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Ajhar HussaIn Vs. Abdul Ghafoor - Court Judgment

LegalCrystal Citation
SubjectContract
CourtRajasthan High Court
Decided On
Case NumberS.B. Civil Revision No. 412 of 1974
Judge
Reported in1978WLN(UC)142
AppellantAjhar Hussain
RespondentAbdul Ghafoor
Cases ReferredMaula Bux v. Union of India
Excerpt:
.....justifying his refusal to repay the sum of rs. 110/-, which was deposited with him by way of 11 monthly installments by the plaintiff.;(b) contract act - section 74 agreement containing a penal clause--held, court can award compensation for breach of contract at reasonable rate.;it is clear that if there is a penal stipulation, the court can award compensation at a reasonable rate in case of breach of contract. hence, i think it just and proper to send this case back to the judge, small causes court, jodhpur, for determination of the question whether any compensation at a reasonable rate can be awarded to the defendant who is complaining of the breach of the agreement embodied in ex. a 2.;revision partly accepted - section 2(k), 2(1), 7 & 40 & juvenile justice (care and protection of..........15/-, per month, while under the second scheme, he deposited a sum of rs. 110/-, only by way of 11 monthly installments. the defendant instead of giving the plaintiff a sofa set under the first scheme paid him a sum of rs. 200/- and promised him to pay the balance of rs. 40/, after some time. under the second scheme, the defendant did not repay the entire amount of rs. 110/-, although he promised the plaintiff to pay the aforesaid sum as and when demanded by the latter. hence, the plaintiff sued the defendant for recovery of rs. 150/-, together with rs. 15/-, as interest.4. the defendant appeared before the judge, small causes court in response to the summons issued to him and contested the suit of the plaintiff on various grounds. in his written statement the defendant denied to have.....
Judgment:

K.D. Sharma, J.

1. This is a civil revision by Ajhar Hussain under Section 23 of the Rajasthan Small Causes Court Ordinance against the judgment & decree of the Judge, Small Causes Court, Jodhpur, dated 27th March, 1974, by which the petitioner's suit against Abdul Ghafoor for recovery of Rs. 164/-, was dismissed with costs.

2. The relevant facts giving rise to this revision petition may be briefly stated as follow : Ajhar Hussain instituted a suit against Abdul Ghafoor for recovery of Rs. 164/-, in the Small Causes Court, Jodhpur, on 12th May,1973. It was alleged in the plaint that Abdul Ghafoor had been running a business under the name & style the Aradhna Sales Corporation. The said Corporation floated twO schemes Nos. 1 and 2 and invited membership from the public. Every person desiring to be member of the first scheme has to fill the membership form and to deposit Rs. 15/-, per month for 16 months. Under scheme No. 1, 15 lucky numbers were to be drawn during the period of 16 months. Every lucky number was to be drawn on the 15th day of each month at 2 P.M. The member who got the lucky number would receive on 15th of any month during the 16 months one of the items, such as, cycle, electric radio, table fan etc., mentioned in the scheme, in addition to the amount deposited by him so far, and his name would be removed from the list of membership. Under he second scheme, floated by the Corporation, every member thereof was required to fill the form of membership and to deposit Rs. 10/-, per month during the period of 24 months Under this scheme, the total lucky numbers to be drawn were 23 and the 24th would be the great lucky number. If any member got a lucky number, on 10th of any month during the period of 24 months he would receive Rs. 251/-, in cash and would not be requited to deposit further installments and his name would be removed from the list of membership and if any member got great lucky number, he would receive a cooler or Rs. 501/-, in cash or 200 Kgs. of wheat, one sofa set and 5 Valves electric radio of 5 Bands.

3. Ajhar Hussain plaintiff deposited a sum of Rs. 240/-, in all under the first scheme by way of installments of Rs. 15/-, per month, while under the second scheme, he deposited a sum of Rs. 110/-, only by way of 11 monthly installments. The defendant instead of giving the plaintiff a sofa set under the first scheme paid him a sum of Rs. 200/- and promised him to pay the balance of Rs. 40/, after some time. Under the second scheme, the defendant did not repay the entire amount of Rs. 110/-, although he promised the plaintiff to pay the aforesaid sum as and when demanded by the latter. Hence, the plaintiff sued the defendant for recovery of Rs. 150/-, together with Rs. 15/-, as interest.

4. The defendant appeared before the Judge, Small Causes Court in response to the summons issued to him and contested the suit of the plaintiff on various grounds. In his written statement the defendant denied to have promised to pay the plaintiff a sum of Rs. 40/-, after some time. According to the defendant's plea, the plaintiff received som of Rs. 200/-, in full satisfaction of his claim and clearly mentioned in the receipt that nothing was due to him from the defendant. As regards the amount of Rs. 110/-, claimed by the plaintiff the defendant, contended that in view of Clause 9 of the agreement, the plaintiff was not entitled to claim refund of this amount as he committed default in payment of monthly installments. The Judge. Small Causes Court, Jodhpur, recorded the statements of the parties and dismissed the suit with costs as stated above. The plaintiff has come up to this Court in revision, as stated above.

5. I have carefully gone through the record and heard Mr. M.H. Farooqui and Mr. M.L. Shrimali for the petitioner and Mr. P.R. Bhansali for the non-petitioner. From & bare reading of the receipt Ex. A 1 on the record, it appears that Ajhar Hussain plaintiff received a sum of Rs. 200/-, from the defendant. Ajhar Hussain admitted his signatures aid endorsement marked A to B on the receipt. In the receipt he has clearly written that after receiving Rs. 200/-, from the defendant, no amount is due to him. The words 'AAB MEN AARADHNA SALES CORPORATION ME KUCH NAHIN HUN' written by him in his receipt definitely negatived his claim for a sum of Rs. 40/-, If the defendant promised him to pay the balance of Rs. 40/-, afterwards he would not have written in the receipt that nothing was due to him from the Aaradhna Sales Corporation after receiving a sum of Rs. 200/-. The Judge, Small Causes Court, Jodhpur, therefore, committed no error in reject-the claim of the plaintiff for the sum of Rs. 40/-.

6. As regards the amount of Rs. 110/-, claimed by Ajhar Hussain plaintiff, it was contended by Mr. Farooqui and Mr. Shrimali that it was not open for the defendant non-petitioner to invoke Clause (9) of the agreement Ex. A2 for justifying refusal to repay the said amount on the ground that the plaintiff committed defaults in the payment of the installments. According to the learned Counsel for the plaintiff-petitioner, this Clause (9) was a penal stipulation, because it provided that in the event of a default in payment of any one installment, the plaintiff would not be entitled to get back the amount deposited by him In support of the above contention, reliance was placed on Section 74 of the Contract Act and on the following authorities : Maula Bux v. Union of India : [1970]1SCR928 , Rameshwar Lal v. Balabux 1973 W.L.N. 677, Steedman v. Brinkle and Anr. Law Report (Appeal Cases) (Vol. 1) 1916 275 and State of Rajasthan v. Chandra Mohan Chopra 1971 W.L.N. 1.

7. Mr. P.R. Bhansali, learned Counsel for the non-petitioner, on the other hand, strenuously urged that the doctrine of penalty does not apply at all to the facts of this case and the stipulation contained in Clause (9) of Ex. A.21 hat in the event of a default of payment of any one installment by the plaintiffs the installments already deposited shall be forfeited cannot be held to be penal It was further argued that even assuming that if it is a penal stipulation, compensation can be awarded by the court at a reasonable rate in case of default.

9. I have given my best consideration to the rival contentions. It may be observed at the outset that it depends on the facts and the circumstances of each case whether a stipulation in the agreement is or is not penal. In the present case, the agreement provided that if the plaintiff made default in the payment of any one installment by the end of the next month, he would be removed from membership of the Corporation and another member would take his place and the amount deposited by him would not be returned to him in any circumstance. This stipulation is, in my opinion, a penal one because it involves forfeiture of the money paid upon default having been made in payment of any one of installments. In support of my above view I may refer to the relevant observations made by their Lordships in Maula Bux v. Union of India in para No. 7 at page 1959, which are as follows:

Where under the terms of the contract the party in breach has undertaken 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.

The defendant was, therefore, not entitled to invoke stipulation No. 9 in the agreement Ex. A 2 for justifying his refusal to repay the sum of Rs. 110/, which was deposited with him by way of 11 monthly installments by the plaintiff. The Judge Small Causes Court, Jodhpur, did not consider this aspect of the case & rejected the claim of the plaintiff for Rs. 110/-, presumably on the ground that he was bound by stipulation NO. 9 of the agreement to which he was a party.

10. Mr. P.R. Bhansali vehemently contended before me that Section 74 of the Contract Act postulates award of compensation at a reasonable rate if there is a per al stipulation and so the case may be sent back to the Judges, Small Causes Court, Jodhpur, for determination of amount of reasonable compensation The above contention is not devoid of force. Section 74 reads as foilows:

When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.

(Explanation and Exception not relevant)

From a bare reading of the wordings of this section, it is clear that if there is a penal stipulation, the court can award compensation at a reasonable rate in case of breach of contract. Hence, I think it just and proper to send this case back to the Judge, Small Causes Court, Jodhpur, for determination of the question further any compensation at a reasonable rate can be awarded to the defendant who is complaining of the breach of the agreement embodied in Ex A. 2.

11. I, therefore, partly accept the revision-petition and while confirming the judgment and decree of the Judge, Small Causes Court, Jodhpur, regarding rejection of the plaintiff's claim for the sum of Rs. 40/-, set aside his judgment and decree relating to rejection of the plaintiff's claim for Rs. 110/-, and send the case back to him for determination of the question whether any compensation at a reasonable rate can be awarded to the defendant who is complaining of breach of the agreement Ex. A. 2 No order as to the costs of this revision-petition. The parties are directed to appear in the trial court on 25.4.78.


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