Delhi High Court

Shubh Gautam vs Nabanita Mukherjee on 2 December, 2013

Author: Rajiv Sahai Endlaw

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                      Date of decision: 2nd December, 2013.

+      RFA 560/2013 & CM No.19100/2013 (for condonation of 2 days
       delay in filing the appeal)

       SHUBH GAUTAM                                             ..... Appellant
                  Through:                Mr. H.K. Chaturvedi and Ms. Anjali
                                          Chaturvedi, Advocates.

                                   Versus

    NABANITA MUKHERJEE                                         ..... Respondent
                  Through: None.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

RAJIV SAHAI ENDLAW, J.

1. The appeal impugns the judgment and decree dated 3rd August, 2013

of the Court of the Additional District Judge (ADJ) (Central)-01, Tis Hazari

Courts Delhi of dismissal of CS No.271/2009 (Unique I.D.

No.02401C0868302006) filed by the appellant for recovery of Rs.5 lakhs

from the respondent.

2. Though this is a first appeal and is coming up before this Court today

for the first time but the counsel for the appellant/plaintiff having along with

the memorandum of appeal filed all the relevant Trial Court record and

being prima facie of the opinion formed on the basis of reading of the

judgment that the issue involved is no longer res integra, instead of dealing

with the application of the appellant/plaintiff for condonation of two days

delay in filing the appeal, the counsel for the appellant/plaintiff has been

heard finally on the appeal.

3. The appellant/plaintiff instituted the suit, from which this appeal

arises, pleading:

(i) that the sole proprietary of the appellant/plaintiff M/s. Sriram

Compounds is a star export house, engaged in the business of

manufacturing of import substitute products like lining compounds

and sealing systems for food and beverage industries;

(ii) that in view of the specialized nature of the work, all the

employees have to undergo various periods of training, hands on

experience, including that of understanding the importance of the

principles and policies for manufacturing food contact packaging

products;

(iii) that the respondent/defendant joined the employment of the

appellant/plaintiff with effect from 1st December, 2003 as a Chemist

and executed a service indemnity bond dated 1st December, 2003

binding herself to work for the appellant/plaintiff for a period of five

years with effect from 1st December, 2003 and agreeing to indemnity

the appellant/plaintiff in the sum of Rs.5 lakhs in the event of

discontinuing the service before the contracted period;

(iv) that the respondent/defendant, in violation of the service

indemnity bond, sent a letter dated 18th February, 2006 stating that

she would be unable to continue with the services as her husband was

moving to Dubai and also on medical grounds but without any

supporting documents;

(v) that the appellant/plaintiff vide letter dated 22nd February, 2006

asked the respondent/defendant to deposit the sum of Rs.5 lakhs for

prematurely leaving the services of the appellant/plaintiff and after

obtaining all training etc., as undertaken in the service indemnity

bond.

Upon non-compliance by the respondent/defendant, the suit for

recovery of Rs.5 lakhs with interest was filed.

4. Though the suit was originally filed under Order 37 of the Civil

Procedure Code (CPC), 1908 but was converted into an ordinary suit. The

respondent/defendant contested the suit, though not disputing the execution

of the service indemnity bond but denying that any training was imparted to

her and further pleading that though the bond was got executed stating that

the respondent/defendant would be deputed to Italy and Germany for

specialized training but was not so deputed and denying her liability in any

amount and further pleading the terms of the service bond to be illegal and

oppressive to public conscience. It was also pleaded that the

respondent/defendant had fallen sick owing to long and onerous duty

imposed by the appellant/plaintiff on her and that the appellant/plaintiff had

not suffered any loss from her leaving the employment.

5. The appellant/plaintiff in his replication averred that the two projects

on which the respondent/defendant was working had been left halfway

owing to the respondent/defendant prematurely leaving the employment.

6. On the pleadings aforesaid of the parties, the following issues were

framed in the suit on 11th September, 2007:

"i) Whether the service bond is on insufficient stamp paper, if so, its effect? OPP

ii) Whether the defendant was incapable of performing her duties due to her ailment, if so, its effect? OPD

iii) Whether the plaintiff is entitled to recover the suit amount? OPP

iv) Relief."

Neither of the parties examined any other witnesses besides

themselves.

7. The learned ADJ has dismissed the suit, finding/observing/holding:

(a) that the service bond was executed on stamp paper of Rs.10/-;

that the respondent/defendant has failed to show that the same was

insufficiently stamped; accordingly, the Issue No.(i) was decided in

favour of the appellant/plaintiff and against the respondent/defendant;

(b) that though the medical record proved by the

respondent/defendant showed her to be only suffering from acute

back pain and the respondent/defendant having been advised to take

rest and to avoid prolonged standing, climbing stairs and avoid jerk

and not to lift heavy weight and to not travel through public transport

but it was also her evidence that she was required to perform her

matrimonial obligations and was not able to continue working; the

same constituted sufficient evidence to show that the

respondent/defendant was medically unfit to continue with the job

with the appellant/plaintiff;

(c) that it was also uncontroverted evidence of the

respondent/defendant that after leaving employment with the

appellant/plaintiff, she did not work and joined another organization

only in August, 2006 and which also established that the

respondent/defendant was unable to work for six months;

accordingly, Issue No.(ii) was decided against the appellant/plaintiff

and in favour of the respondent/defendant;

(d) that an employer is not allowed to take away fundamental

freedom of the employee by imposing harsh conditions through

service bond;

(e) that the respondent/defendant had not left the job of the

appellant/plaintiff deliberately or intentionally or with a view to cause

wrongful loss to the appellant/plaintiff or wrongful gain to herself;

(f) that the appellant/plaintiff had failed to prove that the

respondent/defendant joined another organization at a higher salary;

(g) that the appellant/plaintiff had admitted that 80--100

employees worked in his establishment and it is difficult to believe

that the performance of the entire organisation was dependant only

upon the services of the respondent/defendant;

(h) that though certain losses must have been suffered by the

appellant/plaintiff on account of the respondent/defendant leaving the

job but it was not specifically proved as to what was the extent of

loss;

(i) that it stood established that the respondent/defendant left the

employment for circumstances beyond her control and thus cannot be

penalized therefor;

(j) that the appellant/plaintiff had failed to show by cogent and

sufficient evidence that losses to the tune of Rs.5 lakhs were suffered;

(k) that the appellant/plaintiff had not proved that any of the

machines were bought by the appellant/plaintiff only due to the

respondent/defendant joining the services of the appellant/plaintiff.

Accordingly, the suit was dismissed.

8. The counsel for the appellant/plaintiff has argued that once the

learned ADJ had accepted that certain losses must had been suffered by the

appellant/plaintiff on account of the respondent/defendant leaving the job,

the learned ADJ was bound to award some compensation at least to the

appellant/plaintiff even in the absence of any evidence having been led by

the appellant/plaintiff of having suffered any loss. Reliance in placed on

Section 74 of the Indian Contract Act, 1872.

9. I may at the outset refer to the judgment dated 24th April, 2012 of this

Court in RFA No.195/2004 titled V.S. Saini Vs. D.C.M. Ltd. holding that

on mere breach of service bond, the amount thereof would not become

payable and that no claim on the basis of service bond can be accepted

without showing any damage. It was held that Section 74 of the Contract

Act provides for imposition of reasonable damages and the liquidated

damages provided in the agreement are only the upper limit beyond which

damages cannot be granted. The same learned Judge in an earlier judgment

in M/s. Sicpa India Ltd. Vs. Shri Manas Pratim Deb

MANU/DE/6654/2011 had also held that such clauses in service bond are in

the nature of penalty and are void and the liquidated damages mentioned in

such bond are only the upper limit of the damage which are awarded once

actual damages are proved; accordingly, the judgment of the Trial Court of

dismissal of the suit for recovery of the service bond amount was upheld.

10. I have perused the affidavit by way of examination-in-chief of the

appellant/plaintiff and do not find even a whisper therein of any

consideration for the respondent/defendant to have bound herself to serve

the appellant/plaintiff for a period of five years or of any training having

been imparted by the appellant/plaintiff to the respondent/defendant or of

the appellant/plaintiff having suffered any loss whatsoever on account of the

respondent/defendant leaving the employment. Though in the absence of

any such case in the examination-in-chief, there was no need for the

respondent/defendant to cross-examine the appellant/plaintiff on the said

aspects but still cross-examination was done and nothing is found to have

emerged therein. I have also perused the cross-examination by the

appellant/plaintiff of the respondent/defendant and do not find the

appellant/plaintiff to have therein also established any such case.

11. Reference in this regard may be made to a recent judgment of the

Division Bench of this Court in Vishal Engineers and Builders Vs. Indian

Oil Corporation Ltd. MANU/DE/6829/2011 reiterating that in the absence

of any loss whatsoever, an aggrieved party cannot claim that it is still

entitled to liquidated damages, without, at least proving a semblance of loss.

12. There is another interesting aspect of the matter which emerges from

the record, though was not taken as a defence by the respondent/defendant

and has thus not been adjudicated.

13. The respondent/defendant as aforesaid, joined the employment of the

appellant/plaintiff with effect from 1st December, 2003; she was on that date

issued a letter of appointment, as per which she was to be on probation for a

period of one year and during which period her services were liable to be

terminated without assigning any reason or notice or compensation in lieu

thereof. The service bond which was sought to be enforced, is also dated 1 st

December, 2003 and whereunder the respondent/defendant bound herself to

serve the appellant/plaintiff for five years and to indemnify the

appellant/plaintiff for Rs.5 lakhs in case of discontinuing her services before

the contracted period. The appellant/plaintiff thereafter, on completion of

the probation period, issued letter dated 1st December, 2004 to the

respondent/defendant confirming her employment on the terms and

conditions contained therein. Clause 3 of the said letter was as under:

"3. TERMINATION OF SERVICES:

i. After confirmation in writing of your services, the management shall have the right to terminate this appointment by giving you three months notice. The company reserves the right to pay you in lieu of notice, a sum by way of compensation equal to three months emoluments consisting of basic salary, HRA and bonus entitlement, if any on the declaration.

ii. In case you wish to resign, you shall have to give three month notice and the management reserve its right to either accept the money in lieu or to relieve you of your duties prior to the expiry of the notice period without any compensation for the part or full notice period as the case may be.

iii. That your services will be liable for termination without any notice or pay in lieu thereof at any time during the continuance of your employment on the following grounds:

If the management finds that the particulars supplied by you either in the application form or

at the time of interview are incorrect. If the management finds that you are guilty of misconduct, wilful negligence, disobedience, misappropriation, insubordination and breach of this appointment letter and acts of the like nature i.e. misfeasance, malfeasance and nonfeasance."

There is no mention whatsoever of the service bond in the said letter

and the same is not made subject to the terms of the service bond.

14. In my opinion, the service bond being purely contractual, the contract

as contained in the service bond dated 1st December, 2003, stood modified

in the subsequent confirmation letter dated 1st December, 2004 and

whereunder the respondent/defendant was entitled to leave the employment

of the appellant/plaintiff by a three months' notice or salary in lieu thereof.

For this reason also, the judgment of the learned ADJ, cannot be found fault

with.

15. In that view of the matter, I am refraining from going into another

question which arises, as to whether such service bonds are unconscionable

void and unenforceable.