Skip to main content

There must be a concluded contract in compensation claim for loss and damages

Supreme Court

Vedanta Limited V.  Emirates Trading Agency LLC




Existence of a concluded contract is sine qua non in compensation claim for loss and damages

Respondent's Suit for breach of contract and damages was decreed by Principal District Court, in Original Suit for a sum of Rs. 5,25,55,460/- with interest @ 8% from date of plaint till realisation. First Appeal by Appellant was dismissed by High Court. In Special Leave Petition preferred against same, liberty was granted to approach High Court in the review jurisdiction, on issue whether agreement between parties constituted a concluded contract or matters rested at stage of a proposal and a counter proposal only. Liberty was further granted to approach this Court again, if aggrieved. Review application was dismissed by High Court. Appellant submitted that, agreement was a draft proposal from Respondent regarding supply of phosphoric acid by Appellant in a specified duration. Appellant made a counter proposal to Respondent; both with regard to quantity of supplies and duration of supply. No concluded contract had arisen between parties in absence of any final agreement having been executed.

Breach of promise by Appellant to make promised supplies had resulted in Bangladesh Chemical Industries Corporation (BCIC) forfeiting performance guarantee of Respondent in addition to other pecuniary liabilities imposed. Suit was then instituted by Respondent claiming damages with interest. In a commercial contract, course of conduct of parties, exchange of correspondences, are all important considerations for conclusion whether there existed a concluded contract or not. Isolated examination of agreement shall, therefore, not be appropriate so as to warrant interference with the concurrent findings.

Contract between Respondent and Appellant was independent of contract between Respondent and BCIC. Appellant had only offered a backup support to supply phosphoric acid to Respondent in case the contract was awarded to the latter. In written statement, Appellant had taken a specific defence regarding absence of any concluded contract between it and Respondent. Trial Court as well as First Appellate Court did not specifically deal with issue of draft agreement, corrections in same, existence of a proposal and counter proposal with regard to quantity and time period for supplies, absence of any executed contract by virtue of Appellant having signed, stamped and returned agreement to Respondent, in confirmation. On a presumptive reasoning, based on exchange of correspondence preceding draft agreement, First Appellate Court affirmed finding in Suit of a concluded contract between parties.

High Court, despite noticing specific plea of Appellant with regard to absence of a concluded contract between parties in view of a counter proposal, much less that, agreement was never signed, stamped and returned, reiterated earlier observations of First Appellate Court of a concluded contract between parties based on exchange of correspondence preceding draft agreement, and also on premise that, Respondent had submitted its offer to BCIC on assurance of Appellant for backup support, if contract was awarded to former. High Court declined to delve further into agreement holding it, to be impermissible in review jurisdiction and concluding that, grounds urged were superficial in nature without any material proof, designed to avoid payment, and dismissed review application. High Court failed to notice that, as recent as 28.01.2008, Respondent was still awaiting confirmation of its proposal from Appellant, and soon thereafter performance guarantee was invoked by BCIC against Respondent on 13th April, 2008.

Section 7 of Indian Contract Act, 1872 provides that, in order to convert a proposal into a contract, acceptance must be absolute and unqualified. Existence of a concluded contract is a sine qua non in a claim for compensation for loss and damages under Section 73 of Act arising out of a breach of contract. If instead of acceptance of a proposal, a counter proposal is made, no concluded contract comes into existence. In U.P. Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd., Apex Court observed that, material alterations in contract make a world of difference to draw an inference of concluded contract.

Fulcrum of entire controversy is draft agreement dated 26th October, 2007 marked Exhibit 8-A, for supply of phosphoric acid by Appellant to Respondent. Proposal of Respondent, led to a counter proposal by Appellant. There was no acceptance of proposal by Appellant giving rise to a concluded contract. Quantity and duration of supply, therefore, remained in realm of uncertainty and was never agreed upon so as to give rise to a concluded contract. In absence of a concluded contract between parties having been established by Respondent, claim under Section 73 of Act was not maintainable. Supreme Court set aside Impugned orders and allowed the appeals.


U.P. Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd. MANU/SC/0362/1996
 : (1996) 2 SCC 667


Popular posts from this blog

MACT - Permanent disability - calculate - compensation - Supreme Court - Part 2

1) C. K. Subramonia Iyer vs. T. Kunhikuttan Nair - AIR 1970 SC 376
2) R. D. Hattangadi vs. Pest Control (India) Ltd. - 1995 (1) SCC 551
3) Baker vs. Willoughby - 1970 AC 467
4) Arvind Kumar Mishra v. New India Assurance Co.Ltd. - 2010(10) SCALE 298
5) Yadava Kumar v. D.M., National Insurance Co. Ltd. - 2010 (8) SCALE 567)

5.The heads under which compensation is awarded in personal injury cases are the following : Pecuniary damages (Special Damages)
(i)Expenses relating to treatment, hospitalization, medicines, transportation, nourishing food, and miscellaneous expenditure.
(ii)Loss of earnings (and other gains) which the injured would have made had he not been injured, comprising :
(a)Loss of earning during the period of treatment;
(b)Loss of future earnings on account of permanent disability.
(iii)Future medical expenses.
Non-pecuniary damages (General Damages)
(iv)Damages for pain, suffering and trauma as a consequence of the injuries.
(v)Loss of amenities (and/or loss of prospects…

Passport - DRT - power to impound - High Court

1) Satwant Singh Sawhney v. D.Ramarathnam. Asst. Passport Officer, 1967 (3) SCR 52
2) Menaka Gandhi v. Union of India, 1978 (1) SCC 248
3) Industrial Credit and Investment Corporation of India Ltd. v. Grapco Industries Ltd., (1994) 4 SCC 710
4) Suresh Nanda v. Central Bureau of Investigation, 2008 (3) SCC 674
5) Damji Valaji Shah & another Vs. L.I.C. of India & others [AIR 1966 SC 135]
6) Gobind Sugar Mills Ltd. Vs. State of Bihar & others [1999 (7) SCC 76]
7) Belsund Sugar Co. Ltd. Vs. State of Bihar and others [AIR 1999 SC 3125]
8) Sanjeev R.Apte v. I.F.C.I. Ltd., and others, 2008 (154) DLT 77
9) Smt.Annai Jayabharathi v. The Debt Recovery Tribunal & Anr., CDJ 2005 Ker HC 171
10) Allahabad Bank v. Radhakrishna Maity, AIR 1999 SC 3426
11) Ramalinga v. Radha, 2011 (4) CTC 481
12) Sinnaswami Chettiar v. Aligi Goundan and others, AIR 1924 Madras 893 (OVERRULED)
13) Nallagatti Goundan v. Ramana Gounda and others, AIR 1925 Madras 170
14) Income Tax Officer v. M.K.Mohammad…


Who is Necessary to Proper Party

Order 1 Rule 10 of the Code of Civil Procedure, 1908

Razia Begum v. Anwar Begum, [1959] SCR 1111, relied on. Amon v. Raphael Tuck & Sons Ltd., (1956) 1 All E.R. 273 and Dollfus Mieg et Compagnie S.A. v. Bank of England, (1950) 2 All E.R. 611, referred to.

National Textile Workers’ Union, etc. v. P.R. Ramakrishnan and Ors., [1983] 1 SCR 922,


Meaning of Necessary or Proper Party

Whether Court could direct plaintiff to add lessee as defendant in suit.

Whether Court has discretion to direct a plaintiff, though dominus litis, to implead a person as a necessary party.

The Supreme Court of India in Ramesh Hiranand Kundanmal Vs. Municipal Corporation, Greater Bombay, (1992) 2 SCC 524 : 1992 (2) SCR 1 : JT 1992 (2) SC 136 : 1992 (1) Scale 530 : 1992 (1) CCC 594 : 1992 (1) RCR 644 : 1992 (2) UJ 181 held that a party can be joined as defendant even though the plaintiff does not think that he has any cause of action against him.

A bench comprisi…