Case: M/S. Alopi Parshad &amp; Sons, Ltd Vs. The Union Of India

District Cinemas Ltd., 1951-1 KB 190 at p. 201. In that case, Denning, L. J., is reported to have observed:.......no matter that a contract is framed in words which taken literally or absolutely, covered what has happened, nevertheless, if the ensuing turn of events was so completely outside the contemplation of the parties that the court is satisfied that the parties, as reasonable people, cannot have intended that the contract should apply to the new situation, then the court will read the words of the contract in a qualified sense; it will restrict them to the circumstances contemplated by the parties; it will not apply them to the uncontemplated turn of events, but will do therein what is just and reasonable."But the observations made by Denning L. J., upon which reliance has been placed, proceeded substantially upon misapprehension of what was decided in Parkinson and Co. Ltd. v. Commissioners of Works, 1949-2 KB 632, on which the learned Lord Justice placed considerable reliance.The view taken by him was negatived in appeal to the House of Lords in the British Movietonews case - (1952) A. C. 166 - already referred to. In India, in the codified law of contracts, there is nothing which justifies the view that a change of circumstances, "completely outside the contemplation of parties" at the time when the contract was entered into, will justify a court, while holding the parties bound by the contract,in departing from the express terms thereof, 1949-2 KB 632 was a case in which on the true interpretation of a contract, it was held, though it was not so expressly provided, that the profits of a private contractor, who had entered into a contract with the Commissioners of Works to make certain building constructions and such other additional constructions as may be demanded by the latter, were restricted to a fixed amount only if the additional quantity of work did not substantially exceed in value a specified sum. The Court in that case held that a term must be implied in the contract that the Commissioners should not be entitled to require work materially in excess of the specified sum. In that case, the Court did not proceed upon any such general principle as was assumed by Denning L. J., in 1951-1 KB 190.23. We are, therefore, unable to agree with the contention of Mr. Chatterjee that the arbitrators were justified in ignoring the express terms of the contract prescribing remuneration payable to the Agents, and in proceeding upon the basis of quantum meruit.24. Relying upon S. 222 of the Indian Contract Act, by which duty to indemnify the agent against the consequences of all lawful acts done in exercise of the authority conferred, is imposed upon the employer, the arbitrators could not award compensation to the Agents in excess of the expressly stipulated consideration. The claim made by the Agents was not for indemnity for consequences of acts lawfully done by them on behalf of the Government of India; it was a claim for charges incurred by them in excess of those stipulated. Such a claim was not a claim for indemnity, but a claim for enhancement of the rate of the agreed consideration. Assuming that the Agents relied upon assurances alleged to be given by the Director in-charge of Purchases, in the absence of an express covenant modifying the contract which governed the relations of the Agents with the Government of India, vague assurances could not modify the contract. Ghee having been supplied by the Agents under the terms of the contract, the right of the Agents was to receive remuneration under the terms of that contract. It is difficult to appreciate the argument advanced by Mr. Chatterjee that the Agents were entitled to claim remuneration at rates substantially different from the terms stipulated, on the basis of quantum meruit.Compensation quantum meruit is awarded for work done or services rendered, when the price thereof is not fixed by a contract. For work done or services rendered pursuant to the terms of a contract. Compensation quantum meruit cannot be awarded where the contract provides for the consideration payable in that behalf. Quantum meruit is but reasonable compensation awarded on implication of a contract to remunerate, and an express stipulation governing the relations between the parties under a contract, cannot be displaced by assuming that the stipulation is not reasonable.It is, therefore, unnecessary to consider the argument advanced by Mr. Chatterjee that a claim for compensation on the basis of quantum meruit, is one which arises out of the agreement within the meaning of cl. 20. Granting that a claim for compensation on the basis of quantum meruit may be adjudicated upon by the arbitrators in a reference made under cl. 20 of the agreement, in the circumstances of the case before us, compensation on that basis could not be claimed.25. The plea that there was a bar of res judicata by reason of the decision in the Letters Patent Appeal No. 31 of 1953, has, in our judgment, no force. The Subordinate Judge set aside the award on the ground that there had been judicial misconduct committed by the umpire and also on the view that the claims made, as described in Schedules B and D, were not outside the competence of the arbitrators. The High Court in appeal under the Letters Patent, did confirm the order, setting aside the award; but there was no binding decision between the parties that the claim described in Sch. B, that is, the claim for establishment and contingency charges, was within the competence of the arbitrators in reference under cl. 20. It may be observed that according to the High Court of East Punjab in the Appeal No. 31 of 1953, under the Letters Patent, it was not necessary to express any opinion whether the claim in Sch. C was within the competence of the arbitrators, and the claims described in Sch. D does not appear to have been agitated in the second arbitration proceeding.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]16. The extent of the jurisdiction of the court to set aside an award on the ground of an error in making the award isThere is no foundation for the view that a specific reference, submitting a question of law for the adjudication of the arbitrators, was made.18. We agree, therefore, with the view of the High Court that the reference made, was a general reference and not a specific reference on any question of law. The award may, therefore, be set aside if it be demonstrated to be erroneous on the face ofthat the Agents had incurred this additional expenditure under the head `establishment and contingencies, when the contract expressly stipulated for payment of charges at rates specified therein, we fail to appreciate, on what ground, the arbitrators could ignore the express covenants between the parties, and award to the Agents amounts which the Union of India had not agreed to pay to the Agents. The award of the arbitrators, awarding additional expenses under the head of establishment and contingencies, together with interest thereon, is on the face of itinto consideration the face that the other persons were buying ghee at rates considerably in excess of the stipulated rates, the arbitrators held that the Agents were entitled to be reimbursed to the extent of Rs. 11,27,965-11-3. But the terms of the contract, stipulating the rate at which the financing and overhead charges were to be paid under cl. 13(a) read with cl. 12(b), remained binding so long as the contract was not abandoned or altered by mutual agreement, and the arbitrators had no authority to award any amount in excess of the amount expressly stipulated to beargument is untrue in fact and unsupportable in law. The contract was modified on June 20, 1942, by mutual consent, and the modification was made nearly three years after the commencement of the hostilities. The Agents were fully aware of the altered circumstances at the date when the modified schedule for payment of overhead charges, contingencies and buying remuneration, was agreed upon.Again, a contract is not frustrated merely because the circumstances in which the contract was made, are altered.There is no general liberty reserved to the courts to absolve a party from liability to perform his part of the contract, merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous. That is the law both in India and in England, and there is, in our opinion, no general rule to which recourse may be had as contended by Mr. Chatterjee, relying upon which a party may ignore the express covenants on account of an uncontemplated turn of events since the date of the contract.We are, therefore, unable to agree with the contention of Mr. Chatterjee that the arbitrators were justified in ignoring the express terms of the contract prescribing remuneration payable to the Agents, and in proceeding upon the basis of quantumis difficult to appreciate the argument advanced by Mr. Chatterjee that the Agents were entitled to claim remuneration at rates substantially different from the terms stipulated, on the basis of quantum meruit.Compensation quantum meruit is awarded for work done or services rendered, when the price thereof is not fixed by a contract. For work done or services rendered pursuant to the terms of a contract. Compensation quantum meruit cannot be awarded where the contract provides for the consideration payable in that behalf. Quantum meruit is but reasonable compensation awarded on implication of a contract to remunerate, and an express stipulation governing the relations between the parties under a contract, cannot be displaced by assuming that the stipulation is not reasonable.It is, therefore, unnecessary to consider the argument advanced by Mr. Chatterjee that a claim for compensation on the basis of quantum meruit, is one which arises out of the agreement within the meaning of cl. 20. Granting that a claim for compensation on the basis of quantum meruit may be adjudicated upon by the arbitrators in a reference made under cl. 20 of the agreement, in the circumstances of the case before us, compensation on that basis could not be claimed.25. The plea that there was a bar of res judicata by reason of the decision in the Letters Patent Appeal No. 31 of 1953, has, in our judgment, no force. The Subordinate Judge set aside the award on the ground that there had been judicial misconduct committed by the umpire and also on the view that the claims made, as described in Schedules B and D, were not outside the competence of the arbitrators. The High Court in appeal under the Letters Patent, did confirm the order, setting aside the award; but there was no binding decision between the parties that the claim described in Sch. B, that is, the claim for establishment and contingency charges, was within the competence of the arbitrators in reference under cl. 20. It may be observed that according to the High Court of East Punjab in the Appeal No. 31 of 1953, under the Letters Patent, it was not necessary to express any opinion whether the claim in Sch. C was within the competence of the arbitrators, and the claims described in Sch. D does not appear to have been agitated in the second arbitration proceeding.