Bombay High Court
M/S T WALKAR PHARMACEUTICALS PVT. LTD THR. ITS AUTORIZED PERSON MR. KEDAR TALWALKARversusM/S IATROS PHARMACEUTICALS PVT LTD PUNE- 411037
- Decided
- Disposal
- Disposed Off
Holding
The termination of the marketing agreement was void as no sales‑target condition existed, the reduced loss‑of‑profit award was upheld, and the award of Rs 7,59,074 was set aside for lack of foundational pleadings.
Summary
The appellant, a pharmaceutical manufacturer, terminated a marketing agreement with the respondent, alleging breach, and the respondent sued for declaration of continuation, damages of Rs 25 lakhs, and an outstanding amount of Rs 7,59,074. The trial court awarded only the damages, rejecting the other claims; the appellate court declared the termination unlawful, reduced damages to Rs 21.6 lakhs and awarded the outstanding amount. The appellant appealed, arguing that the sales targets were contractual conditions justifying termination, that the plaintiff’s loss‑of‑profit claim lacked proper pleadings, and that the appellate court erred in its award calculations and in allowing the Rs 7,59,074 claim without foundational pleadings. The High Court held that the agreement did not make sales targets a condition for termination, thus the termination was void; it affirmed the reduced damages award but set aside the award of Rs 7,59,074 for lack of pleadings. Consequently, the second appeal was partly allowed, confirming most of the appellate decree except the direction awarding the outstanding amount.
Issues considered
- Whether a contractual covenant stipulating an additional discount on achieving a particular sales figure can be treated as a ‘target’ for termination of the contract for failure to achieve it
- Whether the plaintiff may lead evidence for loss of profit without detailing in the plaint how the loss was suffered
- Whether the appellate court was justified in applying a different norm for awarding loss of profit than that appearing in the plaintiff’s evidence
- Whether the plaintiff needed to plead the basis of the Rs 7,59,074 claim and whether the appellate court could consider evidence in its absence
Legislation cited
- Code of Civil Procedure — s. Order 7 Rule 11
Subjects
- marketing agreement
- termination
- contractual target
- loss of profit
- damages
- pleadings
- evidence
- contract breach
- civil procedure
Judgment
Neeta Sawant Second Appeal NO.262-2021
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
SECOND APPEAL NO. 262 OF 2021
WITH
INTERIM APPLICATION NO. 2460 OF 2021
M/s. T. Walkar Pharmaceuticals
Pvt. Ltd. …..Appellant
:Versus :
M/s. Iatros Pharmaceuticals Pvt. Ltd. ….Respondent
Mr. A.V. Bhuskute, for the Appellant.
Mr. Mandar Limaye with Ms. Gauri Velankar and Ms. Sajiri Shah i.b. Mr.
Sarang Aradhye for the Respondent.
CORAM : SANDEEP V. MARNE, J.
JUDG. RESD. ON : 21 AUGUST 2026.
JUDG. PRON. ON : 01 SEPTEMBER 2026.
JUDGMENT:
1) This Appeal is filed by the Appellant/Defendant challenging
the judgment and decree dated 28 May 2021 passed by the District Court,
Pune in Appeal No. 149 of 2016. The first Appellate Court has dismissed
the Appeal preferred by the Defendant but has partly allowed the cross
objections filed by the Plaintiff. The Appellate Court has modified the
decree of the Trial Court. The Trial Court had allowed the claim of the
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Plaintiff for damages of Rs.25 lakhs and had rejected the other claims
including the claim for amount of Rs.7,59,074.07/-. The first Appellate
Court has reduced the amount of damages to Rs.21,60,000/- and has
awarded the claim towards outstanding amount of Rs.7,59,074/-. The first
Appellate Court has confirmed the decree qua rejection of other claims of
the Plaintiff. Only the Defendant is aggrieved by the decree of the
Appellate Court and has filed the present Second Appeal.
2) Appellant/Defendant is in the business of manufacture of
pharmaceuticals. The Plaintiff/Respondent is engaged in the business
inter-alia of marketing pharmaceuticals products. The Marketing
Agreement was executed between Plaintiff and the Defendant on 13
August 1999 under which Plaintiff agreed to market the pharmaceutical
products manufactured by the Defendant. The Defendant terminated the
Marketing Agreement vide notice dated 12 December 2000 alleging
breach of covenants thereof.
3) Plaintiff filed Special Civil Suit No. 84 of 2001 challenging
notice of termination dated 12 December 2000 and seeking a declaration
that Plaintiff is entitled to continue with marketing of Defendant's
products as per the Agreement dated 13 August 1999. In the alternative,
Plaintiff sought compensation of Rs.25,00,000/- from the Defendant for
unlawful termination of the Marketing Agreement. Plaintiff also sought
amount of Rs.7,59,074.07/- towards the amount payable as per the
accounts of the Plaintiff. Plaintiff also sought prayer for recovery of
amount of Rs.12,86,694.40/- towards compensation due and payable as
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per the claim in para-25-A to 25-D. The Defendant appeared in the suit
and filed Written Statement. The application filed by the Plaintiff for
temporary injunction was rejected by the Trial Court by order dated 9
March 2001. The Appeal from Order No. 331 of 2001 filed by the Plaintiff
challenging rejection of temporary injunction was disposed of by this
Court by order dated 5 September 2001. Plaintiff sought amendments in
the Plaint for introduction of paragraphs 25A to 25D and 30A in the Plaint
by filing Amendment Application, which was allowed on 29 June 2002.
Defendant filed additional Written Statement in 2002. Based on the
pleadings, issues were framed and parties led evidence in support of their
respective claims and defenses. By judgment dated 6 March 2003, the
Trial Court partly decreed the suit by granting alternate prayer of
damages in the sum of Rs.25 lakhs on account of termination of the
agreement dated 13 August 1999 before expiry of its term. The Trial Court
however rejected the claims for outstanding amount of Rs.7,59,074.07/-
and further compensation of Rs.12,86,694.40/-.
4) Defendant filed Appeal No.149 of 2016 before the District
Court challenging the decree passed by the Trial Court. In the Appeal filed
by the Defendant, Plaintiff filed cross-objections. By judgment and order
dated 28 May 2021, the Appellate Court has dismissed the Appeal filed by
the Defendant but has partly allowed the cross-objections filed by the
Plaintiff. Accordingly, the Appellate Court has modified the decree of the
Trial Court. It has declared termination of the Marketing Agreement to be
unreasonable and void. The Appellate Court has directed Defendant to
pay to the Plaintiff outstanding amount of Rs.7,59,074/- along with
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interest @ 6% p.a. from the date of institution of the suit till realization.
Defendant has been further directed to pay compensation/loss of profit of
Rs.21,60,000/- to the Plaintiff along with interest @ 6% p.a. from the date
of institution of the Suit till realization.
5) Defendant is aggrieved by the decree of the Appellate Court
and has accordingly filed the present appeal. The Plaintiff is not aggrieved
by the decree of the Appellate Court though the same reduces the amount
of damages from Rs.25 lakhs to Rs.21,60,000/-.
6) The Second Appeal has been admitted by formulating
following substantial questions of law:
(i) Whether the contractual covenant stipulating an additional discount
on achieving a particular figure of sales can be treated as a ‘target’ for
the purpose of termination of the contract for failure to achieve the
same?
(ii) Whether it was permissible for the Plaintiff to lead evidence in
support of claim for sufferance of loss of profit of Rs.25,00,000/- without
elucidating in the Plaint the manner in which the loss was actually
suffered?
(iii) Whether the Appellate Court is justified in applying a different norm
for awarding the claim for loss of profits than one appearing in the
evidence led by the Plaintiff?
(iv) Whether in respect of claim for recovery of amount of Rs.7,59,074/-
it was necessary for the Plaintiff to plead as to how the said amount was
due and payable by the Defendant and whether the Appellate Court
could have considered evidence qua the said claim in absence of
pleadings?
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7) I have heard Mr. Bhuskute, the learned counsel appearing for
the Appellant, who submits that the Trial and Appellate Courts have erred
in holding that termination of the Marketing Agreement is unlawful. He
submits that there were specific contractual stipulations for mandatorily
achieving the target of sales figure. He submits that under Clauses-8, 9
and 10 of the Marketing Agreement, the Plaintiff was supposed to achieve
the target amount of Rs.3 crores, which it has admittedly failed to
achieve. He submits that the contract is lawfully terminated by the
Defendant for failure to achieve the target contractually agreed between
the parties.
8) Mr. Bhuskute further submits that the figures quoted by the
Plaintiff in the affidavit of evidence of the alleged profits cannot be
attributed solely by the Defendant. That it has come in evidence that
Plaintiff was doing business with other companies as well. That therefore
profit of Rs.29.22 lakhs for FY-1999-2000 or profit of Rs.22.91 lakhs for
FY-2000-01 is not attributable to the activities of the Plaintiff with the
Defendant. That the said amount of profit is a consolidated profit earned
through businesses made by the Plaintiff to other entities as well. That
the lower Appellate Court has held that those profit figures are relating to
overall business of the Plaintiff, not limited to the Defendant alone.
9) Mr. Bhuskute further submits that the Trial Court had
erroneously awarded the claim for damages of Rs.25,00,000/- in absence
of any pleadings and without discussing the evidence on record. That
there is absolutely no discussion by the Trial Court as to why damages of
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Rs.25 lakhs were awarded by it in favour of the Plaintiff. That mere
finding that there was sufficient material before it on record was not
sufficient and it was necessary for the Trial Court to examine the
pleadings in the plaint and evidence on the aspect of damages. He
submits that the Appellate Court has rejected the evidence led by the
Plaintiff in support of the claim for damages of Rs. 25 lakhs. However,
despite rejecting the said evidence, it has erroneously applied an
imaginary formula for awarding damages of Rs. 21,60,000/-. There are
neither pleadings nor evidence to suggest that such sales figure was
achieved or was achievable, or that profit of 15% could be earned on the
same. That in the entire plaint, there are no pleadings as to how
compensation of Rs. 25 lakhs is claimed. That the pleadings in paragraph
29 of the plaint do not contain any basis as to why Rs.25 lakhs was
claimed as damages. That the Appellate Court thus erred in awarding
claim for loss of profits in the sum of Rs.21,60,000/-. So far as award of
claim towards outstanding dues of Rs.7,59,074/- is concerned, Mr.
Bhuskute submits that the Trial Court had rejected the same on account
of absence of pleadings and evidence. However, the first Appellate Court
has erroneously granted the said claim. That in paragraph 30 of the
plaint, there are absolutely no pleadings to indicate that as to how sum of
Rs.7,59,074/- was due or payable by the Defendant. It is a well-settled
position of law that evidence cannot be permitted to be led in the absence
of foundational pleadings. He accordingly prays for setting aside the
orders passed by the Trial and the first Appellate Courts and for dismissal
of the suit with costs.
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10) Mr. Limaye, the learned counsel appearing for the
Respondent opposes the Appeal submitting that termination of the
Marketing Agreement is rightly held to be unlawful by the Trial and the
first Appellate Court. That there are concurrent findings of fact on the
said issue. That the interpretation of the contract made by both the
Courts does not suffer from the vice of perversity. That no target was
fixed for the Plaintiff to achieve and that therefore termination of the
contract for failure to achieve the alleged target was clearly unlawful.
11) Mr. Limaye further submits that the Trial Court had correctly
awarded the claim for loss of profit in the sum of Rs.25 lakhs and that the
Appellate Court has erroneously reduced the same to Rs.21,60,000/-. He
however submits that the Plaintiff has accepted the sum awarded by the
Courts though it is less than its entitlement. He takes me through the
evidence of the Plaintiff to demonstrate as to how evidence was led in
respect of the profits earned by the Plaintiff during FY-1999-2000 and
2000-2001. He submits that Plaintiff would have earned profits of at least
Rs. 25 lakhs per year. However, the claim was still restricted to only Rs.25
lakhs though Plaintiff was entitled to claim higher figure towards loss of
profit. That the audited Balance Sheet was produced and proved before
the Trial Court. That there is substantial evidence on record to support
Plaintiff's claim for loss of profits.
12) So far as award of claim of outstanding amount of Rs.
7,59,074/- is concerned, he submits that the Trial Court had grossly erred
in rejecting the same ignoring the evidence on record. He takes me
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through paragraph 29 of the affidavit of evidence of Plaintiff's witness to
demonstrate that the sum of Rs.1 lakhs was provided as advance and
financial help to the Defendant. That Plaintiff had supplied packaging
material to the Defendant of value of Rs. 6,59,074.07/- and this is how
claim for outstanding amount of Rs. 7,59,074.07/- was raised. That the
claim was well supported by evidence and there is absolutely no cross-
examination by the Defendant on the evidence produced by the Plaintiff.
That therefore first Appellate Court has rightly awarded the claim towards
dues and that there is no element of perversity for this Court to interfere
in the findings recorded by the lower Appellate Court. On above broad
submissions, Mr. Limaye prays for dismissal of the Appeal.
13) Rival contentions of the parties now fall for my
consideration.
14) I take up the first question of law about termination of
Marketing Agreement for failure to achieve the alleged target by the
Plaintiff. Mr. Bhuskute has invited attention of the Court to Clauses-9
and 10 of the Marketing Agreement, which reads thus:
9) For the current year (September 99/August 2000 12 months) total sale
exceeding Rs.2.50 Crores will entitle 'IATROS' to additional discount on
the incremental amount at 5%.
10) For the subsequent year (September to August), the target amount is
set at Rs.3.00 Crores for entitlement of an additional discount at 5% as
above on incremental sale.
Targets for subsequent years thereafter will be mutually agreed-upon
along with Discount Structure as applicable.
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15) Careful perusal of the above targets would indicate that for
the period September 1999 to August 2000, Defendant had agreed to
extend additional discount of 5% on the incremental amount, if the total
sales exceeded Rs.2.50 crores. For the subsequent year, the target amount
was set at Rs.3 crores for entitlement of additional discount @ 5%. For
the years thereafter, the targets for the purpose of discount structure was
to be mutually decided. That what was agreed between the parties was
that if Plaintiff was to exceed sales figures of Rs.2.50 crores in the first
year, an additional 5% discount was to be granted by the Defendant in
respect of sales exceeding Rs.2.50 crores, Clause 9 of the agreement does
not use the word 'target'. Though the word 'target' appears in Clause 10,
the same is not to be confused with a particular benchmark to be achieved
for continuation of contract. Clause 10 has to be read in conjunction with
Clause 9. Clause 9 applies for the period from September 1999 to August
2000 and Clause 10 applies for the period September 2000 to August 2001.
Except this, there is no difference between the two clauses and both the
clauses provided that on achieving a particular sales figure, the additional
sales would carry discount @ 5%. For the period September 1999 to
August 2000, the threshold for grant of 5% discount was agreed at
Rs.2,50,00,000/- whereas for September 2000 to August 2001, the same
was determined as Rs.3 crores. The word 'target' appearing in second part
of Clause 10 again applies only for providing additional discount of 5%.
Thus, there was no specific agreement between the parties that upon
failure to meet a particular target of sales figure, Defendant was entitled
to terminate the contract.
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16) Both the Courts have taken note of letter dated 30 July 1999
(Exh.58) which was addressed by the Defendant to the Plaintiff and which
had following contents :
"Enclosed please find our selling prices to you for your purchases upto 2
crores.
These prices will be reduced by 5% for your purchasers above 2 crores.
The prices will be revised by mutual agreement when you will cross 3
crores.
17) Thus, apart from specific covenants in the Agreement, the
letter dated 30 July 1999 also indicates that there was no target agreed
nor was any specific contractual obligation for the Plaintiff for doing
marketing business of Rs.2.5 crores. The letter indicates that in the first
year, the selling prices for purchases made by the Plaintiff upto the limit
of Rs.2 crores were 'X'. If sales figures exceeded Rs.2 crores, the Defendant
agreed to give discount of 5%. Parties also agreed that as and when
Plaintiff exceeded the sales figures of Rs.3 crores, the prices of the
products would be further reduced. Thus, the parties agreed for
incentivization of sales made by the Plaintiff. Higher the sales, the
purchase price for the Plaintiff would be reduced. Therefore, it cannot be
held that the parties agreed for any particular target of sales figures for
performance of the contract. Thus, failure to reach any particular sales
figures by the Plaintiff did not empower the Defendant to terminate the
contract.
18) Clause-17 and 18 of the Marketing Agreement stipulated
thus:
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17) The Marketing Agreement will remain in force for a period of three
years from the date i .e. 16th August, 1999 and then may be renewed
thereafter.
18) After three years the Agreement can be terminated by either side by
giving three months notice.
19) Thus, the contract could be terminated by giving 3 months’
notice only after completion of tenure of 3 years. However, termination
notice was issued before completion of period of 3 years and more
particularly the same did not specify the period of 3 months.
20) The Trial and the Appellate Courts have rightly construed the
contractual covenants and the interpretation made by them does not
suffer from any irrationality for this Court to interfere in the same. The
first question of law is accordingly answered by holding that no particular
sales figure could be treated as a ‘target’ for the purpose of enabling
Defendant to terminate the contract for failure to achieve the same.
21) Coming to the second question of law, the Plaintiff’s claim
for loss of profit amounting to Rs. 25 lakhs was essentially based on the
alleged denial of opportunity to perform the contract for its full term.
Plaintiff made following pleadings in paragraph 29 of the plaint in
support of the claim for loss of profits:
(29) The Plaintiff intends to continue with the said Marketing
Agreement of the Defendant's products and wants to genuinely business
in the market and therefore, has sought proper relief as mentioned
below, however, if the Hon'ble Court do not grant said relief, then in the
alternative, the Plaintiff's Prayer for compensation & may kindly be
considered favourably. For the purpose of compensation, Plaintiff
determinate their loss to Rs.25,00,000/-and is entitled to getthe said loss
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compensated from the Defendant and therefore, prays for compensation
in the alternative.
22) Plaintiff's main case was thus for setting aside termination
and for grant of opportunity to perform the contract during its full term.
Alternatively, the Plaintiff raised the claim for loss of profit in the event
the relief of performance of the contract was not to be granted.
23) The averments in paragraph 29 of the plaint are bereft of any
particulars as to how the figure of Rs. 25 lakh was arrived at by the
Plaintiff. Plaintiff however led evidence in support of its claim for loss of
profits. It would be apposite to reproduce paragraph 30 of the affidavit of
evidence of Plaintiff's witness:
30) I say that, in the F.Y. 1999-2000, when Plaintiff was selling
Defendant's goods, Plaintiff Company entered profit of Rs. 29,22,411.42,
so also, in the F.Y. 2000-2001 Plaintiff earned profit of Rs. 22,91,241.28,
however, since Defendant has terminated the said agreement and
illegally prevented Plaintiff from selling Defendant's product Plaintiff
sustained loss of Rs.4,41,854.07/- in F.Y. 2001-2002. This clearly shows
that, if as per the agreement, Plaintiff would have continued the said
busines of selling Defendant's product, Plaintiff would have earned
profit of at least Rs. 25,00,000/- per year, but the said illegal act of the
Defendant has prevented the Plaintiff from earning said profit and thus
has caused loss, which is much more than Rs. 25,00,000/-. I say that
since the said loss has been caused only due to illegal act, of termination
of the agreement before its maturity by the Defendant, hence Defendant
is bound to compensate Plaintiff Company for the said loss. Por the
purpose of this suit the Plaintiff Company has restricted their claim to
the extent of Rs. 25,00,000/-. As aforesaid, Plaintiff Company would
have earned more than Rs.25.00.000/-, if the agreement would have
been continued for the agreed period of 3 years. Defendant must
compensate the Plaintiff Company at least to the extent of Rs.
25,00,000/-. Therefore, Plaintiff Company is entitled for decree to the
extent of Rs. 25,00,000/-as a compensation against the Defendant. I
have produced true copies of Audited Balance Sheets of Plaintiff
Company bearing signature of Mr. VIJAY SHETH, Chartered Accountant
of Plaintiff Company for the year ended 31/3/1999, 31/3/2000 31/3/2001
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and unaudited copy of balance-sheet for the year ended 31/3/2002. I
identify signature of VIJAY SHETH, the contents therein are true and
correct.
24) Thus, the Plaintiff led evidence that it was earning profit of
Rs.29,22,411.12/- during Financial Year 1999-2000 and Rs.22,91,241.28/-
in Financial Year 2000-2001. Plaintiff attributed reduction in the profit in
the year 2000-2001 on account of illegal termination of the Marketing
Agreement. It is contended by Mr. Bhuskute that these figures of profits
were not relatable to the business with the Defendant and that the profit
was earned through activities with other entities also. This contention is
accepted by the Appellate Court.
25) There was thus evidence before the Trial Court in support of
the claim of loss of profit of Rs.25 lakhs. It is sought to be contended by
Mr. Bhuskute that the evidence led by the Plaintiff in support of loss of
profit of Rs.25 lakhs ought to have been discarded on account of absence
of requisite pleadings. In my view, when it comes to a claim for loss of
profits, it is not necessary for the Plaintiff to plead in the plaint all the
particulars as to how the claimed amount has been computed. A claim for
loss of profits ordinarily represents the loss of an opportunity to carry on
business and earn profits. In paragraph 29 of the plaint, Plaintiff has
made some averments for raising the claim for loss of profit of Rs.25
lakhs. Additionally, there are several other averments throughout the
body of the plaint as to how Plaintiff had absolute right to market the
products of the Defendant at least for a period of 3 years as agreed in the
Marketing Agreement (para-25). In my view, those pleadings are
sufficient for the purpose of laying foundation for leading of evidence. It
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therefore cannot be contended that the plaint is totally bereft of any
pleadings for supporting the claim for loss of profit. The entire evidence
need not be pleaded and therefore the evidence cannot be discarded on
the ground of absence of pleadings. The second question of law is
accordingly answered by holding that it was permissible for the Plaintiff
to lead evidence before the Court for claim of sufferance of loss of profit
without enunciating in the plaint, the manner in which the loss was
actually suffered. In any case, the evidence on loss of profits is actually
discarded by the Appellate Court and therefore the discussion on this
question is actually rendered academic.
26) Coming to the third question of law, it is contended by the
Defendant/Appellant that the Appellate Court has erred in applying
totally different norm for awarding claim of loss of profit in the claim of
Rs.21,60,000/-. As observed above, the Trial Court had awarded the entire
claim of the Plaintiff for loss of profit for Rs. 25 lakhs and the Appellate
Court has reduced the same to Rs.21,60,000/-.
27) Perusal of the findings recorded by the Appellate Court would
indicate that the Appellate Court has refused to accept that the figures of
profit stated in paragraph 30 of the Affidavit of Evidence of P.W.1 which
represent the profits earned through exclusive business with the
Defendant. The Appellate Court has held that Plaintiff was doing business
with other entities as well. The Appellate Court has recorded in paragraph
42 of the judgment as under:
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42] It is the evidence of Vinod Shah (P.W.1) that in the financial year
1999-2000 the plaintiff company earned profit of Rs.29,22,411/- and in
financial year 2000-2001 plaintiff earned profit of Rs.22,91,241/-. It is
not the case of the plaintiff that at the relevant time plaintiff was doing
business only with defendant company. Rather, it can be seen from the
cross-examination of the witness that at the relevant time the plaintiff
was doing business with other entities also. Therefore, there is no
satisfactory evidence to show exactly how much profit was earned by
plaintiff by doing business with defendant for those 16 months.
28) Thus, the Appellate Court has not accepted the basis of past
profit figures for the purpose of awarding claim for loss of profits. In my
view, the Appellate Court is right in doing so. Since the figures of profits
claimed in paragraph 30 of the affidavit of evidence are not attributable
exclusively to the business made with the Defendant, the said figures
cannot form the basis for determining how much profits Plaintiff could
have made during the balance period of 1 year and 8 months when it was
not permitted to perform the contract. Instead, the Appellate Court has
applied the formula of 15% profit on the sales figures by holding in
paragraph 43 of the judgment as under:
43] In Mohd. Salamatullah and in M/s. A.T. Brij Paul Singh, the Hon'ble
Apex Court has awarded damages of 15% of the contract price. In the
present case the agreement between parties does not show that any
specific target was fixed. However, the agreement prescribes 5%
incentives for sale of 2.5 crore. In the letter of defendant dt.12.12.1999
below Exh.106 the defendant has stated that the sale from period from
13.08.1999 to 30.11.1999 was of average of Rs. 9 lacs per month.
Naturally, the sale might have increased thereafter. But in absence of
any documentary evidence in that regard the sale @ 9 lacs p.m. needs to
be considered. As per said letter it can be said that the annual business
must have been of Rs. 1,08,000,00/-. The 15% of this amount comes to
Rs.16,20,000/- as loss of profit for one year. Plaintiff in this case is
entitled for compensation/loss of profit for 1 year 8 months i.e.
remaining period of contract which comes to Rs. 21,60,000/-. Thus, I find
that the plaintiff is entitled for compensation/loss of profit to the tune of
Rs.21,60,000/-. I therefore, answer point No. 6 accordingly.
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29) The Appellate Court has thus taken into consideration
Defendant's own letter dated 12 December 1999 (Ex.106) in which
Defendant itself admitted that Plaintiff was doing average sales figures of
Rs.9 lakhs per month during August 1999 and November 1999. The
Appellate Court rightly relied on the evidence in the form of Defendant's
own letter in which it had admitted sales of Rs.9 lakhs per month by the
Plaintiff. After taking the sales figure of Rs.9 lakhs per month, the
Appellate Court arrived at total sales figure achievable for the period of 1
year and 8 months at Rs.1 crore 8 lakhs. Though it was Plaintiff's case that
it was easily possible to increase the sales figure, the Appellate Court has
not considered any notional or hypothecated increase in the sales figures
and has capped the achievable sales at Rs.9 lakhs only during the balance
period of 1 year 8 months. The Appellate Court has thus applied the most
conservative estimate of sales figures based on Defendant’s own letter.
The Appellate Court has thereafter applied 15% profit margin and
achievable sales figure of Rs.1 crore 8 lakhs and this is how, it was
awarded claim for loss of profits in the sum of Rs.21.60 lakhs. I am in
complete agreement with the exercise carried out by the Appellate Court.
Question No. 3 is answered accordingly by holding that the Appellate
Court was justified in holding that a different norm was adopted for
awarding the claim for loss of profits from the one that appeared in the
evidence led by the Plaintiff.
30) So far as Question No.4 is concerned, the same involves
award of claim in the sum of Rs.7,59,074/- by the Appellate Court which
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was rejected by the Trial Court. This claim was raised by the Plaintiff in
paragraph 30 by raising following averments:
(30) The Plaintiff respectfully submits that as per their account,
Defendant has to pay an amount of Rs. 7,59,074.07 Ps. to the Plaintiff.
The Defendant should pay the said amount due to the Plaintiff but as
they have failed to make payment of the same, the Plaintiff is entitled to
recover the said amount from the Defendant in this suit.
31) Thus, beyond pleading that 'as per their account, Defendant
has to pay an amount of Rs.7,59,074.07 ps. to the Plaintiff’', there are
absolutely no pleadings in the plaint as to on what account, the said
figure was claimed by the Plaintiff. In absence of any pleading, Plaintiff
led evidence by stating in paragraph 29 of the Affidavit as under:
(29) I have produced true extract of account of the Defendant Company
maintained by Plaintiff Company. All the entries in the said extract of
account have been made as and when the transaction have taken placed
between the parties. All the figures written therein are true and correct.
The said extract bears my thumb impression and the seal of Plaintiff
Company. The said extract of account As a extract from the
computerised accounts maintained in the office of the Plaintiff
Company. The entries therein have been made in due course of our
business and as and when such transactions took place. The said extract
is for the period from 1/4/2000 to 5/12/2000. In the said extract entry dt
25/11/2000 shows that, the Plaintiff Company had paid an amount of
Rs.1,00,000/- by a Cheque beating No.81088 drawn on BANK OF INDIA,
as an advance money as financial help to the Defendant. So also, entry
dt. 4/6/2000 shows that, Plaintiff Company supplied packing material i.e.
ampoules and trays, for production of goods by Defendant Company
worth Rs.6,59,074.07. Thus, the said account extract shows that,
Defendant cwe an amount of Rs.7,59,074.07 to Plaintiff Company of
advance of Rs.1,00,000/-. Till today in spite of our repeated demand
Defendant has failed to make payment of said amount and therefore,
Plaintiff Company is entitled to get decree for Rs.7,59.074.07 against the
Defendant. I have also produced copy of debit note raised by Plaintiff
Company for Rs.6,59,074.07Ps. dated 30/5/2000 bearing signature of our
accounts officer Mr. ANIL CHOUDHARY. I identify his signature. The
contents therein are true and correct. It is the true carbon copy of the
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Neeta Sawant Second Appeal NO.262-2021
original debit note raised by Plaintiff Company on the Defendant
Company. Both the copies oh prepared in one uniform process on typing
machine available in Plaintiff's office. I have also produced an extract
showing details of raw and packing material supplied by Plaintiff
Company to the Defendant Company worth Rs.6,59,074.07. It bears my
thumb impression and seal of Plaintiff Company. The contents therein
are true and correct.
32) Thus, in the affidavit of evidence, Plaintiff claimed that Rs.1
lakh was provided as financial assistance to the Defendant and
Rs.6,59,074.07/- was due towards packaging material supplied to the
Plaintiff by the Defendant. However, there are absolutely no pleadings
about giving of any advance or about supply of any packaging material in
the entire plaint. In my view, Plaintiff cannot be allowed to lead evidence
in the plaint about providing financial assistance or supply of packaging
material. It would have been another thing if Plaintiff was to atleast
mention that the claim of Rs.7,59,704.07/- was towards advance of supply
of packaging material. Even if full details of the claim of Rs.7,59,074.07/-
were not to be pleaded, at least some basis for the claim ought to have
been provided. There has to be factual assertion that Rs.1 lakh was
advanced to the Defendant towards alleged financial assistance. It was
also necessary to plead that the packaging material was supplied to the
Defendant for which Defendant did not pay to the Plaintiff. However, the
plaint is totally bereft of any pleadings with regard to the financial
assistance of supply of packaging material.
33) Here, the distinction needs to be understood between the
claim for loss of profit and claim for amount towards financial assistance
and supply of packaging material. In respect of the claim for loss of
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Neeta Sawant Second Appeal NO.262-2021
profits, there are specific pleadings in the body of the plaint wherein the
Plaintiff has clearly pleaded that it had an absolute right to market the
products of the Defendant-Company for a full period of three years and
that, on account of the wrongful termination, the Plaintiff lost the
opportunity to do so. The claim was further elucidated by leading
evidence. In any event, a claim for loss of profits can always be
ascertained by the Court by applying an appropriate formula or
percentage. However, for the claim of Rs.7,59,074/- the plaint is totally
silent as to on what account, the said figure was claimed. The case of
providing financial help of Rs.1 lakh to the Defendant and supply of
packaging material worth Rs.6,59,074/- was introduced directly in the
affidavit of evidence. This cannot be permitted. It is well settled position
of law that the parties cannot be permitted to lead evidence in absence of
foundational pleadings and such evidence, if led, is required to be
discarded. (SEE: Ram Sarup Gupta (Dead) By Lrs vs Bishun Narain Inter
College & Ors 1)
34) The Trial Court had rightly rejected the said claim of
Rs.7,59,074.07/- by holding in paragraph 31 of its judgment as under:
31) The plaintiff has also claimed relief for due payable amount Rs.
7,59,074.07 page 21 of the plaint in the suit from defendant which is
prayer clause No (g) in the plaint. However from the reading of the
plaint cause of action clause does not disclosed in detailed about such
claims or any such cause of action arose for such due amount
7,59,074.07 is due against defendant in the plaint and for one of cause of
action and details particular, regarding due and payable amount claimed
by the plaintiff in view of order 7 rule 11 of C.P.C. is not maintainable in
law against defendant in the instant suit. Moreover, there is no notice
given by the plaintiff before filing the suit to show that such due and
1 AIR 1987 SUPREME COURT 1242
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Neeta Sawant Second Appeal NO.262-2021
payable amount was due against the defendant, nor made any cause of
action details particulars in the plaint in the cause of action in the suit.
Therefore, under such circumstances in my opinion, plaintiff has not
proved and entitle for prayer clause (g) prayed against the defendant in
the suit.
35) The Appellate Court has grossly erred in awarding the said
claim of Rs.7,59,074/- by taking into consideration the evidence of P.W.1
ignoring the position that the same was without any pleadings. The award
of claim of Rs.7,59,074/- by the Appellate Court is based entirely on
evidence of P.W.1 which is clear from the following :
31] According to plaintiff, an amount of Rs.7,59,074/- is due from
defendant as per the balance in statement of account. In this regard
Vinod Shah (P.W.1) has testified that "he has produced true extract of
account of the defendant company maintained by plaintiff. All the
entries in the extract of accounts have been made as and when the
transaction had taken place between the parties. All the figures written
therein are true and correct. The extract bears his thumb of impression
and seal of plaintiff company. Said extract of account is an extract from
computerized accounts maintained in the office of plaintiff company.
The entries therein have been made in due course of business and as and
when such transaction took place. The entry dt. 04.06.2000 shows that
the plaintiff company supplied packing material, i.e. ampules and trays
for production of goods to defendant worth Rs.6,59704=07ps. Similarly,
entry dt.25.11.2000 show that plaintiff had paid an amount of Rs. 1 lac to
defendant by cheque as an advance money as financial help. Thus, the
account extract shows that defendant owe an amount of Rs.
7,59,074=07ps to plaintiff company". This evidence of plaintiffs witness
has not been rebutted in his cross-examination. Rather, the ledger
statement has been exhibited as "C-5" in the cross-examination of PW-
1. Thus, the oral evidence of plaintiffs witness supported by statement of
ledger account Exh.C-5 shows that Rs.7, 59074 = 7 ps is due to plaintiff
from the defendant.
32] In para 30 of the written statement defendant has put-forth a story
that in fact ledger balance amount of Rs. 2,32,125/-and costs of ampules
and trays 99, 910 = 70ps total amount of Rs. 3, 32,035 = 71ps is due to
plaintiff from defendant. On the other hand an amount of Rs. 19 ,448/-
as 65% of modvat reversal and Rs 3, 37, 644 = 23ps as excise exemption
from April 2000 to 4.12.2000, total amount of Rs 3, 52, 604 = 23ps is due
to defendant from plaintiff. Therefore, upon calculation plaintiff
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Neeta Sawant Second Appeal NO.262-2021
company owes Rs 20,568 = 52ps to defendant company. There is no
supporting documentary evidence to suffice this contention in the
written statement. It is pertinent to note that the defendant is claiming
50% of excise benefit but there is nothing in the agreement dt.
13.08.1999 that defendant is entitled for 50% of excise benefit. Rather
the document below Exh.61 dt.25.08.1999 signed by both the parties
reflect that the excise modavt benefit will pass on in full to the plaintiff
company.
33] Thus, the unrebutted evidence of Vinod Shah (P.W.1) and
computerised ledger account Exh.C-5 do show that an amount of Rs.
7,95,074/- is due to plaintiff from defendant. The learned trial Court was
of the opinion that plaintiff is not entitled for this amount as it has not
sent pre-suit notice claiming such amount. Legally speaking, such notice
is not mandatory to succeed in the claim. In the present case, infact, it is
the defendant who has terminated the contract by notice dt. 12.12.2000
which entitled plaintiff company to sue on that cause of action. It being
so, the observation of the learned trial Court regarding absence of per-
suit notice is incorrect and plaintiff is entitled for that amount. I
therefore, answer point No. 4 in the affirmative.
36) The Trial Court had specifically recorded a finding that there
was no disclosure of details of the claim in the plaint. The Appellate Court
has not dealt with the aforesaid findings of the Trial Court and has only
considered the Trial Court’s finding regarding failure to give notice of the
claim amounting to Rs. 7,59,074/- to the Defendant. However, the main
finding recorded by the Trial Court was that there is no foundational
pleading in the plaint disclosing cause of action for recovery of amount of
Rs.7,59,074/-. I am in agreement with the Trial Court and unable to
uphold the award of claim of Rs.7,59,074/- on account of absence of
foundational pleading in the plaint. Question No. 4 is accordingly
answered by holding that it was necessary for the Plaintiff to plead as to
how the amount of Rs.7,59,074/- was due or payable by the Defendant
and it was not open for the Appellate Court to consider the evidence qua
the said claim in absence of pleadings.
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Neeta Sawant Second Appeal NO.262-2021
37) The conspectus of the above discussion is that the Appellate
Court has rightly awarded the claim of loss of profit in the sum of
Rs.21,60,000/- in favour of the Plaintiff. However, award of claim of
outstanding amount of Rs.7,59,074/- by the Appellate Court is not in
order and deserves to be set aside.
38) The Second Appeal succeeds in part, and I accordingly
proceed to pass the following order:
(i) The operative direction No. (iii)(c) in the judgment and
decree of the Appellate Court dated 28 May 2021 is set
aside.
(ii) Rest of the decree of the Appellate Court is confirmed.
39) The Appeal is partly allowed to the above extent with
proportionate costs. Nothing would survive in the Interim Application
and the same is disposed of.
[SANDEEP V. MARNE, J.]
Digitally
signed by
NEETA
NEETA SHAILESH
SHAILESH SAWANT
SAWANT Date:
2026.09.01
21:12:33
+0530
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