Damages May Be Of Two Kinds: Know What The Madras HC To Say

• The Madras HC in the case of E-merge Tech Global Services P Ltd vs. Mr. M.R. Vindhyasagar and anr. (2021) has deliberated the conditions in which the Court may grant Compensatory Damages and in which it may grant Restitutionary Damages.
• A single judge bench comprising Justice N. Anand Venkatesh has observed-

“This court is of the view that an order directing an account of profits developed in response to cases where the loss suffered could not be measured adequately … in such cases the Court was empowered to justly compensate the plaintiff by assessing the damages with reference to the gains made by the defendant instead of conventionally assessing it with reference to the loss caused to the plaintiff”.

• The Bench further clarified that where the damages can be ascertained in the usual way, then the court does not need to resort to assess damage by way of profits accrued.
• In the present case, the plaintiff company had moved against the respondent, who was it’s former employee, alleging breach of contract, non-compete, confidentiality and non-solicit agreements entered into between them.
• The Court, while agreeing with the non-disclosure and the non-solicitation clauses, also observed that the non-compete clause cannot be enforced after the defendant (employee) has left the employment. The Court, while making this observation, relied upon the judgement of the Madras HC in the case of FL Smidth (P) Ltd. vs. Secan Invescast (India)(P) Ltd. (2013).
• In order to assess the amount of damages, the Court relied on the judgement of the Supreme Court of United Kingdom where it was held that there was no need to assess the profits where the damages could be assessed in the “usual way”.
• Relying on this, the HC observed thus-

“This has a direct bearing on the case at hand, since there exists unrebutted material providing a legitimate basis on which the COurt can base it’s conclusion to assess the damages. This Court also finds that there is nothing exceptional in the facts of this case so as to warrant a deviation from the general principle”.

• The Court, in its judgement further relied on the case of State of Kerala vs. K Bhaskaran AIR 1985 Ker. where it was held that the test of reasonable foresight as envisaged in Section 73 of Indian Contract Act has to be complied with while assessing the amount of damages, which means those damages which an ordinary man of prudence would be able to see.
• Thus, the Bench held that in the ordinary course of things, the damages must be ascertained by referring to the loss caused to the claimant instead of the gain made by the defendant. But in case of Restitutionary Damages “enquiry is not of the loss suffered by the plaintiff but is focused on the gain made by the defendant from the alleged breach”.

Read the above carefully? Let’s see if you can answer the following-
The test of reasonable foresight has been envisaged in which section of the Indian Contract Act?