Nainar Sundaram, J.@mdashThe defendant in O.S. 767 of 1973 on the file of the District Munsif of Arni, is the appellant in this second appeal.
The plaintiff in the suit is the respondent herein. The plaintiff which is a Municipality, conducted auctions of leases of two bunks. In the auction, the
defendant participated and he was the highest bidder for the first bunk for Rs. 3,210 and for the second bunk for Rs. 3,050. It is admitted that
there was a second highest bidder, who has bid for the first bunk for Rs. 3,200 and for the second bunk for Rs. 3,010. The highest bids of the
defendant were confirmed by the plaintiff, but since the defendant did not pay the advance of three month''s kists per condition 14 of the
Conditions of Auctions, in spite of repeated demand, the leases in his favour of the two bunks were cancelled and the bunks were re-auctioned at
the risk of the defendant and on such re-auction, the first bunk fetched only a sum of Rs. 550 and the second bunk fetched only a sum of Rs. 520.
The plaintiff laid the suit for recovery of damages as the difference between the bids of the defendant and the bids at the second auction, deducting
the earnest money of Rs. 200 already paid by the defendant. The defendant contested the suit, stating that there was no concluded contract and in
any event the plaintiff ought to have confirmed the second highest bids of the first auction, having kept alive the second highest bids by retaining the
earnest deposits made by the second highest bidder of the first auction and if done so, the damages would have got mitigated. The first Court held
that there was a concluded contract, however, the first court countenanced the plea of the defendant on the question of failure on the part of the
plaintiff to mitigate the damages on the facts pleaded and proved, and in this view, the suit of the plaintiff was dismissed but without costs. The
plaintiff appealed. In the appeal, the defendant wanted to canvass the aspect that there was no concluded contract between the plaintiff and the
defendant. The lower appellate Court did not permit the defendant to canvass this aspect on the ground that he has not filed a cross objection to
the finding in this behalf rendered by the first court. On the question of damages, the lower appellate Court bas chosen to take a view different
from the one expressed by the first court and, opining that the plaintiff has taken all the steps to mitigate the damages, reversed the judgment and
decree of the first court by allowing the appeal, and the suit of the plaintiff was decreed with costs. The lower appellate Court also allowed costs in
the appeal before it. This second appeal is directed against the judgment and decree of the lower appellate Court. At the time of admission of this
second appeal, the following substantial questions of law were mooted out for consideration:-
1. Whether the lower appellate Court is right, in holding that the appellant cannot canvass the finding rendered against him by the trial court
because he has not filed any cross objections against that finding, i.e., regarding the validity of the contract and whether the view of the lower
appellate Court is contrary to O.41, R. 22 of the C.P.C?
2. Whether the lower appellate Court is correct in holding that on a proper interpretation of the terms of the contract the plaintiff is entitled to
damages and in further holding that the plaintiff is entitled to be damnified in the whole of the sum claimed as damages?
2. With regard to the first substantial question of law, Mr. D. Peter Francis, learned counsel for the appellant, did not press forth the same in view
of the fact that on an assessment of the legal position with regard to the facts disclosed in the case. I am inclined to agree with the learned counsel
for the appellant that there has been an omission on the part of the lower appellate Court to apply the correct principles on the question of
mitigation of damages. It is true that the defendant committed breach of the obligations cast on him. It is true that the plaintiff got the right to re-
auction the bunks when there was a failure on the part of the defendant to pay the advance of three months kist as per the conditions stipulated. It
is also true that at the second auction, the bids were for meagre amounts. But, the evidence bas disclosed that the second highest bids of the first
auction were kept alive and the plaintiff had preserved the right to accept the second highest bid of the first auction in case of failure to fulfil his
obligations by the first highest bidder and that was the reason why the second highest bids of the first auction were kept alive by retaining the
earnest money deposits made therefor arid the plaintiff has not offered any explanation for ignoring the second highest bids of the first auction kept
alive and falling back upon the bids obtained at the second auction, which bids were admittedly for meagre amounts. The Junior Assistant of the
plaintiff, examined as P.W.1, had deposed that the amounts deposited by the second highest bidder of the first auction have been retained by the
plaintiff municipality to confirm the leases in his favour if it is to be found that the leases could not be concluded in favour of the first highest bidder
in the first auction, namely, the defendant. It is not made out by the plaintiff that the second highest bids of the first auction stood abrogated at any
relevant point of time and in any event, anterior to the second auction by returning the amounts deposited therefor, so that it could be stated that
the second highest bids of the first auction could not be taken note of and implemented further. It is also not demonstrated by the plaintiff that the
second highest bidder of the first auction declined to accept the grant of the leases in his favour in respect of the two bunks. On the other hand, that
there is scope for accepting the second highest bids of the first auction in case the first highest bids of the first auction could not be implemented
and prosecuted, is evident from R. 11 of the Auction Rules. Such being the factual position, I am of the view that the Explanation to S. 73 of the
Indian Contract Act, hereinafter referred to as the Act, would squarely come into play and there is a blatant omission on part of the plaintiff to
remedy the situation and mitigate the damages even though, as established by the facts in the case, it had the means to do so.
3. Explanation to S. 73 of the Act reads as follows-
In estimating the loss or damage arising from a breach of contract, the means which existed for remedying the inconvenience caused by the non
performance of the contract must be taken into account.
The main part of S. 73 of the Act contemplates recovery of damages caused by reason of contract, as per the principles set out therein. But the
damages or loss recoverable stand qualified, limited or circumscribed, by another principle set out in the Explanation to S. 73 of the Act. In
estimating damages or loss, the means which existed for remedying the damages should always be taken into account. The damages or loss
recoverable is limited by the test of what a prudent man as per the circumstances prevailing should have reasonably done to mitigate the damages.
A party omitting to take advantage of the existing and obvious means of remedying or diminishing the damages consequent upon the breach of
contract, cannot recover such portion of the damages or loss equitable to his own negligence and lethargy. In other words, damages or loss, which
might have been avoided by the exercise of ordinary prudence and common intelligence, is not recoverable.
The second principle to govern the award of damages is that there is a duty cast upon the plaintiff to take all reasonable steps to mitigate the loss
consequent on the breach and if there is a failure to discharge this duty and obligation, it will debar him from claiming any part of the damages
which is due to his negligence to take such steps. This principle has been recognised by the Supreme Court in Murlidhar Chiranjilal Vs.
Harishchandra Dwarkadas and Another, . If this principle is applied, I find that the plaintiff could have as well resorted to the second highest bids
of the first auction on the facts and circumstances disclosed and mitigated the damages to a very large extent, and hence the plaintiff has to confine
its claim for damages for a sum of Rs. 10 with reference to the first bunk and Rs. 40 with reference to the second bunk, aggregating to Rs. 50. But,
we find that the plaintiff has with it already the moneys deposited by the defendant to the tune of Rs. 200, which the plaintiff could adjust and, in
fact, is inclined to adjust on the other basis towards the damages, and hence, there is no need to pass a decree even for this sum of Rs. 50. This
obliges me to interfere in second appeal and accordingly, this second appeal is allowed; the judgment and decree of the lower appellate court are
set aside; and the suit of the plaintiff will stand dismissed. In the peculiar circumstances of the case. I direct the parties to bear their respective costs
throughout.
