This paper aims to provide insight to a type of damages, i.e. 'exemplary damages', which is awarded by the judiciary on not so frequent occasions. This is followed by a comparison with various other types of damages.
This paper brings forth: perspective of Common law through prominent cases of England; and important case laws of Indian Courts on exemplary/ punitive damages.
Additionally, it highlights the trend in awarding such damages and the need for evolving the yardsticks for courts to analyse circumstances and grant the such damages.
Lastly, certain key points to be kept in mind by lawyers regarding claim for exemplary damages.
AN OVERVIEW ON TYPES OF DAMAGES
- General & Special Damages: General damages are such as the law implies, and presumes to have occurred, in the usual course of things, naturally from the wrong complained of. Special damages result from the commission of the wrong, not necessarily implied by law, it must be specifically pleaded and proved, unlike general damages.
- Nominal Damages: This is a technical phrase, which means that the court has negatived anything, like real damage, but by granting nominal damages the court affirms that there is an breach/ infraction of a legal right. Though it gives the plaintiff no right to any real damages at all, yet gives a right (to the verdict or judgment), because his legal right has been infringed.1
- Substantial Damages: In contrast to nominal damages, substantial damages is a considerable sum awarded for compensating considerable loss or injury.
- Aggravated Damages: Damages that are awarded when the conduct of the defendant or the surrounding circumstances increase the injury to the claimant by subjecting him to humiliation, distress, or embarrassment, particularly in such torts as assault, false imprisonment, and defamation.2
- Liquidated & Unliquidated Damages: Section 74 of the Act applies to measure of damages, which the parties to the contract have thereby, ascertained, agreed and fixed as payable by defaulting party, this is liquidated damages. On the contrary, damages/ loss assessed or ascertained by court of law are unliquidated.
- Compensatory Damages: This is equivalent to the actual loss in respect to which they are allowed, e.g. payments to reimburse damages such as medical expenses, lost income, and pain and suffering. It is the amount of money determined adequate to compensate for any actual loss or damage caused to the plaintiff.3
TORT AND CONTRACT – LIABILITY - DISTINCTION
The liabilities giving rise to damages are different in tort law and contract. Tort and contract are distinguishable. In Rajkot Municipal Corpn. v. Manjulben Jayantilal Nakum4, the Supreme Court referred to Sir Percy Winfield's Province of the Law of Tort p. 32 referred in Clerk and Lindsell on Torts, which stated that "tortious liability arises from the breach of a duty primarily fixed by the law; such duty is towards persons generally and its breach is redressable by an action for unliquidated damages".5 Further, the apex court stated that the duty primarily is fixed by law which on violation, fastens liability to pay damages. It is personal to the injured. Also, highlighting the distinction, the apex court stated that: (a) in tort liability is primarily fixed by law, while in contract it is fixed by the parties themselves; (b) in tort duty is towards the persons generally, while in contract it is towards specific person or persons; (d) if the claim depends upon proof of the contract, action does not lie in tort, whereas, 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 person might alternatively have pleaded in contract). The purpose of the law of tort is to adjust these losses and offer compensation for injuries by one person as a result of the conduct of another.6
In Black's Law dictionary 'punitive/ exemplary damages' is defined as 'Damages awarded in addition to actual damages when the defendant acted with recklessness, malice, or deceit; specif., damages assessed by way of penalizing the wrongdoer or making an example to others.'7 In the The Law Lexicon, 'exemplary damages' is defined as not being compensatory but awarded to punish the defendant and to deter him and others from similar behaviour in the future.8 The term 'damages' means loss, or injury which results from an unlawful act, injury, or deterioration, caused by the negligence, design, or accident of one person to another, depreciation in value, whether depreciation is caused by a wrongful or lawful act.9
THE INDIAN CONTRACT ACT, 1872
At the outset, from Indian laws perspective, it is pertinent to highlight Section 73 of the Indian Contract Act, 1872 ("Act"), which provides that:
- In case of breach of a contract, the aggrieved party is entitled to receive, from the defaulting party, compensation for any loss or damage caused to him thereby, which:
- naturally arose in the usual course of things from such breach, or
- the parties knew, at the time of entering in to the contract, to be likely to result from its breach.
- The aggrieved party is entitled to receive compensation, in case of failure to discharge obligation, resembling those created by contract.
- In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience (caused by the non-performance) must be considered.
- The said section excludes compensation for any remote and indirect loss or damage sustained due to breach of the contract.
LAW IN ENGLAND – Prominent Precedents
The issue of awarding 'punitive/ exemplary damages' has been a controversial topic for many years. Such damages are not compensatory, but are awarded to punish the defaulting party and to deter him and others from committing similar acts in the future. The law in England, as restated in Rookes v. Barnard10 (affirmed in Cassell v. Broome11) is such damages are not generally allowed, and in England such damages can only be awarded in three classes of cases.12
Briefly, let us understand the law in England on exemplary damages with important case laws:
Hadley v Baxendale13
Mr. Hadley and another (claimants) were millers in steam-mills. The crank shaft of the engine used in their mills had broken. The claimants got into arrangement with W. Joyce & Co. for making a new shaft, for this W. Joyce & Co. wanted the broken shaft as the model for making the new one. The claimants contracted Baxendale and others (appellant carriers) for delivering the broken shaft by a specific date for £2 sterling and 4 shillings. Appellant carriers were unaware that the mill will not function in absence of a new shaft, and delivered the shaft seven days post receipt of the same. The claimants sought damages, for appellant carriers negligence, for loss of profits including payment of wages. Though appellant carriers challenged damages on the ground of remoteness, jury awarded damages of £25, excess of the amount actually paid.
In appeal Baxendale argued that they were unaware that the mill will not function in absence of a new shaft and that Hadley would suffer any particular damage due to late delivery of the shaft. As such, the question raised was whether a defendant in a breach of contract could be held liable for damages which he was unaware of. Hadley submitted that they were entitled to the damages as it was the natural consequence of Baxendale's negligence and the losses actually sustained by Hadley.
It was observed by the House of Lords that "in the great multitude of cases of millers sending off broken shafts to third persons by a carrier under ordinary circumstances, such consequences would not, in all probability, have occurred; and these special circumstances were here never communicated by the plaintiffs to the defendants". Accordingly, it was held that loss of profits cannot reasonably be considered, that such circumstance could have been reasonably contemplated by the parties in the contract, and that jury should have been apprised of this fact, therefore, new trial to be held.
Rookes v. Barnard
A draughtsman, Mr. Douglas Rookes, had resigned from his union. The union and employer had a "closed shop" agreement, and when Rookes refused to join the union, its members threatened a strike unless Rookes resigned or was fired by the employer. Rookes brought an action for damages against the union officials, including Mr. Barnard (chairman of local branch of the union) for using unlawful means to induce the employer to terminate him, and/ or conspiring his dismissal by threatening with strike. A jury awarded Rookes £ 7,500 as damages on the ground that such deliberate illegality be punished with exemplary damages. However, the Court of Appeal reversed the decision, and held that the tort of intimidation existed but threat to terminate a contract was not covered. Rookes appealed further, and the defendants cross-appealed on the point of damages. In the UK House of Lords, it was held, while allowing appeal as well as cross-appeal, and ordering a new trial on the point of damages: (a) per facts, the defendants had committed tort of intimidation; (b) relevant provision of Trade Disputes Act 1906, afforded no defence, because the tort could have been committed by an individual and had it been so it would have been actionable; (c) relevant provision of the aforesaid Act did not protect the defendants, as their interference with Rookes employment was brought about by unlawful intimidation; however, (d) per facts disclosed in the summing up reflected no case for exemplary damages.
Exemplary damages could be awarded in an action of tort where the defendant has not only committed a legal wrong but has also behaved in an outrageous and insulting manner. The decision of House of Lords in Rookes v. Barnard, Lord Devlin restricted exemplary damages only to the following categories of cases:
- oppressive, arbitrary or unconstitutional action by the servants of the government,
- the defendant's conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff,
- exemplary damages are expressly authorized by statute.
Lord Devlin also stipulated that exemplary damages should be awarded "if but only if" the sum of compensatory damages to be awarded had an insufficient punitive or deterrent effect.14
Cassell & Co Ltd v. Broome
The ratio expounded in Rookes v Barnard was applied in the landmark judgement of Cassell v. Broome15 by the House of Lords, which upheld the decision of awarding exemplary damages passed by the jury in the first instance and further elaborated on the scope of awarding such damages in torts.
Mr. Broome, a retired Captain in the Royal Navy, sued author and publishers (defendants) of a book 'The destruction of Convoy PQ17' for libel, which gave an account of a wartime disaster of an ill-fated convoy. Broome claimed exemplary damages against the defendants. The judge ruled that exemplary damages should be awarded according to the principles laid down in Rookes v. Barnard. However, the Court of Appeal dismissed the appeal and gave view that Rookes v. Barnard was wrongly decided by the House of Lords and was not binding even on the Court of Appeal. The House of Lords, on appeal, held that Rookes v. Barnard correctly states the law of England on the legal principles on awarding exemplary damages, as such the award of exemplary damages would stand.
LAW IN INDIA – Important Case Laws
The opinion of the Nariman Committee is that courts in India are not limited in the law of torts merely to what English Courts say or do.16 The Indian courts have been reluctant to award exemplary damages and the view taken is that if the offender has to be punished, then recourse must be the penal law. Nevertheless, exemplary damages have been awarded by the courts in India, by placing reliance upon international precedents and opinions in certain cases.
In this regard, some of the important case laws on exemplary/ punitive damages are highlighted hereunder, with brief facts, observations and ratios put forth by the courts and conclusion drawn thereon:
Rustom K. Karanjia v. Krishnaraj M.D. Thackersey17
An appeal was filed, by editor of 'Blitz' and the company owning the newspaper, before High Court of Bombay against a decree in favour of a prominent businessman and industrialist, Mr. Krishnaraj M.D. Thackersey, for Rs. 300,000/- as general damages. Mr. Thackersey had claimed that an article published in 'Blitz' was grossly defamatory of him, were false and malicious, and injured his character, credit and reputation and in the way that it brought public hatred, contempt and ridicule to his business, thus suffered damage assessed to Rs. 300,000/-. The said appeal was confined to plea of 'qualified privilege'18 and 'quantum of damages'.
The plaintiff argued that the attack was malicious. In this sense, malice means making use of a 'privileged occasion'19 for an indirect or improper motive, and can be proved, inter alia (a) "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". The court upon careful consideration of the concerned Article, was convinced that there was express malice and, therefore, no qualified privilege could be claimed.
It was contended by defendants that the damages awarded by the trial judge were excessive and unreasonable, and, in any case, exemplary damages could not have been awarded. The court referred to the first two categories of Rookes v Barnard (i.e. (a) oppressive, arbitrary and unconstitutional action by the servants of the government; and (b) when the defendant has incurred profit for himself which may well exceed the compensation payable to the plaintiff), and observed that except in such two types of cases, there is no departure from the ordinary compensatory principle for all torts, including libel, and that "Where a newspaper is the defendant, it cannot be said without more that the publication has been made with a view to make profits."
The court referred to Broadway Approvals, Ltd. v. Odhams Press, Ltd.,20 and stated that newspapers in the ordinary course of their business publish news for profits, only when a more pecuniary benefit is shown to have been made by a newspaper it would become liable for punitive damages. The court observed that earlier at common law, damages for defamation were purely compensatory, but this is not the position at present either in India or in common law. The nature of damages awarded in case of defamation is considered to be exemplary in itself. This stance was elaborated with the help of Justice Pearson's opinion in McCarey v. Associated Newspapers, Ltd.21: "... when you have computed and taken into account all the elements of compensatory damages which may be awarded to the plaintiff and arrived at a total of £X, then it is quite wrong to add a sum of £Y by way of punishment of the defendant for his wrong-doing...Moreover, it would not be right to allow punitive or exemplary damages to creep back into the assessment in some other guise."
With reference to the above circumstances, the court drew distinction between aggravated and punitive damages, and observed that aggravated damages may be awarded within the compensatory principle, on "high-handed, oppressive, insulting or contumelious behaviour by the defendant which increases the mental pain and suffering" caused by defamation constituting injury to the plaintiff's pride and self-confidence. However, for awarding punitive or exemplary damages the aforesaid elements cannot be considered.
On quantum of damages, the court further observed that since plea of justification was given up, therefore, evidence in relation thereto couldn't be reconsidered. It is true that there are some reported cases in which it has been held that though the whole justification may not be proved, partial justification may be taken into consideration for the purposes of mitigation of damages The court endeavoured to take the findings of the learned Judge as they are and see if there is anything in those findings which can be properly urged in mitigation of damages, which attempt failed. Accordingly, it was held that, inter alia, the amount of damages awarded by the trial court be reduced to Rs. 150,000/-.
Organo Chemical Industries and Ors. vs. Union of India and Ors.22
The central issues in this civil appeal was whether Section 14B23 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, is unconstitutional and what is the essence of expression 'damages' used therein. However, for the purpose of this paper, the point on damages will be discussed. The Supreme Court observed that 'damages' in the said section is in substance, a penalty imposed on the employer for the breach of the statutory obligation.
The apex court laid out the essentials of 'damages' being: "(a) detriment to one by the wrong-doing of another (b) reparation awarded to the injured through legal remedies and (c) its quantum being determined by the dual components of pecuniary compensation for the loss suffered and often, not always, a punitive addition as a deterrent-cum-denunciation by the law". On 'exemplary damages', the apex court stated that such damages are on an increased scale, and awarded over and above bare compensation for property loss, where circumstances of violence, oppression, malice, fraud, or wanton and wicked conduct aggravates the injury done. Such damages are intended to provide relief for mental anguish, shame, degradation, or else to punish wrongdoer or make his example. As such, such damages are also called 'punitive' or 'punitory' damages or 'vindictive' damages, and (vulgarly) 'smart-money'.
Referring to the object and purpose of the said section, the apex court observed that it is to authorise Regional Provident Fund Commissioner to impose exemplary or punitive damages and thereby, prevent employers from making defaults. In relation to the inclusion of additional sums in the shape of penalty and role of the legislature thereto, the apex court observed that "'damages', as imposed by Section 14B, included a punitive sum quantified according to the circumstances of the case. In 'exemplary damages' this aggravating element is prominent. Constitutionally speaking, such a penal levy included in damages is perfectly within the area of implied powers and the legislature may, while enforcing collections, legitimately and reasonably provide for recovery of additional sums in the shape of penalty so as to see that avoidance is obviated. Such a penal levy can take the form of damages because the reparation for the injury suffered by the default is more than the narrow computation of interest on the contribution." (emphasis supplied).
Accordingly, the writ petition failed and was dismissed with costs.
Nilabati Behera v. State of Orissa and Ors.24
A letter from Smt. Nilabati Behera to the Supreme Court was treated as a writ petition under Article 3225 of the Indian Constitution for determining the claim of compensation made therein due to death of her son Suman Behera in police custody. In this case the apex court spelt out the principle on which the liability of the State arises in such cases for payment of compensation and its difference with the liability in private law in an action on tort. It stated that compensation in a proceeding under Article 32 by the Supreme Court or under Article 22626 by the High Court is a remedy available in public law, basis strict liability for contravention of fundamental rights to which sovereign immunity does not apply, which as a defence may be available in private law in an action based on tort.
The apex court referred to Rudul Sah v. State of Bihar and Anr.27, wherein it was held that in a petition under Article 32, the apex court can grant compensation for deprivation of a fundamental right. Further, it observed that wide powers of Article 32, imposes a constitutional obligation to forge such new tools, which enable the award of monetary compensation, where it is the only mode of redress available.
The apex court further observed that "this remedy in public law has to be more readily available when invoked by the have nots, who are not possessed of the wherewithal for enforcement of their rights in private law, even though its exercise is to be tempered by judicial restraint to avoid circumvention of private law remedies, where more appropriate". Accordingly the apex court held that it is a clear case for award of compensation by way of exemplary damages, the State of Orissa should pay a sum of Rs. 1,50,000 to the petitioner and a sum of Rs. 10,000 by way of costs to the Supreme Court Legal Aid Committee Board.
Shivsagar Tiwari v. Union of India28
The then Minister of Urban Development passed orders of allotment of shops/ stalls to her own relation/ employees/ domestic servants, while doing so many application from other organisations/ persons were not considered without assigning any reason. As per the CBI report on the matter, the allotment were made without following the tender system but on relationship basis with the said Minister. The apex court remarked that such allotments were wholly arbitrary and in misuse of power. Further, it was pointed out that public servants become liable in damages for malicious, deliberate or injurious wrong-doing. The Supreme Court relied upon several foreign pronouncements, including those of Sri Lanka, Bahamas, Jamaica, Victoria and Canada, and expressed that the world jurisprudence has thus, accepted misfeasance in public office as a species of tortious liability and, to prevent misuse, different courts around the world have been awarding exemplary damages. The apex court stated that the mere fact that in the said case "... there is no injury to a third person and he has not come forward to claim damages, has no sequitur insofar as the tortious liability following misfeasance of public office is concerned" (emphasis supplied). Accordingly, the apex court cancelled illegal allotments of shops/ stall, and issued show cause to the said Minister, who was prima facie personally responsible for such illegal allotments, as to why damage should not be awarded against her for her alleged misuse of power.
Rabindra Nath Ghosal vs. University of Calcutta29
Mr. Ghosal had appeared for M.A. Examination in Islamic History and Culture held by the Calcutta University in November, 1984, the result of the same was declared on June, 1985. However, his result was not declared, and shortly thereafter, he pursued a course in law. However, after more than five years he requested Controller of Examinations and Vice Chancellor for his result, and thereupon, filed a Writ of Mandamus in the High Court of Calcutta. On July, 1991, his result declared that he failed. Mr. Ghosal did not challenge the said result. The Ld. Single Judge of the High Court appointed a committee to investigate why result was not declared for so many years. Basis the findings the Ld. Single Judge held that the University and Vice Chancellor (respondents) should pay Mr. Ghosal Rs. 60,000/- as monetary compensation and damages.
The respondents filed an appeal and the Division Bench agreed with the said findings and also noted that Mr. Ghosal had known that he had failed and did not seek issuance of mark sheet for a long time. The said Bench held that this was not a fit case where doctrine of public law should have been invoked, and set-aside the award of damages. Mr. Ghosal appealed before the apex court, which observed that before exemplary damages can be awarded it must be shown that some fundamental right under Article 2130 of the Indian Constitution has been infringed by arbitrary or capricious action on the part of the public functionaries and that the sufferer was a helpless victim of that act. Further, relying on the report of the said committee, it was observed that Mr. Ghosal was aware, from the beginning, that he had failed, and he did nothing for a number of years to have his result declared. In this case it has not been shown what problem the Mr. Ghosal faced and to what extent he suffered prejudice, and how his future was affected. In fact, he was prevented from undertaking future studies. While dismissing the appeal, it was held that "... Division Bench was right in concluding that even though the Respondents were negligent in not declaring the result, this was not a fit case where compensation could or should have been awarded.", and that a case for compensation had not even been pleaded or proved.
M.C Mehta v. Kamal Nath31
Exemplary damages has been awarded in cases related to environment as well. The powers of the Supreme Court under Article 32 are not restricted and it can award damages in a PIL or a writ petition as has been held in a series of decisions. Accordingly, in M.C Mehta v. Kamal Nath, it was held that various laws in force to prevent, control pollution and protect environment and ecology provide for different categories of punishment in the nature of imposition of fine as well as or imprisonment or either of them, depending upon the nature and extent of violation. The fine that may be imposed alone may extend even to one lakh of rupees. It was further held that, "Keeping in view all these and the very object underlying the imposition of imprisonment and fine under the relevant laws to be not only punish the individual concerned but also to serve as a deterrent to others to desist from indulging in such wrongs which is considered to be almost similar to the purpose and aim of awarding exemplary damages, it would be both in public interest as well as in the interests of justice to fix the quantum of exemplary damages payable by Span Motels Pvt. Ltd. at Rupees Ten lakhs only." (emphasis supplied). The amount thereto, was fixed keeping in view the undertaking given by the defendant to bear a fair share of the project cost of ecological restoration which would be quite separate and apart from their liability for the exemplary damages.
Hindustan Unilever Limited v. Reckitt Benckiser India Limited32
Reckitt alleged that HUL in an advertisement on television (reg. HUL's LIFEBUOY soap), intentionally and deliberately disparaged Reckitt's soap under the trade mark DETTOL, with malicious intent to increase market share of its soap by hurting goodwill and reputation of DETTOL. The single bench of High Court of Delhi, inter alia, held and decreed that evidences produced by Reckitt were not enough for compensatory/ general damages, however, HUL's conduct entitled Reckitt for punitive damages, quantified to Rs. 5 lakh.
HUL appealed against the aforesaid decree before the division bench, and argued, inter alia, that: (a) the advertisement merely cautions viewers and public that antiseptic soap tends to injure the skin, and it is not Reckitt's contention that its soap is an antiseptic soap; (b) the proper test for disparagement of goods/ products in disparagement cases was not applied.
The division bench observed that "Indian Courts have recognized actions for damages in a claim for slander of goods", in this regard, it referred to Dabur India Ltd. v. Colgate Palmolive India Ltd33, wherein, without specifying rival product, peculiarity of generic disparagement of the same was held objectionable. Further, the division bench noticed that clever advertisement aspect and observed that "disparagement of a class of goods can result if the rival's goods fall within a class and can be identified". The division bench held that Reckitt successfully proved that the said advertisement was telecasted for 30 seconds on several occasions, that HUL designed the innuendo cleverly to suggest that DETTOL Original caused damage to the skin.
Regarding punitive damages, the division bench observed that though the Supreme Court affirmed principles in Rookes v. Barnard and Cassell v. Broome, it has not set the standards for applying them for awarding punitive/ exemplary damages in libel, claims in tort alongwith economic aspects, such as slander of goods, or IPR matters. Further, it was observed that to award punitive damages, categorization in Rookes v. Barnard (and the principles in Cassell v. Broome) should be adhered, and if general damages is inadequate. Accordingly, it was held, inter alia, that:
- HUL, aware of its wrong doing and the harm because of the published disparagement, aired the said advertisement in most of the national and regional channels and repeated the same, this points HUL's aim to denigrate Reckitt's product and cause harm to its reputation.
- Therefore, award of punitive/ exemplary damages was warranted.
- Exemplary damages of Rs.5 lakhs was justified and accordingly upheld.
Union of India and others v. Sancheti Food Products Limited34
In an auction Sancheti Food Products Limited purchased three confiscated fishing trawlers for Rs.13.19 lakhs, and thereupon, applied for registration under the Merchant Shipping Act, 1958, Part XVA of the aforesaid Act was incorporated in 1983 by an amendment, however, Rules of 1960 governing parameters of registration were not substituted. In correspondence between the parties the officers of the Union of India altered their stand (from time to time) with regard to the said Rules. Meanwhile, the said vessels suffered damage leading to the claims in question which was adjudicated by single bench and thereafter division bench of the High Court of Calcutta.
Before the single bench, Sancheti claimed, inter alia, exemplary damages by invoking principle that exemplary damages can and should be allowed in certain circumstances. The court observed that where necessary defendants must be taught lesson that "tort does not pay", and referred to: (a) Drane v. Evangelow35, wherein the Italian landlord illegally evicted his tenants; and (b) Lucknow Development Authority vs M.K. Gupta36 which granted punitive damages. Accordingly, the court entitled Sancheti to four respective sums of Rs. 1,18,80,000/-, Rs. 2,42,30,000/- (as damages for loss of profits for not plying and for not being able to sell off); Rs. 5 lakh (exemplary damages); and Rs. 5 lakh (assessed costs), with interest @ 11% p.a on the first three of the four sums mentioned above.
Aggrieved with the above order, the appellants moved the division bench of the High Court, which reduced the compensation awarded to Rs.13.19 lakhs, i.e. the cost of acquisition of the three vessels in a public auction, and a further sum of Rs. 22 lakhs on account of repair charges, and interest was reduced to 6% p.a.
To this the appellants filed appeal with Supreme Court. It was held that it could not find any fault with the order of the division bench, therefore, affirmed the order and dismissed the appeal.
Koninlijke Philips N. V. & Anr. v. Amazestore & Anr.37
Two suits were filed by Philips with High Court of Delhi, one for infringement of a registered design, and another for infringement of copyright against (a) Nova Manufacturing Industries Limited; (b) owner of the 'Nova' trademark; and (c) importer of the said infringed product. The suits were filed seeking damages and permanent injunction restraining violation of multiple statutory and common law rights, including infringement of copyright and passing-off of 'trade-dress' for its 'Advance Beard Trimmer Series 3000', and unfair competition.
The court opined that the defendants deliberately imitated shape and configuration of Philips beard trimmers under the QT 4000 Series with mala fide intention, as the defendants are of the same industry. Further, such activity of the defendants were without any authorization from Philips, as such the court was satisfied that the acts of the defendants' constitute piracy of the sole and exclusive, statutory rights vested in Philips u/s 22 of the Designs Act, 2000. Also, the defendants' without any authority brazenly reproduced literary and artistic work of Philips which caused infringement of copyright u/s 51 of the Copyright Act, 1957.
Accordingly, the court awarded compensatory damages, and observed that the "law is well-settled that the degree of mala fide conduct has a direct impact on the quantum and nature of damages that could be awarded in addition to a claim for actual / compensatory damages". The court relied on Hindustan Unilever Limited v. Reckitt Benckiser India Limited38; Rookes v. Barnard39 (referring to the three categories – discussed earlier in this paper); and Cassell & Co. Ltd. v. Broome40 with regard to punitive/ exemplary damages. It observed that this case satisfied all the conditions (stipulated in Rookes v. Barnard), that: (a) Philips is victim of the defendants' unlawful activities violating their statutory rights and suffered loss of goodwill and reputation; and (b) it was evident from the proceedings that high profits was enjoyed by the defendants by sale of infringing products, which is pertinent to be considered for quantifying aggravated damages. Further, it observed that malice from defendants aggravated the injury caused to Philips, and referred to Cassell & Co. Ltd. v. Broome which provides that such damages should be awarded in substitution, if in the opinion of the court the mala fides of the defendants "far exceed (in proportion) the quantum of actual damages" that has established against them.
It is pertinent to state that in the said case, the court formulate a thumb rule for granting damages, as hereunder:
|#||Degree of mala fide conduct||Proportionate award|
|(i)||First-time innocent infringer||Injunction|
|(ii)||First-time knowing infringer||Injunction + Partial Costs|
|(iii)||Repeated knowing infringer which causes minor impact to the Plaintiff||Injunction + Costs + Partial damages|
|(iv)||Repeated knowing infringer which causes major impact to the Plaintiff||Injunction + Costs + Compensatory damages.|
|(v)||Infringement which was deliberate and calculated (Gangster/scam/mafia) + wilful contempt of court.||Injunction + Costs + Aggravated damages (Compensatory + additional damages)|
Concerning the above, the court clarified that the chart is illustrative and not a statutory provision, and that the courts are free to deviate from the same.
Accordingly, the court, inter alia, held that the mala fide actions of the defendants "prove that they fall in the last category in the chart" set-out above, and "compensatory damage is inadequate to punish the Defendants for their outrageous conduct and therefore to deter them from repeating it, the Court awards some larger sum, i.e. aggravated/exemplary damages".
ANALYSIS & KEY POINTS
It is evident from the above that the courts in India are generally disinclined in granting award for punitive/ exemplary damages. This is also due to the lack of clarity in terms of ways and means in identifying a circumstance which qualifies for such damages and is coupled with lack of set standards for quantification of such damages. As such, in light of the above cited and discussed case laws, it can be said time and again, the courts have found it difficult in ascertaining the circumstances where such damages should be awarded and/ or what should be the standards/ yard stick for arriving at the quantum of such damages. Regarding ascertaining the circumstances, in Time Incorporated v Lokesh Srivastava and Anr.41 the High Court of Delhi went to the extent of declaring that "one function of punitive damages is to relieve the pressure on an overloaded system of criminal justice by providing a civil alternative to criminal prosecution of minor crimes". This was held to be wrong, by the division bench of High Court of Delhi, as it would be to sanction violation of the law, further, it declared that the reasoning and formulation for determining punitive damages, provided for in Time Incorporated v Lokesh Srivastava and Anr. and Microsoft Corporation v. Yogesh Papat and Anr.42 is without authority, and it overruled those decisions.43
The principles laid in Rookes v. Barnard and Cassell v. Broome have been affirmed by Supreme Court of India and applied in various cases, however, such application has been in relation to abuse of authority causing infringement of rights (endowed under Indian Constitution) or by public authorities44. Having said that it is pertinent to point out that the House of Lords did not say that in the future the award of exemplary damages should be restricted only in the cases mentioned in Rookes v. Barnard (as affirmed in Cassell v. Broome).45 Further, Lord Nicholls in his speech stated that the essence of conduct constituting the Court's discretionary jurisdiction to award exemplary damages is conduct which was such as to be an outrageous disregard of the claimant's rights.46 Still, while adjudicating and granting punitive/ exemplary damages, the standards and scales have yet not been set, especially in the matters relating to libel, tortuous claims with economic overtones (e.g. slander of goods, or intellectual property matters)47.
Regarding quantum, punitive/ exemplary damages may be awarded to an extent not greater than twice the amount of the damages liable to be paid.48 They must not be uncontrolled or arbitrary; they must be of an amount that is the minimum necessary to achieve their purpose in the context of the particular case. 49
As discussed earlier in this paper, in Koninlijke Philips N. V. & Anr. v. Amazestore & Anr.50 the High Court of Delhi endeavoured to formulate a thumb rule, in the form of a chart, for awarding damages, wherein the last category (i.e. No. (v)) is for punitive/ exemplary damages. The need for a legislation (though on tortious liability of State) was highlighted in Municipal Corporation of Delhi v. Association of Victims of Uphaar Tragedy and Ors.51, wherein the Supreme Court observed the need, that its instrumentalities has been highlighted by the court and the academic world on various occasions and it is high time that a sophisticated jurisprudence of Public Law Liability is developed, because there is no uniform pattern while dealing and deciding claims leading to undesirable consequences and fixation of compensation arbitrarily. The Supreme Court further observed that normally, there must be a direct connection between the wrongdoer's conduct and the victim's injury. However, for cases, which include indirect injury to the people such as on account of vandalism and rioting leading to damages/ destruction of property public and private, the Court should evolve a principle of liability, punitive in nature.52
As such, there is no straight jacket formula or a yard stick for ascertaining and awarding punitive/ exemplary damages, it can be said that the courts in India have been by and large awarding such damages on ad hoc basis. The trend so far as may be depicted from the cases cited above seems to be encouraging to the extent that courts are now endeavouring to develop rules for award of such damages, though in such rule table the category for such an award for punitive/ exemplary damages is still way below table, which invariably reflect the disinclination of the courts for awarding the same.
Important/ Key Points
On the basis of the above cited and discussed case laws, certain important points have been set-out hereunder, which lawyers may keep in mind and consider while dealing with/ advising on cases for claim for award for punitive/ exemplary damages, of course subject to the facts and circumstances in hand, the following should be effectively and evidently proved:
- In a defamation suit against publisher/ writer: (i) substantial pecuniary benefit has been made by such publisher by increased circulation and such benefits/ profits exceeds any award for compensatory damages only; (ii) privileged occasion has been employed, by the writer, maliciously for an indirect/ improper motive (of hatred/ dislike) to defame the plaintiff, which brings public hatred, contempt and ridicule.
- That the interest of the applicant as well as the public at large is undermined by public bodies or officials who: (i) failed, to act lawfully and, to perform their public duties properly; (ii) indulged in malicious, deliberate or injurious wrong-doing or blatantly misused power; (iii) especially if it concerns fundamental rights of citizens under Article 2153 of the Indian Constitution, which has been flagrantly infringed by arbitrary or capricious action, and the applicant/ sufferer was a helpless victim of such an act.
- In matters relating to pollution caused to the environment, basis the principle of 'polluter pays', that one is guilty of committing any illegalities and interfered and/ or endangering the environment or ecology. Also, the miscreant has not taken any action to undo the harm caused and/ or restore the environment/ ecology. Emphasise the intention that an award of punitive/ exemplary damages shall serve as a deterrent to others to desist from doing such wrongs/ harm to the environment/ ecology.
- The wrong/ harm/ loss/ injury caused due to mala fide intent and contumacious conduct of the wrong-doer warrants damages which merely by an award of damages (even if compensatory in nature) will not suffice.
- The wrong-doing is outrageous and in utter disregard of the obligations of the wrong-doer. The gravity of the wrong-doing unequivocally required award of such damages so as to serve as a deterrence.
- The magnitude and/ or capacity (or like) of the wrong-doer may be emphasised for correlating the measure of damages.
- In a claim for punitive/ exemplary damages which has been specifically and absolutely provided for in any statute, e.g. Section 14B of Employees' Provident Funds and Miscellaneous Provisions Act, 1952; Section 32 of Consumer Protection Act, 2019.
1. Mayne's Treatise on Damages, 11th edition, page 3, quoted in AIR 1963 AP 250.
2. (England) (Oxford Law Dictionary, 5th Edn., 2003) referred in P Ramanatha Aiyar: The Major Law Lexicon (Lexis Advance India Research).
3. P Ramanatha Aiyar: The Major Law Lexicon (Lexis Advance India Research).
4. Rajkot Municipal Corpn. v. Manjulben Jayantilal Nakum, (1997) 9 SCC 552 at page 568
5. Sir Percy Winfield's Province of the Law of Tort p. 32 referred in Clerk and Lindsell on Torts (Common Law Library Series No. 3) (12th Edn.) Chapter I, page 1, para 1.
6. Supra: Rajkot Municipal Corpn. v. Manjulben Jayantilal Nakum
7. Blacks Law dictionary, 9th ed. (2009)
8. P Ramanatha Aiyar: The Law Lexicon, 3rd ed. (2012)
10.  AC 1129
11. (1972) UKHL 3
12. Kodungallur Film Society and Ors. vs. Union of India (UOI) and Ors. [2018 (6) BomCR 270]
13.  EWHC J70
14. The Law Reform Commission Ireland, 'Report on Aggravated, Exemplary and Restitutionary Damages', (LRC 60–2000)
16. Re: Destruction of Public & Private Properties v. State of A.P. and Ors.[W.P. (Crl.) No.73 of 2007]: Taking a serious note of various instances where there was large scale destruction of public and private properties in the name of agitations, bandhs, hartals and the like, suo motu proceedings were initiated by Supreme Court on June 5, 2007. After perusing various reports filed, two Committees were appointed; one headed by a retired Judge of the apex court Justice K.T. Thomas (Retd.) and the other Committee was headed by Mr. F.S. Nariman, a prominent Indian jurist.
17. AIR 1970 Bom 424
18. Defined in P Ramanatha Aiyar: The Law Lexicon, 3rd ed. (2012), as "QUALIFIED PRIVILEGE exists in cases where some communication is necessary and proper in the protection of a persons interest, but this privilege may be lost if the extent of its publication be excessive".
19. Defined in P Ramanatha Aiyar: The Law Lexicon, 3rd ed. (2012), as "This is used in law of libel and slander to designate occasions where, for the sake of common convenience, and in the interest of society, certain publications which would otherwise be libels do not have such effect. ... "
20. (1965) 2 All ER 523
21. (1964) 3 All ER 947
22. AIR 1979 SC 1803
23. "14B. Power to recover damages. - Where an employer makes default in the payment of any contribution to the Fund the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 or sub-section (5) of section 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified under section 17, the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf may recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme. Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard. Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme."
24. AIR 1993 SC 1960
25. Article 32 of the Indian Constitution, i.e. Remedies for enforcement of rights conferred by this Part
26. Article 226 of the Indian Constitution, i.e. Power of High Courts to issue certain writs
27. 1983CriL J1644
28. (1996) 6 SCC 558
29. (2002) 7 SCC 478
30. Article 21 of the Indian Constitution, i.e. Protection of life and personal liberty- No person shall be deprived of his life or personal liberty except according to procedure established by law.
31. AIR 2002 SC 1515
32. 2014 (57) PTC 495 [Del] [DB]
33. 2004 (29) PTC 401
34. 2015 (9) SCALE 213
35. 1978 (2) All E.R. 437
36. 1994(1) SC 243
37. 2019 SCC– Online Del 8198
41. 116 (2005) DLT 599
42. 2005 (30) PTC 245
43. Supra: Hindustan Unilever Limited v. Reckitt Benckiser India Limited
44. Ghaziabad Development Authority v. Balbir Singh [(2004) 5 SCC 6]; Lucknow Development Authority v. M.K. Gupta [1994 SCC (1) 243]; Hindustan Unilever Limited v. Reckitt Benckiser India Limited [2014 (57) PTC 495 [Del] [DB]]
45. Kuddus v. Chief Constable of Leicestershire Constabulary,  UKHL 29
46. Supra: W.P. (Crl.) No.73 of 2007
47. Supra: Hindustan Unilever Limited v. Reckitt Benckiser India Limited
48. Kodungallur Film Society and Ors. vs. Union of India (UOI) and Ors. [2018 (6) BomCR 270]
49. Supra: The Law Reform Commission Ireland, 'Report on Aggravated, Exemplary and Restitutionary damages'
51. [AIR2012SC 100]
52. Supra: W.P. (Crl.) No.73 of 2007
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.