Find a Lawyer

Suit No. 86 of 1980, decided on 30th September 1980.

---Damages, claim for‑Proof of‑Claim for damages to be proved by credible evidence‑Plaintiff neither filing any income‑tax return nor paying any income‑tax for last 3 years‑Maximum income tax paid in last 20 years or so never exceeding Rs. 15,000‑Bare statement that in construction business net profits earned remain in region of 20 %., held, cannot form basis for calculation of damages.

‑‑ S. 18‑A‑Advance income‑tax‑Contention that a sum of Rs. 1,25,000 having been deducted as advance income‑tax from bills of plaintiff in respect of work executed within a period of 6 months such fact shows that on work carried out in one year income‑tax payable by plaintiff would have been Rs. 2,50,000 and therefore, profits be calculated at rate of Rs. 5,00,000 per year‑Held, mere statutory deduction of 3 % from bills of plaintiff‑Cannot form basis for calculation of actual profit due to its being liable to refund or adjust ment on proof being adduced of no or lesser profit having been earned‑‑Plaintiff not filing any income‑tax return for last 3 years and‑his income‑tax for any one year never exceeding Rs. 15,000 Contention repelled.

‑‑ S. 73, proviso‑Income‑tax‑Remote and indirect loss‑Damage claimed to be suffered by plaintiff on account of being deprived of profits expected to be earned under contracts abandoned or declined by him, held, can at best be termed as remote and indirect loss sustained on account of blockade of capital‑Such, damage, held further. hit by proviso to S. 73.

‑‑ S. 73, illus (n)‑Interest, payment of‑‑‑Defendant contracting to take payment at different stages of work executed by plaintiff but not making payment on contracted dates‑Case, held, covered by illus. (n), S. 73‑Plaintiff, field, entitled to interest in circumstances of case‑ Case, a mere detention of debt‑Plaintiff not entitled to interest till date of suit in absence of contract to pay interest.

Abdul Hafeez Pirzada for Petitioner.

M. A. Hameed for Defendant.

Date of hearing : 24th September, 1980.

In this suit the plaintiff had claimed the following amounts :‑

"(a) Rs. 13,98,466‑73 being the amount due from the defendant on account of construction work as per‑contract with the defendant.

(b) Rs. 1,00,00,000 on account of loss suffered by the plaintiff due to blockade of his capital by the defendant.

(c) Rs. 90,000 on account of payments made by the plaintiff to his staff and workmen for a period of 18 months.

(d) Rs. 3,00,000 per month as continuing loss from the date of filing of the suit till the date of decree. Interest has also been claimed at the rate of 25%.

2. In this suit written statement has not been filed and by my order dated 17‑9‑1980 1 had passed a part decree allowing tie claim of Rs. 13,98,466.73 plus Rs. 90,000 that is for a total sum of Rs. 14,88,466.73 with interest at the rate of 9 % per annum from the date of the decree. No judgment was passed in relation to relief s (b) and (d) above as 1 wanted evidence to be adduced by the plaintiff first in support of these claims.

3. On 24‑9‑1980 the plaintiff was examined as the only witness for proving the claim for damages. According to the evidence of the plaintiff, the amount for which part decree has already been passed by my order dated 17‑9‑1980, was an admitted amount and in support of his assertion correspondence was produced as Exhs. 1/4 to 3/4. A perusal of these documents supports the assertion of the plaintiff in this regard.

4. According to the plaintiff a huge amount of about Rs. 14,60,000 was detained by the defendant for no reason. The reason communicate to the plaintiff by the defendant was that they had no funds available and as soon as funds became available payment of his dues will be made, The plaintiff has stated in his deposition that he has been a contractor for nearly 25 years and during this period he has executed about 100 projects, He has also produced certain documents to show that after he had finished the work of the defendant he started several projects, but this he had to abandon on account of the defendant not making payment of the balance amount. According to him, he had other offers but these also he could not accept on account of paucity of funds, a situation created by the non. payment of the admitted bills by the defendant. The case of the plaintiff in his deposition is that the work which he had to abandon or which he could not undertake on this account was of the value of about Rs. 5,00,00,000 and the net profit on this would have been about 20 Y. and on this basis he has claimed Rs. 1,00,00,000 as damages.

5. In answer to question from the Court the plaintiff stated that for the last 3 years ate has not filed any income‑tax returns. Previous to that he was doing construction business in partnership with another person who died about 3 years ago. When he was in partnership the deceased partner used to file income‑tax return. In reply to another question from the Court the plaintiff stated that the maximum income‑tax that he has paid in any year was about Rs. 15,000.

6. Mr. Abdul Hafeez Pirzada, learned counsel who appeared on behalf of the plaintiff contended that there has been a great boom in construction business and a return of 20 % as net profit is normal in this business. Alternatively he argued that for the work under the contract with the defen dant, a sum of about Rs. 1,25,000 was deducted from the bills of the plaintiff on account of advance income‑tax and the expected profits on the basis of deduction of this amount for work executed in 6 months, will come to about Rs. 15,00,000 for a period of 3 years. According to him, therefore, if the first basis of 20 % profit is not accepted for calculation of damages, the other basis should be accepted, Mr. M. A. Hamid, who appeared on behalf of the defendant, argued that the claim of the plaintiff for damages was not maintainable and in any case it was highly exaggerated.

7. I am not impressed with the evidence of the plaintiff. On his own admission, the maximum income‑tax, that he has paid in any one year never exceeded Rs. 15,000. On this basis Es profits in any one year would not have been more than Rs. 50,000. He has also admitted that for the last 3 years he never filed any income‑tax returns. The claim for damages musts be proved by credible evidence and a bare statement that in construction business the net profits are in the region of 20 % would not make out the same as the basis for calculation of damages when the plaintiff has admitted that he has neither filed any income‑tax return nor paid any income‑tax for the last 3 years and that in the last 20 years or so, the maximum income‑tax, paid by him never exceeded Rs. 15,000.

8. The other argument by Mr. Abdul Hafeez Pirzada was that a sum of Rs. 1,25,000 was deducted as advance income‑tax from the bills of the plaintiff by the defendant in respect of a work executed within a period of 6 months shows that on work carried out in one year, the income‑tax payable by the plaintiff would have been Rs. 2,50,000 and; therefore, hi profits should be calculated at the rate of Rs. 5,00,000 per year. There are two difficulties in accepting this contention. Firstly, this deduction is made under a statutory provision in the income‑tax laws and latter on if it is proved that either no profit was made or the profit was considerably less, the income‑tax deducted at the rate of 3% is liable to refund or adjustment, as the case may be, Mere statutory deduction of 3 % from the bills of the plaintiff cannot be the basis for calculation of actual profit. Secondly as stated earlier, the plaintiff has not filed any income‑tax return for the last 3 years and his income‑tax for only one year never exceeded Rs. 15,000. In view of this, the contention of the learned counsel for the plaintiff cannot be accepted.

9. I may further add that the claim of damages based on the expected profits to be made by the plaintiff on the contracts abandoned or declined by aim on accounts of blockade of his capital is hit by the proviso to section 73 of the Contract Act which provides that compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. The damage claimed to be suffered by the plaintiff on account of being deprived of the profits expected to be earned under the contracts abandoned or declined by him can at best be turned as remote and indirect loss sustained on account of blockade of capital by the defendant.

10. There is yet another reason why damages as claimed by the plaintiff cannot be awarded and only interest can be claimed. Illustration (n) appended to section 73 is as follows :‑

''(n) A contracts to pay a sum of money to B, on a day specified. A does not pay the money on that day; B, in consequence of not receiving the money on that day is unable to pay his debts, and is totally ruined. A is not liable to make good to B anything except the principal sum he contracted to pay, together with interest up to the day of payment."

11. I may observe here that although the claim of the plaintiff appears to be based on what he refers as "blockade of his capital" by the defendant and, therefore, might be treated as a case of detention of a debt, it in fact is a case where the defendant had contracted to make payment at different stages of the work executed by the plaintiff and the payment was not made on the contracted dates. The case, therefore, is covered by illustration (n) of section 73 of the Contract Act and the plaintiff is entitled to interest. Had it been a case of a mere detention of a debt, the plaintiff would not have been entitled even to interest till the date of filing of the suit in the absence of a contract to pay interest.

12. By my order dated 17‑9‑1980 I have already granted interest at. 9 per annum from that date on the claim decreed. The plaintiff is, therefore, entitled as damages interest at 9% per annum from July 1977 up to 17‑9‑1980, when I passed decree for the principal amount. This period comes to 3 years and 2 months and interest calculated at 9 % per annum for this period on Rs. 13,98,466.73 comes to Rs, 4,03,807.25. The plaintiff is entitled to this amount against his claim under sub‑clause (b) of the prayer clause. The claim made in sub‑clause (d) of the prayer clause is rejected as the plaintiff is not entitled in law to the same.

13. I, therefore pass a decree for Rs. 4,03,807.25 in favour of the plaintiff and against the defendant in respect of the claim for compensation. This decree is in additional to the part decree passed by me on 17‑9‑1980.

14. The plaintiff shall also be entitled to proportionate costs.

Suit partly decreed.

Find a Lawyer Near You

Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.