Darshan Singh vs The Hindustan Cold Stores and Refrigeration (Private), Ltd.

R.S. Narula, J.—The circumstances giving rise to this Defendant''s Regular First Appeal against the decree of the Court of Shri Charan Singh Tiwana, Suordinate Judge, 1st Class, Amritsar, dated December 11, 1959, for a sum of Rs. 7,250 and costs in favour of the Plaintiff-Respondent, are these. The Respondent (hereinafter called the Plaintiff) used to carry on business of cold storage at Verka in district Amritsar. On February 11, 1958, the Appellant (whom I will call Defendant in this judgment) booked space for storage of 2,000 bags of potatoes in the cold storage of the Plaintiff for the period 1st March to 31st October, 1958. Not having been able to utilise the space, the original agreement was varied by a subsequent written contract Exhibit P. 9, dated June 6, 1958, whereby the reservation of the space for storage of potatoes by the Defendant was reduced to that for 1,000 bags at the original contracted rate of Rs. 7.25 P. per bag as hire charges. The Defendant having failed to utilise even that space, ultimately gave notice, Exhibit P. 10, dated June 21, 1958, to the Plaintiff wherein it was stated that for reasons mentioned in the notice, it had not been possible for the Defendant to make use of the space allotted to him in the Plaintiff''s cold storage, and that, therefore, the Defendant desired the Plaintiff to allot the space reserved for the Defendant to any other customer on hire immediately on the receipt of the notice. It was further stated by the counsel for the Defendant that the contract entered into by his client with the Plaintiff on June 6, 1958 (Exhibit P. 9) stood cancelled, and that the Defendant would not be liable to pay any hire charges or damages in any event. The Plaintiff immediately sent his reply Exhibit P. 11 through his advocate. In that reply he referred to the previous contract and stated that it was as a matter of concession that on June 6, 1958, the Defendant had been allowed to utilise space for 1,000 bags only instead of 2,000 bags, and that the said concession was given on the assurance given by the Defendant to the effect that he would be fulfilling his obligation. The Plaintiff''s reply to the Defendant''s notice ended with the following words:

Please take (notice) that my clients are keeping the space allotted to you till the end of the season and they do not accept your cancellation as binding on them. Please take note that the contract continues and your liability to pay the rental charges is continuing. You are at liberty if you so desire, to utilise the space. Please take note.

The Defendant not having stored any potatoes, the Plaintiff ultimately served notice, dated November 13, 1958, on the Defendant calling upon the latter to pay the former a sum of Rs. 7,250 on account of hire charges for the space allotted by the Plaintiff for the storage of 1,000 bags of potatoes to the Defendant. The amount claimed not having been paid, the suit from which the present appeal has arisen was filed by the Plaintiff in December, 1958.

In his written statement, dated March 2, 1959, the Defendant admitted the execution of the agreement Exhibit P. 9, dated June 6, 1958, but stated that it was a new contract, and that even the said new contract had been subsequently cancelled by notice. The Defendant denied that the Plaintiff had reserved space for 1,000 bags of potatoes for him, and disowned liability to pay anything on account of the notice of cancellation, dated June 21, 1958 (Exhibit P. 10), served by him on the Plaintiff. He also claimed that the contract in suit had become impossible of performance, and ultimately stated in paragraph 7 of his written statement, inter alia, as follows:

If it is held that the contract was not validly cancelled then in that event, the Plaintiff is guilty of negligence. The Plaintiff was under an obligation to take all reasonable steps to mitigate the loss flowing from the alleged breach, which the Plaintiff did not take and the Plaintiff thus is not entitled to recover hiring charges or damages from the Defendant at all.

In reply to the above quoted plea of the Defendant, it was stated by the Plaintiff in his replication, dated March 28, 1959, as below:

There was no negligence. The Plaintiff had kept the space reserved. Furthermore it was for the Defendant to bring potatoes for preservation and not for the Plaintiff to search for potatoes for preservation. There was no question of any negligence. The contract was subsisting and it had not been validly cancelled. All other considerations are irrelevant.

(3) From the pleadings of the parties, the trial Court framed the following issues:

(1) Could Defendant revoke,--vide notice, dated 21st June, 1958, the agreement between the parties on 6th May, 1958.

(2) Could the Defendant not perform his part of the contract due to the circumstances unforeseen and beyond his control?

(3) Did the Plaintiff reserve a space for 1,000 bags of potatoes in his cold storage?

(4) To what amount of rent and damages, if any, is the Plaintiff entitled?

After recording evidence of the parties, the trial Court by its judgment, dated December 11, 1959, held that the Plaintiff had on no occasion refused to perform his part of the contract, and consequently the Defendant had no right to put an end to the contract by any unilateral action. Issue No. 1 was, therefore, decided in favour of the Plaintiff. Issue No. 2 was found against the Defendant. Finding on issue No. 3 was recorded in favour of the Plaintiff. The judgment of the trial Court on issue No. 4 is confined to the following three sentences:

The terms of the contract Exhibit P. 9 are clear on the point that the Defendant had agreed to pay a sum of Rs. 7/4 as the rent for storing each bag. The Plaintiff was, therefore, deprived of rental charges to the extent of Rs. 7,250 by the breach of the contract on the part of the Defendant. The Plaintiff is, therefore, entitled to recover this amount.

At the time of admission of this Regular First Appeal against the abovementioned decree of the trial Court, it was directed by the Motion Bench (D. K. Mahajan, J.) that the decretal amount may be paid to the decree-holder on furnishing security for restitution in the event of judgment-debtor''s appeal succeeding. We are given to understand by the learned Counsel for the Appellant, that in pursuance of the said direction, the decretal amount has already been paid in full by the Defendant to the Plaintiff on the latter having furnished the requisite security.

At the hearing of this appeal Mr. Harbans Singh Gujral, the learned Counsel for the Defendant, fairly and frankly conceded that he was not in a position to contest the finding of the trial Court on issues No. 1 to 3. Regarding issue No. 4, he confined his submissions to the plea contained in paragraph 7 of his client''s written statement, which has already been quoted verbatim in this judgment. Counsel submitted on the authority of the judgment of this Court in Prem Singh v. The State of Punjab (Now Haryana State) 1968 CLJ. P&H 247, that it is the duty of the trial Court to frame proper and distinct issues (under Rule 1 of Order 14 of the Code of Civil Procedure) arising out of the pleadings of the parties. He submitted that the Defendant had been seriously prejudiced by the non-framing of any issue arising out of the statutory defence taken specifically by the Defendant on the basis of the explanation to Section 73 of the Indian Contract Act (9 of 1872). Section 73 provides that 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 parties knew, when they made the contract, to be likely to result from the breach of it. The statutory explanation to the abovesaid provision is in the following words:

In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.

Mr. Gujral submitted that as soon as paragraph 7 of the written statement and the corresponding paragraph in the replication were perused, it became the duty of the trial Court to frame appropriate issue or issues arising out of the said pleas. Counsel referred to the Division Bench judgment of the Calcutta High Court in Rahim Bakhsh Mandal and Ors. v. Sajjad Ahmad Chowdhary and Anr. AIR 1915 Cal. 160 , wherein it was observed that a party is not entitled to damages for breach of contract, if by the use of reasonable precautions he might have avoided loss. Reference was also made by the counsel for the same proposition to the basic judgment of their Lordships of the Privy Council in A.K.A.S. Jamal v. Moolla Dawood, Sons & Co. 43 I.A. 6., and to the law laid down by a Division Bench of the Calcutta High Court in Burn and Co. Ltd. Vs. H.H. Thakur Sahib Shree Lakhdirjee, , to the effect that there is a statutory obligation on the Plaintiff to minimise damages arising after the breach of contract has occurred. Counsel also referred in this connection to a Division Bench judgment of the Oudh Chief Court in AIR 1943 17 (Oudh) . In Dhulipudi Namayya v. The Union of India AIR 1958 A.P. 533, it was held that it is undoubtedly the duty of a Plaintiff to mitigate the damage caused by the Defendant''s breach. The Division Bench of the Andhra Pradesh High Court further observed that a Plaintiff cannot claim to be compensated for loss which was due to his own failure to behave reasonably after the breach. It was held that the test to determine whether the behaviour of the Plaintiff was reasonable or not, is to see whether he did what a prudent man might have reasonably done if the whole expense was to fall on himself, i.e., the Plaintiff should show that he did not act in a way allegedly open to blame. In Thawardas Pherumal and Anr. v. Union of India AIR 1055 S.C. 468., the relevant facts were these. Owing to the default of the Government in not removing the burnt bricks which were ready for delivery and which had to be emoved by the Government from the brick kilns of Thawardas Pherumal, etc., a large number of katcha bricks of the contractor were destroyed by rains. The contractor claimed damages from the Government for the resultant loss. After discussing the question of liability of the Government, their Lordships of the Supreme Court held that though the Government was not absolved from all liability, all that it could be held responsible for was for damages occasioned by the breach of its contract to remove the pucca bricks which it had undertaken to remove. After referring to the explanation to Section 73 of the Contract Act, it was observed that the contractor had also a duty under that provision of law to minimise the loss as the contractor would have had the right to remove the bricks himself and stack them elsewhere and claim compensation for the loss so occasioned. It was further observed that alternatively, the contractor could have sold the bricks in the market and claimed the difference in price.

The statutory explanation to Section 73 of the Indian Contract Act and the pronouncements of the Sup-erne Court and several High Courts in connection with the application and construction thereof show that it is the duty of a Court to consider the question of mitigation of damages while assessing the quantum of damages in a suit based on breach of a contract. In any event, a specific plea having been raised in that behalf by the Defendant and having been denied in the replication of the Plaintiff, it became the duty of the Court to frame issues arising out of that specific plea. Issues arise, as stated in Sub-rule (1) of Rule 1 of Order 14 of the Code of Civil Procedure, when a material proposition of fact or law is affirmed by the one party and denied by the other. Sub-rule (5) enjoins on a trial Court the statutory duty to read the plaint and the written statements, and to frame and record the issues on which the right decision of the case appears to depend after such examination of the parties as may appear necessary, for the purpose of ascertaining upon what material propositions of fact or of law the parties are at variance. If the learned Subordinate Judge when framing issues had carefully read the written statement of the Defendant, and the further written statement (called the replication) of the Plaintiff, he would indeed have framed an issue relating to the question of mitigation of damages. The trial Court committed a palpable error of law in not doing so. We have already held that the right decision of issue No. 4, i.e.. the decision on the question of quantum of damages depend substantially on the decision of the Court on questions of fact arising out of the plea relating to the duty of the Plaintiff to mitigate the damages.

In the circumstances of this case we hold that the Plaintiff was under an obligation to take all reasonable steps to mitigate the loss flowing from the breach of the contract Exhibit P. 9 by the Defendant. As no issue has been framed in that regard, the Plaintiff would, in our opinion, be prejudiced if we follow the course suggested by Mr. Gujral to decide this crucial question on the evidence already on the record. The finding on issue No. 4 framed by the trial Court would depend upon the decision of the additional issues which we are going to frame. While maintaining the findings of the trial Court on issues Nos. 1 to 3, we, set aside the finding on issue No. 4 as to the quantum of damages for which the Defendant is liable. Inasmuch as the Court from whose decree this appeal has been preferred has omitted to frame approoriate issues arising out of the plea in question relating to the Plaintiff''s duty to mitigate the damages, and has on that account failed to determine this important question of fact, we proceed to frame the following additional issues which appear to us to be essential to the right decision of the suit upon its merits, and refer the same for trial to the Court of first instance, and direct the trial Court to take additional evidence that may be produced by the parties on those issues" and then to return the evidence along with the findings of the trial Court and the reasons in support thereof to this Court, within four months from today:

Whether the Plaintiff took all reasonable steps to mitigate the loss flowing from the breach of the contract Exhibit P. 9 by the Defendant?

If issue No. 5 is decided against the Plaintiff, is he still entitled to any damages on account of the breach of the contract by the Defendant; if so how much?

If issue No. 5 is decided in favour of the Plaintiff, what is the extent of the mitigation of the damages arising out of the breach of the contract in question?

Relief.

Costs of this hearing shall abide the final result of the appeal.

The Appellant shall appear in the Court below on April 14, 1969, when a date for further proceedings shall be fixed by the Court below and notice of the same shall be served on all the other parties ''to the suit.

Shamsher Bahadur, J.--I agree.