CHUNNILAL V. MEHTA & SONS LTD. V. CENTURY SPN. & MFG.

FACTS

• The appellant was appointed managing agent of the respondent company.

• The respondents terminated the agreement and removed the appellant as managing agent way before the expiry of the agreement.

• The appellant claimed damages worth 28 lakhs for wrongful termination. Respondent admitted that termination was wrongful.

• The Court had to decide the quantum of damages the appellant was entitled to which required interpretation of certain clauses of the agreement.

• Both the Single and the Division Bench of the High Court concurrently dismissed the appellant's suit for damages.

• The certificate under Article 133 of the Constitution was denied by the High Court on the ground that the question required in the instant case is a question of law and not a substantial question of law as required by Article 133 and Section 110 CPC.

ISSUE

• Whether the interpretation of said document, managing agency agreement, raises a substantial question of law.

• Whether the view taken by the High Court with respect to Article 133 was wrong and that the appellant was entitled to appeal to the supreme court as a matter of right.

HELD

• Affirmed decree of HC and dismissed the appeal with costs.

• It is well settled that the construction of a document which is the foundation of rights of parties raises a question of law.

• Meaning of Article 133(1) of the Constitution and S. 110 of CPC: Where judgment/order/decree which is appealed against concurs with courts immediately below, an appeal shall lie to SC if HC certifies that appeal involves a substantial question of law. S. 110 of CPC also has a similar provision, though is repealed.

• When a question ceases to be substantial/is not appealable: What is a substantial question of law would depend upon the facts & circumstances of each case.

  • However, if a question of law is decided by the highest court of a country then it ceases to be a question of law even if it was important or difficult in past or that affected the parties adversely.

  • Likewise, an absurd question of law will not become a substantial question of law between parties.

• In Raghunath Prasad Singh v Deputy Commissioner of Pratapgarh (AIR 1927 PC 110) the Chief court concurrently dismissed the case of the appellant and refused to grant a certificate to appeal by observing that substantial question of law meant a question of general importance.

• In Dinkarrao v Rattansey (AIR 1949 Nag 300) it was observed that a question of law is substantial between the parties if the decision turns out "one way or another" on the particular view taken of the law. Such a view must affect the decision even though the question may be wholly unimportant to others and if it does not then it is not a substantial question of law.

• In R Subba Rao v N Veeraju (AIR 1951 Mad 969) Dinkarrao (supra) was rejected on the ground that logically such would lead to making a clearly absurd plea to involve a substantial question of law because the decision on merits would be directly affected by it.

• The Dinkarrao Case went further than was warranted. The view taken by the division bench is too narrow and that by Dinkarrao too wide.

Proper test for determining a substantial question of law

1. Whether it is of general public importance or

2. Whether it directly and substantially affects the rights of the parties.

   • If so, whether it is either an open question as if it is not finally settled by the court or not free from difficulties or calls for discussion of alternative views

3. If the question is settled by the highest court or the general principles in that regard are well settled and the issue is of applying those principles to the particular facts of the case, then that won't be a substantial question of law.

Comment

• The construction of an agreement clause not only involves a question of law but also it is neither simple nor free from doubt.

• When parties name a sum of money to be paid as liquidated damages they must be deemed to exclude the right to claim an unascertained sum of money as damages.

• Thus, it has been held by the Supreme Court that a construction of document of title or of document which is the foundation of rights of the parties necessarily raises a question of law.