Jojy George Koduvath

Key Takeaways, Crisped

The ingredients of Defamation are –

1. defamatory statement (harming reputation)
2. refer to the plaintiff
3. published before a third party.

Available defences are –

• (i) Justification by truth,  
• (ii) Fair and bonafide comment,   
• (iii) Privilege (without malice),
• (iv) Consent,
• (v) Apology.

Following Publications are exempted (S. 499 IPC)

• 1. Truth for public good
• 2. Public conduct of public servants – in good faith 
• 3. Matter touching any public question – in good faith 
• 4. True reports of proceedings of courts
• 5. Expressing opinion, on merits of case decided in Court – in good faith 
• 6. Expressing opinion on character of the author – in good faith
• 7. Censure passed in good faith by person having lawful authority 
• 8. Accusation preferred in good faith who have lawful authority 
• 9. Imputation made in good faith for protection of his or other’s interests
• 10. Caution intended for good of person to whom conveyed or for public good.

No absolute privilege to defamatory statements in the pleadings/complaints

• There is difference of opinion.
• The modern trend is to see that it is ‘qualified privilege’. That is, liability is casted upon the defendant if the defamatory statement is quite unconnected with and irrelevant to the main statement.

The court awards following types of damages.

• .1. Exemplary/punitive damages 
• 2. Aggravated damages 
• 3. Compensatory damages 
• 4. Contemptuous damage 
• 5. Nominal damages

Burden of proving Malice

• Always on the plaintiff.

PART I

Introduction

Damages arise from ‘tortious liability’ and ‘breach of contract’. It is observed in Rajkot Municipal Corpn. v. Manjulben Jayantilal Nakum, (1997) 9 SCC 552, as under:

• “In tort, liability is primarily fixed by law while in contract they are fixed by the parties themselves. In tort, the duty is towards the persons generally while in contract it is towards specific person or persons. If the claim depends upon proof of breach of the contract, action does not lie in tort. If the claim arises, from the relationship between the parties, independent of the contract, an action would lie in tort at the election of the plaintiff, although the might alternatively have pleaded in contract.”

Tortious Liability

Blacks Law Dictionary defines ‘tort’ as violation of duty imposed by general law or otherwise upon all persons occupying the relation to each other involved in a given transaction. There must always be a violation of some duty owed to plaintiff and generally such a duty must arise by operation of law and not by mere agreement of the parties.

Essential Elements of Tortious Liability

The essential elements of tortious liability are –

• (a) some wrong doing and (b) negligence or strict liability.

Damages in Civil Cases:

1. It is a matter for judicial determination.
2. Therefore, a proper civil suit is necessary.
3. The damages may be special damages (as in contract) or general damages (as in tort; also, sometimes, in contract).

General Damages (contra distinct to specific damages as in breach of contract):

• It is the damages awarded by the court for the harm inflicted by the defendant upon the plaintiff, like pain and suffering. It can be –
  • It includes mental anguish, anxiety.
  • Public humiliation, loss of reputation, shame.
  • Sleep-disturbance, emotional distress, depression.

Kinds of Damages Awarded by Court:

Damages (in general) are of three kinds: First, nominal; Second, general damages; Third, special damages.

The court awards following types of damages.

• .1. Exemplary/punitive damages – it is in the form of a punishment against the defendant for his illicit acts.  The award of damages may exceed the actual loss suffered by the plaintiff in such cases.
• 2. Aggravated damages – It is awarded over and above the actual damages that may be calculated in a normal case; or, the actual pecuniary loss.  It is done considering the gravity of the illicit act of the defendant; or, to make good the injury or deprivations suffered by the plaintiff.
• 3. Compensatory damages – In the cases where damages are awarded as compensatory damages the courts consider the actual injury or damages suffered by the plaintiff.  It may be the expenses for the treatment or the loss of  income.
• 4. Contemptuous damage – In the award of contemptuous damages the court does not award the exact or proved loss suffered by the plaintiff; it gives only a lesser amount.  
• 5. Nominal damages – In cases where nominal damages were awarded, court does not take the actual (or reasonable) damages suffered by the plaintiff.   It is done in cases where the plaintiff failed to prove the damages in money terms, or where the court considers that the plaintiff is not entitled for a compensation in its full sense.

Quantum of Damages where No Scale to Measure Damages:

Where the plaintiff proved his entitlement for damages but failed to place the materials for the foundation of fixing damages in Tort, should the plaint be dismissed?

• No. The court can, in such cases, award –
  • (i) nominal damages; or(ii) damages considering the attendant or all relevant circumstances to fix the damages.
• On Guess work -In K. Narendra v. Riviera Apartments (P) Ltd., AIR 1999 SC 2309, our Apex Court while dealing with award of compensation under Sect. 21 of the Specific Relief Act opined that ‘compensation to some extent is a matter of guess work’.The explanation appended to the Section expressly enacts that the Court is not precluded from exercising jurisdiction to award compensation even in a case where the contract has been rendered incapable of specific performance.

Wrong-doer cannot complain damages cannot be measured – In Story Parchment Co. Vs. Paterson Parchment Paper Co., 282 U.S. 555 (1931), it was held that the wrong-doer is not entitled to complain that the damages cannot be measured with exactness or precession.

Should actual Damages be Established in Court?

For awarding damages under Tort, some objective evidence must be placed before the court so that the court can fix the quantum; otherwise, the court may award only nominal damages.

How the court determines pecuniary damages in Tort?

For asserting tortious liability, as observed by our Apex Court, in Rajkot Municipal Corpn. v. Manjulben Jayantilal Nakum, 1997 (9) SCC 552, it must be established before a court of law that:

• (i) The defendant was under duty of care, primarily fixed by law, not to create physical danger to the person or property of third party;
• (ii)  The defendant ought to have reasonably foreseen the physical danger likely to be affected;
• (iii)  Violation of such duty fastened liability upon the defendant to pay damages; and
• (iv) Actual physical damage must have been caused to the plaintiff or his property out of such breach of duty.

Foreseeability of Damages

In United India Insurance Co.  v. Thomas, 1999-1 KLT 165; 1999 1 RCR(Civ) 610, the Kerala High Court held as under:

•  “In a suit for damages in a tort case, the court has power to award pecuniary compensation to the plaintiff for the injury or damage caused to him out of the wrongful act of the defendant. The test employed for determining whether the defendant is liable for damages is the test of directness, that is to say the defendant is liable for all direct consequences of the tortuous acts suffered by the plaintiff whether or not a reasonable man would have foreseen them. The Court of Appeal in Re Polemis and Furness, Withy & Co. Ltd. (1921) 3 K.B. 560) held that once the tortuous act is established the defendant is to be held liable for all the damages which ‘is in fact directly traceable to the negligent act, and not due to independent causes having no connection with the negligent act’.
• Foreseeability of some damage is relevant to decide whether the act complained of was negligent or not. But the liability for damages is not restricted to foreseeable damage but extends to all the damage directly traceable to the negligent act. This view was adopted by the Privy Council in Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co. Ltd. (1961) 1 All. E.R.404 (PC). In holding foresee ability to be the correct test, the judicial committee observed that Polemis” case (supra) should not be regarded as a good law. Lord Viscound Simonds observed:
  • “For it does not seem consonant with current ideas of justice or morality that, for an act of negligence .however slight or venial, which results in some trivial foreseeable damage, the actor should be liable for all consequences, however, unforeseeable and however grave, so long as they can be said to be “direct”. It is a principle of civil liability subject only to qualifications which have no present relevance, that a man must be considered to be responsible for the probable consequences of his act.”
• His Lordship further said:
  • “But, with great respect to the full court, this is surely irrelevant, or, if it is relevant, only serves to show that the Polemis rule works in a very strange way. After the event even a fool is wise. Yet it is not the hindsight of a fool, but it is the foresight of the reasonable man which alone can determine responsibility. The Polemis rule, by substituting “direct” for “reasonably foreseeable” consequence, leads to a conclusion equally illogical and unjust.”
• The above test of foreseeability was affirmed in The Wagon Mound (No. 2) (1966) 2 All. E.R.709) and Hughes v. Lord Advocate (1963) 1 All. E.R.705). While adjudicating the claim for compensation by the Tribunal under S.165 of the Act the foresee ability test has no application. It is for the Civil Court to apply this test while assessing the damages in accordance with the facts and circumstances of each case.”

PART II

Damages in Defamation cases:

• Defamation is bifurcated into two classes; Libel & slander.
• If defamation is triggered out of a written matter, it is libel; if it is verbal, it is slander.

A man’s reputation is his property

William Shakespeare speaks through Iago, in Othello, Act III, Scene III as under:

• “Good name in man and woman, dear my lord,
• Is the immediate jewel of their souls.
• Who steals my purse steals trash. ’Tis something, nothing;
• ’Twas mine, ’tis his, and has been slave to thousands.
• But he that filches from me my good name
• Robs me of that which not enriches him
• And makes me poor indeed.”
• (quoted in : Ram Jethmalani v. Subramaniam Swamy, AIR 2006 Delhi 300)

In Dixon V. Holden (1869) LR 7 Eg 488, it is held that a man’s reputation is his property and possibly more valuable than any other form of property.

Odger Sayd in his introduction to his book on defamation that

• “No man may disparage or destroy the reputation of another. Every man has a right to have his good name maintained unimpaired, this right is a jus in rem, a right absolute and good against all the world words which produce, in any given case, appreciable injury to the reputation of another, are called defamatory and defamatory words, if false, are actionable”. (Quoted in : R.B. Onkarji Kasturchandji v. Suresh Seth: (1997) 1 MPJR 21)

In Miller V. Shomp Son (1874 LR 9 CP 118), attempt is made to define defamation as exposing a person to contempt, ridicule or public hatred or to prejudice him in the way of office, profession or trade. Faulks Committee in England in 1975 opined that

• “Defamation shall consist of publication to a third party of matter which in all the circumstances would be likely to affect a person in the estimation of reasonable people generally”. (Quoted in : R.B. Onkarji Kasturchandji v. Suresh Seth: (1997) 1 MPJR 21)

Defamation is publication or exposition of a matter that tends to lower the plaintiff in estimation of right thinking members of society Sim V Stretch (1936) 2 All ER 1237); Ramakant v/s Devilal Sharma (1969 MPLJ 805); R.B. Onkarji Kasturchandji v. Suresh Seth: (1997) 1 MPJR 21) .

Definition of defamation in IPC:

It is defined in the Indian Penal Code, 1860. Sec. 499 reads as under:

• “499. Defamation: Whoever, by words either spoken or intended to be read, or by signs or by visible representations, makes or publishes any imputation concerning any person intending to harm, or knowing or having reason to believe that such imputation will harm, the reputation of such person, is said, except in the cases hereinafter excepted, to defame that person.
• Explanation 1.—It may amount to defamation to impute anything to a deceased person, if the imputation would harm the reputation of that person if living, and is intended to be hurtful to the fellings of his family or other near relatives.
• Explanation 2.—It may amount to defamation to make an imputation concerning a company or an association or collection of persons as such.
• Explanation 3.—An imputation in the form of an alternative or expressed ironically, may amount to defamation.
• Explanation 4.—No imputation is said to harm a person’s reputation, unless that imputation directly or indirectly, in the estimation of others, lowers the moral or intellectual character of that person, or lowers the character of that person in respect of his caste or of his calling, or lowers the credit of that person, or causes it to be believed that the body of that person is in a lothsome state, or in a state generally considered as disgraceful.
• Illustrations
  • A says— “Z is an honest man; he never stole B’s watch”; intending to cause it to be believed that Z did steal B’s watch. This is defamation, unless it fall within one of the exceptions.
  • A is asked who stole B’s watch. A points to Z, intending to cause it to be believed that Z stole B’s watch. This is defamation, unless it fall within one of the exceptions.
  • A draws a picture of Z running away with B’s watch, intending it to be believed that Z stole B’s watch. This is defamation, unless it fall within one of the exceptions.c) A draws a picture of Z running away with B’s watch, intending it to be believed that Z stole B’s watch. This is defamation, unless it fall within one of the exceptions.
• First Exception.—Imputation of truth which public good requires to be made or published.—It is not defamation to impute anything which is true concerning any person, if it be for the public good that the imputation should be made or published. Whether or not it is for the public good is a question of fact.
• Second Exception.—Public conduct of public servants.—It is not defamation to express in good faith any opinion whatever respecting the conduct of a public servant in the discharge of his public functions, or respecting his character, so far as his character appears in that conduct, and no further.
• Third Exception.—Conduct of any person touching any public question.—It is not defamation to express in good faith any opinion whatever respecting the conduct of any person touching any public question, and respecting his character, so far as his character appears in that conduct, and no further.
• Illustration
  • It is not defamation in A to express in good faith any opinion whatever resenting Z’s conduct in petitioning Government on a public question, in signing a requisition for a meeting on a public question, in presiding or attending at such meeting, in forming or joining any society which invites the public support, in voting or canvassing for a particular candidate for any situation in the efficient discharge of the duties of which the public is interested.
• Fourth Exception.—Publication of reports of proceedings of courts.—It is not defamation to publish substantially true report of the proceedings of a Court of Justice, or of the result of any such proceedings.
• Explanation.—A Justice of the Peace or other officer holding an enquiry in open Court preliminary to a trial in a Court of Justice, is a Court within the meaning of the above section.
• Fifth Exception.—Merits of case decided in Court or conduct of witnesses and others concerned.—It is not defamation to express in good faith any opinion whatever respecting the merits of any case, civil or criminal, which has been decided by a Court of Justice, or respecting the conduct of any person as a party, witness or agent, in any such case, or respecting the character of such person, as far as his character appears in that conduct, and no further.
• Illustrations
  • A says—”I think Z’s evidence on that trial is so contradictory that he must be stupid or dishonest”. A is within this exception if he says this in good faith, inasmuch as the opinion which he expresses respects Z’s character as it appears in Z’s conduct as a witness, and no farther.
  • But if A says—”I do not believe what Z asserted at that trial because I know him to be a man without veracity”; A is not within this exception, inasmuch as the opinion which express of Z’s character, is an opinion not founded on Z’s conduct as a witness.
• Sixth Exception.—Merits of public performance.—It is not defamation to express in good faith any opinion respecting the merits of any performance which its author has submitted to the judgment of the public, or respecting the character of the author so far as his character appears in such performance, and no further.
• Explanation.—A performance may be submitted to the judgment of the public expressly or by acts on the part of the author which imply such submission to the judgment of the public.
• Illustrations
  • A person who publishes a book, submits that book to the judgment of the public.
  • A person who makes a speech in public, submits that speech to the judgment of the public.
  • An actor or singer who appears on a public stage, submits his acting or singing to the judgment of the public.
  • A says of a book published by Z—”Zs book is foolish; Z must be a weak man. Z’s book is indecent; Z must be a man of impure mind.” A is within the exception, if he says this in good faith, inasmuch as the opinion which he expresses of Z respects Z’s character only so far as it appears in Z’s book, and no further.
  • But if A says “I am not surprised that Z’s book is foolish and indecent, for he is a weak man and a libertine.” A is not within this exception, inasmuch as the opinion which he expresses of Z’s character is an opinion not founded on Z’s book.
• Seventh Exception.—Censure passed in good faith by person having lawful authority over another.—It is not defamation in a person having over another any authority, either conferred by law or arising out of a lawful contract made with that other, to pass in good faith any censure on the conduct of that other in matters to which such lawful authority relates.
• Illustration
  • A Judge censuring in good faith the conduct of a witness, or of an officer of the Court; a head of a department censuring in good faith those who are under his orders, a parent censuring in good faith a child in the presence of other children; a schoolmaster, whose authority is derived from a parent, censuring in good faith a pupil in the presence of other pupils; a master censuring a servant in good faith for remissness in service; a banker censuring in good faith the cashier of his bank for the conduct of such cashier as such cashier- are within this exception.
• Eighth Exception.—Accusation preferred in good faith to authorised person.—It is not defamation to prefer in good faith an accusation against any person to any of those who have lawful authority over that person with respect to the subject-matter of accusation.
• Illustration
  • If A in good faith accuses Z before a Magistrate; if A in good faith complains of the conduct of Z, a servant, to Z’s master;if A in good faith complains of the conduct of Z, a child, to Z’s father-A is within this exception.
• Ninth Exception.—Imputation made in good faith by person for protection of his or other’s interests.—It is not defamation to make an imputation on the character of another provided that the imputation be made in good faith for the protection of the interests of the person making it, or of any other person, or for the public good.
• Illustrations
  • A, a shopkeeper, says to B, who manages his business—”Sell nothing to Z unless he pays you ready money, for I have no opinion of his honesty.” A is within the exception, if he has made this imputation on Z in good faith for the protection of his own interests.
  • A, a Magistrate, in making a report to his own superior officer, casts an imputation on the character of Z. Here, if the imputation is made in good faith, and for the public good, A is within the exception.
• Tenth Exception.—Caution intended for good of person to whom conveyed or for public good.—It is not defamation to convey a caution, in good faith, to one person against another, provided that such caution be intended for the good of the person to whom it is conveyed, or of some person in whom that person is interested, or for the public good.”

Essential Elements of Defamation in Civil Law:

The courts in India have been applying the definition of defamation in the IPC for determining whether the disputed civil matter is an actionable wrong (or defamatory).

As shown above, the Essential Elements of Tortious Liability are –

• (a) some wrong doing and (b) negligence or (c) strict liability.

The ingredients of Defamation that arises from the definition in the IPC are the following:

1. Defendant must have made a defamatory statement.
2. It should be false or baseless.
3. It must refer to the plaintiff. Or, it must be understood by right thinking or reasonable minded people as referring to the plaintiff.
4. It must have harmed the reputation of the plaintiff; or, in other words, there must be special damages to the plaintiff.
5. It was made or published before a third party.
6. It should have been willfully published; or, the defendant must have been negligent in making the statement (without verifying its truth).

In RB Onkarji Kasturchandji v. Suresh Seth, (1997) 1 MPJR 21, it is observed, referring Jones V. Jones (1916) 2 AC 481,.as under:

• “In general, there are four essentials of the tort of defamation, namely:-
• .(i) There must be a defamatory statement.
• (ii) The defamatory statement must be understood by right thinking or reasonable minded persons as referring to the plaintiff.
• (iii) There must be publication of the defamatory statement that is to say, it must be communicated to some person other than the plaintiff himself. (Chiranshree Das v. Amitabh Das, LAWS(KAR)-2018-8-304).
• (iv) In case of slander, either there must be proof of special damage or the slander must come within the serious classes of cases in which it is actionable per se.”

Available defences:

Generally speaking, following are the available defences in a defamatory suit:

•  .(i) Justification by truth,  (ii) Fair and bonafide comment,   (iii) Privilege, (iv) Consent, (v) Apology.

Defenses in Sec. 499 IPC

If we go by Sec. 499 IPC following are the defenses –

• .1. Truth which public good requires to be made or published
• 2. Public conduct of public servants – in good faith 
• 3. Conduct of any person touching any public question – in good faith 
• 4. Publication of substantially true reports of proceedings of courts
• 5. Expressing opinion, on merits of case decided in Court or conduct of witnesses – in good faith 
• 6. Expressing opinion respecting merits of public performance for the judgment of the public or respecting the character of the author so far as his character appears in such performance – in good faith
• 7. Censure passed in good faith by person having lawful authority 
• 8. Accusation preferred in good faith to any of those who have lawful authority 
• 9. Imputation made in good faith for protection of his or other’s interests
• 10. Caution intended for good of person to whom conveyed or for public good.

Defamatory-Complaint to Police or Court, Whether Privileged?

Yes; if not actuated by malice.

In Watt v. Longsdon, (1930) 1 KB 130: 1929 All ER Reprint 284 it was observed that the privileged communications may lose their privilege if (i) they exceeded the limits of the duty or (ii) they published with express malice. It was held as under:

• “By the law of England there are occasions on which a person may make defamatory statements. These occasions are called privileged occasions. A reason frequently given for this privilege is that the allegation that the speaker has “unlawfully and maliciously published” is displaced by proof that the speaker had either a duty or an interest to publish, such duty or interest conferring the privilege.
• But communications made on these occasions may lose their privilege: (i) They may exceed the privilege of the occasion by going beyond the limits of the duty or interest, or (ii) they may be published with express malice, so that the occasion is not being legitimately used, but abused.”
• (The Fourth Law Commission, Chaired by Justice J. L. Kapur 1964-1968, in its 33^rd Report quoted the aforesaid portion. The Commission was required to suggest whether a new provision be inserted in the Code of Criminal Procedure, imposes an obligation on the public servants to give information about bribery, etc. to the nearest Magistrate or Police Officer. The Commission did not recommend the suggestion for change.)

In the 33^rd Report the Law Commission also referred (under the head ‘Qualified privilege’) following passage from ‘Hickson and Carter-Ruck Law of Libel and Slander’, (1953), p. 147 where it was stated –

• “A person is not only entitled, but is under a duty, to report to the police what he knows, if he has reason to believe that a felony has been committed. Such a report would be protected by qualified privilege because the person making it had a duty to do so, and the persons to whom it was made-namely the police officials-had an interest in receiving it. But the position would be quite different if, instead of making the report to the police, he made it to the local newspaper, which would have no interest which the law would recognize in receiving it.”

Satish Chandra Mullick Vs. Jagat Chandra Dutta, AIR  1974 Cal 266, considered whether an information lodged with the police would fall under the head, ‘qualified privilege’. It was held as under:

• “30. Information lodged with the police was considered to be an absolute privilege but subsequently it was held a qualified privilege. If the occasion is qualified privilege, the language of the privileged communication should not be scrutinised strictly.
• 31. In Jenoure v. Delmege reported in (1891) AC 73, the Judicial Committee at page 79 of the said report stated ‘The privilege would be worth very little if a person making a communication on a privileged occasion were to be required, in the first place, and as a condition of immunity, to prove alternatively that he honestly believed the statement to be true. In such a case bona fide is always to be presumed.’ ….
• 32. Tn Watt v. Longsdon, reported in (1930) 1 KB 130 it was inter alia held that “In order that a communication may be privileged the person making it must have an interest in the matter communicated, or there must be a duty, legal, moral or social, to make the communication incumbent on the person making it towards the person receiving it.” Therefore, where there is a duty to communicate to a third party, the occasion is privileged. So also when a person has interest in communication to a third party and the third party is interested in getting the communication, the occasion is privileged.”

Privilege to defamatory statements in pleadings/complaints

In Dr. Arul Prakasam vs P.Palkani, 2021-5 MadLW 907 it is held that the statement made by the defendant in a written statement or counter, were not to be considered to be a defamatory statement. It is observed by the court as under:

• “17. The words used in the pleadings or in the affidavit by the defendant in the course of the judicial proceedings are privileged and therefore, cannot be made basis for any defamatory action by the ‘Doctrine of Judicial Privilege’. In the Full Bench Judgment .. in Chunni Lal Vs. Narsingh Das reported in (AIR 1918 All 69 (FB)), it has been held that in the course of judicial proceedings were not actionable on the ground of ‘Absolute Privilege’. Further, in an yet another Judgment, .. in Ali Mohammad Vs. Manna Lal, reported in (AIR 1929 All 972), has held that the ‘Absolute Privilege’ attached to the statement on the principle that there is an absolute privilege for parties, witnesses, counsel, jury or Judges in regard to words spoken in office, and this privilege extends to the statements in the affidavit made by the parties or witnesses.”

Contrary opinions are also strong.

In Sanjay Mishra v. Govt. (NCT of Delhi), 2012-189 DLT 196, ILR 2012-22 Dlh 421, it is observed as under:

• “11. In Sandyal v. Bhaba Sundari Debi, 7 Ind. Cas.803 : 15 C.W.N. 995 : 14 C.L.J. 31, the learned Judges, following the case of Augada Ram Shaha V. Nemai Chand Shaha, 23 C. 867;12 Ind. Dec. (n.s.) 576, held that defamatory statements made in the written statement of a party in a judicial proceedings are not absolutely privileged in this country, and that a qualified privilege in this regard cannot be claimed in respect of such statements, unless they fall within the Exceptions to Section 499 of the Indian Penal Code. Undisputedly, the case of the petitioner was not in any of these Exceptions.” (Quoted in Sushma Rani v. H.N. Nagaraja Rao, 2020- 4 AIRKarR 741, 2020-6 Kar LJ 483)

The Kerala High Court observed as under in Prabhakaran v. Gangadharan, 2006 CriLJ 1872, 2006 (2) KerLT 122 –

• “Once a statement has been filed in a court of law, that statement can be taken as published and if such a statement amounts to per se defamatory, it is the duty of the accused to establish that they are justified in making such a statement under any of the exceptions to Section 499 I.P.C. Without considering the evidence to be adduced and the defence to be set up, it is not possible to come to a finding whether the statements contained in the written statement are defamatory or not.”

In Smt. Madhuri Mukund Chitnis Vs. Mukund Martand Chitnis, 1990 Crl LJ 2084, Madhuri Mukund v. Mukund Martand, 1990 SCC OnLine Bom 410; Thangavelu Chettiar v. Ponnamal, 1965 SCC OnLine Mad 248 and K. Prabhakaran v. Gangadharan, 2006 SCC OnLine Ker 302, it is observed that the imputations made in a proceeding which is filed in a Court is clearly a publication.

There will not be absolute privilege to defamatory statements in a pleadings –

• Ram Jethmalani v. Subramaniam Swamy, AIR 2006 Delhi 300,
• Dhiro Koch and Ors. v. Gobinda Dev Mishra Bura Satria, 65 Ind. Cas.204,
• Auguda Ram Shaha v. Nemai Chand Shaha, 12 Ind. Dec. 576
• Rahim Bakhsh v. Bachcha Lal, AIR 1929 All 214
• John Thomas v. K. Jagadeesan, (2001) 6 SCC 30
• Rohini Singh v. State of Gujarat, 2018 SCC OnLine Guj 10,
• Thangavelu Chettiar v. Ponnammal, AIR 1966 Mad 363,
• Madhuri Mukund Chitnis v. Mukund Martand Chitnis, 1990 CriLJ 2084, 1989 MhLJ 58.

Absolute and Qualified privilege

The distinction between absolute and qualified privilege was brought out in Panday Surinder Nath Sinha v. Bageshwari Prasad, AIR 1961 Pat 164. It reads as under:

• “In absolute privilege, it is the occasion which is privileged and when once the nature of the occasion is shown, it follows, as a necessary inference, that every communication on that occasion is protected; in qualified privilege, the occasion is not privileged, until the defendant has shown how that occasion was used. It is not enough to have an interest or a duty in making a statement the necessity of the existence of an interest of duty in making the statement complained of, must also be shown.

• In absolute privilege, the defendant gets absolute exemption from liability; in a qualified privilege, the defendant gets a conditional exemption from liability.

• In absolute privilege, the defendant is exempted from liability even when there is malice on his part; in qualified privilege, the defendant is exempted from liability only when there is no malice on his part.

• In absolute privilege, statements are protected in all circumstances, irrespective of the presence of good or bad motives; in qualified privilege, even after a case of qualified privilege has been established by the defendant, it may be met by the plaintiff proving in reply improper or evil motive on the part of the defendant, in which case defense of qualified privilege vanishes and the plaintiff succeeds; and

• In absolute privilege as well as in qualified privilege, the defendant has to prove his plea of privilege, but with this difference that in absolute privilege the defense is absolute and irrefutable by plaintiff, whereas in qualified privilege the defense is not absolute but reputable by the plaintiff.” (Quoted in: Ram Jethmalani v. Subramaniam Swamy, AIR 2006 Delhi 300)

It is pointed out in Ram Jethmalani v. Subramaniam Swamy, that absolute privilege finds mentioned under the Constitution or Parliamentary traditions. Under our Constitution, vide Article 105(2) and 194(2) provisions have been made giving complete immunity to the statements made by members of Parliament and State Legislatures respectively, in course of proceedings of the House.

Qualified Privilege is Lost if actual MALICE is Established.

In Ram Jethmalani v. Subramaniam Swamy, AIR 2006 Delhi 300, it is observed –

• “Unlike defense of truth, defense based on fair comment can be defeated if the plaintiff proves that the defamer acted with malice. Similar is the situation where the defense is of qualified privilege.
• Privilege is designed to protect expression made for the public good. Protection of qualified privilege is lost if actual malice is established. In public interest, absolute privilege is a complete defense. Rationale of absolute privilege being restricted to Court proceedings or proceedings before Tribunals which have all the trappings of a Civil Court…”

What is Malice?

In Ram Jethmalani v. Subramaniam Swamy, AIR 2006 Delhi 300, it is explained as under:

• “97. Whether the defendant made the offending statements in good faith and whether active malice has been proved I would prefer to answer the twin questions by following the rationale and reasoning of Lord Dunedin in the decision reported as 1917 AC 309, Adam v. Ward, as observed at page 327 of the report: If the defamatory statement is quite unconnected with and irrelevant to the main statement which is ex-hypothesis privileged then I think it is more accurate to say that the privilege does not extend thereto than to say that the result may be the same, that the defamatory statement is evidence of malice. Then I think the first way is the true way to put it, and under it will also range all the cases where the express malice is arguable from the too great severity or redundancy of the expression used in the privileged document itself. I may note that this test was adopted by the Division Bench of the Bombay High Court in Janardan Karandinkar’s case (Janardan Karandinkar v. Ramchandra Tilak, AIR 1947 Bom 209).”

The court proceeded, observing –

• “99. A man may be a thief. In relation to his employment if an investigating agency supplies information of the said fact to the prospective employer, it would be a privileged occasion and no action would lie. But say, the investigating agency reaches the wedding venue when the man is getting married. It would be of no concern nor an occasion for the investigating agency to proclaim to the gathering that the man is a thief. In such a situation, if an action is brought, it would be no defense for the investigating agency to establish that the man is a thief. A lady may be a prostitute but it would not give a license to all and sundry to call her a prostitute as and when they feel like. Of course, where the character of a person is a relevant issue, statements made honestly, bona fide and on some objective facts would qualify as made on privileged occasion.”

Burden of proving Malice is on the Plaintiff

In Rustom K. Karanjia v. Krishnaraj M.D. Thackersey, AIR 1970 Bom 424, it was observed – in order to make a libel actionable, the burden of proving actual or express malice is always on the plaintiff. In Satish Chandra Mullick Vs. Jagat Chandra Dutta, AIR  1974 Cal 266, it was held as under:

• “33. In the case of Tushar Kanti Ghose v. Bina Bhowmick, reported in (1953) 57 Cal WN 378 it has been inter alia held, “The burden of proving an innuendo lies on the plaintiff because it is a part of the burden of proving that the libel was published “of and concerning the plaintiff.”

Libel against a News Paper in R.B. Onkarji Kasturchandji v. Suresh Seth

In R.B. Onkarji Kasturchandji v. Suresh Seth: (1997) 1 MPJR 21, the MP High Court rejected the plea of damages on libel in the following set of facts –

• “(a) In alleged publications in News Paper repeatedly, all the plaintiffs were not named.
• (b) The defendants are not shown to have published the offending items maliciously.
• (c) The issue (sale of famous Rajwada) was of public interest and evoked agitation, public demonstrations, protest, publications by persons other than defendants of the extent that “Rajwada Bachao Samiti” was constituted.
• (d) defendant, printed and publisher of News paper, occupied response role of Mayor (twice at Indoere) MLA, Minister and responsible citizen and deemed it to be his duty to write in public interest.
• (e) There was general belief that apparent consideration in the sale-deed was considerably less than the fair market value in that there was murmur or whisper of 29 lakhs, 50 lakhs and report of expert estimating it to be of 71 lakhs and offer of higher amount by other bodies.
• (f) The defendant, through his News Paper, echoed the feelings of residents of lndore.
• (g) After sale, the property was acquisitioned by the State Government.

Pointing out the fact that a fair comment is good defence when shown to rest on true facts (Abdul Gani v/s Chhaikodi, 1971 MPLJ 23) the High Court (in R.B. Onkarji Kasturchandji v. Suresh Seth) noticed that the trial court had not cared to focus proper attention on the following factors –

• “(a) Impeccant conduct exhibiting no intention to defame.
• (b) Position of public interest as a Journalist.
• (c) Publication in several other news papers and protest by public (Exs. D/4, D/5, D/6) and Representation (Ex. D/16).
• (d) Failure to impugn valuation contained in Ex. C-1 through cross-examination.
• (e) Purpose and public injury in the face of nature of the property in question.
• (f) Acquisition by the Government.”

How Court Fixes Damages in a Defamation Case:

Amount of damages depends upon –

•  (i)  gravity of allegation
• (ii)  the size and influence of the circulation
• (iii)  the effect of the publication
• (iv)  the extent and nature of the claimant’s reputation
•  (v)  the behavior of the defendant
• (vi)  the behavior of the claimant.
  • See: Ram Jethmalani   Vs. Subramaniam Swami – AIR 2006 Delhi 300.

Do Indian Courts award Exemplary Damages?

As in England (Rooks Vs. Bernard, [1964 AC 1129: (1964) 1 All ER 367, 410] ; Cassel Vs. Broome, [1972 AC 1027: (1972) 1 All ER 801]) Indian courts also award  exemplary damages in rare cases.  Such damages are awarded if only the court finds that there is contumacious, arbitrary and willful acts from the part of the defendant; and the court finds that the plaintiff deserves a sympathetic consideration from the court; and that the plaintiff proves his case in toto.

In some cases, such damages are seen awarded against the Govt. The Supreme Court awarded exemplary damages in the following cases:

1. Ghaziabad Development Authority Vs. Balbir Singh, (2004) 5 SCC 65.
   • Salmond and Heuston on the Law of Torts; Cassell & Co. Ltd. v. Broome [1972 AC 1027: (1972) 1 All ER 801]; and  Rookes v. Barnard [1964 AC 1129: (1964) 1 All ER 367, 410] referred to as regards exemplary damages.
2. Lucknow Development Authority Vs. M.K.Gupta, AIR 1994 SC 787, 1994 SCC (1) 243
   • Salmond and Heuston on the Law of Torts referred to to as regards exemplary damages..

The Bombay High Court awarded exemplary damages in Rustom K. Karangia Vs. Krishnaraj, AIR 1970 Bom. 424.  In this case it was found that there was high-handed, oppressive, insulting,  or contumacious behavior from the part of the defendant which increased mental pain and suffering to the plaintiff,  by defamation.

Contempt of Court Act, 1971 – A cursory view

Freedom of speech and expression is guaranteed as a fundamental right, under Article 19(2) of Constitution of India. But, it is not an absolute right. Contempt of Court is one of its exceptions.

According to Section 2(a) of the Contempt of Court Act, 1971, ‘Contempt of Court’ are of two categories –

• .(i) Civil Contempt, and
• .(ii) Criminal Contempt.

Section 2(b) defines ‘Civil Contempt’ as ‘.. willful disobedience to any judgment, decree, direction, order, writ or other process of a court or willful breach of an undertaking given to a court’.

Section 2(c) of Act defines ‘Criminal Contempt’ as ‘..  the publication (whether by words, spoken or written, or by signs, or by visible representation, or otherwise) of any matter or the doing of any other act whatsoever which

• .(i) Scandalizes or tends to scandalize, or lowers or tends to lower the authority of, any court; or
• .(ii) Prejudices, or interferes or tends to interfere with, the due course of any judicial proceeding; or
• .(iii) Interferes or tends to interferes with, or obstruct or tends to obstruct, the administration of justice in any other manner’

Defenses available in cases of Criminal Contempt are the following –

• .(i) Innocent publication and distribution of matter. (Section 3)
• .(ii) Fair and accurate report of judicial proceedings. (Section 4)
• .(iii) Fair criticism of judicial act. (Section 5)
• .(iv) Bonafide complain against the presiding officer of a subordinate court. (Section 6)
• .(v) No substantial interference with due course of justice. (Section 13)
• .(vi) Justification by truth. (Section 13(2))

“It is a prized privilege to speak one’s mind”

In New York Times Co. Vs. Sullivan, 376 U.S. 254 (1964), U.S. Supreme Court, while dealing with libel matter it is observed as under:

• “It is a prized privilege to speak one’s mind, although not always with perfect good taste, on all public institutions and this opportunity should be afforded for vigorous advocacy no less than abstract discussion.”
• It is referred to in:
  • Subramanian Swamy v. Union of India, SCC 2016-7 221
  • Shreya Singhal v. Union of India, 2015-5 SCC 1
  • Indirect Tax Practitioners Assn. v. R. K. Jain, 2010-8 SCC 281

Freedom & Privilege of Press

It is true that the press enjoys some privilege and enjoins certain duty. They have the duty or right ‘to acquaint the public of the happenings in and around them’; and it is enshrined in the Constitution.

In Salena Dandasi v. Gajjala Malla Reddy, 2007 LAP 249, the Andhra High Court (PS Narayana, J.) pointing out the importance of an independent Press and protecting the freedom of Press, it is said that the same cannot be stretched too far so as to protect the Editor, Publisher or a Journalist from every kind of publication. It was observed that even though the alleged incident was informed to police, the reporting of the distorted and deviated versions with the comments as though the plaintiff was in a way misfit to be continued as a legal professional, without proper verification of facts at least, may not fall within the umbrella of protective journalism since it cannot be said to be falling within responsible journalism. The court added that where the comments were beyond the permissible limits, well embedded with certain untrue comments, that too without taking the minimum expected care to be taken by the defendants, while proceeding to make a publication, there cannot be any justifiable reason to let off such parties free of any liability whatsoever.

In Rustom K. Karanjia v. Krishnaraj M.D. Thackersey, AIR 1970 Bom 424, it was observed as under:

• “Mr. Mistry, on behalf of the plaintiff, further argued that even if qualified privilege was assumed in favour of the defendants, he was able to show that the attack on his client was malicious. The law is clear in the matter. Malice in law, which is presumed in every false and defamatory statement, stands rebutted by a privileged occasion. In such a case, in order to make a libel actionable, the burden of proving actual or express malice is always on the plaintiff. Malice in that sense means making use of a privileged occasion for an indirect or improper motive. Such malice can be proved in a variety of ways, inter alia
• (i) by showing that the writer did not honestly believe in the truth of these allegations, or that he believed the same to be false;
• (ii) or that the writer is moved by hatred or dislike, or a desire to injure the subject of the libel and is merely using the privileged occasion to defame… and
• (iii) by showing that out of anger, prejudice or wrong motive, the writer casts aspersions on other people, reckless whether they are true or false….
• Mr. Mistry contends that almost all the material defamatory allegations in the Article come under one or more of the above categories.” (quoted in: Salena Dandasi v. Gajjala Malla Reddy, 2007 LAP 249)

The court (in Rustom K. Karanjia v. Krishnaraj M.D. Thackersey, AIR 1970 Bom 424) accepted the argument of the plaintiff it was held as under:

• “Having, therefore, given our careful consideration to the Article and the aspects of malice put before us by learned counsel for the plaintiff, we are satisfied that the whole Article was conceived in express malice and, therefore, no qualified privilege can at all be claimed.”

In Reynolds v. Times Nespapers Limited   (2006) 1 Law 223 : 2001 (2) AC 127 the House of Lords considered defence in a defamation case – as to

• the Privilege ,
• Honest comment on public interest,
• Publication to world at large,
• Freedom of Expression and Protection of reputation, and
• responsibility of a Journalist in the context of freedom of expression, the Journalistic ethics to be maintained.

The House of Lords illustrated, depending on the circumstances of that case, ten points that were to be included in the relevant considerations as to ‘qualified privilege’ for publication of defamatory statements in the public interest, justification and fair comment, journalist’s duty to publish an allegation even if it turned out to be false, etc.. (This defence was abolished by s 4(6) Defamation Act 2013) The ten points cited were the following:

• 1.  The seriousness of the allegation. The more serious the charge, the more the public is misinformed and the individual harmed, if the allegation is not true.
• 2. The nature of the information, and the extent to which the subject-matter is a matter of public concern.
• 3. The source of the information. Some informants have no direct knowledge of the events. Some have their own axes to grind, or are being paid for their stories.
• 4. The steps taken to verify the information.
• 5. The status of the information. The allegation may have already been the subject of an investigation which commands respect.
• 6. The urgency of the matter. News is often a perishable commodity.
• 7. Whether comment was sought from the plaintiff. He may have information others do not possess or have not disclosed. An approach to the plaintiff will not always be necessary.
• 8. Whether the article contained the gist of the plaintiff’s side of the story.
• 9. The tone of the article. A newspaper can raise queries or call for an investigation. It need not adopt allegations as statements of fact.
• 10. The circumstances of the publication, including the timing.” (Quoted in: Salena Dandasi v. Gajjala Malla Reddy, 2007 LAP 249)

PART III

Pleadings – No Strict ‘Denial’ warranted in ‘Damages’

Order VI, rule 1 and 2 of Code of Civil Procedure 1908 lay down the basics of pleading. They read as under:

• Rule 1: Pleading: “Pleading” shall mean plaint or written statement.
• Rule 2: Pleading to state material facts and not evidence:
• (1) Every pleading shall contain, and contain only a statement in a concise form of the material facts on which the party pleading relies for his claim or defence as the case may be, but not the evidence by which they are to be proved.
• (2) Every pleading shall, when necessary, be divided into paragraphs, numbered consecutively, each allegation being, so far as is convenient, contained in a separate paragraph.
• (3) Dates, sums and numbers shall be expressed in a pleading in figures as well as in words.

Order 6 rule 4 of the Civil Procedure Code stipulates guidelines for precise pleadings. Order 6 Rule 4 CPC reads as under:

• “Rule 4. Particulars to be given where necessary: In all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, willful default, or undue influence and in all other cases in which particulars may be necessary beyond such as are exemplified in the forms aforesaid, particulars (with dates and items if necessary) shall be stated in the pleading.”

Order VIII Rule 3, 4 and 5 CPC reads as under:

• Rule 3: Denial to be specific: It shall not be sufficient for a defendant in his written statement to deny generally the grounds alleged by the plaintiff, but the defendant must deal specifically with each allegation of fact of which he does not admit the truth, except damages.
• Rule 4: Evasive denial: Where a defendant denies an allegation of fact in the plaint, he must not do so evasively, but answer the point of substance. Thus, if it is alleged that he received a certain sum of money, it shall not be sufficient to deny that he received that particular amount, but he must deny that he received that sum or any part thereof, or else set out how much he received. And if an allegation is made with diverse circumstances, it shall not be sufficient to deny it along with those circumstances.
• Rule 5: Specific denial: (1) Every allegation of fact in the plaint, if not denied specifically or by necessary implication, or stated to be not admitted in the pleading of the defendant, shall be taken to be admitted except as against a person under disability :
• Provided that the Court may in it discretion require any fact so admitted to be proved otherwise than by such admission.
• (2) Where the defendant has not filed a pleading, it shall be lawful for the Court to pronounce judgment on the basis of the facts contained in the plaint, except as against a person under a disability, but the Court may, in its discretion, require any such fact to be proved.
• (3) In exercising its discretion under the proviso to sub-rule (1) or under sub-rule (2), the Court shall have due regard to the fact whether the defendant could have, or has, engaged a pleader.
• (4) Whenever a judgment is pronounced under this rule, a decree shall be drawn up in accordance with such judgment and such decree shall bear the date on which the judgment was pronounced.

Under Order 6 rule 4, CPC, vague or general allegations are insufficient in pleading with respect to the matters laid down in this rule and it requires ‘full‘ particulars of such matters in pleadings.

Damages: Issue will be framed, without denial

As shown above, Order VIII Rule 3 gives an exemption to strict ‘denial’ with regard to the claim of ‘damages’. Why? J. B. Ross v. C. R. Screven, AIR 1917 Cal 269 explained as under:

• “(O. 8, R 3, CPC) puts the burden on the plaintiff, whether or not the defendant denies in such a case an issue is necessary.” (Quoted in – Indore Malwa United Mills Ltd.  Vs Ramkaran Ghisslal, AIR 1963 MP197. Also see: W.  Jaya-raghavan v. The Leo Films, 1948 61 LW 173; 1948 1 MLJ 209)

In Fateh Chand Vs. Balkishan, AIR 1963 SC 1405, it was observed that the ‘Legislature has sought to cut across the web of rules and presumptions under the English common law’ with regard to the compensation to be awarded in case of breach of contract. Section 74 speaks as to ‘reasonable’ compensation. It is pointed out that this proposition as to ‘reasonable’ compensation, and thereby the intervention of court to fix the reasonable amount, laid down in Section 74, is a deliberate deviation from the English Common Law which allows forfeiture of genuine pre-estimated damages, by the affected party.

Pleadings on Defamation

The Pleading requirements –

• Defamatory words must be set out in the plaint. (M.J. Zakharia Sait v. T.M. Mohammed, (1990) 3 SCC 396; R. Rajagopal v. J. Jayalalitha: AIR 2006 Mad 312 (DB))
• When the defamatory sense is not apparent , the defamatory meaning must also be set out.
• Where particular context is to be set out, for showing defamation, it shod be stated.

In M.J. Zakharia Sait v. T.M. Mohammed, (1990) 3 SCC 396, the Supreme Court held as under:

• 30. In W. Hay and Ors. v. Aswini Kumar Samanta, AIR 1958 Cal 269 a Division Bench of the Calcutta High Court held that it is well-settled that in a “libel action” the ordinary defamatory words must be set out in the plaint. Where the words are per se or prima facie defamatory only the words need be set out. Wherever the defamatory sense is not apparent on the face of the words, the defamatory meaning or as it is technically known in law, the innuendo must also be set out and stated in clear and specific terms. Where again the offending words would be defamatory onlyin the particular context in which they were used, uttered or published, it is necessary also to set out except where as in England, the law is or has been made expressly otherwise, the offending context (colloquium) in the plaint, and to state or ever further that this context or the circumstances constituting the same, were known to the persons to whom the words were published, or, at least, that they understood the words in the defamatory sense. In the absence of these necessary averments, the plaint would be liable to be rejected on the ground that it does not disclose any cause of action.
• 31. What exactly should be pleaded in an action for defamation has been stated also in Halsbury’s Laws of England [Vol. 28 – 4th ed.].
• In paragraphs 174, 175, 176, 177 and 178 of the said Volume, we have discussion with regard to natural and ordinary meaning of the words complained of, and about the innuendo and the facts and matters supporting innuendo which should be pleaded and proved. It is stated there that in drafting a statement of claim in libel or slander, it is necessary to distinguish between cases in which the words complained of are alleged to be defamatory in their natural and ordinary meaning, whether the literal or the inferential meaning, and those in which the defamatory meaning is a secondary meaning derived from extrinsic or special facts or matters, so that a legal or true innuendo must be pleaded. If it is claimed that the words are defamatory in their natural and ordinary meaning and the words bear only one literal meaning, which is clear and explicit, it is not necessary to plead the meaning in the statement of claim. However, if the words are reasonably capable of bearing more than one literal meaning or if the defamatory meaning relied on is inferential (a “false or popular” innuendo), it is desirable and may even be necessary to plead the defamatory meaning or meanings. Where the plaintiff wishes to claim that the words complained of were understood to be defamatory in a secondary or extended meaning by those persons having knowledge of some special facts or matters, such a meaning constitutes a separate cause of action and the same should be pleaded expressly in a separate paragraph in the statement of claim (emphasis supplied). Particulars must be given of the facts and matters on which the plaintiff relies in support of any secondary or extended defamatory meaning which it is decided to plead. These special facts or matters may be extrinsic to the words used or there may be some special meaning of the words themselves. The plaintiff should plead that particular words bore the innuendo meaning.
• Paragraph 172 of the Halsbury’s Laws of England, Vol-28. Paragraph 172 is extracted as under :-
• “172. Pleading and proof of words – In an action for defamation, the actual words complained of, and not merely their substance, must be set out verbatim in the statement of claim. A libel action cannot be brought in respect of a document the contents of which the plaintiff is unaware; but in a slander action interrogatories may, in an exceptional case, be permitted, prior to the statement of claim, to ascertain the precise words spoken. It is no longer necessary to prove at trial the precise words pleaded; it will suffice to prove words substantially the same and the jury should be invited to consider whether the words are defamatory in the version it has accepted. Where the plaintiff complains of a book or long article, he must specify the passages which he alleges to be defamatory rather than merely plead the whole book or article.” (Quoted in: Essel Infraprojects Ltd vs Devendra Prakash Mishra, 2015-1 AIR BomR 482, 2015-1 BCR 340)

In W.Hay and others vs. Aswini Kumar Samanta AIR 1958 Cal 269 it was held as under:

• “11. It is well settled that, in a libel action, the defamatory words must be set out in the plaint. Where the words are per se or prima facie defamatory only the words need be set out. Where, however, the defamatory sense is not apparent on the face of the words, the defamatory meaning, or as it is technically known in law, the “innuendo” must also be set out and set out in clear and specific terms. These are universally accepted propositions. Where again the offending words would be defamatory only in the particular context, in which they were used, uttered or published, it seems to us that it is necessary also to set out, except where, as in England, the law is or has been made expressly otherwise, the offending context (Colloquium) in the plaint and to state or aver further that this context or the circumstances, constituting the same, were known to the persons, to whom the words were published, or, at least, that they understood the words in the defamatory sense. In the absence of these necessary averments, the plaint would be liable to be rejected on the ground that it does not disclose any cause of action.” (Quoted in: Essel Infraprojects Ltd vs Devendra Prakash Mishra, 2015-1 AIR BomR 482, 2015-1 BCR 340)

End Notes:

Award of damages in breach of contracts:

If the damages arise from a contract it is governed under Sec. 74 of the Contract Act and the relevant provisions of the Specific Relief Act.

Sec. 74 of the Contract Act reads as under:

•  “Section 74.   Compensation for breach of contract where penalty stipulated for.
•  When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.
• Explanation.– A stipulation for increased interest from the date of default may be a stipulation by way of penalty.
• Exception.– When any person enters into any bail-bond, recognizance or other instrument of the same nature, or, under the provisions of any law, or under the orders of the Central Government] or of any State Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein.
• Explanation.– A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested.

Illustrations

(a) A contracts with B to pay B Rs. 1,000, if he fails to pay B Rs. 500 on a given day. A fails to pay B Rs. 500 on that day. B is entitled to recover from A such compensation, not exceeding Rs. 1,000, as the Court considers reasonable.

(b) A contracts with B that, if A practises as a surgeon within Calcutta, he will pay B Rs. 5,000. A practises as a surgeon in Calcutta. B is entitled to such compensation; not exceeding Rs. 5,000, as the Court considers reasonable.

(c) A gives a recognizance binding him in a penalty of Rs. 500 to appear in Court on a certain day. He forfeits his recognizance. He is liable to pay the whole penalty.

(d) A gives B a bond for the repayment of Rs. 1,000 with interest at 12 per cent. at the end of six months, with a stipulation that, in case of default, interest shall be payable at the rate of 75 per cent. from the date of default. This is a stipulation by way of penalty, and B is only entitled to recover from A such compensation as the Court considers reasonable.

(e) A, who owes money to B a money-lender, undertakes to repay him by delivering to him 10 maunds of grain on a certain date, and stipulates that, in the event of his not delivering the stipulated amount by the stipulated date, he shall be liable to deliver 20 maunds. This is a stipulation by way of penalty, and B is only entitled to reasonable compensation in case of breach.

(f) A undertakes to repay B a loan of Rs. 1,000 by five equal monthly instalments, with a stipulation that in default of payment of any instalment, the whole shall become due. This stipulation is not by way of penalty, and the contract may be enforced according to its terms.

(g) A borrows Rs. 100 from B and gives him a bond for Rs. 200 payable by five yearly instalments of Rs. 40, with a stipulation that, in default of payment of any instalment, the whole shall become due. This is a stipulation by way of penalty.”

If the parties had not pre-determined the damages or if the court finds the pre-determined damages in the contract is illegal or unconscionable, the court will fix the damages under Sec. 21 of the Specific Relief Act, 1963.

Sec. 21 of the Specific Relief Act reads as under:

•   “21. Power to award compensation in certain cases.
• (1) In a suit for specific performance of a contract, the plaintiff may also claim compensation for its breach, either in addition to, or in substitution of, such performance.
• (2) If, in any such suit, the court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly.
• (3) If, in any such suit, the court decides that specific performance ought to be granted, but that it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him such compensation accordingly.
• (4) In determining the amount of any compensation awarded under this section, the court shall be guided by the principles specified in section 73 of the Indian Contract Act, 1872 (9 of 1872).
• (5) No compensation shall be awarded under this section unless the plaintiff has claimed such compensation in his plaint: Provided that where the plaintiff has not claimed any such compensation in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just, for including a claim for such compensation. Explanation.—The circumstance that the contract has become incapable of specific performance does not preclude the court from exercising the jurisdiction conferred by this section.”

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