FATEH CHAND versus BALKLSHAN DAS

Citation: [1964] 1 S.C.R. 515 · Decided: 15-01-1963 · Supreme Court of India · Bench: BHUVNESHWAR PRASAD SINHA · Disposal: Order modified

Cited by 5 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

1 S.C.R. 
SUPREME COURT REPORTS 
515 
FATEH CHAND 
v. 
BALKlSHAN DAS 
(B. p; SINHA, c. J., P. B. GAJENDRAGADXAJ't, 
K. N. WANCHOO, K. C. DAS GUPTA and 
J. C. SHAH, JJ.) 
Contract-Compen•ation fur /,reach of contract where penalty 
stipulated for-"tlte contract contains nny other stipulation by 
way of penalty", if applicable tu all stipulat;on by way of 
penalty-Indian Contract Act, W/2 (Act IX of 1111'2), s. U-
Code of Civil Proadure, JVOS (Act 5 uf 1908), s . . ~ (U) tti1td 
0. 20 r. 12(1)(c). 
By agreement dated March 21, 1949, the plaintiff con· 
tracted to •ell lea•ehold rights in a piece of land and in the 
building constructed thereon to the defendant. The plaintil!' 
re.:eived Rs. 25,000/- under the agreement and delivered posses-
sion of the building and the land in his occupation to the 
defendant, but the sale was not completed before the expiry of 
the period stipulated in the agreement, and for this default 
each party blamed the other. The plaintifT instituted a suit 
in the court of the Subordinate Judge claiming to forfeit the 
amount of Rs. 25,000/· received by hi'll, and praying for ~ 
decree for possession of the land and building and for compen· 
sation for use and occupation of the building from the date of 
delivery of possession to the defendant of the property. The 
defendant contended that the plaintifT having broken the con· 
tract could not forfeit the amount of Rs. 25,000/· received by 
him nor claim any compensation. The trial Judge held that 
the plair.tifT had failed to put the defendant in possession and 
could not therefore retain Rs. 25,000/· and accordingly directed 
that on the plaintifT depositing Rs. 25,000/- less Rs. 1,400/- the 
defendant do put the plaintifT in possession "{ld awarded to the 
plaintiff future mesne profits at the rate of Rs. 140/· per 
mcnscm from the date of the suit until delivery of possession. 
On appeal the High Court modified the decree of the trial 
court and declared "that the p!aintifT was entitled to retain 
out of Rs. 25,000/- paid by the defendant under the sale 
agreement, a sum of Rs. 11,250/·" and directed that the plain· 
tiff do get from the defendant compensation for use at the rate 
of Rs. 265/· per mensem. 
Held, that the High Court was right in holding lhat the 
defendant had committed breach of the contract, 
1163 
January, 15. 
1963 
/.'ateh Chand 
v. 
Balkis!iOJ1 Dos 
016 SUPREME COURT REPORTS-[1904] VOL. 
Held, further, cnat the expression "the ,contract contains 
any .other stipulation by way of penalty" comprehen.•ively 
applies to every covenant involving a penalty-\vhether it is 
fOr payment on breach of' contract of money, or delivery of 
property in future, or for" forfeiture of right to money or other 
property already dclivci·ed. Duty not to enforce the penalty 
clause ·~but ,only to, award reasonable compensation is statu .. 
torily imposed upon courts by s. 14 of the Indian Contract 
Act. 
In ·aQ casCs, therefore, whei·e there is· a stipulation iu the 
nature of penalty for forfi;:iture of an amount deposited pur-
suant to the terms of a contract which expressly p!'ovides for 
forfeiture, ~he COl!rt has jurisdiction to awt1-rd such sum only as 
it considers ll::aso'nable, but not exceeding the amount specified 
in the contract as Ijable to forfeiture. 
' 
/ 
In the present case in the absence of any iJl'OOf of damage 
arising from the breach of .. contract, the amount ~o(.Rs. 1,000/-
which had been forfeited and liability to foiteiture whereof 
was not challenged and the advantage. that the plaintilf derived 
·by retaining the sum of Rs. 24,000/- wai sufficient. compensa-
tion to the plaintiff for loss suffered by him. In the absence 
of evidence to show that the value of th~ property had depre-
ciated, since the <lite of the contract, the decree passed by thr: 
High Cr.urt awar dini 10% of the contract price to the plaintiff 
as co1npensatio11 C'JU l l not be sustained. 
Abdul <Jani & Co. v. Trustees oj 1/1.e Purl of Bombay, 
I. L. R. 1952 Born'., 747 
and NaleAa 
Aiyar v. Appav" 
Padayaclii, (1913) I. L. R. 38 Mad. 178, distinguished. 
Held, further, that the plaintiff was not only entitled to 
111esnc profits at the rate fixed by the trial court, but \Vas also 
entitled to interest on such profits : vidc s. 2(12) of the Code of 
Civil Procedure. 
CrYIL At·l'~lLf,A'J'B JutUSlJI<J'.l'WN : C:::ivil Appeal 
No. 287 of HJ60. 
Appeal from the judgment and decree dated 
August 22, 1957 of the Punjab High Court in 
(Circuit Bench)

Excerpt shown. Read the full judgment & AI analysis in Lexace.