INDIA Law and Practice Contributed by: Vijayendra Pratap Singh, Asif Ahmed, Tanmay Sharma and Bhanu Jindal, AZB & Partners
in-house counsel cannot claim to be an “advo- cate” under the Advocates Act, and hence the legal privilege enshrined under the Evidence Act (now BSA) would not be available to such law - yers.
to grant exemplary or punitive damages in fraud claims. Section 74 of the Contract Act provides that, if a sum is named in the contract as the amount to be paid in the case of such a 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 con - tract reasonable compensation not exceeding the amount so named, or, as the case may be, the penalty stipulated. While the principle enshrined under Section 74 of the Contract Act allows any amount stipulated in the contract, even by way of penalty, to be grant - ed as damages to a plaintiff, the Indian courts have diluted the principle under Section 74 to reasonable compensation only if it is “genuine pre-estimate of damages” fixed by both parties and is found to be such by the court. The courts have therefore held that the expression “whether or not actual damage or loss is proved to have been caused thereby” means that, where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded without proving the actual loss. However, amounts stipulated in contracts in terrorem cannot be granted under Indian law. This principle therefore limits the scope of exem - plary or punitive damages under the Contract Act. It should be noted that the aforementioned prin - ciples may not be applicable, stricto sensu, in cases involving fraud, as fraud unravels all, and any contract obtained by fraud would make it
7. Special Rules and Laws 7.1 Rules for Claiming Punitive or Exemplary Damages
In Indian jurisprudence, punitive or exemplary damages may only be granted in certain cases, such as tortious claims, IPR matters or where the relevant statute so allows such damages to be imposed. Such damages are often awarded in cases where the party in breach of an agree - ment has behaved in an outrageous, reprehen - sible or objectionable manner. In general, how - ever, the principles for granting general damages are enshrined under Sections 73 and 74 of the Contract Act, and do not provide for the granting of punitive or exemplary damages. Section 73 of the Contract Act deals with com - pensation for breach of a contract which results in actual damage in the nature of unliquidated damages. Section 73 of the Contract Act itself provides that a party can claim compensation for any loss or damage caused to them which “naturally arose in the usual course of things” . Furthermore, Section 73 provides that compen - sation therein is not to be given for any remote and indirect loss or damage sustained by rea - son of the breach. The principles under Section 73 only allow for a party to be placed, as far as money can allow, in as good a situation as though the contract had been performed and a duty has been cast on the plaintiff to take all reasonable steps to mitigate the loss suffered by them. These principles do not allow the courts
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