Central Dairy Farm Case Study

FACTS
(Facts of case in brief)

There are two parties in this case; the appellant is Kamil and brothers a registered partnership firm and the respondent is Central Dairy Farm, Uttar Pradesh Pashu Dhan Uddyog Nigam Limited. A contract is awarded to the appellant for the supply of 30000 live sheep and goats to the respondent @ Rs. 786/- per quintal. The contract was stipulated for a period of one year. The appellant deposited a sum of Rs. 260000/- as security for the good performance of the above contract , the amount was in form of fixed deposit with the
Bank of India, Jhansi. There was very a important clause in the contract pertaining to forfeiture of security amount.

According to the defendants since the appellant defaulted
Now under these circumstances the plaintiff a registered partnership filed a suit for permanent injunction order, restraining the respondent from en-cashing the said security amount. . 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 appellant has preferred this second appeal.

ISSUE
1. Whether the amount of security deposited by the 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 respondents?

1.1 To what extent can the amount of compensation be awarded to the aggrieved party in case of no actual loss or damage but due to mere breach of the terms and conditions stated in the contract .

1.2 Whether in case of liquidated damages can the party claim to receive compensation in form of the given amount in the contract pertaining to the forfeiture
SAW Pipes Ltd. stated that there is no requirement to prove that there were actual losses occurred due to breach of contract by other party or not otherwise . 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.

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 for 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