P L D 1961 (W (PLP)

The letter mentions that since the plaintiff was introduced to the defendant through the latter's father it was his duty to serve him, but he also asks the plaintiff not to stand on ceremony and tell him very clearly as to what salary he would want. There is again a pressing request asking the plaintiff to come to Karachi as soon as possible. The plaintiff replied to this letter on 16th February (Exh. 16/2) and amongst many other things stated his liabilities which were in the nature of education of his children etc. and the expenses of life in Karachi and told him that whatever emolument the defendant thought fit, having regard to these considerations, may be fixed and he would then come to Karachi though he mentions that it would require him some time to do so. Thereafter it seems that the defendant sent a wire to the plaintiff asking him to come promptly to Karachi and to that the plaintiff replied by letter dated 19‑2‑56 (Exh. 16/1) informing him that he would reach Karachi on the morning of 25th February, 1956. The defendant was so anxious to get the plaintiff to Karachi that he promptly acknowledged this letter by his letter dated 20‑2‑56, Exh. 11 noting the fact that the plaintiff was reaching Karachi on 25th morning and promising to receive him at the railway station. The plaintiff did arrive on the 25th and was received by the defendant personally at the railway station. It may also be mentioned that in Exh. 11 the defendant had further requested the plaintiff to find for him, if possible, one or two servants who could be loyal and industrious and who would be employed in the office as peon or at home as Choukidar. On the face of these letters which were written by the defendant from Karachi to the plaintiff at Bahawalpur, it is difficult to see any force in the contention of the learned counsel for the defendant that the plaintiff was using undue influence over the defendant for the purpose of obtaining an employment with him.

5. It appears that the plaintiff was treated by the defendant to have joined his service right from 25th February though the terms of the employment were actually reduced to writing on a stamp paper on 16th of March 1956. This is Exh. 6 and may usefully be reproduced: "Reference our conversations, the undersigned feels pleasure in confirming your appointment as General Manager of

1. Sabi Estates, and

2. Exh. Imp. Corporation Ltd., on a monthly salary of Rs. 1,000 (Rupees one thousand only) per mensem only. This salary is inclusive of all allowances and shall be subject to increase as and when the business conditions permit. The post offered is a permanent one of course expressly subject to the business conditions being well and therefore in the initial stage duration of this appointment is for a period, of ten years. If, God forbid, the undersigned terminates your services for his own reasons, you will be given 3 years salary in advance, and in case you leave you will also give 12 months' notice. You shall be given one month's casual leave with pay after completing every 12 months of service. This leave could be taken when due, as and when desired by you." It may be noted that this agreement which is in the form of a letter is in the nature of confirming the appointment of the plaintiff, which would mean that the agreement had been reached earlier. Then the next document Exh. 13 dated 24‑3‑56 is a letter from the defendant to the plaintiff sanctioning the leave from 26th March to 9th April, 1956. The plaintiff has stated that he was anxious to get back to Bahawalpur and bring his family to Karachi and that the leave was sanctioned for this purpose. A sum of Rs. 700 was paid by the defendant to the plaintiff on account of his salary as shown by the receipt Exh.

15. The date on this document is 22nd March though it was later on changed into 25th. This document was produced by the defendant actually in the course of the evidence and it is possible to understand his hesitation in doing so. The plaintiff left for Bahawalpur where he was served with the letter of the defendant's lawyer, Exh. 8, cancelling the appointment, the relevant portion of which has already been reproduced earlier. Then there are two lawyers' notices on behalf of the plaintiff. These are dated 11th April 1956 and 16th September 1951, to neither of which any reply was sent by the defendant. The explanation given by the plaintiff in respect of the delay for the filing of the suit is that he had broken his two arms one after the other in accidents and was therefore not able to come to Karachi and file the suit earlier.

6. In support of his contention that the agreement Exh. 6 was brought about by undue influence, Mr. Khawaja relied upon the statement of the plaintiff wherein he had said in cross‑examina tion that besides the normal prayers he also used to offer Tahajjud and Zikr (form of prayers) and that this used to commence at 3 a.m. and last until the morning prayers. The suggestion was that the plaintiff had by such religious profession created a deep impression of his spirituality on the defendant so that the latter was not in a position to resist whatever terms the plaintiff-proposed. I do not find any force in this contention. It has been shown above with reference to the letters of the defendant himself that he was extremely keen to get the plaintiff in his service and that he was not doing so under the spell of his immediate presence. The fact that the plaintiff was a religious man may well have been one of the considerations far the defendant to consider him desirable for the nature of the work which he was going to entrust with him. He was on the look‑out of a man who should be honest and possessed of integrity so that he could trust him implicitly and to that end the religious attitude of the plaintiff may have counted in his favour but that does not constitute undue influence. Mr. Khawaja next contended that the terms of Exh. 6 themselves were such, which suggested that the transaction was unfair and the plaintiff had been able to obtain an unfair advantage over the defendant. I do not agree. It may be that the plaintiff drove a bard bargain but that is not the same thing as saying that the transaction was unconscionable. Besides, in order to constitute an undue influence in relation to a contract the first requisite to be established is that the relations subsisting between the parties should be such that one of them should be in a position to dominate the will of the other and using that position he should obtain an unfair advantage over the other. Section 16 of the Contract Act which defines undue influence makes this clear and sub‑clause (2) of that section, without prejudice to the generality of foregoing principle, states that a person is deemed to be m a position to dominate the will of another‑ "(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress". None of these circumstances exist in the present case, nor can it be said with regard to the generality of the principle that in this case the plaintiff was even otherwise in a position to dominate the will of the defendant. It is not suggested that the defendant had become the Murid (follower) of the plaintiff, nor is it said that the plaintiff was the preacher of any particular cult. Merely because he offered prayers and Tahajjud it is not possible to hold that he was in a position to dominate the will of the defen dant in the sense contemplated by law.

7. Mr. Khawaja then pointed out that though this document, Exh. 6, purports to have been executed on the 16th of March the date of the purchase of this stamp is actually 9th of March. This has been explained by the plaintiff who stated that the defendant had given him a letter in the same term as Exh. 6 on a plain paper on 16th March 1956 and when the contents of that letter were reproduced on the stamp paper it was thought fit to put on it the same date as was borne on the unstamped paper. This explanation is a reasonable one and I do not think that the validity of Exh. 6 is open to question on this ground, particularly in view of the effect of the other documents to which reference has already been made. , There is then Exh. 13 in which the defendant has sanctioned the leave of the plaintiff from 26th of March to 9th of April. Where would be the question of sanctioning any, leave if the plaintiff had not been appointed ? There is also Exh. 15 which is the receipt of the payment of Rs. 700 as the salary of the plaintiff. Mr. Khawaja who produced this document at a late stage urged that this document showed that the terms of Exh. 6 were not intended to be acted upon because the amount shown in this receipt and which was actually paid is Rs. 700 and not Rs. 1,

000. I do not think that the fact that Rs. 700 only, were paid to the plaintiff and that the period mentioned in the receipt is 25‑2‑56 to 25‑3‑56, necessarily means that the salary from Rs. 1,000 had been reduced to Rs.

700. In fact, the plaintiff had added in his own writing the following words to the receipt, the body of which was in the hand of the defen dant himself:‑ "Less Rs. 300 of my pay". This addition was scored out by the plaintiff and initialled by him at the instance of the defendant, and it is not difficult to under stand the defendant may have asked the plaintiff to do this saying that it was not necessary to say so in this document. The making of the endorsement would however show that the plaintiff knew his salary to be Rs. 1,

000. He was however in need of money to go to Bahawalpur and bring his family, and considering that the defendant was his employer it is not un-understandable that he did not find it necessary to resist the wish of the defendant to score out the addition which he (plaintiff) had made on the receipt. The explanation given by the defendant, when he came in the witness box, of Exh. 6 was very much different from what had been pleaded or what had been said in his lawyer's letter, Exh.

8. There it had been said that the plaintiff had not accepted the offer or joined his duty. In the witness box the defendant stated that Exh. 6 was executed merely to enable the plaintiff to show it to his relations who considered him worthless and not doing any regular work. He goes on to say that the plaintiff had assured him that he would not make use of the document for any other purpose and that he would return the document to him after he had shown it to his relations, and then he states as follows:‑ "After about a week of the execution of Ex. 6 he told me that he wanted to go to Bahawalpur to bring his children. He made persistent demands for leave as well as for salary and I therefore paid him his salary for a month and gave him leave. He said he will come back within a week. About that time my father came from Lahore, and when he learnt of these things he was angry with me for having acted hastily in engaging the plaintiff whom he did not consider to be a reliable man. I then demanded the document Exh. 6 back from him as had been agreed. He tried to evade it by saying that he would need it to show it to his people at Bahawalpur. I told him that this object could be achieved by his getting a photostat copy of this agreement and returning the original to me. He did not do so. Upon which there was unpleasantness and in fact there was a physical quarrel between him and my father. I then turned him out of my house and he went to live with a friend of his named Azad." Nothing of this kind had been said before by the defendant nor was any question of this kind put to the plaintiff in his cross -examination. Even otherwise, I find it impossible to accept this explanation. The defendant admits that he is in business since 1954, which is of an extensive character and for which he maintains a staff of 5 to 7 people. He is thus neither inexperienced nor immature and I cannot believe that a person like him would hand over to the plaintiff the document like Exh, 6 contain ing such specific obligations merely for the purpose that the plaintiff would be able to show it to his relatives. If this was so the defendant would have definitely taken simultaneously a writing from the plaintiff which would exclude the possibility of user of this document against the defendant. The fact remains that there is indisputable evidence of the defendant's wish to employ the plaintiff, there is the fact that the plaintiff came from Bahawal pur to Karachi. For this purpose there is the written agreement of service, there is the sanction of leave and there is the payment of certain salary. On the face of all this it is idle to suggest that there was no agreement of service or that the same was not intended to be acted upon. I, therefore, hold that the plaintiff was appointed by the defendant on a salary of Rs. 1,000 per month and that neither the agreement Exh. 6 nor the sanction of leave Exh. 13 was obtained under undue influence. My finding therefore on issues Nos. 1 and 2 is in the affirmative and on issue No. 3 in the negative.

8. That brings me to the more difficult question of the quantum of damages which is the subject‑matter of issues Nos. 4 and

5. On this part of the case the learned counsel for the defendant did not say very much, but in answer to my question Mr. Khalid Ishaque, the learned advocate for the plaintiff conceded that laving regard to the provisions of section 74 of the Contract Act, it was within the discretion of the Court to grant a lesser amount of damages than the one named in the contract and according to him 3/4th of the amount claimed would represent a reasonable compensation. I shall now proceed to deal with this question.

9. The claim of Rs. 37,500 made by the plaintiff consists of three years' salary (Rs. 36,000) which is stated in the agreement to be payable to the plaintiff in case his services were terminated, Rs. 1,000 on account of salary for the period commencing from 25‑2‑56 to 25‑3‑56 and Rs. 500 on account of leave salary. For the second item the plaintiff could only claim Rs. 300 because he had already received Rs.

700. The third item of Rs. 500 was not pressed, and rightly so, because the letter Exh: 6 cancelling the agreement of service was issued on the 24th of March and since the plaintiff is claiming damages equivalent to three years' salary a ‑claim for leave salary for a portion of that period would in any case be untenable. Therefore, the only question which remains to be considered is whether the plaintiff is entitled to the whole amount of Rs. 36,000 (3 years' salary). The question whether this amount is in the nature of penalty or liquidated damages is not of much importance in view of section 74 of the Contract Act, the relevant portion of which reads as follows:‑ "

74. 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 by way of penalty, the party complaining of the breach is entitled, whether or 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. Explanation.‑A stipulation for increased interest from the date of default may be a stipulation by way of penalty." From what has been said in the preceding paragraphs it follows that the defendant committed the breach of contract by prematurely terminating the services of the plaintiff, the duration of which was fixed for 10 years. Under section 74, the party complaining of the breach, is entitled to receive from the party who has broken the contract, reasonable compensation not exceeding the amount named or the penalty stipulated for. It is plain that the amount named in the contract is the limit within which the plaintiff is entitled to get compensation and the point whether the compensa tion claimed is reasonable or not is a matter which is to be determined by .the Court having regard of course to all the circumstances of the case.

10. Section 74 of the Contract Act and the principle con tained therein has been the subject of a considerable amount of judicial interpretation. The question whether actual damage has to be proved by the plaintiff has been directly raised in this case in issue No. 5 and has to be answered. On this question a certain amount of difficulty was experienced in view of a short observa tion of the Privy Council in a case Bhai Panna Singh and others v. Bhai Arjun Singh and others (A I R 1929 P C 179). This case arose out of a transaction of an agreement of sale of an immovable property in which the sale had not been completed and both the vendor and the purchaser in turn claimed damages blaming each other for the breach. The lower Court had found in favour of the vendor and had held that the purchasers were in breach, with which finding their Lordships of the Privy Council agreed. The question then arose as to what was the amount of damages to be granted to the vendor, who had claimed Rs. 10,000 which was the amount named in the contract as damages to be paid by the party in breach. The only evidence of actual loss to the vendor consisted of the difference between the price at which the property was agreed to be‑ sold and the actual price brought on re‑sale to another person and this was only Rs. 1,

000. The question which their Lordships were considering was whether, the plaintiff could still claim Rs. 1,000 as damages which was the amount named in the contract, and this is what their Lordships said:‑ "The effect of section 74, Contract Act of 1872 is to disentitle the plaintiffs to recover simpliciter the sum of Rs. 10,000 whether as penalty or liquidated damages. The plaintiffs must prove the damages they have suffered." On the basis of these observations an argument was raised in a Calcutta case before Justice Ameer Ali Mahadeoprasad v. Siemens (India) Ltd. (A I R 1934 Cal. 285) that notwithstanding a sum named in the contract a plaintiff is not entitled to anything unless he proves actual damage. The contention was repelled by the learned Judge who interpreted the observation of the Privy Counsel in the particular circumstances of that case not to go so far as that and came to the conclusion which he stated in the following words: "To my mind, the following is the intention of the legislature; (1) The plaintiff must prove his damage in a general sense; (2) the contract made by the parties estimating their damages is in itself evidence; (3) if there is no other evidence of damage, I can conceive of certain cases where this evidence alone will be considered sufficient, nor do I think that the Judicial Committee intended by anything said in Panna Singh v. Firm Bhai Arjan Singh to exclude such a possibility; (4) the sum named however is not conclusive evidence, that is to say, if there is other evidence or circumstances showing that it was excessive, the Court will not consider itself bound by it: (5) if, on the other hand, the other evidence and circumstances indicate that the damage equals or may equal, or is likely to exceed the amount named, the Court will abide by it, and lastly, (6) in case, that is to say, where the other evidence shows that it is unreasonable, the plaintiff will have to prove his damages irrespective of the figure."

11. This Calcutta case came to be considered by a Bench of the Lahore High Court in a case Mool Chand Behari Lal v. S. D. Chand and Co. (A I R 1947 Lah. 112) and Muhammad Sharif, J. did not agree with the interpretation of Ameer Ali, J. of the above quoted observations of the Privy Council and observed as follows:‑ "The learned Judge evidently thought that the sum named by the parties is a good proof of the amount of damages that have been caused. But with the utmost respect to the learned Judge, this is not the meaning of which the Privy Council judg ment is susceptible. Their Lordships of the Privy Council clearly intended to convey that the plaintiff must prove his damages; in other words, that the sum named by the parties was not to be taken itself as proof of damages." But when the learned Judge summed up his own conclusions which appear in para. 23 of the judgment, this is what he observed:‑ "Section 74 is applicable in all cases where a sum is fixed as the amount payable in case of breach, regardless of the fact whether any actual loss was or was not caused. If the Court considers that the sum named is not excessive or unreasonable it shall allow it, or otherwise reduce it to the figure it considers reason able to allow. In cases where there is no data to estimate the amount of damages actually caused, the discretion of the Court is unfettered in allowing what it considers "reasonable compensation", subject, of course, to the maximum fixed by the parties."

12. It appears to me that an interpretation of the observation of the Privy Council quoted above for the purpose of advancing a proposition that if actual damage or loss is not proved the plaintiff would not be entitled to anything, would he in disregard of the clear words of section 74 which are "whether or not actual damage or loss is proved to have been caused thereby". Having regard to the particular circumstances of the Privy Council case in which it was proved that the only actual damage was a sum of Rs. 1,00) on re‑sale of the property, the true import of their Lordships' observation would be that a party complaining of breach cannot unconditionally and without limitation claim the amount named in the contract regardless of the actual damage or other relevant circumstances of the case.

13. Section 74 seeks to resolve the difficulties in the common law doctrine of damages. It dispenses with fine distinctions between the claim of damages based on the principle of liquidated damages and those imposed by way of penalty. It makes provision C for both and the principle laid down is that where a sum is named or a penalty is stipulated the party complaining of the breach is entitled to a reasonable compensation not exceeding the amount so named or the penalty so stipulated. And though it says that o "whether or not actual damage or loss is proved to have been caused" it lays down that the compensation to be given to the injured party should be a reasonable one within the maximum stipulated in the contract. It must, therefore, follow that merely because a sum has been named in the contract the party complaining of the breach cannot claim that sum as a matter of course, because the Court will grant only a reasonable compensation and no more whatever may be the figure named. It must also follow that where a sum has been named in the contract the party complaining of breach is entitled to some damages. In exercising the unquali fied discretion granted to it by this section the Court will naturally act with care and caution and in accordance with recognised principles. Where therefore the sum named is the result of an honest and genuine pre‑estimate of damages having regard to the nature of the transaction and the circumstances of the case the Court may not find much difficulty in awarding an amount not far different from the one named unless the contrary is proved. But where the sum has been stipulated as 'in terrorem' to work as a deterrent to compel a party to fulfil the main contract and no certain data can be found for the determination of the 'reasonable compensation", the Judge may experience a real difficulty. In such cases, the Court will look to the nature of the transaction, the position of the parties at the time of the bargain and the comparative undue advantage or disadvantage which might result to the parties by the enforcement of the penal clause.

14. In the present case there is no proof that the plaintiff gave up any job for the purpose of getting employment with the defendant or that he was deprived of any chance of another employment by accepting the service of the defendant or by stay ing at Karachi for a month as he did. It must also be borne in mind that the plaintiff in his letter, Exh. 16/2, had himself stated that all that he wanted was a reasonable salary to meet his expenses G in Karachi. And it is also true that since he had been introduced to the defendant through his (defendant's) father the plaintiff looked upon the defendant with reverence and was anxious to provide for him. The agreement, Exh. 6, states that the appointment of the plaintiff was as the General Manager of

1. Sahi Estates and

2. Export Import Corporation Ltd. on the monthly salary of Rs. 1,

000. He was closely cross‑examined as to the nature and amount of work that he had done during the one month that he was with the defendant but he only gave vague replies and all that he was able to specify was that he had interviewed one or two persons who were wanting a job with the defendant and bad done some work relating to preparation of vouchers, reports and returns and other office routine work. He further admitted that he did not remember the details of the work actually done by him. In his letter, Exh. 16/2, he said that he knew nothing about business affairs but he had been a successful A. D. C: It is, therefore understandable that at the end of a month the defendant or his more experienced father finding that the plaintiff was not useful enough for the work or for the salary that had been fixed decided to get rid of him and did so. The provision for payment of three years' salary in advance at the rate of Rs. 1,1100 per month in case of removal was certainly not a genuine pre‑estimate of damages which the plaintiff was likely to suffer from the breach of contract. It was a stipulation to act as 'in terrorem' to deter the defendant from removing the plaintiff from service. It may further be noted that whereas the liability of the defendant in case of premature removal of the plaintiff was to be the payment of three years' salary, the plaintiff had only to give twelve months' notice in case he wanted to leave service. There is also the fact that the employment itself was made "expressly subject to the business condition being well. If, there fore, the business condition had deteriorated and in fact there is no evidence that the Export Import Corporation Ltd. had been formed or even started working the plaintiff's services might have come to an end much earlier than after three years from the date of his employment. In the circumstances of the case I am also of the view that to grant three years' salary to the plaintiff without his having worked for it would be more inequitable and hard than not to grant this amount to the plaintiff. The plaintiff says that he has not been able to obtain any employment after his removal, but that may be because on his own showing that he had broken his arms one after the other and was unfit for work. Supposing he had been fit and had been able to secure employment with a salary of Rs. 1.000 per month or a little less there would have been very little actual damage. Taking all these facts into consideration I have come to the conclusion that payment of twelve months' salary amounting to Rs. 12,000 (Twelve thousand) to the plaintiff would adequately meet the ends of justice and would amount, to a reasonable compensation. This would also be in consonance with the principle of reciprocity, considering that the plaintiff had only to give twelve months' notice it he wanted to leave the job.

15. As a result of the above findings I grant a decree to the plaintiff for the sum of Rs. 12,300 (Rs. 300 being the arrears of salary for the first month) only with proportionate costs. A. H. Order accordingly.