O. Sivadasan v. New India Assurance Co. Ltd.

, 2011 SCC OnLine Ker 3972 (para 79 in

MNAU/KE/0737/2011) but 91, 92 and 93 in SCC

91. One may recollect that there is absolutely no evidence of any conspiracy or any ill-
motivated effort on the part of the plaintiff and crew members to deliberately sink the vessel.
There was absolutely no evidence adduced by the Insurance Company to show that the vessel
had sunk due to the deliberate act of anybody. One may remember that the infirmities
indicated by the Insurance Company only show that the incident might not have occurred as
alleged by the plaintiff. But they did not show that it was scuttling. In fact they are unable to
give the reason for the tragedy. On the basis of the authorities already made mention of and
other materials on record, unless it is proved that the mishap is a self generated peril, the
Insurance Company may not be able to deny its liability. There is no evidence to show that if
a net gets entangled and the crew tries to release it, the vessel will not sink.

92. The fact that the crew could have done better things is not an answer. Merely pointing out
certain circumstances by itself does not lead to the conclusion that the sinking of the vessel
was a stage managed one. At best, it remains as a suspicion. Suspicion cannot take the place
of proof. The court cannot be called upon to presume and assume facts so as to reach a
conclusion that there may have been a conspiracy to sink the vessel by the plaintiff and
members of his crew.

93. In the facts and circumstances of the case, we are unable to accept the finding of the court
below that the plaintiff is not entitled to any relief. We feel that going by the provisions of the
Marine Insurance Act and on the basis of Ext. A1 policy issued to the plaintiff, the act that
caused the vessel to sink qualifies as perils of the sea.

R.N. Gosain Vs. Yashpal Dhir (1992) 4 SCC 683

10. Law does not permit a person to both approbate and reprobate. This principle is based on
the doctrine of election which postulates that no party can accept and reject the same
instrument and that “a person advantage under an order (for example for the payment of
costs) a party may be precluded from saying that it is invalid and asking to set it aside”.
Simplex Concrete Piles (India) Ltd. Vs. Union of India 2010 SCC OnLine Del 821

13. The Supreme Court in its judgment reported as M.G. Brothers Lorry Service v. Prasad
Textiles, (1983) 3 SCC 61 has held that a contractual clause which is in the teeth of a
provision which furthers the intendment of a statute, has to give way and such a clause
becomes void and inoperative by virtue of Section 23 of the Contract Act. The Supreme
Court in M.G. Brother's case was dealing with a contractual provision which sought to set at
naught Section 10 of the Carriers Act, 1865. The Supreme Court in the said judgment has
held the following: “Condition 15 of the Way Bill is void in view of Section 23 of the
Contract Act because its object was to defeat the provisions of Section 10 of the Carriers Act.
If under a particular bargain the rights of the parties were extinguished that would not hit the
provisions of Section 28 of Contract Act and as such would not be violative of Section 23 of
the said Act. But if rights are not extinguished but only the remedies are barred different
consideration would apply. “The Carriers Act was passed, not only to limit the liability of the
carriers, but also to declare the liability of the carriers. Therefore, any contract or bargain
which seeks to defeat the liability of the carriers as enacted by law would defeat the
provisions of that Act. Under Condition 14 there was neither any extinguishment or liability
nor contracting out of liability but only a special period of limitation of notice was provided
other than Section 10 of the Carriers Act. If Condition 15 be permitted then it will defeat the
provisions of Section 10 of the Carriers Act. Even in a case where the plaintiff was unaware
of the arrival of the goods at the destination or was unaware of a loss or damage, the plaintiff
would not have any right to institute a suit if no claim was made and could not have been
made within 30 days as stipulated in Condition 15 of the Way Bill. In essence Condition 15
was to impose additional obligation upon the owner of consignee because it stipulated giving
of the notice either from the date of the arrival of the goods at the destination which more
oftener than not, is not known to the owner of the goods, or from the date of booking, which
again is useless because unless loss or damage occurs no liability arises.”

15. The issue therefore boils down to whether rights which are created by Section 73 and 55
of the Contract Act can or cannot be contractually waived. If there is a public policy or public
interest element in these Sections, then the rights under these sections cannot be waived. Let
us examine the matter. If we look at that portion of the Contract Act, 1872 till Section 73 it
broadly comprises of three parts. The first part is the formation and the requirements for the
formation of a legal agreement/contract. The second part deals with the performance thereof.
The third part deals with the effect of breach of the contract. Provisions pertaining to the
effect of breach of contract, two of which provisions are Sections 73 and 55, in my opinion,
are the very heart, foundation and the basis for existence of the Contract Act. This is because
a contract which can be broken at will, will destroy the very edifice of the Contract Act. After
all, why enter into a contract in the first place when such contracts can be broken by breaches
of the other party without any consequential effect upon the guilty party? It therefore is a
matter of public policy that the sanctity of the contracts and the bindingness thereof should be
given precedence over the entitlement to breach the same by virtue of contractual clauses
with no remedy to the aggrieved party. Contracts are entered into because they are sacrosanct.
If Sections 73 and 55 are not allowed to prevail, then, in my opinion, parties would in fact not
even enter into contracts because commercial contracts are entered into for the purpose of
profits and benefits and which elements will be non-existent if deliberate breaches without
any consequences on the guilty party are permitted. If there has to be no benefit and
commercial gain out of a contract, because, the same can be broken at will without any
consequences on the guilty party, the entire sub-stratum of contractual relations will stand
imploded and exploded. It is inconceivable that in contracts performance is at the will of a
person without any threat or fear of any consequences of a breach of contract. Putting it
differently, the entire commercial world will be in complete turmoil if the effect of Sections
55 and 73 of the Contract Act are taken away. In view of the observations of the Supreme
Court in the case of India Financial (supra) and the Division Bench of this court in Ircon
International (supra) and again of the Supreme Court in the case of M.G. Brothers, the
expressions “public policy” and “if permitted will defeat the provisions of law” in Section 23
have to be interpreted to further the object of the Contract Act and not defeat the same. That
being so, it is clearly a matter public policy and public interest that the sanctity of the
contracts are preserved. To permit a contractual clause having the object to defeat the very
contract itself, is a matter of grave public interest. If such a Clause is allowed to stand, then,
the same will defeat the very basis of existence of the Contract Act. Having thus expounded
at some length I thus need not say any further on the intendment of the Contract Act and the
public interest/public policy behind Sections 55 and 73 thereof.

16. Provisions of the contract which will set at naught the legislative intendment of the
Contract Act, I would hold the same to be void being against public interest and public policy.
Such clauses are also void because it would defeat the provisions of law which is surely not
in public interest to ensure smooth operation of commercial relations. I therefore hold that the
contractual clauses such as Clauses 11A to 11C, on their interpretation to disentitle the
aggrieved party to the benefits of Sections 55 and 73, would be void being violative of
Section 23 of the Contract Act. The interpretation given by the Supreme Court in the Ram
Nath International case is a literal and strict interpretation of clauses whereby the expression
“reason beyond the control of the contractor” has been so strictly and literally interpreted to
include even those cases which are on account of the defaults of the employer itself and but
for the said judgment I would have preferred to interpret the clauses in the manner which the
Arbitrator has done and not strike them down by applying Section 23 of the Contract Act. I
have also reproduced above the reasoning given in the Award which in my opinion, would
otherwise have been enough to dispose of this case, however, the said findings in the award
being totally against a direct opposite interpretation given to such clauses by the Supreme
Court, would therefore have to give way.

Abba Gani and Co. v. Trustees of the Port of Bombay, 1951 SCC OnLine Bom 115

Page 757 - The observations of Lord Justice Mellish in In re Dagenham (Thames) Dock Co.:
Ex parte Hulse with regard to the nature of a deposit are rather striking. The judgment is at
page 1025, and the observations of Lord Justice Mellish are as follows: — “……I have
always understood that where there is a stipulation that if, on a certain day, an agreement
remains either wholly or in any part unperformed—in which case the real damage may be
either very large or very trifling—there is to be a certain forfeiture incurred, that stipulation is
to be treated as in the nature of a penalty.” But the difficulty that Mr. Mistry has to get over is
that the equitable jurisdiction of the Court to give relief against forfeiture and to relieve a
party against penalty is conditioned by this very important fact, that ordinarily the Court will
not help a wrong doer or a party in default in obtaining a deposit which he had made for the
due performance of a contract when he himself broke the contract or repudiated the contract.
I think it may be considered—as I shall presently point out—well settled in England that,
when a party repudiates a contract or puts an end to the contract, and if any deposit that he
has made for the due performance of the contract has been forfeited, he cannot sue for the
refund of that deposit. This principle was clearly enunciated in the case to which I have
already referred: Ex parte Barrell. In re Parnell. The principle has also been subsequently
enunciated in the case which has come to be looked upon as the leading case on the subject,
namely, Howe v. Smith. Lord Justice Cotton says (p. 95):— “……What is the deposit? The
deposit, as I understand it, and using the words of Lord Justice James, is a guarantee that the
contract shall be performed. If the sale goes on, of course, not only in accordance with the
words of the contract, but in accordance with the intention of the parties in making the
contract, it goes in part payment of the purchase-money for which it is deposited; but if on the
default of the purchaser the contract goes off, that is to say, if he repudiates the contract, then,
according to Lord Justice James, he can have no right to recover the deposit.” On the same
page, Lord Justice Cotton qualifies these remarks by saying that there may be cases where a
Court of equity might give relief in respect of the forfeiture of the deposit even to a party in
default, and this is what the learned Lord Justice says (p. 95):— “I do not say that in all cases
where this Court would refuse specific performance, the vendor ought to be entitled to retain
the deposit may well be that there may be circumstances which would justify this Court in
declining, and which would require the Court, according to its ordinary rules, to refuse to
order specific performance, in which it could not be said that the purchaser had repudiated the
contract, or that he had entirely put an end to it so as to enable the vendor to retain the
deposit. In order to enable the vendor so to act, in my opinion there must be acts on the part
of the purchaser which not only amount to delay sufficient to deprive him of the equitable
remedy of specific performance, but which would make his conduct amount to a repudiation
on his part of the contract……”

Page 762 - And in support of the doctrine of stare decisis, Sir Norman Kemp has referred to
two decisions of this Court in Burjori v. Jamshed, and Balvanta v. Bira, where this Court has
held that a defaulting party is not entitled to return of depositmoney. The result, therefore, is
that the plaintiffs are not entitled to the benefit conferred by s. 74 of the Contract Act, because
they are suing for the refund of a deposit to which that section does not apply. They are not
entitled to relief against forfeiture on equitable grounds, because they repudiated the contract,
and being in default they are not entitled to the refund of a deposit which was intended as a
guarantee for the performance of the contract. The learned Judge below took the same view
of the law and dismissed the plaintiffs' suit. In our opinion, the learned Judge was right. The
appeal, therefore, fails and must be dismissed with costs. Appeal dismissed

McDermott International Inc. Vs. Burn Standard Co. Ltd. (2006) 11 SCC 181

116. We may now look at clause 37 of the main contract entered into by and between ONGC
and BSCL which reads as under:
“37. Indirect and consequential damages.- Neither company nor contractor shall be liable to
the other for any consequential damages, which shall include but not be limited to loss of
revenue/profits, loss or escape of product, etc”.

120. In terms of clause 37 of the main contract, reference whereto has been made
hereinbefore, neither of the parties are liable to the other for any consequential damages. The
claim for damages raised by MII cannot be said to be consequential damages. The claim
related to direct losses purported to have been occasioned by the failure to perform the
contractual duty on the part of BSCL and to honour the time-bound commitments. Such a
loss, according to MII, occurred on account of increased overhead cost and decreased profit
and additional management costs by reason o BSCL’s delays and disruptions. It is only in that
view of the matter, that the Emden formula was taken recourse to. Furthermore, clause 37 of
the main contract was a matter of an agreement by and between the said parties. So far as
ONGC is concerned, it cannot be said to have any role to play in the event of breach of
obligation on the part of BSCL towards its sub-contractor.

Saini Construction Company Vs. Delhi Jal Board, decided on 29th October, 2015

49. In a nutshell, Supreme Court holds in Saw Pipes's case (supra) that a liquidated damage
would be a damage which on the face of it ensues if there is a breach of a contract, but its
estimation is not possible and thus the parties would be perfectly justified in quantifying the
same as a reasonable pre-estimate of the loss. Such am amount would be recoverable as a
loss; without proof of the quantum of the loss; because the quantum has been agreed to by the
parties; and the loss is inherent.

50. Suffice it to state that observations made by Supreme Court in para 68 of Saw Pipes's case
(supra) are squarely applicable in the present case as per which delayed constructions such as
completing construction of road or bridges within stipulated time would be difficult to be
linked with actual losses suffered by the State and in such cases the pre-estimated damages
envisaged in the contract have to be paid.