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1983 Supreme(HP) 40
High Court Of Himachal Pradesh
V.P.GUPTA
H.P.STATE FOREST CORPORATION, SIMLA - Appellant
Versus
HARI CHAND - Respondent
Civil Suit No. 35 of 1982
Decided On : 08/18/1983
H.M. Sharma, for plaintiff; D.D. Sud vice Chhabil Dass, for Defendant.
A party complaining of a breach of contract is entitled to receive reasonable compensation, not exceeding the amount of penalty stipulated in the agreement, but the actual loss or damage suffered must be proved.
Headnote:
CONTRACT - BREACH - PENALTY CLAUSE - ENFORCEABILITY - REASONABLE COMPENSATION - SECTION 74 OF THE CONTRACT ACT - INTERPRETATION - APPLICATION.
Fact of the Case:
Plaintiff, a corporate body engaged in extracting resin from Himachal Pradesh forests, entered into an agreement with the defendant for the extraction and supply of resin from a specified forest lot. The agreement stipulated a minimum yield of 20 quintals per thousand blazes, with a penalty of Rs.400 per quintal for failure to extract the minimum quantity. The defendant extracted 791 tins of resin but failed to deliver 418 tins, resulting in a loss to the plaintiff. The plaintiff claimed compensation for the undelivered resin, penalty for illicit tapping, and freight charges.
Finding of the Court:
1. The court held that the penalty clause in the agreement was void and unenforceable under Section 74 of the Contract Act. 2. The plaintiff was entitled to reasonable compensation for the loss suffered due to the defendant's breach of contract. 3. The plaintiff failed to prove the actual loss or damage suffered due to the non-delivery of resin, and therefore, could not recover any amount as compensation. 4. The plaintiff was entitled to recover freight charges incurred for transporting the resin to the factory.
Issues: 1. Whether the penalty clause in the agreement was enforceable. 2. Whether the plaintiff was entitled to compensation for the undelivered resin. 3. Whether the plaintiff was entitled to interest on the claimed amount. 4. Whether the defendant was entitled to the security deposit and the price of the resin supplied.
Ratio Decidendi: 1. Section 74 of the Contract Act provides that a party complaining of a breach of contract is entitled to receive reasonable compensation, not exceeding the amount of penalty stipulated in the agreement. 2. The plaintiff failed to prove the actual loss or damage suffered due to the non-delivery of resin, and therefore, could not recover any amount as compensation. 3. The penalty clause in the agreement was void and unenforceable, and the plaintiff was entitled to recover only reasonable compensation under Section 74 of the Contract Act.
Final Decision: The plaintiff's suit was dismissed, and the defendant was entitled to the security deposit and the price of the resin supplied.
1. The plaintiff is a corporate body and is engaged in the extraction of resin from the forests of Himachal Pradesh. It has a factory known as, "Rosin and Turpentine Factory at Nahan for the manufacture of rosin out of resin. In the month of March 1979, forest in lot No. 2 of 1979 of Chopal Forest Division was auctioned to defendant and an agreement was executed between the parties on 1st August, 1979. As per terms of the agreement the defendant was allotted 20,585 blazes and the minimum yield per thousand blazes was at the rate of 20 quintals and the total yield for the entire lot was fixed to be 412 quintals resin. This resin was to be delivered by the defendant at the Rosin and Turpentine Factory at Nahan and the defendant was to receive payment at the rate of Rs.166 per quintal. The contract was to be completed till 31st December, 1979. According to the terms of the agreement, the defendant was handed over the possession of 20585 blazes. The defendant could also get some running payment as per conditions of the agreement but could not do any illicit tapping or cause damage to the trees. In case of illicit tapping or causing damage the defendant was liable to pay compensation at the rate of Rs.400 per quintal. The extracted resin was to remain at the risk and responsibility of the defendant and in case of default, unauthorised removal attempted or reported theft of the resin the defendant was to pay a penalty of Rs.400 per quintal for the loss. The defendant was also subjected to a penalty at the rate of Rs.400 per quintal for failure to extract and supply minimum agreed yield of 412 quintals.
2. It is alleged that the defendant extracted 791 tins of resin but did not deliver the same at the Nahan factory with the result that the plaintiff had to carry 373 tins weighting 60.45 quintals to the factory on 3-2-1980. The defendant was entitled to receive a payment of Rs.10,647.40 paise for these resin tins. The defendant is alleged to have lost 418 tins containing 73.36 quintals of resin which were extracted by him and therefore a penalty is claimed for this loss in terms of Cl. 29 of the agreement at the rate of Rs.400 per quintal. The defendant also did not extract the minimum quantity of resin and was liable to pay penalty under Cl. 30 of the agreement. It is alleged that there was some illicit tapping and for this the defendant is liable to pay penalty. The plaintiff also claims Rs.2455.95 as freight, loading and unloading charges for the carriage of 373 resin tins. The defendant received some running payments also. After calculations the plaintiff has claimed an amount of Rs.1, 76, 771-55 paise from the defendant for the various items as shown in para 21-A of the plaint. A credit of Rs.6,137-40 for some items as mentioned in para 21-B of the plaint is allowed. Thus the plaintiff claims a principal amount of Rupees 1,70,634.15 from the defendant and after adding interest at the rate of 18% per annum from 1-1-1981 to 31-5-1982 amounting to Rs.74.725-85, the total claim of the plaintiff is Rs.2,44, 860. Now for recovery of Rs.2,44,860 (2,45,360?) the plaintiff has filed this suit on 11th June, 1982. Further interest is also claimed.
3. The defendant contested the plaintiffs claim alleging that the suit has not been filed through an authorised person and that the plaintiff is not entitled to the amount. The clause regarding imposition of penalty is alleged to be void and unenforceable and the defendant claims the amount of security deposited by him along with the price of resin. The defendant has also disputed the claim regarding interest.
4. On the pleadings of the parties the following issues were framed on 26-1-1983:-
1. Whether the suit has been filed through an authorised person? OPP
2. Whether the plaintiff is entitled to the recovery of Rs.1,70,634-15 as principal amount mentioned in para 21 of the plaint ? OPP
3. Whether the plaintiff is entitled to interest? If so, at what rate and how much? OPD
4. Whether the clause
