UNIVERSAL MARINE AGENCIES Vs. STATE OF KERALA

JUDGEMENT

(1.) AS per Ext. P5 notice of demand issued by the tahsildar, Mangalore, the 1st petitioner firm was directed to pay a sum of Rs. 24,974. 94 which as per that notice was due from the 1st petitioner by way of rent and other charges in respect of an Ice and Cold Storage-cum-Freezing plant at Azhikode. Admittedly the petitioners by executing Ext. P1 agreement dated 8-5-1970 took on lease the 'ice Plant-cum-Cold Storage-cum-Freezing Plant' at azhikode for a term of one year. It is the case of the petitioners that on enquiries they found out that the break-up of the amount was as follows: This is not disputed on behalf of the respondents. According to the petitioners the demand represents only 3 claim for damages for alleged breach of the terms of Ext. P1 lease-agreement. It is also necessary to mention here that going by the averments contained in Para. 14 of the counter-affidavit "the amount shown in the notice" was "properly assessed by the department as the damage sustained to the Government on account of the default of the lessee". The question is whether the respondents are entitled to invoke the provisions of the Kerala Revenue Recovery Act, 1968, or the Revenue Recovery Act, 1890 (Central) for recovery of the aforesaid sum.

(2.) ADMITTEDLY the amounts mentioned in items Nos. (i), (v) and (vi) mentioned in the preceding paragraph are not covered by any of the specific clauses of Ext. P1 agreement. The amounts mentioned as items Nos. (ii), (iii) and (iv) are contended to fall within clauses (4) (a) and (3)respectively of the agreement. However, according to the learned Government pleader all these sums mentioned in items Nos (i) to (vi) aforementioned would attract clauses (16) and (17) of Ext. P1 agreement. On that basis, it is the case of he respondents, that in view of the provision contained in clause (16)of Ext. P1 agreement the respondents are entitled to resort to the provisions of the Kerala Revenue Recovery Act, 1968 as also of the Central Act aforementioned.

(3.) WITH reference to an almost similar provision, clause. 18 of the General Terms and Conditions, in a contract wherein it was provided that:- "18. Recovery of sums due. "whenever any claim for the payment of a sum of money arises out of or under the contract against the contractor, the purchaser shall be entitled to recover such sum by appropriating in whole or in part, the security, if any, deposited by the contractor x x x " The Supreme Court in Union of India v. Raman Iron Foundry (AIR. 1974 SC' 1265) holding that the words 'claim for the payment of a sum of money' should be read along with the heading: 'recovery of sums Due', and that so understood the clause deals with the subject of recovery of sums due, said in Para. 9 thereof at page 1273. "now the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority, When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not an actionable claim and this position is made amply clear by the amendment in S. 6 (e) of the transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred. " and proceeded to extract a passage from the decision rendered by Chagla C. J. in Iron and Hardware (India) Co v. Firm Shamlal and bros. (AIR. 1954 Bombay 423) which reads: "as already stated, the only right which he has is the right to go to a Court of law and recover damages. Now. damages are the compensation which a Court of law gives to a party for the injury which he has sustained. But, and this is most important to note, he does not get damages or compensation by reason of any existing obligation on the part of the person who has committed the breach. He gets compensation as a result of the fiat of the court. Therefore, no pecuniary liability arises till the Court has determined that the party complaining of the breach is entitled to damages. Therefore, when damages are assessed, it would not be true to say that what the Court is doing is ascertaining a pecuniary liability which already existed. The Court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till that determination there is no liability at all upon the defendant". The Supreme Court ultimately said: "this statement in our view represents the correct legal position and has our full concurrence. A claim for damages for breach of contract is, therefore, not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under clause. 18, to recover the amount of such claim by appropriating other sums due to the contractor"