1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO.785 OF 1994 Kolhapur District Sahakari Doodh Utpadaka Sangh Ltd., Kolhapur Plot No.B-1, M.I.D.C. Area, Gokul Shirgav, Tal. Karveer, District – Kolhapur ..... Appellant V/s. M/s.Jagdamba Dairy Farm, 557, Guruwarpeth, Satara – 415 002, through Prop. Shri S.H. More. .....Respondent Mr.P.D.Dalvi, Advocate, for the Appellant. CORAM : SHRI P.B.MAJMUDAR & SMT.R.P.SONDURBALDOTA , JJ. DATED : 29TH SEPTEMBER, 2008. ORAL JUDGMENT (PER P.B.MAJMUDAR, J. ) 1. This appeal is directed against the judgment and order passed by 3rd Joint Civil Judge, Senior Division, Kolhapur, dated 31-12-1993 in Special Civil Suit No.102 of 1989, by which the learned Trial Judge has dismissed the suit of the plaintiff and allowed the counter claim of the defendant to the tune of Rs.54,000/-. The appellant herein is the original plaintiff in the aforesaid suit. The aforesaid suit was filed for recovery for the amount of Rs.11,62,684.18 from the defendant on the ground that the 2 defendant committed breach of contract and as per the agreement arrived at between the parties, the plaintiff was entitled to receive the aforesaid amount towards penalty for breach of the contract. 2. The plaintiff is a co-operative milk society registered under the Co-operative Societies Act, 1960. The plaintiff is engaged in the business of collecting milk, processing the milk and distributing the milk. The Head Office of the plaintiff's society is located in Kolhapur, at Gokul, Shirgav, Tal. Karveer. It is the case of the plaintiff that in September 1987, the defendant had expressed his intention to purchase the milk in bulk from the plaintiff. The defendant being bulk purchaser of the milk executed an agreement in favour of the plaintiff. The said agreement was executed between the parties on 28-09-1987. Pursuant to the said agreement, the defendant agreed to purchase 9000 litres milk per day. 3. It is the case of the plaintiff that rate was mutually agreed during the flush season from October to March was Rs.5/- per litres and from April to September, it was Rs.6/- per litres. It is also the case of the plaintiff that defendant was to furnish bank guarantee as well as to deposit amount equivalent to the price of the milk per day. As per the agreement, in the event of non-lifting of the milk per day, the defendant was to pay 70 paise per litre by way of penalty. The defendant started lifting the milk as per the terms of the agreement. 3 4. It is the case of the plaintiff that the defendant did not lift the milk as agreed and had also not complied with the rest of the conditions of the agreement. It is also the case of the plaintiff that in December 1987, the defendant did not lift a single litre of milk and accordingly committed breach of contract and in view of the same, the plaintiff is entitled to claim penal charges @ 70 paise per litre by way of damages. During October 1987 to September 1988, the defendant failed to lift 20,26,915 litres of milk and the penal charges comes to Rs.14,18,840.50, out of which during October 1987 to September 1987, the defendant deposited 2,56,186.32 and after deducting the said amount , the balance comes to Rs.11,62,654.18. It is further the case of the plaintiff that in addition to the said amount, a deposit of Rs.54,000/- was forfeited by the plaintiff and the balance was demanded, but the defendant did not accept the demand of the plaintiff, therefore, the aforesaid suit was filed by the plaintiff for recovery of said amount with interest. 5. The defendant submitted his written statement at Exh.11 and denied the claim of the plaintiff in toto. According to the defendant, the plaintiff has not suffered any loss due to non-lifting of the milk on the part of the defendant. According to the defendant, the plaintiff received huge amount from the sale of the milk during the relevant period. In view of the same, the plaintiff is not entitled to any damages as they have not suffered 4 any loss. Clause 6 (iii) of the agreement is challenged by the defendant on the ground that such clause is against public policy and the same cannot be enforced in view of Section 23 of the Indian Contract Act. So far as the aforesaid clause is concerned, it gives option to the plaintiff to cancel the contract and it also deals with the penal clause. On such and other averments, suit was resisted by the defendant. 6. The defendant also raised counter claim for Rs.4,25,349.32 and prayed for decree of the said amount. The counter-claim was resisted by the plaintiff by filing written statement at Exh.17, denying the counter-claim of the defendant. 7. The learned Trial Judge framed various issues at Exh.12, arising out of the pleadings. The Trial Court held that the plaintiff has proved that the defendant has committed breach of contract. The Trial Court further held that the plaintiff has failed to prove that because of such breach of contract, the plaintiff has sustained loss of Rs.14,18,840.50. The Trial Court also held that the defendant has failed to prove that the plaintiff by way of coercion recovered an amount of Rs.2,56,182.32 from the defendant. The Trial Court also held that the defendant is entitled to recover an amount of Rs.54,000/-, which amount was forfeited by the plaintiff from the security deposit given by the defendant. Accordingly, by the impugned judgment and decree, the suit of the plaintiff has been 5 dismissed by the Trial Court and the counter-claim is partly allowed. The plaintiff was directed to refund an amount of Rs.54,000/-, which is the forfeited deposit amount with interest @ 5% to the defendant. 8. It is the aforesaid decree which is impugned at the instance of original plaintiff in this appeal. The learned counsel for the appellant submitted that in view of clear & explicit terms in the agreement, the plaintiff was justified in demanding the amount claimed in the suit towards damages. It is submitted by the learned counsel for the appellant that in view of penal clause in the agreement, the plaintiff was justified in claiming the said amount as since the defendant has admittedly committed breach of contract, the plaintiff was entitled in view of penal clause in the agreement. It is further submitted that in this view of the matter, the Trial Court should not have allowed the counter-claim for Rs.54,000/-. The learned counsel for the appellant submitted that by appreciating oral and documentary evidence on record, the suit of the plaintiff is required to be decreed and counter-claim is required to be dismissed. 9. At the time of hearing of this appeal, none remained present on behalf of the respondent. We have heard the learned counsel for the appellant and have gone through the oral and documentary evidence produced on record and gone through the R & P which is available for our perusal. 6 10. The point which requires consideration in this appeal is as to whether the plaintiff can said to have proved his claim for getting decree for damages in view of the penal clause provided in the agreement and as to whether the defendant can be said to have proved the counter-claim. 11. At this stage, it is required to be mentioned that though there was an arbitration clause in the agreement and even though the defendant has taken the said point in the written statement, ultimately, the said point was not pressed later on and both the sides were allowed to lead evidence before the Trial Court regarding the merits of the suit. 12. In order to substantiate his case, the plaintiff has examined one Balvant Shankar Katkar at Exh.122. The said witness has produced the agreement in question which is at Exh.118 on record. As per the evidence of the plaintiff's witness, the defendant agreed to lift 9000 litres milk per day. As per the agreement, the defendant failed to lift the milk. As per the said agreement, in case defendant fails to lift the milk, the defendant had agreed to pay penal charges @ 70 paise per litre. According to the said witness, the said agreement was entered into in his presence. The penal charges were fixed considering the nature of the milk and the cost required for conversion. The said witness has stated in his examination-in-chief as to on what basis the charges were imposed. The said witness has deposed that defendant has stopped lifting the milk and on that basis, 7 penal charges were charged and the said document was prepared under his supervision and it bears his signature, which is at Exh.116 on record. The said witness further stated that even though repeatedly, the defendant was informed to lift the milk and to pay penal charges, he refused to act on that basis. The letters regarding the same are produced on record at Exh.119. The rate of milk was also produced on record by the said witness. He further stated in para No.4 of the examination-in-chief that the deposit which was furnished by the defendant was forfeited by the plaintiff due to breach of contract. 13. In the cross-examination, the said witness has admitted that before the agreement, the defendant had submitted an application requesting the plaintiff to give 9000 litres milk per day and that in the meeting, quota of 9000 litre milk per day was fixed and sanctioned. The witness has further stated in the cross-examination that before the agreement, the defendant had deposited an amount of Rs.54,000/- towards deposit. The witness has stated that though agreed, the defendant had not furnished any bank guarantee as per the agreement. The witness however, admitted that no written intimation was sent to him in this behalf. The witness has admitted that from 20-04-1988, the plaintiff discontinued supply of the milk to the defendant. The said aspect is finding place in Para No.17 of the judgment of the Trial Court. In Para No.7 of the 8 cross-examination the said witness has stated that even in case of non- lifting of collected milk, the said milk can be pasteurized and can be sold after two days. The witness however, denied the suggestion that the plaintiff society was selling the milk at Bombay. 14. In the translated copy of the deposition, it appears that there is some mistake and on going through the original deposition in Marathi Language, the witness has not admitted that the plaintiff society used to sale pasteurized milk in Kolhapur at higher rates than at the rate on which it was given to the defendant. The said witness further stated in the cross- examination that the plaintiff society had maintained separate books of account of the penal charges per month, but the plaintiff has not maintained separate account regarding the loss incurred by them per month. 15. The plaintiff has also examined another witness Mr.Ashok Dinkar Patil at Exh.126. The said witness was working as Accountant with the plaintiff's society. He had produced original account books showing the account of the defendant. The said witness has also stated in the cross- examination that he had no occasion to inspect the account of the defendant prior to 1998. The said witness has stated that debit entries are carried forward regarding debiting penal charges after considering total non-lifting of the milk in the month as per the account. The said witness 9 however, admitted that for non-upliftment of milk from October 1987 for the first time, the entries were carried on 31-10-1987. He further admitted that he cannot assign any reason as to why specific date is not mentioned in extract of account which is produced on record. The said witness also admitted that debit entry as on 31-10-1987 is not carried forward nor accounted for in the subsequent months. 16. The defendant examined himself at Exh.130. The defendant in his evidence has stated that plaintiff society for the first time had demanded penal charges on account of non-lifting of the milk in the month of October 1987. He has stated in his evidence that the plaintiff has not suffered any loss at all. He has stated in his evidence that the rate of the milk was higher as per the agreement and in that period, the rate prevailing at Kolhapur was 7.50 per litre and at Bombay, it was Rs.9.50 per litre. The defendant has stated that plaintiff society used to supply milk even at Bombay. He further stated that during the subsistence of the agreement, the plaintiff had not suffered any loss in any manner and plaintiff has committed breach of the agreement. Nothing substantial has been brought out in the cross-examination of the defendant. 17. So far as the question about breach of agreement is concerned, considering the totality of the evidence on record, in our view, the Trial Court has rightly given finding on the said aspect against the defendant by 10 recording detailed reasons on this issue. It is not in dispute that after entering into the agreement, the defendant subsequently stopped lifting the milk for which no justification was given. The finding therefore, given by the Trial Court in this aspect is based on proper appreciation of evidence on record. 18. In this view of the matter, the question posed before us is as to whether the plaintiff is entitled to receive any amount towards damages or towards penalty on the ground that the defendant has committed breach of the agreement in question. It is also required to be considered as to whether the plaintiff is entitled to forfeit the amount of security deposit. 19. In order to appreciate the aforesaid aspects, the principal question which is required to be considered is as to whether from the evidence on record can it be inferred that the plaintiff has suffered any loss on account of defendant's not fulfilling his contractual obligations. Going through the evidence of the plaintiff, it is explicitly clear that the plaintiff has failed to make out any case about the actual loss sustained by it. As per the evidence of the plaintiff & from the evidence on record, it is clear that even though the plaintiff used to maintain books of account, no amount has been shown towards any damages/loss allegedly sustained by the plaintiff. If the plaintiff has not suffered any loss or damages and in fact as per the say of the defendant, the plaintiff has received more amount subsequently, 11 by selling the milk, in our view, the plaintiff is not entitled to get any amount towards liquidator damages in connection with the alleged breach of the contract. Even from the evidence on record, it is not possible for us to pass any decree towards compensation in favour of the plaintiff, since there is nothing on record to show that the plaintiff has suffered any loss at all. In the instant case, the plaintiff has not placed any evidence on record showing that by non-performance of the contract by the defendant for a particular period, they sustained particular loss in their business. There is absolutely nothing on record to suggest about any such loss, no particulars are given in any manner either in the plaint or in the evidence. In absence of any evidence in this behalf, no amount can be awarded towards damages or compensation to the plaintiff. Under these circumstances, it is not possible to believe that the plaintiff must have suffered any such loss in any manner. However, the learned counsel for the appellant submitted that even in view of the clause in the agreement for penalty, the plaintiff is entitled to recover the amount towards penalty. 20. In our view, when the plaintiff has not sustained any loss, no decree for penalty can be passed in his favour simply because there is a penal clause in the agreement. In this connection, a reference is required to be made to the ruling of the Hon'ble Apex Court in the case of Union of India V/s. Rampur Distillery & Chemical Co. Ltd., AIR 1973 SC 1098, 12 wherein it was held that “4. It is important that the breach of contract caused no loss to the appellants. The stipulated quantity of rum was subsequently supplied to the appellants by the respondents themselves at the same rate. The appellants, in fact, made no attempt to establish that they had suffered any loss or damage on account of the breach committed by the respondents. 5. Following the decision in Maula Bux's case (1970) 1 SCR 928 = (AIR 1970 SC 1955) we hold that the High Court was right in rejecting the appellant's claim that they are entitled to forfeit the security deposit. Civil Appeal 1346 of 1967 is accordingly dismissed with costs”. 21. In the instant case, as pointed out earlier, the appellant did not made any attempt to put any evidence on record in any manner as to the actual loss which they allegedly suffered. Under these circumstances, in our, the Trial Court was justified in not decreeing the suit in favour of the plaintiff for the monetary claim made by the plaintiff in the suit. 22. So far as the question about forfeiting the security amount is concerned, in view of the judgment of the Apex Court referred to above, and in view of the fact that the plaintiff has not lead any evidence in this behalf that he has sustained loss, the plaintiff was not justified in forfeiting the amount of security deposit. The learned Trial Judge has properly appreciated the evidence on record for coming to the conclusion that the plaintiff has failed to make out any case about sustaining any loss. The 13 Trial Court in Para No.17 of the judgment has found that even though plaintiff has not supplied the milk for a particular period, the plaintiff has charged penalty @ 70 paise per litre. Under the circumstances, the Trial Court has held that when the plaintiff has not supplied the milk, the plaintiff is not entitled to recover any amount by way of penalty. It has been found by the Trial Court that the plaintiff by non-supplying the milk terminated the contract and it can be very well said that there was rescession of contract. 23. In our view, on the basis of the oral & documentary evidence, the finding of the Trial Court is correct and the trial Court has rightly appreciated oral and documentary evidence. In view of what is stated above, we do not find any substance in the appeal and the same is dismissed. No order as to costs. ( R.P.SONDURBALDOTA J. ) ( P.B.MAJMUDAR, J. )