1. Subramanian Chetty agreed to sell paddy to Ayodhia Pillai and received a deposit of Rs. 500. Ayodhia Pillai failed to perform his part of the contract and is sued for damages by Subramania. The finding is that it was Ayodhia that broke the contract. The question is whether Subramania is restricted in his claim by the amount of the deposit. The Courts below have held that he is not entitled to recover anything, more.
2. In second appeal Mr. Venkatachariar wants to support the judgments of the Courts below by asking us to read a finding in their judgments to the effect that the parties agreed at the time of the contract that nothing more than Rs. 500 is to be recovered, in case of breach. We are unable to agree with this contention. There is no finding, as a matter of fact, that there was an agreement that the only amount payable as damages is Rs. 500. The District Judge gives as reason for refusing damages the fact that the contract contains no stipulation for damages for breach of contract. If this reasoning is to be given effect to, then in every case where the parties fail to provide for damages for breach, the offending party is not liable to pay damages.
3. The parties have their right to damages under Section 73 of the Indian Contract Act; and unless they expressly contract out of that right under Section 74 they are entitled to such compensation as flows from the breach. The decision in Allahabad Improvement' Trust v. Tikandra Jang Bahadur 30 Ind. Cas. 584. no doubt supports the respondent, but, with all respect, we are unable to follow it In this Presidency it is now settled that the forfeiture of the deposit for failure to perform is not affected by Section 74 of the Contract Act. Natesa Aiyer v. Appavu Padayaehi 19 Ind. Cas. 462. In a later case (Full Bench), Vellore Taluq Board v. Gopalasami Naidu (3) 26 Ind. Cas. 226 it was held that the amount forfeited may be taken into account in estimating the damages; That was also the view taken by one of us in Orr v. Chitha Chinna Yegappa Chetty (1915) M.W.N. 249, It follows from these rulings that the general right to damages remains unaffected by the forfeiture, although in estimating the damages the amount may go towards mitigating the claim.
4. In this view, the decision of the Court below must be reversed. It has been found that Subramania suffered damage to the extent of Rs. 1,031-10-3. Deducting from this the sum of Rs. 500, Subramania is entitled to a decree for Rs. 531-10-3 with interest thereon at 6 per cent. from this date from the estate of Ayodhia Pillai. He is entitled to his costs in this Court. There will be no costs in the Courts below.