Holding

A contract of personal service cannot be specifically enforced; the appropriate remedy is damages, and thus the plaintiff's suit for mandatory injunction is dismissed.

Summary

Badri Nath Dixit sued Nandganj Sihori Sugar Co. Ltd. and its officers for a mandatory injunction to enforce an alleged contract appointing him as Instrumentation Foreman, relying on letters from the holding company's chairman that purportedly promised his appointment under a Government scheme. The trial court dismissed the suit, but the appellate courts ordered specific performance, directing the defendants to appoint him. The Supreme Court examined whether a contract of personal service can be specifically enforced under the Specific Relief Act and whether the letters created a binding contract. It held that contracts of employment or personal service are not ordinarily subject to specific performance; the appropriate remedy is damages, and no enforceable contract or statutory scheme was established. Consequently, the Court set aside the appellate orders, restored the trial court's dismissal, and allowed the defendants' appeal.

Issues considered

Can a contract of employment or personal service be specifically enforced by a decree of specific performance under the Specific Relief Act?
Do letters from a holding company's chairman create a binding contract enforceable by a third party claimant?
Is a mandatory injunction an appropriate remedy for enforcing an alleged appointment under a Government scheme?
Is damages the only remedy available for breach of a personal service contract?

Legislation cited

Specific Relief Act, 1963s. 14, s. 41

Subjects

specific performancecontract of employmentpersonal service contractmandatory injunctionSpecific Relief Actdamagesprivity of contractgovernment scheme

Judgment

NANDGANJ SIHORI SUGAR CO. LTD., RAE BARELI
A
AND ANR.
v.
BADRI NATH DIXIT AND ORS.

APRIL 24, 1991
B
[K. JAGANNATHA SHE1TY, TKOCHU THOMMEN AND
YOGESHWAR DAYAL, JJ.J

Specific Relief Act, 1963: Sections 14 and 41-Contract for
employment-Whether enforceable against employer-Damages-
Whether a remedy for breach of personal contract.
c
The first respondent institnted a snit for mandatory injunction to
enforce a contract alleged to have been entered into between him and
the appellants, officers of the second respondent Corporation, for
appointment to the post of Instrumentation Foreman in the appellants'
D company, and for consequential reliefs. He contended that he had been
sponsored by the Chairman and Managing Director of the second
respondent Corporation, which was the holding company of the appel-
lants' company by his two letters for appointment as an Apprentice
Engineer in terms of a scheme formulated by the Government of India.
The appellants and the second respondent denied the existence of any
E contract.

The trial court dismissed the suit. However, on appeal, the first
appellate court decreed the suit and directed the first appellant to
appoint the first respondent to the post of Apprentice Engineer under
the scheme sponsored by the Government of India. This was confirmed,
F in appeal, by the High Court, which held the first respondent was
entitled to be appointed to the post of Instrumentation Foreman with
effect from the date on which the former incumbent of that post had
resigned.

In the appeal before this Court, on behalf of the appellants it was
G contended that there was no evidence of the contract having been
entered into by the appellants with the first respondent; nor was there
any evidence of a scheme of the Government of India, which entitled
him to be appointed to any post in the appellants' company, and that, in
any view, he was not qualified for appointment as an Apprentice, much
less to the higher post oflnstrumentation Foreman.
H

468
SUGAR CO. v. B.N. DJXJT 469

On behalf of the first respondent it was contended that the letters A
addressed by the second respondent in his capacity as Chairman, and
Managing Director of the holding campany, to the appellants, the offi-
cers of the subsidiary company, made it obligatory on the part of the
latter to appoint him in terms of the Government of India scheme, as so
found by both the first Appellate Court and the High Court. B

Allowing the appeal, this Court,

HELD: 1.1 A contract of employment cannot ordinarily be
enforced by or against an employer. The remedy is to sue for damages.
The grant of specific performance is purely discretionary and must be
refused when not warranted by the ends of justice. Snch relief can be c
granted only on sound legal principles. In the absence of any statutory
requirement, courts do not ordinarily force an employer to recruit or
retain in service 11:n employee not required by the employer. There are,
of course, certain excepti'!ns to this role, such as in the case of a public
servant dismissed from service in contravention of Article 311 of the D
• Constitution; reinstatement of a dismissed worker under the Industrial
Law; a statutory body acting in breach of statutory obligations, and the
like. f475D-E]

B.N. Tiwari v. District Board, Agra, AIR 1964 SC 1680; U.P.
State Warehousing Corporation v. C.K. Tyagi, [1970] 2 SCR 250 and E
Executive Committee of Vaish Degree College, Shamli and Ors. v.
Lakshmi Narain and Ors., [1976] 2 SCR 1006, referred to.
_,,
.,_, Indian Contract and Specific Relief Acts, by Pollock & Molla,
Tenth Edn., page 983 and Halsbury's Laws of England. Fourth Edn.,
Volume 44, paragraphs 405 to 420, referred to. F

1.2 In the instant case, neither from the plaint nor from the evi-
dence is it possible to identify any concluded contract to which the first
respondent is a party or which he can enforce. There is no specific plea
or evidence as regards the particulars of the scheme of the Government
of India in terms of which he seeks relief whether it is a statutory G
scheme, and if so, what are the provisions relied on by him and whether
a duty is cast on the appellants and a benefit is conferred on persons like
the first respondent. Assuming that such a scheme existed or any such
contract bound the parties, it would be violative of all basic norms of
law to decree a suit for specific performance of a contract of personal
service. [472E-G] H
•
470 SUPREME COURT REPORTS (1991) 2 S.C.R.

A 1.3 Courts do not ordinarily enforce performance of contracts of
a personal character, such as a contract of employment. Subject to
certain well defmed categories of exceptions, law does not permit, and
the Specific Relief Act does not contemplate, the enforcement of a con-
tract of a personal nature by a decree for specific performance. The
B facts of the instant case do not fall within the exceptions. [472A, 474D)

Rigby v. Connol, [1880) 14 CbD 482, 487 and Executive Commit-
tee of Vaish Degree College, Shamli and Others v. Lakshmi Narain and
Ors., [1976) 2 SCR 1006 at 1020, referred to.

Cheshire. Fifoot and Furmston's Law of Contract, 11th ed., p.
c 614 and Halsbury's Laws of England Fourth Edition, Volume 44, at
page 407, referred to.

1.4 Even if there was a contract in terms of which the first
respondent was entitled to seek relief, the only relief which was avail-
D able in law was damages and not specific performance. Breach of con-
tract must ordinarily sound in damages, and particularly so in the case •
of personal contracts. Assuming that a contractual relationship arose
consequent upon the letters addressed by the second respondent to the
first appellant, the first respondent was a total stranger to any such
relationship, for no relationship of a fiduciary character existed bet-
E ween the first respondent and the second respondent or the appellants.
Neither on principles of law or equity nor under any statute did the first
respondent acquire an enforceable right by reason of the letters
exchanged between the appellant and second respondent, nor did he
have privily of any kind to their relationship. No collateral contract to
which he was a earty did arise on the facts of this _case and at no time
F was the second respondent acting as his agent. There is no express or
implied contract which is enforceable by him. [475G-H, 476A-B)

In the circumstances, the decrees of the High Court and the first
appellate court are set aside aod that of the trial court is restored. [476D)

G CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3644
of 1989.

From the Judgment and Order dated 10.10.1988 of the Allaha-
bad High Court in S.A. No. 194 of 1987.

H Yoeshwar Prasad and Mrs. Shobha Dikshit for the Appellants.
1

SUGAR CO. v. B.N. DIXIT [TIJOMMEN, J.] 471

B.D. Agarwala, Gopal Subramaniam, Ms. Bina Gupta, Arvind
A
Verma, Ms. Monika Mohil, R.K. Srivastava and P. Misra for the
Respondents.

The Judgment of the Court was delivered by

THOMMEN, J. This appeal is by defendants 1 and 2 in a suit for 8
mandatory injunction. The appellants are officers of Nandganj Sihori
Sugar Co. Ltd., Rae Bareli, of which the third defendant, the U.P.
State Sugar Corporation Ltd. (the second respondent herein) is the
holding company. The State of Uttar Pradesh (the third respondent) is
the fourth defendant. The plaintiff, Badri Nath Dixit (the first respon-
dent), instituted the suit for mandatory in junction to enforce a con-
tract alleged to have been entered into between the plaintiff and c
defendants 1 & 2 for appointment of the plaintiff to the post of
Instrumentation Foreman in the defendants' company, and for conse-
quential reliefs. The plaintiff contended that he had been sponsored by
the Chairman and Managing Director of the third defendant, by his
letters dated 18 October, 1982 and 14 December, 1982 for appoint- D
ment by defendants 1 & 2 as an Apprentice Engineer in terms of a
scheme formulated by the Govemment of India, but such appointment
was not made by defendants I & 2. The plaintiff prayed for an injunc-
tion compelling defendants I & 2 to appoint him to the post of
'Instrumentation Foreman', which post, according to him, was at the
time of the suit lying vacant. In effect, what the plaintiff seeks is a E
decree to compel the specific performance of a contract of personal
service.

v Defendants 1 to 3 filed a jo;!lt written statement denying the
allegations. They stated that there was no contract, as alleged, and
there was no vacancy for any post to which the plaintiff was qualified F.
to be appointed. They further stated that the plaintiff had been condi-
tionally offered appointment as a Fitter Trade Apprentice, subject to
his possessing the requisite qualifications and his selection by the
Apprentice Board, Kanpur. The plaintiff was not qualified and was,
therefore, not selected. They further contended that neither as an
Apprentice nor as Instrumentation Foreman was the plaintiff qualified G
to be appointed. The suit was dismissed by the trial court. However,
on appeal by the plaintiff it was decreed by1 the learned Additional
District Judge who directed defendant I to appoint the plaintiff to the
post of Apprentice Engineer under the scheme sponsored by the
Government of India. This decree was confirmed in appeal by the
High Court by the impugned judgment. The High Court further held H
472 SUPREME COURT REPORTS [1991] 2 S.C.R.

A that the plaintiff was entitled to be appointed to the post of Instrumen-
tation Foreman with effect from the date on which the former incum-
bent of that post had resigned.

Counsel for the appellants (defendants 1 & 2) submits that there
is no evidence of the alleged contract having been entered into by the
B defendants with the plaintiff; nor is there any evidence of a scheme of
the Government of India which entitled the plaintiff to be appointed to
any post in the defendants' company. Counsel states that, in any view,
the plaintiff was not qualified for appointment as an Apprentice and
much less to the higher post of Instrumeniation Foreman.

The plaintiff's counsel, however, submits that the letters addres-
c sed by the third defendant in his capacity as Chairman and Managing
Director of the holding company to defendants 1 & 2, the officers of
the subsidiary company, made it obligatory on the part of the latter to
appoint the plaintiff in terms of the Government of India scheme. It
was so found by the first Appellate Court and the High Court. That
D finding is not liable to be impeached in the present proceeding. He
says that the defendants are, therefore, liable to be compelled by
means of a mandatory in junction to honour the offer held out by them
to the plaintiff, who is entitled to enforce the contract founded on such
offer by seeking specific performance of it.

E We are surprised that the first Appellate Court and the High
Court should have proceeded on the assumption that any enforceable
contract existed. Neither from the plaint nor from the evidence is
it possible to identify any concluded contract to which the plaintiff is a
party or which the plaintiff can enforce. The defendants deny the
existence of any contract or any other relationship which gives the
F plaintiff any cause of action against the defendants. There is no
specific plea or evidence as regards the particulars of the alleged
scheme of the Government of India in terms of which the plaintiff
seeks relief. Whether it is a statutory scheme, and if so what are the
provisions relied on by the plaintiff, and whether a duty is cast on the
defendants and a benefit conferred on persons like the plaintiff, is
G neither pleaded nor spoken to in evidence. Assuming that any such
scheme existed or any such contract bound the parties, to have decreed
a suit for specific performance of a contract of personal service, on the
facts alleged by the plaintiff, was to violate all basic norms of law.
Courts do not ordinarily enforce performance of contracts of a
personal character, such as a contract of employment. In the words of
H Jesse!M.R.:
SUGAR CO. v. B.N. DIXIT (THOMMEN, J.( 473

"The courts have never dreamt of enforcing agreements
A
strictly personal in their nature, whether they are agree-
ments of hiring and service, being the common relation of
master and servant .. ."[Rigby v. Connol, [1880] 14 ChD
482, 487; see Cheshire, Fifoot and Furmston's Law of Con-
tract, 11th ed., p. 6141."
B
In the joint written statement filed by defendants 1 to 3, repre-
senting the holding and subsidiary companies, the alleged contract has
been clearly denied. We fail to see how the letters addressed by the
Chairman of the holding company to the officers of the subsidiary
company advising the appointment of the plaintiff to a post which he
was found to be -not qualified to hold could have resulted in any con- C
tract between the defendants of the one part and the plaintiff of the
other part. Assuming that the letters written by the Chairman of the
holding company were in the nature of a direction which a subsidiary
company was compelled to carry out, we fail to see how on the facts of
this case, the plaintiff, who had no privity whatever to a contract,
assuming there was a contract, could enforce any right under it. In the D
first place, the letters sent by the Chairman of the holding company
are merely in nature of an advise giving rise to no contractual relation-
ship. Even if the advise is taken to be of the character of a direction
which the subsidiary company is bound to comply with, any obligation
arising from such direction is not enforceable at the instance of a total
stranger. The Chairman was in no sense acting as a trustee of the E
plaintiff and no relationship of a fiduciary character whatever is
alleged or proved to have exised between them. Assuming that the
then Chairman was personally interested in the plaintiff, that was not
y an interest which is legally enforceable against the defendants. Such
predilection on the part of the Chairman of a holding company, what-
ever be its impact on the subsidiary company, does not give rise to any F
actionable claim. There is no evidence, whatsoever, as to the existence
of a Government scheme, apart from a reference to it in the
Chairman's letter. The plaintiff has not shed any light upon it. The
defendants have not admitted any such scheme. Even if a scheme
existed, there is no evidence that it was enforceable at the instance of a
person seeking its benefit. Nor has the plaintiff pleaded estoppel or G
adduced any evidence to support any such contention.

In the absence of any specific plea or evidence as regards the
nature and other particulars of the scheme, it is preposterous that the
courts below should have thought it fit to issue a mandatory injunction
to compel the performance of the alleged contract of service in terms H
474 SUPREME COURT REPORTS (1991) 2 S.C.R.

A of or pursuant to an unknown scheme. Subject to certain well defined
categories of exceptions, the law does not permit, and the Specific
Relief Act does not contemplate, the enforcement of a contract of a
personal nature by a decree for specific performance. The facts of this
case do not fall within the exceptions. Assuming that the fact alleged by
the plaintiff to be true-as stated earlier, there is not evidence what-
B
ever to support them-the plaintiff is not entitled to any relief other
than damages in the event of his being in a position to prove that he
has been damnified by reason of the defendants' failure to carry out
the obligations arising under what he calls a contract.

In Halsbury's Laws of England, Fourth Edition, Volume 44, at
c page 407, it is stated:

"407. Contracts for personal work or services.-A judg-
ment for specific performance of a contract for personal
work or services is not pronounced, either at the suit of the
employer or the employee. The court does not seek to
compel persons against their will to maintain continuous
personal and confidential relations. However, this rule is
not absolute and without exception. It has been held that
an employer may be restrained from dismissing an
employee in breach of contract if there is no loss of confi-
dence between employer and employee or if (at least in a
E contract of employment to carry out a public duty) the
employee has been dismissed in a manner which does not
comply with statutory or contractual regulations governing
dismissal. No court may, whether by way of an order of
specific performance of a contract of employment or an
in junction restraining a breach or threatened breach of
F such a contract, compel an employee to do any work or
attend at any place for the doing of any work.

This principle applies not merely to contracts of empl~
ment, but to all contracts which involve the rendering of
G continuous services by one person to another, such as a
contract to work a railway line ... "
(emphasis supplied)

As st11ted by this Court in Executive Committee of Vaish Degree
College, Shamli and Others v. Lakshmi Narain and Ors., [1976] 2 SCR
H 1006 at 1020:
SUGAR CO. v. B.N. DIXIT [THOMMEN, J.] 475

" .... a contract of personal service cannot ordinarily be
A
specifically enforced and a Court normally would not give
a declaration that the contract subsists and the employee
)..
even after having been removed from service can be
deemed to be in service against the will and consent of the
employer. This rule, however, is subject to three well recog-
nised exceptions; (i) where a public servant is sought to be B
removed from service in contravention of the provisions of
Art. 311 of the Constitution of India; (ii) where a worker is
sought to be reinstated on being dismissed under the Indust-
'"'>-- rial Law; and (iii) where a statutory body acts in breach or
violation of the mandatory provisions ofthe statute."
(emphasis supplied)
c
A contract of employment cannot ordinarily be enforced by or
against an employer. The remedy is to sue for damages. (See section
• 14 read with section 41 of the Specific Relief Act; see Indian Contract
' and Specific Relief Acts, by Pollock & Mulla, Tenth Edn., page 983).
The grant of specific performance is purely discretionary and must be D
'I refused when not warranted by the ends of justice. Such relief can be
granted only on sound legal principles. In the absence of any statutory
requirement, courts do not ordinarily force an employer to recruit or
retain in service an employee not required by the employer. There are,
of course, certain exceptions to this rule, such as in the case of a public
servant dismissed from service in contravention of Article 311 of the E
Constitution; reinstatement of a dismissed worker under the Industrial
,.. Law; a statutory body acting in breach of statutory obligations, and
y the like. (B.N. Tiwari v. District Board, Agra, AIR 1964 SC 1680;
U.P. State Warehousing Corporation v. C.K. Tyagi, [1970] 2 SCR 250;
Executive Committee of Vaish Degree College, Shamli and Ors. v.
Lakshmi Narain and Ors., [1976] 2 SCR 1006; see Halsbury's Laws of F
England, Fourth Edn., Volume 44, paragraphs 405 to 420.)

On the facts of this case, the High Court was clearly wrong in
issuing a mandatory injunction to appoint the plaintiff. Even if there
' ... was a contract in terms of which the plaintiff was entitled to seek relief,
the only relief which was available in law was damages and not specific G
performance. Breach of contract must ordinarily sound in damages,
and particularly so in the case of personal contracts. Assuming that a
contractual relationship arose consequent upon the letters addressed
by the third defendant to the 1st defendant, the plaintiff was a total
stranger to any such relationship, for, on the facts of this case, no
relationship of a fiduciary character existed between the plaintiff and H
476 SUPREME COURT REPORTS [19911 2 S.C.R.

A the third defendant or other defendants. Neither on principles of law
or equity nor under any statute did the plaintiff acquire an enforceable
right by reason of the letters exchanged between the first and third
defendants. The plaintiff had no privily of any kind to their relation-
ship. No collateral contract to which the plaintiff was a party did arise
on the facts of this case. At no time was the third defendant acting as
8 an agent of the plaintiff. There is no express or implied contract which
is enforceable by the plaintiff. (See Halsbury's Laws of England.,
Fourth Edn., Volume 9, paragraphs 334 to 342).

The plaintiff's counsel suggests that the claim is justifiable on the
basis of legitimate expectations for appointment. There is no specific
C plea or evidence to support any such contention. Whatever expecta-
tions might have arisen from the letters of the third defendant, they
could not have in law given rise to any right enforceable by specific
performance.

For all these reasons we hold that the plaintiff's suit for man-
D datory injunction, on the facts of the case, was rightly dismissed by the
trial court and wrongly decreed by the first Appellate Court and the
High Court. We set aside the decrees of the High Court and the first
Appellate Court and restore that of the trial court. The plaintiff's suit
shall accordingly stand dismissed and the defendants' appeal allowed
with costs throughout.

N.P.V. Appeal allowed.