“C.R.” IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOMAS P.JOSEPH MONDAY, THE 21ST DECEMBER 2009 / 30TH AGRAHAYANA 1931 AS.NO. 856 OF 1998() ------------------------ OS.69/1994 OF SUB COURT,KOTTARAKKARA .................... APPELLANT - PLAINTIFF: ----------------------------------- THE REHABILITATION PLANTATIONS LTD., REGD. OFFICE, PUNALUR, REPRESENTED BY MANAGING DIRECTOR. BY ADV. SRI.M.C.JOHN SRI.JINI JOY PATHADAN RESPONDENT – DEFENDANT: --------------------------------------- P.S. ANSARY, 'SHAN' TRADERS, ATHIRA BUILDINGS, KANJIRAPPALLY. ADV. SRI.T.I.ABDUL SALAM THIS APPEAL SUIT HAVING BEEN FINALLY HEARD ON 21/12/2009 ALONG WITH AS NO. 9 OF 1999 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: “C.R.” THOMAS P.JOSEPH, J. = = = = = = = = = = = = = = = = = = = = = = = = A.S. NO.856 OF 1998 AND A.S. NO. 9 OF 1999 = = = = = = = = = = = = = = = = = = = = = = = = = Dated this the 21st day of December, 2009 J U D G M E N T --------------------- The question that arises for a decision in these appeals is whether Section 23 of the Indian Limitation Act, 1963 (for short, “the Act”) applies to suits ex-contractu governed by Article 55 of that Act. 2. Short facts in O.S. No.116 of 1994 from which A.S. No.9 of 1999 arose are: Appellant, a Government Company entered into Ext.A1, agreement with the respondents on 7.8.1990 as per which the latter agreed to purchase 25 metric tons of skim crepe rubber at the rate of Rs.17.27 per Kg. Respondents were to pay the price and remove the skim crepe rubber from the factory of appellant at Kulathoopuzha before 25.8.1990. Respondents were given a grace period of 7 days to remove the goods failing which they were to pay ground rent to the appellant at the rate of Rs.5/- per metric ton per day. Appellant reserved right to extend the period for taking delivery of the goods charging ground rent as above. In case of default on the part of respondents, appellant could re-sell the goods at the risk of the respondents. Rupees Ten thousand deposited by the A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 2 :- respondents towards security in that event, was to be forfeited. Respondents paid the price and took delivery of only 9.5 metric tons within the prescribed time. On 4.10.1990 respondents paid price for another 9.5 metric tons of crepe rubber and removed the same by 10.10.1990. As per letter dated 7.11.1991 appellant directed respondents to remove the remaining 6 metric tons of crepe rubber but they did not comply with that direction. Appellant invited tenders for re-sale of the remaining crepe rubber on 12.12.1991 but only one person submitted tender quoting Rs.11.04/- per Kg. That tender was not accepted as the price quoted was low and again tenders were invited on 20.2.1992. One person quoted Rs.13/- per Kg., which was accepted on 24.3.1992 and accordingly the 6 metric tons of crepe rubber was sold. Appellant filed the suit claiming compensation which includes advertisement charges, ground rent from the date of agreement till goods were removed by the subsequent purchaser and the short-fall in the price that occurred in the re-sale. In O.S. No.69 of 1995 also the same facts are involved with the difference in the relevant dates and that there was no formal agreement executed by the respondents in favour of the appellant. In spite of direction respondents did not deposit the earnest money or execute the formal agreement. In that suit also A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 3 :- appellant claimed compensation in the same manner as above. Respondents resisted the suits contending inter alia that the suits are barred by limitation since the same are filed after three years of the date on which breach was allegedly committed by not paying the price and removing the goods on or before the due dates. Learned Sub Judge found that there was breach of contract on the part of respondents but held relying on decision of the Delhi High Court in Bhajan Singh and Co. v. Karson Agency (AIR 1967 Delhi 101 [FB]) that the suits are barred by limitation. Consequently suits were dismissed. Hence these appeals. It is contended by learned counsel for appellant that even if it is assumed that Article 55 of the Act governed the period of limitation for the suits in question, Sec.23 of the Act is available to the appellant and hence period of limitation would run only from the dates of re-sale consequent to the breach committed by the respondents. Learned counsel relied on the decisions in Eastern Traders (I) Ltd. v. Punjab National Bank (AIR 1966 Punjab 303) and S.K.A.R.S.M. Ramanathan Chettiar v. National Textile Corporation Ltd. (AIR 1985 Ker. 262). Learned counsel for respondents contend that Sec.23 of the Act has no application to the suits ex-contractu and placed A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 4 :- reliance on the unreported decision of a Division Bench of this Court in The Rehabilitation Plantations Ltd. v. P.M. Abdul Latheef (A.S. No.852 of 1998 decided on 9.7.2003) to buttress his contention. It is also contended that a suit for compensation for breach of contract is governed by Article 55 of the Act and hence period of limitation would begin to run from the date of breach and not from the date on which the loss was quantified. Reliance is placed on the decisions in Bhajan Singh Co.'s case (supra), Delta Foundations and Constructions v. Kerala State Construction Corporation Ltd. (2003 [1] KLT 626) and the unreported decision in the Rehabilitation Plantation Ltd.'s case. 3. In O.S. No.69 of 1995 there is a contention that as no formal agreement was executed between the parties there is no concluded contract. Absence of a written agreement is fatal when as per the terms and conditions agreed between the parties a formal agreement is necessary to create a concluded contract. The terms and conditions in this case do not prescribe so. Indisputably tender submitted by the respondents was accepted by the appellant and acceptance was intimated to the respondents. That created a concluded contract. A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 5 :- 4. To answer the contentions regarding limitation it is necessary to advert to the relevant provisions in the Act. Article 55 of the Act reads, “Description of suit Period of Time from which limitation period begins to run 55. For compensation for Three years When the contract the breach of any is broken or (where contract, express or there are success- implied not herein ive breaches) specially provided when the breach for in respect of which the suit is insti- ted occurs or (where the breach is continuing) when it ceases.” Section 23 of the Act reads, “23. Suits for compensation for acts not actionable without special damage.- In the case of a suit for compensation for an act which does not give rise to a cause of action unless some specific injury actually results A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 6 :- therefrom, the period of limitation shall be computed from the time when the injury results.” Question posed is whether Sec.23 of the Act is applicable to suits ex- contractu or is it confined to suits for compensation arising from tort alone? In the unreported decision (in A.S. No.852 of 1998) relied on by learned counsel for respondents in a similar situation where the suit was for compensation for breach of contract it was observed by the Division Bench in paragraph 8 of the decision, “Reliance was placed on the provisions of Section 23 of the Limitation Act also. It is well settled that Section 23 would apply only to suits based on tort. Breach of contract itself gives rise to a cause of action and time begins to run from the date of breach. In Bhajan Singh and Co. (Supra), the Full Bench of the Delhi High Court stated that Section 23 is applicable only to cases where the act in itself will not give rise to a cause of action. Respondent also placed reliance on the decision of the Rangoon High Court in V.M.Gany v. Leong Chye (AIR 1936 Rangoon 510) wherein that Court examined the scope of Section 24 of A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 7 :- the Old Limitation Act and opined that Section 24 applies not to suits based on contract, but to suits based on tort….” (emphasis supplied) This according to learned counsel for appellant is not correct since Sec.23 of the Act does not in its application differentiate between a suit on contract and a suit based on tort. 5. One of the early decisions on the point is Kedar Nath v. Har Govind (AIR 1926 Allahabad 605). That was a suit for compensation based on a contract. Question arose whether Section 24 of the Limitation Act, 1908 (corresponding to Sec.23 of the Act) applied to suits based on contact. Ashworth J, while taking the view that the provision applies to suits based on contract observed, “A reference to the terms of S.73 of the Contract Act shows that a suit can only be brought for injury or loss already caused and not for prospective loss. S.74 makes an exception to this. It allows a suit to be based on mere breach when the contract names a sum to be paid in case of mere breach or contains a stipulation by way of penalty. The A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 8 :- present contract did neither. Where there is no sum named to be paid in case of breach or stipulation by way of penalty, under Indian law a mere breach of the covenant by omission to pay, as in this case, gives no right to a claim for compensation and suit will come within the language of S.24 of the Limitation Act. I may mention that the word ‘act’ in S.24 will include an omission (see S.3(2) of the General Clauses Act, 10 of 1897) it has been urged that S.24 is only applicable to suits based on tort, but no reason appears for holding this….” The Rangoon High Court took a different view in V.M. Gany v. Leong Chye (AIR 1936 Rangoon 510) and Annamalai Chettiyar v. Gowasjee (AIR 1938 Rangoon 258). In the former case Ba U, J. criticised the decision of Ashworth, J. in Kedar Nath's case (supra) that Sec.24 of the Old Act (corresponding to Sec.23 of the Act) applies to the suits based on contract also and held that so far as suits for compensation for breach of contract is concerned time begins to run from the date of breach (as provided in Article 115 of the Old Act) and not from the date of actual loss and hence Sec.24 (of the Old Act) has no application. The view of Ba U, J. was not A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 9 :- accepted by the Patna High Court in Jagath Kishore v. Parmeshwar Singh and Others (AIR [38] 1951 Patna 348). The Division Bench referred to the contra views expressed by Ashworth, J. and Ba U, J. (in the decisions referred supra) as to the application of Sec.24 of the Old Act to suits based on contract. Relying on an earlier Bench decision in Jagannath Marwari v. Kalidas (AIR [16] 1929 Patna 245) it was held in Jagath Kishore's case (supra) that the better view is that Sec.24 (of the Old Act corresponding to Sec.23 of the Act) is applicable in the case of actions ex-contractu in proper cases where the terminus a quo was the date of injury and not breach of the covenant. In U.N. Mithra's 'Law of Limitation and Prescription' at page 699 it is stated by the author, “...as the language is general and may in proper cases apply to other acts as well which give rise to a cause of action only when specific injury results therefrom.” To me it appears, there is nothing in Sec.23 of the Act suggesting that the provision is confined in its application to suits based on tort. A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 10 :- Weight of authorities are also in favour of the view that Sec.23 of the Act is not confined in its application to suits for compensation arising from tort and that it could apply to suits based on contract where terminus a quo is the date of injury and not the breach of contract. The Division Bench of this Court while deciding A.S. No.852 of 1998 only considered the decision in V.M. Gany's case (supra). The contra authorities on the point were not brought to the notice of the Division Bench. Bhajan Singh and Co.'s case (spura) referred to by the Division Bench in A.S. No.852 of 1998 in my view has only said that Sec.23 of the Act applies only to cases where the act (or omission) in itself will not give rise to a cause of action. But a reconsideration of that matter is not necessary on the facts of these cases as the appeals could be decided de hors the question whether Sec.23 is applicable to suits on contract. 6. Now the question for consideration is whether to a case to which Article 55 of the Act applies, Sec.23 would apply so that the period of limitation is either extended or modified. Article 55 of the Act prescribes the period of limitation as three years for suits for compensation for breach of contract, express or implied (corresponding to Articles 115 and 116 of the Old Act). The period of limitation in such cases runs from the date on which the contract is A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 11 :- broken and where there are successive breaches from the date on which the breach in respect of which the suit is filed, occur. In the case of continuing breach the day to be reckoned is the day on which it ceases. According to the learned counsel for appellant re-sale of the goods and consequent loss to the appellant gave rise to a fresh cause of action. Learned counsel contends that appellant suffered loss when re-sale for a lesser price was occasioned by the act or omission of respondents. In Halsbury’s Laws of England, 4th Edn., Vol.28 in paragraph 662 it is stated, “In an action for a breach of contract the cause of action is the breach. Accordingly such an action must be brought within six years of the breach; after the expiration of that period the action will be barred, although damage may have accrued to the plaintiff within the six years of action brought.” 7. In Kumar Nath Bhuttacharjee v. Nobo Kumar Bhuttacharjee ([1898] ILR [26] Calcutta 241) plaintiffs were held not bound to bring their action for damages (on breach of covenant) within six years from the date of breach. It was held that cause of action for plaintiffs arose when they were damnified. But referring to A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 12 :- that decision the Allahabad High Court said, in Raghubar Rai and Another v. Jaij Raj and Another ([1912] ILR [34] Allahabad 429), “With great respect to the learned Judges the rule laid down by them cannot be defended on principle. One breach of a contract can only furnish one cause of action and no more. Actual loss when it occurs is only one of the results of the breach, and is not an act of the party who breaks a contract and can, therefore, create no second cause of action. It is a pity that the case of Battley v. Faulkner ([1820] 3 Barn. & Ald. 288) was not brought to the notice of the learned Judges. That is a clear authority for the proposition that consequential damage arising from the breach gives no cause of action......” The observation of Bayley, J. in Battley v. Faulkner (supra) that, “...If the plaintiff in this case had released the defendant from the breaches of contract, A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 13 :- that release would have been a bar to the present action for special damages subsequently occurring, and this shows that the foundation of the action is breach of contract. It was, therefore, from the period when the contract was broken that the cause of action occurred....” was quoted with approval in Raghubar Rai's case (supa). In Kedar Nath’s case (spura) Ashworth, J. took the view that Sec.24 of the Old Act (corresponding to Sec.23 of the Act) applies to suits on contracts since extent of damages is governed by Sec.73 of the Contract Act and from the time loss is suffered cause of action would arise. But in Jagath Kishore's case (supra) the Division Bench of Patna High Court was of the opinion that Ashworth, J. was not quite correct in his view of Sec.73 of the Contract Act and preferred the view of Ba U, J. in V.M. Gany's case (supra) that breach of contract per se gives rise to a cause of action and time begins to run from that date. The Contract Act and Limitation Act are not Statutes pari materia. Section 73 of the Contract Act is only a declaration of the common law as to damages. As such it is not A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 14 :- Sec.73 of the Contract Act which governs the period of limitation for the suit. It only helps the plaintiff to quantify the damages to which he is entitled consequent to the breach. 8. The issue was considered by the Madras High Court in Soundararajan & Co. v. Annamalai Nadar (AIR 1960 Madras 480). That was a suit for damages suffered on a breach of contract and a consequent re-sale. Contention of plaintiff was that period of limitation would run not from the date of breach but only after re-sale when the exact amount of damages could be ascertained by the plaintiff. Ananthanarayanan J, held, “But we find upon a scrutiny of the relevant dates that this claim is definitely out of time. It ought to have been instituted within three years of the date of breach of contract and it is no defence to this objection to urge that it was only the occasion of re-sale which enabled the defendant firm to ascertain exactly the degree of damages or the precise amount which would represent the injury suffered by them. The occasion for ascertainment will have to be distinguished from the date upon A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 15 :- which cause of action arose and from which limitation began to run.” (emphasis supplied) This decision was followed by the same High Court in Ragagopala Naidu v. Ayyaswamy Chettiar (AIR 1965 Madras 532). That was a case involving a contract to permit the plaintiff to occupy a certain premises for a period of 15 days during Deepawali each year to enable plaintiff sell crackers at a good price. On 17.10.1953 plaintiff asked for possession of the premises. By notice dated 26.10.1953 defendant repudiated the demand. Plaintiff suffered loss as he could not sell crackers during the period of Deepawali and had to sell out crackers at a loss by 13.11.1953. In the suit for damages that followed question arose whether the period of limitation runs from 6.11.1953 when time for putting plaintiff in possession of the premises expired or on 13.11.1953 when plaintiff suffered damages. The Madras High Court held that breach was completed by 6.11.1953 when time for putting the plaintiff in possession expired and that the fact that plaintiff could determine quantum of damages only later by sale of the entire stock at a loss does not mean that limitation did not commence to run from the date of breach. At page A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 16 :- 533 it was held, “The acceptance of the contentions urged by the learned counsel for the appellant would be completely opposed to the scheme of Article 115 and Sections 23 and 24 of the Limitation Act. In every case of breach of contract for the sale of goods the plaintiff who comes to court has a duty to mitigate the damages and he may have to take certain steps with regard to the goods in question and it is only after such steps are taken by way of re-sale that the damages could be ascertained. That does not mean that the running of time is postponed till the damages are actually ascertained and after re-sale In this case there is no question of any continuing damage within the meaning of Section 23 nor is it a case in which a cause of action has not accrued to the plaintiff on the date of the breach within the meaning of Sec.24.” 9. Now I shall consider the decision relied on by the counsel for appellant in Eastern Traders (I) Ltd. v. P.N. Bank (supra). There, referring to Sec.24 and Article 115 of the Old Act it was held, A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 17 :- “a breach in the abstract would not be sufficient, in our opinion, to provide a foot-hold for the plaintiff to file a suit for compensation against the second defendant. It was only when the goods had been disposed of in November, 1948, when the injury was actually sustained and time must run from that date.” This decision was distinguished by the Division Bench of the Delhi High Court in Bhajan Singh and Co’s case (supra). In paragraph 35 referring to the decision of the Punjab High Court it was held, “It may be noted that there was no detailed discussion of the exact meaning and scope of section 24 of the Limitation Act and none of the decisions bearing on the matter was considered. Further the actual decision of the case was based on their finding that there was no proof of the damages sustained by the appellant-plaintiff and not on the question of limitation. Thus the observations on the question of limitation were obiter dicta. The decision should, therefore, be regarded as confined to the facts of that particular case and A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 18 :- not as laying down a general proposition of law regarding the scope and applicability of section 24 of the Limitation Act.” Decision of the Punjab High Court was not based on any detailed discussion of the point involved. The Full Bench of Delhi High Court held that Sec.24 of the Old Act (corresponding to Sec.23 of the Act) has no application to suits governed by Article 115 of the Old Act (corresponding to Article 55 of the Act). The Division Bench of this Court in Delta Foundations and Constructions's case (supra) distinguished the decision of Punjab High Court in Eastern Traders (I) Ltd.'s case (supra) holding that it involved a contract of indemnity coming under Sec.24 of the Old Act (corresponding to Sec.23 of the Act). The Division Bench held that for suits for compensation for breach of contract as in the present case it is Article 55 of the Act (and not Article 113) applied and the starting point of limitation is when the contract is broken. The decision in S.K.A.R.S.M. Ramanathan Chettiar v. National Textile Corporation Ltd. (supra) relied on by learned counsel for appellant did not concern Article 55 of the Act. That decision only said that in a breach of contract to supply goods the difference between contract A.S. No.856 of 1998 & A.S. No.9 of 1999 -: 19 :- price and sale price is the