Tej Narain vs Behary Loll Doss And Ors. on 20 May, 1884

Calcutta High Court
Tej Narain vs Behary Loll Doss And Ors. on 20 May, 1884
Equivalent citations: (1884) ILR 10 Cal 764
Author: Tottenham
Bench: Tottenham, Norris


Tottenham, J.

1. This is an appeal from a decision of the Subordinate Judge of Bhaugulpore. Two points have been raised by the learned pleader for the appellant in support of the appeal. The first point is that, upon a true construction of the bond, the clause stipulating for the payment of interest at 15 per cent, per annum upon unpaid interest should have been construed as a penalty clause and not as a clause entitling the plaintiff to such interest as liquidated damages. The words of the bond are as follows: In case of our failing to pay year by year the said sum of Rs. 3,000 the same shall be considered as principal, and thereon interest shall run also at the rate of Re. 1-4 per cent, per month.” No doubt at times some difficulty arises in deciding whether the sum named in a contract to be paid upon a breach is a penalty or liquidated damages. But we do not think there is any difficulty in this case. The law upon the construction of contracts in this respect is thus laid down in Chitty on Contracts, 7th edition, p. 782: “It has been said to be very difficult to lay down any general principle in cases of this kind, but still there is one which may be safely stated, viz., that where articles contain covenants for the performance of several things, and then one large sum is stated at the end to be paid upon breach of performance, that must be considered as a penalty; but where it is agreed that if a party do (or as in this case refrain from doing) such a particular thing, such a sum shall be paid by him then the sum stated may be treated as liquidated damages.” The rule is stated in the words used by Heath, J., in Astley v. Weldon 2 B. and P. 346; and that case was said by Tindal, C.J., in Kemble v. Farren 6 Bing. 141 “to be decided on a clear and intelligible principle”; and in Sparrow v. Paris 7 H. and N. 594, Bramwell, B., in giving the judgment of the Court of Exchequer, says: ” It is a sum payable in one event, it is not a sum to secure the performance of several matters; this is the distinction upon which the question turns, the names the parties give, the money, penalty or liquidated damages are immaterial.” In this case the payment to be made depends upon the happening of one event only, viz., the non-payment of Rs. 3,000 as interest at the end of the current year in which such interest should have been paid. We are, therefore, of opinion that Mr. Twiddle’s first point fails.

2. The second point urged was that the Subordinate Judge was wrong in refusing to receive parol evidence tendered by the defendants to show that after the execution of the bond the plaintiff stated that the clause in question was intended to operate as a penalty clause, and that the conditions therein contained would not be enforced. In support of this contention we were referred to two cases, viz., Baksu Lakshman v. Govinda Kanji I.L.R. 4 Bom. 594, and Hem Chunder Soor v. Rally Churn Das I.L.R. 9 Cal. 528. If we may say so, we entirely concur in those decisions; indeed, the luminous and able judgment of Melvill, J., in the Bombay case cannot but commend itself to the mind of every lawyer. But we are of opinion that the principle upon which those cases were decided is not applicable to the present case. But suppose it is, ought it to be applied in this case ? We think not. MELVJLL, J., in Baksu Lakshman v. Govinda Kanji says : The rale, which on a consideration of the whole matter, appears to me most consonant, both to the statute law and to equity and justice, is this, namely, that a party, whether plaintiff or defendant, who sets up a contemporaneous oral agreement, as showing that an apparent sale was really a mortgage, shall not be permitted to start his case by offering direct parol evidence of such oral agreement; but if it appear clearly and unmistakeably from the conduct of the parties that the transaction has been treated by them as a mortgage, the Court will give effect to it as a mortgage and not as a sale; and, thereupon, if it be necessary to ascertain what were the terms of the mortgage, the Court will, for that purpose, allow parol evidence to be given of the original oral agreement.” Now, if we apply this rule, it is impossible to say that it appears clearly and unmistakeably from the conduct of the parties that the clause in question has been treated as a penalty clause, ” the Court, therefore, will not give effect to it as a penalty clause,” and will not, therefore, admit parol evidence of an alleged oral agreement that it was to be treated as such. Mr. Twidale urged that the fact of the plaintiff’s abstaining from suing for the interest of each year as it became due was evidence of the intention of the parties to treat the clause as a penalty clause. We are unable to agree with him; if it is evidence of anything, we think it is evidence of a contrary intention. In our judgment the second point fails, and we think this appeal must be dismissed with costs.

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