BASHESHAR NATH AND CO Vs. UNION OF INDIA

JUDGEMENT

(1.) (Plaintiff on 4.1.63 contracted with defendant to supply 19,600 tents @ Rs. 22.625 Plaintiff made part supplies and then Sought extention of time for the rest. Deft. began recovering 2% P.M. from plaintiff's bills and rate was also agreed to reduction @Rs. 211.50. When there was further delay, contract was cancelled. He was still to supply 9450 tents. Deft. then bought 1163 tents @ Rs. 217 under the risk purchase clause. However it claimed Rs. 72,675.00 from plaintiff. Matter was referred to Arbitrator who gave an award for Rs. 36,000.00 Plaintiff Challenged this. One of the objections was that Deft's actual loss was much less than the sum awarded and that the award was based on no evidence on record. The issues were whether there was error of law apparent on the face and whether it was based on no evidence.) Judgment para 10 onwards is:-

(2.) CLAUSE 11 (3) of the Conditions of Contract giving the right to the Union of India to recover the losses suffered by them on account of contractor's failure to supply the contracted goods came up for interpretation before Prakash Narain, J. in Union of India v. M/s. Tribhuwan Das AIR 1971 Delhi 120. The contention of the Union of India was that irrespective of whether the Government suffered any loss or not on account of the contractor's failure to supply the contracted goods, the Government was entitled to damages. After referring to a number of decisions of various High Courts and the decision of Privy Council in Erroll Mackav V. Maharaja Dhiraj Kameshwar Singh, AIR 1932 Privy Council 190 196, it was observed that the measure of damages normally, in case of breach of contract is a difference between the contract price and the market price on the date of the breach. It was held that under clause 11 (3) of the Conditions of Contract on the failure of the contractor to deliver the stores or part of the stores, the Government becomes entitled at it option either to recover as liquidated damages a sum of 2% of the price of stores not supplied or if they are supplied late; or to purchase the stores not supplied or short supplied from anywhere else at the risk and expense of the contractor and claim any excess price paid by the Government or to cancel the contract. In case there is risk purchase or cancellation of contract the contractor is liable for any loss which the purchaser or the Government may sustain though the contractor would not be entitled to payment of any gain made by the Government on the repurchase. Thus the Government could recover only loss sustained by it and could not claim damages from the contractor if no loss was sustained.