LexKANCHAN UDYOG LIMITED versus UNITED SPIRITS LIMITED
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
[2017] 7 S.C.R. 175 KANCHAN UDYOG LIMITED v. UNITED SPIRITS LIMITED (Civil Appeal No. 1168 of 2007) JUNE 19, 2017 (RANJAN GOGOi AND NAVIN SINHA, JJ.] A B Contract Act, 1872 - ss. 73, 63 :-- Damages for wrongful termination of contract - Appellant entered into an agreement with respondent for establishment of non-alcoholic beverages bottling plant - The concentrate (essence), for preparation of the no~'- 'C alcoholic beverage, was to be supplied by the respondent - Loan advanced to the appellant by State Industrial Development Corporation(WBIDC) for esta.blishment of the bottling plant - Bottlers agreement was terminated by the respondent, on which appellant .ftled suit - Single Judge of High Court decreed suit in D favour of appellant awarding damages towards loss of anticipated profits and costs for installation of the plant - Division Bench in appeal reversed the decree and dismissed the suit - Propriety - Held: Proper - It cannot be held that the breach alone was the cause for loss of anticipated profits, much less it was the primary or E dominant reason - As per materials on records, appellant had thanked respondent for its advertising support - Appellant had acknowledged that it would continue to suffer losses for jive-six years while seeking long term credit for supply of concentrates and had failed to deploy adequate manpower as per its own projections, this itself demonstrated the poor financial condition of the appellant - Losses were reflected in its balance sheet - It cannot be held that breach by the respondent was the dominant cause for loss of anticipated profits - Appellant failed to take steps to mitigate its losses, as it stopped lifting concentrates from another company after having done so for nearly a year without any explanation and didn't take steps to sell the unit after its closure, rather did that belatedly after seven years - Therefore, appellant failed to abide by its own obligations and lacked adequate infrastructure, .finances and manpower to run its business. Contract - 'Reliance loss' and 'Expectation loss' - Discussed. 175 F G H 176 SUPREME COURT REPORTS [2017) 7 S.C.R. A Dismissing the appeal, the Court HELD: 1. In the facts of the present case, it cannot be . · held that ·the breach alone was the cause for loss of anticipated B c profits, much less was it the primary or d-0minant reason. The appellate court has adequately discussed the appellant's letter ~hanking the r.es.pondent for its advertising support. With reference to evidence, the appellant court has also adequately . discussed that the appellant failed to take steps to mitigate it losses urtder the Explanation to Section 73 of the Act. There is no reason to come to any different condusion from the materials on record. If concentrates were available from Mis. VEC, the appellant had to offer an explan.ation why it stopped lifting the same after havi.ng done so for nearly a year, and ·could have continued with the business otherwise and earned profits. It could also have taken steps to sell the unit after its closure in May, 1989 rather than to do so belatedly in 1996. No reasonable steps D had been displayed as taken by the appellant for utilisatfon of its bottling plant by negotiations with others in the business. Nothing had been demonstrated of the injury that would have been caused to it thereby. (Paras 25, 27)(189-F; 191-D-F( E F 2.1 That leaves the question with regard to reliance loss and the expectation loss. Whether the two could be maintainable simultaneously or were mutually exclusive? The primary object for protection of expectation interest, has been described as to put the innocent party in the position which he would have occupied had the contract been performed. The general aim of the law being to protect the innocent party's defeated financial expectation and compensate him for his loss of bargain, subject to the rules of causation and remoteness. The purpose of protection of reliance interest is to put the plaintiff in the position in which he would have been if the contract had never been made. The loss may include expenses incurred in preparation by the G innocent party's own performance, expenses incurred after the breach or even pre-contract expenditure but subject to remoteness. (Para 28](191-G-H; 192-A-B] 2.2 The appellant had failed to establish its claim that the breach by the respondent was the cause for loss of a
Excerpt shown. Read the full judgment & AI analysis in Lexace.