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Raghubar Rai v. Jaij Raj
Factual and Procedural Background
The suit arose from a transaction dated 20th April 1895, where the plaintiffs sold certain landed property to some defendants and left Rs. 708 with the vendees for payment to Sanchi Ram, the mortgagee of other property belonging to the vendors. The vendees failed to pay Sanchi Ram, leading to a decree obtained by Sanchi's heirs on 14th January 1910 for Rs. 1,769-4-8. The plaintiffs had not paid any money under that decree but filed an action on 6th June 1910 against the defendants to recover the amount covered by the decree. The court of first instance held the claim barred by limitation, treating it as unpaid purchase money. The lower appellate court reversed that decision, treating the suit as one for damages for breach of covenant to pay Rs. 708 to Sanchi Ram. The matter reached the second appeal stage where the primary issues of cause of action and limitation were contested.
Legal Issues Presented
- Whether the plaintiffs have a cause of action for breach of covenant to pay Rs. 708 to Sanchi Ram in the absence of actual loss or payment under the decree.
- If a cause of action exists, the date on which it arose for the purpose of limitation.
- Whether the suit is barred by limitation under the Limitation Act.
- Whether obtaining a decree against the plaintiffs gives a fresh starting point for limitation.
Arguments of the Parties
Appellants' Arguments
- The plaintiffs have no cause of action as they have not paid any money under the decree obtained against them.
- The suit is premature because there has been no actual loss sustained by the plaintiffs.
- If a cause of action exists, the suit is barred by limitation.
Respondents' Arguments
- The breach of a covenant itself creates a cause of action irrespective of actual loss.
- The suit is for damages consequent on the breach of covenant to pay Rs. 708 to Sanchi Ram.
- Relied on precedents supporting the proposition that breach without actual loss suffices for a cause of action.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Lethbridge v. Mytton | Establishes that breach of covenant without actual loss gives cause of action. | Supported the proposition that breach alone creates cause of action. |
| Carr v. Roberts | Same principle as above regarding breach and cause of action. | Reinforced the court's acceptance of breach as cause of action. |
| Loosemore v. Radford | Supports cause of action arising on breach without actual damage. | Used to justify plaintiffs' cause of action despite no payment made. |
| Ashdown v. Ingamells | Same principle on breach of covenant and cause of action. | Further support for court's holding on cause of action. |
| Dorasinga Tevar v. Arunachalam Chetti | Confirms breach of covenant suffices for cause of action. | Referenced in support of the respondents' position. |
| Raghunath Rai v. Brijmohan Singh | Similar principle on breach and cause of action. | Supported the court's acceptance of cause of action on breach. |
| Mansab Ali Gulab Chand | Clarifies no continuing breach or successive breaches under Limitation Act for single payment contracts. | Applied to determine limitation period commencement. |
| Kumar Nath Bhuttacharjee v. Nobo Kumar Bhuttacharjee | Discussed timing of cause of action and limitation in breach of covenant cases. | Considered but distinguished on principle by the court. |
| Battley v. Faulkner | Holds consequential damages do not create a new cause of action for limitation purposes. | Applied to reject argument for fresh cause of action upon actual damage. |
Court's Reasoning and Analysis
The court began by affirming that breach of a covenant itself creates a cause of action even if no actual loss has been sustained, relying on established precedents. Since the sale deed fixing the covenant was registered, Article 116 of the Limitation Act applied, and limitation started to run from the date of breach, which was the date of the sale, 20th April 1895. The court rejected the notion of successive or continuing breaches because the contract did not involve periodic obligations. It further held that obtaining a decree on 14th January 1910 did not restart the limitation period as the law prescribes specific modes for fresh limitation, and decree obtainment is not one of them. The court critically examined the reasoning in Kumar Nath Bhuttacharjee v. Nobo Kumar Bhuttacharjee, noting that a single breach can only give rise to one cause of action, and consequential damage does not create a new cause of action. The plaintiffs had not yet paid any money under the decree, so the argument of a second cause of action did not arise. Thus, the suit filed on 6th June 1910 was barred by limitation under Article 116.
Holding and Implications
The appeal is allowed.
The decree of the lower appellate court is set aside, and the plaintiffs' suit is dismissed with costs. The direct effect is that the plaintiffs' claim for damages for breach of covenant is barred by limitation as the cause of action arose on the date of the breach in 1895. No fresh cause of action arises from obtaining the decree in 1910 or from any actual loss not yet sustained. The court did not establish any new precedent but reaffirmed existing principles on breach of covenant and limitation.
Karamat Husain and Tudball, JJ.:— The suit out of which this appeal arose was one for recovery of money. The plaintiffs' case was as follows:—
On the 20th of April, 1895, the plaintiffs sold certain landed property to some of the defendants and left a sum of Rs. 708 with the vendees for payment to one Sanchi Ram, who was the mortgagee of some other property of the vendors. The vendees failed to pay, and Sanchi's heirs sued on the mortgage and obtained a decree, dated the 14th of January, 1910, for Rs. 1,769-4-8. It is admitted that the plaintiffs have not yet paid any money under the decree. They, however, on the 6th of June, 1910, brought an action against the defendants for the recovery of the money covered by the decree. The court of first instance treated the claim as one for the unpaid purchase money and held it to be barred by time. The lower appellate court took the suit to be one for damages for the breach of the covenant to pay Rs. 708 to. Sanchi, found that it was not barred by time and reversed the decree of the first court. In second appeal it is urged that the plaintiffs have no cause of action, and that if they have, the suit is barred by time. Notwithstanding the, fact that the pleadings of the parties do not clearly disclose the nature of the suit, the learned counsel for the appellants and the learned vakil for the respondents are agreed that the suit is for damages consequent on the breach of the covenant to pay Rs. 708 to Sanchi Ram. Such being admittedly the nature of the suit, the first point for determination is whether, in the absence of an actual loss, the plaintiffs have a cause of action on the breach of the covenant. The contention of the learned counsel for the appellants is that so far only a decree has been obtained against the plaintiffs; that they have paid no money under it, and that, as they have suffered no actual loss, their suit is premature.
The reply of the learned vakil for the respondents is that the breach of a covenant is sufficient to create a cause of action and that an actual loss is unnecessary. He refers us to the following cases:— Lethbridge v. Mytton, Carr v. Roberts, Loosemore v. Radford, Ashdown v. Ingamells; Dorasinga Tevar v. Arunachalam Chetti, and Raghunath Rai v. Brijmohan Singh. The cases cited by the learned vakil for the respondents fully support the proposition that the breach of a covenant without any actual loss gives a sufficient cause of action. Following the above-mentioned cases we hold that the plaintiffs, notwithstanding the fact that they have not paid any money under the decree, dated the 14th of January, 1910, have a cause of action in consequence of the breach of the covenant to pay Rs. 708 to Sanchi Ram. The next question is as to the date on which the said cause of action arose. In the registered sale-deed, dated the 20th of April, 1895, no time for the payment of Rs. 708 to Sanchi Ram was fixed, and the cause of action, there-fore, arose on the date of the sale, i.e, the 20th of April, 1895. It arises on the date of the breach if a date is fixed for the performance of a contract, but when no date is fixed for the performance the dates of the breach and the promise coincide.
The sale-deed being a registered document, article 116 of the Limitation Act applies and limitation began to run when the contract was broken on the 20th of April 1895. There are no successive breaches, for they happen in those cases only in which there is a promise to perform periodically, such as payment of rent or of annuity; nor is there any continuing breach, which, in the words of Mr. Shephard, applies only to “contracts obliging one of the parties to adopt some given course of action during the continuance of the contractual relation.” (Mitra on Limitation, Vol. I, p. 304, 7th Ed.). Hence it was held in Mansab Ali Gulab Chand that upon failure to pay the principal and interest secured by a bond upon the day appointed for such payment breach of the contract to pay is committed, and there is no “continuing breach” within the meaning of section 23 nor “successive breaches” within the meaning of Article 115 of the Limitation Act (Act XV of 1877).
The breach in the case before us occurred on the 20th of April, 1895, and the action for compensation was brought on the 6th of June, 1910, and it was, therefore, barred by six years' limitation under article 116 of the Limitation Act. There is no substance in the suggestion that the obtainment of the decree of the 14th of January, 1910, gives the plaintiffs a fresh starting point of limitation. The law of limitation has prescribed certain modes which give a fresh starting point of limitation and the obtainment of a decree is not one of those.
In Kumar Nath Bhuttacharjee v. Nobo Kumar Bhuttacharjee,, which was regarded as a suit for compensation for the breach of a covenant and which was defended on the plea of limitation, a Bench of the Calcutta High Court, after discussing the cases of Loosemore v. Radford and Lethbridge v. Mytton, remarked:—“These cases, therefore, show that in a certain class of cases, even before an injury is done or damage takes place, the plaintiff may bring an action in order that the person making the covenant may place him in a position to meet the liability he has taken on the latter's behalf. No authority has been shown to the effect that such a suit may not be brought for damages subsequent to injury sustained. The causes of action in the two classes of cases are different. In the one there is a right to bring an action to have the plaintiff put in a position to meet the liability cast upon him, in the latter to be indemnified after the plaintiff has met the liability. We think, therefore, that the plaintiffs were not bound to bring their action within six years from the date of the mortgage; that their cause of action arose when they were damnified, that is, when they paid the mortgage debt to Srinath Roy in 1893………”
With great respect to the learned Judges the rule laid down by them cannot be defended on principle. One breach of a contract can only furnish one cause of action and no more. Actual loss when it occurs is only one of the results of the breach, and is not an act of the party who breaks a contract and can, therefore, create no second cause of action. It is a pity that the case of Battley v. Faulkner was not brought to the notice of the learned Judges. That case is a clear authority for the proposition that consequential damage arising from the breach gives no new cause of action. The claim in that case was for compensation for a breach of contract brought within six years from the date on which damages occurred, but beyond six years from the breach. The suit was held to be barred by time. Bayley, J. said:—“If the plaintiff in this case had released the defendant from the breaches of contract, that release would have been a bar to the present action for the special damages subsequently occurring, and this shows that the foundation of the action is the breach of contract. It was, therefore, from the period when the contract was broken that the cause of action accrued, and as that happened more than six years before the commencement of the present action, I think the non-suit was right.” Holroyd, J., said:—“It is said, however, that although the action might be maintained upon the breach of promise, yet the damage sustained forms a substantive ground of action, but cannot be so considered in this form of action.”
The point, that the date on which actual damage was sustained gave the plaintiffs a second cause of action, does not arise inasmuch as the plaintiffs have not yet paid any money to the heirs of Sanchi Ram.
To sum up. The suit is one for compensation for the breach of contract. The breach took place on the 20th of April, 1895, and a cause of action arose on that day. The suit is, therefore, barred by limitation under article 116 of the Limitation Act.
The point that a second cause of action will arise when the plaintiffs will sustain actual loss, is not before us.
The result is that we allow the appeal, set aside the decree of the lower appellate court and dismiss the plaintiffs' suit with costs.
Appeal allowed.
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