TMI Blog1969 (8) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... onvenience was caused to the Military authorities because of the failure on the part of the plaintiff to supply the food-stuff contracted to be supplied. - C.A. 851 OF 1966 - - - Dated:- 19-8-1969 - J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ. For the Appellant : Jagdish Swarup, Solicitor-General, Yogeshwar Prasad, C.M. Kohli and G.R. Chopra For the Respondent : L.M. Singhvi and S.P. Nayar JUDGMENT The Judgment of the Court was delivered by Shah, Ag. C.J. Maula Bux hereinafter called the plaintiff entered into a contract No. C/74 with the Government of India on February 20, 1947, to supply potatoes at the Military Headquarters, U.P. Area, and deposited an amount of Rs. 10,000 as security for due performance of the contract. He entered into another contract with Government of India on March 4, 1947 No. C/120 to supply at the same place poultry, eggs and fish for one year and deposited an amount of Rs. 8,500/- for due performance of the contract. Clause 8 of the contract ran as follows: "The officer sanctioning the contract may rescind his contract by notice to me/us in writing :-- (i) (ii) (iii) (iv) If I/we decline, neglect or delay to comply with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt observed that the decision of this Court in Fateh Chand v. Balkishan Dass [1964] 1 S.C.R. 515. did not purport to overrule the previous "trend of authorities" to the effect that earnest money deposited by way of security for the due performance of a contract does not constitute penalty contemplated under s. 74 of the Indian Contract Act, that even if it be held that the security deposited in the case was a stipulation by way of penalty, the Government was entitled to receive from the plaintiff reasonable compensation not exceeding that amount, whether or not actual damage or loss was proved to have been caused, and that even in the absence of evidence to prove the actual damage or loss caused to the Government "there were circumstances in the case with indicated that the amount of Rs. 10,000 in the case of potato contract and Rs. 8,500/- in the case of poultry contract may be taken as not exceeding the reasonable compensation for the breach of contract by the plaintiff." The High Court further observed that the contract was for supply of large quantities of potatoes, poultry and fish, which would not ordinarily be available in the market, and "had to be procured in case of bre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount so named or, as the case may be, the penalty stipulated for................................" There is authority, no doubt coloured by the view which was taken in English cases, that s. 74 of the Contract Act has no application to cases of deposit for due performance of a contract which is stipulated to be forfeited for breach: Natesa Aiyar v. Appavu Padayachi [1913] LL.R. 38 Mad. 178; Singer Manufacturing Company v. Raja Prosad [1909] I.L.R. 36 Cal. 960; Manian Patter v. The Madras Railway Company [1906] I.L.R. 19 Mad. 188. But this view is no longer good law in view of the judgment of this Court in Fateh Chand s case [1964] 1 S.C.R. 515. This Court observed at p. 526: "Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach, and (ii) where the contract contains any other stipulation by way of penalty. The measure of damages in the case of breach of a stipulation by Way of penalty is by s. 74 reasonable compensation not exceeding the penalty stipulated for." The Court also observed: "It was urged that the section deals in terms with the right to receive from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken to pay a sum of money or to forfeit a sum of money which he has already paid to the party complaining of a breach of contract, the undertaking is of the nature of a penalty. Counsel for the Union, however, urged that in the present case Rs. 10,000/- in respect of the potato contract and Rs. 8,500 in respect of the poultry contract were genuine preestimates of damages which the Union was likely to suffer as a result of breach of contract, and the plaintiff was not entitled to any relief against forfeiture. Reliance in support of this contention was placed upon the expression (used in s. 74 of the Contract Act), "the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused there by, to receive from the party who has broken the contract reasonable compensation". It is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree, and the Court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. But the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequence of the default by Maula Bux to supply potatoes, poultry, eggs and fish as stipulated by him. Against the judgment of that Court Appeal No. 2001 of 1966 is filed in this Court and is decided today. The High Court of Allahabad having confirmed the decree passed by the Trial Court, no useful purpose will be served by directing a fresh enquiry into the question whether the Union of India is entitled to recover from the plaintiff any reasonable compensation for breach of contracts and whether that compensation is equal to or exceeds the amounts deposited. Evidence on that question has already been led and findings have been recorded. In dealing with the Appeal No. 2001 of 1966 we have held that the Union has failed to establish by evidence that any damage or loss was suffered by them which arose out of the default committed by the plaintiff. We decline therefore to afford another opportunity for leading the evidence as to the loss suffered by the Union on account of the failure on the part of the plaintiff to carry out the contracts. On the view taken by us it must be held that the High Court was in error in disallowing the plaintiff s case. The High Court has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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