SIR CHUNILAL V. MEHTA AND SONS, LTD. versus THE CENTURY SPINNING AND MANUFACTURING CO., LTD.

"In the first case cited; it was also .held that a misapplication of principles of law does not raise any substantial question of law so as to attract the operation of s. llO ........ ..

p. 555

There can be no doubt that that is a view which has been held by various High Courts in India, but the decision cited omit to consider two· decisions of their Lordships of Privy Council on this very point which, in (!) 22~.

p. 555

opinion, very largely modify the views taken in the cases cited and which of course it is impos·

p. 556

sible for us to ignore." (p. 226) Referring to th11 Privy C'-<mncil case the learned Chief Justic:e observed as follows :

p. 556

"In the Lucknow case the only question was whether the defendant there obtained an absolute interest or a limited interest under will. That again was a question which was of no interest to anyone outside the parties to the suit. Nevertheless, their Lordships con· sidered in both cases that the questions were substant.ial questions of law bec:iuse they were rnbstantial as between the parties. We can only consider this to mean that a question of law is substantial as between the parties if the decision turns one way or another on the particular view taken of the law. If it docs not affect the decision t.hen it cannot be su bstantial as between the parties. But if it substa.11· tially affects the decision then it is substan· tial as between the parties though it may be

p. 556

wholly unimportant to others." (p. 228) It may be that in the case before it, the Nai?pur High Court was justified in granting certificate because of the points involved was the construction of a deed of compromise and the High Court had interpreted that deed differently from the court below. But it seems to us that some of the observations of Boso C. J., are a lit.tlo too wide. We are prepared to assume that the learned Chief .Justice did not intend to say that where a question of law raised is palpably absurd it would still be regarded as a substantial question of law merely because it affects the decision of the case one way or the other, But at the s:ime time his observation that the view taken in the cases cited before him requires to be modified in the light of the Privy 9oµncjl decj.sjOIJ woulq imply t~at a ~uestiop of l!i-1f is deemed to be a substantial question of law even though the legal principles applicable to the case are well defined and there can be no reasonable divergence of opinion about the correctness of the view taken by the High Court. If we have understood the learned Chief Justice right, we think that he has gone further than was warranted by the decision of the Privy Council in Raghunath Prasad Singh's case (1).

pp. 556–557

The other case relied upon was Rimma"lapudi Subba Roo v. Noony Veeraju ( In that case the test of the kind · suggested by Bose C.J., was rejected on the ground that logically it would lead to the position that even a palpably absurd plea raised by a party would involve a substantial question of law because the decision. on the merits of the case would be directly affected by it. What was, however, said was that when a question of law is fairly arguable, where there is room for difference of opinion on it or where the Court thought it necessary to deal with that question at some length and discuss alternative view, then the question would be a sabstantial question of law. · On the other hand if the question was practically covered by the decision of the highest court or if the general principles to be applied in determining the question are well settled and the only question was of applying those principles to the particular fact of the case it would not be a substantial question of Jaw.

p. 557

We a.re in general agreement with the view taken by the Madras High Court and we think that while the view taken by the Bombay High Court is rather narrow the one taken by the former High Court of Nagpm~ is too wide. The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it ~GS st;PhEME COURT REPORTS [1962J.St1Pt. directly and substantially affects the rightR of th~ parti<'S and if so whether it is either an open ques· tion in the sense that it is not finally settled hy this Court or hy the Privy Council or by the Fede. ral Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the· highest Court or the general principles to be applied in determining the question aro well settled and there is a mero queation of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law.

pp. 557–558

Applying these tests it would be clear that tho ·question involved in this appeal, that is, the construction of tho Managing Agency agreement is not only one of law but also it is neither simple nor free from doubt. In the circumstances we have no hesitation in saying that the High Court was in error in refusing to grant the appellant a certificate that tht~ appeal involves a substantial question of law. It has to ho borne in mind that upon the success or the failure of tho contention of the parties, thoy stand to succeed or fail with respect to their claim for nearly 26 lakhs of rupees.

p. 558

Now as to the merits. The relevant facts may be briofly stated. Chunilal Mehta & Co., Bombay were appointed Managing Agents of the respondent company for a term of :!l years by an agreement dated June 15, 1933. By a resolution passed by the respondent company in October l!l45, Chunilal .Mehta. & Co., were permitted to assign the benefits of the afor<'said agreement to the present appellant, Sir Chunilal V. Mehta & Sons Ltd. On April 23, 1951, the Board of Directors of the Company terminat<'d the agreement of 1933 and passed a resolution removing the appellant as Managing Agents on April 23, 1951. The appellant thereupon filed a suit on the original side of the Bombay High Court claiming Rs. 50 lakhs by way of damages for wrongful termination of the agreement. Eventually· with the permission of thll Court it amended the plaint and claimed instead Rs. 28,26,804/-. The company admitted before the Court that the termination of

pp. 558–559

, f l d h t e appel h 1 ants employment was wrong u an so t e only question which the learned Judge before whom the matter went had to decide was the quantum of damages to which the appellant was entitled. This question depended upon the construction to be placed upon cl. 14 of the Managing Agency agreement.

p. 559

That clause runs thus :

p. 559

"fn case the Firm shall be deprived of the office of Agents of the Company for any reason or cause other than or except those reasons or causes specified in Clause 15 of these presents the Firm shall be entitled to receive from the Company as compensation or liquidated damages for the loss of such appointment a. sum equal to the aggregate amount of the monthly salary of not less than Rs. 6,000/- which the Firm would have been entitled to receive from the Company, for and during the whole of the then unexpired portion of the said period of 21 years if the said Agency of the Firm had not been deter-

p. 559

mined." In order to appreciate the arguments advanced before us it would, however, be desirable to reproduce the two earlier clauses-els. 10 and 12. They run thus :

p. 559

10. The Company shall pay to the Firm by way of remuneration for the services to be performed by the Firm as such Agents of the Company under this Agreement a monthly sum of Rs. 6,000/- provided that if at the clos<· of any y<'ar it shall be found that tho total remunerat.ion of· the firm receivf'd in such year shall have been less than IO per cent of the gross profits of thtJ Company for such year the Company shall pay to the Firm in respect of ~uch year such additional sum by way of remuneration as will make the total sum received by the Firm in and in respect of such year equal to I 0 per cent of tho groSB profits of the Company in that year. The first payment of such remuneration shall bf, made on the first day of August 19:l3.

pp. 559–560

"12. The said monthly remuneration or Hillary shall accrue due from day to day but shall be payable by the company to tho l•'irm. monthly, on the first day of the month immediatdy ~ucceeding tho month in which it shall have been earned."

p. 560

Tho learned trial judge upon the interpretation placed by him on cl. 14 awarded to the appellant a sum of Rs. 2,:W,OCO/., calculating the amount at Ha. (),000/- p.m. for the unexpired period of the term of the Managing Agency agreement and also awarded interest thereon. Kow according t-0 l\Ir. Palkhivala for the appellants, the interpretation placed upon cl. 14 by the trial judge and the appeal Court is erroneous in that it makes the words "not less than" in cl. 14 redundant. Learned counsel contends that on a proper construction of cl. 14 the appellants are entitled to compensation computed on the basis of the total estimated remuneration under cl. l 0 for the unexpired period. Under that clause, he contends, the appellants are entitled to 10% of the profits of the <:ompany subject to a minimum of Rs. 6,0UO/- p.m. Alternatively learned counsel contends that cl. 14 is not exhaustive of the appellant's right to compensation and the right to be compensated in respect of contingent remunera- 3 s.c.k. tion based oa 10% of profits is left untouched by that clause.

pp. 560–561

A perusal of cl. 14. clearly shows that the parties have themselves provided for the precise amount of damages that would be payable by the Company the Managing Agents if the Managing Agency agreement was terminated before the expiry of the period for which it was made. The clause clearly states that the Managing Agent shall receive from the Company as compensation or liquidated damages for the loss of appointment a sum equal to the aggregate amount of the monthly salary of not less than !ts. 6,000/- for and during the whole of the unexpired portion of the term of Agency. Now, when parties name a sum of money to be paid as liquidated damages they must be deemed to exclude the right to claim an unascertaiued sum of · money as damages. The contention of learned counsel is that the words "not less than" appearing before "Rs. 6,000/-" in cl. 14 clearly bring in cl. 10 and, therefore, entitle the appellant to claim 10% of the estimated profits for the unexpired period by way of damages. But if we accept the interpretation, it would mean that the parties intended to confer on the Managing Agents what is in fact a right conferred by s. 73 of the Contract Act and the entire cfause . would be rendered otiose. Again the right to claim liquidated damages is enforceable under s. 74 of the Contract Act and where such a right is found to exist no question of ascertaining damages . really arises. Where the parties have deliberately specified the amount of liquidated damages there can be no presumption that they, at the same time, intended to allow the party who has suffered by the breach to give a go-by to the sum specified and claim instead a sum of money which was not ascertained or ascertainable at the date of the breach. Learned counsel contends that upon this view the words "not less than" would be rendered otiose. In·our opinion the~e wordR, as rightly-pointed out hy the High Court, were intended only to emphasise the fact that compensation will be computable at an amount not less than Rs. fi,000 p.m. Apparently, they thought it desirable to emphasise the point that the amount of lts. 6,000 p.m. was regarded by them as reasonable and intended that it should not be reduced by the court in its discretion.

pp. 561–562

Mr. Palkhivah argued that what the appellants were entitled to was remuneration aud remuneration meant nothing but salal'y. The two words, according to him, have been used intorchangeahly in the various clauses of the agreement. If, therr.forc, salary in cl. 14 is the same as remunerat.ion, which according to him it is, then as indieated in el. JO it would mean 10% of the gross profits of the Company subject to a minimum of Rs. 6,00P/-p.m. Jn support of the argument that the two words wherever used in the agreement mean one and the same thing learned counsel relies on cl.12 which says that the monthly remuneration or salary shall accrue due from day to day. Then undoubtedly the two words clearly mean the same thing. But from a perusal of the clause it would a.ppear that remuneration there could mean nothing other than Rs.6,000/·p.m. For, that clause provides that the amount shall accure from day to day and be payable at the end of the month immediately succeeding the month in which it had been earned. Now, whether a company had made profits or not and if so what is the extent of the profits is determinable only at the end of its accounting year. To say, therefore, that the remuneration of 10% of the gross profits accrues from day to day and is' payable every month would be to ignore the nature of this kind of remuneration. Therefore in our opinion, when the remuneration and salary were equated in cl. 12 nothing else was meant but Rs.u,OOOf-and when tho word salary was used in cl. 14 we have no doubt that only that amount was meant and no other. It may be that under cl. 10 the appellant was entitled to additional remuneration in case the profits were high upto a limit of 10% of the gross. profits. That was a right to claim something over and above Rs.6,000/-and could be characterised properly as additional remuneration and not fixed or normal remuneration which alone was apparently in the minds of the parties when they drew up cl. 14. In our opinion, therefore, the High Court was right in the construction placed by it upon the clause.

pp. 562–563

Coming to the alternative argument of Mr. Palkhivala, we appreciate that the right which the appellant had of claiming 10% of profits was a valuable right and that but for cl. 14 he would have been entitled in a suit to claim damages estimated at 10% of the gross profits. We also appreciate his argument that a party in breach should not be allowed to gain by that breach and escape liability to pay damages amounting to a very much larger sum than the compensation payable under cl. 14 and that we should so interpret cl. 14 as to keep alive that right of the appellants. Even so, it is difficult, upon any reasonable construction of cl. 14, to hold that this right of the appellants were intended by the parties to he kept alive. If such were the intentions of the parties clearly there was no need whatsoever of providing for compensation in cl. 14. If that clause had not been there the appellant would indeed have been entitled to claim damages at the rate of 10% for the entire period aubject to minimum of Rs. 6,000/- p.m. On the other hand it seems to us that the intention of the parties was that if the appellants were relieved of the duty to work as Managing Agent and to put in their own money for ~arrying on the duties of managing agents they should not be entitled to get anything more than Rs. 6,000/- p.m. by way of compensation. Clause 14 as it stands deals with one subject only ~ .

pp. 563–564

. ,.

p. 564

SUPREME OOURT REPOR1'S [1962] SUPP. and that is compenation. It does not expreBBly or by necessary implication keep alive the right tu claim damages under the general law. By providing for compensation in express terms the right tu claim damages under the general law is neceBSarily e~cluded and, therefore, in the face of that clause it is not open to tho appellant to oontend that that right is left unaffected. Thero is thus nu substance in the alternative contention put forward by the learned counsel.

p. 564

Accordingly we affirm the decree of the High Com t and dismiss the appeal with cost.a.

p. 564

Appe,al di,siniS&li. KRISli.J.'i"A PRASAD AND .OTHER~

p. 564

v.

p. 564

GAURI KUMAR! D.EVl (P. B. A. K. and

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K. N. w JJ.) in t!.t State-Bjject on claim pendiny-Bihar Land of ~hare Patna

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of

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had

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attachment and of and The

p. 564