What is the core point in this case?

If a party ends a contract under Section 39, it can claim damages but must restore benefits received under Section 64, subject to set-off for proven loss.

Did the Court order any refund?

Yes. Rs. 4000 paid under the contract was refundable under Section 64, subject to the defendants’ right to set-off damages for the plaintiff’s repudiation.

Who were the parties and what was the business?

A film distributor in Calcutta and a limited company importing films. The distributor managed regional handling and office support under contract terms.

How do Sections 39 and 64 work together?

Section 39 lets the aggrieved party end the contract for breach; Section 64 requires returning benefits received, with adjustments for damages.

What happened finally in higher court?

The Privy Council allowed refund subject to damages and sent the matter back to the High Court to assess the exact damages.

Murlidhar Chatterjee v. International Film Co. (1943) Discharge by Breach

Murlidhar Chatterjee v. International Film Co. (1943) — Discharge by Breach & Refund

Privy Council (India) 1943 AIR 1943 PC 34 Contract Law Discharge by Breach By Gulzar Hashmi India 26 Oct 2025

Primary keywords: Murlidhar Chatterjee v. International Film Co.; discharge by breach; Section 39; Section 64
Secondary: refund of benefits; repudiation; film distribution contract

Quick Summary

This case explains how Section 39 and Section 64 work together. If one party ends the contract for breach, they may sue for damages. But under Section 64, they must restore benefits received, subject to the other side’s right to claim set-off for proven loss.

End the contract for breach → you can claim damages.
But you must return benefits taken under the contract.
Set-off for the other side’s damages still applies.

Issues

After ending the contract under Section 39, must the party restore benefits received?
How should courts balance refunds with damages due to repudiation or breach?

Rules

Section 39: Aggrieved party may treat the contract as ended and sue for damages.
Section 64: A party who rescinds must restore benefits received under the contract, subject to set-off for damages.

Facts — Timeline

Optional

Timeline visual for Murlidhar Chatterjee case

8 May 1936 — Contract Formed

Distributor (plaintiff) to manage the company’s Calcutta office and handle films in several regions; company (defendant) to supply new positive prints monthly.

Payments & Prints

Plaintiff to pay ₹1750 per print towards cost; prints to be returned after exploitation.

2 Jul & 7 Nov 1936 — On-account Payments

Plaintiff pays ₹2000 twice on account for films. Delivery delays and booking difficulties arise.

1 Dec 1936 — Complaint & Stop Business

Plaintiff alleges delays and breach; says they will not continue. Defendant denies breach.

21 Jan 1937 — Repudiation Accepted

Defendant accepts repudiation and threatens to claim losses.

Suit Filed

Plaintiff seeks ₹3000 damages, ₹4000 refund, and ₹913.13 expenses.

Arguments — Appellant vs Respondent

Plaintiff (Distributor)

Delays and non-delivery amount to breach.
After ending the contract, amounts paid should be refunded.
Also entitled to damages and expenses.

Defendant (Company)

No breach; plaintiff’s repudiation caused loss.
Company entitled to set-off damages against any refund.
Operational disruption should be compensated.

Judgment

Refund with Set-off

The Privy Council held that the plaintiff can recover ₹4000 paid under the contract, subject to the defendant’s right to set-off damages caused by repudiation and other breaches. The case was sent back to the High Court to assess damages.

Key line: End the contract under Sec. 39, but return the benefits under Sec. 64, after adjusting for proven loss.

Ratio Decidendi

Sec. 39 allows rescission and a claim for damages.
Sec. 64 compels restoration of benefits on rescission.
Refund is subject to set-off of defendant’s damages.

Why It Matters

The case shows the two-way fairness of contract law. A wronged party can exit and claim damages, but cannot keep benefits without accounting for them. It guides drafting and remedies in ongoing supply or service contracts.

Key Takeaways

Sec. 39 → end contract + claim damages.
Sec. 64 → restore benefits on rescission.
Refunds are adjusted by set-off.

Keep records of payments & performance.
Document delays and delivery issues.
Use clear monthly supply terms in drafts.

Mnemonic + 3-Step Hook

Mnemonic: “End-Return-Adjust”

End: Use Sec. 39 to end the contract for breach.
Return: Under Sec. 64, return benefits received.
Adjust: Apply set-off for the other side’s damages.

IRAC Outline

Issue

After rescission under Sec. 39, must the rescinding party return benefits under Sec. 64?

Rule

Sec. 39 allows rescission and damages; Sec. 64 requires restoration of benefits with set-off for damages.

Application

Plaintiff ended the contract citing delay. Amounts paid were refundable, but defendant could set-off losses due to repudiation.

Conclusion

Refund of ₹4000 allowed, subject to assessment and set-off of defendant’s damages by the High Court.

Glossary (Easy English)

Discharge by Breach: Ending a contract because the other side failed to perform.
Rescission: Treating the contract as cancelled and undoing its effects.
Set-off: Adjusting a refund by subtracting the other party’s proven damages.
Repudiation: Clear refusal or inability to perform essential terms of the contract.

Student FAQs

Not usually. If you rescind under Sec. 39, Sec. 64 says you must restore benefits, after adjusting for the other side’s damages.

₹4000 paid under the contract was refundable, but subject to set-off of the company’s damages.

To calculate the exact damages for set-off—how much loss the company suffered due to repudiation or breach.

No. It allows damages but insists that benefits taken must be returned or adjusted fairly.

Case Card

CASE_TITLE: Murlidhar Chatterjee v. International Film Co. (1943)
PRIMARY_KEYWORDS: Murlidhar Chatterjee v. International Film Co.; discharge by breach; Section 39; Section 64
SECONDARY_KEYWORDS: refund of benefits; repudiation; film distribution contract
PUBLISH_DATE: 26 Oct 2025
AUTHOR_NAME: Gulzar Hashmi
LOCATION: India
Slug: murlidhar-chatterjee-v-international-film-co-1943-discharge-by-breach