Holding

Section 152 CPC cannot be used to correct a non‑accidental omission affecting the merits, such as the denial of pendente‑lite interest, and damages for loss of profit are recoverable where the contract is rescinded illegally, with a reasonable percentage of the contract price as compensation.

Summary

The appellant, a contractor, entered into a contract with the State of Madhya Pradesh to construct a hostel, but the contract was rescinded by the State alleging insufficient progress. The appellant sued for the contract price of Rs 32,000 and claimed Rs 20,000 as damages for loss of profit. The trial court decreed the suit with future interest and, under CPC s.152, later corrected the decree to award pendente‑lite interest. The High Court set aside the pendente‑lite interest and reduced the decree to Rs 4,783.33, disallowing the damages claim. The Supreme Court held that the omission of pendente‑lite interest was not an accidental mistake and therefore could not be corrected under s.152, justifying the High Court’s order. It also held that the appellant was entitled to damages for loss of profit because the contract was illegally rescinded, and that a 10% award of the contract price was reasonable. The appeal was partly allowed, modifying the decree to Rs 24,783.33 with future interest.

Issues considered

The omission of pendente‑lite interest in the trial court decree – whether it constitutes an accidental omission that can be corrected under CPC s.152.
Whether a contractor can claim damages for loss of profit (expected profit) when a government contract is illegally rescinded, under Contract Act s.73.
Whether the High Court was justified in reducing the damages award and setting aside pendente‑lite interest.

Legislation cited

Code of Civil Procedure, 1908s. 152, s. 34, s. Order 47 Rule 1
Indian Contract Act, 1872s. 73

Subjects

contract rescissiondamagesloss of profitpendente lite interestCPC s.152correction of judgmentbreach of contractexpected profitcivil appeal

Judgment

A DWARAKADAS .
~
v.
STATE OF MADHYA PRADESH AND ANR.

FEBRUARY 10, 1999

B [V.N. KHARE AND R.P. SETHI, JJ.]

Code of Civil Procedure 1908, s. 152---<:01Tection of Clerical Er-
ror:r-Trial Court decreeing suit for recovery of Rs. 32,000 with future inter-
est-Subsequently on applicatwn by Plaintiff Trial Court co"ecting judgment
c and awarding,pendente lite interest-High Court setting aside grant ofpendente
lite interest-Held, omission to grant pendente lite interest not accidental and
could not be comcted by Trial Court.

Contract Act 1872, s. 73-Compensation for Breach of Contract-Trial
Court decreeing Appellant's suit for recovery of compensation for breach of
D contract including damages of Rs. 20,00D-High Court in appeal by Defen-
dant State disallowing claim for damages and reducing decretal
amounHle/d, High Court not justified in disallowing claim of damages as
expected profit out of contract illegally rescinded.

The Respondent State in June, 1961 rescinded a contract dated
E
December 26, 1960 with the appellant for construction of a hostel for boys
on the ground that not even 10 per cent of the work had been completed
despite a lapse of nine months. Claiming that the termination of the
contract was illegal, the appellant filed a suit for recovery of Rs. 32,000
including a claim of Rs. 20,000 as damages for breach of contract. The trial
F court decreed the suit with future interest. Later by a separate order on
an application by the Plaintiff under s. 152 of the Code of Civil Procedure,
1908, the Trial Court corrected the judgment and decree by including
pendente lite interest.

The High Court in an appeal by the Respondent against the main
G judgment, disallowed the Appellant's claim for damages and reduced the
decretal amount to Rs. 4,783.33. Further, the High Court allowed the
Respondent's revision application and set aside the grant of pendente lite ¥
--
interest.

H Partly allowing the appeal, this Court
524
DWARAKADAS v. STATE[SETIII,J.] 525

HELD : 1. The omission in not granting the pendente lite interest A
could not be held to be an accidental omission or mistake as was wrongly
done by the trial court. The High Court was, therefore, justified in setting
aside the aforesaid order by accepting the revision petition filed by the
State. [527-H; 528-A]

Thirngnanavali Amal v. P. Venugopala, AIR (1940) Mad 29, approved. B
l' Jainab Bai v. Madhya Pradesh State Road Transport Corporation,
(1969) Madhya Pradesh Journal 716, disapproved.

Feroz Shah v. State, AIR (1957) Madhya Bharat 50;Maharaj Puttu Lal
v. Sripal Singh, AIR (1937) Oudh 191 and West Bengal Financial Corporation C
v. Bertram Scott (I) Ltd., AIR (1983) Cal 381, referred to.

2. The High Court was not justified in disallowing the claim of the
appellant for Rs. 20,000 on account of damages as expected profit out of
the contract which was found to have been illegally rescinded. The grant of
damages by the Tri~! Court which was 10% of the contract price was D
reasonable and permissible particularly when the High Court had con·
curred with the finding of the trial court regarding breach of contract.
[530-C-EJ
A. T. Brij Pal Singh v. State of Gujarat, [1984] 4 SCC 59 and Mohd.
Salamatullah v. Government of Andhra Pradesh, AIR (1977) SC 1481, E
referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1209 of
1992.

From the Judgment and Order dated 19.7.83 of the Madhya Pradesh F
High Court in F.A No. 86 of 1973.

S.K. Garnbhir for the Appellant.

Ms. Kamakshi S. Mehlwal and S.K. Agnihotri for the Respondents.
G
The Judgment of the Court was delivered by

SETHI, J. In response to the tenders invited by the respondent-
State, the appellant herein was allotted the work for the construction of a
hostel for 100 boys at polytechnic Ujjain for which agreement (Ex. P. 22)
was executed between the parties on 26th December,· 1960. The entire work H
526 SUPREME COURT REPORTS (1999] 1 S.C.R.

A was required to be completed within 29 months with further condition that
1/4 of the work was to be completed within 5 months, half the work to be
completed within 10 months and 3/4 work was to be completed within 15
months. The work order was issued to the appellant on 26th December,
1960 who started construction on 28th December, 1960. The Superintend-
ing Engineer is alleged to have obstructed the progress of the work with
B the result that the work could not be completed within the time schedule.
The contract executed between the parties was rescinded by the respon-
dents vide letter dated 19.6.61 on the ground that the appellant had not
completed even 10 per cent of the work despite lapse of more than 9
months. The appellant however, contended that the termination of the
C contract was in breach thereof. He claimed Rs. 20,000 as damages for
breach of contract besides claiming other amounts payable by the respon-
dent to him. Suit for the recovery of Rs. 32,000 filed by the appellant was
decreed with a direction that the appellant would also be entitled to future
interest @ 6 per cent per annum.

D After the decree of the trial court the appellant filed an application
under Section 152 of the C.P.C. praying for awarding of interest from the
date of the suit till the date of the decree by correcting the judgment and
decree on the ground that non awarding of interest pendente lite was an
accidental ommission. The trial court allowed this application and directed
the correction of the judgment and decree by awarding interest pendente
E lite.

Aggrieved by the judgment and decree of the trial court, the respon-
dent-State filed the First Appeal No. 86 of 1973 and against the order
passed in application under Section 152, Revision application No. 145 of
p 1974. The High Court vide the order impugned herein partly allowed the
appeal by holding the respondents-State liable to pay only a sum of Rs.
4,783.33 to the plaintiff with interest at the rate of 6 per cent per annum.
Civil Revision No. 145 of 1974 was allowed and the order of the trial court
granting interest pendente lite was set aside.

G We have heard learned counsel fo~ the parties and perused the
record.

Learned counsel appearing for the appellant has vehemently argued
that High Court was not justified in setting aside the order of the trial court
H passed on 30th November, 1973 by which his client was granted pendente
DWARAKADAS v. STATE [SETHI,J.] 527
)

- lite interest. It is submitted that the non granting of the interest for the
period of litigation was an accidental omission which was rectified by the
trial court. In support of his contention he has relied upon the judgments
A

in Jainab Bai and Ors. v. Madhya Pradesh Statr Road Transport Co1pora-
tion, [1969] Madhya Pradesh Journal P. 716; Feroz Shah v. State, AIR
(1957) Madhya Bharat p. 50; Maharaja Puttu Lal v. Sripal Singh and Ors.,
B
AIR (1937) Oudh p. 191 and West Bengal Financial Corporation and Anr.
v. bertram Scott(/) Ltd., AIR 1983 Calcutta p. 381.

Section 152 C.P.C. provides for correction of clerical arithmeti~al
mistakes in judgments, decrees or orders or errors arising therein from any
accidental slip or omission. The exercise of this power contemplates the c
correction of mistakes by the Court of its ministerial actions and does not
contemplate of passing effective judicial orders after the judgment, decree
or order. The settled position of law is that after the passing of the
judgment, decree or order, court or the tribunal becomes functus officio
and thus being not entitled to vary the terms of the judgments, decrees and D
orders earlier passed. The correction contemplated are of correcting only
accidental omission or mistakes and not all omissions and mistakes which
might have been committed by .the Court while passing the judgment,
decree or order. The omission sought to be corrected which goes to the
merits of the case is beyond the scope of Section 152 for which the proper
remedy for the aggrieved party is to file appeal or review application. It
E
implies that the Section cannot be pressed into service to correct an
omission which is intentional, how erroneous that may be. It has been
noticed that the courts below have been liberally construing and applying
the province of Sections 151 and 152 of the CPC even after passing of
effective order in the lis pending before them. No Court can under the F
cover of the aforesaid sections modify, alter or add to the terms of its
original judgment, decree or order. In the instant case, the trial court had
specifically held the respondents-State liable to pay future interest only
despite the prayer of the appellant for grant of interest with effect from
the date of alleged breach which impliedly meant that the court had G
-
"it
~
rejected the claim of the appellant in so far as pendente lite interest was
concerned. The omission in not granting the pendente lite interest could
not be held to be accidental omission or mistake as was wrongly done by
the trial court vide order dated 30th November, 1973. The High Court was,
therefore, justified in setting aside the aforesaid order by accepting the H
528 SUPREME COURT REPORTS [1999] 1 S.C.R.

A revision petition filed by the State. ~

The reliance of the learned counsel for the appellant on Jainab Bai
case (supra) is misplaced inasmuch as in that case the aggrieved party had
sought for award of interest ·after the decree, by filing the application under
Section 152 C.P.C. and under Order 47 Rule (1) of the C.P.C. The Division
B Bench relied upon the decision of Madras High Court in Thirugnanavali
Amal v. P. Venugopala, AIR (1940) Madras p. 29 wherein it was held that
where a mistake had occurred in the decree inspite of mention of the future
interest in the judgment, the Court had the power to rectify the mistake
and if it occurred in the decree because of omission of it in the judgment,
c the mistake could not be corrected. We agree with the view taken by •
Madras High Court but cannot subscribe to the general observations made
by the Madhya Bharat High Court in Jainab Bai's case. In Maharaja Puttu
Lal v. Sripal Singh and Ors., AIR 1937 Oudh 191, the court had awarded
the mesne profits to the decree holder by correction upon satisfaction that
D the plaintiff had specifically claimed such profits and its pleader was
admitted to have made an oral statement requesting the court to determine
the amount of mesne profits in the execution department which was
accepted but not mentioned in the decree sheet. Under the facts and
circumstances of that case the court held that such being an accidental
E omission the same could be corrected in exercise of the powers vested in
the court under Section 152 of the C.P.C.

In Feroz Shah's case (supra) future interest was allowed by the Court
on being satisfied that the omission in the decree was accidental and that
no grounds existed for the defendant therein to resist the claim of the
F decree holder. The West Bengal Financial Corporation's case does not in
any way help the appellant inasmuch as in that case the scope of Section
'
152 was not at all considered as the only point decided was that a plaintiff
is entitled as of right to the grant of interest under Section 34 of the C.P.C.
In view of what we have held in. this case regarding the ambit and scope
G of Section 152 of the C.P.C., we are of the opinion that view of Madhya I
Bharat High Court cannot be held to be based upon sound principles. --1
1

The claim of the petitioner for payment of Rs. 20,000 as damages on
account of breach of contract committed by the respondent- State was
H disallowed by the High Court as the appellant was found to have not placed
DWARAKADAS v. STATE[SETHI,J.] 529
the material on record to show that he had actually suffered any loss on A
account of the breach of contract. In this regard the appellate court
observed: "It is not his case that for due compliance of the contract he had
advanced money to the labourers or that he had purchased materials or
that he had incurred any obligations and on account of breach of contract
by the defendants he had to suffer loss on the above and other heads. Even B
in regard to the percentage of profit he did not place any material on
record but relied upon assessment of the profits by the Income Tax Officer
while assessing the income of the contractors from building contracts." such
a finding of the appellate court appears to be based on wrong assumptions.
The appellant had never claimed Rs. 20,000 on account of alleged actual C
loss suffered by him. He had preferred his claim on the ground that had
he carried out the contract he would have earned profit of 10% on Rs. 2
lacs which was the value of the contract. This Court in A. T. Brij Pal Singh
and Ors. v. State or Gujarat, (1984) 4 SCC 59) while interpreting the
provisions of Section 73 of the Contract Act, has held that damages can be
claimed by a contractor where the government is proved to have committed D
breach by improp,erly rescinding the contract and for estimating the
amount of damages court should make a broad evaluation instead of going
into minute details. It was specifically held that where in the. works con-
tract, the party entrusting the work committed breach of contract, the
contractor is entitled to claim the damages for loss of profit which he E
expected to earn by undertaking the works contract. Claim of expected
profits is legally admissible on proof of the breach of contract by the erring
party. It was observed :

"What would be the measure of profit would depend upon facts F
and circumstances of each case. But that there shall be a
reasonable expectation of profit is implicit in a works contract and
its loss has to be compensated by way of damages if the other party
to the contract is guilty of breach of contract cannot be gainsaid.
In this case we have the additional reason for rejecting the con-
tention that for the same type of work, the work site being in the G
vicinity of each other and for identical type of work between the
same parties, a Division Bench of the same High Court has
accepted 15 per cent of the value of the balance of the works
contract would not be an unreasonable measure of damages for
loss of profit......... H
530 SUPREME COURT REPORTS (1999) 1 S.C.R.

A Now if it is well-established that the respondent was guilty of
breach of contract inasmuch as the rescission of contract by the
respondent is held to be unjustified, and the plaintiff-contractor
. had executed a part of the works contract, the contractor would
-
. be entitled to damages by way of loss of profit. Adopting the
measure accepted by the High Court in the facts and circumstances
B of the case between the same parties and for the same type of work
at 15 per cent of the value of the remaining parts of the work
contract, the damages for loss of profit can be measured."

C To the same effect is the judgment in Mohd. Salamatullah and Ors. v.
Government of Andhra Pradesh, AIR {1977) SC 1481. After approving the
grant of damages in case of breach of contract, the court further held that
the appellate court was not justified to interfere with finding of fact given
by the trial court regarding quantification of the damages even if it was
based upon guess work. In both the cases referred to hereinabove. 15% of
D the contract price was granted as damages to the contractor. In the instant
case however the trial court had granted only 10% of the contract priee
which we feel was reasonable and permissible, particularly when the High
Court had concurred with the finding of the trial court regarding breach
of contract by specially holding that "we therefore see no reason to inter-
E fere with the finding recorded by the trial court that the defendants by
rescinding the agreement committed breach of contract." It follows there-
fore as and when the breach of contract is held to have been proved being
contrary to law and terms of the agreement, the erring party is legally
bound to compensate the other party to the agreement. The appellate court
p was, therefore, not justified in disallowing the claim of the appellant for
Rs. 20,000 on account of damages as expected profit out of the contract
which was found to have been illegally rescinded.

The appellate court further slashed the other claims of the appellant
G and held him entitled to the payment of Rs. 4,783.33 only. The learned
counsel for the appellanfhas been very fair to concede that such finding
returned by the appellate court is reasonable and that the appellant would
not insist upon the payment of further amount and be satisfied with the
amount decreed by the High Court in addition to the sum of Rs. 20,000
H claimed as damages.
)- .

DWARAKADAS v. STATE (SETIIl,J.] 531

Under the circumstances this appeal is partly allowed modifying the A
judgment decrees of the courts below and holding the appellant plaintiff
entitled to the grant of decree to the extent of Rs. 24,783.33 with future
interest at 6% per annum payable from the date of decree till realization.
The parties to bear their own costs in this appeal.

S.M. Appeal partly allowed. B

y