 Yes, very, very good afternoon friends. And what a Saturday changing the time to understand the pleadings and evidence on the liquidated and unliquidated damages. What we speak of the contract act and the interplay between the contract act, the pleadings and what we were talking about before going live to the session on mute to the effect that as to what will be the role under the arbitration act and commercial code act. Keeping in view the significance of these aspects regarding the pleadings and evidence, we thought why not request a person who has created his own mark, own niche when we were connecting with Mr. Al Sundar Rishan, the senior advocate and former president of the Madras Bar Association. We thought we should bring someone who can actually speak upon these interplays which are growing and growing with the flux of time and the relevance for the professionals and other ones is quite relevant. And his sessions we saw on the YouTube, they were immensely popular. So we made a lot of requests and just like his name, not only Sundar but his power of expression is also that Sundar. We had Mr. Sundar Mohan whose name has been recently been declined. His sessions are also too good. He had also pitched in for us that we can take the sessions without taking much time since we know it's a weekend and people have more plans since the things have got for the betterment. I request Mr. Sundar Rishan to take things forward. Audio, sir. Thank you, Mr. Vikas. Before I go into the subject, I will have to say thanks to one good friend, Mr. Manishankar, former advocate general, additional advocate general of Tamil Nadu, who is the reason for introducing me to Mr. Vikas and the reason for me to participate in this session. Thank you, Mr. Manishankar. And thank you, Mr. Vikas, for giving me this opportunity. And I actually made use of this opportunity to learn a little more and also latch on to a few judgments which have recently come on this subject. And on the topic that has been given to me, that is pleadings and evidence for liquidated and unliquidated damages with reference to contract act. I have planned to go ahead with this session in three parts. One is the importance of pleadings and the second one is what are the ingredients that are necessary to carry forward successfully a claim on liquidated damages and unliquidated damages and to sum up at the end after going through one or two judgments as to what should form part of the pleadings for the purpose of proving liquidated damages and for the purpose of proving unliquidated damages. So, my session will be in three parts. So far as pleadings are concerned, as all of you know, pleadings under CPC are strictly applicable before the Civil Court. If you file a suit, then you have to go by order 6, order 7, order 8 for plaint, written statement, counter claim, etc. So far as arbitration act is concerned, arbitration act though deals with lot of contractual disputes between parties and is an alternative dispute resolution forum as a substitute for Civil Court. Yet the framers of the law have said that strict rules of CPC will not be applicable and therefore there may be some allowance so far as pleadings are concerned when it comes to arbitration. But nevertheless, if you want to be successful in establishing a claim, then the ingredients that will have to go into the claim and the evidence that is necessary to establish the claim are a must, whether law requires it or does not require it, your client requires it and therefore you will have to be very careful in framing your pleadings. So far as the Civil Courts are concerned, I am going ahead with this lecture keeping in mind the law students and raw law graduates who are in the beginning. This is not for the seasoned lawyers who might have done hundreds of suits and hundreds of arbitration cases. Therefore, let not anyone think that I am going into too much of the basics. My intention is to go into the basics for the law students and the beginners. So far as the civil suits are concerned, a suit is initiated by filing of a plaint and once the plaint is numbered and summons are served on the defendants, they are called upon to come forward with their defense which is called the written statement. And along with the written statement, if the defendant has a claim against the plaintiff, then law enables him to file a countersuit which is called a counterclaim. So far as pleadings in general are concerned, it is contained in order six of the civil procedure court. Specific rules relating to the plaint are contained in order seven civil procedure court. So far as written statements, set off and counterclaim is concerned, it is contained in order eight of the civil procedure court. Now, what are the basic rules of pleadings which are necessary in a commercial transaction? You can just turn to order six. Order six rule two, it says that every pleading shall contain and mark this word contain only a statement in a concise form of material facts on which the party pleading relies for his claim or defense as the case may be, but not the evidence by which they are to be proved. Every pleading shall that is procedural when necessary be divided into paragraphs numbered consecutively each allegation being as far as convenient contained in separate paragraphs. Therefore, what is required is you are not bound to plead the evidence itself in the plaint, but whatever is the material fact on the basis of which your cause of action has arisen and on the basis of which your relief is sought for will have to be there. That is the first basic rule which any teacher on CPC will impart in the class to the students. Then the next one which will be important is rule four of order six. There are certain cases where special pleadings will have to be there over and above pleading the material facts alone. There are certain circumstances such as misrepresentation, fraud, breach of trust, willful default, undue influence. In all those cases, the particulars may be necessary beyond such as are exemplified in the forms of foresight. CPC has also given certain forms which can be used subject to improvements being made. So, over and above what is there in the form, special particulars will have to be given with regard to misrepresentation, fraud, breach of trust, willful default, undue influence etc. For example, a person has executed a contract. He wants to deny the obligation of performing his part by saying that he did not voluntarily sign the agreement under undue influence he had done that. It is not sufficient if it is merely pleaded that I had signed it under undue influence. Over and above pleading undue influence, you will have to give particulars as to what is the nature of force that was imposed on you in whose presence there were 10 people surrounding me. They compelled me to sign at so and so time, at so and so place. I had no other go and therefore I signed. Like that wherever it is misrepresentation, wherever it is fraud, wherever it is undue influence, such particulars are necessary and that is what is set out in sub rule 4 of order 6. Then sub rule 6 is also of some importance. Sub rule 6, sub rule 8 and sub rule 9 can be seen together. Sub rule 6 says, any conditioned precedence, the performance or occurrence of which is intended to be contested shall be distinctly specified in the pleading by the plaintiff or the defendant as the case may be, subject there to an averment of the performance or occurrence of all the conditions preceded and necessary for the case of the plaintiff or the defendant shall be implied in the pleading. Now, if a suit is filed against the government, then a notice under section 80 has got to be issued. If a eviction petition is filed for willful default and payment of rent, in Tamil Nadu there is a provision that if a notice is issued and in spite of the notice and the notice period as per law having passed if the payment has not been made, then the default is presumed to be willful. Therefore, if you want to rely upon a conditioned precedent for the purpose of drawing a presumption, then the fact that you have issued a notice, the fact that the notice has been served, the fact that you have waited for the period contemplated with the notice and the fact that there has been no payment thereafter. These are all the material facts for the purpose of taking advantage of the conditioned precedent and therefore, it has got to be pleaded. Similarly, if you file a suit against the government, section 80 notice has to be issued unless it is waived and you will have to plead. I have issued the notice on so and so date, it has been served on so and so date for two months thereafter there has been no response and therefore, I am now filing the suit. Therefore, as per sub rule 6, wherever any conditioned precedent is necessary and that has got to be pleaded the details of that has got to be mentioned. Then sub rule 8, denial of contract, where a contract is alleged in any pleading, a bare denial of the same by the opposite party shall be construed only as denial in fact of the express contract alleged or matters of fact from which the same may be implied and not as a denial of legality or sufficiency in law of such contract. And then 9, wherever the contents of any document are material, it shall be sufficient if in any pleading to state the effect thereof as briefly as possible without setting out the whole or any part thereof unless the precise words of the document or any part thereof are material. Therefore, whatever is material for the purpose of building up your case to reach the cause of action to support the relief they have to be pleaded and this is what has been enumerated in order 6. And then if we go to order 7 which specifically deals with planes, order 6 as I already told is applicable to both pleading as a complaint and written statement that is common to both. Order 7 is specifically with regard to planes and sub rule 1 is procedural with regard to the plane name of the plaintiff description etc. Then 2, in money suits where the plaintiff seeks to recovery of money, the plane shall state the precise amount claim except in cases where it cannot be ascertained like in a suit for accounts or in a suit where you are claiming mean profits, you will not be able to assess it at the time when you file the complaint. Under those circumstances you may say that I will ascertain the damages specifically in the course of the proceedings but as of now tentatively I assess it and claim it as so and so subject to an undertaking that as and when I compute it properly and in full I undertake to pay the court fees for that that is enabled under rule 2. Then sub rule 7 relief to be specifically stated, every plane shall state specifically the relief which the plaintiff claims either simply or in the alternative and it shall not be necessary to ask for general or other reliefs which may always be given by the court may think just to the same extent as if it had been asked for and the same rule shall apply to any relief claimed by the defendant in his written statement. Now when you claim a suit may be filed for declaration of title and recovery of possession or a suit may be filed for declaration of title related to removal property and injunction asserting that we are in possession but however as an alternative we may also plead that if in any view the court comes to the conclusion that we are not in possession but our title is declared we should not go remedy less therefore we can have an alternative plea of recovery of possession if it is held that we are the order of the property but we are not in possession therefore we will not be entitled to injunction in the alternative we can ask for recovery of possession similarly we can ask for damages damages may be a liquidated sum as ascertained in the contract or in the alternative if the court comes to the conclusion that we are not entitled to the fixed amount as liquidated damages in the contract even then I have suffered X amount of damages actually therefore that X amount I should be given therefore alternative reliefs you should not be driven to a different suit the intention of enabling a plaintiff to come forward with specific reliefs and also reliefs in alternative is to avoid multiplicity of proceedings and see that a defendant is not vexed twice on the same cause of action if you file a suit for a relief and if on the same pleadings on the same cause of action you are entitled to an alternative relief also you will have to ask for that alternative relief also in the same suit and not reserve your right to file a subsequent suit at a later point of time for which there are other provisions whether you are entitled to it or not entitled to it but so far as order 7 rule 7 is concerned it enables a plaintiff to come forward with a relief and also an alternative relief and then next thing which will be important is rule 14 this may appear on the face of it contrary to order 6 rule 2 order 6 rule 2 says that you have to plead the material facts but you need not plead the evidence but order 7 rule 14 provides where the plaintiff sues upon a document or relies upon a document in his possession or power in support of his claim he shall enter such document in a list and shall produce it in court when the plaintiff is presented by him and shall at the same time deliver the document and a copy thereof to be filed with the plaintiff where any such document is not in possession or power of the plaintiff he shall where possible state in whose possession or power it is a document which ought to be produced in the court by the plaintiff when the plaintiff is presented or to be entered in the list to be added or annexed to the plane but is not produced or entered accordingly shall not please market shall not without the leave of the court be received in evidence on his behalf at the hearing of the suit however there is an exception nothing in this rule shall apply to document produced for cross examination of the plaintiff's witness or handed over to a witness merely to refresh his memory earlier before the amendment of the plane this amendment was introduced in the year 2002 prior to that there will be two sub rules or 7 rule 14 1 documents which are relied on order 7 rule 14 2 documents which may be relied on at a later point of time therefore you will have to produce the first set of documents along with the plane and documents which are going to rely upon at a later point of time you will have to give it in a separate list and produce it at later point of time but the lawmakers thought that time that is consumed by civil proceedings is getting elongated and therefore whatever document the plaintiff wants to rely upon he will have to produce it along with the plane and also give it to the defendant along with the plane and if any document has not been produced along with the plane but is necessary to be relied upon at a later point of time then sufficient reasons has to be given and an affidavit has to be filed and the court has to be satisfied with the reasons and only with the permission of the court you will be entitled to rely upon the same this at first blush may seem it is contrary to order 6 rule 2 which says that evidence need not be pleaded but on a careful analysis of order 6 rule 2 and order 7 rule 14 it can be seen that cpc is not calling upon you to plead the evidence it is only saying that whatever is the document which you are having in your custody in support of your pleadings you produce that document along with the plaint itself this is for the purpose of shortening the time that may be taken and to reduce the number of adjournments for getting the documents and then producing the documents this is now this is done so far as plaint is concerned coming to written statement it is important that order 8 rule 2 in a written statement you may simply deny the plaintiff's case and put the entire burden on him or apart from denying the plaintiff's case you may have a new case of your own to plead suppose you are the owner of the property and the plaintiff says that you have conveyed the property to him on a particular day and thereby he has become the owner but you are not handing over possession and therefore he is filing a suit for recovery of possession in such a suit there may be a mere denial saying that I have never executed a sale deed in his favor and therefore the question of me handing over possession to him does not arise that is a mere denial but there may be cases where you may have a new case to be pleaded suppose you say that I have actually signed a document but I signed it under initiating circumstances or he wanted some security for a loan which he gave to me and therefore I have given it to him subject to a right of reconvenience or whatever it is whatever may be the facts if you have to plead something apart from mere denial of the pleadings of the plaintiff that has got to be specifically pleaded and that is provided in order 8 rule 2 CPC the defendant must raise by his pleading all matters which show the suit not to be maintainable or that the transaction is either wide or widable in point of law and all such grounds of defense if not raised would be likely to take the opposite party by surprise or would raise issues of fact not arising out of the plaint as for instance fraud limitation release payment performance or facts showing illegality therefore apart from mere denial if you have any other defense such defense also should be pleaded so that the plaintiff is put on notice of what case he has got to meet and so that he can be prepared to go ahead with the trial then sub rule 3 denial to be specific it shall not be sufficient for a defendant in his written statement to deny generally the grounds alleged by the plaintiff but the defendant must deal specifically with each allegation of fact of which he does not admit the truth except damages 4 has to be read along with this where a defendant denies the allegation of fact in the plaint he must not do so evasively but answer the point of substance thus if it is alleged that he has received a certain sum of money it shall not be sufficient to deny that he received that particular amount but he must deny that he received that sum or any part thereof or else set out how much he has received and if the allegation is made with diverse circumstances it shall not be sufficient to deny it along with those circumstances for example if a suit is filed saying that on so-and-so date I have lent a sum of rupees 1 lakh and the defendant has signed a promissory note and given it to me he has not paid the money therefore I am filing the suit just see how a particular denial will be I strongly deny the allegation that on so-and-so date a sum of rupees so-and-so has been lent to me and I have signed a promissory note if you deny the plaintiff's case alone then it may give room to an interpretation that on that day you did not receive money you did not receive 1 lakh and you did not sign a promissory note that means you might have received money on some other day you might have received some money other than 1 lakh or you might have executed a security document other than a promissory note therefore to rule out such a case CPC actually teaches us CPC is teaching a council how he should put his pleading like saying that don't merely deny if you have a case to be pleaded please plead that case under order aid rule 2 don't deny vaguely don't deny in one word you will have to say I have not received any money from the plaintiff on so-and-so date or any other date I have not received a sum of rupees 1 lakh as alleged by the plaintiff or any other amount I have not executed a promissory note in favor of the plaintiff acknowledging the said sum of money as alleged by the plaintiff or any other document as claimed by the plaintiff therefore you are blocking all gates neither 1 lakh nor any other amount has been received neither on so-and-so date nor on any other date neither a promissory note nor any other document thereby the entire burden goes to the plaintiff to show what is the amount we have actually lent on what date what is the document etc that is the perpet of rule 4 then rule 5 every allegation of fact in the plane if not denied specifically or by necessary implication or stated to be not admitted in the pleading shall be taken to be admitted except against the person who has got disability see section 5 sub rule 5 says that if you don't do what is required to be done as told above it amounts to admitting the allegations in the plate now we'll come to the most important part of order 8 which will happen almost in every case in a suit arising out of a contract there will definitely be a counterclaim in every arbitration case and in every suit arising out of a contract when there is a breach alleged the plaintiff will say that the defendant has got to pay me so much the first defense of the defendant will be I am not liable to pay any money to him it is he who has committed breach and I have suffered damage and therefore I am entitled to a counterclaim and that is now contemplated and that is now spelled out in order 8 rule 6 where in a suit for recovery of money the defendant claims to set off against the plaintiff's demand any ascertain some of money legally recoverable by him from the plaintiff not exceeding the pecuniary limits of the jurisdiction of the court and both parties filled the same character as they fill in the plaintiff's suit the defendant may at the first hearing of the suit but not afterwards unless permitted by the court present a written statement containing the particulars of the debt sought to be set off then counterclaim is 6a a defendant in a suit may in addition to his right of pleading a set off under rule 6 set up by way of a counterclaim against the claim of the plaintiff any right or claim in respect of the cause of action accruing to the defendant against the plaintiff either before or after filing the suit but before the defendant has delivered his defense and before the time limited for delivering his defense has expired whether such counterclaim is in the nature of a claim for damages or not provided that the counterclaim shall not exceed the pecuniary limits of the jurisdiction of the court this has come up for interpretation counterclaim can be filed along with the written statement that is before the first statement of defense has been filed or if it is not so filed court say that it has got to be liberally interpreted and therefore if the limitation has not expired then the counterclaim can be filed in the same suit and these are all the relevant provisions so far as pleadings are concerned to sum up I can say that all material facts have to be pleaded special facts have to be pleaded in respect of fraud misrepresentation undue influence coercion etc so far as defense is concerned defense has got to be specific it should not be vague any special facts that has got to be pleaded has got to be pleaded any conditioned precedent that has got to be pleaded has got to be pleaded and so far as alternative reliefs are concerned if at all you're asking for any alternate relief if that also should be pleaded and the documents on which you're relying upon in support of your suit has got to be filed at the first instance itself unless the court gives you leave to produce it at a later point of time and along with the written statement you may have a set off or you may have a counterclaim and the counterclaim will be treated as if it is a plaint and to that counterclaim the plaintiff will be entitled to file a written statement where all the rules relating to written statement will be applicable and with that the pleadings part is over and now coming to the topic on liquidated damages and unliquidated damages and the evidence that is required for the same so far as liquidated damages is concerned it is an ascertained amount which one is entitled to claim from the other on account of the happening of an event that is a breach said to have been done by the other person to say as an example liquidated damages will the the terms will be available in almost all construction contracts EPC contracts turnkey contracts where it will contain a clause that the contract should be performed within a period of two years if it is not so performed within a period of two years then the party of the first part that is the person who is engaging the contractor that is the employer will be entitled to liquidated damages at a particular percentage say for instance half percent of the total contract value subject to a maximum of 5 percent or 10 percent whatever it is if it is so provided then it is liquidated damages if if the quantum is not fixed in the contract then damages will be called unliquidated damages there has been a breach and one party has suffered damage on account of the breach and is entitled to be compensated but what is the extent to which the person is entitled to be compensated that has got to be ascertained therefore an unacertained dumps some which has got to be ascertained is called unliquidated damages for enforcing a claim for liquidated damages but for section 73 and 74 of the contract act one may say that I have to prove only two things one is breach two is a clause providing for liquidated damages therefore if it is admitted or it is proved that the contract was entered into on 1st January 1996 two years was provided the work has not been completed by 31 12 1997 two years is over now give me half a percent for every month of delay subject to a maximum of five percent don't ask me to prove anything that will be we will be entitled to ask for that but for section 73 and 74 of the contract to a normal person they may say that why should I go for any proof consensus ad item we both have agreed he has agreed to pay me in the event of default that default has happened therefore don't ask for anything more please pay me the money but that is not so the framers of law thought that nobody should have any unjust enrichment merely because another person has committed a mistake or another person has committed a breach though the contractor has committed a breach by not completing the work within time if the employer has not suffered any damage why should he be presented with half a percent per month or five percent overall as liquidated damages unless he has actually suffered some damage that is the thread that runs through section 73 and 74 of the contract 73 of the contract act compensation for loss or damage caused by breach of contract when a contract has been broken the party who suffers by such breach is entitled to receive from the party who has broken the contract compensation for any loss or damage caused to him thereby which naturally arose in the usual course of things from such breach or which the party is new which they may when they made the contract to be likely to result from the breach of it such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach then 74 the next part of 73 we need not go into it that is a quasi contract then 74 compensation for breach of contract where penalty stipulated for when a contract has been broken if a sum is named in the contract as the amount to be paid in case of such breach or if the contract contains any other stipulation by way of penalty the party complaining of breach is entitled whether or not actual damage or losses proved to have been caused thereby to receive from the party who has broken the contract mark this word reasonable compensation not exceeding the amount so named or as the case may be penalties stipulated for therefore 73 says when there is a breach of contract the other party is entitled to be compensated for any loss or damage that has directly flown from the breach not something which is remote directly flown from the breach he is entitled to compensation 74 deals with the case where the contract itself stipulates the amount which has got to be paid by way of compensation or by way of penalty and if such compensation or penalty has been provided for in the contract itself then actual damage need not be proved but the person who has suffered on account of the breach is entitled to what is not given in the first part of section 74 the cap has been introduced in the later part of 74 by saying the person who has suffered damage is entitled to reasonable compensation not exceeding the amount which is contemplated that is for 73 and 74 put together let us see a hypothetical situation there is a contract for supply of cement bags 1000 cement bags has to be supplied within a period of one month and if 1000 cement bags are not supplied then 100 rupees has got to be paid per bag as compensation for the period of default let it be that it is supplied after one month if it is supplied within a period of one month 100 rupees per bag has got to be paid in excess if this is the contract and applying section 74 if the cement bags have not been supplied within one month there is a breach therefore the employer is entitled to damages he is entitled to compensation but then imposing a sum of rupees 100 per bag for one month is in the nature of a penalty the employer will not be entitled to enforce this and say that 1000 bags into 100 rupees you give me this much amount of money he will be entitled to reasonable compensation which shall not exceed 100 rupees suppose he says that you did not supply the 1000 bags to me therefore I had to buy the 1000 bags of cement from another alternate to supplier you agree to supply it to me for 350 rupees per bag I was forced to purchase it for 375 rupees per bag therefore 25 rupees per bag is the additional amount which I have incurred by way of expenditure over and above what I would have paid to you and at what price I'm entitled to buy from you therefore 25 rupees into 1000 bags will be the actual loss that is the reasonable compensation suppose in a given case he was not able to buy at 450 rupees but he had to buy only at 475 then the second part of section 74 will come he will be entitled to reasonable compensation not exceeding the amount which is stipulated the amount which is stipulated is 100 suppose he has spent 125 rupees more per bag the employer will not be entitled to ask for 125 rupees per bag he will be entitled only up to the cap therefore under section 74 you are not entitled to the maximum amount which has been prescribed because it is the nature for penalty when the actual damage is less than that you will not be presented with a bouquet of 100 rupees per cement bag because that will amount to unjust enrichment you will be entitled only to the actual if you have incurred loss more than what has been stipulated you will be entitled only to the maximum which was contemplated and you will not be entitled to something more this is in a case where there has been a prescription in the contract itself if there is no prescription of the contract itself we will go by section 73 and under 73 whatever is the direct link between the breach and the loss that is suffered that has got to be ascertained and whatever is ascertained you will be entitled to this is the broad interpretation of section 73 and 74 and it arises more often in construction contracts and more than the civil courts all arbitration cases and claims are flooded with the claims for liquidated damages and unliquidated damages what the courts have held that a person is not entitled to the amount which has been prescribed in the contract because it is the nature of a penalty but there is an exception to that if the actual quantum cannot be ascertained and there is a pleading that it is a genuine pre-estimate of damage that is before the contract has been entered into if the parties have genuinely estimated that this will be the loss that the employer will suffer if there is a breach and such genuine pre-estimate has been arrived at by the parties on a consensus ad item then and only then they will be entitled to enforce the claim for liquidated damages without any necessity for any further proof unless it is a genuine pre-estimate of damage and unless it is a case where damage cannot be ascertained the quantum of damage cannot be ascertained the courts will not award what has been contemplated between the parties with the agreement therefore what is necessary is that one there should be a contract two there should be a breach by one party three on account of such breach the other party should have suffered some damage four as a direct consequence the other party has suffered some quantum of damage on account of the breach then the employer is entitled to compensation under section 73 so far as 74 is concerned there should be a contract there should be a prescription of an amount in the contract three such prescription should be a genuine pre-estimate of the damage that may occur four there should be a breach five on account of the breach the person should have suffered a damage six even if it is a pre-estimate of damage unless the person has actually suffered damage he will not be entitled to the entire amount he will be entitled only to reasonable compensation unless you say that the compensation cannot be ascertained at all and at any rate he will not be entitled to compensation over and above the amount which has actually been fixed with the contract these are the conditions so far as 73 and 74 are concerned and there are number of cases which have come up for interpretation on 73 and 74 before the honorable supreme court and to name a few popular cases we can first see Maulau box versus union of India a very very simple case where there was a contract entered into with the government for supply of eggs and fish the condition the contract provided that if there was a failure of performance then the deposit which was made in those days 8500 rupees the deposit which was made will be forfeited by the government that is they will appropriate that amount as if it was towards the damage supreme court said that you are not entitled to appropriate that amount of rupees 8500 which has been given as earners for a deposit you are not entitled to forfeit it you are not entitled to appropriate it to appropriate it because it will amount to a penalty on the other hand supreme court said that it is not a case where you cannot ascertain the damage in quantum which you have actually suffered it is possible to ascertain the amount because of the failure of the contractor to supply the eggs and fish as agreed by him if you have bought it and source it from some other person at a higher cost what is the price at which you have bought what is the difference between the price which the contractor and agree to sell to you supply to you and what is the price at which you have bought it outside you are entitled only to that much therefore applying the principles of section 74 this is what the supreme court has said it is true that in every case of breach of contract the person agreed by the breach is not required to prove the actual loss or damage suffered by him before he can claim a decree and the court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract but the expression whether or not actual damage or loss is proved to have been caused thereby is intended to cover different classes of contracts which come before the courts in case of breach of some contracts it may be impossible for the court to assess compensation arising from breach while in other cases compensation can be calculated in accordance with established rules where the court is unable to assess the compensation the sum named by the parties if it is regarded as a genuine estimate may be taken into consideration as a measure of reasonable compensation but not if the sum named is in the nature of penalty where the loss in terms of money can be determined the party claiming compensation must prove the loss suffered by him and coming to the facts of that case supreme court says in the present case the government could have proved the rates at which they had purchased and also other incidental charges incurred by them in procuring the goods contracted for but no such attempt was made therefore they were not entitled to the claim supreme court therefore says that summing up on 73 and 74 they say if an amount is stipulated and it is a genuine estimate and the actual loss cannot be ascertained the court can be led by the amount which has been agreed between the parties and presume that what has been agreed between the parties is a fair and reasonable compensation but if it is a case that it can be ascertained but no steps has been taken to ascertain it then they will not go by what has been agreed between the parties even if it is provided in the contract the next judgment on the same line 1974 to a cc page 231 raman iron foundry union of india versus raman iron foundry i don't want to read this because they only reiterate this subsequently in 2003 5 a cc page 705 supreme court in omgc versus sawpipes one of the most leading cases and if you go into any case of liquidated damages and unliquidated damages section 73 or 74 there will be no judgment without making reference to omgc versus sawpipes and in omgc versus sawpipes they had gone into several questions as to whether an orbital award can be set aside by the court under section 34 that is on merits and what is against public policy etc incidentally the question which arose in that case was there is a provision contained in the agreement providing for liquidated damages whether omgc was entitled to press for that sum of liquidated damages and that is paragraph 46 from the aforesaid in para 45 they extract 73 and 74 of the contract act and in 46 this is what they say from the aforesaid sections it can be held that when a contract has been broken the party who suffers by such breach is entitled to receive compensation for any loss which naturally arises in the usual course of things from such breach these sections further contemplate that if parties knew when they made the contract that a particular loss is likely to result from such breach then they agree for payment of such compensation in such a case there may not be necessity of leading evidence for proving damages unless court arrives at a conclusion that no loss is likely to occur because of such breach further in cases where court arrives at a conclusion that the term contributing damages is by way of a penalty the court may grant reasonable compensation not exceeding the amount so named in the contract on proof of damages however when the terms of contract are clear and unambiguous then its meaning is to be gathered only from the words used therein in a case where agreement is executed by experts in the field it would be difficult to hold that the intention of the parties was different from the language used therein in such a case it is for the party who contains that the stipulated amount is not reasonable compensation to prove the same they refer to another similar case patechan just like raman foundry and maula box and ultimately they conclude that if it is a genuine pre-estimate of damage then they are entitled to it that is there in paragraph 68 terms of a contract are required to be taken into consideration before a conclusion whether the party claiming damages is entitled to the same two if the terms are unambiguous stipulating the liquidated damages in case of breach of contract unless it is held that such estimate of damage bar compensation is reasonable or by way of penalty the party who has committed the breach is required to pay such compensation and that is what is provided in section 73 of the contract act section 74 is to be read along with section 73 and therefore in every case of breach of contract the person agreed by the breach is not required to prove the actual loss or damage suffered by him before he can claim a decree court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of breach of contract in some contracts it would be impossible for the court to assess the compensation arising from the breach and if compensation contemplated is not by way of penalty or unreasonable court can award the same if it is a genuine pre-estimate by the parties as a measure of reasonable compensation now very recently a judgment has been rendered by the honour of supreme court in 2022 to ACC pay 382 this may be a diversion from what has been held so far in this case the arbitral tribunal held that time which is provided in the agreement is not the essence of contract therefore liquidity damages which has been provided for the contract even though it says it is a genuine pre-estimate of damage even then the employer is not entitled to it that was the finding of the arbitral tribunal and the supreme court refused to interfere with that and approved the award of the arbitral tribunal after it had come to the supreme court from the high court and held that one under section 34 the scope of interference is less even otherwise they justified and upheld the findings of the arbitral tribunal in saying that time is not the essence of contract even though it has been prescribed that time was the essence of contract and I'll tell you the reasons for that and therefore they were not entitled to liquidity damages on the other hand in the alternative a relief was given to them to the extent of the actual sum which was suffered by them as damage to understand this judgment it's only better to read what the clause was clause 9 of the agreement which is extracted in paragraph 5 of the judgment time and date of delivery is the essence of the supply order and delivery must be completed not later than the date specified therein it must be noted that delayed supplies even delivery and or accepted by the purchaser will be treated as supplied but effected after the schedule period without prejudice to failure and termination clause even the extension in delivery period is granted even when extension in delivery period is granted such acceptance of extension as the case may be will be without prejudice to claim damages under failure and termination clause unless the purchaser clearly waves his right in writing to recover such damages with the approval of the competent authority clause 10 provided for failure and termination clause bar liquidated damages it says time and date of delivery shall be the essence of the contract if the contractor fails to deliver the stores or any installment thereof within the period prescribed for such delivery in the schedule or at any time repudiates the contract before the expiry of such period the purchaser may without prejudice to any right or remedy available to him to recover damages for the breach of contract a recover from the contractor as agreed liquidated damages and not by way of penalty a sum equivalent to half a percent of the contract price for the whole unit per week for such delay or part thereof within bracket this is an agreed genuine pre-estimate of damage duly agreed between the parties which the contractor has failed to deliver within the period up to a maximum of 5 percent therefore this clause itself has been written after reading the propositions of law laid down by the supreme court in the long line of judgments that if it is a genuine pre-estimate of damage and time is the essence of contract further proof is not required and parties are at consensus ad item therefore the party who has suffered on account of the breach is entitled to claim the damages this is the clause in spite of this the orbital tribunal held that the employer was not entitled to the damages for two reasons one there was an extension of time given for supplies the agreement says that even if extension is given they are entitled to claim damages but still the interpretation was that on one hand you say time is the essence of contract on the other hand you are granting extension of time to enable the supplier to continue the contract and supply thereby the term time is the essence of contract has lost its significance once it has lost its significance then you are not entitled to sit on that time is the essence of contract and in almost all the construction contracts supreme court says that time cannot be the essence of contract once time is not the essence of contract then the prescription with regard to liquidary damages saying that you have to pay x amount of money for x amount of delay also pales into insignificant you are not entitled to it under section 73 and 74 you are entitled to only the actual amount which you have suffered and this is what the supreme court says in the finding of the orbital tribunal is in paragraph 11 of the judgment is extracted in paragraph 11 of the judgment the orbital tribunal at the outset held that merely having a clause in the contract making time the essence of it would not be determinative rather an overall view having regard to all the terms of contract are to be taken into consideration further they noted that the contracts containing provision for extension of time or payment of penalty on default would dilute the obligation of timely performance and render the clauses imbuing time as essence of contract ineffective additionally orbital tribunal also noted that generally under construction contracts time is not the essence ultimately on this issue the orbital tribunal noted one time is not the essence and two they are not entitled to liquidary damages on the aspect of liquidary damages orbital tribunal held that liquidary damages which are pre-estimated damages cannot be granted as there was no breach of contract due to the fact that time was not the essence once time is not the essence then the question of breach does not arise once breach does not arise the question of pre-estimate and payment of the damage also does not arise and this was affirmed by the supreme court and the reasonings by the hon. supreme court runs from para 34 they deal with what is the essence of contract and also they deal with what is the actual loss that has been suffered by them and therefore they confirm and they refer to ONGC was a sawpipes also in para 38 and they reiterate all these principles subject to one deviation saying that even if it is provided that it is a genuine pre-estimate of damage they will not be entitled to claim that amount if the contract contains a clause for extension also therefore don't read one clause in isolation read the contract as a whole in one place they say time is the essence in another place they say that if there are sufficient reasons time can be extended once you say time can be extended then the other clause time is the essence of contract fails in the insignificance because it fails in the insignificance there is no breach of contract because there is no breach of contract they are not entitled to liquidate damages but what is the actual loss that has been suffered by you you compute it you prove it and you are entitled to it therefore this is what that is the latest word on liquidate damages and unlimited damages by the supreme court where they have referred to all the earlier judgments also so now coming back to the summation now we have these two side by side one what is to be stated in the pleadings two what are the principles for liquidate damages and unlimited damages now when you go forward with the plane and the contract contains a clause for liquidate damages what should go into your pleading and what is required to be provided in evidence I will sum up in that if it is a contract containing a clause relating to time breach and liquidate damages what you have to plead is that there is a written agreement that is a material fact coming under order 6 rule 2 what are the conditions preceded that there is a clause containing a provision for liquidate damages law says that it should be a genuine pre-estimate therefore in your pleading you will have to say that this is the contract this is the date by which they have to supply in the event it is not supplied the employer is certain to suffer damages this is not something which I am subsequently pleading this is something which was known to both the employer and the supplier at the inception itself and when they negotiated and entered into the contract itself this was discussed and as a genuine pre-estimate of damage this amount has been arrived at that should also be in your pleading next is the date has passed the supply has not been made X amount should have been supplied by Y date whereas they have supplied a lesser amount and by a later date and thereby they have committed breach the fourth part of the pleading is on account of the breach I have suffered damage but the damage is incalculable because it depends upon various factors which cannot be calculated by me and that is why we have discussed about this at the inception itself and entered into an agreement and as a genuine pre-estimate we have arrived at this amount and therefore I am entitled to this amount that should be the pleading so far as only liquidated damages is concerned if you are asking for unliquidated damages in a case where the contract has not provided for a fixed amount then what is the obligation between the parties what is the time by which it has got to be done then the defendant has committed breach which breach is not on account of anything that is attributable to the plaintiff because if the plaintiff is also a cause for the defendant in not being able to perform the contract then you will not be entitled therefore to rule out that you will also have to say that the defendant has committed breach for which the plaintiff is not in any way responsible and as a result the plaintiff has suffered damage and this is the actual amount which I have suffered as damage and this will arrive I can give you a very clear example for this there is an agreement for purchase of electrical energy from a electric from a power generating plant and the price at which we have agreed to purchase is 5 rupees 50 price per unit they have to supply for one year they have to supply one lakh units per month suppose they have supplied only 80 000 units per month and the supply has stopped with the eighth month or ninth month then calculate the number of days of default number of units of default that shows the breach what is the loss suffered by you because of the fact that they have not supplied electricity you have consumed in excess from the electricity board or you have operated your diesel generator for the purpose of generating power this is the cost at which I have purchased diesel and had I been supplied the electrical unit from them 5 rupees 50 price into x number of units that has been substituted by electrical generator by diesel generator this is the cost therefore this minus this is the actual loss suffered by me this has got to be the pleading so far as the unliquidated damages is concerned and as per order 7 rule 14 you will have to file all the documents the contract the notices exchanged between the parties which established the breach the log books by which you show what is the energy that has been supplied by them and what date up to what time and then the fact that you have purchased diesel for the purpose of running your diesel generators the bills and invoices so far as that is concerned your account books everything all this has got to be filed under order 7 rule 14 this will be what is necessary so far as a plaint is concerned coming to a written statement without a counter claim what can be the pleading and what can be the defense in the written statement you can say even though time has been fixed as the essence of contract there are other classes contained in the agreement these are the classes and by these classes the term providing for time as essence of the contract has become insignificant two in contracts of such nature time cannot be the essence of contract three even though the agreement says it is a genuine pre-estimate of damage it is not a genuine pre-estimate of damage it is something where the actual loss can be ascertained and since the actual loss has not been suffered by them actual loss has not been ascertained and pleaded by them they are not entitled to it this can be your defense if you don't plead these things in a written statement then the pleading and the term in the contract that it is a genuine pre-estimate of damage will stand if that stands then as per ONGC was a stop pipes the plaintiff will be entitled to a decree therefore while you are defending a claim for liquidary damages in your written statement you have to specifically deny one whether there is a breach or no breach plead that any additional facts on your side which you have to plead you plead that if you say that the fault was not attributable to you it was because of something which he has to enable me to do it he has not enabled me to do it therefore I was not able to do it this is a special fact which you have to plead therefore under order 6 rule 4 you have to order order 8 rule 4 you have to plead that therefore in a written statement denial of the plaintiff's case pleading of the additional facts which you have to plead then special pleadings with regard to pre-estimate time is a sense of contract etc you have to plead it is by nature of a penalty and therefore you are not a plaintiff is not entitled to it all these things unless you plead you will not be entitled to argue on that you will not be entitled to lead evidence on that one cardinal principle is that no amount of evidence can be looked into unless it is backed with a foundation in the pleadings in the pleading if you don't say that it is not a genuine pre-estimate of damage there has been no discussion at all between the parties and he has a stereotype the previous agreements which were entered into by the government it is a standard form contract there has been no discussion at all unless you plead it in your proof of it out you are not entitled to give evidence in that regard therefore very carefully at pleadings denial has to be specific additional facts has to be pleaded and what is necessary and what is material has got to be pleaded like what I have said about and in a counterclaim just like a plaint in a counterclaim if you come forward with a plea for liquidary damages or unlimited damages follow all the rules which I have said with regard to the plaint and whatever is the evidence that evidence has to be led in the form of proof of it out and documents documents has got to be filed along with the plaint unless you get the permission of the court explaining the circumstances that you are not able to get these documents at that point of time and then lead the evidence therefore pleadings is very important proving what you have pleaded is the secondary aspect if you do both then you are bound to succeed subject to the conditions which have been mentioned in section 73 and 74 and other provisions of the contract act and the judgments rendered by the force and with this I will conclude and I thank the organizers and all of you who have participated here and who have been listening patiently to me thank you very much thank you thank you so much and we all knew that your sessions are always insightful and rightly so I was reminded that Aparna had connected with Mr. Manishankar and he got it connected with you and the way the people have actually latched up on the youtube it shows the way you have shared the knowledge and people have appreciated I will just take the first question from the from the youtube itself it says if a person has purchased a house from a builder later the house gets damaged due to substantive construction can the buyer seek damages in the absence of any contract? Certainly he is entitled to damages because section 73 says if there is any breach and directly that is what has got to be pleaded and proved is that the terms of the construction contract and what has been delivered is substandard you will have to plead that and prove it and the damage that has been suffered is directly attributable to what what is the breach committed by the builder in such event the the buyer of the flat will be the buyer of the building he will be entitled to damages damages is a right that is given to him under law it may be it may be controlled by a contract but it is a right that flows from law. Yeah this is by Pratimand if the limitation period is over for filing a suit in case of a private property sir if the documents are not in the favor of the dependent has done these are all done if you also read probably the we don't so far as so far as limitation is concerned the right is not the the the right is there but the remedy is lost therefore law does not help a person who has slept over his right that is why they say under section that is why law provides under 25 of the contract act there can be a promise to perform a time bond contract because the right is always there if I have lent one lakh rupees to Ramasamy my entitlement to get that one lakh is always there but the remedy to go to court and file a suit and recover that money that remedy is lost because court will not keep the time for litigation endless and it will not keep the litigants waiting to see if a suit will come or not but if a person is good enough that he comes forward and he promises to pay the amount by a written contract by a written letter your promise to pay a time bar debt later on it cannot be defended saying that it is a time bar debt therefore you're not entitled to it the reason is the right always is there until I get back my one lakh my right to get that one lakh is there the remedy alone was lost that remedy is recreated by a subsequent promise under section 253 if there is no subsequent promise we have to thank our stars so rightfully summed up as I say the Vigilanta bus non-dormant yes yes and in one of the famous judgments by the honorable supreme court says that you can't open up just like a repair nickel or you just can't be a kumkarna for your rights and suddenly waken up yes yes and acknowledgement is also part of the limitation act would say that there is a difference between acknowledgement and your promise to pay a time bar debt promise to pay a time bar debt can be even subsequent to the period of limitation but your acknowledgement has to be within the period of limitation payment will extend the time of limitation acknowledgement will extend the time of limitation but these two things has to happen within the original period of limitation whereas under 253 of the contract act it can be even beyond you're not audible I have got muted yeah after a lot of time I'm seeing K. Sankara Raman he used to attend a webinar at the initial stage it shows your immense popularity I'm saying that the interplay between the section 25 and section 17 has been explained but this is by Sandeep if someone is defined by a TV channel due to wrong and biased reporting which telecast is seen by the entire state or a youtube etc does one have a damage a remedy for seeking unliquidated damages against such such persons he damages so far as defamation is concerned it is always only nominal and you cannot actually quantify it it is something in the nature of penalty unless you say that in a peculiar case where I was about to be given a contract and I had all the qualification for that contract and two days before signing of the contract there was a news publication saying that a building which was put up by this contractor has fallen down which building was not actually put up by me it was put up by somebody else and because of this news the contract which was to be signed by me was taken away and I was not given that contract had I performed that contract I would have earned X amount of damages X amount of profit if you can even then you cannot say that the damage that has been sustained by you is directly attributable to this person you will be entitled only to nominal damages the reason is the next factor will come mitigating factor had you been given the contract you will be spending one year or two years on that contract your men and material will be deployed and you will work and you learn that money whereas because this contract was not given your men are idle your material is idle you will be using it elsewhere and mitigating the damage which you have suffered suppose I have suffered one crore of damage which is loss of profit because of this tv news publication my contract has gone you can't sit at home for two years and say had I done that work I would have done that work for two years I would have earned two crores profit you give me the two crores profit that you will not get you will have to mitigate it mitigation use your resources use your men use your machine for some other contract and then you can say that I would have got two crores in that contract whereas I have earned only one crore 80 lakhs therefore give me this 20 lakhs difference you will be entitled to that much but I will do all that so Hudson formula will not come into being yes yes now I am saying that Hudson formula will not come into being what we use for the purposes of damages etc in the arbitration uh what do they say Hudson formula the estimated that this calculation has to be done whatever is lost in the contractor cases etc yes sir I can see I can gauge your popularity we had once requested Sanjay Pinto also for taking a session he has also joined us I will connect with him after the session he says in case of a concurrent breach when liquidated damages are only for a specific breach can unliquidated damages be claimed for other breaches as per Supreme Court in sale versus Gupta brothers yes that is what in the latest judgment also where liquidated damages was also provided but liquidated damages was not given but whatever other damages they have suffered they are entitled to it that is what Supreme Court has said in that Wells-Pons case 2022 yeah can it be claimed against the failure of power supply which led to the loss in production failure of power supply against the licensee that is against the board yeah board uh if it is see if they have a justification for that you you may not be entitled to it uh there there certainly there will be provisions contained in the uh electricity regulatory commission rules and regulations where they say that the board will not be liable to compensate you force major force major clause something I didn't do that so again one of your followers seems to be Subramanian Rajasekhar sir can you give any live examples without naming your clients for section 73 and 75 wherein one can wherein you have succeeded to derive of that electricity board case itself I will not name the case of the plaintiff uh the uh the substation had to be constructed within a particular time and it was not done within that time the defenses where that the land was to be made available by the electricity board to us there was problem with regard to acquisition and taking possession therefore they had extended the time and within the every extension contained a clause this is without prejudice to my right to claim liquidated damages I am giving you extension but I will levy liquidated damages in such a case we were able to satisfy the court that time has been extended therefore time is not the essence to the extension of time was after satisfaction that I am not responsible for that three even though liquidated damages has been provided for no actual loss has been sustained with the board because the substation had come a little later there is no evidence by them saying that some extra expenditure had been incurred by them they merely said this clause is there pay me the money the court said no and whatever amount which belonged to the plaintiff which was retained by the board was directed to be was decreed and they gave it with interest yeah so what I could have summed up Mr Pinto says it's a brilliant exhaustive and lucid lecture and something coming from Mr Sanjay Pinto speaks volume because the way he is or at least their knowledge is and other people are also sharing the same they're all this on all on the same page that the session was brilliant and needless to add one who has heard it and seen it you would actually realize it the way you have done it and before we end up the session today tomorrow we will be having a session since a lot of people had connected us to speak on these startups tomorrow is the interplay between the intellectual property and startups by SS Naganan a senior advocate he has already done various webinars with us and his knowledge is too good to be shared and Mr Venkat Raghun an advocate who is a council for a lot of startups so do stay connected with us tomorrow at 6 p.m and thank you Mr Sureshan it's always a pleasure hearing you thank you everyone thank you thank you thank you thank you Namaskar