PARTIES WHICH ARE OTHERWISE GOVERNED BY INDIAN CONTRACT ACT, CANNOT CLAIM UNDER SECTION 70 OF THE CONTRACT ACT: APEX COURT.

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The Apex court bench comprising of Justices R F Nariman and Vineet Saran interpreted that claim of quantum merit laid down under section 70 of the Indian Contract Act, cannot be raised when the parties are otherwise regulated or governed by contract. While clarifying this statement the bench stated that Chapter V of the Indian Contract Act deals with ‘certain relations resembling those created by contract’, and section 70 forms a part of this chapter and it states that any person who enjoys or receives any benefit of a non-gratuitous act is liable or obligated to compensate the person who provides the benefit.

The court pronounced this verdict while hearing an appeal filed by Mahanagar Telecom Nigam Ltd against Tata Communications, this was filed against an order of the

Telecom Disputes Settlement Appellate Tribunal. The matter dealt with MTNL adjusting certain amounts to itself from its dues to Tata which emerged out of a purchase order. MTNL avowed that Tata had committed a breach of contract, as the amount deducted from the bills by Tata were identified to be rent rates of dark fibre.

Although the purchase order had provided liquidated damages in the event of default, which was determined to be 12% of the purchase value. Relying on this, the Telecom Dispute Settlement and Appellate Tribunal (TDSAT) commanded MTNL to return to Tata the amount which was held by them in excess of 12% of the liquidated damages. Countering this view MTNL, approached the Apex Court, and subsequently, the bench cited several precedents, wherein it was held that for any work done or any services provided in conformance of a contact, then in such situation quantum meruit cannot be awarded. The judgement referred to the pronouncement in Mulamchand v. State of M.P.[1] that:

"The important point to notice is that in a case falling under Section 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract, nor ask for damages for the breach of the contract, for the simple reason that there is no contract between him and the other person for whom he does something or to whom he delivers something. So where a claim for compensation is made by one person against another under Section 70, it is not on the basis of any subsisting contract between the parties but on a different kind of obligation. The juristic basis of the obligation in such a case is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or restitution".

The case was dominated by Section 74 of the Indian Contract Act, as liquidated damages were specified in the contract. Hence, the Court asserted the order of TDSAT, which stated that MTNL was not in a position to impose a unilateral sum by resorting to section 70, over and above the liquidated damages.


 

 

 

[1] (1968) 3 SCR 214