# Plaintiff/ v. Central Dairy Farm, U.P., Pashu Dhan Uddyog, Ltd. and another

- **Citation:** (2007) 3 ILRA 683
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2007-08-22
- **Case number:** Second Appeal No. 1007 of 2005
- **Bench:** Pankaj Mithal
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/plaintiff-v-central-dairy-farm-u-p-pashu-dhan-uddyog-ltd-and-another-41073
- **Pages:** 6

## Headnote

Indian Contract Act-1872-Section 73,
74-Compension
for
loss
caused
by
breach of contract-Contract for supply of
30,000 live sheep and goats-deposit of
Rs.2,60,000/- towards security-breach
of contract-without proof of actual losswhether the amount of security can be
for fitted?-held-'No'.

Held: Para 14

Therefore, on breach of the contract by
the plaintiff-appellant, the defendantrespondent
No.1
is
entitled
to
a
reasonable compensation not exceeding
the amount of security but not without
establishing that it had actually suffered
damage or loss on account of the said
breach. In other words, compensation
cannot be awarded where no loss or
damage has been suffered at all. There is
nothing on record to establish that any
loss/damage was actually suffered by
the
defendant
respondent
No.1
on
account of the alleged breach of contract
by the plaintiff-appellant. Thus, in view
of the legal position as discussed above
specially in the light of five judges
decision of the Supreme Court in Fateh
(Supra) the defendant-respondent No.1
cannot
forfeit
the
security
amount
without proving any actual loss or
damage suffered by it.
Case law discussed:
AIR 1963 SC-1405
AIR 1970 SC-1955
AIR 1973 SC-1098
AIR 1977 Alld. 28
AIR 2003 SC-2629

## Text

3 All] M/s Kamil & Brothers V. Central Dairy Farm and another
683
Therefore, on the facts there was a breach
of the conditions of the contract of the
insurance and accordingly the insurance
company i.e. the appellant Oriental
Insurance Company was not liable for
payment of any compensation.

11. In view of the above, the appeal
succeeds. The judgment order and award
passed by the Motor Accident Claims
Tribunal dated 14.1.2003 passed in
MACP No. 33/70/93 (Jagdish Singh &
another Vs. Sushil Kumar Shukla &
another) is set aside to the extent it fixes
the liability to pay the compensation
awarded upon the appellant insurance
company. The respondent No.3 the owner
of the vehicle is held liable to satisfy the
award.

12. The appeal is allowed as above
with no orders as to costs.
---------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 22.08.2007

BEFORE
THE HON'BLE PANKAJ MITHAL, J.

Second Appeal No. 1007 of 2005

M/s Kamil & Brothers

...Plaintiff/Appellant
Versus
Central Dairy Farm, U.P., Pashu Dhan
Uddyog, Ltd. and another
...Defendants/Respondents

Counsel for the Appellant:
Sri Ramendra Asthana

Counsel for the Respondents:
Sri Ram Niwas Singh
Sri V.K. Chandel
Sri V.K.S. Chandel

Indian Contract Act-1872-Section 73,
74-Compension
for
loss
caused
by
breach of contract-Contract for supply of
30,000 live sheep and goats-deposit of
Rs.2,60,000/- towards security-breach
of contract-without proof of actual losswhether the amount of security can be
for fitted?-held-'No'.

Held: Para 14

Therefore, on breach of the contract by
the plaintiff-appellant, the defendantrespondent
No.1
is
entitled
to
a
reasonable compensation not exceeding
the amount of security but not without
establishing that it had actually suffered
damage or loss on account of the said
breach. In other words, compensation
cannot be awarded where no loss or
damage has been suffered at all. There is
nothing on record to establish that any
loss/damage was actually suffered by
the
defendant
respondent
No.1
on
account of the alleged breach of contract
by the plaintiff-appellant. Thus, in view
of the legal position as discussed above
specially in the light of five judges
decision of the Supreme Court in Fateh
(Supra) the defendant-respondent No.1
cannot
forfeit
the
security
amount
without proving any actual loss or
damage suffered by it.
Case law discussed:
AIR 1963 SC-1405
AIR 1970 SC-1955
AIR 1973 SC-1098
AIR 1977 Alld. 28
AIR 2003 SC-2629

(Delivered by Hon'ble Pankaj Mithal, J.)

1. The plaintiff-appellant was
awarded a contract for the supply of
30,000/- live sheep & goats to the
defendant-respondent No.1 i.e. Central
Dairy Farm, Uttar Pradesh Pashu Dhan
Uddyog Nigam Limited at the rate of
Rs.786/- per quintal. The contract was for
a period of one year and the supply was to
be made between 1.10.1985 to 30.9.1986.
684 INDIAN LAW REPORTS ALLAHABAD SERIES [2007
The plaintiff-appellant deposited a sum of
Rs.2,60,000/- as security for the good
performance of the above contract. The
said security amount was in the form of a
fixed deposit with the Bank of India,
Jhansi. The contract/agreement contained
a forfeiture clause in respect of the
security
amount.
According
to
the
defendants-respondents
since
the
plaintiff-appellant defaulted in the due
performance of the contract, the security
was directed to the forfeited.

2. It was in the above circumstances
the
plaintiff-respondent
a
registered
partnership firm through one of its partner
filed
original
suit
for
permanent
injunction
restraining
the
defendantrespondent No.1 from en-cashing the
security amount of Rs.2,60,000/- kept in
fixed deposit receipt No. 9 / 151 dated
21.9.1985 with the Bank of India, Jhansi.
The suit was decreed by the Court of first
instance but in appeal the judgment and
order of the Trial Court was reversed and
the suit was dismissed. Therefore, the
plaintiff-appellant
has
preferred
this
second appeal.

3. Heard Sri Ramendra Asthana,
learned counsel for the appellant and Sri.
R.N. Singh for the respondent No. 1.

4. On the basis of the submission
made by the learned counsel for the
parties only one substantial question of
law arises in this second appeal i.e.
whether the amount of security deposited
by the plaintiff-appellant for the due
performance of the contract is liable to be
forfeited on the mere allegation of breach
of contract without sufferance of actual
loss or damage and in the absence of
determination and quantification of the
actual
loss/damage
suffered
by
the
defendants-respondents?

5. In order to appreciate the above
substantial question of law, it is first
necessary to consider the provisions of
Section 73 and 74 of the Contract Act,
1872 (hereinafter referred to as an Act).
Both the above sections provide for the
consequence of breach of contract.
Therefore, they are to be read together
and not separately. Sections 73 and 74 of
the Contract Act reads as under:-

"73. Compensation for loss or
damage caused by breach of contract.-
When a contract has been broken, the
party who suffers by such breach is
entitled to receive, from the party who has
broken the contract, compensation for any
loss or damage caused to him thereby,
which naturally arose in the usual course
of things from such breach, or which the
parties knew, when they made the
contract, to be likely to result from the
breach of it.
Such compensation is not to be given
for any remote and indirect loss or
damage sustained by reason of the
breach.
Compensation
for
failure
to
discharge obligation resembling those
created by contract.- When an obligation
resembling those created by contract has
been
incurred
and
has
not
been
discharged, any person injured by the
failure to discharge it is entitled to
receive the same compensation from the
party in default, as if such person had
contracted to discharge it and had broken
his contract.

Explanation.- ..............................
3 All] M/s Kamil & Brothers V. Central Dairy Farm and another
685
74. Compensation for breach of contract
where penalty stipulated for.- 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.

Explanation.- ..................................
Exception.- .....................................
Explanation.- .................................."

6. The general principle which is
embodied in Section 73 of the Act is that
whenever there is a breach of contract, the
party who suffers by such a breach is
entitle to recover the loss or damage
caused to him from the other party.
However, recovery of any such loss or
damage cannot be made unless the party
claiming has actually suffered the loss or
damage and the same has been quantified.

7. The position is slightly different
with regard to liquidated damages. In a
claim for liquidated damages the party
complaining of breach of contract must
fulfil the following conditions:

(i) he must prove that he has sustained
loss or damage due to breach of the
contract ;
(ii) only reasonable sum can be awarded
as compensation for the loss or
damage so sustained :
(iii) whatever may be the actual quantum
of loss or damage sustained, the
compensation cannot exceed the sum
named in the contract ;
(iv) The court has power to dispense with
the proof of damage or loss so
suffered; and
(v) it is always open to the other party to
show that no loss was actually
suffered.

8. Therefore, even in cases where
the damages or penalty is named in the
contract or is provided by a forfeiture
clause though proof of actual amount of
loss or damages may be dispensed with
but nonetheless sufferance of loss or
damage due to such breach of contract is a
sine quo non for claiming damages or for
forfeiting the security amount.

9. A five judges Bench of the
Supreme Court while dealing with the
similar controversy and in interpreting the
provisions of Section 74 of the Act in
AIR 1963 SC 1405 Fateh Chand Vs.
Balkishan Dass, held that where a
contract contains stipulation by way of
penalty the Court has jurisdiction to
award such sum only as it considers
reasonable but not exceeding the amount
specified in the contract by way of
compensation. It further lays down that
Section 74 of the Act provides that the
aggrieved party is entitled to receive
compensation from the party who has
broken the contract whether or not actual
damage or loss is proved. It merely
dispenses with proof of "actual loss or
damage" but it dose not justify the award
of compensation when as a consequence
of breach of contract no legal injury has
been caused. This has been provided
because compensation for breach of
contract is awarded to make good only the
loss or damage which arose in the natural
course of things and not otherwise.
686 INDIAN LAW REPORTS ALLAHABAD SERIES [2007
10. The legal position that emerges
from the plain reading of Section 73 and
74 of the Act in the light of the above
authority of the Supreme Court is that a
party complaining of the breach of
contract
is
entitled
to
receive
compensation for loss or damage suffered
by it from the party who has broken the
contract
;
where
the
amount
of
compensation
has
been
named
or
provided in the contract by way of penalty
or forfeiture of any amount, the Court
shall
assess
and
award
reasonable
compensation but not exceeding the
amount so named; and for the assessment
of such reasonable compensation the
party need not prove the actual damage or
loss suffered but it would not justify the
award compensation when no such
damage or loss has actually been suffered
on account of breach of contract. Section
74 of the Act, merely dispenses with the
proof of actual loss or damage only for
assessment of damage or loss as the
maximum limit has been named in the
contract but it does not dispense with the
burden of proving that in fact damage or
loss has actually been suffered.

11. In AIR 1970 SC 1955 Maula
Bux Vs. Union of India, a three judges
Bench of the Supreme Court while
making a distinction between the earnest
money and the amount deposited in
security for the due performance of the
contract held that a person complaining of
the breach of contract is not required to
prove actual loss or damage suffered by
him and the Court is competent to award
reasonable compensation even if no actual
damage is proved. The aforesaid authority
has been followed by the Division Bench
of the Supreme Court in AIR 1973 SC
1098 Union of India Vs. Rampur
Distillery and Chemical Co. Ltd. The
Division Bench of the Allahabad High
Court in AIR 1977 Alld. 28 State of U.P.
Vs. Chandra Gupta & Co. relying upon
the above two decisions of the Hon'ble
Supreme Court held that Section 73 and
74
of
the
Act
entitles
a
person
complaining of breach of contract to get
reasonable compensation but not if no
damage is suffered on account of its non
performance.

12. Thus, in my considered opinion
a
person
is
entitled
to
receive
compensation in terms of money only if
he has actually suffered damage or loss on
account of breach of contract by the other
party and not otherwise. Therefore,
sufferance of damage or loss is an
essential pre condition for the award of
compensation by way of damages. The
determination or assessment of damage or
loss caused is altogether another aspect of
the matter. The assessment of damages
can be made by actual proof of damage or
loss suffered or it may be a reasonable
sum which the Court thinks fit but not
exceeding the amount named in the
contract where it is not possible to assess
the same on the basis of material on
record. The party aggrieved may be
absolved of the burden of proving the
amount of actual damage or loss but
nevertheless is responsible to prove that
the breach of the contract had actually
caused damage or loss to it.

13. Sri R.N. Singh, learned counsel
for the respondent has placed reliance
upon AIR 2003 SC 2629 Oil and
Natural Gas Corporation Ltd., Vs.
SAW Pipes Ltd. and has contended that
there is no requirement of proving the
actual loss or damage suffered when
under the contract the amount of loss is
pre-stipulated by way of forfeiture clause.
3 All] M/s Kamil & Brothers V. Central Dairy Farm and another
687
The Division Bench of the Supreme Court
in the above case held that the jurisdiction
of the Court to award compensation in
case of breach of contract is unqualified
except for the fact that it has to be
reasonable and not above the amount
specified under the contract. It also lays
down that a party complaining of the
breach of contract is entitled to receive
reasonable compensation whether or not
actually loss is proved to have been
caused by such breach, as in some cases it
is impossible for the court to assess the
compensation arising from such breach.
However, neither Section 74 of the Act
nor any of the above authorities cited at
the Bar dispenses with the pre-condition
of actual damage or loss being suffered or
awarding compensation. Only proof of
amount of actual loss and damage has
been dispensed with where the contract
itself specifics the amount or provide for a
penalty or forfeiture of the sum specified.

14. In the present case undisputedly
there is a forfeiture clause of the security
amount, which is other than the earnest
money, in the event of breach of contract.
Therefore, on breach of the contract by
the plaintiff-appellant, the defendantrespondent
No.1
is
entitled
to
a
reasonable compensation not exceeding
the amount of security but not without
establishing that it had actually suffered
damage or loss on account of the said
breach. In other words, compensation
cannot be awarded where no loss or
damage has been suffered at all. There is
nothing on record to establish that any
loss/damage was actually suffered by the
defendant respondent No.1 on account of
the alleged breach of contract by the
plaintiff-appellant. Thus, in view of the
legal
position
as
discussed
above
specially in the light of five judges
decision of the Supreme Court in Fateh
(Supra) the defendant-respondent No.1
cannot forfeit the security amount without
proving any actual loss or damage
suffered by it.

15. In the end learned counsel for the
respondents urged that the suit itself was not
maintainable and was barred by section 41
(h) of the Specific Relief Act, 1963 as the
agreement/contract contained an arbitration
clause. However, a perusal of the judgment
and order of the lower appellate Court
reveals that the said issue was decided
against the defendant-respondent No.1
though the appeal was allowed in its favour.
The defendant-respondent No.1 has not
preferred any cross objections against the
finding on the above aspect. I have also
perused the agreement. It does not contain
any such arbitration clause. The respondent
No.1 who complains of the breach of
contract
has
itself
not
invoked
the
arbitration clause, if any, and has straight
away proceeded to forfeit the security
without waiting for a finding of any
competent authority about the breach being
committed and the party responsible for
such a breach of contract. Therefore, the
above submission is without substance.

16. In the result, the appeal succeeds
and is allowed. The judgment and order
dated 8.11.2005 of the lower appellate court
dated passed in Civil Appeal No. 148 of
2003 (Central Dairy Farms, Uttar Pradesh,
Pashudhan Uddyog Nigam Ltd. & another
Vs. M/s Kamil and Brothers) is set aside
and that of trial court dated 15.11.2003
passed in Original Suit No. 344 of 1987
(M/s Kamil and Brothers Vs. Central Dairy
Farms, Uttar Pradesh, Pashudhan Uddyog
Nigam Ltd. & another) is restored. No order
as to costs.

Appeal Allowed.
---------
688 INDIAN LAW REPORTS ALLAHABAD SERIES [2007
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 13.09.2007

BEFORE
THE HON'BLE AMITAVA LALA, J.
THE HON'BLE V.C. MISRA, J.

First Appeal From Order No. 1030 of 2000

National Insurance Company ...Appellant
Versus
Bankey Bihari Lal & others ...Respondents

Counsel for the Appellant:
Sri V.K. Birla

Counsel for the Respondents:
Sri Shekhar Srivastava,
Sri Ramendra Ashthana,
Sri M.K. Chandel
Sri Rajeev Chaddha
Sri Anand Srivastava

(A) Motor Vehicle Act 1988-Section-166
(2)-Territorial
jurisdiction
of
Courtaccident
took
place
at
Nepal-Truck
owner/Insurance
company
place
of
business
at
Gorakhpur-held-claim
Tribunal at Gorakhpur has jurisdiction.

Held: Para 4

On the basis of said sub-section either of
the places as aforesaid i.e. appropriate
place of accident at Nepal, appropriate
place of residence/carrying on business
of the claimants at Agra, Uttar Pradesh
or
appropriate
place
of
residence/carrying on business of the
respondents i.e. owner of the truck
and/or
Insurance
Company
at
Gorakhpur,
Uttar
Pradesh,
the
respondents under the claim petition,
are the appropriate places for hearing of
the claim petition. Since the claim
petition has been filed in the jurisdiction
of Gorakhpur, we hold that the Tribunal
at Gorakhpur had the jurisdiction to
entertain, try and determine the claim
petition of the claimants.
(B) Motor Vehicle Act, 1988-Section 166
(3)-Limitation
for
claim
petition
admittedly when accident took place
amended provision not in existenceperiod of 6 months or 12 months on
sufficient cause shown- No retrospective
application- held- even after 3 years can
be filed

Held: Para 7

Therefore, between the date of the
accident
and
the
date
of
filing
application, if the law repealed, the
effect will be made applicable to the
application as if the law was not existing
on that date. Hence, we hold and say
that the application is squarely covered
by the amended Act.

(C) Motor Vehicle Act. 1988 Section 163A- Multiplier- age of claimants as well as
of the deceased are material factor- the
age of deceased 22 years- and of the
claimants
55-
60
years-
held-
 8
multiplier- proper and just- Second
schedule applicable

Held: Para 8 & 9

Therefore, at the time of award in the
year 2000, their ages may not cross 60
years. Against this background multiplier
of 8 was applied taking into account the
ages of the parents roughly about 60
years alongwith the age of the deceased
as 22 years, having cumulative effect.

We find from the Second Schedule under
Section 163-A of the Act, 1988 that
multiplier of 8 will be applicable in the
case of the ages between 55-60 years
when multiplier of 5 will be applicable in
case of ages between 60-65 years and
above also. Therefore, we do not find any
ambiguity in applying multiplier of 8. We
also find that multiplier of 17 will be
applicable in case of age between 20-25
years.
Case law discussed:
AIR 1966 SC 2155, 1966(4) SCC 652, 1996(2)
TAC 324, 1994(2) SCC 176, 1996 ACJ 831,
2003(2) SCC 274