CHINNASWAMY CHETTIAR Vs. CHERU

JUDGEMENT

(1.) THE only question that arises in this appeal is whether the recovery of any sum beyond Rs. 4000/- and interest on the defaulted instalments in pursuance of the compromise decree in O. S. No. 75 of 1125 of the district Court of Trichur is unenforceable by virtue of the provisions of section 74 of the Indian Contract Act, 1872. Under Section 74: "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 otter 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. "

(2.) IN other words the section stipulates that "reasonable compensation" shall be the measure of the recovery and that the penalty or liquidated damages indicated in the contract, its outside limit. As pointed out by Pollock and Mulla in their Commentary to the INdian Contract Act, 1872, it is a bold section which "cuts the most troublesome knot in the Common Law doctrine of damages"and carries "the tendency of the English authorities to its full consequences. "

(3.) THE suit which ended in the compromise was for a sum of Rs. 10,000 made up as follows: Amount due as per accounts on 32-12-1124: Rs. 9939-12-9 Interest thereon from the said date to date of suit at 12 per cent per annum. Rs. 330--3-3 Total Rs. 10270-0-0 Amount waived by the plaintiff Rs. 270-0-0 Balance Rs. 10000-0-0 and the relevant portion of the petition as it appears in the razi-decree reads: