Dismissed

Urban Improvement Trust v. M/S Mahendra Kumar Goyal

Rajasthan HC1 Apr 2025CSA/97/2025

Case brief

AI extract

What is this about?

The High Court Bench at Jaipur dismissed a second appeal against a regular appeal order that decreed a contractor's suit for loss of profit. The Bench held that no substantial question of law arose regarding the contractor's entitlement to compensation for delays caused by the employer, referencing Section 73 of the Indian Contract Act.

What did the court decide?

The second appeal was dismissed; the impugned order of the First Appellate Court allowing the suit for recovery of loss of profit was affirmed.

Urban Improvement Trust Vs M/S Mahendra… — Contract and Commercial Disputes | Rajasthan HC (2025)

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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

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S.B. Civil Second Appeal No. 97/2025

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Urban Improvement Trust, Bharatpur Service Through Secretary Urban Improvement Trust Bharatpur Rajasthan.

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The Executive Officer, Urban Improvement Trust Bharatpur Rajasthan.

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----Appellants

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Versus

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M/s Mahendra Kumar Goyal, A-Glass Contractor R/o E-39 Ranjeet Nagar Bharatpur, Through Partner Mahendra Kumar Goyal S/o Kapoor Chand Goyal R/o E-39 Ranjeet Nagar Bharatpur Rajasthan.

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----Respondent

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For Appellant(s) : Mr. R.B. Sharma Ganthola For Respondent(s) :

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HON'BLE MR. JUSTICE ASHOK KUMAR JAIN

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Order

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01/04/2025

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Instant second appeal is preferred by appellant defendant aggrieved from judgment and decree dated 23.10.2024 in civil regular appeal no. 88/2021 passed by learned Additional District Judge no.1, Bharatpur whereby the judgment and decree for dismissal of civil suit dated 06.03.2018 in civil suit no. 1/2015 was set aside and civil suit preferred by respondent plaintiff was decreed.

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Learned counsel for appellant while relying upon grounds of appeal submitted that in a bid (NIT) initiated by appellant defendant the respondent plaintiff has participated and after being successful in bid, a work order was issued to respondent plaintiff but due to unavoidable circumstances, the work was neither

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started nor completed. He further submitted that the plaintiff has filed a civil suit before the trial court to claim loss of profit but the trial court after considering the evidence both documentary and oral, has dismissed the suit. He also submitted that aggrieved from dismissal of civil suit, a regular appeal was preferred before the district court and same was decided by learned Additional District Court. He also submitted that while allowing the appeal the appellate court has ignored the principle of law and awarded compensation to a person, who has not performed any work in pursuant to work order or tender. He also submitted that the matter pertains to public money and public money no payment can be made from public money to a person, who has not performed any work. At last, he submitted that the grounds are sufficient to frame substantial question of law as suggested by him in para no. (V) of memo of appeal, as it is a case of reversal findings.

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Heard learned counsel for appellant and perused the entire record.

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The facts giving rise to instant second appeal in brief are that respondent plaintiff (a contractor) filed a civil suit for recovery of ₹ 59,220/- on the ground that the appellant defendant has issued a work order but despite his repeated efforts drawing, design and lay out were not made available to him. He further averred that there was electricity pole with wire and same were not shifted, despite reminder by plaintiff. The plaintiff has claimed ₹55,760/as loss of profit, equivalent to 10% of total amount of work order. The plaintiff has also claimed interest @ 9% p.a. The defendant has filed reply and on the basis of pleadings of the parties seven

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issues were framed. The plaintiff examined himself as PW-1 and exhibited 13 documents whereas Vinit Tiwari was examined as DW-1 and exhibited 8 documents. The trial court after considering the evidence on record has decided these issues against the plaintiff and dismissed the suit of plaintiff.

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On an appeal under Section 96 of CPC, learned Additional District Judge no.1, Bharatpur while considering the evidence and material on record in light of judgment of M/s A.T. Brij Paul Singh Vs. State of Gujarat AIR 1984 SC 1703 has decreed the suit of plaintiff and aggrieved from order of appellate court, the instant second appeal is preferred. 6. Herein this case, the basis contention of appellant is that the plaintiff respondent has not worked in pursuant to work order awarded to him after being successful bidder so he is not entitled for 10% profit as claimed by him. This issue was considered by Hon’ble Supreme Court in case of M/s A.T. Brij Paul Singh (supra) in light of Section 73 of Indian Contract Act, 1872. Section 73 of the Contract Act provides for compensation for loss or damage caused by a breach of contract. It states that the party who suffers from breach is entitled to compensation for loss or damages that naturally arises from the breach or that the parties knew would likely result from it at the time of contract formation. 7. In case of M/s A.T. Brij Paul Singh (supra), Hon’ble Supreme Court while considering loss of profit in case work is entrusted to a contractor has observed that contractor is entitled to claim damages and for a profit evaluation broad assessment would be sufficient. The standard formulae for computation of loss of profit and overheads have to be adopted by the courts. In

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several pronouncements three common formulae were used and these are (i) Hudson’s formula; (ii) Emden’s formula; and (iii) Eichleay’s formula

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In case of Bharat Coaking Coal Limited Vs. M/s. L.K. Ahuja (2004) 5 SCC 109 Hon’ble Supreme Court has held that it is not unusal for the contractor to claim loss of profit arising out of contractual delay attributable to the employer. In such cases, the contractor need to establish that they would have used the same time for other business in which they could have earned profit. Unless such plea is raised and established, the claim for loss of profit cannot be granted in law.

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In case of M/s. Unibros Vs. All India Radio 2023 INSC 931, Hon’ble Supreme Court reiterated that to claim loss of profit, the contractor must provide credible evidence demonstrating:

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The occurrence of delay in contract completion,

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That such delay was not attributed to the contractor,

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The contractor’s status as an established entry handling substantial projects,

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Specific loss of probability due to the breach.

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Herein this case, we are considering the second appeal and it is evident on record that a contract was awarded to the respondent plaintiff and afterwards the work was not executed due to certain issues, the plaintiff has established that the delay was only because of employer. The fact was decided against the appellant though the trial court has dismissed the civil suit but the appellate court has allowed the same under Section 96 of CPC. The appellate court is empowered to consider the facts of the case. This court can only interfere, if a substantial question of

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arises and not otherwise. As per Section 73 of Indian Contract Act, a compensation can be granted and the judgment as referred hereinabove also indicate that such compensation is permissible under the law.

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Looking to the legal position as settled till date, the plaintiff is entitled to claim compensation for the loss of profit, even if he has not executed the actual work, therefore, the grounds raised by learned counsel for appellant does not give rise to any substantial question of law.

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Section 100 of CPC provides for second appeal in case wherein the High Court is satisfied that the case involves a substantial question of law. Thus, the First Appellate Court is final court on facts and in second appeal normally cannot re-appreciate the evidence or facts.

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Just to determine whether a question is substantial question of law or not, was laid down by a Constitution Bench of Hon’ble Supreme Court in case of Chunilal V. Mehta & Sons. Ltd. Vs. Century Spg. and Mgf. Co. Ltd . AIR 1962 SC 1314, as under:

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"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 directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal 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 are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law."

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Recently Hon’ble Supreme Court in case of Suresh Lataruji

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Ramteke versus Sau. Sumabai Pandurang Petkar & Ors. (Civil

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Appeal No. 6070/2023, arising out of SLP(C)No.20183 of 2022

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decided on 21.09.2023) considered the scope of Section 100 of CPC

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and summarised the law as under:

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The jurisprudence on Section 100, CPC is rich and varied. Time and again this Court in numerous judgments has laid down, distilled and further clarified the requirements that must necessarily be met in order for a Second Appeal as laid down therein, to be maintainable, and thereafter be adjudicated upon. Considering the fact that numerous cases are filed before this Court which hinge on the application of this provision, we find it necessary to reiterate the principles.

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13.1 The requirement, most fundamental under this section is the presence and framing of a “substantial question of law”. In other words, the existence of such a question is sine qua non for exercise of this jurisdiction.

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13.2 The jurisdiction under this section has been described by this Court in Gurdev Kaur v. Kaki (2007) 1 SCC 546 (Two-Judge Bench) stating that post 1976 amendment, the scope of Section 100 CPC stands drastically curtailed and narrowed down to be restrictive in nature. The High Court’s jurisdiction of interfering under Section 100 CPC is only in a case where substantial questions of law are involved, also clearly formulated/set out in the memorandum of appeal. It has been observed that: “At the time of admission of the second appeal, it is the bounden duty and obligation of the High Court to formulate substantial questions of law and then only the High Court is permitted to proceed with the case to decide those questions of law. The language used in the amended section specifically incorporates the words as “substantial question of law” which is indicative of the legislative intention. It must be clearly understood that the legislative intention was very clear that legislature never wanted second appeal to become “third trial on facts” or “one more dice in the gamble”. The effect of the amendment mainly, according to the amended section, was:

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(i) The High Court would be justified in admitting the second appeal only when a substantial question of law is involved;

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(ii) The substantial question of law to precisely state such question;

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(iii) A duty has been cast on the High Court to formulate substantial question of law before hearing the appeal;

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(iv) Another part of the section is that the appeal shall be heard only on that question.” Gurdev Kaur (supra) was referred to and relied upon in Randhir Kaur v. Prithvi Pal Singh & Ors. (2019) 17 SCC 71

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13.3 In Santosh Hazari v. Purushottam Tiwari (2001) 3 SCC 179 a Bench of three Judges, held as under in regard to what constitutes a substantial question of law:-

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a) Not previously settled by law of land or a binding precedent.

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b) Material bearing on the decision of case; and (c) New point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. Therefore, it will depend on facts of each case.

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Such principles stand followed in Government of Kerala v. Joseph 2023 SCC Online SC 961 and Chandrabhan v. Saraswati 2022 SCC Online SC 1273.

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16.5 Interference on findings of fact permitted in exceptional cases, i.e., when finding is based on either inadmissible or, no evidence. This Court in Dinesh Kumar v. Yusuf Ali (2010) 12 SCC 740 referring to various other cases held:- a) It is not permissible for High Court to reappreciate evidence as if it was the first appellate court unless findings were perverse.

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b) Finding of fact can be interfered in exceptional circumstances as rarity, rather than a regularity. c) Scrutiny of evidence in second appeal is not prohibited but has to be exercised upon proper circumspection.

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In case of Amar Singh Vs. Dalip Singh (2012) 13 SCC 405 , Hon’ble Supreme Court explained the purpose of framing question of law in following manner:

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405 , Hon’ble Supreme Court explained the purpose of framing

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“a) The purpose of framing of substantial question of law is to give the parties an opportunity to come prepared on that particular question.

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b) When a substantial question of law is formulated by the Court then the same must be made known to parties and thereafter they have to be given an opportunity to advanced arguments thereon.

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c) If any additional questions were framed at the time of hearing, the Court must hear the parties on that question as well.”

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Hon’ble Court in case of Chandrabhan Vs. Saraswati 2022 SCC

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Online (SC) 1273 (decided on 22.09.2022) has summarised principle relating to Section 100 of CPC in following words:-

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“(i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or (iii) the courts have wrongly cast the burden of proof.”

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Having considered legal position and also grounds raised by learned counsel for appellant, no substantial question of law arises from the material on record, therefore, the second appeal sans merit and same is liable to be dismissed.

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Hence, the second appeal is hereby dismissed.

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Misc. application, if any, stands disposed of.

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(ASHOK KUMAR JAIN),J

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CHETNA BEHRANI /115

Urban Improvement Trust v. M/S Mahendra Kumar Goyal

Case brief

What is this about?

What did the court decide?

Urban Improvement Trust v. M/S Mahendra Kumar Goyal

Case brief

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What did the court decide?

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