S.M. Murray vs Fenner (India) Ltd.
1986 Latest Caselaw 110 Del

JUDGMENT

D.P. Wadhwa, J.

(1) The plaintiff, an employee of defendant No. 1, filed this suit for recovery of damages amounting to Rs. 2.78.500.00 on account of breach of service contract, and he also prayed for relief of injunction against all the defendants from dispossessing him from certain premises given to him by virtue of his employment.

(2) There are four defendants. Defendant No. 1 is a limited company, and defendants Nos. 2, 3 and 4 were its Directors during the relevant time. Claim of any relief against defendants Nos. 2, 3 and 4 does not survive for consideration as facts would show. Nothing was also said by the plaintiff as to how any relief could be claimed against these defendants. The suit against defendants Nos. 2, 3 and 4 has to be dismissed. Reference to the defendant hereinafter would, therefore, mean defendant No. 1 only.

(3) The service agreement in question is dated 18-2-1981 and is between the plaintiff and the defendant (Ex. P-2). Though the plaintiff claimed that terms of his employment were governed by the agreement Ex. P-2 and the resolutions passed by the Board of Directors of the defendant and Office Orders, the defendant claimed that conditions of service of the plaintiff were governed only by agreement Ex. P-2.

(4) The service of the plaintiff was terminated by the defendant by letter dated 21-4-1984 (Ex. Dw 1/3). Now, while the defendant claims that termination was in accordance with the service agreement, the plaintiff claims otherwise and so this suit.

(5) On pleadings of the parties, the following issues were framed : 1. Whether the services of the plaintiff were validly terminated before the expiry of the period prescribed under the service contract between the parties ? O.P.D. 2. If not, to what amount of damages, if any, is the plaintiff entitled ? 3. Can the defendants, dispossess the plaintiff from the house No. D-118, Saket, and remove any of the goods even though belonging to the defendants without recourse to law ? O.P.D. 4. Relief.

(6) On the statement of counsel for the parties issue No. 3 was struck off as by an interim order made earlier I had directed that the plaintiff would not be dispossessed without due course of law.

(7) It is the admitted case that premises No. D-118, Saket, New Delhi, were let out to the defendant for the residence of the plaintiff at a monthly rent of Rs.2,000.00 per month. During the pendency of the case, the plaintiff filed an application seeking amendment of the plaint claiming a further sum of Rs. 18.334.00 as damages. This was on the ground that the plaintiff surrendered possession of these premises to the landlord on 11-8-1985 and be said that since he was to continue to be in the employment of the defendant till 16-5-1986 under the service contract, he was entitled to an allowance at the rate of Rs. 2,000.00 per month equivalent to free furnished residential accommodation. The fact that the plaintiff surrendered possession to the landlord on 11-8-1985 was contested. However, the possession was agreed to have been given to the landlord on 19-9-1985 when I appointed a local commissioner for the purpose. I had, however, permitted the plaintiff to amend his plaint to claim the amount of Rs. 18.334.00 aforementioned. If the plaintiff succeeds, he might be entitled to damages equivalent to rent of a free furnished accommodation at the rate of Rs. 2,000.00 per month from 19-9-1985 to 16-5-1986. The following two additional issues were thus framed : 1. Whether the plaintiff has surrendered the possession of the premises being No. D-118, Saket, New Delhi, to the defendants, and, if so, on which date ? 2. If the above issue is held in favor of the plaintiff, is he entitled to a further amount of Rs. 18.334.00 as claimed in para 13A of the- amended plaint ?

(8) Again, additional issue No. 1 does not survive for consideration. Counsel for the parties agreed that possession of the premises in question should be taken to have been delivered to the landlord on 19-9-1985.

(9) In support of his case, the plaintiff examined himself only as a witness while the defendant produced its Director (Personnel) Mr. T.J. Raju. Parties were also allowed to file affidavits by way of evidence.

(10) The service agreement though dated 18-2-1981 became effective from 16-2-1981. It was for a period of 5 years and would have expired on 16-2-1986. The plaintiff contcnds, howcvcr,that even though the service agreement was to expire on 16-2-1986, he was entitled to 3 months' notice on the expiry thereof and thus, according to him, he would have continued in service till 16-5-1986. I do not think that contention of the plaintiff is quite correct. If reference is made to Clause (12) of the agreement, on which clause the plaintiff relies in support of his argument, it would be clear that the question of three months' notice after the expiry of the agreement would arise only when the plaintiff continued to be in service for full five years and the agreement bad run its full course. Clause (6) visualizes the termination of the agreement before the expiry of five years' period. To me it appears that in the present case three months' notice after the end of five years is contingent on the plaintiff continuing to be in the service of the defendant for full five years and for that purpose it would also not be material if it was the defendant who committed breach of the agreement before five years' term. I would, therefore, hold that service agreement (Ex. P-2) was to expire on or about 16-2-1986.

(11) Mr. Gopalan, learned counsel for the defendant, submitted that there was no obligation for the defendant to continue employing the plaintiff for five years. He said clauses (6) and (10) and also clause (12) of the agreement empowered the- defendant to sack the plaintiff at any time before that period. He said the service agreement imposed an obligation only on the plaintiff to make hit services available to the defendant for a period of five years and that the defendant did not undertake or covenant to utilise the services of the plaintiff for five years which meant that the services could be terminated at any time after giving a reasonable notice. The counsel said that the contract was not mutual for both the parties to keep it alive for five years Mr. Gopalan strongly relied on clause (10) to say that the plaintiff was guilty of misconduct and to back this he relied on two letters of the plaintiff (Exs. D-2 and D-4) to contend that the plaintiff was not getting on well with his colleagues and that the defendant had lost confidence in him and also that there was no work in the company for which the plaintiff could be suitable. The counsel also contended that during the service of the plaintiff with the defendant, the plaintiff had been advertising in the U.S.A. for a suitable employment and that this also would amount to misconduct on his part. Reference was also made to the statement of DW-1 Raju who said that the plaintiff was ineffective and not useful to the defendant. But if reference is made to the letter of termination (Ex. DWI/3), there is no whisper of any charge of misconduct or otherwise against the plaintiff It is what is called termination simpliciter. I may at this stage set out clause (10) of the agreement : "IF the Employee shall at any time willfully neglect or refuse or from illness or any other cause become or be unable to perform any of the duties devolving upon him under this engagement the Company may suspend the salary of the Employee during such neglect refusal illness or inability as aforesaid And Further the Company in the event of such refusal or neglect of the Employee or his becoming incapacitated by illness or otherwise or his incompetence or unfitness to perform the duties required of him under this engagement may immediately terminate the engagement of the Employee without giving any notice. And the Company in the event of the Employee being guilty of drunkenness or any other misconduct may immediately terminate the engagement of the Employee without giving any notice."

(12) There is nothing on the record to show that the plaintiff willfully neglected or refused or from illness or any other cause became or was unable to perform any of the duties assigned to him. No evidence of any misconduct against the plaintiff has been proved. I would not rely on the statement of Raju (DWI) that the plaintiff was ineffective or was not useful. Raju was not concerned with the working of the plaintiff and, in fact, I would say there is nobody to support what he said. He was a Director (Personnel) of the defendant, working at Madurai. He had no occasion to work with the plaintiff. He joined the defendant after the plaintiff. No one has come from the Delhi office of the defendant to support the allegations of misconduct on the part of the plaintiff. I also cannot rely upon or even refer to the letter (Ex.D-3) of Mr. N.J. Forsyth, the Managing Director of the defendant, as to what he had laid therein without his being examined in court as a witness. Though this letter does not say much as regards the conduct of the plaintiff, there arc certain observations which are. perhaps only known to . Mr. Forsyth himself. If there is no work of the defendant for which the plaintiff could be found suitable, it is not the plaintiff who can be blamed for that. I do not find anything wrong in the plaintiff seeking a better employment while working with the defendant. Of course, his leaving the defendant before the period of five years would be subject to the provisions of the service agreement between him and the defendant. With the letter of termination, the defendant sent a cheque for Rs. 13,500.00 equivalent to the salary of the plaintiff for three months. This in itself would show that the services of the plaintiff were terminated not because of any misconduct. The arguments of Mr. Gopalan that under the service agreement the defendant could terminate the services of the plaintiff by giving a reasonable notice and also that services of the plaintiff were terminated became of misconduct are contradictory and it appears to me that the defendant is not sure of its ground.

(13) As noted above, the service agreement in question was for five years commencing from 16-2-1981 and was to continue till 16-2-1986. By terminating the services of the plaintiff before the expiry of the service agreement, the defendant has committed breach of the same and I would hold that the services of the plaintiff were not validly terminated before the expiry of the prescribed period, and issue No. 1 is decided in favor of the plaintiff.

(14) Before I arrive at the amount of damages to be awarded to theplaintiff, it will be appropriate to find out as to what were the emoluments drawn by the plaintiff. Of course, the main question that calls for decision is if the plaintiff is to be awarded damages in terms of the emolument to be drawn by him as from the date of wrongful termination of the service agreement till the agreement was to expire in its normal course. It was one of the contentions of Mr. Gopalan that whatever the defendant was incurring by way of expense for the plaintiff would not necessarily be the income of the plaintiff and would not form part of his emoluments. This was when he referred to the claim of the plaintiff towards expenses for maintenance of the car. But, from the evidence, I find that the provision of the car to the plaintiff was more by way of perquisite given to him for his personal use than for his official duty. I am of the view that the damages are to be calculated in terms of the actual emoluments of the plaintiff irrespective of the fact if some of the emoluments drawn by him were not mentioned or covered in the service agreement. Parties can always vary the terms of the service agreement regarding emoluments and the like.

(15) It is admitted case of the parties that the plaintiff was drawing a. salary of Rs. 4.500.00 per month and he was also provided with a free furnished residential accommodation at the rate of Rs. 2,000.00 per month. Then the electricity and water bills, medical, car expenses all on actual basis and fixed allowance for a driver at the rate of Rs. 350.00 per month were all borne by the defendant. The plaintiff has claimed expenses under various heads which include expenses towards entertainment but in the absence of full particulars given by the plaintiff, I think, it will be safe to rely on the statement of allowances given by the defendant. The defendant has filed a monthwise statement towards medical, car, electricity and water and driver allowance given to the plaintiff for the year 1983. Again, I think, it will be safe if average of these expenses is taken. The total expenses for the year 1983 towards medical, car, electricity and water and driver are respectively Rs. 4236.69, Rs. 51,899.91, 2868.86 and Rs. 420000. The monthly average of these figures would be Rs. 5267.12 per month. It was stated by the defendant that it had provided car and other furniture to the plaintiff which was the property of the defendant and that these were unauthorisedly sold by the plaintiff. This action of the plaintiff was strongly commented upon by Mr. Gopalan. He said that the plaintiff wrongfully retained the property of the defendant and then without any lawful authority sold the same. This action of the plaintiff appeared to me to be rather unusual but then he explained that since he was out of job and was not having any source of income he had to dispose of these items and he said that he was agreeable if the proceeds thereof are adjusted against his claim of damages. Thus, to that extent, the award of damages has to be reduced. The plaintiff did give. certain figures of sale of car and other goods of the defendant but there being no other evidence to support this I am not prepared to accept his statement as to the amounts for which all these goods were sold. The defendant, in a statement which was supported by the affidavit of Raju, gave the particulars of all these goods including the original cost and the book value as on 31-8-1983. I would accept the book value as given by the defendant. Then, there was dispute regarding two items, i.e. Godrej fridge and one voltage stabilizer as to who had purchased the same. Then again, counsel for the parties agreed that the value as shown by the defendant of these two items might be apportioned half and half between the parties. The total value of these two items, as given by the defendant, is Rs. 9549.50 and half of this, i.e. Rs. 4774.75, will be adjusted in the ultimate claim of the plaintiff. The cost of other items is Rs. 11,116.80 which is also to be similarly adjusted. The defendant has also brought on record evidence to show that the car which was being used by the plaintiff was, in fact, the property of the defendant and that the written down value of this car (Ambassador 1977-Model) for the accounting year 1983-84, in the books of the defendant, was Rs. 19.487.00 . I would accept this value as correct though the plaintiff said that he had sold the car at a lesser price. The car was registered in the name of Bmf Beltings Ltd. representative Sri S.M. Murray'. This Bmf Beltings Ltd. is stated to be the sister concern of the defendant. Thus, in all a sum of Rg. 35,378.55 (Rs. 4774.75+ Rs. 11,116.80 + Rs. 19,487.00) will have to be deducted from the claim of award of, damages to the plaintiff.

(16) As noted above, the plaintiff was provided with a residential accommodation which the defendant had taken on rent in Saket, New Delhi, at the rate of Rs. 2,000.00 per month. This residential accommodation was surrendered by the plaintiff on 19-9-1985. The plaintiff got his plaint amended to claim further damages at the rate of Rs. 2,000.00 per month from 19-9-1985 till 16-2-1986, the date on which the service agreement was to expire. This amount would come to Rs. 10,000.00 , though the plaintiff made a claim for Rs. 18.334.00 . The total emoluments of the plaintiff would be Rs. 9,767.12 (Rs. 4500.00 + Rs. 5267.12.) pm. I think, no claim for leave encashment would be admissible as the service agreement clearly stipulated that the plaintiff would be entitled to one month's leave every year and which might be accumulated for one year only. However, lam of the view that the plaintiff would be entitled to leave travel concession (LTC) allowance. He availed of Ltc for three years and he was paid Rs. 13,176.00 , Rs. 12.568.00 and Rs. 21.994.00 . The plaintiff was, therefore, entitled to claim Ltc for two more years of his service. To arrive at the figure of Ltc allowance for a year, it appears to me to be appropriate to take average of the Ltc allowance for the last three years. That way, the Ltc allowance for two years would come to Rs. 31.800.00 .

(17) I may note that an argument was also raised if the plaintiff was entitled to whole of the expenses towards car maintenance as he could also be said to be using the car for official purposes as well. Raju (DW 1) did not say of any such apportionment and I would refer to his following statement :    "HOWEVER,at the discretion of the first defendant, the first defendant does sometime provide car and housing facility to its senior executives including charges relating to reimbursement of fuel consumed. No entertainment allowance is, however, paid. In the present case, the first defendant did provide car and housing facility to the plaintiff including reimbursement of fuel consumed. The housing accommodation which was provided to the plaintiff was furnished."  

(18) Section 73 of the Contract Act 1872 deals with compensation for loss or damage caused by breach of contract. The relevant portion of the section reads as under :    "73.Compensation for loss or damage caused by breach of contract. -When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Explanation.-In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account."  

(19) In India International Centre v. S.N. Pandit, (2nd (1976) I Delhi 60), it was said that duration of an employment contract might be one of the three kinds:    (1)A contract for an indefinite period the duration of which it determined only when it is brought to an end by a notice of reasonable period. The length of notice would depend on the nature of the contract, the status of the employee and other circumstances; (2) A contract for a definite period binding both the parties to the master and servant relationship till the end of that period. This can be terminated only for a cause or justification such as misconduct or inefficiency; and (3) A contract for a period stated and yet terminable by a notice of a reasonable period.  

(20) It will be seen that the contract in question will fall in the second category.  

(21) In S.S. Shetty v. Bharat Nidhi Ltd. , the Supreme Court held that if the contract of employment was for a specific term, the servant would in that event be entitled to damages, the amount of which would be measured prima facie and subject to the rule of mitigation in the salary of which the master had deprived him and that servant would then be entitled to whole of the salary benefits etc. which he would have earned had he continued in the employment of the master for the full term of the contract, subject of course to mitigation of damages by way of seeking alternative employment. It was held that the position as it obtained in the ordinary law of master and servant was quite clear and that the master, who wrongfully dismissed his servant, was bound to pay him such damages as would compensate him for the wrong that he had sustained. The Supreme Court referred, with approval, to Chitty on Contracts, 21st Edition, Vol. (2), p. 559, para 1040, and to Collier v. Sunday Referee Publishing Co. Ltd., (1940-4 All. E.R. 234 at p. 237(A)).

(22) It was contended by Mr. Gopalan, learned counsel for the defendant, that even though if it was held that there was breach of the contract the plaintiff could not claim damages in terms of his salary and perquisites for whole of the unexpired period of his service under the contract. He said that it was the duty of the plaintiff to mitigate the damages. In support of his submission, he referred to a decision of the Travancore High Court in Thomakutty v. Thomas, (AIR 1954 Tra, Co. 104). In this case the real point for consideration before the court was whether the plaintiff bad made all diligent attempts to get an employment similar to the one he had in the defendant school. The Court observed as under : "A servant complaining of wrongful dismissal from service cannot rest content by merely putting forward a claim for recovery in a lump and in advance the entire amount of anticipated salary covering the whole period for which he expected to continue in service so as to utilise such amount for safe investment and thus to convert the very injury complained of into a blessing in disguise. The common law which recognises his right to recover damages for wrongful dismissal imposes a corresponding duty on him to do all that is possible to mitigate such damages. He is bound to act in that direction not only in his own interests but also in the interests of the opposite party against whom he has to sustain an action for damages. He has to use due diligence in endeavoring to obtain suitable employment with wages approximating that which he was getting in the service from which he was dismissed, even though he is not expected to accept a fresh engagement in a lower status. The possible chance of obtaining a suitable employment elsewhere has to be taken into account in assessing the measure of damages to be awarded to the plaintiff."

(23) At this stage, I may note the evidence which has come on record in the present case. The plaintiff, in answer to a court question as to whether he tried to get any alternative employment, said that he did not because after crossing the age of 50, it was not possible to get a suitable employment. He also said that he made no efforts to get alternative employment and also that between the period 21-1-1984 and 11-8-1985 when he was in Delhi he had been applying for employment but could not get any employment. He said that he was being offered emoluments much lower than what he was getting and also the employment offered was not having the same status which he was enjoying in the service of the defendant. In answer to a question in cross-examination, the plaintiff gave names of three companies to whom he had applied for employment. He said that though . he received letters from these firms, he told them that he could join only after 1986. The plaintiff also said that for the first time he received offer from M/s Hilton Rubber Industries Ltd. in January 1985, when that company asked the plaintiff as to what he was getting from the defendant. The plaintiff informed that company that he was getting Rs. 5,000.00 plus perks and if he was paid the same amount he would join that company. The plaintiff did not receive any offer thereafter.

(24) It, therefore, appears to me that if there was any burden or duty cast on the plaintiff not to sit idle and to try to look for an alternative employment in order to minimise the loss or damage arising from the breach of the contract he did discharge his burden or the duty. Though the plaintiff did say that he informed the companies from which he received letters that he would join them in 1986, there was no firm offer and he was not getting suitable employment. It has come on record that the plaintiff is a rubber technologist. He is B.Sc. and is holding Diploma in Polymer Technology from U.K. The plaintiff said that he was basically a tyre-man and a tyre manufacturing specialist and he developed special technology for the manufacture of V-belts and autofan belts.

(25) Mr. C. Trivikrama Rao, learned counsel for the plaintiff, referred to a decision of the Bombay High Court in K. O. Hiranandani v. Bharat Barrel and Drum Mfg. Co. Pvt. Ltd. wherein the court repelled the argument of the defendant that onus was on the plaintiff to show that he made proper attempts to obtain alternative employment and thereby mitigate damages and also that in any event the facts relating to the attempts made by the plaintiff to mitigate damages would be well within his knowledge and that, therefore, the burden of proving those facts would be on the plaintiff. With reference to the Explanation to S. 73 of the Contract Act, the court held that what the Explanation enacted was not in the nature of an independent rule or duty but was merely a factor to be taken into account in assessing the damages naturally arising from the breach, for the purpose of the main part of Section 73 and that that was precisely the reason why it was enacted not as a sub-section or a separate paragraph but as an Explanation to the substantive rule in the first part of Section 73. It was also held in that case that if one had regard to the terms of the Explanation and the way in which it was worded and viewed it in its proper perspective, it was quite clear that the words "the means which existed of remedying the inconvenience caused by the non-performance of the contract" which must be taken into account would, in the case of a contract of employment, be nothing else but the existence of other jobs of which the plaintiff could have availed himself and further that the existence or non-existence of other jobs was not a matter which could be said to be especially within the knowledge of the plaintiff.

(26) In support of his argument on the question of onus as regards mitigation of damages, Mr. C. Trivikrama Rao referred to certain standard works on the law of contract. I need not refer to these because, in my view, the provisions of the Explanation to Section 73 of the Contract Act are quite explicit and I am more inclined to follow the judgment of the Bombay High Court, referred to above, which, to my mind, lays down the correct law. However, I may note that the following books were referred to: (1) G.H.Treitel on the Law of Contract, 6th Edn, p. 736; (2) Law of Contract by Cheshire and Fifoot, 9th Edn. p. 604; (3) Anson's Law of Contract, 25th Edn., p. 570 ; (4) Halsbury's Law of England, Vol. 16, 4th Edn., para 653 ; (5) Chitty on Contracts, Vol. I, 24th Edn., p. 753, paras 1592, 1593 ; and (6) Chitty on Contracts, Vol. II. 24th Edn., p. 623, para 3636.

(27) The defendant led no evidence to show if any suitable job was available to the plaintiff. In fact, the defendant is absolutely silent on this aspect of the matter. It was only when a question was put by the court to the plaintiff if he tried for some alternative employment that the defendant asked a few questions to the plaintiff. It is no secret that jobs are hard to come by and also that there is no security of employment to the executives working in private or ganizations. Jobs are not a commodity freely available in the market. It is not the case of the defendant that any suitable employment was available which the plaintiff did not get. Mr. Gopalan said that giving to the plaintiff full salary for whole of the unexpired period was not something contemplated in Section 73 of the Contract Act, particularly the Explanation thereto. That may not be the universal rule in the case of a service contract. One has to see the period of the employment, the nature of the job, the availability of suitable job immediately or in the near future and the like, to assess the damages. As to what means existed of remedying the inconvenience caused by the breach of the contract in mitigating the loss or damage there from is a question of fact to be seen in each case. The words in the Explanation that "means which existed of remedying the inconvenience caused" would mean the existence of suitable job. The Explanation does not cast any duty on the plaintiff to look for an alternative employment. If a suitable job existed which the plaintiff did not take, the salary and perks in that job could certainly be taken into account while assessing the damages. The Explanation says no more. In any case, the party which is at fault, as the defendant in the present case is, cannot ask the plaintiff to show the existence of suitable jobs and also the attempts made by the plaintiff to get the same. Burden lies on the defendant to show that means existed to mitigate the loss and if it is so proved the plaintiff cannot recover for a loss which he could have avoided. If the plaintiff get or is able to get another job the earnings in that job would have to be taken into account in assessing the damages. The plaintiff, however, need not accept an offer of employment which is not equivalent to that held by him or is lower in status, but at the same time the plaintiff cannot be just whimsical in his approach and has to act as a man of ordinary prudence.

(28) In the present case before me, the term of the service agreement was to expire on 16-2-1986. The plaintiff stated that he did not take up any alternative employment though he had been making attempts and no suitable employment was being offered to him. In these circumstances, I am of the view that the plaintiff is entitled to damages calculated in terms of his salary and other perquisites for whole of the period of his employment from the date of wrongful termination of the service agreement, i.e. 21-4-1984, till it was to expire in its normal course, i.e. 16-2-1986. This comes to Rs. 2,56,776.64. Out of this, the amount of Rs. 35,378.55 is to be deducted, leaving the balance of Rs. 2,21,298.09. Issue No. 2 and additional Issue No. 2 are decided accordingly.

(29) I, therefore, decree with costs the suit of the plaintiff for Rs. 2,21,298.09. The plaintiff will also been titled to interest on this amount at the rate of 12ø/o per annum from the date of decree till payment. No such interest will, however, be payable if the decretal amount is paid within one month from today.