Whether Steamer Agent Liable to Pay Demurrage to Port for
Uncleared Goods? Question Answered by Supreme Court

(By V.B.Hari Narayan, Advocate, High Court of Kerala)

The Honourable Supreme Court in the judgement dated 5.08.2020 in Chairman, Board of Trustees, Cochin Port Trust v Arebee Maritime Agencies Private Limited & Ors .
(2020 (4) KLT OnLine 1126 (SC)which originated from the decision of the Honourable High Court of Kerala rendered on 27.9.2011 has decided several pertinent legal issues with reference to the liability of a steamer agent to pay ground rent/demurrage in respect of goods which are stored in the custody of port trust beyond a period of 75 days on account of the owner of the goods failing to come forward to take delivery of the same or clear the port charges.

Incidentally the Supreme Court also considered the larger question as to whether a ship owner or his agent can be considered as an ‘owner’ in terms of the definition contained under Section 2(o) of the Major Port Trusts Act with reference to goods.

The Supreme Court also considered the impact of Section 61 and 62 of the Major Port Trusts Act in so far as it lays down an obligation on the part of the Port Trust to sell goods not removed from its premises within an outer time limit of 2 months and whether such a stipulation is mandatory or directory in nature.

While considering the question as to whether a steamer agent can be construed as an “owner” in relation to goods under Section 2(o) of the Major Port Trusts Act, the court has drawn a distinction with reference to the ownership of goods until the stage of landing and removal to a place of storage, and when the goods are actually taken by Port Trust for storage.  But at the same time, by treating the definition of Owner as an inclusive one, and that loading and unloading can take place at the instance of steamers agent also, the Court refused to declare that the steamer agent is not included within the definition of Owner under the Major Port Trusts Act. As far as the 1st scenario is concerned, the Supreme Court held that until the stage of landing and removal to a place of storage, the steamer agent or the vessel may be held liable for charges in respect of services rendered qua unloading of goods. However  in respect of the 2nd scenario it has been made clear by the Supreme Court that the point of time from which the Port Trust takes charge of the goods, then it is only the Importer, consignee, agent or owner of the goods or those entitled to the delivery of the goods who are liable for payment of storage or demurrage charges. In the light of the above declaration of law it can be safely concluded that a ship owner or a steamer agent in so far as it relates to the payment of storage or demurrage charge demanded by the Port Trust is not liable for payment of such charges.However, the question whether the Port Trust can recover the charges from the shipper/consignor is left open.

As regards the question with reference to the obligation of Port Trust to sell those goods which are not taken delivery by the consignee within a reasonable time it was held by the Court referring to Section 61 & 62 of the Major Port Trusts Act that, it is the duty of Port Trust to destuff every container entrusted to it and return the destuffed containers within a short period of time as is feasible and what is the ‘short period’ has to be determined on the facts of each case. To that extent the Court set aside the judgment of Kerala High Court treating the expression ”may” used in Section 61 & 62 to be read as “shall” subject to a caveat that the Port Trust must act reasonably to sell the goods within a reasonable period once the goods comes into its custody. 

In view of the above Judgement more particularly the undertaking given by the steamer agents admitting their liability for payment of ground rent up to 75 days before the High Court it is now clear that the steamer agents are not liable to pay any ground rents to the port beyond the period of 75 days as admittedly they do not come within the purview of definition of ‘owner’ as provided under S 2(o) of the Major Port Trusts Act in relation to goods which are in the custody and storage of the Port Trust.

Adoption in the context of the Juvenile Justice
(Care and Protection of Children) Act, 2015

(By Sasisekhar Menon, Librarian, High Court of Kerala)

“Our children are our greatest treasure. They are our future. Those who abuse them tear at the future of our society and weaken our nation.”                     -- NELSON MANDELA

The United Nations Convention on the Rights of the Child, 1989 is the world’s most widely ratified human rights treaty in history. It was based on the idea that children are human beings and individuals with their own rights The convention says childhood is separate from adulthood, and lasts until 18 years. It has inspired Government to change laws and policies and make investments so that more children finally get the healthcare and nutrition they need to survive and develop, and there are stronger safeguards in place to protect children from violence and exploitation.

Hague Adoption Convention on Protection of Children and Co-operation in Respect of Inter Country Adoption; the preamble of which states Inter country adoption shall be made in the best interests of the child and with respect for his or her fundamental rights and to prevent the “abduction of’, the sale of, or traffic in children and each state should take, as a matter of priority, appropriate measures to enable the child to remain in the care of his or her family of origin.

This Convention entered into force on 1^st May, 1995 and as on March 2019, the Convention has been ratified by 99 countries. To comply with international standards, many changes have been introduced in national legislation enacting laws to criminalize the act of obtaining improper gains from international adoptions.

Laws governing Adoption in India:

Adoption law in India is in conjunction with the personal laws of individual religion and therefore, adoption is not allowed as per the personal laws of Muslims, Christians, Parsis and Jews in the country. However, an adoption can be made from an orphanage under the Guardians and Wards Act, 1890, subject to court’s approval. Hindus, Jains, Buddhists or Sikhs are allowed to adopt a child formally and the adoption is as per the Hindu Adoption and Maintenance Act, 1956 which was enacted as part of the Hindu Code Bills.

Adoption of abandoned, surrendered or abused children is governed by the Juvenile Justice (Care and Protection of Children) Act, _;2015.

In the absence of any concrete Act for inter country adoption, the procedures laid down by the Guardians and Wards Act, 1890 are followed.

The Juvenile Justice (Care and Protection of Children) Act, 2015

This Act (for brevity mentioned hereafter as the JJ Act, 2015) came into effect on 15.01.2016. It replaced the earlier Act of 2000 and allows for Juveniles in conflict with law in the age group of 16-18, involved in heinous offences to be tried as adults. The Act has also sought to create a universally accessible adoption law for India. It attempts to streamline adoption procedures for orphan, abandoned and surrendered children, the existing Central Adoption Resource Authority (CARA) has been given the status of a statutory body to enable it to perform its functions more effectively. It allows a JJ Board (which includes psychologists and sociolgists) to decide whether a Juvenile Criminal in the age group of 16-18 should be tried as an adult or not. It introduced concepts from the Hague Convention of 1993, which were missing in the previous Act. The Act introduced foster care in India. Families will sign up for foster care and abandoned, orphaned children, or those in conflict with the law will be sent to them. Such families will be monitored and shall receive financial aid from the State. In adoption, disabled children and children who are physically and financially incapable will be given priority. Section 56 to 73 of the JJ Act, 2015 deal with Adoption. Section 56(1) states that “adoption shall be resorted to for ensuring right to family for the orphan, abandoned and surrendered children, as per the provision of the Act, the rules made thereunder and the Adoption Regulations framed by the Authority.”

Section 63 mention the effect of Adoption thus, “once an adoption order is issued by the court, the child shall become the child of the adoptive parents, and the adoptive parents shall become the parents of the child as if the child had been born to the adoptive parents, for all purposes, including intestacy, with effect from the date on which the adoption order takes effect, and on and from such date all the ties of the child in the family of his or her birth shall stand severed and replaced by those created by the adoption order in the adoptive family”.

Section 67 explains State Adoption Resource Agency and Section 68 the Central Adoption Resource Authority. Section 72 deals with grants by Central Government and Section 73 deals with Accounts and audit of the authority.

Features of the Adoption Regulations. 2017 (w ef 16.01.2017)

Regulation 3: Fundamental principles governing adoption:

(a) The child’s best interests shall be of paramount consideration, while processing any adoption placement.

(b) Preference shall be given to place the child in adoption with Indian citizens and with due regard to the principles of placement of the child in his own socio-cultural environment, as far as possible.

(c) All adoptions shall be registered in Child Adoption Resource Information and Guidance system and the confidentiality of the same shall be maintained by the Authority.

Regulation 14: Non - resident Indians to be treated at par with resident Indian.

Regulation 22: Procedure for adoption of a child from a foreign country by Indian citizens.

Regulation 33: Role of State Government and State Adoption Resource Agency.

Regulation 34: District Child Protection Unit.

Regulation 37: Central Adoption Resource Authority.

Landmark Judgments of the Supreme Court of India on Adoption.

1. Lakshmi Kant Pandey v. Union of India(1984 KLT OnLine 1203 (SC) decided in 06.02.84).

The court held that no attempt should be made to trace or contact biological parents coming forward to claim child after it had been given to foreign in adoption. It is also necessary while considering placement of child in adoption to bear in mind that brothers and sisters or children who have been brought up as siblings should not be separated except for social reasons. As soon as deciding to give child in adoption to foreigner is finalised, recognized social or child welfare agency must, if child has reached age of understanding, take steps to ensure that child is given proper orientation and prepared for going to its new home in new country so that accumulation of child to new environment is facilitated.

2. In Shabnam Hashmi v. Union of India(2014 (2) KLT 444) on 19.02.2014, the court held u/S.41 of the JJ (Care and Protection of Children) Act 2000- Adoption of children by person irrespective of religion, caste, creed etc. Muslim personal law does not recognize adoption though it does not prohibit childless couple from taking care and protecting child with material and emotional support. S.41 as amended in 2006 contemplates adoption. Provision of S.41 enabling any person, irrespective of religion he professes to take child in adoption. Prospective parents, irrespective of their religious background, are free to access provision of 2000 Act for adoption of children after following procedure prescribed. The JJ Act, 2000 as amended in 2006 is an enabling legislation that gives a prospective parent the option of adopting an eligible child by following the procedure prescribed. The JJ Act, 2000 does not mandate any compulsive action by any prospective parent leaving such person with the liberty of accessing the provisions of the Act if he so desires. Such a person is always free to adopt or choose not to do so and instead follow what he comprehends to be the dictates of the personal law applicable to him. The JJ Act. 2000 is a small step in reaching the goal enshrined by Art. 44 of the Constitution. Personal beliefs and faiths, though must be honoured, cannot dictate the operative of the provisions of an enabling statute. An optional legislation that does not contain an unavoidable imperative cannot be stultified by principles of personal law which however would always continue to govern any person who chooses to so submit himself until such time that the vision of a uniform civil code is achieved.

Adoption-Held-Right of child to be adopted and that of prospective parents to adopt- not to be declared fundamental right u/Art. 21 of the Constitution-Present is not appropriate time and stage where right to adopt and right to be adopted can be raised to status of fundamental right and/or to understand such right to be encompassed by Art. 21 of the Constitution- Elevation of right to adopt or to be adopted to the status of fundamental right- will have to await dissipation of conflicting thought processes in this sphere of practices and belief prevailing in country.

3. In Stephanie Joan Becker v. State & Ors.(2013 (1) KLT SN 115 (C.No.100) SCon 08.02.2013 held,

Inter country adoption- Application by appellant to court for appointing her as guardian of female orphan child aged about 10 years- Another application for permission of court to take child out of country for adoption- Application rejected by trial court -HC did not interfere- Adoption process spelt out under guidelines, adhered to- Expert bodies also in favour of adoption of child- Appellant could not be said disqualified or disentitled to relief sought by her- Impugned orders set aside-Appellant appointed as legal guardian of female child with necessary directions. Having regard to the totality of the facts of the case, the proposed adoption would be beneficial to the child apart from being consistent with the legal entitlement of the foreign adoptive parent.

4. In Sampurna Behura v. Union of India & Ors.(2018 (2) KLT OnLine 3060 (SC)on 09.02.2018 held-

The JJ Boards (JJB) and Child Welfare Committees (CWC) must appreciate that it is necessary to have sittings on a regular basis so that a minimal number of inquiries are pending at any given point of time and justice is given to all juveniles in conflict with law and social justice to children in need of care and protection. This is a constitutional obligation. The NCPCR (National Commission for Protection of Child Right) and the SCPCR (State Commission for Protection of Child Rights) must carry out time bound studies on various issues, as deemed appropriate under the JJ Act, 2015. Based on these studies, the State Governments and the Union Territories must take remedial steps.

5.InUnion of India & Ors. v. Ankur Gupta & Ors.(2019 (1) KLT OnLine 3083 (SC)on 25.02.2019, held-

Respondents No. 1 and 2 submitted an application through Central Adoption Resource Information and Guidance System (CARINGS) to adopt a child as Indian Prospective Adoptive Parents. Respondent No.2 had by then required citizenship of USA. Baby Shomya (born on 30.09.17) was referred by Respondent No.3 for adoption by R1&2, who apprehended that, referrel of Baby Shomya for adoption would expire on 18 January 2018, repeatedly corresponded with appellants as a follow up for completing adoption of Baby Shomya. In March 2018, when R & R2 visited Baby Shomya, they were informed that their request for permission to continue first application as Indian living in India, Prospective Adoptive Parents was declared as invalid because R1 had also been given US citizenship. Child was declared free for adoption in 14.12.17 by Child Welfare Committee. Before expiry of 60 days, child could not have been offered for adoption to parents, who were eligible for adoption under S.59.

Rl & 2 had been bona fidepursuing their applications for adoption, initially as resident Indians and thereafter even as overseas citizens of India, and as per S.57 were fully eligible and competent to adopt child. But statutory procedure and statutory regime, which was prevalent as on date was equally applicable to all aspirants.

Competent authority shall again notify child Shomya legally free for adoption, by notification within one week. In event, within 60 days from date Shomya was declared as legally free for adoption was not taken by or adopted by Indian prospective adoptive parents, child Shomya shall be given in adoption to Rts 1 & 2 in inter country adoption. All consequential steps thereafter shall be completed.

Recent Development:

The P & H HC has in July, 2020 ruled that a No objection certificate from the Central Adoption Resource Authority (CARA) or to follow a procedure of the JJ Act,2015 is not required if the Hindu adoptive parents has adopted a child directly from biological parents of the child. Justice Nirmaljit Kaur advised the petitioner to obtain a simple NOC from the CARA that it would be in the interest of the adoptive parents and the child. This also ensures a clean transition from one country to another and protect them from facing any difficulty in visa or any other requirement.

Tail Piece:“It is the spirit and not the form of law that keeps justice alive.”

                                                                                          - Earl Warren.

Much Ado About Nothing

(By S.M. Unnikrishnan, Advocate, Palakkad)

As per the Hindu Succession (Amendment) Act, 2005, (39 of 2005) the daughters are also made coparceners in the property. Before the amendment only male members were coparceners and they get a right by birth in the coparcenary property. Before the advent of Hindu Succession Act (30 of 1956) on the death of a coparcener the property devolved on the other coparceners who are males not removed from the common ancestor by more than three degrees. The devolution of the property was by survivorship. While the matters stood thus, on the death of the coparcener, wife of the coparcener was entitled to maintenance from the coparcenary property. In 1937 when Hindu Women’s Right to Property Act came into force, the wives were entitled to a limited estate which will go back to the main stream i.e., coparcenary on the death of the wife since it was a limited estate. When the Hindu Succession Act, 1956 came into force there was difference in the devolution of interest in the coparcenary property. This limited estate became absolute under Section 14(1) of the Hindu Succession Act (30 of 1956).

As per Section 6 of the Hindu Succession Act, (Act 30 of 1956) when a male Hindu dies after the commencement of the Act, having at the time of his death an interest in a Mithakshara coparcenary property, his interest in the property shall devolve by survivorship upon the surviving members of the coparcenary and not in accordance with this Act.

Provided that if the deceased had left him surviving a female relative specified in class I of the schedule or a male relative specified in that class who claims through such female relative the interest of the deceased in the Mithakshara coparcenery property shall devolve by testamentary or intestate succession, as the case may by, under this Act and not by survivorship. Explanation 1- For the purposes of this section the interest of Hindu Mithakshara coparcener shall be deemed to be the share in the property that would have been allotted to him, if a partition of the property had taken place immediately before his death, irrespective of whether he was entitled to claim partition or not. As per the proviso class I heirs of the coparcener in his share at the time of his death are his wife and children including daughters. So as per the Hindu Succession Act before the amendment of Section 6 in 2005 the daughters indirectly became sharers in the coparcenary property with regard to the share of the coparcener. This section i.e. Section 6 was introduced into the Hindu Succession Act 30 of 56 in order to give right in the Mithakshara coparcenary property to the females. In fact in the constituent assembly when the bill with regard to the Act was discussed there was a group having a firm opinion that coparcenery and coparcenery property should be put an end to. There was another group who were very much upset by the suggestion and they were not prepared give up the coparcenery and the coparcenery property. Only to satisfy them Section 6 was introduced in the Act. It was clear that by passage of time there will be no coparcenary property left for survivorship amongst the coparceners. Once the property of a coparcener devolves on his class 1 heirs on his death the remaining property alone will be available for survivorship. The result will be the coparcenary property gets truncated and only a skeleton will remain after sometimes as coparcenery property for survivorship. After a period of time there will be no property left for applying Section 6 and Section 8 of the Act alone will be there to apply if a male Hindu dies intestate. It is after almost 50 years that Section 6 was amended making daughters also coparceners. Now it is very clear that there will be only very little property left in the coparcenary for the daughters to acquire by birth.

In between 1956 Act and the amendment in 2005, various states have introduced special enactments for giving share in the joint family property to the daughters. In Kerala, by the introduction of the Kerala Joint Hindu Family System (Abolition) Act, 1975, a notional partition of the joint family property took place on the basis of the sharers available in the family on 01.12.1976. As per Section 4 of the said Act joint family became disrupted as if a partition has taken place and they were holding the property as tenants-in-common. The property in their hands in the joint family property is their serarate property and thereafter none, both male and female will get any right by birth in the property. The proviso to sub-section (1) of Section 6 of the Hindu Succession (Amendment) Act (39 of 2005) any disposition or alienation including any partition or testamentary disposition of property which had taken place before December 2004 shall be affected or invalidated by the amendment. The notional partition as per Section 4 of the Kerala Joint Hindu Family System (Abolition) Act, will be deemed to be a partition which has taken place on 01-12-1976 i.e., before 20.12.2004. So in Kerala the amendment has no effect because a special state enactment will prevail over the central enactment i.e., as inheritance to the property is included in the concurrent list in the 7^th Schedule to the Constitution; only criterion being it should not be against the central enactment for which provision is made in the central enactment. The Joint family Abolition Act was upheld by the Supreme Court to be constitutionally valid and therefore with regard to Mithakshara coparcenary property, the Kerala Joint Hindu Family System (Abolition) Act, will prevail over Section 6 of The Hindu Succession (Amendment) Act, 2005.

In the result, the amendment of Section 6 of the Hindu Succession Act in 2005, by which the daughters in the Hindu joint family is made coparceners have practically no effect as far as Kerala is concerned. Other states like Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra have made necessary changes in the Act giving right to daughters also in the Mithakshara coparcenary property. Over and above this the Amendment Act says about non applicability of the Amendment Act with regard to testamentary dispositions of property effected before 20.12.2004. This clause will in effect open the flood gate for litigations and will become a lawyers’ paradise. Please see Section 30 and explanation in the Act and the recent judgment by Justice K.M.Joseph (Kalyanaswamy v. Bhakthavalsalam) (2020 (4) KLT 913 (SC)).

I am unable to comprehend why we should insist on the existence of a coparcernary and coparcenary property. My opinion is that the coparcenary concept should be put an end to and Section 6 is to be omitted from the Hindu Succession Act. The devolution of property should be as per Section 8 and 9 and 15 and 16 of the Hindu Succession Act for males and females respectively. The confusions and complications created by the statutes and judgments of various High Courts and Supreme Court can be avoided forever; though the recent judgment of the Supreme Court has tried to set at rest many contradictions. (Vineeta Sharma v. Rakesh Sharma & Ors.)(2020 (4) KLT OnLine 1009 SC). My feeling is that the new generation parents do not show any discrimination against sons and daughters and we need not create that feeling in them by introducing new statute and amendments.

According to me the same principles apply to Marumakkathayees and Aliyasanthanas in Kerala. Section 17 of the Hindu Succession Act has become practically defunct; especially after the commencement of the Kerala Joint Hindu Family System (Abolition) Act, 1975. In short, my opinion is that Section 6 has to be omitted from the Hindu Succession Act after discussing the pros and cons of the effect of the section and the amendment. The effect of the omission of Section 6 from the Act also can be gone into before finalising it.

My experience as a lawyer being limited to Kerala has its own limitations. Criticism welcome.

Reliefs to be Sought for in a Suit for Specific Performance

(By Sunil Prakash, Advocate, Madras High Court )

In a suit for specific performance, when there are conflicting rights of parties namely, that of the agreement holder and the subsequent purchaser, what relief, the agreement holder should seek, apart from the relief of specific performance of sale agreement? It assumes significance, since the subsequent sale to a bona fidepurchaser for value, who was not put on notice of the earlier sale agreement, results in negation for the relief of specific performance. As there is inter play of rights between the agreement holder and the subsequent purchaser, the subsequent purchaser for value, who was not put on notice is protected under Section 19(b) of the Specific Relief Act, 1963. This article intends to examine the said issue.

The issue raised in the article is based on the decision of the Hon’ble Supreme Court in B.Vijaya Bharathi v. P. Savitri¹wherein it was held that the subsequent purchaser had purchased the property, even prior to the filing of suit and also there was no conveyance in favour of the agreement holder. The agreement holder, who though aware of the conveyances in favour of the subsequent purchaser of the same property, even prior to the filing of the suit, did not seek any relief for their cancellation. It would stand in the way to decree a suit for specific performance, unless the sale deeds in favour of subsequent purchasers are also set aside.

The Three Judge Bench of Hon’ble Supreme Court inDurga Prasad v. Deep Chand ²
 has decided the proper form of Decree in a suit for specific performance and it was held that the subsequent purchaser should join with the vendor in executing the conveyance in favour of the agreement-holder. It would assume more significance to analyze, if the proper form of Decree is to be considered in consonance with the pleadings, evidence and nature of reliefs sought for or can it be moulded by using the discretionary powers of the Court.

On perusal of facts in Durga Prasad(supra), in my humble view no law was laid down. A cursory reading of paragraph 5 of the said judgment would reveal that there was a compromise between the agreement holder and the subsequent purchaser. The compromise was that the subsequent purchaser had agreed to transfer conveyance in favour of the agreement holder. The only issue that the Court set out to decide was, as to who would be entitled to the consideration of `62,000/- for the re-conveyance which is deposited in Court., namely, whether the subsequent purchaser, or the vendor/custodian. It was held that the subsequent purchaser would be entitled to `58,000/- and the remaining `4000/- would go to the custodian of the vendor’s properties. The Court while disposing posed a question as to what should be the proper form of decree and while embarking on such an exercise, it had held that the vendor and the subsequent transferee to join in the conveyance so as to pass title to the agreement holder.

Scenarios:

1) If the possession is with the vendor, a mere relief seeking enforcement of the sale agreement simpliciter would give complete relief to the party, as the vendor is duty bound to execute sale deed and deliver possession as defined in Section 55(1)(f) of Transfer of Property Act, 1882.

2) If after the sale agreement, possession of the property is passed on to the subsequent purchaser, a mere relief for specific performance of the sale agreement without relief of possession, will disentitle the agreement holder from obtaining actual possession of the property. The agreement holder should also specifically seek relief of possession along with the relief for enforcement of sale agreement, as the subsequent purchaser is not bound by the sale agreement which is sought to be enforced. This is mandatory for complete and effective relief.³

3) When the property which is sought to be conveyed in the sale agreement, along with its possession, is held jointly by the vendor along with the other persons having right, title and interest in the property, then the agreement holder should also seek relief of partition of the property and possession of the vendor’s share along with the relief for enforcement of sale agreement. It would also be gainful to look into Section 22 of Specific Relief Act, 1963, which provides for possession or partition in certain cases, in addition to the relief of specific performance of the sale agreement or refund of the earnest money. However under Section 22(2) there must be a specific prayer for the relief of possession, partition and refund of earnest money.

4) If prior to the filing of suit, the property has been purchased by the subsequent purchaser and he has also been put into possession, the agreement holder is also aware of the said factum, but no averments/allegations has been pleaded and no reliefs claimed against the subsequent purchaser, then in the said scenario the agreement holder would be constrained to make necessary pleadings and lead evidence.

Any amount of evidence without pleadings is not admissible in law. The title of the property is incidentally decided as the validity of sale in favour of subsequent purchaser is normally put to test, only if there are specific averments/allegations made by the agreement holder against the subsequent sale (prior to the suit but after agreement of sale). The subsequent purchaser cannot be expected to prove negative and a mere denial, about the existence of earlier agreement of sale is sufficient to shift the burden of proof on the agreement holder. The suit for specific performance will partly take the character of suit for declaration and without testing the validity of sale, the Hon’ble Courts would be constrained to decide and grant necessary reliefs to the vendor based on the agreement of sale.

Setting aside alienation will assume more significance, since there is a valid sale transaction for consideration and also valuable third party right has come into play. It would also be gainful to look into Section 34 of the Specific Relief Act, 1963 which specifies that mere declaration would not be sufficient, without a consequential prayer. Hence in my humble view, there will be a bar under Section 34 (second para) of the Act to decree the suit and grant necessary reliefs in the said circumstances. If the principle laid down in Durga Prasad (supra) is applied with full vigor, then it might run counter to the concept of pleadings, evidence and provision of law in a given circumstances.

Unless we are clear about the reliefs, subsequent suit for compensation would be a bar after the dismissal of suit for specific performance. It would also be gainful to look into Section 21 of Specific Relief Act, 1963, which also provides for compensation in certain cases, in addition to the relief of specific performance of the sale agreement. However, under Section 21(5) there must be a specific prayer for the relief of compensation to be sought for.

Reasoning:

When no relief is sought for against any party to the suit, it would amount to no cause of action against the said party.⁴ A party to the suit cannot introduce a new case without making any attempt to get the same duly incorporated in the plaint in accordance with law.⁵ The pleadings and evidence normally determines the issue in dispute hence the courts cannot grant relief when there is no foundation in the pleading and the other party had no opportunity to negate.⁶

The reasoning of one decision cannot be applied in the absence of similarity of circumstances in another case. Normally the decision has to be read in the context of the questions which have arose for consideration in the subsequent case.⁷ The judgment of the Court could be read only in the context of the issue which arose for consideration. It cannot be said to be a law when the matter ended in a compromise.⁸ The decision of a Court which does not proceed on consideration of an issue cannot be deemed to be a law to have a binding effect.⁹ It would not be right to extract portions from such a judgment, and then build upon it.¹⁰

The observations and the directions came to be made more in the peculiar facts and circumstances of the case in order to do complete and substantial justice between the parties in exercise of the discretionary jurisdiction under Article 136 and 142 of the Constitution of India. There is no discussion of the law either and therefore it has no precedential value as laying down any law.¹¹ The non-executant of a deed, must approach the Court under Section 34 of the Specific Relief Act, 1963 seeking cancellation and the said action would be in personam.¹² A small reprieve was granted by the Court on the peculiar facts by clearly holding that the said order is not intended to be used as a precedent.¹³

If the vendor denies his exclusive right, title and interest in the property which is sought to be conveyed in the sale agreement, then the right, title and interest of the vendor is to be determined before deciding on the relief for enforcement of sale agreement.¹⁴

There cannot be a differential treatment in granting reliefs in civil suits namely suit for injunction without the relief of declaration and suit for declaration without the relief of possession is not maintainable and vice versa(even if party proves his title/possession).¹⁵

Author’s view:

In my humble view, no inference could be drawn that the party need not seek any declaratory reliefs challenging the termination of agreement and sale deed in favour of the subsequent purchaser by followingDurga Prasad(supra) as straight jacket principle. In doing so it would certainly run contrary to the principle of pleadings and evidence which normally plays a crucial role while deciding the civil suits. Such inference have been drawn by almost all the High Courts on various occasions but it was not brought to the knowledge of the said Courts that the judgment in Durga Prasad’scase (with due respect) was based on a compromise between parties, and no law was actually laid down, to act as a precedent.

I am therefore of the humble view that the law laid down inVijay Barathi(supra) which has correctly held that relief of setting aside alienation has to be sought for along with the relief for enforcement of sale agreement is to be followed as precedent. As the right, title and interests of the parties are decided, the agreement holder should also seek necessary declaratory reliefs by challenging the sale deeds. If the sale agreement is terminated, then the agreement holder should also necessarily seek declaratory relief challenging the termination of agreement.¹⁶ It therefore become imperative to seek said reliefs in a suit for specific performance based on the circumstances 1) to set-aside the alienation 2) relief of possession, if subsequent purchaser has been put into possession of the property 3) relief of partition, if vendor holds right only in part of the property 4) to set-aside the termination of sale agreement and 5) additional relief of compensation, if relief of specific performance cannot be granted or as additional relief (not mandatory).

Foot Notes:

1.Vijaya Bharati v. Savitri (2017 (3) KLT OnLine 2137 (SC) = AIR 2017 SC 3934).

2.  Lala Durga Prasad v. Lala Deep Chand (AIR 1954 SC 75).

3. Babulal v. Hazari Lal Kishore (1982 KLT OnLIne 1015 (SC) = AIR 1982 SC 818).

4.  2020 (2) MWN (Civil) 533.

5. 1999 (78) DLT 659.

6.  Firm Srinivas Ramkumar v. Mahbir Prasad (1951 KLT OnLine 804 (SC) = AIR 1951 SC 177 (F.B.))

      Shehla Burney v. Syed Ali Mossa Raza (2011 (2) KLT Suppl.38) SC = (2011) 6 SCC 529).

      Sheikh Abdul Khayum v. Mulla Alibhai (AIR 1963 SC 309).

      Scotts Engineering v. Rajesh P.Surana(2008 (3) KLT Suppl.1235 (SC) = (2008) 4 SCC 256).

7. AIR 1990 Pun.117 (F.B.).

      Fida Hussain v. Muradabad Development Authority (2011 (3) KLT Suppl.64 (SC) =
(2011) 12 SCC 615).

        Regional Manager v. Pawan Kumar Dubey (1976 KLT OnLine 1003 (SC) = (1976) 3 SCC 334 (F.B.)).

8. Director of Settlements v. Apparao(2003 (1) KLT SN 35 (C.No.48) SC = (2002) 4 SCC 638 (F.B.)).

9. Municipal Corporation of Delhi v. Gurnam Kaur (1988 (2) KLT SN 63 (C.No.90) SC =
(1989) 1 SCC 101).

10. 2006 (6) A.L.T. 593 (D.B.).

11. M/s. EXL Careers & Anr. v. Frankfinn Aviation Services Private Limited(2020 (4) KLT 898 (SC)
= dated 05.08.2020 (SC) (F.B.)

12. Deccan Paper Mills Co. Ltd. v. Regency Mahavir Properties & Ors. (2020 (5) KLT 108 = dated
19.8.2020 (SC) (F.B.)).

13.            Shri Parshwatilak Shwetamber Murtipujak Tapagacch Jain Trust v. The State of Maharashtra & Ors. in SLP (Civil) D.No.17041/2020, dated 21.08.2020 (SC) (F.B.).

14. Dharmambiri Rana v. Pramod Kumar Sharma (2017 (4) KLT OnLine 2116 (SC) =
AIR 2017 SC 5431).

15. Arulmigu Chokkanatha Swamy Koil Trust v. Chandran(2017 (1) KLT OnLine 2070 (SC) = AIR 2017 SC 1034).

      Meharchand Das v. Lal Babu Sidhique(2007) 14 SCC 253).

      Gian Kaur v. Raghubir Singh (2011 (4) KLT Suppl. 55 (SC) = (2011) 4 SCC 567).

16. I.S.Sikandar v. Subramani (2013) 15 SCC 27).

        2017 (2) CTC 656 (SC).

Cap on Liquidated Damages: A Deterrent to Delay

(By Meera Shankar, Executive Director (Retd.) NBCC (India) Ltd., New Delhi)

If there is one clause in construction contracts that continues to mystify Owners and Builders alike it is the Liquidated Damages clause. It is an integral part of all such contracts and there is scarcely any arbitration where the clause is not invoked - yet the true import and purpose of the clause still remains elusive.

In this article I have attempted to show how the liquidated damages clause, ironical as it may seem, has a more significant role than merely determining the compensation to be paid by the Contractor in case he delays.The clause endeavours to address the issue of ‘delay’- the bane of all construction contracts -- firstly by prompting the contractor, under the threat of penalty, to perform in a timely fashion. Secondly and more importantly by specifying a ceiling on the damages, it puts the Owner on notice that if he fails to act in the face of wanton delay by the Contractor, he too shall face consequences. The first deserves no elaboration. I will therefore straightaway come to the second .

One of the important features of the LD clause, as it is widely known, is the cap on amount of damages that can be levied by the aggrieved party on the defaulting party in the case of a breach. The damages are generally stipulated as a rate for each day or week of delay by the contractor in completing the works and therefore necessarily begins from a specified date.(Hudson’s Building and Engineering Contracts). Needless to say therefore that if due to some act of prevention, which may include the ordering of extras by the Owner, the contractor is prevented by completing the work by the specified date, the LD clause will cease to apply and the Owner will lose the right to levy Liquidated damages.(Ibid)

Now I come back to the issue of the ceiling on Liquidated Damages that is imposed by the clause itself. What is the sanctity of the cap? Is it meant to be sacrosanct?

The answer to these questions can be found in S.74 of the Indian Contract Act., which reads:

“74. When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.”                                               (emphasis mine)

So, if S.73 of the Act provides for compensation for loss or damage caused by a breach of promise, S.74 clarifies that if the parties have predetermined the compensation to be paid for a specified breach, then the party aggrieved by the breach is not entitled to receive compensation in excess of the amount so specified. If any doubt existed with regard to the interpretation of this legal provision, it was unequivocally settled by the Supreme Court in ‘Sir Chunilal Mehta & Sons Ltd. v. Century Spinning & Manufacturing Co. Ltd.(1962 KLT OnLine 1121 (SC) = AIR 1962 SC 1314) way back in 1962. A five Judge Bench held that “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.”

The net result of the law as laid down is that regardless of the length of the delay due to reasons attributable to the Contractor, the latter’s maximum liability to the Owner on this account will be restricted to the ceiling amount.This takes me to the question what is the purpose of the ceiling in the LD clause ? There can be no quarrel with the fact that delay in any contract,let alone a construction contract, is not a good thing. It hurts the Owner the most, because delay brings with it an escalation of costs. It inconveniences the neighbours who have to endure disturbances for a longer period. And if it is a public utility project, delay effects the public in more ways than one. It deprives them of the early use of the utility, it hampers the free flow of traffic and more importantly the tax payer ends up paying a lot more for the utility than was originally envisaged.To my mind therefore, the ceiling on LD is intended to serve as a disincentive to the Owner for prolonging the contract, when confronted with an incorrigibly recalcitrant contractor. By telling the Owner that this is the maximum you can recover from the contractor, regardless of the length of the delay caused by the latter, the clause is a warning to the Owner that if you continue to persist with a non performing contractor beyond a reasonable length of time, you shall do so at your own peril. It is not as if the contract itself does not provide remedies for such situations. When the amount of LD payable by the contractor has reached the limit, the best-case scenario for the Owner would be to terminate the defaulting contractor’s contract and award the balance work to another at the risk and cost of the former. But invariably the Owner procrastinates and allows the recalcitrant contractor one extension after another. They do so firstly, because it is cumbersome to go through the process of terminating an existing contractor and awarding it to another contractor. Secondly, such action requires timely and proper application of mind to the causes of the delay. If the Contractor is able to prove that the delay was caused even partially by the Owner himself, the latter would be held accountable for wrongful termination. The Owner therefore finds it easier and also safer to play ball and to postpone any adverse decision against the contractor. Lastly and more importantly he remains brazen in his belief that in the end, despite the ceiling, he would be able to recover the losses or at least much of it through means I have discussed below. It is my earnest belief if the contract provision with regard to ceiling on LD is strictly enforced and the Owner finds that no matter what the extent of delay by the Contractor, he will not be compensated beyond the ceiling limit, he will shed his lethargy and work towards an early completion of the project.

Unfortunately in practice seldom will you find a case where the Owner has restricted his claim for delay, to the amount stipulated in the LD clause. In other words he by-passes with impunity his contractual promise to limit his claim in the event of delay by the Contractor. To escape the constraints of the clause these claims are often camouflaged in euphemistic terms, for instance, as damages for extended financing, increased project administration costs, loss of profits that would have been earned from the project, cost of facilities provided during the extended period, etc.These are in effect claims arising of alleged delay in completion and as such included within the ambit of the LD clause and therefore inadmissible in terms of the Contract. Thus Owners often find ways to circumvent the ceiling and end up claiming and often even getting compensation for delay far in excess of the cap, thereby defeating the very purpose for which the ceiling was imposed. This may be largely because the rigors of the settled legal position are not brought to the notice of the adjudicating forum.

Moving away from the issue of Liquidated Damages, I would like to briefly touch upon yet another factor that an over indulgent Owner needs to be wary about. If after endless extensions spanning over years, the Owner finally decides that enough is enough and proposes to terminate the contract and recover the risk and cost charges from the contractor, there is every possibility of it being turned down. It is well settled in law that a claim for damages is assessed as on the date of the breach. In Murlidhar Chiranjilal v. Harishchandra Dwarkadas & Anr.(AIR 1962 SC 366), the Hon’ble Supreme Court has held that a duty is cast on the Plaintiff “to take all reasonable steps to mitigate the loss consequent on the breach and debars him from claiming any part of the damage which is due to his neglect to take such steps.” In Saco Rubber (P) Ltd. v. U.O.I. (72 (1998) DLT 521) the Claimant had entered into a running contract with the Government for the supply of canvas shoes in July 1982,but the Claimant failed to complete the supply and the contract was rescinded by the Government. In 1992 the UOI raised counter claims against the Claimant towards the loss incurred on the risk purchase. The Claim was disallowed as it was not based on the market rate prevailing as on the date of the breach.

Since my article is aimed primarily at drawing attention to the LD clause, I have dealt at length with the consequences when the Owner procrastinates in taking action on delays committed by the Contractor. But for prolongation of construction contracts, the Owner is sometimes as much to blame as the Contractor,if not more.In the race to boost work orders Government entities often rush to award work even before, the land is acquired, proper exploration of the soil etc., is completed, finances are planned and arranged or designs are prepared. The fate of such ill planned projects can well be imagined.

Despite a significant improvement in recent years in India’s standing in the ‘ease of doing business’ criteria, a lot still needs to be done. Enforcement of contracts is one of the areas where India is woefully down the ladder. According to the Business Standard in the beginning of 2020, India was at 163rd position in a list of 190 countries. An effective contract enforcement system is expected among other things, to increase adherence to contracts. As long as we continue to allow a two year contract to run into 7 years or more, India’s dream of becoming a favoured destination for international business will only remain a pipe dream.