Research › Browse › Judgment

Madhya Pradesh High Court · body

1966 DIGILAW 71 (MP)

K. R. Shah v. Municipal Committee, Dhamtari

1966-05-04

SHIVDAYAL

body1966
JUDGMENT 1. This second appeal arises from a suit for recovery of damages for breach of a contract. The plaintiff's case was that by a memo dated 11 April 1958, the Municipal Committee, Dhamtari (defendant) invited tenders for the supply of certain electrical goods. The plaintiff submitted his quotation on 19 April 1958. The tender was accepted by the defendant per memo dated 28 April 1958. A part of the price was paid in advance. On 29 May 1958, the plaintiff supplied the goods but the defendant refused to accept delivery and on 1 July 1958, the defendant finally refused to accept the goods. For this breach of the contract the plaintiff claimed Rs. 1952. 75 P. as damages. 2. The suit was resisted, infer alia, on the grounds that the Municipal Committee, Dhamtari, had been suspended by the Government under section 53-A of the Municipalities Act on grounds of corruption, nepotism and in-competency and a petition for mandamus filed by the President of the Municipal Committee had been dismissed by the High Court and eventually by the Supreme Court and that the contract was fraudulent, illegal and void and the defendant Municipal Committee was not bound by it. It was further alleged that the plaintiff charged approximately thrice than the actual market price of the articles to be supplied. The contract was hard and unconscionable and hence could not be given effect to. The advance was given to the plaintiff in contravention of the financial Rules. The plaintiff did not suffer or sustain any damages. 3. The trial Court found that the contract was legally entered into on behalf of the Municipal Committee so that it was hound by it. The Committee did not discharge the burden of proving that the plaintiff was in a position to dominate the will of the President of the Municipal Committee. In the result, it passed a decree for Rs. 1621 against the Municipal Committee. 4. The first appellate Court has held that the President of the Municipal Committee had authority and power to enter into the contract that the defendant Committee could not prove that the plaintiff and the President of the Committee had entered into a conspiracy and defrauded the Municipal Committee and that the breach of the contract was committed by the Municipal Committee. But it dismissed the suit holding that the plaintiff could not prove the quantum of damages. But it dismissed the suit holding that the plaintiff could not prove the quantum of damages. The learned Judge of the appellate Court has observed that the plaintiff adduced no evidence to show that he suffered any loss by selling the goods which were not accepted by the Municipal Committee. The plaintiff did not produce account books, so that it could not be ruled out that he sold the goods at a profit. 5. In this second appeal, it is contended for the plaintiff that the findings on other issues being in his favour, the decree passed by the trial Court should have been maintained. The argument is that the measure of damages in such a case is the difference between the market rate on the date on which breach of contract was committed by the defendant and the contract rates. In my opinion, this proposition is quite correct. It is undoubted law that in the case of a breach of contract of sale of goods, the difference between the contract rate and the market rate on the date of the breach represents the measure of damages which the other party is entitled to. The principle of Trojan & Co. vs. Nagappa, AIR 1953 SC 235 , can be applied here. 6. Shri Jakatdar, learned counsel for the Municipal Committee, supports the decree passed by the first appellate Court on other grounds. It is strenuously argued that the contract was hard and unconscionable and it was made in the circumstances which make it obvious enough that fraud was practiced upon the Municipal Committee as a result of a collusion between the plaintiff and the President of the Municipal Committee. Reference is made to the following dates as they appear in the judgment of the Supreme Court. Radheshyam Khare vs. State of M.P. 1959 MPLJ 185. On 18 November 1957, the State Government issued a notification under section 53-A of the C.P. and Berar Municipalities Act (II of 1922) and appointed a Deputy Collector, Shri B.P. Jain, as Executive Officer of the Municipal Committee. The grounds for this action are stated in the notification (page 187 of the above Report). On 21 December 1957, a writ petition was presented to the High Court. It was dismissed on 20 February 1958. On 21 February 1958, the Letters Patent Appeal was dismissed. The grounds for this action are stated in the notification (page 187 of the above Report). On 21 December 1957, a writ petition was presented to the High Court. It was dismissed on 20 February 1958. On 21 February 1958, the Letters Patent Appeal was dismissed. On 21 March 1958, an application for certificate under Articles 132 and 133 of the Constitution was rejected. On April 1958, the Supreme Court granted a special leave to appeal. An interim stay order was also passed which was eventually vacated on 13 May 1958. On 30 September 1958, the Supreme Court dismissed the appeal. 7. Learned counsel now points out the significance of the dates on which the tenders were invited by the President, who was the petitioner before the Supreme Court. Quotations were invited on 11 April 1958. The plaintiff submitted his tender on 19 April 1958 and the President passed the order accepting the tender on 28 April 1958 (Ex. P-4). In this background the contract rates and the rates which are now relied on by the plaintiff as the market rates as prevalent (on 30 June 1958) may be compared. The argument is that the facts speak for themselves. The President of the Municipal Committee in those circumstances, that is, after the Committee's supersession and appointment of an Executive Officer and after the dismissal of the writ petition filed by the President and during the pendency of the appeal before the Supreme Court by special leave, entered into that contract accepting the tender of rates almost three times the market rates. If the law does not necessarily require direct evidence of conspiracy, there cannot be a case better than the present one which proves foul play to which the President and the plaintiff were necessarily parties, thereby to defraud the Municipal Committee. In Anson's Law of Contract (21st Edition) at page 211, the law is stated thus:- "In equity the term 'fraud' had a more extended meaning than at common law. This is not to say that equity did not recognize the type of fraud defined in Derry vs. Peek (1889) 14 AC 337, but it went further and took account of any breach of the sort of obligation which is enforced by a Court that from the begining regarded itself as a Court of conscience. This is not to say that equity did not recognize the type of fraud defined in Derry vs. Peek (1889) 14 AC 337, but it went further and took account of any breach of the sort of obligation which is enforced by a Court that from the begining regarded itself as a Court of conscience. Fraud in equity, or 'constructive fraud' as it is usually called, covered a variety of situations undue influence, unconscionable bargains, abuse of confidence and transactions which are contrary to the public interest, such as marriage-brokage contracts, contracts in restraint of trade and concealed preferences to creditors. Equitable fraud would entitle the party injured to rescind a transaction tainted with it and to be restored to his original position." In Earl of Ayles ford vs. Morris (1873) LR 8 Ch. A. 484 (490), Lord Selborne described the cases which raise a presumption of fraud, from the circumstances or condition of party's contracting-weakness on one side, usury on the other or extortion or advantage taken of that weakness. There, it is laid down:- "Fraud does not here mean deceit or circumvention; it means an unconscientious use of the power arising out of these circumstances and conditions and when the relative position of the parties is such as, prima facie, to raise this presumption, the transaction cannot stand, unless the person claiming the benefit of it is able to repel the presumption by contrary evidence, proving it to have been in point of fact fair, just and reasonable." With the utmost respect I would apply these dicta to the present case. The plaintiff has not proved that the transaction was fair, just and reasonable. 8. The appeal is dismissed with costs.