Indiabulls Properties Pvt vs Treasure World Developers on 28 February, 2014
35. The Division Bench then considered the law enunciated in
Union of India v Raman Foundry.13 Four decades after it was
delivered, that decision is still a locus classicus. In Indian law, Raman
Foundry says, there is no qualitative difference between liquidated
damages and unliquidated damages. All that Section 74 does is to
eliminate the nice distinctions between contractual provisions for
liquidated damages and those in the nature of a penalty, or in
terrorem clauses. The latter are not enforced. The amount of
liquidated damages is only the outer limit of what is recoverable. It is
not automatically guaranteed as the claimant's entitlement. It does
not, eo instanti, create any pecuniary liability or obligation, or a
corresponding entitlement to the claimant.