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Arbitration & Commercial LawSupreme Court of India

Food Corporation of India v. Pratap Kundu

Civil Appeal · 2019 INSC 1305Decided 29 Nov 2019
Civil Appeal No. 9127 of 2019
Justice Ashok Bhushan · Justice M.R. Shah

Background

A transport contractor (Pratap Kundu) was engaged by the Food Corporation of India (FCI) to supply casual labour at its Bikna Depot, under a contract that gave him 471% above the scheduled rate for most items but, for the item covering casual labour wages, said rates would instead follow the outcome of a then-pending Supreme Court case. After the Supreme Court in 2010 fixed specific wage rates for the casual labourers (to be paid directly to them), the contractor nevertheless claimed he was entitled to be reimbursed at the higher 471% rate for those same wages, and also to a share of "profit" on the contract. The Calcutta High Court partly sided with him and sent the matter back to FCI's Chairman for recalculation, prompting cross-appeals by both FCI and the contractor to the Supreme Court.

Decision Breakdown

The Supreme Court held that because the contract itself said casual-labour wage rates would "abide by the decision" of the pending Supreme Court case, the contractor was bound by the wage rates actually fixed by the Court in 2010, and could not additionally claim 471% above those rates, allowing that would result in unjust enrichment far beyond what he had even paid the labourers himself. The Court agreed with the High Court that the 2010 judgment did not leave open any separate "profit" entitlement for the contractor, and struck down that part of the High Court's direction. FCI's appeal was partly allowed (confirming wages must follow the 2010 Supreme Court rate and rejecting the profit claim, while remanding only the mechanical recalculation of exact differential amounts to the FCI Chairman), and the contractor's cross-appeal was dismissed.

Lesson Learnt

When a commercial contract expressly makes a payment term conditional on the outcome of pending litigation, a party cannot later claim a more favourable rate under a different clause of the same contract once that litigation is decided: the specific, litigation-linked term governs.

Food Corporation of India v. Pratap Kundu – Legal Case Shots | LegalAware