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TMI Blog2011 (4) TMI 1479X X X X Extracts X X X X X X X X Extracts X X X X ..... would be completed within six months, that is, on or before 28.5.1997. The necessary Drawings were supplied by the Appellant to the Respondent on 9.12.1996. 2. Clauses 16.1 and 16.2 of the Contract, which deals with the imposition and recovery of liquidated damages, read thus:- 16.1 The date of delivery of the stores stipulated in the acceptance of tender should be deemed to be the essence of the contract and delivery must be completed not later than the dates specified therein. Extension will not be given except in exceptional circumstances. Should, however, deliveries be made after expiry of the contract delivery period, without prior concurrence of the Purchaser, and be accepted by the consignee, such deliveries will not deprive the Purchaser of his right to recover liquidated damages under clause 16.2 below. However, when supply is made within 21 days of the contracted original delivery period, the consignee may accept the stores and in such cases the provision of clause 16.2 will not apply. 16.2 Should the tenderer fail to deliver the stores or any consignment thereof within the period prescribed for delivery the Purchaser shall be entitled to recover % of the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, a failure to object can be seen as evidence substantiating a particular position. Such evidence cannot be conclusive or total self-sustainable, impervious to or intolerant of proof to the contrary. It shall be open for the Arbitral Tribunal to go into the question and give a determinative finding as to whether the accord and satisfaction given by the party was free of any extraneous circumstances or was obtained under force or coercion by the party in a domination position. It has been held in Nathani Steels Ltd. -vs- Associated Constructions, 1995 Supp(3) SCC 324 and Union of India -vs- Popular Builders, Calcutta, (2000) 8 SCC 1 that where a party has accepted the Final Bill without any protest and the Court is satisfied that the accord and satisfaction had been arrived at by the execution of a full and final receipt and/or a final bill, in the absence of any fraud, duress, coercion or the like, the Arbitration Clause would have come to its logical end and no proceedings under the Arbitration Conciliation Act, 1996 (A C Act for short) would be called for. A reading of NTPC -vs- Rashmi Constructions, Builders Contractors, (2004) 2 SCC 663 is further illustrative on this issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, though certainty is an important value in normal commercial contract law, it is not an absolute and immutable one but is subject to change in the changing social conditions. (Emphasis Supplied) 7. LIC of India -vs- Consumer Education Research Centre, (1995) 5 SCC 482 reiterates and resonates the tenor and timbre of these very observations in these compelling words:- 47. It is, therefore, the settled law that if a contract or a clause in a contract is found unreasonable or unfair or irrational, one must look to the relative bargaining power of the contracting parties. In dotted line contracts there would be no occasion for a weaker party to bargain or to assume to have equal bargaining power. He has either to accept or leave the services or goods in terms of the dotted line contract. His option would be either to accept the unreasonable or unfair terms or forego the service for ever. With a view to have the services of the goods, the party enters into a contract with unreasonable or unfair terms contained therein and he would be left with no option but to sign the contract. 8. A similar exposition of the law is available in Suisse Atlantique Societe d' Armement Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pensation in case of breach of contract is unqualified except as to the maximum stipulated; and compensation has to be reasonable. Under Section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it. This section is to be read with Section 74, which deals with penalty stipulated in the contract, inter alia (relevant for the present case) provides 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, the party complaining of breach is entitled, whether or not actual 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. Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. Therefore, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved the rates at which they had to be purchased and also the other incidental charges incurred by them in procuring the goods contracted for. But no such attempt was made. Hence, claim for damages was not granted. 66. In Maula Bux case the Court has specifically held that it is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree and the court is competent to award reasonable compensation in a case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. The Court has also specifically held that in case of breach of some contracts it may be impossible for the court to assess compensation arising from breach. 67. Take for illustration construction of a road or a bridge. If there is delay in completing the construction of road or bridge within the stipulated time, then it would be difficult to prove how much loss is suffered by the society/State. Similarly, in the present case, delay took place in deployment of rigs and on that basis actual production of gas from platform B-121 had to be changed. It is un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping Corporation Ltd., (2007) 13 SCC 434 where their Lordships observed that - ―There is no proposition that the courts could be slow to interfere with the arbitrator's award, even if the conclusions are perverse, and even when the very basis of the arbitrator's award is wrong‖. 13. We are unable to appreciate the reliance placed by Mr. H.S. Phoolka, learned Senior Counsel for the Appellant on Bharat Sanchar Nigam Limited -vs- Reliance Communication Ltd., (2011) 1 SCC 394, wherein their Lordships had ―noted that the liquidated damages serve useful purpose of avoiding litigation and promoting commercial certainty and therefore, the Court should not be astute to categorise as penalties the clauses described as liquidated damages‖. The Respondent itself does not contend that the liquidated damages partake of the stigma of a penalty. Its argument is that the Appellant did not bother to place any evidence of its having suffered losses. 14. Learned Counsel for the Respondent has contended that the Arbitrator, as well as the learned Single Judge, were fully satisfied that no damage had resulted as a consequence of the delay effect the change of the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rably and undeniably resulted in a loss. Furthermore, the Court was satisfied that the liquidated damages of ₹ 2 per kg/litre was not in the nature of a penalty. This is not the factual matrix obtaining before us. 17. Mr. Phoolka relies on paragraph 8 of the decision of the learned Single Judge in Mahanagar Telephone Nigam Ltd. -vs- Haryana Telecom Ltd., 2010(2) Arb. L.R. 60(Delhi). Our learned Brother had in contemplation contracts the breach of which would invariably lead to damages. It was in those circumstances that the burden of proof was held to shift from the claimant to the party in breach. The latter would then have to prove that the breach did not result in any loss. Secondly, our learned Brother had only reiterated the consistent views of the Supreme Court starting from Fateh Chand, continued in Maula Bux and reiterated in Saw Pipes that in the presence of a clause for liquidated damages it may be irrelevant to prove actual loss, but the contract did not absolve the claimant to prove that it had sustained some loss attributable to a breach or non-performance by the alleged defaulter. It would also be required to prove that the liquidated damages were not punitiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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