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Pasalapudi Brahmayya and anr. Vs. Teegala Gangaraju - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAndhra Pradesh High Court
Decided On
Case NumberCivil Revn. Petn. No. 1317 of 1958
Judge
Reported inAIR1963AP310
ActsIndian Contract Act, 1872 - Sections 74
AppellantPasalapudi Brahmayya and anr.
RespondentTeegala Gangaraju
Appellant AdvocateK.V. Rangachari, Adv.
Respondent AdvocateT. Veerabhadra, Adv.
DispositionRevision allowed
Excerpt:
contract - damage - section 74 of contract act, 1872 - suit for recovery of damage for breach of contract - even though sum to be paid for breach of contract is provided in contract party claiming damage must prove actual damage he has suffered - plaintiff failed to prove the loss suffered - held, plaintiff is not entitled to damages. - .....by the other party the court has power to grant compensation to the party 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.' the learned judge further held that:--'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 there can be no question of awarding compensation.' similar is the view taken in union of india v. vasudeo agarwal, : air1960pat87 , where, following the decision of the privy council in air.....
Judgment:

Chandrasekhara Sastry, J.

1. This Civil Revision Petition has been referred to a Bench of this Court by Narasimham, J., as it raises an important question as to the true interpretation of Section 74 of the Indian Contract Act and accordingly it has now come before us for decision.

2. The petitioners entered into an agreement in writing with the respondent on 31-7-1954 for rendering him service as his farm watchmen for the year 1954-55. The respondent agreed to pay to the petitioners 162-1/2 kunchams of jonna grain and 225 kunchams of paddy for the year. The services were to be rendered by the 2nd petitioner and his younger brother, Koopaiah. They are the sons of the 1st petitioner. It is stipulated under the agreement that the 2nd petitioner and Koopaiah should hot absent themselves for a period exceeding 12 days in the year and that, if they absented them selves on more number of days, the 2nd petitioner should pay for the days he absented himself at the rate of Re. 1/- per day and Koopaiah at the rate of Re. 0-8-0 per day.

3. It is the plaintiff-respondent's case that the 2nd petitioner absented himself for 182 days and that, therefore he is entitled to recover Rs. 182/-as damages as per the terms of the agreement in addition to an amount of Rs. 10/- being the 'Advocate's fee for the registered notice. Koopaiah also absented himself for 20 days and Rs. 4/- is claimed as damages on that account After allowing certain, deductions, the plaintiff claimed an amount of Rs. 91-1-9 from the petitioners.

4. The District Munsif, Kowur decreed the plaintiff's claim with regard to the damages, but disallowed the amount of Rs. 10/- which was sought to be recovered as Advocate's fee for the registered notice and an amount of Rs. 5/- for the services rendered by the 1st petitioner in place of the 2nd petitioner. The lower Court rested its decision on the term in the contract, Ex. A-1 which, stated that:

'If the period of absence is more, remission orrebate (mudara) which Lachayya is to give is atthe rate of Re. 1/- per day and Koopaiah of usat the rate of eight annas per day',which according to the lower Court is valid andenforceable according to its tenor: __

5. It is argued by Sri Rangachari, the Reamed counsel for the petitioners that, on a proper construction of Section 74 of the Indian Contract Act read with Section 73 the plaintiff is not entitled to any damages unless he proves that he suffered damaged or loss by reason of the default committed by the petitioners. In support of his contention, he relied upon the decision of the Privy Council in Bhai Panna Singh v. Bhai Arjun Singh, AIR 1929 PC 179. That case arose out of a suit by the vendors for damages for breach of a contract for sale. The contract provided inter alia that the party retracting from the contract shall pay Rs. 10,000/- as damages. The only evidence of loss was that of the loss on resale by Rs. 1,000/- out of which they received Rs. 500/- as advance. It is when considering the claim of the vendors for the amount of Rupees 10,000/- stipulated in the agreement that the Privy-Council held as follows:

'The effect of Section 74 Contract Act of 1872, is to disentitle the plaintiffs to recover simpliciter the sum of Rs. 10,000/- whether penalty or liquidated damages. The plaintiffs must prove the damages they have suffered.'

Ultimately, therefore the plaintiffs suit was decreed only for an amount of Rs. 500/-. This is clear authority for the position that though an amount is named in the contract as the amount to be paid in the case of such breach or if the contract contains any other stipulation by way of penalty, the party complaining of breach must prove the damages he has suffered. This decision was referred to and followed by a Board of the Calcutta High Court in Pravudayal v. Ramkumar, : AIR1956Cal41 and it was pointed out that:--

'Where an agreement for sale provides that whichever party retracts from the contract will pay a certain sum as damages when the contract is broken the other party cannot under Section 74, Contract Act recover simpliciter the sum whether Us penalty or liquidated damages, He must first prove the actual damages he has suffered.'

It was also pointed out that:--

'It is not necessary that the Court has to come to a decision that the penally mentioned is an unreasonable one before the Court can proceed to assess the actual amount of damages.'

The learned counsel for the petitioner referred us also to the decision in Satyanarayan Amolakchand v. Vithal Narayan, : AIR1959Bom452 . In that case, the contract specified a sum of Rs. 1,000/- as damages for its breach and it was contended before Mudholkar, J. that the plaintiff was entitled to this amount or to a reasonable amount irrespective of the question whether the plaintiff had proved the actual, loss. The learned Judge found, on the evidence, that the plaintiff had not shown that he had suffered, any damage at all and proceeded to hold that:--'No doubt Section 74 says that where a sum is stated in the contract as payable to a party if a breach thereof is caused by the other party the Court has power to grant compensation to the party 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.' The learned Judge further held that:--

'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 there can be no question of awarding compensation.' Similar is the view taken in Union of India v. Vasudeo Agarwal, : AIR1960Pat87 , where, following the decision of the Privy Council in AIR 1929 PC 179, it was held that the effect of Section 74 is to disentitle the plaintiff to recover simpliciter the penal sum named in the agreement as doe and payable on breach of contract, whether as penalty or liquidated damages, unless he proves the damages he has suffered. On the authority of these decisions, the plaintiff in this case cannot get a decree for any damages unless he proves that he has suffered loss or damage.

6. But it is argued by Sri Veerabhadraiah, the learned counsel for the respondent, that on a plain reading of Section 74 the plaintiff is entitled to a decree for some damages or compensation as admittedly, the defendants committed breach of the agreement. He relied upon the decision in Meyyappa v. Nachammal, AfR 1929 Mad 783(2), where the learned Judge held that the fact that no loss is proved to have been sustained by the plaintiff on account of the breach of tbe agreement by the defendants is no bar to the awarding of compensation under Section 74 of the Contract Act. Apparently, the decision of the Privy Council in AIR 1929 PC 179 was not, by then, reported and was not brought to the notice of Sundaram, Chetty J. who gave that decision.

7. We are also referred to the decision of. Ameer AH, J. in Mahadeo Prasad v. Siemens Ltd.,. AIR 1934 Cal 285. But this also docs not render any assistance to the respondent. The learned Judge held that the plaintiff must prove his damage in a general sense.

8. We are next referred to the decision of the Supreme Court in Chunilal V. Mehta and Sons Ltd. v. Century Spinning and ., : AIR1962SC1314 . But it does not support the contention of the. Jearned counsel for the respondent. The Supreme Court held that:--

'Where the parties have deliberately specified the amount of liquidated damages there can be no presumption that they at the same time, intended to allow the party who has suffered by the breach to give a go-by to the sum specified and claim instead a sum of money which was not ascertained or ascertainable at the date of the breach.'

Reliance also is placed on the decision of the House of Lords in Clydebank Engineering and Ship Building Co. Ltd. v. Don Jose Ramos-Yzquierdo Y Castaneda, (1905) AC 6. The contract in that case was for the building of four torpedo-boat destroyers for the Spanish Government within the stipulated periods. The contract further provided that the penalty for late delivery shall be at the rate of 5001 per week for each vessel not delivered by the contractors within the contract time. The question that arose for decision was whether this stipulation was by way of penalty. It was held that the sum of 5001 a week was to be regarded as liquidated damages and not as a penalty. This decision does not, therefore, support the contention of Mr. Veerabhadrayya.

9. In the present case, the lower Court has not found that the plaintiff has suffered any damage. Therefore, the decree for damages can-rot be sustained. The Civil Revision Petition is allowed and the plaintiff's suit S. C. No. 126 of 1956, on the file of the lower Court is dismissed. The parties shall bear their own costs here and in the lower Cour


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