MANU/DE/4538/2010

Equivalent/Neutral Citation: (2010)ILR 2Delhi699

IN THE HIGH COURT OF DELHI

CS (OS). No. 614A/2002
Decided On: 23.02.2010
Simplex Concrete Piles (India) Ltd. Vs. Union of India
Hon'ble Judges/Coram:
Valmiki J. Mehta, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Mr. V.P. Chaudhry, Senior Advocate with Mr. G. Tushar
Rao, Advocate and Mr. Nitinjiya Chaudhry, Advocate
For Respondents/Defendant: Mr. B.V. Niren, Advocate
Case Note:
Indian Contract Act, 1872 - Section 23, 55, 73--Arbitration Act, 1940--Section
20, 29--Objections against award of arbitrator--Plea taken, even if there is a
breach of contract, damages cannot be claimed by contractor in view of
contract between parties--Held--Rights under Section 73 and 55 of Contract
Act cannot be waived if there is a public policy or public interest element in
these Sections--Contractual clauses which disentitle aggrieved party to
benefits of Sections 55 and 73 would be void being violative of Section 23 of
Contract Act--Award made rule of Court.
The following principles can be culled out from the aforesaid paragraphs:
(i) Public policy is a changing concept, it is not static but dynamic; it changes
from time to time and the Courts have been empowered while interpreting
this doctrine to resort to, judicial legislation euphemistically called
interpretation, to further the public interest, equity, good conscience and
justice.
(ii) A law which is made for individual benefit can be waived by an
individual/private person, however, when such law includes a public
interest/public policy element, such rights arising from the law cannot be
waived because the same becomes a matter of public policy/public interest.
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.

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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.
JUDGMENT
Valmiki J. Mehta, J.
1 . An issue of far reaching importance is called for decision in the present case. The
issue is that can contractual clauses disentitle a person from claiming damages which a
person is otherwise entitled to under law. Putting it differently, can a person who is
guilty of breach of contract and is consequentially liable in law to pay damages under
Section 73 of the Contract Act or other charges under Section 55 of the Contract Act
1872, can prevent the aggrieved party from claiming the same by contractually so
providing i.e. can the Arbitrator be prevented from awarding the damages/losses simply
because clauses in the contract prohibits award of damages/losses. The relevant
contractual clauses in this case are Clauses 11A to 11C and which clauses read as
under:
11. Time, delay and extension.-(A) Time is of the essence of the contract and

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is specified in the contract documents or in each individual works order.
As soon as possible, after contract is let or any substantial work order is placed
and before work under it is begun, the GE and the contractor shall agree upon
the time and progress chart. The chart shall be prepared in direct relation to the
time stated in the contract documents or the works order for completion of the
individual items thereof and/or the contract or works order as a whole. It shall
include the forecast of the dates for commencement and completion of the
various trades, processes or sections of the work, and shall be amended as may
be required by agreement between the GE and the contractor within the
limitation of time imposed in the contract documents or works order. If the
work be delayed:
(i) by force majeure, or
(ii) by reason of abnormally bad weather, or
(iii) by reason of serious loss or damage by fire, or
(iv) by reason of civil commotion, local combination of workmen, strike
or lockout, affecting any of the tradesmen employed on the work, or
(v) by reason of delay on part of nominated sub-contractors, or
nominated suppliers which the contractor has, in the opinion of GE,
taken all practicable steps to avoid, or reduce, or
(vi) by reason of delay on the part of contractors or tradesmen engaged
by the Government in executing work not forming part of the contract,
or
***
(viii) by reason of any other cause, which in the absolute discretion of
the accepting officer is beyond the contractor's control;
then in any such case the officer hereinafter mentioned may make fair and
reasonable extension in the completion dates of individual items or groups of
items of works for which separate periods of completion are mentioned in the
contract documents or works order, as applicable.
***
(B) If the works be delayed:
(a) by reason of non-availability of government stores in Schedule B or
(b) by reason of non-availability or breakdown of government tools and
plant listed in Schedule C;
then, in any such event, notwithstanding the provisions hereinbefore contained,
the accepting officer may in his discretion, grant such extension of time as may
appear reasonable to him and the same shall be communicated to the
contractor by the GE in writing. The decision so communicated shall be final
and binding and the contractor shall be bound to complete the works within
such extended time.

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 (C) No claim in respect of compensation or otherwise, howsoever arising, as a
result of extensions granted under Conditions (A) and (B) above shall be
admitted.
On the basis of the aforesaid clauses, it is contended that even if there is a breach of
contract by the objector/Union of India in causing delays by its own faults, even then,
damages cannot be claimed by a contractor and such damages cannot be awarded by
the Arbitrator.
2. The issue involved in the present case has become further complex because of two
judgments of the Supreme Court dealing with very much these Clauses 11A to 11C.
Whereas in the case of Ramnath International Construction (P) Ltd. Vs. Union of India
MANU/SC/8802/2006 : (2007) 2 SCC 453, the Supreme Court while interpreting these
clauses has held that even if the employer/Union of India is at fault, yet, Clauses 11A to
11C bar the entitlement of the contractor to damages, on the other hand, a recent
judgment of the Supreme Court reported as Asian Techs Limited Vs. Union of India and
others MANU/SC/1620/2009 : (2009) 10 SCC 354 holds that the clauses in question,
namely, 11A to 11C, prevents only the department from granting damages, but it does
not prevent the Arbitrator from awarding damages which are otherwise payable by the
employer on account of its breach of contract.
3 . By the impugned Award, the Arbitrator has very logically, thoroughly, exhaustively
and with clarity interpreted the relevant Clauses 11A to 11C and held that Clause 11A
ought not to be interpreted to deny damages to a contractor when the fault is of the
employer. Since the Award effectively discusses and gives the rationale for
interpretation of Clauses 11A to 11C to entitle the contractor to damages, I reproduce
below few of the relevant paragraphs of the Award and which read as under:
36. The above agreement between the parties carries an exception clause and
that is concerning the dispute for which final and binding decision is vested in
an authority or an official. The dispute in the reference is for claim for losses or
damages on account of prolongation of contract period. No final and binding
decision as to whether claim for losses or damages on account of prolongation
of contract period could be made or not is catered for in the contract. Condition
11(A) and 11(B) of IAFW-2249 provide for grant of extension to contract
period. Use of words "final and binding decision" in these two conditions
relates to quantum or extent of extension granted implying thereby that the
decision of authorities stated therein is final and binding on the length of
extension granted. Contractor cannot thus dispute if his request for extension of
time is not approved upto the date requested by him. This is not the case in the
present reference as full extension, upto the certified date of completion of
contract, had been granted. The use of term "final and binding" in these
conditions 11(A) and (B) can thus have no other implication. Now, I turn to the
provisions contained in Condition 11(c) of IAFW-2249. It states that no claim in
respect of compensation or otherwise, however arising as a result of extension
granted under conditions 11(A) and (B) shall be admitted. UOI, in their
submissions and arguments, heavily relied on these provisions and argued that
all reasons for extensions of time were on account of failure on the part of
Contractor in timely fulfilment of his contractual obligations. Though condition
11(c) does not contain for any final and finding binding decision by any
authority or official, as envisaged in the arbitration agreement between the
parties, yet it carries the force of stopping the Contractor for raising any claim
of compensation. There is, however, an overriding provision i.e. the reason

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necessitating the grant of extension have to fall within those listed in Condition
11(A) and (B). It is quite logical to have such a provision in the contract as the
Contractor accepts the liability, including financial liability, if the contract gets
delayed for the reasons given in condition 11(A) and (B). If, on the other hand,
it becomes necessary to grant extension to contract period for reasons other
than those listed in Condition 11(A) and (B), the liability and consequences
thereof are not accepted by the Contractor. This has been made very specific
and made known to Contractor before quoting. This agreed provision of the
contract needs to be respected. The line of demarcation is therefore explicitly
drawn between the parties in accepting responsibilities for liabilities arising out
of delays caused in execution of the Contract. Extension to contract period
could be granted under Condition 7 and 9 of IAFW-2249. Contractor could be
justified extension of time if for any reason he is prevented from performance
of his obligations. Sections 51 to 55 of Indian Contract Act would refer. In any
case, the two parties to a contract, could mutually agree to a new completion
date but as per IAFW-2249, Contractor is stopped from raising claim for
compensation only and only if reasons for grant of extension to contract period
fall within those listed in conditions 11(A) and (B) and not for any other
reason. Provisions of condition 11 (c) cannot therefore be applied across the
board and details would need to be examined after affording due respect to this
condition 11(c).
3 9 . The discussions in Para 36 above make it necessary to go through the
reasons listed in the said conditions 11(A) and (B). Condition 11(A) has seven
reasons with reasons (i) to (vi) referring to force-majeure, abnormally bad
weather, fire, civil commotion, strike or lockout, delays by nominated suppliers
or sub contractors despite best efforts of contractor or by Government
Contractor/tradesmen in executing works not forming part of contract. All these
six reasons relate to occurrences or events on which Contractor could have had
no control whatsoever. Reason (vii) goes further to add "by reason or any other
cause, which in the absolute discretion of the Accepting Officer is beyond the
control of Contractor". The reason (vii) is thus an extension of reasons (i) to
(vi) without specific mention of cause. UOI submitted that this reason covered
all aspects which the Accepting Officer considered as beyond Contractors
control. According to them, this would also include the reasons of delay even if
caused at the hands of Department as these were also beyond the control of
Contractor. On this specific issue, Contractor relied on the rule of ejusdem
generis" and even referred to Supreme Court Judgement AIR 1979 SC 65. I
have examined this aspect and opine that reason (vii) cannot be considered in
isolation of other reasons (i) to (vi). It obviously intends any reason or any
specific causes, other than those listed in (i) to (vi), which are beyond
Contractors control that is the causes on which Contractor can have no control.
It cannot be made to encompass the reason or causes which are within
Government's or Department's control and then they cause the delays. In the
garb of the wording of reason (vii), it is not correct to bring in such reasons or
delays caused at the hands of Department. Such a liability cannot,
contractually, be passed on to the Contractor for he cannot be expected to
provide for it in his quotation. If the arguments of UOI were to be accepted
then it would imply that consequences of all or any delays, consciously or
otherwise, caused by Department would be borne by Contractor. I cannot
therefore subscribe to the views of UOI and hold that reason 11 A(vii) cannot
be made to include, in its ambit, the delays caused at the hands of the
Department.

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 40. In view of the above discussions, Contractor is stopped from raising any
claim for compensation or otherwise, howsoever arising, only for reasons
falling under condition 11(A) and (B) of IAFW-2249 with the implication of
reason (vii) as concluded by me in the preceding paragraph. For reasons, other
than these, which lead to grant of extension to contract period, condition 11(c)
cannot come into action. This conclusion is based on logical, just and fair
interpretation of condition 11(c).
4 . I would have ordinarily accepted this thorough reasoning as given in the Award,
however, the Supreme Court has in fact held just the opposite in the judgment of
Ramnath International's case (supra), in paragraph 12 thereof, and which reads as
under:
12. Clause (C) provides that where extensions have been granted by reason of
the delays enumerated in clause (A) which were beyond the control of the
contractor, or on account of the delays on the part of the employer specified in
clause (B), the contractor is not entitled to make any claim either for
compensation or otherwise, arising in whatsoever manner, as a result of such
extensions. After enumerating certain delays, sub-clause (viii) of clause (A)
specifically mentions delay on account of any other cause beyond the control of
the contractor. The causes for delays specified in clause (A), thus, encompass
all delays over which the contractor has no control. This will necessarily include
any delays attributable to the employer or any delay for which both the
employer and the contractor are responsible. The contract thus provides that if
there is any delay, attributable either to the contractor or the employer or to
both, and the contractor seeks and obtains extension of time for execution on
that account, he will not be entitled to claim compensation of any nature, on the
ground of such delay, in addition to the extension of time obtained by him.
Therefore, the claims for compensation as a consequence of delays, that is
Claim 24 of the Hangar Contract and Claims 13 to 16 of the Road Contract are
barred by clause 11(C).
(Underlining is mine)
As already stated above, the Supreme Court in the recent judgment of Asian Techs
Limited's case (supra) has held to the contrary while interpreting the same clauses.
5. What should a High Court do when faced with two judgments of the Supreme Court
which apparently cannot be reconciled with respect to its ratios? The Full Bench of the
Patna High Court in the judgment reported as Amar Singh Yadav Vs. Shanti Devi and
Ors. MANU/BH/0021/1987 : AIR 1987 Pat 191 has held that when there are two
differing judgments of the Supreme Court, then, the High Court should follow that
judgment which lays down the correct law. The relevant paras of the judgment are as
under:
15. In fairness to the learned Counsel for the respondents, it must be said that
the aforesaid observation indicates that there is a direct conflict on this point
herein with the ratio in the Himalaya Tiles and Marble (Private) Limited,
(MANU/SC/0361/1980 : AIR 1980 SC 1118) (supra). However, both the
judgments have been rendered by a Bench consisting of two Hon'ble Judges
and cannot possibly be reconciled. This situation at once brings to the fore the
somewhat intricate question posed at the outset, which has come to be of not
infrequent occurrence, namely, when there is a direct conflict between two
decisions of the Supreme Court, rendered by coequal Benches which of them

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should be followed by the High Courts and the Courts below.
16. Now the contention strongly urged on behalf of the respondents that the
earlier judgment of a co-ordinate Bench is to be mechanically followed and
must have pre-eminence, irrespective of any other consideration, because the
latter one has missed notice thereof, does not commend itself to me. When
judgments of the superior Courts are of co-equal Benches, and, therefore, a
matching authority, then their weight inevitably must be considered by the
rational and the logic thereof and not by the mere fortuitous circumstance of
the time and date on which they were rendered. Equally, the fact that the
subsequent judgment failed to take notice of the earlier one or any presumption
that a deviation therefrom could not be intended, cannot possibly be
conclusive. Vital issues, pertaining to the vital questions of the certainty and
uniformity of the law, cannot be scuttled by such legal sophistry. It is manifest
that when two directly conflicting judgments of the superior Court and of equal
authority exist, then both of them cannot be binding on the Courts below. A
choice, however difficult it may be, has to be made in such a situation and the
date cannot be the guide. However, on principle, it appears to me, that the High
Court must in this context follow the judgment, which would appear to lay
down the law more elaborately and accurately. The mere incidence of time,
whether the judgments of co-equal Benches of the superior Court are earlier or
later, and whether the later one missed consideration of the earlier, are matters
which appear to me as hardly relevant, and, in any case, not conclusive.
17. The view I am inclined to take has the support of the high authority of
Jessel M. R. in Hampton vs. Holman (1877) 5 Ch D 183. Therein also the
learned Master of the Rolls was faced with the difficult task of choosing
between the two decisions of equal authority, which were directly in conflict
with each other. He observed as follows:-
Now I take it that both the cases to which I have referred are not to be
reconciled with Hayes vs. Hayes (1828) 38 ER 822 at all events, they
differ from it so far as to leave me at liberty now to say that Hayes v.
Hayes is not sound law; indeed it appears that Sir John Leach himself
was dissatisfied with his decision.
Again in Miles vs. Jarvis (1883) 24 Ch D 633, Kay, J., was similarly faced with
two judgments of equal weight which were in conflict. He observed as follows:-
............. The question is which of these two decisions I should follow,
and, it seems to me that I ought to follow that of the Master of the
Rolls as being the better in point of law.
Reference in this context may in particular be made to the celebrated case of
Young vs. Bristol Aeroplane Co. Ltd. (1944) KB 718. Therein, in a similar
context of the Court of appeal being bound by its previous decisions, it was
held that it was not only entitled but indeed duty bound to decide which of the
two conflicting decisions of its own will it follow in case of a clear divergence
of the opinion in the earlier precedents.
18. I am not unaware that in Govindnaik G. Kalaghatigi vs. West Patent Press
Company Limited MANU/KA/0102/1980 : AIR 1980 Kan 92, a narrowly divided
Full Bench has taken the view, by majority of three: two, that in such a
situation, the later of the two decisions should be followed. A perusal of the

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judgment would, however, show that, in fact, there were two questions firmly
posed before the Full Bench firstly that where there was a conflict of two
decisions of the Supreme Court of unequal Benches, which one is to be
followed and, secondly, when these decisions are of co-equal Benches, then
which decision is to be followed. It seems somewhat patent that the majority
view adverted to the first of the two questions alone, and, there does not
appear to be any discussion whatsoever on the second question. The minority
decision, however, while agreeing with the majority view on the first question,
adverted to the second question and considered the matter in detail, concluding
as follows:-
.........It seems to us, therefore, the High Court would be well advised
to consider which of two conflicting decisions it will follow in the
interest of the administration of justice and it ought to follow that
which is better in point of law than in point of time.
With great respect, I am inclined to wholly agree with the aforesaid view of the
minority and it bears repetition that the majority view does not seem to have
even adverted to this question in essence.
20. I am not unmindful of the legal aphorism that a living authority is not to be
quoted. Yet, because of the eminence, Mr. Seervai's authoritative Constitutional
Law of India already achieved, it is necessary to notice his opinion in this
context, in the latest edition of that work at page 2244 (Third Edn.).
But judgments of the Supreme Court, which cannot stand together,
present a serious problem to the High Courts and to the subordinate
Courts. It is submitted that in such situations, the correct thing is to
follow that judgment which appears to the Court to state the law
accurately, or more accurately than the other conflicting judgment.
2 3 . I am more than amply conscious of the difficulties of making a choice
between decisions of the superior court when they are in direct conflict with
each other. But, such a duty can neither be skirted nor evaded. It was rightly
and forcefully pointed out by Lord Denning in Seaford Court Estates Ltd. vs.
Asher (1949) 2 All ER 155 that when a Judge comes up against such a truck, he
is not to fold his hands and it is his duty to iron out the creases. Therefore,
when such a divergence arises and the litigant's fortune depends thereon, the
issue has to be frontally adjudicated upon. Obviously, in such a situation, it is
not the province of the High Court or the subordinate court to comment on the
judgment of the Supreme Court, which are patently entitled to respect. Its plain
duty, in the interest of justice, is to respectfully follow that which appears to it
to state the law accurately or, in any case more accurately than the other
conflicting judgment. The view I am inclined to take is not only fortified, but in
a way derived from the Full Bench judgment in Indo Swiss Time Limited vs.
Umrao MANU/PH/0164/1981 : AIR 1891 P&H 213. It, perhaps, deserves
highlighting that though on another point the learned Judges of the Full Bench
differed but on this particular momentous issue there was an absolute
unanimity. The subsequent Full Bench decision in Kulbhushan Kumar and Co.
vs. State of Punjab MANU/PH/0134/1984 : AIR 1984 P & Har 55 is also in a way
relevant and instructive.
24. To conclude on this aspect, it is held that where there is a direct conflict

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 betwixt two decisions of the Supreme Court rendered by co-equal Benches, the
High Court must follow that judgment which appears to it to state the law more
elaborately and accurately. The answer to question (1) posed at the outset is
rendered in these terms.
6 . Various other High Courts of the country have also held that when there are
conflicting judgments of Supreme Court of co-equal Benches, then, the High Court
ought to follow the judgment which lays down the law more correctly. The aforesaid
judgment in the case of Amar Singh Yadav (supra) relied upon the judgement of Indo
Swiss Time Limited vs. Umrao and Ors. MANU/PH/0164/1981 : AIR 1981 P&H 213 (FB)
and the ratio of which judgment was followed by the Bombay High Court in the
judgment reported as The Special Land Acquisition Officer (I). Bombay and Anr. Vs. The
Municipal Corporation of Greater Bombay MANU/MH/0304/1988 : AIR 1988 Bom 9. The
Full Bench High Court of Allahabad in the judgment reported as Ganga Saran Vs. Civil
Judge, Hapur, Ghaziabad and others MANU/UP/0025/1991 : AIR 1991 All 114 has held
as under:
7 . One line of decision is that if there is a conflict in two Supreme Court
decisions, the decision which is later in point of time would be binding on the
High Courts. The second line of decisions is that in case there is a conflict
between the judgments of Supreme Court consisting of equal authorities,
incidence of time is not a relevant factor and the High Court must follow the
judgment which appears it to lay down elaborately and accurately.
8. Similar situation arose before a Full Bench of Punjab and Haryana High Court
in the case of M/s Indo Swiss Time Limited, Dundahera Vs. Umrao,
MANU/PH/0164/1981 : AIR 1981 P&H 213. What the Full Bench in the said case
held is extracted below (at pp. 219-220 of AIR):
Now the contention that the latest judgment of a co-ordinate Bench is
to be mechanically followed and must have pre-eminence irrespective
of any other consideration does not commend itself to me. When
judgments of the superior Court are of co-equal Benches and therefore,
of matching authority then their weight inevitably must be considered
by the rationale and the logic thereof and not by the mere fortuitous
circumstances of the time and date on which they were rendered. It is
manifest that when two directly conflicting judgments of the superior
Court and of equal authority are extant then both of them cannot be
binding on the courts below, Inevitably a choice, though a difficult one,
has to be made in such a situation. On principle it appears to me that
the High Court must follow the judgment which appears to it to lay
down the law more elaborately and accurately. The mere incidence of
time whether the judgments of coequal Benches of the Superior Court
are earlier later is a consideration which appears to me as hardly
relevant.
This decision was followed by the Bombay High Court in the case of Special
Land Acquisition Officer Vs. Municipal Corporation, MANU/MH/0304/1988 : AIR
1988 Bom 9. The majority of Judges in the Full Bench held that if there was a
conflict between the two decisions of equal benches which cannot possibly
reconcile, the courts must follow the judgment which appear to them to state
the law accurately and elaborately. We are in respectful agreement with the
view expressed by the Full Bench of Punjab & Haryana High Court in the case of

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 M/s Indo Swiss Time Limited Vs. Umrao (MANU/PH/0164/1981 : AIR 1981 P&H
213) (Supra) especially when the Supreme Court while deciding Qamaruddin's
case (1990 All WC 308) (Supra) did not notice the U.P. amendment to S. 115,
C.P.C. and earlier decision of the Supreme Court. In the light of the view
expressed in this case it is to be examined as to which of the case decided by
the Supreme Court lays down the law accurately. As noticed earlier the U.P.
Amendment Act No. XXXXI of 1978 amended S.115 of Code of Civil Procedure.
By virtue of this amendment, revision u/S. 115, C.P.C. did not lie to the High
Court against the appellate or revisional order passed by the District Court
where the valuation of the suit is less than Rs. 20,000/-. This amendment came
up for consideration in M/s Jupiter Chit Fund (Pvt) Ltd. Vs. Dwarka Diesh,
(MANU/UP/0055/1979 : AIR 1979 All 218) (FB) (Supra) and it was held that
S.115, C.P.C. as amended by U.P. Amendment Act assigns mutually exclusive
jurisdiction to the High Court and district Court. This full bench decision was
affirmed by Supreme Court in its two decisions namely in the cases of Vishesh
Kumar Vs. Shanti Prasad, (MANU/SC/0052/1980 : AIR 1980 SC 892) and
Vishnu Awatar Vs. Shiv Autar (MANU/SC/0053/1980 : AIR 1980 SC 1575)
(supra). A perusal of the judgment of the Supreme Court in the case of
Qamaruddin's case (1990 All WC 309) (Supra) indicates that it was not brought
to the notice of the bench deciding the case that it was a case from U.P. and
that S.115, C.P.C. amended by U.P. Amendment Act No. XXXI of 1978 governed
the matter. The matter was disposed of as if S.115, C.P.C. as originally enacted
applied.
7. All the above judgments have been considered by a Division Bench of this Court in
the judgment reported as Smt. Gopa Manish Vora Vs. Union of India
MANU/DE/0841/2009 and the relevant paras of which read as under:
19. We are, therefore, faced with a situation where one line of decisions of the
Supreme Court indicates that the five circumstances mentioned in Alka Gadia
(supra) are exhaustive and another line of decisions of the Supreme Court of
benches of equal strength indicates that the said circumstances are illustrative
and not exhaustive. This raises the question as to what the High Court is to do
in a situation where there is a conflict between decisions of the Supreme Court
rendered by Benches of equal strength. In Ganga Saran vs. Civil Judge, Hapur,
Ghaziabad and Ors. MANU/UP/0025/1991 : AIR 1991 All 114, a Full Bench of
the High Court of Allahabad considered this very question. The Full Bench
observed as under:
7. One line of decision is that if there is a conflict in two Supreme
Court decisions, the decision which is later in point of time would be
binding on the High Courts. The second line of decisions is that in case
there is a conflict between the judgments of Supreme Court consisting
of equal authorities, incidence of time is not a relevant factor and the
High Court must follow the judgment which appears it to lay down law
elaborately and accurately.
2 0 . The Full Bench of the Allahabad High Court referred to a Full Bench
decision of the Punjab and Haryana High Court in the case of Indo Swiss Time
Limited, Dundahera vs. Umrao and Ors. MANU/PH/0164/1981, wherein it was
observed as under:
Now the contention that the latest judgment of a co-ordinate Bench is

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 to be mechanically followed and must have pre-eminence irrespective
of any other consideration does not commend itself to me. When
judgments of the superior Court are of co-equal Benches and therefore,
of matching authority then their weight inevitably must be considered
by the rationale and the logic thereof and not by the mere fortuitous
circumstances of the time and date on which they were rendered. It is
manifest that when two directly conflicting judgments of the superior
Court and of equal authority are extant then both of them cannot be
binding on the courts below. Inevitably a choice, though a difficult one,
has to be made in such a situation. On principle it appears to me that
the High Court must follow the judgment which appears to it to lay
down the law more elaborately and accurately. The mere incidence of
time whether the judgments of coequal Benches of the Superior Court
are earlier later is a consideration which appears to me as hardly
relevant.
21. The Allahabad High Court in Ganga Saran (supra) agreed with the view
taken by the Full Bench of Punjab & Haryana High Court in Indo Swiss Time
Limited (supra) that when there is a conflict between two decisions of equal
Benches, which cannot be reconciled, the courts must follow the judgment
which appears to them to state the law accurately and elaborately.
2 2 . A Division Bench of this Court in Virender Kumar @. Bittoo vs. State
MANU/DE/0583/1995: 59 (1995) DLT 341 also considered the question of
conflict of judgments of different Benches of the Supreme Court of co-equal
strength. The Division Bench noted with approval the decision of the Full Bench
of the Allahabad High Court in the case of Ganga Saran (supra) as having been
laid down that if there is a conflict between two decisions of equal Benches of
the Supreme Court, which cannot possibly be reconciled, the courts must follow
the judgment which appears to them to state the law accurately and elaborately
and particularly so when the later decision of the Supreme Court did not notice
the earlier decision.
8 . I would have ordinarily decided this case on a totally different issue, viz of the
contractual clauses being void under Section 23 of the Contract Act, and which aspect I
will dilate upon a little later, however, Mr. V.P. Chaudhary, Senior Advocate, appearing
for the petitioner, has argued that this Court must decide as to which judgment applies
i.e. whether of Ramnath International or Asian Techs and for this purpose has invited
my attention to the decision of the Supreme Court reported as M/s. Indian
Petrochemicals Corp. Ltd. Vs. Shramik Seva MANU/SC/0538/2001 : AIR 2001 SC 3510
and para 8 thereof in which the Supreme Court mandates the High Court to take a view
on merits on the issue, although there is apparently conflicting views as per the
judgment of the Supreme Court. This para 8 reads as under:
8 . We have perused the impugned order of the High Court. We are unable to
appreciate the approach of the High Court. Even when it was faced with
diametrically apposite interpretation of the judgment of this Court, it was
expected of the High Court to decide the case (writ petition) on merit according
to its own interpretation of the said judgment. Instead the High Court after
referring to rival contentions of the parties, in para 3, observed thus:
In our view, the right course for the petitioner will be to approach the
Apex Court and to seek a clarification of the said order. Mr. Singhvi is

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 agreeable to take necessary steps.
And having directed the appellants herein to take back the employees
for a period of four months or until order is passed by this Court
whichever is earlier, disposed of the writ petition.
9. In deciding this issue of the disentitlement to damages to the contractor (because of
Ramnath International's case) or the entitlement to damages (on account of Asian Techs
Limited's case), however, I would prefer to decide this case and base this judgment
wholly, independently on my view that clauses which bar and disentitle a contractor to
claim its just claims/damages/monetary entitlement, and which a contractor is entitled
to by virtue of provisions of Sections 73 and 55 of the Contract Act, are void by virtue
of Section 23 of the Contract Act, 1872. I am also taking up this aspect of Section 23
first because the present discussion will help in deciding whether correct law is laid
down in Ramnath International's case or in Asian Techs Limited's case. It is therefore
necessary, at this stage, to reproduce Section 23 of the Contract Act The same reads as
under:
2 3 . What considerations and objects are lawful, and what not. -The
consideration or object of an agreement is lawful, unless--
it is forbidden by law 1; or
is of such a nature that, if permitted, it would defeat the provisions of any law;
or
is fraudulent; or
involves or implies injury to the person or property of another; or the Court
regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to
be unlawful. Every agreement of which the object or consideration is unlawful,
is void.
A reading of the aforesaid provision of Section 23 shows that where the consideration
or object of an agreement is unlawful, the said agreement is void. The consideration or
object of an agreement is unlawful if it is forbidden by law or it is of such a nature that
if permitted it defeats the provisions of law or the same involves injury to the person or
property of another or the Court regards it as immoral or opposed to public policy. Two
parts of this Section are relevant for determining the issue in the present case. The first
part being that a clause in an agreement is unlawful and void when the same is opposed
to public policy. The second part is that such a contractual clause is void if allowing
operation of such clause will defeat the provisions of law.
10. The expression "public policy'' has been a subject matter of various decisions of the
Supreme Court. It has been held that the expression "public policy" has to be
interpreted in the context of the statute in which such expression appears. The
expression "public policy" as per the requirement and the context of the statute in which
the expression is found, has been accordingly interpreted by the Supreme Court. What
is therefore the meaning which should be attributed to this expression as found in
Section 23 is the question. Instead of referring to various judgments, I would seek to
refer to the observations and the ratio of the Supreme Court in one of its recent
judgments reported as Indian Financial Association of Seventh Day Adventists Vs. M.A.

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Unneerikutty and Another MANU/SC/3291/2006 : (2006) 6 SCC 351 on the meaning of
this expression in Section 23. I refer to this judgment because in a few paragraphs the
Supreme Court has encapsulated the law with regard to the expression public policy,
and in the process has also referred to its earlier decisions on the point as also the
relevant commentaries of certain authors. Paras 16 to 19 of the said judgment lays
down the ratio with regard to the meaning of the expression "public policy", and which
I with all humility adopt, for the purpose of the decision in the present case. These
paragraphs 16 to 19 read as under:
16. Section 23 of the Contract Act lays down that the object of an agreement
becomes unlawful if it was of such a nature that, if permitted, it would defeat
the provisions of any law.
1 7 . The term "public policy" has an entirely different and more extensive
meaning from the policy of the law. Winfield defined it as a principle of judicial
legislation or interpretation founded on the current needs of the community. It
does not remain static in any given community and varies from generation to
generation. Judges, as trusted interpreters of the law, have to interpret it. While
doing so, precedents will also guide them to a substantial extent.
18. The following passage from Maxwell, Interpretation of Statutes, may also
be quoted to advantage here:
Everyone has a right to waive and to agree to waive the advantage of a
law or rule made solely for the benefit and protection of the individual
in his private capacity which may be dispensed with without infringing
any public right or public policy. Where there is no express prohibition
against contracting out of it, it is necessary to consider whether the Act
is one which is intended to deal with private rights only or whether it is
an Act which is intended as a matter of public policy.........
19. The doctrine of public policy may be summarised thus:
Public policy or the policy of the law is an illusive concept; it has been
described as "untrustworthy guide", 'variable quality', "uncertain one"
"unruly horse" etc.; the primary duty of a court of law is to enforce a
promise which the parties have made and to uphold the sanctity of
contracts which form the basis of society, but in certain cases, the
court may relieve them of their duty on a rule founded on what is
called the public policy;...... but the doctrine is extended not only to
harmful cases but also to harmful tendencies; this doctrine of public
policy is only a branch of common law, and just like any other branch
of common law, it is governed by precedents; the principles have been
crystallised under different heads and though it is permissible for the
courts to expound and apply them to different situations, it should only
be invoked in clear and incontestable cases of harm to the public.
(Underlining supplied)
11. The following principles can be culled out from the aforesaid paragraphs:
(i) Public policy is a changing concept, it is not static but dynamic; it changes
from time to time and the Courts have been empowered while interpreting this
doctrine to resort to, judicial legislation euphemistically called interpretation, to

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 further the public interest, equity, good conscience and justice.
(ii) A law which is made for individual benefit can be waived by an
individual/private person, however, when such law includes a public
interest/public policy element, such rights arising from the law cannot be
waived because the same becomes a matter of public policy/public interest.
12. The Supreme Court in its judgment reported as M.G. Brothers Lorry Service Vs.
M/s. Prasad Textiles MANU/SC/0037/1983 : 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.
(underlining added)
I have reproduced the portions of the judgment from the head note because the head
note portion faithfully reproduces the relevant ratio of the judgment.
13. A Division Bench of this court has also recently considered the legal position under
Section 23 of the Contract Act in the judgment reported as Ircon International Ltd. Vs.
NBCC MANU/DE/2238/2008 : 155 (2008) DLT 226. The relevant paragraphs of this
judgment are paras 15, 20, 21, 27 and 28:
1 5 . The learned Counsel for the appellant has also relied upon
MANU/SC/0783/2006 : AIR 2006 SC 963,(2006) 6 SCC 315,
MANU/BH/0067/1965 : AIR 1965 Pat. 239. MANU/BH/0017/1998 : AIR 1996
All. 72 and MANU/LA/0023/1950 : AIR (37) 1950 Lah. 174 wherein the part of

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 the arbitration agreement, "which makes the arbitrator's determination 'final'
and binding between the parties'' and declares that the parties have waived the
right of an appeal or objection 'in any jurisdiction', has been held to be hit by
Section 28 of the Contract Act and also being against public policy
20. After considering the judgments relied upon by the appellant and discussed
by us above, we are of the opinion that a person may waive his rights. Such
waiver of rights is permissible even in relation to a benefit conferred under the
law. But it is trite that no right can be waived where public policy or public
interest is involved. The contract between the parties must be in obedience to
law and not in derogation thereof Contracting out is permissible provided it does
not deal with a matter of public policy. An agreement under no circumstances
can violate the public policy [Centrotrade Minerals and Metal Inc. vs.
Hindustan Copper Ltd., MANU/SC/8146/2006 : 2006 (11) SCC 245].
21. Section 28 of the Contract Act which provides for agreements in restraint of
legal proceedings as void, the parties cannot by a contract seek to exclude the
application of a statutory provision as it is not valid Mukul Dutta Gupta vs.
Indian Airlines Corpn., MANU/WB/0075/1962 : AIR 1962 Cal. 1311. The
most obvious and direct form of contracting out of a statute is where a party
agrees not to make a claim for a benefit for which a statute provides. But it may
take many other forms, varying with the nature, subject matter and the object
or purpose of the statute, and the means selected to escape from its provisions
or its operations. Express statutory prohibitions against contracting out renders
void an agreement or clause that is inconsistent with it. But when there is no
express prohibition in the statute, an agreement; the operation of which defeats
or circumvents the purpose or policy of the statute, would also be barred.
27. The object of the rule is, that no party/person should be left remedy less.
Necessary corollary to this would be that, if no adequate remedy is provided for
by a special statute through the Forum established under it for a particular
purpose/situation, civil Courts remedy to administer justice cannot be said to
be ousted to deal with even such cases.
28. So far as the part in the arbitration clause in the said agreement regarding
the non-applicability of the Act of 1996 is concerned, we consider that it is void
and the parties cannot by themselves exclude the statute itself which is being
drafted by the Legislature to look after the arbitration matters.
(underlining is mine)
14. 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

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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.
15. 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.
16. I may finally note that the Supreme Court in its recent judgment reported as G.
Ramachandra Reddy Vs. UOI, MANU/SC/0998/2009 : 2009(6) SCC 414 has, though
without referring to Section 23 of the Contract Act, held that a clause in a contract
cannot prevent the award of damages although the same are otherwise payable in law.
1 7 . The issue which now remains to be addressed however is does Ram Nath

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International's judgment hold the field or the judgment in Asian Techs Ltd applies? This
indeed is a vexed question and ordinarily, as already stated, I would not have ventured
to enter into this area of controversy but, since, the learned senior counsel for the
petitioner has very strongly pressed for decision on this aspect also, I am accordingly
adverting to this aspect. Before doing so, I may note that both the judgments of Asian
Techs Ltd. and Ram Nath International are of benches of two Judges. Further, the
decision in Asian Techs case does not refer to the judgment of Ram Nath International
case although identical clauses have also been dealt with in the Asian Techs case. In
terms of the various Full Bench judgments of different High Courts and the Division
Bench judgment of this Court, I have the onerous obligation, as the learned senior
counsel for the petitioner put, to decide that which of the two judgments should
operate. One way in my opinion, would be that the effect of the two cases and the ratio
of the two cases can be said to be distinguishable because the judgment in the Ram
Nath International case, does not deal with the position that Arbitrators right to award
such damages is unfettered and a contractual clauses which debars payment of damages
only prevents the department from doing so. That however, would be an over
simplification, because, both the judgments squarely deal with the issue of an
arbitration Award entitling or disentitling a contractor for damages.
18. In my opinion, if I look at the issue from both the micro and macro positions,
keeping in focus the intendment of legislation called the Contract Act, then, the
judgment in the case of Asian Techs Ltd. can be said to laying down a law which would
further the object and purpose of the Contract Act. I must hasten to add that I am still
doubtful whether I am entitled to decide, the aspect that out of two decisions of
Supreme Court, which one is to prevail, therefore, my observations are strictly in terms
of the limited parameters of the facts of the present case required to decide the aspect
of the entitlement or the disentitlement to damages in view of the provisions of Section
55 and 73 of the Contract Act. I would with all due respect to the learned senior counsel
for the petitioner, would not venture further and would leave it finally for a larger Bench
of this court or the Supreme Court itself to consider whether at all there is any conflict
between the judgments of Ram Nath International and Asian Techs Ltd and if there is a
conflict, the ratio of which of the two judgments ought to prevail. I am therefore,
deciding this case, to make things very clear, only on the basis of the decision that
contractual clauses which prohibit the entitlement to rightful damages of a person is
clearly hit and are void by virtue of Section 23 of the Contract Act.
19. For the purposes of record, I may say that no other issue was pressed before me by
the objector except this issue of disentitlement of the claimant/petitioner/non-applicant
to damages on the basis of Clauses 11A to 11C of the Contract Act and as per the
interpretation thereof in Ramnath International's case. I may note that the argument of
the objector with regard to the fact that damages could not have been decided by the
Arbitrator was sought to be canvassed by the learned senior counsel for the petitioner
as being barred by "res judicata" because of an order passed in a petition under Section
20 of the Arbitration Act, 1940, referring all the disputes including the present dispute
of damages for decision by the Arbitrator, but, in view of my other findings given
above, I am not pronouncing upon this issue which has been canvassed and argued by
the learned senior counsel for the petitioner. Mr. V.P. Chaudhary, appearing for the
petitioner very fairly does not press his objections being I.A. No. 11421/2003. Interest
at the rate of 9% per annum is awarded on the awarded amount from the date of this
judgment till payment under Section 29 of the Arbitration Act, 1940. The award is made
rule of the court. Let the decree be drawn in terms of thereof. Parties to bear their own
costs.

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