan Sabha (Photo credit: Wikipedia)

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1517 OF 2013
(Arising out of S.L.P. (C) No.2490 of 2008)
M/s A.S. Motors Pvt. Ltd. …Appellant
Versus
Union of India & Ors. …Respondents
J U D G M E N T
T.S. THAKUR, J.
1. Leave granted.
2. This appeal by special leave arises out of an order dated 8
th
August, 2007, passed by a Division Bench of the High Court of
Madhya Pradesh at Jabalpur whereby Writ Appeal No.491 of 2007
filed by the appellant has been dismissed and the order passed by the
learned Single Judge dismissing Writ Petition No.720 of 2007
affirmed. Multiple rounds of litigation between the parties have been
aptly recapitulated in the order passed by the Single Judge of the
High Court in Writ Petition No.720/2007 and refreshed by the DivisionPage 2
Bench of the High Court while dismissing the writ appeal filed against
the same. It is in that view unnecessary for us to recount the entire
factual background in which the controversy in this appeal arises
except to the extent it is absolutely necessary for us to do so for the
disposal of this appeal.
3. National Highway Authority of India Ltd. (NHAI for short)
invited tenders for award of a contract for collection of fee for the use
of National Highways from Km. 61.00 to Km.103 on Morena-Gwalior
Section of National Highway No.3. Appellant too among others made
an offer which was accepted by the NHAI in terms of its letter dated
14
th
March, 2006 asking the appellant to submit a demand draft for a
sum of Rs.2,20,00,125/- towards performance security and a bank
guarantee for a similar amount to be valid for a period of 15 months
for the due observance of the terms and conditions contained in the
contract. Both these requirements were satisfied by the appellant
with the result that a contract for collection of user fee commencing
from 1
st
April, 2006 to 31
st
March, 2007 was finally allotted in its
favour. It is not in dispute that pursuant to the said allotment the
appellant started collecting the prescribed fee as per the terms and
conditions of the agreement and also started depositing monthly
instalments stipulated under the same.
4. Certain violations were in due course noticed by the NHAIPage 3
including complaints to the effect that the appellant was collecting
excess fee from vehicles passing through Toll Plaza. This resulted in
the termination of the collection contract by the competent authority
in terms of a letter dated 27
th
July, 2006, and forfeiture of the
performance security of Rs.2,20,00,125/-. Termination ordered by
the respondent triggered litigation between the parties that took
several rounds before the High Court. We are not immediately
concerned with the nature of those proceedings and the orders
passed in the same from time to time. What is important is that the
termination of the contract had once been quashed by the High Court
whereupon the same was terminated for a second time after a showcause notice and a personal hearing to the appellant in compliance
with the direction issued by the High Court in its order dated 25
th
January, 2007.
5. Aggrieved by the fresh termination of the contract as also the
forfeiture ordered by the competent authority, the appellant filed Writ
Petition No.720 of 2007 before the High Court of Madhya Pradesh. By
his order dated 18
th
June, 2007, a Single Judge of the High Court
allowed the said petition in part and while upholding imposition of
penalty and forfeiture of performance guarantee, quashed the
revocation of the bank guarantee by the respondent, as unfair and
unreasonable having regard to the fact that the respondent hadPage 4
already received Rs.7,33,33,750/- towards collection charges,
Rs.2,20,00,125/- towards forfeiture of the performance security and
a penalty amount of Rs.2,41,097/- making a total of
Rs.9,55,74,970/- which was more than Rs.8,80,00,500/- the amount
contracted to be paid to the respondent. The High Court held that
the termination of the contract and the forfeiture of the performance
security for the breaches committed by the appellant were perfectly
justified in the light of the report submitted by the agency deployed
by the respondent to collect material regarding overcharging of fee
and other violations committed by the appellant.
6. Feeling aggrieved by the order passed by the Single Judge of
the High Court the appellant preferred Writ Appeal No.491 of 2007
which was heard and dismissed by a Division Bench of the High Court
by its order dated 8
th
August, 2007. The present appeal assails the
correctness of the said order.
7. We have heard learned counsel for the parties at some length
who have taken us through the record including the orders passed by
the High Court from time to time.
8. It was argued on behalf of the appellant that termination of
the contract between the parties was legally bad not only because the
principles of natural justice requiring a fair hearing to the appellant
were not complied with but also because there was no real basis forPage 5
the respondent-authority to hold that the appellant had committed
any breach of the terms and conditions of the contract warranting its
termination. We find no merit in either one of the contentions. The
reasons are not far to see. Rules of natural justice, it is by now fairly
well settled, are not rigid, immutable or embodied rules that may be
capable of being put in straitjacket nor have the same been so
evolved as to apply universally to all kind of domestic tribunals and
enquiries. What the Courts in essence look for in every case where
violation of the principles of natural justice is alleged is whether the
affected party was given reasonable opportunity to present its case
and whether the administrative authority had acted fairly, impartially
and reasonably. The doctrine of audi alteram partem is thus aimed
at striking at arbitrariness and want of fair play. Judicial
pronouncements on the subject have, therefore, recognised that the
demands of natural justice may be different in different situations
depending upon not only the facts and circumstances of each case
but also on the powers and composition of the Tribunal and the rules
and regulations under which it functions. A Court examining a
complaint based on violation of rules of natural justice is entitled to
see whether the aggrieved party had indeed suffered any prejudice
on account of such violation. To that extent there has been a shift
from the earlier thought that even a technical infringement of thePage 6
rules is sufficient to vitiate the action. Judicial pronouncements on the
subject are a legion. We may refer to only some of the decisions on
the subject which should in our opinion suffice.
9. In Suresh Koshy George v. University of Kerala, AIR
1969 SC 198, this Court while examining the content and the sweep
of the rules approved the view expressed in Russel v. Duke of
Norfolk, [1949] 1 All ER 109 in the following words:
“7. … … The rules of natural justice are not embodied rules.
The question whether the requirements of natural justice have
been met by the procedure adopted in a given case must
depend to a great extent on the facts and circumstances of
the case in point, the constitution of the Tribunal and the rules
under which it functions.
8. In Russel v. Duke of Norfolk, [1949] 1 All ER 109 at p.118,
Tucker, L.J., observed:
“There are, in my view, no words which are of universal
application to every kind of inquiry and every kind of domestic
tribunal. The requirements of natural justice must depend on
the circumstances of the case, the nature of the inquiry, the
rules under which the Tribunal is acting, the subject matter
that is being dealt with, and so forth. Accordingly, I do not
derive much assistance from the definitions of natural justice
which have been from time to time used, but, whatever
standard is adopted, one essential is that the person
concerned should have a reasonable opportunity of presenting
his case.”
10. In Keshav Mills Co Ltd. v. Union of India, (1973) 1 SCC
380 this Court extracted with approval the observations of Lord Reid
in Ridge v. Baldwin, (1963) 2 W.L.R. 935 and said:
“8. … … We do not think it either feasible or even desirable to
lay down any fixed or rigorous yard-stick in this manner. The
concept of natural justice cannot be put into a straight-jacket.
It is futile, therefore, to look for definitions or standards of
natural justice from various decisions and then try to apply
them to the facts of any given case. The only essential point
that has to be kept in mind in all cases is that the personPage 7
concerned should have a reasonable opportunity of presenting
his case and that the administrative authority concerned
should act fairly, impartially and reasonably. Where
administrative officers are concerned, the duty is not so much
to act judicially as to act fairly. See, for instance, the
observations of Lord Parker in In re H.K. (an infant), (1967) 2
QB 617. It only means that such measure of natural justice
should be applied as was described by Lord Reid in Ridge v.
Baldwin case (supra) as “insusceptible of exact definition but
what a reasonable man would regard as a fair procedure in
particular circumstances”. However, even the application of
the concept of fair-play requires real flexibility. Everything will
depend on the actual facts and circumstances of a case. As
Tucker, L.J., observed in Russell v. Duke of Norfolk, [1949] 1
All ER 109:
“The requirements of natural justice must depend on the
circumstances of the case, the nature of the enquiry,
the rules under which the tribunal is acting, the subjectmatter that is being dealt with and so forth.”
11. Reference may also be made to P.D. Agrawal v. State Bank
of India, (2006) 8 SCC 776, where this Court approved the
observations made by Mukharji, J. in Charan Lal Sahu v. Union of
India, (Bhopal Gas Disaster) (1990) 1 SCC 613, in the following
words:
“30. The principles of natural justice cannot be put in a
straitjacket formula. It must be seen in circumstantial
flexibility. It has separate facets. It has in recent time also
undergone a sea change.
31. In Ajit Kumar Nag v. G.M. (PJ), Indian Oil Corprn.
Ltd. (2005) 7 SCC 764, a three-Judge Bench of this Court
opined: (SCC pp.785-86, para 44)
“44. We are aware of the normal rule that a person must have
a fair trial and a fair appeal and he cannot be asked to be
satisfied with an unfair trial and a fair appeal. We are also
conscious of the general principle that pre-decisional hearing
is better and should always be preferred to post-decisional
hearing. We are further aware that it has been stated that
apart from laws of men, laws of God also observe the rule of
audi alterem partem. It has been stated that the first hearing
in human history was given in the Garden of Eden. God did
not pass sentence upon Adam and Eve before giving an
opportunity to show cause as to why they had eaten the
forbidden fruit. (See R. v. University of Cambridge [1723] 1
Str 557) But we are also aware that the principles of naturalPage 8
justice are not rigid or immutable and hence they cannot be
imprisoned in a straitjacket. They must yield to and change
with exigencies of situations. They must be confined within
their limits and cannot be allowed to run wild. It has been
stated: “ ‘To do a great right’ after all, it is permissible
sometimes ‘to do a little wrong’.” [Per Mukharji, C.J. in Charan
Lal Sahu v. Union of India, (Bhopal Gas Disaster) (1990) 1
SCC 613, at 705, para 124.] While interpreting legal
provisions, a court of law cannot be unmindful of the hard
realities of life. In our opinion, the approach of the court in
dealing with such cases should be pragmatic rather than
pedantic, realistic rather than doctrinaire, functional rather
than formal and practical rather than ‘precedential’.”
xxx xxx xxx
xxx xxx xxx
39. Decision of this Court in S.L. Jagmohan, (1980) 4 SCC
379, whereupon Mr Rao placed strong reliance to contend that
non-observance of principle of natural justice itself causes
prejudice or the same should not be read “as it causes
difficulty of prejudice”, cannot be said to be applicable in the
instant case. The principles of natural justice as noticed
hereinbefore, have undergone a sea change. In view of the
decisions of this Court in State Bank of Patiala v. S.K. Sharma,
(1996) 3 SCC 364 and Rajendra Singh v. State of M.P.,
(1996) 5 SCC 460 the principle of law is that some real
prejudice must have been caused to the complainant. The
Court has shifted from its earlier concept that even a small
violation shall result in the order being rendered a nullity. To
the principle/doctrine of audi alteram partem, a clear
distinction has been laid down between the cases where there
was no hearing at all and the cases where there was mere
technical infringement of the principle. The Court applies the
principles of natural justice having regard to the fact situation
obtaining in each case. It is not applied in a vacuum without
reference to the relevant facts and circumstances of the case.
It is no unruly horse. It cannot be put in a straitjacket
formula. (See Viveka Nand Sethi v. Chairman, J&K Bank Ltd.
(2005) 5 SCC 337 and State of U.P. v. Neeraj Awasthi, (2006)
1 SCC 667. See also Mohd. Sartaj v. State of U.P., (2006) 2
SCC 315)
(emphasis supplied)
12. In Maharashtra State Board of Secondary and Higher
Education v. K.S. Gandhi & Ors., (1991) 2 SCC 716, this Court
while reiterating the legal position observed:
“22. … … The omnipresence and the omniscience (sic) of thePage 9
principle of natural justice acts as deterrence to arrive at
arbitrary decision in flagrant infraction of fair play. But the
applicability of the principles of natural justice is not a rule of
thumb or a strait-jacket formula as an abstract proposition of
law. It depends on the facts of the case, nature of the inquiry
and the effect of the order/decision on the rights of the person
and attendant circumstances.”
13. In Maharashtra State Board of Secondary and Higher
Secondary Education & Anr. v. Paritosh Bhupeshkumar Sheth
& Ors. (1984) 4 SCC 27, this Court reiterated the the observations
made by Matthew, J. in Union of India v. Mohan Lal Kapoor,
(1973) 2 SCC 836 that it was not expedient to extend the horizons
of natural justice involved in the audi alteram partem rule to the
twilight zone of mere expectations, however great they might be.
14. We may finally refer to the decision of this Court in Aligarh
Muslim University v. Mansoor Ali Khan, (2000) 7 SCC 529,
where this Court with approval quoted the following observations of
Sir Willam Wade (Administrative Law, 9
th
Edn. pp.468-471)
“… … it is not possible to lay down rigid rules as to when the
principles of natural justice are to apply, nor as to their scope
and extent… There must also have been some real prejudice
to the complainant; there is no such thing as a merely
technical infringement of natural justice. The requirements of
natural justice must depend on the facts and circumstances of
the case, the nature of the inquiry, the rules under which the
tribunal is acting, the subject-matter to be dealt with and so
forth.”
15. Coming to the case at hand we find that the termination of the
contract between the parties was preceded by a show-cause notice
issued to the appellant and a hearing provided to it by the competentPage 10
authority. The show-cause notice issued to the appellant on 24
th
November, 2006 enclosed with it all relevant documents including the
complaints received against the appellant from various quarters and a
copy of the report submitted by the agency engaged for verifying the
allegations against the appellant. The appellant had unsuccessfully
challenged the show-cause notice in Writ Petition No.6338 of 2006,
before the High Court. The High Court had while refusing to interfere
in the matter directed the appellant to submit a reply to the notice.
The appellant had accordingly appeared before the authority on 12
th
January, 2007, submitted its written statement and was heard in
support of its case that it had not committed any default. In the reply
or at the hearing, the appellant had not alleged any mala fide, bias or
prejudice against the officers dealing with the matter or the agency
employed by them for collecting and verifying facts. Principles of
natural justice thus stood substantially complied with. The contention
that the appellant should have been given an opportunity to crossexamine the persons whose statements had been recorded by the
agency in the course of its inquiry and verification was rightly
rejected by the High Court keeping in view the nature of the inquiry
which was primarily in the realm of contract, aimed at finding out
whether the appellant had committed any violation of the contractual
stipulations between the parties. Issue of a show-cause notice andPage 11
disclosure of material on the basis of which action was proposed to be
taken against the appellant was in compliance with the requirement
of fairness to the appellant who was likely to be affected by the
proposed termination. Absence of any allegation of mala fides
against those taking action as also the failure of the appellant to
disclose any prejudice, all indicated that the procedure was fair and in
substantial, if not strict, compliance with the requirements of Audi
Alteram Partem. The first limb of the challenge mounted by the
appellant, therefore, fails and is hereby rejected.
16. Coming then to the question whether the respondentAuthority had material enough to justify termination of the contract.
The High Court has referred in detail to the report submitted by the
agency deployed for collection of evidence and verification of the
allegations and come to the conclusion that the respondent was
perfectly justified in adopting the method and the procedure adopted
by it in the instant case for collection of information and evidence
regarding the alleged malpractices being committed by the appellant.
The Single Judge of the High Court has while dealing with this aspect
observed:
“There is no allegations of mala fide, personal prejudice or
bias against any of the members of agency which conducted
the discreet inquiry. In the facts and circumstances of the
case I am of the considered view that the method adopted by
the National Highway Authority to detect the illegalities being
committed by the petitioner is a fair and reasonable method
and it has not caused any prejudice or bias to the petitioner.Page 12
There is no material available on record on the basis of which
the report submitted by the agency as contained in Annexure
R/7 can be discarded by this Court, this report cannot be
rejected merely on the ground that it is collected behind the
back of the petitioner. The nature of irregularity committed
by the petitioner can be detected only if a discreet enquiry in
the manner as done by the respondents have acted in a
manner which is violative of the principle of natural justice.
The report submitted was placed before the petitioner he was
given opportunity of submitting his defence and explanation
both in writing and personally. Records indicated that
petitioner was unable to produce any cogent material to show
that this report is unsustainable and cannot be relied upon.”
17. In the appeal preferred against the above order, the appellant
had made a grievance only in regard to two aspects covered by
question nos. (III) and (V) , formulated by the Single Judge in the
following words:
(III) Whether the action for termination of the contract is
done by the competent authority and whether cancellation of
the contract is based on proof of breach committed by the
petitioner?
(V) Whether the provision of Section 74 of the Contract Act
applies in the present case and forfeiture of the performance
security and revocation of bank guarantee is arbitrary and
unfair warranting interference by this Court?”

18. While dealing with question No.III above, the Division Bench
held:
“In respect of issue No. III, the learned Writ Court while
relying upon various facts brought on record gave a
categorical finding in paragraph 21 that the modus operandi
adopted by the petitioner of charging higher rate from road
was a clear breach of contract and under clause 18(a) of the
Contract Agreement, the same was determined, and also
entitled the national Highway Authority of India to impose and
realize the penalty for such breach as stipulated therein. In
our considered opinion the Writ Court did not faulter in
recording the aforesaid finding.”
19. There is, in our opinion, no error of law, nor is there any
perversity in the appreciation of the material available before thePage 13
respondents. The reports submitted by the agency employed by the
respondent-Authority was damning for the appellant and clearly
showed that the appellant was indulging in malpractices like charging
excess fee from the owners/drivers of the vehicles using the stretch
of road covered by the contract. Nothing in particular has been
pointed out to us to persuade us to take a contrary view. If the report
submitted by the agency against whom the appellant has no
allegation of malice or other extraneous considerations to make are
accepted, we see no reason why the same could not furnish a safe
basis for the respondent to take action especially when the appellant
was abusing its position as a contractor, putting the public at large to
unnecessary harassment and exaction of money not legally
recoverable from them. The material collected could and was rightly
made a basis for the termination of contract by the competent
authority.
20. The upshot of the findings recorded by the High Court which
we have affirmed in the foregoing paragraphs is that the appellant
was not entitled to claim any relief in exercise of its extra ordinary
writ jurisdiction of the High Court. The High Court could have
relegated the appellant to seek redress in an appropriate civil action
before a competent civil Court, whether for damages or recovery of
the amount forfeited by the respondent. The High Court has notPage 14
done so. It has given partial relief to the appellant to the extent of
holding that the invocation of the bank guarantee was not justified in
the light of the forfeiture of performance security and the amount of
penalty. In any event we see no room for interfering with the order
passed by the High Court in exercise of our jurisdiction under Article
136 of the Constitution of India which too is both extraordinary and
discretionary in nature. We may in this connection refer to the
following passage from Halsbury’s Laws of England Fourth
Edition Vol.-16 pages 874-876, which sums up the legal position in
England as to the right of a party who has not come to the Court with
perfect propriety of conduct and with clean hands, to claim an
equitable relief.
1305. He who comes into equity must come with clean hands.
A court of equity refuses relief to a plaintiff whose conduct in
regard to the subject matter of the litigation has been
improper. This was formerly expressed by the maxim “he who
has committed iniquity shall not have equity”, and relief was
refused where a transaction was based on the plaintiff’s fraud
or misrepresentation, or where the plaintiff sought to enforce a
security improperly obtained, or where he claimed a remedy
for a breach of trust which he had himself procured and
whereby he had obtained money. Later it was said that the
plaintiff in equity must come with perfect propriety of conduct,
or with clean hands. In application of the principle a person will
not be allowed to assert his title to property which he has dealt
with so as to defeat his creditors or evade tax, for he may not
maintain an action by setting up his own fraudulent design.
The maxim does not, however, mean that equity strikes at
depravity in a general way; the cleanliness required is to be
judged in relation to the relief sought, and the conduct
complained of must have an immediate and necessary relation
to the equity sued for; it must be depravity in a legal as well
as in a moral sense. Thus, fraud on the part of a minor
deprives him of his right to equitable relief notwithstanding his
disability. Where the transaction is itself unlawful it is notPage 15
necessary to have recourse to this principle. In equity, just as
at law, no suit lies in general in respect of an illegal
transaction, but this is on the ground of its illegality, not by
reason of the plaintiff’s demerits.”
21. Judged in the light of the above, the appellant had breached
the contractual stipulations, harassed innocent citizens to cough up
more than what they were in law required to pay and thus
undeservedly enriched itself before it turned to the Court to claim
relief in the extraordinary writ jurisdiction of the High Court on
equitable considerations. Such an attempt could and ought to have
been frustrated by the High Court, as indeed has been done, no
matter only partially.
22. That brings us to the only other ground of challenge relating
to invocation of the Bank Guarantee by the National Highway
Authority of India which according to the appellant was arbitrary and
unfair in the facts and circumstances of the case. The High Court has
taken the view that apart from a penalty of Rs.2,41,097/-, National
Highway Authority had already recovered a sum of Rs.2,20,00,125/-
out of the bank drafts furnished by the appellant towards
performance security. The total amount, thus, received by the
authority was more than the amount payable to it under the contract
if the same had been performed diligently till the end of the contractPage 16
period. Invocation of the bank guarantee for recovery of any further
amount was in that view held to be unjustified by the High Court.
23. There is no appeal by the Authority against that part of the
judgment, although it was argued on behalf of the Authority that in
terms of clause 18(b) of the contract, the Authority had the right to
estimate the excess of collection by the appellant-contractor and
recover the same from it. Clause 18 may be extracted in extenso at
this stage:
“18. Penalty for charging excess fee :
(a) In case, it is observed and/or established to the
satisfaction of the Authority that the Contractor has
charged fee in excess of the prescribed rate, the
Authority may terminate the contract forthwith and/or
may impose a penalty of Rs. One lakh or an amount
equivalent of one day’s fee receivable by the Authority,
which ever is higher and may provide the Contractor
another opportunity of continuing the Fee Collection.
However, in no case, the authority shall afford more
than one opportunity to the Contractor.
(b) The Authority also, reserves the right to estimate the
excess collection of fee made by the Contractor and
recover the same, which will be over and above the
penalty imposed and to be recovered from the
Contractor.
(c) The termination under this clause shall make the
Contractor liable for unconditional forfeiture of the
Performance Security.”
24. It is evident from a simple reading of the above that the
Authority was competent to terminate the contract if the appellant
was found charging in excess of the prescribed rate of fee. Apart fromPage 17
termination of the contract any violation in the nature of excess fees
being charged could result in imposition of a penalty in terms of
clause 18(a) (supra). What is significant is that in terms of clause 18
(b) besides termination of the contract and levy of penalty the
Authority was also entitled to estimate the excess collection made by
the appellant and recover the same from it. There is nothing on
record before us whether any such estimation was made by the
Authority and if so the basis on which that was done. The failure of
the Authority to estimate accurately could jeopardise its claim for
recovery by a simple invocation of the bank guarantee. It may have
been a different matter if the Authority had estimated the excess
amount accurately and sought to recover the same by invocation of
the bank guarantee but without a proper estimation of the excess
received by the appellant, it was not open to the respondent to
invoke the bank guarantee and recover the entire amount of
Rs.2,20,00,125/- covered by the same. The High Court was, in that
view, correct in holding that invocation of bank guarantee was not
justified having regard to the fact that the Authority had already
recovered the penalty levied by it and also forfeited the performance
security amount of Rs.2,20,00,125/- in the form of bank drafts
furnished by the appellant.
Page 18
25. Insofar as the recovery of the performance security of
Rs.2,20,00,125/- from out of the bank drafts furnished by the
appellant is concerned, we have no difficulty in holding that such a
forfeiture was available to the respondent-Authority under the terms
of the contract and the provisions of Section 74 of the Contract Act
did not forbid the same. The scope of Section 74 has been the subject
matter of several pronouncements of this Court including the
Constitution Bench decisions in Fateh Chand v. Balkishan Das
AIR 1963 SC 1405, Union of India v. Ramam Iron Foundry
(1974) 2 SCC 231 and SAIL v. Gupta Brother Steel Tubes
(2009) 10 SCC 63. The common thread that runs through all these
pronouncements is that an aggrieved party is entitled to receive
compensation from the party who has broken the contract whether or
not actual damage or loss is proved to have been caused by the
breach and that the Court has, subject to the outer limit of the
penalty stipulated, jurisdiction to award such compensation as it
deems reasonable having regard to the circumstances of the case.
This would essentially be a mixed question of law and fact that a Writ
Court could not possibly decide. The appellant could and indeed
ought to have sought its remedies in a proper civil action if it
questioned the reasonableness of the amount recoverable by the
appellant in terms of the contractual stipulations. Page 19
26. In the result this appeal fails and is dismissed but in the facts
and circumstances, without any order as to costs.
……… ……………….…..…J.
(T.S. Thakur)
……………………………..…J.
(Gyan Sudha Misra)
New Delhi
February 21, 2013Page 20
ITEM NO.1B COURT NO.9 SECTION IVA
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

C.A. No………./2013 @
Petition(s) for Special Leave to Appeal (Civil) No(s).2490/2008
(From the judgement and order dated 08/08/2007 in WA No.491/2007 of
The HIGH COURT OF M.P AT JABALPUR)
M/S. A.S. MOTORS PVT. LTD. Petitioner(s)
VERSUS
U.O.I. & ORS. Respondent(s)
Date: 21/02/2013 This Petition was called on for JUDGMENT today.
For Petitioner(s) Mr. Niraj Sharma,Adv.
For Respondent(s) Mr. Praveen Jain,Adv.
Mr. T.S. Sidhu,Adv.
Ms. Pallavi Mohan,Adv.
Mr. Ganesh Kamath,Adv. For
M/S. M.V. Kini & Associates
The Court made the following
J U D G M E N T
Hon’ble Mr. Justice T.S. Thakur pronounced Judgment of the
Bench comprising His Lordship and Hon’ble Mrs. Justice Gyan
Sudha Misra.
Leave granted.
The appeal is dismissed in terms of the signed judgment.
(N.K. Goel)
Court Master
(Veena Khera)
Court Master
(Signed “Reportable” Judgment is placed on the file)

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