STATE OF KARNATAKA ETC. versus SHRI RAMESHWARA RICE MILLS THIRTHAHALLI ETC.

Citation: [1987] 2 S.C.R. 398 · Decided: 24-02-1987 · Supreme Court of India · Bench: O. CHINNAPPA REDDY

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
STATE OF KARNATAKA ETC. 
v. 
SHRI RAMESHWARA RICE MILLS THIRTHAHALLI ETC. 
FEBRUARY 24, 1987 
B 
[O. CHINNAPPA REDDY & S. NATARAJAN, JJ.] 
c 
Indian Contract Act, 1872-s. 73 -Agreement-Clause 12-
Interpretation of-Right to assess damages when arises-Damages for 
breach of condition of agreement-Assessment to be made by an inde-
pendent body and not by parties to the contract. 
.i I 
--.tr 
Revenue Recovery Act-Damages for breach of conditions of 
" ) 
contract-Whether recoverable as arrears of land revenue. 
l 
Clause 12 of the agreements separately entered into between the 
't-- ,. 
respondents and the appellant-State provided that "for any breach of 
D co:tditions the first party (the respondent) shall be liable to pay damages 
to the second party (the State) as may be assessed by the second party in 
addition to the forfeiture in part or full of the security amount deposited 
by the first party and that any amount that may become due or payable 
by the first party to the second party under any part of the agreement, 
E 
F 
shall he deemed to be and may be recovered from the f"irst party as if 
they were arrears ofland revenue. 
According to the Sta.te the respondents committed a breach of 
their respective contract and, therefore, demanded payment of 
damages as assessed by the authorities representing the State. As the 
respondents failed to pay the damages, the State initiated recovery 
proceedings under the Revenue Recovery Act. The respondents chal-
lenged the recovery proceedings by f"ding suit/writ petition. 
The Full Bench of the High Court dismissed the Second Appeal 
(out of which C.A. No. 471 of 1975 arises) preferred by the State hold-
ing that the State is not competent to adjudicate upon the question 
G 
whether the respondent committed breach of contract, that the State is 
H 
not competent to assess the damages for any breach of contract not 
admitted by the respondent and that the damages so assessed cannot be 
recovered as if they were arrears of land revenue. Following this 
f~ 
decision, the High Court allowed the writ petitions filed by the other 
respondents and quashed the recovery proceedings. 
398 
STATE OF KAR. v. S.R.R.M. 
399 
In the appeal to this Court on behalf of the State-it was contended 
that the authorities representing the State, even though a party to the 
agreement are empowered nuder Clause 12 to not only assess the dam-
ages occasioned by the breach of the conditions but also to adjudication 
any issue concerning the commission of the breach itself. 
Dismissing the Appeals, 
HELD: 1. On a plain reading of the words in Clause 12: "and for 
any breach of conditions set forth herein-before, the fU"st party shall be 
liable to pay damages to the second party as may be assessed by the 
second party", it is clear that the right of the second party to assess 
damages would arise only if the breach of conditions is admitted'or if no 
issue is made of it. If it was the intention of the parties that the officer 
acting on behalf of the State was also entitled to adjudicate upon a 
dispute regarding the breach of conditions the wording of Clause 12 
would have been entirely different. A right to adjudicate upon an issue 
relating to a breach of conditions of the contract would not flow or is not 
inhered in the right conferred to assess the damages arising from a 
breach of conditions. The power to assess damages is a subsidiary and 
consequential power and not the primary power. (403A-C) 
2. Adjudication by the Officer regarding the breach of the con-
tract cannot be sustained nuder law because a party to the agreement 
cannot be an arbiter in his own cause. Interests of justice and equity 
require that where a party to the contract disputes the committing of 
any breach of conditions the adjudication should be by an independent 
person or body and not by the other party to the contract. The position 
will, however, be different where there is no dispute or there is con-
sensus between the contracting parties regarding the breach of condi-
tions. In such a case the Officer of the State even though a party to the 
contract will be well within bis rights in assessing the damages occas-
ioned by the breach in view of the specific terms of Clause 12. [ 403D-F) 
3. The Foll Bauch while taking the view that the State is not 
entitled to recover damages as arrears of land revenue because damages 
for breach of conditions will not amount to "money doe under the 
contract" has wrongly relie

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