Indian Kanoon - Search engine for Indian Law

Mr. Maheshwari has relied upon the decision of this Court in Fateh Chand v. Balkishan Das(1) wherein, according to him, this (1) [1970] 1 S.C.R. 928. (2) (1964) 1 S.C.R. 515.

Court has held, under similar circumstances, that the stipulation under the conrtact regarding forfeiture of the amount deposited is a stipulation by way of penalty attracting s. 74 of the Contract Act. On this assumption, counsel urged that there is a duty, statutorily imposed upon Courts by S. 74 of the Contract Act not to enforce the penalty clause but only to award reasonable compensation. This aspect, he urges, has been totally missed by tile High Court.

Again, at p. 528 it observed "In our judgment the expression 'the contract contains any other stipulation 'by way of penalty' comprehensively applies to every covenant involving a penalty whether 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 delivered. Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon courts by s. 74. In all cases, therefore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the court has jurisdiction to award such sum only as it considers reasonable, but not exceeding the amount specified in the contract as liable to forfeiture."