Back
1962 Supreme(AP) 161
Andhra Pradesh High Court
Judges : CHANDRASEKHARA SASTRI, P.CHANDRA REDDY
Pasalapudi Brahmayya - Appellant
Versus
Teegala Gangaraju - Respondent
Decided On : 09-13-62
A party complaining of a breach of contract cannot recover damages without proving loss or damage, even if the contract specifies a sum payable in the event of a breach.
Headnote:
CONTRACT ACT - SECTION 74 - INTERPRETATION - DAMAGES - PROOF OF LOSS OR DAMAGE - NECESSITY - PENALTY OR LIQUIDATED DAMAGES - DISTINCTION.
Fact of the Case:
The petitioners entered into an agreement with the respondent to render services as farm watchmen for a year. The agreement stipulated that if the petitioners absented themselves for more than 12 days, they would pay damages at a specified rate per day. The petitioners absented themselves for a significant number of days, and the respondent sued for damages.
Finding of the Court:
The court held that the respondent was not entitled to damages unless he proved that he suffered loss or damage as a result of the petitioners' breach of contract. The court relied on Section 74 of the Indian Contract Act, which provides that where a sum is named in a contract as payable in the event of a breach, the party complaining of the breach must prove the damages he has suffered.
Issues: Whether the respondent was entitled to damages without proving loss or damage.
Ratio Decidendi: The court held that Section 74 of the Indian Contract Act requires the party complaining of a breach of contract to prove the damages he has suffered, even if the contract specifies a sum payable in the event of a breach. The court distinguished between penalty and liquidated damages, holding that liquidated damages are payable without proof of actual loss, but penalty is not.
Final Decision: The court allowed the petitioners' civil revision petition and dismissed the respondent's suit for damages.
( 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-respondents case that the 2nd petitioner absented himself for 182 days and that, therefore he is entitled to recover Rs. 182. 00as damages as per the terms of the agreement in addition to an amount of Rs. 10. 00 being the Advocates fee for the registered notice. Koopaiah also absented himself for 20 days and Rs. 4. 00 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 plaintiffs claim with regard to the damages, but disallowed the amount of Rs. 10. 00 which was sought to be recovered as Advocates fee for the registered notice and an amount of Rs. 5. 00 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 or rebate (mudara) which Lachayya is to give is at the rate of Re. 1/- per day and Koopaiah of us at the rate of eight annas per day", which according to the lower Court is valid and enforceable 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. 00 as damages. The only evidence of loss was that of the loss on resale by Rs. 1,000. 00 out of which they received Rs. 500. 00 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. 00 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. 00. 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, AIR 1956 Cal 41 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 damag
