Does Filing a Suit Amount to Notice of Termination of Contract

Saji Koduvath, Advocate, Kottayam.

Introduction

Filing a suit may amount to notice of termination of a contract if:

  • The contract or governing law does not mandate notice.
  • The pleadings clearly declare that the contract is terminated; and
  • The defendant acts upon or acknowledges that intention, for example, by stopping performance, ceasing payment (such as rent or invoices), sending an email confirming cessation of services, or making admissions in pleadings.

In such cases, the filing of the suit may be treated as constructive notice of termination. If the defendant accepts and acts upon the termination, they may be estopped from later denying its validity.

In M/s Nopany Investiments (P) Ltd. Santokh Singh (HUF), AIR 2008 S C 673, 2008 (2) SCC 728, has laid down as under:-

  • “In any view of the matter, it is well settled that filing of an eviction suit under the general law itself is a notice to quit on the tenant. Therefore, we have no hesitation to hold that no notice to quit was necessary under Section 106 of the Transfer of Property Act in order to enable the respondent to get a decree of eviction against the appellant. This view has also been expressed in the decision of this Court in V. Dhanappal Chettiar v. Yesodai Ammal, 1979(2) RCR (Rent) 352; [AIR 1979 SC 1745]”

See also:

  • Brompton Lifestyle Brands Pvt. Ltd. v. Riveria Commercial Developers Ltd. , 2023-4 AD(Del) 591,
  • International Institute of Neuro Sciences & Oncology Ltd. , Chandigarh v. Sahibjit Singh Sandhu, 2017-3 PLR 51; 2017-3 RCR(Civ) 554 (P&H),
  • Neelam v. . Sanjay Pahwa, 2016(1) R.C.R (Rent) 696,
  • Bhagirath Verma v. Dada Dev Mandir Prabandhak Sabha (Barah Gaon) Palam, 2016-234 DLT 3
  • Hazari Vs. Vinod Kumar. 2015(4) R.C.R (Civil) 688,
  • Chanda v. Rajesh Saxena, 2015-224 DLT 480,
  • Jeevan Diesels & Electricals Ltd. Vs. Jasbir Singh Chadha (HUF) & Anr. 2011 (183) DLT 712
  • Harikesh Vs. Smt. Narain Devi, 2010 (1) R.C.R(Rent) 99
  • M/s Mandap International Pvt. Ltd. v.. M/s Ahuja Kashyap Pvt. Ltd., 2014(5) R.C.R (Civil) 797.

No Termination – If Contract Mandates Written Notice

However, where the contract or applicable statute requires a written notice in a particular form, merely filing a suit is not sufficient to constitute valid termination. In such cases, compliance with the prescribed notice process is mandatory.

No Notice, Damages Alone

The Supreme Court clarified this in Indian Oil Corporation Ltd. v. Amritsar Gas Service, (1991) 1 SCC 533, where it held:

  • The agreement being revocable by either party in accordance with clause 28 by giving thirty days’ notice, the only relief which could be granted was the award of compensation for the period of notice, that is, 30 days.

Issuance of notice may amount to sub-judice

Issuance of notice, when a suit is pending, even if it does not amount to sub-judice (Latin: “under judgment”), may be unnecessary, redundant, or even improper, as the issue is already seized by the court.

In such a situation the court can proceed – as if the suit or contention amounts to sufficient notice if-

  • The plaint itself discloses the grounds of termination or claim, and
  • The defendant suffers no prejudice, and
  • The suit is not premature.

Opponent’s Conduct Matters
If the opposite party acts based on the termination (e.g., ceases performance, accepts return of goods, or initiates exit procedures), that conduct may confirm mutual understanding of termination, which courts can take notice of.


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