M/S D.C.M.Limited & Anr. vs Mahabir Singh Rana
2009 Latest Caselaw 5272 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

                        + RFA No. 453/1996

                                        Reserved on : 20.11.2009
                                        Pronounced on: 17.12.2009

IN THE MATTER OF :

M/S D.C.M.LIMITED & ANR.                       ..... Appellants
                   Through: Mr.Harvinder Singh and
                            Ms.Sapna, Advocates


                   versus

MAHABIR SINGH RANA                               ..... Respondent
                 Through: Nemo


CORAM

* HON'BLE MS.JUSTICE HIMA KOHLI

     1. Whether Reporters of Local papers may
        be allowed to see the Judgment?          Yes.

     2. To be referred to the Reporter or not?   Yes.

     3. Whether the judgment should be
        reported in the Digest?                  Yes.


HIMA KOHLI, J.

1. The present appeal is filed by the appellants against the

judgment and decree dated 9.9.1996 passed by the learned Additional

District Judge, decreeing the suit for declaration, mandatory injunction

and recovery of damages/compensation of Rs.99,500/- filed by the

respondent/employee against the appellants/management.

2. The facts of the case are largely undisputed. The

respondent was working in the mill of the appellants/management

since 17.7.1952. He initially joined as a Weaving Apprentice and was

promoted from time to time. At the time relevant for the purposes of

present appeal, the respondent/employee was working as an Assistant

Weaving Master with the appellants/management. Though there is no

dispute about the fact that the age of superannuation of the

respondent/employee was 58 years, as per him, he would have

attained the age of 58 years on 15.7.1930, whereas as per the

appellants/management, the respondent/employee would have

attained the age of 58 years on 1.12.1928. It is undisputed that the

last salary drawn by the respondent/employee was Rs.1,750/-, besides

conveyance and other benefits.

3. As per the averments made in the plaint by the

respondent/employee (plaintiff in the trial court), the cause of action

for instituting the aforesaid suit arose on 27.9.1984, when the

appellants/management terminated his services. The aforesaid action

of the appellants/management was stated to be illegal and arbitrary on

the ground that it was in breach of the terms of the contract and the

termination order was issued without giving three months‟ notice to

the respondent/employee or paying him the salary in lieu of notice, in

advance. As the appellants/management refused to pay to the

respondent/employee his dues, as demanded by him in his letter dated

3.10.1984 reiterated in the legal notice dated 31.12.1984, the

respondent/employee instituted the aforesaid suit in the trial Court on

22.03.1985.

4. Summons were issued in the suit on 26.03.1985.

Thereafter, the appellants/management entered appearance and

contested the suit. After the pleadings were completed, the following

issues were framed:

"1.Whether the suit is maintainable against defendant No.1?

2.Whether the plaint lacks material particulars and is liable to be rejected? OPD.

3.Whether the suit is properly valued for purposes of court-fee and jurisdiction? OPP

4.Whether the suit for declaration is not maintainable as alleged in the W/S?

5.Whether the suit for recovery of damages beyond three months is maintainable? OPP

6.Whether the terms and conditions of the compromise have been violated? OPP

7.Whether the plaintiff is entitled to any damages? If so, to what extent?

8. Relief."

5. Both the parties adduced oral and documentary evidence,

whereafter, arguments were heard by the trial court and the suit of

the respondent/employee was ultimately decreed on 09.09.1996, for a

sum of Rs.99,500/- with interest payable @ 6% p.a. from the date of

the decree, till realization alongwith costs on the decretal amount and

a mandatory injunction to the appellants/management to pay the

decretal amount within a period of three months from the date of the

decree.

6. Aggrieved by the aforesaid judgment and decree dated

9.9.1996, the appellants/management preferred the present appeal.

The appeal was admitted on 28.1.1997. Despite the fact that

respondent/employee was initially represented in the present appeal,

after the order of admission, none has appeared on his behalf.

7. It is also relevant to note that though the

appellants/management had prayed for an interim order seeking stay

of the execution of the impugned decree, vide order dated 1.4.1997,

the Division Bench directed that the decretal amount, if deposited,

would be paid to the respondent/employee on furnishing security for

restitution to the satisfaction of the trial court. Counsel for the

appellants/management submitted that the appellants had

subsequently deposited a sum of Rs.1,08,893/- in the Executing Court

on 24.10.1993 and upon offering adequate security, the amount was

released in favour of the respondent/employee on 7.4.1998.

8. Mr. Harvinder Singh, learned counsel for the appellants/

management submitted that the appellants are aggrieved by the

findings returned by the trial court, in respect of issues No.5 and 7.

He stated that the trial court failed to appreciate the fact that no effort

was made by the respondent/employee for seeking gainful

employment elsewhere, as per the requirement of the Explanation to

Section 73 of the Indian Contract Act, 1872 (hereinafter referred to as

„the Act‟). In support of the aforesaid argument, he relied on the

following judgments:

(i) Workmen of the Bangalore Woollen, Cotton and Silk Mills Co. Ltd. vs Its management 1962 1 LLJ 213

(ii) M.Nanjappa Vs. M.P.Muthuswamy AIR 1975 Karnataka 146

(iii) Smt.J.Twari Vs. Jawala Devi Vidya Mandir and Ors. 1979 (1) SLR 614

(iv) S.M.Murray Vs. M/s Fenner (India) Ltd. 1986 (11) DRJ

(v) Kendriya Vidyalaya Sangathan and Another Vs. S.C.Sharma (2005) 2 SCC 363

9. Apart from the above argument, it was submitted on behalf

of the appellants/management that on account of failure on his part to

seek mitigation of damages, the respondent/employee could have at

best claimed three months‟ salary as damages from the

appellants/management. It was lastly urged that as the

respondent/employee had himself stated in his deposition that he had

become physically unfit to do any work, the sight of his one eye having

been completely lost, he could not claim the wages for the remaining

period of employment beyond three months‟ salary, which was

adequate for compensating him.

10. I have heard the counsel for the appellants/management

and have carefully perused the trial court record and the judgments

relied upon by him.

11. Heavy reliance was placed by the counsel for the appellant

on the Explanation to Section 73 of the Act, which lays down what may

be called the measure of damages in case of breach of contract. The

relevant extract of the section is reproduced hereinbelow:

"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.

xxx

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."

12. The Explanation to the aforesaid Section stipulates that 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." The

aforesaid Explanation is commonly referred to as the rule of mitigation

of damages. The contention of the counsel for the

appellants/management is that a duty was cast on the

respondent/employee to mitigate the damages and the onus of

proving that he made efforts to obtain alternative employment was on

him as the plaintiff. He further submitted that the

respondent/employee had not made any averments in the plaint that

he really made any effort to mitigate the damages and hence he failed

to discharge the onus placed upon him. Having failed to discharge the

said onus, the same could not have shifted to the

appellants/management and in such circumstances, the trial court

ought not to have directed payment of full wages under the contract to

the respondent/employee.

13. This Court is unable to persuade itself to agree with the

submission of the counsel for the appellants/management that the

respondent/employee was duty bound to mitigate the damages. In

this regard, the judgment of a Single Judge of the Bombay High Court

in the case of K.G.Hiranandani vs. Bharat Barrel and Drum

Mfg.Co.Pvt.Ltd. reported as AIR 1969 Bombay 373, followed by a

Single Judge of this Court in the case of S.M.Murray Vs. M/s Fenner

(India) Ltd. 1986 (11) DRJ 12 is relevant. After discussing the

Explanation to Section 73 of the Act, it was noted in the aforesaid

judgment that the Explanation was not enacted as a sub-section or a

separate paragraph to Section 73, but only appended as an

"Explanation to the substantive rule in the first part of Section 73".

Hence, no duty, which is actionable, can be cast on a party to claim

entitlement to damages by first establishing that he had made efforts

to obtain alternative employment to mitigate the damages. Reference

to para 4 for the purpose of construction of Explanation to Section 73

is necessary and is reproduced hereinbelow:

"4.Before I proceed to deal with the rival contentions of the learned counsel on either side, it would be convenient refer to material portions of Section 73 of the Contract Act which is the section which lays down what may be called the measure of damages in case of breach of contract. The substantive portion of that section lays down the basic rule that a party who suffers by the breach is entitled to receive from the party in breach "compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach". The Explanation to the section lays down that in estimating the loss or damage arising from the breach of a contract, "the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account". Though what the Explanation enacts is popularly called the "rule" in regard to mitigation of damages, and has been so referred to even in some decided cases and standard works, and though it is loosely called a "duty" to mitigate, the position really is, as out legislature has rightly stated, merely this, that what the Explanation enacts is not in the nature of an independent rule or duty but is 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. That is precisely the reason why it is enacted, not as a sub-section or a separate paragraph, as an "Explanation" to the substantive rule in the first part of Section 73. Support is to be found for this view which I am taking in a passage in Mayne on damages (12th ed.) para 149, point (2), in which it is stated that the expression "duty to mitigate" is the common and convenient way of stating the position, but that expression is a somewhat loose one, since there is no duty which is actionable or which is owed to any one by the plaintiff. It is further pointed out in the said message that the plaintiff cannot owe a duty to himself, and that the position is similar to that of a plaintiff whose damages are reduced because of his contributory negligence. If means existed of remedying the inconvenience caused by the breach of contract which have not been availed of by the plaintiff, the damages claimed by him cannot be said to arise "naturally" from the breach within the main part of Section 73 of the Contract Act or, to put it in another way, the means, if any, of remedying the inconvenience caused by the breach of contract are factors that go to reduce the damages that might otherwise have been said to have arisen "naturally" from the breach, that, in my opinion, is the proper construction that should be placed upon, what is popularly called the rule in regard to mitigation of damages." (emphasis added)

14. Coming to the case in hand, it is not denied by the counsel

for the appellants/management that the duration of the contract with

the respondent/employee was for a definite period and binding upon

both the parties to the master and servant relationship, till the end of

that period and that the same could be terminated only for a cause or

justification such as misconduct or inefficiency (Ref.: India

International Centre vs. S.N. Pandit, reported as ILR (1976) I Delhi

60). The contract of employment of the respondent/employee in the

present case was to expire on his attaining the age of 58 years. As

per the respondent/employee, at the time of service of notice of

termination dated 27.9.1984, he had 46 months of employment left

whereas, as per the appellants/management, the respondent/

employee had 27 months of employment left before being

superannuated.

15. A perusal of the pleadings and the evidence, which has

come on the record shows that though the appellants/management

mentioned in their written statement that no effort had been made by

the respondent/employee to mitigate the damages by seeking suitable

employment elsewhere, no positive evidence was led by the

appellants/management to prove that the respondent/employee had

means at hand for mitigating the damages and despite the same, he

had not availed himself of them. Having failed to discharge the said

onus by showing that the respondent/employee ought to have

reasonably taken certain mitigating steps, the appellants/management

cannot claim that normal measure of damages ought to have been cut

down while granting relief to the respondent/employee. This Court

therefore is not inclined to follow the judgment of a Single Judge of

Karnataka High Court the case of M. Najappa (supra) that Explanation

to Section 73 of the Act requires that for an order to grant relief by

way of damages in an action of wrongful dismissal, the

respondent/employee ought to have proved that other jobs were not

available. The Court would prefer to be guided by the judgment of the

Bombay High Court in the case of K.G.Hiranandani (supra) followed

by a Single Judge of this Court in the case of S.M.Murray (supra). The

case of Kendriya Vidyalaya Sangathan (supra) also has no application

to the facts of the present case. In the aforesaid case, while

examining the orders of the CAT, affirmed by the Punjab and Haryana

High Court, directing the respondent/employee therein to be reinstated

in service with all consequential benefits from the date of dismissal

from service, the Supreme Court made an observation as to the claim

of back wages in the case of reinstatement of an employee and held

that it was for him to show that he was not gainfully employed for the

relevant period. In the present case, the respondent/employee had

filed a civil suit for recovery of damages/compensation after his

services were terminated. The yardstick applied for discharging the

onus in such a case cannot be equated with the above case and has to

be tested on a different anvil.

16. Even the second limb of the argument raised on behalf of

the appellants/management that at best the respondent/employee

could have claimed and be held entitled to grant of three months‟

salary in lieu of notice pay as damages, is devoid of merits. It is

undisputed that the appellants/management did not tender even the

three months‟ pay to the respondent/employee while issuing the notice

of termination. Rather, the correspondence placed on the record

shows that the appellants/management chose not to reply to the

demand notices issued by the respondent/employee to them. Counsel

for the appellants/management submitted that notice pay could very

well have been collected by the respondent/employee by approaching

the office of the appellants/management. The said plea is taken note

of only to be rejected. It was for the appellants/management to

ensure that the notice pay for three months was enclosed with the

termination notice and/or forwarded to the respondent. It was not for

the respondent/employee to run from pillar to post for collecting the

same after receiving the termination notice. Therefore, the termination

notice was itself improper.

17. The records reflect that the appellants/management

terminated the services of the respondent/employee on 27.9.1984.

Thereafter, the respondent/employee issued a letter dated 30.10.1984

to the appellants/management informing them that he had

approached the Accounts Manager and other authorities to receive the

notice pay for three months on two occasions, but was denied

payment. The appellants/management however did not respond to

the said letter. This was followed by a legal notice dated 31.12.1984

issued on behalf of the respondent/employee to the

appellants/management which was also not replied to by the latter.

Thus, the party who is in the wrong and in breach of the terms of the

contract, cannot claim an additional right to impose an onerous duty

on the aggrieved party for claiming damages.

18. Coming to the next submission of the counsel for the

appellants/management that as the respondent/employee himself

stated in his testimony that he became physically unfit to do any work,

he could not claim wages beyond a period of three months, a perusal

of the testimony of the respondent/PW-1 shows that in the course of

his cross-examination, he had stated on 3.4.1987 that he did not try

to find any alternative job because his eye sight was weak and he had

lost his one eye. It is not the case of the appellants/management that

the services of the respondent/employee were terminated on account

of any physical disability or ill health. A perusal of the termination

letter shows that the same was completely silent on the reasons of

termination. Hence reliance placed by the counsel for the

appellants/management on the judgment of the Supreme Court in the

case of Workmen of Bangalore(supra) is completely misplaced. In the

aforesaid case, while dealing with the definition of „retrenchment‟

under the provision of Section 2(oo) of the Industrial Disputes Act,

1947, the Supreme Court observed that when a workman is

discharged on the ground that he is medically unfit, it cannot be said

that he had been discharged on the ground that his services were no

longer required and his physical condition prevented him from

rendering the service for which he had been employed. It was in the

aforesaid context that the Supreme Court noted further that service

cannot be said to be terminated unless it was capable of being

continued, i.e., the contract requires certain physical fitness in a

workman and the absence thereof, means that he would not be offered

re-employment.

19. As noted above, in the present case, physical fitness was

not the ground for terminating the services of the

respondent/employee. The statement made on behalf of the

respondent/employee in his deposition, in answer to a query posed on

behalf of the appellants/management in the cross-examination, to the

effect that he did not try to find out any alternative employment due

to his weak eye sight and on account of his having lost one eye, has to

be seen in the context of the relevant time when such a statement was

made. The said statement was made by the respondent/employee on

03.04.1987. By that time, a period of two and a half years had

already lapsed since the date of termination of his services. As per the

appellants/management, had the respondent/employee continued in

service, he would have attained the age of retirement of 58 years on

15.07.1988, which was only about 14 months down the line from the

date of recording the testimony of the respondent/employee in the suit

proceedings. Even if the submission made by the

appellants/management that when the respondent/ employee‟s

services were terminated, only 27 months of his service remained, is

accepted, it is clear that his termination was at the very fag end of his

career.

20. As noted in the case of S.M.Murray(supra), one has to see

the period of employment, the nature of job, availability of suitable job

etc. The appellants/management had not set out any case in the trial

court that though suitable employment was available with the

respondent/employee, he did not make any effort to get the same.

Trial court record reveals that no evidence whatsoever was led by the

appellants/management to show that any suitable job was available to

the respondent/employee. Apart from a bald averment made in the

written statement to the effect that the respondent/employee had

failed to seek mitigation of damages by seeking alternative

employment, the appellants/management remained completely silent

on this aspect of the matter. It is no secret that on the eve of the

attaining the age of retirement, it is extremely difficult for an

employee to secure alternative employment in the market and that

jobs at that age become hard to come by. In view of the aforesaid

facts and circumstances, this Court is not inclined to accept the

submissions made by the counsel for the appellants for seeking

reversal of the decree. The statement made by the

respondent/employee can be considered as sufficient to conclude that

given his physical condition, he could not have secured any suitable

alternative employment. As the termination of service of the

respondent/employee was not on the ground of his physical condition,

the appellants/management cannot be permitted to gain any benefit

on the said count. The judgment of the Supreme Court in the case of

Smt.J.Twari (supra) relied upon by learned counsel for the

appellants/management is also distinguishable for the reason that in

the said case, the Supreme Court took notice of the fact that the

appellant/employee therein had made no effort to seek alternative

employment for 20 long years. In the present case, the remaining

term of employment of the respondent/employee was at best, 46

month.

21. The last submission made on behalf of the

appellants/management was that while granting relief under issues

No.7 & 8, the trial court ought to have reduced the damages assessed

as the respondent/employee could not have been held entitled to

salary for a period of 50 months along with other benefits. In this

regard, he draws the attention of this Court to Annexures A & B,

enclosed with the plaint by the respondent/employee. Annexure-A

reflects that the salary of respondent/employee was Rs.1,740/-. The

respondent/employee calculated that the sum total of the wages

payable to him from September 1984 to 30.6.1988, was Rs.86,610/-.

22. In Annexure-B to the plaint, the respondent/employee had

set out his claim for damages on account of entitlement to medical

allowance, book subsidiary, earned leave, medical leave and

conveyance allowance, which as per the respondent, totalled to

Rs.26,359/-. He however stated that he had restricted his claim to

Rs.12,890/- in the plaint.

23. As far as the damages claimed by the respondent/employee

in Annexure-B to the plaint towards medical allowance, book

subsidiary, earned leave are concerned, in the opinion of this Court,

the respondent/employee could not be held entitled to the same as the

conveyance was intended to be for the purposes of discharging his

duties under the appellants/management. Similarly, earned leave,

medical leave and medical allowance could only be claimed and

granted to the respondent/employee had he remained in service.

Same is the position with regard to book subsidiary. Hence, no

amount could be held to be payable to the respondent/employee on

the heads reflected in Annexure B, restricted by him in the plaint to a

sum of Rs.12,890/-.

24. Further, the respondent/employee is not entitled to claim

salary for a period of more than 46 months for the reason that even as

per him, he was to retire at the age of 58 years which period as per

his calculation, would have got completed on 27.07.1988. The wages

granted by the trial court for a period of additional three months, apart

from 46 months is not permissible as the same would take the

respondent/ employee beyond the age of superannuation as claimed

by him. The notice pay period of three months would have to form a

part and parcel of the entire remaining period of service and not

exclusive thereof. The compensation thus payable to the

respondent/employee for the remaining period of his service would be

for a period of 46 months and not of 50 months merely because notice

pay compensation was not tendered to him by the

appellants/management while terminating his service. Accordingly,

the wages payable to the respondent/employee are scaled down from

Rs.96,500/- to Rs.86,610/-, with interest payable @ 6% p.a., as

granted by the trial court.

25. For the aforesaid reason, the present appeal is disposed of

by holding that the impugned judgment and decree is required to be

modified to the extent that the respondent/employee is entitled to a

decree of Rs.86,610/- with interest payable @ 6% p.a. from the date

of decree till realization along with costs. The Registry is directed to

prepare a modified decree sheet on the aforesaid lines. There shall

however be no orders as to costs in the present appeal. The trial court

record be released forthwith.

                                                    (HIMA KOHLI)
DECEMBER 17, 2009                                     JUDGE
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