A Sale That Was Never Proved Cannot Measure A Loss
Buyers pulled out of a 2010 deal to take over a debt-laden sponge iron company. A trial judge made them pay Rs 5.51 crore. A Division Bench has found the sellers were the ones in breach.
The Court held that the sellers failed to transfer the controlling shares and reconstitute the board as the deal required, and tried to change a key term within a day. The buyers' withdrawal was a lawful avoidance, not a repudiation. The sellers' claimed distress sale at a lower price was never proved — no share moved, no money traced. The Rs 5.51 crore decree was set aside; the buyers' Rs 1 crore refund stands.
- Damages must be proved, not calculated. An expected profit is not a proven loss.
- A text message can end a contract — what matters is whether a ground existed when it was sent.
- Section 53 protects the innocent party, not the one who prevented performance.
- Letters written after suing prove nothing; they are a pleading in another form.
- Court
- High Court at Calcutta
- Bench
- Justice HON'BLE JUSTICE DEBANGSU BASAK, Justice HON'BLE JUSTICE ARYAK DUTT
- Citation
- APD No. 5 of 2026 with APDT No. 18 of 2026
- Case
- APD No. 5 of 2026 with APDT No. 18 of 2026
- Decided
- 10 September 2026
- Outcome
- Buyers' appeal allowed; sellers' suit dismissed; refund decree affirmed
The deal
The sellers controlled a company whose main asset was a sponge iron plant near Dhanbad. It owed a bank about Rs 22 crore and faced action under the SARFAESI Act.
In September 2010 the buyers agreed, after due diligence, to take over the company as a going concern for Rs 28.01 crore, assuming the bank liability; they had already paid Rs 1 crore towards it. The agreement tied payment to the transfer of at least 51 per cent of the shares and a board meeting to install the buyers' nominees.
The next day the sellers sent a proposed amendment. Three days later the buyers withdrew by text message and asked for their money back. The sellers later said they had sold instead to others for Rs 22.50 crore, and sued for the Rs 5.51 crore difference. A Single Judge decreed it in May 2026, while also ordering the Rs 1 crore refunded.
Who broke the contract
Reading the agreement as a whole, the Bench held the sellers had neither transferred the controlling shares nor convened the board, and had sought within 24 hours to modify an essential term. The buyers' written complaint of April 2011, well before either suit, set out the same grievance.
A text message communicates a decision; it is not a reasoned document. What matters is whether a ground to avoid the contract existed when it was sent. It did, so the withdrawal was lawful.
The sellers' reliance on Section 53 of the Contract Act was misplaced: it gives rights to the party prevented from performing, not a shield to the defaulter. The bank's later action flowed from the company's own long default.
Why there were no damages
Compensation under Section 73 is compensatory, and the claimant must prove the loss. The whole claim rested on the alleged later sale, yet there was no share transfer, no money received, no change in statutory returns — the sellers still held the shares.
The trial judge's arithmetic showed only the profit the sellers expected, not a loss they suffered. A letter written after the suit was filed carried no weight.
The Rs 5.51 crore decree was set aside and the sellers' suit dismissed. The buyers, having lawfully avoided the contract, are entitled to restitution: the Rs 1 crore refund was affirmed with interest. The plea that the agreement was void for misrepresentation was rightly rejected.
Who argued it
Appearances as recorded in the judgment of the Court.
Frequently asked
Can a seller recover the shortfall from a cheaper resale?
Only if it proves the resale and the loss. Here there was no evidence the resale ever happened.
Is withdrawing from a deal by text message valid?
It can be, if a ground to avoid the contract existed at that time.
Pulling out of a share-purchase deal
- Record, at once and in writing, the other side's failure that justifies withdrawal.
- Check which obligation fell due first; sequence decides breach.
- If you claim damages from a resale, prove the resale with share transfers and payments.
- Seek refund of advances as restitution when the other side broke first.
Source. High Court at Calcutta, APD No. 5 of 2026 with APDT No. 18 of 2026, decided 10 September 2026 by Justice HON'BLE JUSTICE DEBANGSU BASAK, Justice HON'BLE JUSTICE ARYAK DUTT. This explainer is written from the judgment text as reported.
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