1. This is an appeal by the defendant from a decree for damages t the extent of Rs. 394/4/- for an alleged breach of a contract for the sale of saw dust. The plaintiff has filed a cross objection in which he has claimed enhancement of the damages by Rs. 394/4/-.
2. The relevant facts are as follows: The defendant who is a forest contractor and a timber merchant at Yeotmal had opened branch office at Murtizapur for the sale of timber and saw dust. According to the plaintiff, he had appointed Gopikisan (P.W. 2) as the manager of the shop and that Gopikisan entered into a contract with the plaintiff on 29-8-1948 for the supply of 2000 bags of saw dust within four months at the rate of Rs. 1/- per bag. The plaintiff alleges that he paid Rs. 250/-as an advance to Gopikisan, that Gopikisan delivered to him only 423 bags of saw dust and that neither he nor the defendant delivered to him the balance. It may be mentioned that in the contract it is stated that if a breach were committed the defendant would be liable to pay Rs. 1000/- by way of damages. The plaintiff therefore claimed this amount together with of a sum of Rs. 102/- which was in excess of the amount which he had paid to Gopikisan over and above the price of 423 bags supplied by him from time to time.
3. The defendant denied the claim. While he admitted that he kept a stock of timber at Murtizapur and also that Gopikisan was his servant who was working at Murtizapur, he denied that Gopikisan was either a manager of the shop, or a diwanji or an agent of the defendant, or that he had any authority to make any forward contracts for the purchase or sale of goods. he also denied the damages claimed by the plaintiff.
4. The trial Court dismissed the suit. The lower appellate Court however granted a decree to the plaintiff for the refund of Rs. 102/- and damages to the extent of Rs. 394/4/-.
5. The first point urged on behalf of the defendant is that Gopikisan had no authority to enter into the alleged contract. There is no doubt that Gopikisan did enter into a contract of the kind alleged by the plaintiff. But it would appear that Gopikisan had no authority to enter into such a contract. It is one thing for a person to authorise his servant to sell goods which are in stock with him, it is another to authorise him to enter into a contract to well goods at a future date. The plaintiff has led no evidence to prove Gopikisan's authority to do the latter. Indeed he has not even alleged in his plaint that Gopikisan had any authority to enter into a contract of this kind. He was content to say that Gopikisan was the manager of the branch opened by the defendant at Murtizapur. That allegation is not sufficient. It was necessary for the plaintiff to allege further that by reason of the position which Gopikisan held he had either express or implied authority to enter into such a contract. Reliance is however placed upon the following statement in the evidence of the defendant himself in support of the contention that Gopikisan had authority to enter into this contract.
'In Murtizapur the P.W. 2 was ordered to sell Saw Dust between annas -/12/- to Rs. 1/4/-..... not below annas -12/- ..... P.W. 2 had authority to sell Saw Dust in Akola also at A. -/14/- per bag (Yeotmal delivery). It is a fact that I had also empowered P.W. 2 to sell Saw Dust in Akola and also in Murtizapur.'
This part of the evidence of the defendant only shows that Gopikisan authorised to effect sales. It dos not show that he had any authority to enter into contracts. There is a read difference between a power to sell goods and a power to enter into a contract to sell goods at a future date. It is clear from the contract on which the plaintiff relies that the transaction related to future goods and not to goods then in existence. It cannot be implied that a person who has a power to sell ready goods must also of necessity have a power to enter into a contract for the sale future goods. On this short ground therefore the plaintiff's claim for damages must fail.
6. There is however another reason why, in my opinion, the plaintiff's claim for damages must fail. It is that the plaintiff has led no evidence to show that he had suffered any damage at all; nor can it be inferred that the plaintiff must have suffered any damage. The learned Judge of the lower appellate Court when faced with this difficulty placed reliance upon the statement or the admission made by the defendants which is already quoted and came to the conclusion that the plaintiff is entitled to damages on the basis of the difference between the contract price and the maximum price at which the defendant had authorised Gopikisan to sell saw dust at Murtizapur. In the first place, this evidence does not show that any damage was sustained by the plaintiff. In the next place, this evidence is not sufficient to enable the Court to ascertain what was the rate of saw dust at the date of the breach. It may well be that the rate was Re. 1/-, -/14/- or even -12/-, in which cases the plaintiff would certainly not be entitled to damages.
7. It is however said that the contract having specified a sum of Rs. 1000/- as damages for its breach, the plaintiff was entitled to this amount or to a reasonable amount irrespective of the question whether the plaintiff had proved the actual loss. If the sum mentioned in the contact as damages payable by the defendant to the plaintiff is pre-estimate by the parties, Section 74 of the Contract Act would apply and would entitle the plaintiff to reasonable damages not exceeding the amount so named in case there was breach of the contract by the defendant. If however this amount has been mentioned in terrorem it would be by way of penalty and the plaintiff would not be entitled to claim this amount or any reasonable amount unless it is shown that he has actually sustained damages. In the instant case, it would appear that the amount of Rs 1000/- mentioned in the contract is not pre-estimate by the parties of the damage that would have been sustained by the plaintiff by reason of the breach. Bearing in mind that the rate of one bag of saw dust was Rs. 1/- the total price that would have been payable by the plaintiff to the defendant for the entire quantity of 2000 bags would be Rs. 2000/-. If defendant supplied 1999 bags but failed to one bag there would undoubtedly be a breach of the contract on the part of the defendant and under the contract as it stands the defendant would be liable to pay Rs. 1000/- as compensation to the plaintiff. This would be entirely disproportionate to the injury sustained by the plaintiff. It would therefore follow that the figure specified in the contract was fixed not as a pre-estimate by the parties of the damages which the plaintiff would suffer by reason of the breach, but in terrorem. Where such is the case, it cannot be presumed that the plaintiff must prove that he did in fact suffer some damage. Therefore the plaintiff must prove that he did in fact suffer some damages, though he need not prove the actual extent of the damages. Here the allegation is that the saw dust was to be used for manuring the fields of the plaintiff and that the failure of the defendant to supply the full quantity of saw dust contracted for resulted in damages to the plaintiff. There is no evidence to show that saw dust is sued as a manure nor has one word been said by any one in this case that the use of saw dust gives a better yield of crops than otherwise. It would therefore follow that the plaintiff has not shown that he had suffered any damage at all. No doubt Section 74 says that where a sum is stated in the contract is payable to a party if a breach thereof caused by the other party the Court has power to grant compensation t the firm even though actual loss or damage is not proved. But that does not mean that compensation can be awarded even though no loss whatsoever has been caused. For the very concept of award of compensation is bound up with loss or damage that results from a breach of contract. All that Section 74 permits is award of compensation even where the extent of the actual loss or damage is not proved and gives discretion to the Court to fix the amount Where, as here, no loss or damage has ensued thee can be no question of awarding compensation. In my opinion, therefore, the plaintiff is not entitled to claim any damages.
8. For these reasons, I allow the appeal, dismiss the cross-objection and modify the decree of the lower appellate Court by reducing it from rs. 496/4/- to Rs. 102/-. The plaintiff will be entitled to his costs on Rs. 102/- in all the Courts and the defendant will be entitled to his costs on the remainder in all the Courts. Costs of the cross-objection will be borne by the plaintiff-respondent.
9. Appeal allowed.