Punjab State vs Dr. B.S. Nanda and Others

R.L. Anand, J.—Unsuccessful plaintiff, State of Punjab, has filed the present Regular Second Appeal and it has been directed against the judgment and decree dated 14.9.1979, passed by the Court of Additional District Judge, Ferozepur, who affirmed the judgment and decree dated 22.7.1977, passed by the Court of Sub-Judge, 1st Class, Ferozepur, who dismissed the suit of the plaintiff-appellant.

The facts of the case can be described in the following manner. Plaintiff-State of Punjab, filed a money suit for a sum of Rs. 10,000/- against Dr. B.S. Nanda, Shri Chaman Lal and Shri Tarlochan Singh, and it was alleged by the plaintiff that defendant No. 1 Dr. Nanda executed a bond in favour of the State on 27.1.1966 in which defendants No. 2 and 3 became the sureties and they undertook that they will be jointly and severally liable for the repayment of the amount of the bond. The plain tiff stated that defendant No. 1 joined the Government Service as Civil Assistant, Gurgaon, Class II (non-gazetted) on six months at District Jail Hospital, Ludhiana on 1.4.1961 and he was later on selected by the Subordinate Services Selection Board, Punjab, on regular basis. Defend ant No. 1 applied for the grant of leave to join the condensed MBBS course at Medical College, Patiala while he was posted at Ferozepur and accordingly, his leave for 730 days for undergoing the MBBS course was sanctioned subject to the condition that defendant No. 1 shall execute a bond to serve the Punjab Government for a particular period, failing which, he shall pay the amount as mentioned in the bond. Defendant No. 1 had joined the condensed MBBS course at Medical College, Patiala on 1.10.1964 and he completed the course on 10.10.1966 and defendant No. 1 also executed a bond on 27.1.1966 before the Sub-Registrar, Ferozepur with two sureties, namely defendants No. 2 and 3. As per the bond, the defendant No. 1 was supposed to serve for five years and if he violates the terms of the bond, he was liable to pay Rs. 10,000/- besides interest. The plaintiff after completing the condensed MBBS Course, became absent from duty w.e.f. 19.3.1970 and prior to his being absent he applied for leave for 2 months w.e.f. 16.2.1970 to 18.4.1970 on account of domestic work. Defendant No. 1 left charge of his duties on 19.3.1970 without getting his leave sanctioned and his explanation was called but he did not submit any reply and applied for extension of leave for further two months w.e.f. 19.5.1970 which was refused. He again applied for extension of leave for four months which too was refused and he was asked to resume his duties within 10 days, failing which he was informed that he will be declared as absent and action would be taken against him. As the defendant No. 1 violated the terms and conditions of the bond, a suit was filed by the State of Punjab.

Notice of the suit was given to defendants No. 2 and 3 but they did not appear and proceeded ex parte. Defendant No. 1 alone contested the suit and he took up the defence that he was directed to fill up a bond to serve the State for a period of three years only and in default to pay Rs. 5,000/- and as the requisite form, was not available so he wrongly got a form in which there was a condition to serve for five years or in default to pay Rs. 10,000/- and that the same was not enforceable as the conditions for joining the medical college for condensed course was three years only. It is further alleged that the bond which was to be executed by defendant No. 1 also provided to serve the Punjab State for a period of three years from the completion of the condensed MBBS Course and in default to pay Rs. 5,000/-. Defendant No. 1 tendered his resignation on 15.9.1972 giving one month''s notice and that the defendant No. 1 was deemed to have left the service on 15.10.1972 and that defendant No. 1 is deemed to have served the State Government for a period of six years after the completion of the condensed MBBS Course.

From the pleadings of the parties, the following issues were framed by the trial Court:-

To what amount if any, the plaintiff is entitled to recover from the defendant? OPP

Relief.

Vide the judgment and decree dated 22.7.1997, the learned Sub Judge, 1st Class, Ferozepur, dismissed the suit,

The ground for dismissal of the suit was of two folds, firstly, that defendant No. 1 was not supposed to serve for a period of five years and that the bond which has been executed by the defendants cannot be relied upon by the State and secondly that the claim of the plaintiff failed on account of technical ground as it has failed to prove that it suffered on account of not completing the alleged terms of service after doing the condensed MBBS Course, by defendant No. 1.

The first appellate Court endorsed the reasons of the trial Court and in this regard I can quote with advantage the paras No. 9 and 10 of the judgment of the first appellate court: -

"A perusal of the evidence above discussed would show that the doctors who were in service prior to the joining of the condensed MBBS Course at Medical College, Patiala, were not required to execute a bond for a sum of Rs. 10,000/- and for five years as the Doctors who were not in service were required to execute. Along with Dr. B.S. Nanda some other doctors who were in service completed the condensed MBBS Course and their bonds were produced on record. D.W.4/1 is the bond furnished by Dr. Tarlok Singh Sandhu. Vide this bond the Doctor under took to serve the Punjab Government for a period of three years after completion of the condensed course or to it pay a sum of Rs. 5,000/-. Similarly, vide Ex. D.10 is the bond by Dr. Harbhajan Singh which he executed bond for a sum of Rs. 5,000/- in case he did not serve the Punjab Government in rural area for a period of three years after completing the course. The letter Ex. D.8 is addressed to Dr. B.B. Nanda by the Principal Government Medical College, Patiala vide which Panjabi translation of specimen bond form was sent to him and he was asked to execute that bond. The specimen form is Ex. D.8/1. It is for a sum of Rs. 5,000/- for a period of three years. The letter copy of which is Ex. D.4 sent by Dr. B.S. Nanda to the Principal show that Dr. B.S. Nanda had executed a bond for Rs. 10,000/- for five years service but he informed the principal that he had received a new bond form the Director, health Services which contained a penalty clause of Rs. 5,000/- for three years service. He however alleged that his examination was approaching fast and the time was short so his old bond may be kept as a security and he will furnish the required bond later on whom he will take his old bond back. This would show that it was only by mistake that a bond for Rs. 10,000/- and five years period of service was executed by the respondent and the State cannot take advantage of this mistake on the part of the respondent. The condition for those persons who were already in service will also apply to the case of Dr. B.S. Nanda and he could not be discriminated on any ground.

The next question to be determined is as to whether the respondent served the State for a period of three years after completing the course. The plaintiff did not produce any record to show as at what time the respondent joined service though it is evident that he served up to 19.3.1970 when he absented himself without obtaining leave. There is the statement of the respondent to the effect that he joined service immediately after completion of the course at rural dispensary Vcahhowal in District Amritsar. His course was completed on 10.10.1966 and since October, 1966 till 1970 he remained in service. Ex. PB is a letter ad dressed by Director Health Services Punjab to the Principal Medical College Patiala whereby the respondent was required to join rural dispensary Vachhowal in Amritsar on the completion of condensed MBBS course in September/October 1966. In pursuance of this letter the respondent made his departure report to the Principal Government Medical College, Patiala on 10.10.1976. In this letter he described himself as Incharge Rural Dispensary Vachowal. The copy of the letter is Ex. D-5. These documents will show that before he actually completed his course directions were issued that he should join at rural dispensary Vachhowal and in compliance thereto the respondent made his departure report, if in fact, the respondent had not complied the directions then action should have been taken immediately against him. In view of the evidence on record coupled with the statement of the respondent and in the absence of any rebuttal. I find that the respondent joined service in October, 1966 and he continued in service till 19.3.1970. he had thus completed a period of three years service and was not liable to pay any amount as compensation to the Punjab State. The learned Trial Court, rightly decided issue No. 1 against the plaintiff."

Ultimately, the first appellate Court endorsed the judgment and decree of the trial Court and dismissed the appeal filed by the State and aggrieved by the judgment and the decree of the Courts below, the present appeal has been preferred.

I have heard Smt. S.K. Bhatia, DAG, Punjab, on behalf of the appellant as nobody has appeared on behalf of the respondents.

It is proved on the record that Dr. Handa, defendant No. 1 executed a bond on 27.1.1966 to the effect that after successfully completing the condensed MBBS course, he will serve the State Government for a minimum period of five years on being required by the Government to do so within six months of the receipt of the intimation from the Principal on his completion of the said course otherwise he will pay a sum of Rs. 10,000/- together with interest thereon from the date of the demand at the Government rate for the time being in force. The copy of the bond is Ex. PA.

I have just stated above that the plaintiffs were non-suited mainly on the ground that since defendant No. 1 was already in Government Service so under the Rules, he was to furnish a bond to serve the Punjab Government for a period of three years after the completion of the condensed MBBS course and, there fore, the bond cannot be got executed.

The Courts below relied upon the statement of Shri B.S. Banda, defendant No. 1, who appeared as DW-5 who stated that he was required to furnish an undertaking that he would serve for a period of three years on the completion of the condensed MBBS course failing which he shall pay Rs. 5,000/- as the other doctors who were in service had done the same thing. He wrongly filled in a bond for a sum of Rs. 10,000/- for a period of five years and when the authorities realised a mistake a letter alongwith pro-forma of the bond was sent to him requiring him to execute a fresh bond in the sum of Rs. 5,000/- for a period of three years. He, of course, did not execute the fresh bond but made an application that his previous bond for Rs. 10,000/- may be treated as bond for Rs. 5,000/- and the term of the bond may be treated for three years.

In the view of this Court, both the Courts below, have not rightly appreciated the case. It is not proved on the record that the Government at any time had modified the terms of the bond Ex. PA. No bond came into existence vide which the defendant No. 1 undertook to compensate the State of the extent of Rs. 5,000/- or undertaking that on completion of the course he would serve for a period of three years. Till a concluded contract comes into existence, the rights and the liabilities of the parties cannot be governed. Even if the Government has taken the bond for a sum of Rs. 5,000/- from other doctors who might have undertaken that they would serve for a period of 3 years on the completion of the condensed MBBS course, still those illustrations and precedents cannot be binding instances upon the Government. The concluded contract between the plaintiffs and the defendants No. 1 to 3 was that defendant No. 1 shall compensate the State to the tune of Rs. 10,000/- or he shall serve the State for a period of five years on completion of the course. In the view of this Court, the other evidence which is against the contents of the contract Ex. PA should not have been allowed or read into for the purpose of disposing the matter. It is established on the record that defendant No. 1 did not serve the Government for a period of five years and in these circumstances, the defendants No. 1 and 3, were jointly and severally responsible to pay the compensation to the plaintiffs. Both the Courts further committed error by stating that the State has not been able to prove about the actual loss suffered by it on account of the non-joining of defendant No. 1. Section 74 of the Contract Act lays down that 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 the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for. Exception of Section 74 is relevant for our purpose which lays down that when any person enters into any bail bond, recognizance or other instrument of the same nature or, under the provisions of any law, or under the orders of the Central Government or of any State Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein. In our case, when Shri Nanda had given the option to join the condensed MBBS course, he was given study leave of 730 days. The purpose of the scheme was to impart knowledge to the officers so that these officers after getting the necessary training should serve the masses and specially the rural people. The reading of Section 74 coupled with the exception, thus, is clear that once there is a breach on the part of a person of a clause of contract, which provides for the penalty, the Civil Court has the power to grant reasonable compensation not exceeding the amount so named in the contract, by way of penalty stipulated for and when such breach is in relation to a public duty, the direction would be to pay the whole amount mentioned therein.

In AIR 1962 Supreme Court 1314, Sir Chunilal v. Mehta and Sons, it has been held as under :-

"Where parties name in a contract reduced to writing a sum of money to be paid as liquidated damages they must be deemed to exclude the right to claim an unascertainable sum of money as damages. The right to claim liquidated damages is enforceable u/s 74 of the Contract Act and where such a right is found to exist no question of ascertaining damages really arises. Where the parties have deliberately specified the amount of liquidated damages there can be no presumption that they at the same time, intended to allow the party who has suffered by the breach to give a go-by to the sum specified and claim instead a sum of money which was not ascertained or ascertainable at the date of the breach."

In the present case defendant No. 1 had agreed to pay a sum of Rs. 10,000/- to the State in case he does not serve the Department for a period of five years after completing the course. He has failed to do so in relation to a public duty and in these circumstances, it was within the competency of the state to realise the amount of Rs. 10,000/- from defendants No. 1 to 3 who are jointly and severally responsible on the basis of bond Ex. PA.

Resultantly, the appeal is allowed the judgments and decree of the courts below are hereby set aside and a money decree is granted for a sum of Rs. 10,000/- in favour of the State of Punjab and against all the defendants alongwith costs throughout and defendants No. 1 to 3 jointly and severally shall also pay the interest at the rate of 6% per annum from the date of the suit till payment. The decree-sheet be prepared accordingly in due course.