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Judgment
This is an application for stay of the Judgment under Order 41, Rule 5 of C.P.C. By the impugned Judgment, the trial Court has held that the respondent No. 1 is entitled to recover a sum of Rs. 23.27 crores paid to the appellant as per the service and supply contracts and damages, whereby the appellant agreed to supply and set up fertilizer manufacturing plant to respondent No. 1. The amount is decreed under two heads. 1) Five per cent of the contract price as damages. 2) The return of the price of machinery paid by the respondent. The trial Court has directed the return of the price of the plant, without directing the corresponding return of the plant. Though it was contended by the respondent that they do not have the plant, there does not seem to be much substance in the contention, since, according to the respondent, the appellant abandoned the commissioning of the plant.
As stated earlier, in addition to the recovery of the price of the plant, the trial Court has directed the plaintiff to recover 5 % of the sum of Rs. 23.27 crores from the defendants no. 1 and 2 jointly and severally for the loss suffered by the plaintiff. This is in pursuance of Clause 19.4 of the contract which limits the appellant''s liability. That clause reads as follows :
19.4 Anything herein to the contrary not with-standing, CONTRACTOR''S responsibility for any liability under this CONTRACT shall be limited to a maximum liability equal to Five (5%) percent of the contract price.
Having considered the application for stay and having regard to the fact that it is a money decree for damages, the appellant is not entitled to a blanket stay of such a decree. However, having regard to the clause which limits the liability i.e. clause 19.4 reproduced above, we are of the view that the clause must be taken to have limited the appellant''s liability to the said sum.
It is the contention on behalf of the respondent No.1 that the clause limiting liability cannot be applied because there is a fundamental breach of the contract by the appellant. The trial Court has observed that there is a fundamental breach because the technology failed and has also observed that the plaintiff i.e. respondent No.1 herein is entitled to the rescission of the contract. It must be noted that no question of rescission of the contract arises between the parties. In any case we, prima facie, find that the breach of the term of the contract does not suggest fundamental breach as contemplated in Skandia Insurance Co. Ltd. Vs. Kokilaben Chandravadan and Others, . That was a case arising out of an insurance contract. This, prima facie, it appears that the liability ought to have been limited in accordance with Clause 19.4 of the contract.
In the circumstances, we consider it appropriate to direct that there shall be stay of the Decree to the extent of Rs. 23.27 crores subject to the appellant furnishing as security as follows:
Fifty per cent of the aforesaid amount of Rs. 23.27 crores shall be secured by furnishing a Bank Guarantee which shall be renewed pending the decision in appeal; and the remaining 50 % shall be secured by furnishing security to the satisfaction of the Registrar within a period of 12 weeks from today.
There shall be no stay with regard to the Decree of the trial Court to the extent of 5 % of 23.27 crores. The appellant shall deposit the sum of Rs. 1,16,35,000/-in the trial Court within a period of 12 weeks. The respondent No.1 shall be entitled to withdraw the amount upon its deposit by the appellant, by furnishing security for the said amount to the satisfaction of the trial Court, along with interest as ordered. Application disposed of.