1. The first defendant, who is the principal respondent before us in this appeal, entered into a contract with the original owner of the house in dispute in 1909 for the purchase of the house. It appears that he had already advanced to the owner certain sums of money amounting to Rs. 3,650. The price of the house was fixed at Rs. 10,000. On the 25th November 1911, he borrowed Rs. 6,500 from the 4th plaintiff and executed a promissory note to the 1st and 2nd plaintiffs and also a varthamanam or agreement. The amount of the promissory note was payable on demand and carried interest at the rate of 9 per cent. In the varthamanam which was executed on the same date as the promissory note, it was stipulated that the amount of the promissory note was to be paid by the end of March 1912 and that in default of such payment, the 1st defendant was to execute a conveyance of the house in question by the 10th April of the same year for a sum of Rs. 6,500, the amount borrowed under the promissory note. In this suit the plaintiffs asked for specific performance of the agreement to sell inasmuch as the amount due on the promissory note was not paid by the stipulated date. They also ask in the alternative for a decree for the amount due to them with interest. The learned Subordinate Judge gave a decree to the 4th plaintiff for the amount due on the promissory note with interest at the stipulated rate, but he disallowed the prayer for specific performance, holding that the contract sought to be enforced was in the nature of a penalty within the meaning of Section 74 of the Contract Act. That section says: '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.' It is argued on behalf of the appellant by the learned Advocate-General that this case does not come within Section 74,inasmuch as the stipulation in default of payment of the amount borrowed under the promissory note was to convey certain immoveable property and not to pay a sum of money and that section contemplates that the penalty should be in the shape of a sum of money or increased rate of interest or something of that nature. That apparently was the law under the old Contract Act, but the language has been changed. What we have now got is that the penalty may be either in the shape of a specified sum of money or any other stipulation intended by the parties to be penalty for breach of the contract. The language of Section 74 of this present Contract Act is wide enough, therefore, to cover- this case. Nor is there any good reason why the penalty should be held to be limited to money.
2. The next question is whether in this case, the stipulation in Exhibit A as regards the conveyance of the house was intended to be by way of penalty. Upon the facts, it is quite clear that it was so intended. The 1st defendant had already entered into an agreement two years previous to the date of the varthamanam in question to purchase this house, and on the very date the promissory note and the varthamanam were executed, an agreement was entered into, or rather the old agreement was renewed, with the owner of the house under Exhibit II in the presence of the 2nd plaintiff himself. It recites that the property was to be sold to the 1st defendant for Rs. 10,000. The learned Advocate-General is unable to suggest any reason why, if the 1st defendant was to buy the house for Rs. 10,000 and he renewed the agreement to that effect on the very date of the promissory note and the varthamanam, Exhibit A, he should have agreed to sell the same house for Rs. 6,500 to the 4th plaintiff.
3. The only reasonable explanation is that the parties intended that the stipulation in Exhibit A regarding the conveyance of the house in default of payment of the amount of the promissory note on the date fixed was to be by way of penalty for default of payment on the fixed date. The learned Advocate-General also argued that as a matter of fact the house was not sold to the 1st defendant for Rs. 10,000 but only for Rs. 6,500. But there is no foundation for that argument. The price of the house i.e., Rs. 10,000 was recited in the deed of sale as well as in Exhibit II. Of this amount Rs. 3,650 represented what the purchaser, that is, the 1st defendant had already paid to the owner of the house.
4. The decree of he learned Subordinate Judge is right and we dismiss the appeal with costs.