Failed Contingent Contract Doesn't Defeat Claim For Services Actually Rendered: Calcutta High Court
The Calcutta High Court has held that although a contingent employment contract failed because the agreed condition precedent never occurred, the failure of the contract did not deprive a consultant of remuneration for services actually rendered and accepted by the employer. Applying the doctrine of quantum meruit embodied in Section 70 of the Indian Contract Act, 1872, the Court held...
The Calcutta High Court has held that although a contingent employment contract failed because the agreed condition precedent never occurred, the failure of the contract did not deprive a consultant of remuneration for services actually rendered and accepted by the employer. Applying the doctrine of quantum meruit embodied in Section 70 of the Indian Contract Act, 1872, the Court held that compensation is payable where non-gratuitous services have been rendered and enjoyed, even if the underlying contract never became enforceable.
A Division Bench of Justice Debangsu Basak and Justice Md. Shabbar Rashidi partly allowed an appeal filed by business consultant Pulinat Ettan Thomas against a commercial court decree in favour of Finorchem Limited. While affirming that the consultant's appointment never commenced because the agreed contingency failed, the Bench modified the decree by awarding him remuneration for services rendered after adjusting the advance already received.
"The defendant did render services to the plaintiff company and such services were not gratuitous. Therefore, the defendant is entitled to the remuneration for the services rendered," the Court observed.
Background
Finorchem Limited entered into an agreement with the appellant on August 2, 2019 to engage him as a business consultant. According to the company, the arrangement contemplated that the consultant and seven experts in the rubber chemicals field would join simultaneously. An advance amount of ₹50,47,422 was paid to the consultant, but only four of the proposed experts ultimately joined the company. The company therefore instituted a commercial suit seeking a declaration that the consultant's appointment had never commenced and for refund of the advance amount with interest.
The consultant disputed this position, contending that his appointment was independent of the joining of the other experts and that he had actively discharged his responsibilities by advising the company, participating in recruitment, and assisting in commissioning manufacturing units. He also filed a counterclaim seeking over ₹2.81 crore towards unpaid remuneration, reimbursement of expenses and severance benefits.
The Commercial Division decreed the company's suit, directed refund of ₹55,47,422 with interest and dismissed the counterclaim, leading to the present appeal.
The Division Bench upheld the trial court's finding that the agreement was a contingent contract within the meaning of Sections 31 and 32 of the Contract Act.
Referring to Clause 1 of the agreement and the evidence on record, the Court found that the parties had intended the consultant's appointment to commence only upon the simultaneous joining of all seven experts. Since that event never occurred, the contract never became enforceable and the consultant could not retain the advance paid under it.
The Bench therefore affirmed the finding that the advance amount had to be refunded and also rejected the consultant's claim for severance benefits, which depended upon the commencement of the contractual relationship.
However, the High Court disagreed with the trial court's refusal to award any remuneration for the services admittedly rendered by the consultant.
The Bench noted that the consultant had deposed about attending meetings with company officials, assisting in commissioning plants at Panoli and Cochin, participating in recruitment interviews and providing business consultancy. Importantly, these assertions were neither effectively challenged in cross-examination nor rebutted by a witness having personal knowledge of the relevant events.
Relying on the Supreme Court's decisions in Muddasani Venkata Narsaiah v. Muddasani Sarojana and Food Corporation of India v. Vikas Majdoor Kamdar Sahkari Mandli Ltd., the Court held that where services are rendered without any intention to act gratuitously and the beneficiary accepts those services, Section 70 of the Contract Act entitles the provider to reasonable compensation notwithstanding the failure of the contract itself.
Accordingly, the Court held that the consultant was entitled to consultancy fees of ₹15 lakh per month for August to November 2019, amounting to ₹60 lakh. Since he had already received ₹55 lakh (including TDS), the Bench modified the decree and directed the company to pay the balance amount of ₹5 lakh with interest at 8% per annum from December 1, 2019 until realization. The claim for reimbursement of certain travel expenses was rejected for want of documentary proof.
Case: Pulinat Ettan Thomas v. Finorchem Limited, AD-COM 02 of 2026