FOOD CORPORATION OF INDIA AND ORS. versus M/S. BABULAL AGRAWAL

Citation: [2004] 1 S.C.R. 129 · Decided: 05-01-2004 · Supreme Court of India · Bench: BRIJESH KUMAR

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

j 
FOOD CORPORATION OF INDIA AND ORS. 
v. 
MIS. BABULAL AGRAWAL 
JANUARY 5, 2004 
[BRIJESH KUMAR AND ARUN KUMAR, JJ.] 
Indian Contract Act, 18721/ndian Registration Act; Section 17/Transfer 
of Property Act; Sections 106 & 107: 
A 
B 
Agreement between Food Corporation and a firm for construction of C 
plinths and handing over to Corporation on monthly rent as per terms of the 
agreement-Corporation gave notice and vacating plinths before expiry of the 
period agreed for-Suit for damage/or breach of terms-Trial Court awarded 
damages and dec;reed the suit In favour of the firm-High Court modified 
decree by reducing damages-On appeal, Held: Corporation could not bock D 
out from the promise held out and thus cannot escape from liability.for breach 
c!f the terms of the contract-Agreement deed is not a lease deed in itself-On 
execution it creates a right/another document in respect of immovable 
property-Hence an executory agreement-Thus, agreement/lease deed not 
compulsorily require registration-It could appropriately be classified as 
monthly lease deed-However, appellant could not make it a ground to escape E 
fiw11 its liability for breach of terms of agreement-One who holds 0111 a 
promise, if backs out, he would have to compensate the other party who acted 
bonajidely on the ba~·is of promise made-Hence, Food Corporation liable to 
pay compensation. 
limitation Ac1, Article 55: 
Plea of limitation-Raising of--Held: it must he raised at least al the 
appellate stage if not raised earlier-Since suit was filed within three years 
of vacating the premises, not barred by time. 
F 
Appellant-Corporation invited tenders for hiring plinths for storing G 
foodgrains. Tender or Respondent-firm was accepted. Consequently, 
appellant-Corporation and the respondent-firm entered into an agreement. 
As per terms or the agreement, the firm had to construct plinths which 
would be hired by the appellant-Corporation initially for a period of three 
129 
H 
130 
SUPREME COURT REPORTS 
(2004) I S.C.R. 
A years extendable to another year on payment of monthly rent. 
Accordingly, the firm had performed its part of the agreement and handed 
over the plinths to Corporation. Later, the Corporation after serving notice 
to the firm vacated the plinths. The firm filed a suit for damages. Trial 
Court decreed the suit awarding damages with interest thereon. On appeal, 
B High Court modified the decree by reducing amount towards damages. 
Hence the present appeal and the cross appeal. 
It was contended for the appellant-Corporation that since no 
registered lease deed was executed for a period of three years, tenancy 
was created on a month to month basis and it could ''alidly be terminated 
c by giving notice; that in the facts and circumstances of the case, the 
Corporation was not liable for damages; that the agreement deed being 
an unregistered document would not be admissible in evidence; and that 
the suit for damages was time barred. 
On behalf of the respondent-firm, it was submitted that since the 
D Corporation rncated the plinths before the expiry of period of three yr:ars 
in breach of the terms of the agreement, it was liable for damages at the 
rate equh·alent to rent for the plinths. 
Dismissing the appeal and allowing the cross appeals, the Court 
E 
HELD: I. l. The Trial Court and the High Court have rightly held 
that in the absence of any lease deed or a registered lease deed, the nature 
of the lease would only be that of a monthly lease. But it does not mean 
that it would deprive the firm of damages for breach of terms of an 
agreement in accordance with which the firm had performed its part of 
F 
the obligation by creating a liability against it by taking loan from bank. 
The plinths were constructed in accordance with the design and 
specification given by the Corporation. It may be of no use to any other 
person and for any other purpose. In this background as what was held 
out by the Corporation, assumes importance and in case one who holds 
out a promise, backs out, will have to compensate the party who acted 
G bonaftdely on the basis of the promise made. 1138-B-DI 
1.2. Respondent-firm filed a suit for damages for the breach of 
contract. It was not a suit for specific performance of the contract. A 
promise was definitely held out by the Corporation to the firm, for 
occupying the premises for a period of three years at a given rate of rent. 
H The premises were in fact constructed in accordance with the i

Excerpt shown. Read the full judgment & AI analysis in Lexace.