# 549· SIR CHUNILAL V. MEHTA AND SONS, LTD v. THE CENTURY SPINNING AND MANUFAC· TURING CO., LTD

- **Citation:** [1962] Supp. 3 S.C.R. 549
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** B. P. SmHA, J. L. Kapur, M. Hidayatullah, J. C. Shah, J. R. MuDHOLKAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/549-sir-chunilal-v-mehta-and-sons-ltd-v-the-century-spinning-and-manufac-turing-2400
- **Pages:** 16

## Headnote

Supreme Court Appellate Jurisdiction of-Appeal against
decree of affirmance-Substantial question of law-Construction
of agreement, if such a question-Br.ach of contract-Liquidated
1amages-Constitution of India, Art. 133(1).
The appellants were appointed managing agents of the
respondents for 21 years. Under cl. 10 of the agreement the
appellants were entitled to a remuneration equal to 10% of
the gross profits <if the respondents subject to a minimum of
Rs. 6,000 per month. Clause 14 provided that if the agree·
ment was terminated otherwise in accordance with the provisions thereof the appellants would be entitled to liquidated
damages "of not less than Rs. 6,000" per month for the
unexpired portion of the agreement. The respondent wrongfully terminated the agreement before the expiry of the
stipulated period. The appellants filed a suit for recovery of
damages for breach of contract cin the basis of 10% of the
gross profits of the respondents. The trial Judge granted a
decree for Rs. 2,34,000 calculating the amount at.Rs. 6,000
per month. On appeal by the appellants the High Court
affirmed the decree. The appellants applied to the High
Court for a certificate of fitness for appeal to the Supreme
Court but it declined to grant the same on the ground that
though the question involved in the case relating to the interpretation of the agreement was a question of law it was not a
substantial question of law as required by Art. 13(1) of the
Constitution.
Held, that the case involved a substantial question of
law and the appellants were entitled to the certificate as of
right. A substantial question of law is one which is of
general public importance or which directly and substantially
affects _the rights of the parties and which have riot been
finally settled·by the Supreme Court, the Privy Council or the
Federal Court or which is not free from difficulty or which
calls for discussion of alternative views. The question involved in the present ca'3e as to the construction of the agreement
was not only one of Jaw but it was neither simple nor free
from doubt and was a substantial questiop of l'!'Y wi!hin th~
fllCi!nin? of Art, 133(1).
·
·
·
•
1962
March {J,
1961
Sir Chunilol
V. Afehta d: Som,
Ltd.
...
Tht Ctnli..17 SpiMing
d.: JI 4nrifa<turing
Co, Ltd.
M:Jdho/l;(l' J.
550 SUPREME COURT REPORTS (1962] SUPP.
Kaiklw.shroo Pirojsha Glzaira v. C.P. Syndicate Ltd.,( 1948)
I. Born. L. R. 741; R~~thunath Prasrul Singh v. Depuly Commissioner~( ParlaPVarh, ',1927) 54 l. A. 126 and Dinkarrrw v.
R'lllansey, I. L. R. ( 1949) Nag. 224, referred to.
.
Rimmalap>;di Subb<1 Rtw v . • Voony l'eeraju, [. L. R. 1952
~fad. 264, approved.
lleld, further that upon a proper construction of cl. 14
of the agreement the appellant; were entitled to damages
at the rate of Rs. 6,000 per month only.
The words "not
le<S than Rs. 6,000" in
cl. 14 could not be construed
as meaning 10% of the gross profits as provided in cl. 10.
When in cl. 14 the parties named a sum of money to be paid
....,.
as liquidated damages, it excluded the right to claim an
unascertaincrl sum as darnages.
Crvn. APPELLATE JURISDICTION : Civil Appeal
.No. 417 of 19:ii.
Appeal by sp~cial leave from the judgment
and dceree tlatBd .\farch 14, 19.56, of tho Bombay
High Court in Appeal No. 94 of 1955.
N. A. Palkhivala, J. B. Dadachanji, 8. N. Andie)/,
R1tm.eshwar .l\'ath and P. L. Vohm, for the appellants.
.
llf. C. 8r1alvad; Attorney General of India, R .• !.
Joshi and R. P. Malteshwari, for the respondont.
Pon1!3 A. Melita and R. H. Dliehar, for the
r ntervencr.
1962. March 5,
The Judgment of the Court
1va~ delivered by
MuDIIOLll:AR, J.-This is an appeal by special
lerive iigainst. tho Judgment of the High Court of
Bomh11.y in an appeal from the jud~ment of a single
.Judge of that Court. The claim in appeal before
tho High Court was for a.bout 26 lakhs of rupees.
Being aggrieved by the decision of the High Court,
'h<> n.npelliint a.pp lied for a. certificate under Art.
I !l3(l )la) of the Con•titu

## Text

3 S.C.R.
SUPREME COURT REPORTS
549·
SIR CHUNILAL V. MEHTA AND SONS, LTD.
v.
THE CENTURY SPINNING AND MANUFAC·
TURING CO., LTD.
(B. P. SmHA, C.J., J. L. KAPUR, M. HIDAYATULLAH,
J. C. SHAH and J. R. MuDHOLKAR, JJ.)
Supreme Court Appellate Jurisdiction of-Appeal against
decree of affirmance-Substantial question of law-Construction
of agreement, if such a question-Br.ach of contract-Liquidated
1amages-Constitution of India, Art. 133(1).
The appellants were appointed managing agents of the
respondents for 21 years. Under cl. 10 of the agreement the
appellants were entitled to a remuneration equal to 10% of
the gross profits <if the respondents subject to a minimum of
Rs. 6,000 per month. Clause 14 provided that if the agree·
ment was terminated otherwise in accordance with the provisions thereof the appellants would be entitled to liquidated
damages "of not less than Rs. 6,000" per month for the
unexpired portion of the agreement. The respondent wrongfully terminated the agreement before the expiry of the
stipulated period. The appellants filed a suit for recovery of
damages for breach of contract cin the basis of 10% of the
gross profits of the respondents. The trial Judge granted a
decree for Rs. 2,34,000 calculating the amount at.Rs. 6,000
per month. On appeal by the appellants the High Court
affirmed the decree. The appellants applied to the High
Court for a certificate of fitness for appeal to the Supreme
Court but it declined to grant the same on the ground that
though the question involved in the case relating to the interpretation of the agreement was a question of law it was not a
substantial question of law as required by Art. 13(1) of the
Constitution.
Held, that the case involved a substantial question of
law and the appellants were entitled to the certificate as of
right. A substantial question of law is one which is of
general public importance or which directly and substantially
affects _the rights of the parties and which have riot been
finally settled·by the Supreme Court, the Privy Council or the
Federal Court or which is not free from difficulty or which
calls for discussion of alternative views. The question involved in the present ca'3e as to the construction of the agreement
was not only one of Jaw but it was neither simple nor free
from doubt and was a substantial questiop of l'!'Y wi!hin th~
fllCi!nin? of Art, 133(1).
·
·
·
•
1962
March {J,
1961
Sir Chunilol
V. Afehta d: Som,
Ltd.
...
Tht Ctnli..17 SpiMing
d.: JI 4nrifa<turing
Co, Ltd.
M:Jdho/l;(l' J.
550 SUPREME COURT REPORTS (1962] SUPP.
Kaiklw.shroo Pirojsha Glzaira v. C.P. Syndicate Ltd.,( 1948)
I. Born. L. R. 741; R~~thunath Prasrul Singh v. Depuly Commissioner~( ParlaPVarh, ',1927) 54 l. A. 126 and Dinkarrrw v.
R'lllansey, I. L. R. ( 1949) Nag. 224, referred to.
.
Rimmalap>;di Subb<1 Rtw v . • Voony l'eeraju, [. L. R. 1952
~fad. 264, approved.
lleld, further that upon a proper construction of cl. 14
of the agreement the appellant; were entitled to damages
at the rate of Rs. 6,000 per month only.
The words "not
le<S than Rs. 6,000" in
cl. 14 could not be construed
as meaning 10% of the gross profits as provided in cl. 10.
When in cl. 14 the parties named a sum of money to be paid
....,.
as liquidated damages, it excluded the right to claim an
unascertaincrl sum as darnages.
Crvn. APPELLATE JURISDICTION : Civil Appeal
.No. 417 of 19:ii.
Appeal by sp~cial leave from the judgment
and dceree tlatBd .\farch 14, 19.56, of tho Bombay
High Court in Appeal No. 94 of 1955.
N. A. Palkhivala, J. B. Dadachanji, 8. N. Andie)/,
R1tm.eshwar .l\'ath and P. L. Vohm, for the appellants.
.
llf. C. 8r1alvad; Attorney General of India, R .• !.
Joshi and R. P. Malteshwari, for the respondont.
Pon1!3 A. Melita and R. H. Dliehar, for the
r ntervencr.
1962. March 5,
The Judgment of the Court
1va~ delivered by
MuDIIOLll:AR, J.-This is an appeal by special
lerive iigainst. tho Judgment of the High Court of
Bomh11.y in an appeal from the jud~ment of a single
.Judge of that Court. The claim in appeal before
tho High Court was for a.bout 26 lakhs of rupees.
Being aggrieved by the decision of the High Court,
'h<> n.npelliint a.pp lied for a. certificate under Art.
I !l3(l )la) of the Con•titution. The ju :lgment of the
High Court in appeal was in affirma.nco of the judgment of the learned single ,Judge dismissing the
~ppellant's suit. for qamages and therefore, it wa~
1
3 S.C.R. SUPREME COURT REPORTS
551
necessary for the appellant to establish that a substantial question of law was involved in the appeal.
On behalf of the appellant it was contended that
the question raised concerned the interpretation to
be placed on certain clauses of the mrmaging agency
agreement upon which their claim in the suit was
founded and that · as the interpretation placed by
the appeal court on those clauses was erroneous and
thus deprived them of the claim to a substantial
amount the matter deserved to be certified by the
High Court under Art. 133(l)(a) of the Constitution.
The learned Judges,dismissed the 11.pplication without a judgment apparently following their previous
decision in KaikhushrooPirojsha Ghaira v. C.P. Syndicate Ltd. (1).
The appellants, therefore, moved this
Court under Art. 136 of the Constitution for grant
of special leave which was granted. In the application for special leave the appellant had raised a
specific contention to the effect that the view taken
by the High Court with regard to the application for
certificate under Art. 133 (1) (a) of the Constitution
was wrong, that the appellant was entitled to
appeal to this Court as a matter of right and that
while considering the appeal this question should
also be decided.
The appellant pointed out that
tho· view taken by the Bombay High Court on the
point as to what is a substantial question of law
runs contrary to the decision of the Privy Council
in Raghunath Prasad Singh v. Deputy Commissioner of
Partabgarh (2) and the decision of some High Courts
in India and that therefore, it is desirable that this
Court should pron0unce upon the question in this
appeal and set the matter at rest. We think that it
is eminently desirable that the point should be considered in this appeal.
It is not dijputed before us that the question
raised by the appellant in the appeal is one of Jaw
because wh11t the appellant is challenging is the
interpretation placed upon cert,ain clauses of the
(1) (\948) L. Born. LR. 744.
(2) (1927) 54 I.A. 126, 12&,
.
.
'
1962
Sir Chunilal
V. Mehta cf! Sons,
Ltd.
v.
The Century Spinning
& Manufacturing
Co, Ltd.
Mu<l~olkaf' J,
•
1962
Sir Churiilal
J', .l[rli.t.1 ((_·Sons,
'
Lid.
v.
Tht Ctnt11 )' ·"Pi1lni'ffg
&: .lloriuf1cturing
Co., I.id,
.\fudhr,,l!:ar J.
' .
552 SUPREME COURT REPORTS [1962) SUPP.
ma.naging agency a.greement which a.re the founda.-
tion of the claim in suit. Indeed it is well settled
that the construction of a decument of title or of a
dooument which is the foundation of the rights of
parties necessarily raises a question of law.
The next question is whether the interpretation
of a document of the kind referred to abov11 raises
a substantial question of la.w.
For, Art. I :~3( I)
provides that where the judgment, decree or final
order appealed from affirms the decision of the
conrt immediately below in any case other than a.
case referred to in sub-cl. ( c) an a.ppea.I sh&U lie to
this Court if the High Court oertifics that tbe appeal
involves some substantial question of law. To tho
same effect are the provisions of s. IIO of tho Code
of Civil Procedure. In the old Judicial Commissioner's Court of Oudh tho view was taken that a
substantial question of law meant a question of
general importance. Following that view its successor, the Chief Court of Oudh, refused to grant a
cortificat~ to one Rcghunath Prasad Singh whose
appeal it had dismissed. The appellant, therefore,
moved tho Privy Council for special leave on the
ground that the appeal raised a substantial question
of law. The Privy Council grant<,>d speoial leave to
the appellant ai1d while granting it ma.do the follow.
ing observation in their judgment:
"Admittedly here the decision
of the
Court affirmed tho decision of tho Court immedia.tely below, and, thert>foro, the whole question turns upon whether there is a substantial
question of law.
Thero seems to have been
somo doubt, at any rato in the old Court of
Oudh, to which the present Court succeeded,
as to whether a. substantial questinn of law
meant a. question of genera.I importance. Their
J,ordshi ps think it is quite clear and indeed
it was conceded by !\fr. De Gruyther t.ha.t that
fS not the meaning, but that "substantiai
3 S.C.R.
SUPREME COURT REPORTS
553
question of law" is a substantial question of
law as between the parties in the case involved."
Then their Lordships observed that as the case had
occupied the High Court for a very long time and
on whieh a very elaborate judgment was delivered
the appeal on its face raised as between the parties
a substantial question of law. This case is reported
in Raghunath Prashad Singh v. Deputy Commissioner of
Partabgarh(l). What is a substantial question of law
as between the parties would certainly depend upon
the facts and circumstances of every case.
Thus
for instance, if a question of law had been settled
by the highest court of the country the question of
law however important or diffi<'ult it may have been
regarded in the past and however much it may affect
any of the parties would cease to be a substantial
question of law. Nor again, would a question of
law which is palpably absurd be a subsLantial question of law as between the p1rties. The Bombay
High Court, however, in their earlier decision already adverted to have not properly appreciated
the test laid down by the Privy Council for ascertaining what is a substantial question of law. Apparently the judgment of the Privy Council was brought
to their notice though they do not make a direct
reference to it, they have observed as follows:
"The only guidance that we have had
from the Privy Council is that. substantial
question is not necessarily a question which is
of public importance. It must be a substantial question of law as between the parties in
the case involved. But here again it must
not be forgotten that what is contemplated is
not a question of law alone ; it must be a substantial question. One can define it nega-
. tively. For instance, if there is a well established principle of law aIJq that principle i~
(I) (1927) 54!. A. 1261 12a.
1961
Sir' Chunilal
V. MtAta & Sons,
Ltd
••
TAe C1ritur1 Spinning
ch Manufacturing
Co., Ltd.
Mudholkar J.
Sir Chunil~
V. MtlUtJ &, Soru,
Ltd.
••
r,,_ C.nM.1 Spio•;,,g
<6 Monufocturing
Cn., Ltd.
.\fudholk1r J,
554 SUPREME COURT REPORTS [1962] SUPP.
applied to a. given set of fa.ots, tha.t would
certainly not be a substantial question of la.w.
Where tho que8tion of law is not well settled
or where there is some doubt as to the principle of law involved, it certainly would ra.ise
a substantial question of la.w which would
require a final adjudication by the highest
Court."
One of the. points which the learned judges of the
Bombay High Court had to consider in this case
was whether the question of construction to be
placed upon a. decree was a substantial question of
law.
The learned Judges said in their judgment
that the decree was undoubtedly of a complicated
cha.racte r but even so they refused to grant a certificate under s. I IO of the Code of Civil Procedure
for appeal to the Federal Court because the construction which the Court was called upon to place
on the decree did not raiAe substantial question of
law. Thny have obRerved tllat even though a decree
may be of a complicated character what the Court
ha.a to <lo is to look at its variolli! provisions and
draw its inference therefrom. Thus according to the
learned Judges merely because the inference to
be drawn is from a complicated decree no subtan.
tia.l question of law· would arise.
Apparently in
coming to this conclusion thoy omitted to a.ttach
sufficient weight to the view of the Privy Council that
a question of la.w is "a substantial question of law"
when it affects tho rights of the parties to tho proceeding. Further the learned Judges seem to have
taken the viow that there should be a doubt in the
mind of the Court as to the principle of law involved and unless there is such doubt in it8 mind the
question of law decided by it ca.nnot be said to be
"a substantial qu,,stion of law" 80 as to entitle n
party to a. certificat.o under s. 110 oft.he Code of
Civil Pro~ure. It is trqo that the~ have μot sa\d
.3 S.C.R.
SOPREME COURT REPORTS
555
in so many words that such a doubt must be entertained by the Court itself but that is what we understand their judgment to mean and in particular the
last sentence in the portion of their judgment which
we have quoted above.
As against the view taken by the Bombay High
Court there are two decisions of the High Courts in
India to which reference was made before us.
One
is Dinkarrao v. Rattansey ('). !n that case applying
the Privy Council's decision the High Court held that
a question of law· is substantial as between the
parties if the decision turns one way or another on
the particular view taken of the law. If the view
taken does not affect the decision then it cannot be
substantial as between the parties ; but it would be
otherwise if it did, even though the question may be
wholly unimportant to others. It was argued
before the High Court on the basis of certain decisions that no question of 111,w can be substantial
within the meaning of s. llO of the Code of Civil
Procedure unless the legal principles applied in the
case are not well defined or unless there can be
some reasonable divergence of opinion about the
correctness of the view taken and unless the case
involves a point of law such as would call for fresh
definition and enunciation. Adverting to those
cases Bose C. J., (as he then was) who delivered the
judgment of the Court observed as follows :
"In the first case cited; it was also .held
that a misapplication of principles of law does
not raise any substantial question of law so
as to attract the operation of s. llO ........ ..
There can be no doubt that that is a view
which has been held by various High Courts
in India, but the decision cited omit to consider two· decisions of their Lordships of the
Privy Council on this very point which, in o~r
(!) J. L. R. (1949) N•B· 22~.
.
~
.
196B
Sir Chunilol
V. M•hta &
Sons, Ltd.
v.
Thi Cmtur1' Spinnin_f
&: M onufacturing
Co., Ltd
tUudholkar J.
1961
Si< Chuni/.J V.
,\f,hla ti' Stma, Lld
••
Tiu Centur.1 Spitm;ng
<i· :\-f an1ifacturinr
Co., Lid.
,.\1 udltolkar J .
556 SUPRE~fE COURT REPORTS [1962] SUPP.
opinion, very largely modify the views taken in
the cases cited and which of course it is impos·
sible for us to ignore." (p. 226)
Referring to th11 Privy C'-<mncil case the learned
Chief Justic:e observed as follows :
"In the Lucknow case the only question
was whether the defendant there obtained an
absolute interest or a limited interest under I\
will.
That again was a question which was
of no interest to anyone outside the parties to
the suit. Nevertheless, their Lordships con·
sidered in both cases that the questions were
substant.ial questions of law bec:iuse they were
rnbstantial as between the parties. We can
only consider this to mean that a question of
law is substantial as between the parties if
the decision turns one way or another on the
particular view taken of the law. If it docs not
affect the decision t.hen it cannot be su bstantial as between the parties. But if it substa.11·
tially affects the decision then it is substan·
tial as between the parties though it may be
wholly unimportant to others." (p. 228)
It may be that in the case before it, the Nai?pur
High Court was justified in granting certificate
because of the points involved was the construction
of a deed of compromise and the High Court had
interpreted that deed differently from the court
below.
But it seems to us that some of the observations of Boso C. J., are a lit.tlo too wide.
We
are prepared to assume that the learned Chief
.Justice did not intend to say that where a question
of law raised is palpably absurd it would still be
regarded as a substantial question of law merely
because it affects the decision of the case one way
or the other,
But at the s:ime time his observation
that the view taken in the cases cited before him
requires to be modified in the light of the Privy
9oμncjl decj.sjOIJ woulq imply t~at a ~uestiop of l!i-1f
3 S.C.R.
SUPREME OOURT REPORTS
557
is deemed to be a substantial question of law even
though the legal principles applicable to the case
are well defined and there can be no reasonable
divergence of opinion about the correctness of
the view taken by the High Court. If we have
understood the learned Chief Justice right, we
think that he has gone further than was warranted
by the decision of the Privy Council in Raghunath
Prasad Singh's case (1).
The other case relied upon was Rimma"lapudi
Subba Roo v. Noony Veeraju (2). In that case the
test of the kind · suggested by Bose C.J., was
rejected on the ground that logically it would lead
to the position that even a palpably absurd plea
raised by a party would involve a substantial
question of law because the decision. on the merits
of the case would be directly affected by it. What
was, however, said was that when a question of law
is fairly arguable, where there is room for difference
of opinion on it or where the Court thought it necessary to deal with that question at some length and
discuss alternative view, then the question would
be a sabstantial question of law. · On the other
hand if the question was practically covered by
the decision of the highest court or if the general
principles to be applied in determining the question
are well settled and the only question was of
applying those principles to the particular fact of
the case it would not be a substantial question of
Jaw.
We a.re in general agreement with the view
taken by the Madras High Court and we think that
while the view taken by the Bombay High Court
is rather narrow the one taken by the former High
Court of Nagpm~ is too wide. The proper test for
determining whether a question of law raised in the
case is substantial would, in our opinion, be whether
it is of general public importance or whether it
(!) (1927) 541.A.126, 128.
(2J I.L.R. 1952 Mad. 264.
1962
Sir Chunilal V.
M1hl a&: 'Sone, Ltd.
v.
l'lu Century Spinning
dJ M oii.ufacturinz,
Co., ltd.
Mudho/l:arJ.
11
S;, Chunil o1 Y.
JI eh ta &: Sons. W.
i
Tiu Cmlu'' ,.,,,.ing
d· Manujacluf'int
Co., Ltd.
MudhtlkM J.
~GS st;PhEME COURT REPORTS [1962J.St1Pt.
directly and substantially affects the rightR of th~
parti<'S and if so whether it is either an open ques·
tion in the sense that it is not finally settled hy
this Court or hy the Privy Council or by the Fede.
ral Court or is not free from difficulty or calls for
discussion of alternative views. If the question is
settled by the· highest Court or the general principles to be applied in determining the question aro
well settled and there is a mero queation of applying those principles or that the plea raised is palpably absurd the question would not be a substantial
question of law.
Applying these tests it would be clear that tho
·question involved in this appeal, that is, the construction of tho Managing Agency agreement is not
only one of law but also it is neither simple nor
free from doubt.
In the circumstances we have no
hesitation in saying that the High Court was in
error in refusing to grant the appellant a certificate
that tht~ appeal involves a substantial question of
law. It has to ho borne in mind that upon the
success or the failure of tho
contention of the
parties, thoy stand to succeed or fail with respect to
their claim for nearly 26 lakhs of rupees.
Now as to the merits. The relevant facts may
be briofly stated. Chunilal Mehta & Co., Bombay
were appointed Managing Agents of the respondent
company for a term of :!l years by an agreement
'
dated June 15, 1933.
By a resolution passed by
the respondent company in October l!l45, Chunilal
.Mehta. & Co., were permitted to assign the benefits
of the afor<'said agreement to the present appellant,
Sir Chunilal V. Mehta & Sons Ltd. On April 23,
1951, the Board of Directors of the Company terminat<'d the agreement of 1933 and passed a resolution removing the appellant as Managing Agents on
April 23, 1951. The appellant thereupon filed a
suit on the original side of the Bombay High Court
-
3 s.c.it.
SUPREME COURT REPORTS
559
claiming Rs. 50 lakhs by way of damages for wrong1962
ful termination of the agreement. Eventually· with
Sir Ch••ilal
the permission of thll Court it amended the plaint
V. Mehia &J Soos,
and claimed instead Rs. 28,26,804/-. The company
U.,~·
admitted before the Court that the termination of The C•ntur7 SpiMi"t
h
1
,
f l
d
h
&! Manufacturing
t e appel ants employment was wrong u an so t e
Co., IM.
only question which the learned Judge before whom
the matter went had to decide was the quantum of
MudholkarJ.
damages to which the appellant was entitled. This
question depended upon the construction to be
placed upon cl. 14 of the Managing Agency agreement.
That clause runs thus :
"fn case the Firm shall be deprived of
the office of Agents of the Company for any
reason or cause other than or except those
reasons or causes specified in Clause 15 of
these presents the Firm shall be entitled to
receive from the Company as compensation
or liquidated damages for the loss of such
appointment a. sum equal to the aggregate
amount of the monthly salary of not less than
Rs. 6,000/- which the Firm would have been
entitled to receive from the Company, for and
during the whole of the then unexpired portion
of the said period of 21 years if the said
Agency of the Firm had not been determined."
In order to appreciate the arguments advanced
before us it would, however, be desirable to reproduce the two earlier clauses-els. 10 and 12.
They
run thus :
10.
The Company shall pay to the Firm
by way of remuneration for the services to be
performed by the Firm as such Agents of the
Company under this Agreement a monthly
sum of Rs. 6,000/- provided that if at the
1962
Sfr Clwnilol V.
M11tla &.· S01ts Lt4
v.
560 SUPRE~IE COURT REPORTS [1962) SUPP.
T ht Ctn/tu_> SpiNrin g
th, Jlarrufaeluring
1Co., /Jd.
clos<· of any y<'ar it shall be found that tho
total remunerat.ion of· the firm receivf'd in
such year shall have been less than IO per
cent of the gross profits of thtJ Company for
such year the Company shall pay to the Firm
in respect of ~uch year such additional sum
by way of remuneration as will make the total
sum received by the Firm in and in respect of
such year equal to I 0 per cent of tho groSB
profits of the Company in that year. The
first payment of such remuneration shall bf,
made on the first day of August 19:l3.
M,dholkar J.
"12. The said monthly remuneration or
Hillary shall accrue due from day to day but
shall be payable by the company to tho l•'irm.
monthly, on the first day of the month immediatdy ~ucceeding tho
month in which it
shall have been earned."
Tho learned trial judge upon the interpretation placed by him on cl. 14 awarded to the appellant a sum of Rs. 2,:W,OCO/., calculating the amount
at Ha. (),000/- p.m. for the unexpired period of the
term of the Managing Agency agreement and also
awarded interest thereon. Kow according t-0 l\Ir.
Palkhivala for the appellants, the interpretation
placed upon cl. 14 by the trial judge and the appeal
Court is erroneous in that it makes the words "not
less than" in cl. 14 redundant. Learned counsel
contends that on a proper construction of cl. 14 the
appellants are entitled to compensation computed
on the basis of the total estimated remuneration
under cl. l 0 for the unexpired period. Under that
clause, he contends, the appellants are entitled to
10% of the profits of the <:ompany subject to a
minimum of Rs. 6,0UO/- p.m.
Alternatively learned
counsel contends that cl. 14 is not exhaustive of the
appellant's right to compensation and the right to
be compensated in respect of contingent remunera-
-
3 s.c.k.
SUPREME COURT REPORTS 56l
tion based oa 10% of profits is left untouched by
that clause.
A perusal of cl. 14. clearly shows that the
parties have themselves provided for the precise
amount of damages that would be payable by the
Company t::> the Managing Agents if the Managing
Agency agreement was terminated before the expiry
of the period for which it was made. The clause
clearly states that the Managing Agent shall receive
from the Company as compensation or liquidated
damages for the loss of appointment a sum equal
to the aggregate amount of the monthly salary of
not less than !ts. 6,000/- for and during the whole
of the unexpired portion of the term of Agency.
Now, when parties name a sum of money to be
paid as liquidated damages they must be deemed to
exclude the right to claim an unascertaiued sum of
· money as damages. The contention of learned
counsel is that the words "not less than" appearing
before "Rs. 6,000/-" in cl. 14 clearly bring in cl. 10
and, therefore, entitle the appellant to claim 10% of
the estimated profits for the unexpired period by way
of damages. But if we accept the interpretation, it
would mean that the parties intended to confer on
the Managing Agents what is in fact a right conferred
by s. 73 of the Contract Act and the entire cfause .
would be rendered otiose.
Again the right to
claim liquidated damages is enforceable under s. 74
of the Contract Act and where such a right is
found to exist no question of ascertaining damages .
really arises. Where the parties have deliberately
specified the amount of liquidated damages there
can be no presumption that they, at the same time,
intended to allow the party who has suffered by the
breach to give a go-by to the sum specified and claim
instead a sum of money which was not ascertained or
ascertainable at the date of the
breach. Learned
counsel contends that upon this view the words "not
less than" would be rendered otiose. In·our opinion
196>
Sir Chunilal' V.
M1hta &! Sons, Ltd.
••
The Century Spinfting
& Manufaclur inV
1
Co. Ltd.
fl1udholkar J.
1962
Sir Chunilal V.
Mehta~ Sons, Ltd.
v.
Tht Century Spinnint
~ klanufacturinl Co.
Lid
MudhollwJ.
662 SUPREME COURT REPORTs [1962) SUPP.
•
the~e wordR, as rightly-pointed out hy the High
Court, were intended only to emphasise the fact
that compensation will be computable at an amount
not less than Rs. fi,000 p.m.
Apparently, they
thought it desirable to emphasise the point that the
amount of lts. 6,000 p.m. was regarded by them as
reasonable and intended that it should not be reduced by the court in its discretion.
Mr. Palkhivah argued that what the appellants
were entitled to was remuneration aud remuneration
meant nothing but salal'y. The two words, according
to him, have been used intorchangeahly in the various
clauses of the agreement. If, therr.forc, salary in
cl. 14 is the same as remunerat.ion, which according
to him it is, then as indieated in el. JO it would
mean 10% of the gross profits of the Company subject to a minimum of Rs. 6,00P/-p.m.
Jn support
of the argument that the two words wherever used
in the agreement mean one and the same thing learned counsel relies on cl.12 which says that the
monthly remuneration or salary shall accrue due
from day to day. Then undoubtedly the two words
clearly mean the same thing. But from a perusal of
the clause it would a.ppear that remuneration there
could mean nothing other than Rs.6,000/·p.m.
For,
that clause provides that the amount shall accure
from day to day and be payable at the end of the
month immediately succeeding the month in which
it had been earned. Now, whether a company had
made profits or not and if so what is the extent of
the profits is determinable only at the end of its
accounting year. To say, therefore, that the remuneration of 10% of the gross profits accrues from
day to day and is' payable every month would be
to ignore the nature of this kind of remuneration.
Therefore in our opinion, when the remuneration
and salary were equated in cl. 12 nothing else was
meant but Rs.u,OOOf-and when tho word salary was
used in cl. 14 we have no doubt that only that
1
'
as.a.&.
sU:PR:EM:E cou&r REPORTS
563
amount was meant and no other. It may be that
under cl. 10 the appellant was entitled to additional
remuneration in case the profits were high upto a
limit of 10% of the gross. profits. That was a right
to claim something over and above Rs.6,000/-and
could be characterised properly as additional remuneration and not fixed or normal remuneration
which alone was apparently in the minds of the parties when they drew up cl. 14. In our opinion,
therefore, the High Court was right in the construction placed by it upon the clause.
Coming to the alternative argument of Mr.
Palkhivala, we appreciate that the right which the
appellant had of claiming 10% of profits was a
valuable right and that but for cl. 14 he would have
been entitled in a suit to claim damages estimated
at 10% of the gross profits. We also appreciate
his argument that a party in breach should not be
allowed to gain by that breach and escape liability
to pay damages amounting to a very much larger
sum than the compensation payable under cl. 14
and that we should so interpret cl. 14 as to keep
alive that right of the appellants. Even so, it is
difficult, upon any reasonable construction of cl. 14,
to hold that this right of the appellants were intended by the parties to he kept alive. If such were
the intentions of the parties clearly there was no
need whatsoever of providing for compensation in
cl. 14. If that clause had not been there the appellant would indeed have been entitled to claim damages at the rate of 10% for the entire period aubject
to minimum of Rs. 6,000/- p.m. On the other hand
it seems to us that the intention of the parties was
that if the appellants were relieved of the duty to
work as Managing Agent and to put in their own
money for ~arrying on the duties of managing agents
they should not be entitled to get anything more
than Rs. 6,000/- p.m. by way of compensation.
Clause 14 as it stands deals with one subject only
Sir Chunilol V.
M1hla &t Sons, Ltd.
Vo
The Centu,y Spinning
&: M anuJacturing
Co., Ltd.
Mudholkar J.
i962
Sir Cl11111il4l V.
M1hla 41 Sons1 Ud.
v.
Tiu Ct11t111y Spinning
4' M"""fact,,.ing
C.. Lid.
M ui!rol /w J.
IHI
Morch 6t>
.
, .
~
. .
.
.
.
.
' ,.
SUPREME OOURT REPOR1'S [1962] SUPP.
and that is compenation. It does not expreBBly or
by necessary implication keep alive the right tu
claim damages under the general law. By providing for compensation in express terms the right tu
claim damages under the general law is neceBSarily
e~cluded and, therefore, in the face of that clause it
is not open to tho appellant to oontend that that
right is left unaffected. Thero is thus nu substance
in the alternative contention put forward by the
learned counsel.
Accordingly we affirm the decree of the High
Com t and dismiss the appeal with cost.a.
Appe,al di,siniS&li.
KRISli.J.'i"A PRASAD AND .OTHER~
v.
GAURI KUMAR! D.EVl
(P. B. GA.JK'.SDRAGADKAR, A. K. SARKAR and
K. N. w AN CHOO, JJ.)
Bxecution-l'eroonal decree against mortgagor-Mortgaged
e•late i·eBting in t!.t State-Bjject on claim pendiny-Bihar Land
Reform• Act, 19W(Acl 30 oj 1950), s. 4(d).
The appcllan t obtaine<l a
preliminary decree, on an
anomalous mortgage of a ~hare in the Zamindari village of
Sonchari Mouza in the Patna lJistrict and khudkasht land
appertaining to the Mouza, against the mortgaged properties
with a direction for a personal decree for the balance and
there followed a final mortgage decr<e on 30.9.1947. An
application for execution against the mortgaged properties was
dismissed on 9.1.1954 as in the meantime the mortgaged pro·
pcrtics \\·hich constituted an estate within the meaning of
s. 2(1) of the Bihar Land Reforms Act, 1950, had vested in
the State.
Execution was sought personally against the mortgagor
I
. by attachment and sale of other properties of the mortgagor
and it was ultimately ordered by the executing <OUJ t.
The