12 June 2020

For claiming payment of agreed amount, claimant need not prove any actual loss

Failure to make payment of compensation payable under contract is not equal to breach of contract.

   Paragraph 1103 of Halsbury's distinguishes between kinds of money payments. Damages, as dealt with earlier, are said to be distinguishable from debts and from a sum of money payable under a contractual liability to pay a sum on a given event. In fact, damages are sought to be distinguishable from compensation and from a penalty and from costs. In the present case, once we come to the conclusion that the amount awarded is not damages and for breach of contract, the petitioner-Niko has no case whatsoever to challenge the award. It will be also beneficial to consider Anson's on the Law of Contract, which, in Chapter 18, deals with actions to recover an agreed sum. The claim in that case was for a liquidated amount and the defendant was obliged under the contract to pay money. Although in that sense, it is said to be similar to specific performance, it is distinguishable and does not attract the same bar in law. The Law of Contract draws a clear distinction between a claim for an agreed sum and a claim for damages for breach of contract. The claimant need not prove loss where a claim is for payment of an agreed sum and remoteness of damages and mitigation of loss are irrelevant in such situations. In the instant case, the formula is meant to provide for such payment. The application of the formula is a matter which was before the tribunal and which the tribunal has considered. The formula was admittedly applicable being within the contractual scope and was not extraneously sourced. There is no question of any further proof of loss caused. [Para No.54]

For claiming payment of agreed amount, claimant need not prove any actual loss
In Divisional Controller, KSRTC Vs. Mahadeva Shetty & Anr., the court had occasion to consider the meaning of the expression "compensation", as stated in the Oxford Dictionary, and observed that it signifies that which is given in recompense, an equivalent rendered. Damages, on the other hand, constitute the sum of money claimed or adjudged to be paid in compensation for loss or injury sustained, the value estimated in money of something lost or withheld. The term "compensation" etymologically suggests the image of balancing one thing against another. Its primary signification is equivalence and the secondary and more common meaning is something given or obtained as an equivalent of sorts. Pecuniary damages are to be valued on the basis of full compensation. This concept was believed to be first stated by Lord Blackburn in Livingston Vs. Rawyards Coal Company. The court further observed that the Rule of Law requires that wrongs should not remain unredressed. All the individuals or persons committing wrongs should be liable for an action and damages for breach of civil law or for criminal punishment. Compensation means anything given to make things equivalent, a thing given or to make amends for loss. It need not therefore be in terms of money. Compensation is an act which court orders to be done or a money which court orders to be paid by a person, whose acts or omissions have caused loss or injury. The term "compensation" is not ordinarily used as an equivalent to damages, although compensation may often have to be measured by the same rule as damages. In the instant case, the expression "compensation" is used in several places throughout the contract. However, as rightly suggested, the purpose of making the one-time payment is to balance the non-supply of gas from D6 or from other sources. It is not damages for breach of contract, as contemplated. There is no question of an action for damages of breach of civil law or criminal punishment in the instant case. The compensation payable by way of one-time payment was a contractual payment and not beyond the terms of the contract or for breach of contract and hence cannot be questioned at this stage.[Para No.55]

Bombay High Court

Niko Resources Limited
Gujarat State Petroleum

Decided on 09/06/2020

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