1989 PLP 636 (CLC)

This is a suit for recovery of Rs.20,00,000 as .damages that it is a private limited company carrying on the business of sporting and hunting arms. Defendant No.l was employee of the plaintiff and was working as a Foreman. Defendant No.2 stood surety for the compliance of the Indemnity Bond/ Undertaking executed by defendant No.l. During the probationary period the plaintiff sent defendant No.l for advance training to U.S.A. After completing the said training the defendant No.l had to serve the plaintiff for a minimum period of three years, failing which he was liable to pay compensation of Rs.2 lacs to the plaintiff. The defendant No.l in breach of the agreement or service and the Indemnity Bond tendered his resignation by post on 29‑9‑1985 but the plaintiff refused to accept the same. The defendant No.l deserted his duties and thus caused the plaintiff loss and is, therefore, liable for damages. Hence this suit.

2. The defendants have chosen to remain absent in spite of service. The suit has, therefore, proceeded ex parte. Evidence of Abdul Waheed Khan Managar Administration of plaintiff‑company was recorded. He has stated that the plaintiff on account of the breach of agreement, committed by defendant No.l, suffered damages to the tune of Rs.2.00,000. 3.The details of damages are, shown as follows:‑ (1) Rs.32,405 spent on sending the defendant No.l to USA, giving him foreign exchange of 1,000 Dollars,' preparation of his passport and his kit allowances. (2) The plaintiff had spent 60 Dollars per day on the training of defendant No.l for 10 weeks, which comes to Rs.8,446.20 (3) The plaintiff has engaged another person by name NIUMta7 Ahmed on contract basis for the work of assembling revolvers and paid him Rs.45,000. (4) The plaintiff had also sent ones another man by name Rashid Yar Khan for training in place of defendant No.! and spent Rs.60,000 on him. In this way the plaintiff suffered a loss of Rs.1,45,851.20 and not of Rs.2,00,000.

5. The law on the point is laid down in Section 74 of the Contract which reads as under:174 When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation b) way of penalty, the party complaining of the breach is entitled, whether not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or as the case may be, the penalty stipulated for. This section is at variance with the English on the subject. Under the common law a genuine pre‑estimate of damages agreed! upon by the parties is regarded as liquidated damages, but a stipulation in a contract in terrorem is a penalty. In the case of liquidated damages the contract is binding upon the parties. penalty however the Court refuses to enforce it and awards aggrieved party reasonable compensation. While Act eliminates this distinction. that in the case of Muhammad Karimuddin v. Kanza Food Industries Ltd., Karachi P L D 1982 Kar. 590, a Single Judge of this Court had considered this aspect and in the light of the decisions of the Supreme Court viz. P L D 1969 SC 80, West Pakistan v. Messrs Mistry Patel & Co. and ~9.P.I.D.C. v. Aziz Qureshi P L D 1970 SC 222 held as follows:‑ "I venture to say that the difference which exists under the English law between liquidated damages and a penalty is not recognized by section 74 of the Contract Act and, therefore, irrespective of the fact whether the amount as mentioned in the agreement is a penalty, or liquidated damages, a party complaining of the breach is entitled to recover damages whether or not actual damages (have been suffered by it subject to the maximum limit of such damages which will be the amount so mentioned in the agreement. Therefore, merely because a specific sum by way of liquidated damages is mentioned as payable in the event of a breach in the agreement is not a sufficient ground for the Court to grant the same to the party complaining of the breach as this amount only represents the maximum limit of damages which may be recovered by such party in the event of a breach. In spite of mention of 'a specific sum in an agreement to be paid as damages to a party in the event of a breach by the other the Court still has to hold that such amount would normally arise as damages to such a party in the case of a breach by the other. Therefore, in cases, where the party complaining of the breach, in fact, suffered no damages at all and on the contrary gained some advantage in spite of the breach or where the Court finds that the sum mentioned as damages in the agreement in case of breach, is such that it could not reasonably arise from such breach, the Court may refuse to grant the same. In the present case, therefore, before the defendants could successfully forfeit the sum of Rs.?.,50,000 under clause (16) of the agreement or claim its adjustment by way of damages arising from the breach on the part of plaintiffs, it mist be shown that this amount would reasonably arise as damages to the defendant in the case of non‑performance of the condition in the agreement relating to sanction letter of German loan by the plaintiffs. "

6. Same view was taken by me ‑in the case of I.C. Engineers v. Karachi Shipyard & Engineering Works reported in 1988 C L C 15155.

7. It would, therefore, appear that the plaintiff is entitled to recover the amount of Rs.32,405 which it had spent while sending defendant to U.S.A. plus the amount of Rs.8,446.20 which it had spent on defendant No.l for Meeting his training expenses at United States at 60 Dollars per day and Rs.45,000 which it had paid to Mumtaz Ahmad who was engaged, in place of defendant NO‑1 on contract basis for assembling revolvers. The amount of Rs.60,000 B spent by the plaintiff on the training of Rasheed Yar Khan, whom it had sent for training to Spain for 49 days in place of defendant No.l can not be claimed by the plaintiff as the plaintiff has already claimed ails the amount that they had spent on defendant No.l and they can not get the expenses that they incurred on the training of another man. These expenses are not more than what they had spent on defendant No.l and the plaintiff was at the most only entitled to the difference of excessive expenses that they had to bear on they training of another man. I, therefore, decree the plaintiffs suit for a sum of Rs.85.851.20 against the defendants Nos.l and 2 jointly and severally. The proportionate costs of the suit shall be borne by defendants.) A.A./G‑94/K suit decreed.