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Mohd. Salamatullah And Others v. Government Of Andhra Pradesh .
Factual and Procedural Background
The erstwhile Government of Hyderabad contracted with the plaintiff-appellants in 1947 to manufacture a specified number of guns at a price of Rs 125 per gun. Although the plaintiffs produced some guns, the contract remained unfulfilled. Both the trial court and the High Court found that the State had breached the agreement.
The plaintiffs sued for damages under several heads. The trial court decreed a total of Rs 5,42,704-14-6, which included Rs 1,87,500 as loss of profit (15 % of the contract price). The State appealed. The High Court reduced the total decree to Rs 4,73,847-6-1, mainly by lowering the profit component to Rs 1,25,000 (10 % of the contract price). Certified by the High Court, the plaintiffs appealed to the Supreme Court of India.
Legal Issues Presented
- Whether the High Court was justified in reducing the estimated profit component of damages from 15 % to 10 % of the contract price without identifying supporting material on record.
- What standard governs an appellate court’s interference with the trial court’s findings on the quantum of damages when no specific grounds are raised in the memorandum of appeal.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Supreme Court noted that:
- The State’s memorandum of appeal to the High Court contained no specific ground challenging the 15 % profit calculation.
- The High Court gave “no convincing reasoning” for substituting a 10 % figure; its conclusion amounted to an unsupported guess.
- Appellate interference with a trial court’s finding of fact requires a demonstrable basis in the record, which was lacking here.
Consequently, the Court held that the trial court’s 15 % estimate, though itself an approximation, had at least some evidentiary footing (Exhibit 62/29 and the un-controverted testimony of PW-1) and therefore should stand. Because the decree amount had already been realised by the plaintiffs soon after the trial-court judgment, the Court declined to award further interest. Each side was ordered to bear its own costs.
Holding and Implications
The Supreme Court restored the trial court’s award of Rs 1,87,500 for loss of profit and affirmed the remaining portions of the High Court’s decree; no further amounts or interest were payable, and both parties were to bear their own costs.
Implications: The decision reiterates the limited scope of appellate intervention in factual determinations on damages. Unless the record discloses a clear error or specific grounds of challenge, a higher court should not substitute its own estimate for that of the trial court. No new legal precedent was set beyond this reaffirmation of established appellate restraint.
V.R Krishna Iyer, J.— This appeal, by certificate, turns on the quantum of damages to be awarded for a breach of contract for manufacture of guns to be supplied to the Nizam's Hyderabad Government, a story before the Police Action, wayback in 1947.
2. The facts of the case are that the then Hyderabad Government had placed orders with the plaintiff-appellants for manufacture of a certain number of guns, the price per gun being put at Rs 125. Although some of the guns were manufactured the contract could not be completed and it is now concurrently found that there was a breach of contract on the part of the State. The plaintiffs claimed as damages for breach of contract a huge sum under various heads. The trial court awarded a decree in a sum of Rs 5,42,704-14-6. The aggrieved State took up the matter in appeal to the High Court which granted a decree in a sum of Rs 4,73,847-6-1. Substantially, both the courts agreed on most of the heads of claim. The only major difference was in the rate of damages for breach of contract based on estimated profits. The trial court put this figure at Rs 1,87,500-0-0. Although the plaintiffs had claimed a much larger sum, the State, through its Counsel, pointed out that as per Exhibit 62/29 the plaintiffs themselves had estimated the margin of profit at a sum of Rs 1,87,500 which worked out to 15 per cent of the total amount invested in the gun-making. In short, based on this argument of Government Counsel, the trial court awarded the aforesaid sum of Rs 1.87,500. Of course, it must be said at this stage that PW 1, the first plaintiff, had deposed to the effect that Rs 25 per gun was the agreed profit and there was no cross-examination on this point by the State defendant. Even so the trial court chose to reduce the claim under the head of damages for breach of contract to 15 per cent for the reasons mentioned above.
3. In the grounds of appeal there is nothing seen to indicate why the 15 per cent awarded by the trial court should not have been granted. There is only a general ground (Ground 6) in the memorandum of appeal which does not make any specific point at all regarding the quantum of damages. It is true that Shri Parameswararao appearing for the State has attempted to draw our attention to certain facts lying dormant in the record warranting the reduction of the quantum of damages, but we are not inclined to investigate into the matter de novo when no ground has been raised in the memorandum of appeal to the High Court.
4. However, the High Court, after setting out the facts bearing on the quantification of the damages, stated, without any convincing reasoning:
“We think that it will be just and reasonable to put this profit at 10 per cent of the contract price which works out to Rs 1,25,000.”
We are not able to discern any tangible material on the strength of which the High Court reduced the damages from 15 per cent of the contract price to 10 per cent of the contract price. If the first was a guess, it was at least a better guess than the second one. We see no justification for the appellate court to interfere with a finding of fact given by the trial court unless some reason, based on some fact, is traceable on the record. There being none we are constrained to set aside the judgment of the High Court in regard to the assessment of damages for breach of contract. We restore the award of Rs 1,87,500 made by the trial court on account of estimated profits (it transpires that when the trial court passed the decree the amount was recovered by the appellants with the result that there was nothing more to be paid by the State to the respondents herein). Of course, having regard, to all the circumstances of the case we direct the parties to bear the costs in this court. We may make it further clear that in regard to other items of claim we uphold what the High Court has awarded. In view of the fact that shortly after the decree was passed by the trial court the decree amount appears to have been recovered by the respondents, we do not award any interest under the decree.
5. By the time we reached the concluding part of the judgment, Counsel on both sides agreed that instead of making complicated calculations over small amounts, it would be better to leave the parties be quits; neither party will have to pay the other any amount (inclusive of court fee).
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