Gajraj, a renowned businessman, wanted to establish a cloth dyeing unit for his textile business. He approached Kamai, a director of Swinla Manufacturers and Suppliers Ltd. ('Swinla') for supply of raw indigo, to be used

The suit filed by Gajraj against Swinlaw Manufacturers and Suppliers relates to the abrupt termination of the contract for supply of indigo that led to the complete stoppage of commercial production at the cloth dyeing unit plant set up by Gajraj. Gajraj claimed compensation for the loss of profits at the new plant consequent to its stoppage and also for the full cost of the plant incurred by him. In a similar case in Kanchan Udyog Ltd. (Appellant) vs. United Spirits Ltd. (Respondent) the appellant entered into an agreement with the respondent for establishment of a non-alcoholic beverages bottling plant. The concentrate (Essence), for preparation of the non-alcoholic beverage, was to be supplied by the respondent. The beverage was to be sold in specified districts of West Bengal, as provided for in the marketing agreement. The bottler's agreement was terminated by the respondent. Commercial production at the plant ceased and the suit was instituted by the appellant in 1990. The learned Single Judge decreed the Suit, awarding damages towards loss of anticipated profits, and towards costs for installation of the plant, after deducting ₹9.05 lakhs payable by the appellant to the respondent as consultancy charges. The respondent was held liable to pay to the appellant a sum of ₹4,24,33,000/- with interest @ 10% from the date of suit till payment. The Division Bench in appeal reversed the decree, and dismissed the Suit. The appellants moved the Supreme Court. The Supreme Court held that the appellant was not entitled to any expectation loss towards anticipated profits for the reasons that it was already seeking deferred payment for the concentrates purchased due to its poor financial position, the confirmation that sales had not picked up and the fact that they had acknowledged that they will not be able to run the plant profitably for the next six years The Court also held that any grant of reliance loss would tantamount to giving a benefit to it for what was essentially its own lapses. There are no allegations of any deficiency in the plant. The appellant had failed to establish its claim that the breach by the respondent was the cause for loss of anticipated profits, that the profitability projection in its loan application was a reasonable basis for award of damages towards loss of anticipated profits. The appellant had failed to abide by its own obligations and lacked adequate infrastructure, finances and manpower to run its business. It also failed to take reasonable steps to mitigate its losses. The Supreme Court held that the appeal lacked merit and dismissed the same. Since the facts are similar in Gajraj's case, it can be concluded that Swinla, similarly, is not liable to pay compensation to Gajraj.