P L D 1953 Lahore 400 (PLP)

M. KHURSHID ZAMAN, J.‑--This is a plaintiff's appeal against the Judgment and decree of the District Judge, Sialkot, confirming the decree of Additional Sub‑Judge, 1st Class, Sialkot. The plaintiff, Cantonment Board, Sialkot, brought a suit for recovery of Rs. 3,637‑8‑

0. The defendant, Sheikh Nazir Ahmad (respondent in this appeal), was given a contract by the plaintiff Board for the removal of rubbish from the Cantonment area. The contract was for a period of one year commencing from the 1st April 1948 and ending on the 31st March 1949. According to the terms of the contract, the contractor was to pay Rs. 16,015 in all in four equal instalments falling due on the 10th April 1948, 10th July 1948, 10th October 1948 and the 10th January 1949, respectively. It was stipulated that if any instalment was not paid on the due date, the Executive Officer of the Board would be authorized to recover Rs. 10 per day from the contractor as penalty, and if he failed to pay the instalment for 20 days after it had become due, the said officer would have the power to cancel the contract and to deduct the outstanding instalment and the penalty from the amount of the contractor's security. In such a case he was further authorized to resell the contract and recover from the contractor any loss which may result from the resale of the contract. The other material terms of the contract are as follows:‑ Clause 8.‑-Any interpretation placed by the Executive Officer on the terms of the contract shall be deemed to be correct. Clause 10.--The Government lorries will be used to remove the rubbish. Clause 11.‑-If any of the lorries went out of order the following course shall be adopted‑ (a) if the lorry should remain out of order for more than three days the Board shall pay to the contractor Rs. 10 per day as compensation, but this compensation shall be payable only if the Cantonment area was regularly cleaned every day. The undisputed facts are that the Cantonment Board supplied two lorries only for 19 days and for the rest of the contract period only one lorry was placed at the disposal of the contractor for removing the rubbish and that from the 7th May 1948, to the 20th January 1949, the defendant paid to the Board Rs. 12,377‑8‑

0. When the Board demanded the balance (Rs. 3,637‑8‑0), the defendant replied that under the terms of the agreement he was entitled to the use of two lorries, but he had been supplied with only one and this violation of clause 10 of the agreement entitled him to compensation at the rate of Rs. 10 per day under clause 11(a) and that this compensation had not been paid by the Board. He maintained that he was justified in adjusting the balance towards the amount of compensation with the Board owned him. The Executive Officer repudiated the defendant's claim for compensation which, according to his interpretation of the rele vant clause, was payable only if the contractor had to incur any additional expenses in removing the rubbish by employing extra vehicle. He further warned the defendant that if the balance was not paid immediately he would cancel the contract. The defendant thereupon brought a suit for injunction restraining the Executive Officer and the Cantonment Board from terminating his contract. He maintained that as the Board had not paid his compensation under clause 11 (a) of the agreement, his contract could not be terminated for non‑payment of the balance. A temporary injunction was issued but as the contract period expired during the pendency of the suit, it (the suit) became infructuous and was consequently dismissed. The present suit was then brought by the Cantonment Board against the defendant to recover Rs. 3,637‑8‑0 being the balance of the contract money. Referring to the plea taken by the defendant in the former suit, the plaintiff pleaded that the defendant was not entitled to withhold the balance in lieu of compensation under clause 11 (a) which, according to the interpretation of the Executive Officer, was payable only if the defendant incurred any expenditure in removing the rubbish by hiring extra transport or labour; that, in fact, he (the defendant) did not incur any expenditure and did not suffer any damages by reason of failure on the part of the plaintiff to supply him with two lorries; that the number of lorries to be employed for removing the rubbish was not of the essence of the contract; that as the lorry supplied by the Board made four trips instead of two, clause 10 of the agreement was substantially satisfied; that the Executive Officer's interpretation of the terms of the agreement could not be ques tioned by the defendant under clause 8 of the agreement and that the interpretation placed by the Executive Officer on the terms of the agreement was reasonable and fair. The defendant resisted the suit and denied these allegations and maintained that he was legally justified in deducting the balance in lieu of the amount of compensation which was payable to him under clause 11 (a) for breach of clause 10 of the agree ment. He further pleaded that be was not bound by the inter pretation of the agreement by the Executive Officer and that such clause was not legally valid. On the various contentions of the parties the learned trial Judge framed the following issues:‑ (1) Had the defendant paid the four instalments as they fell due? (2) Is the defendant not bound by clause 8 of the contract? (3) If issue No. 2 is decided against the defendant, then what is the interpretation placed by the Cantonment Executive Officer on clause 11 (a) of the contract? (4) Is the interpretation placed by the Executive Officer on clause 11 (a) irrelevant to the issue in the case and the defendant is not bound by such interpretation as stated in the plaint? (5) Is the defendant entitled to deduct the amount of compensation out of the contract money? (6) If issue No. 5 goes against the defendant, is the plaintiff not entitled to the amount sued for? (7) Has the defendant incurred additional expenses on account of short supply of one vehicle and suffered damages on that score? If so, to what amount and what is its effect on the case? Issue No. 1 was decided against the defendant but it is an admitted fact that he paid Rs. 12,377‑8‑0 out of the contract money. Issue No. 2 was decided in favour of the defendant and issue No. 4 was answered in the affirmative. In view of his find ings on issues Nos. 2 and 4, the trial Judge did not consider it necessary to give any finding on issue No.

3. On issue No. 5 the finding was that the defendant was entitled to deduct Rs. 3,460 out of the contract money. Issue No. 7 was found against the defendant for want of evidence. On his findings on issues Nos. 2 4 and 5, the trial Judge decreed the plaintiff's suit only to the extent of Rs. 177‑8‑0, leaving the parties to bear their own costs. Against this decision the plaintiff preferred an appeal and the defendant filed cross‑objections claiming costs in the trial Court. The District Judge, upholding all the findings of the trial Court, dismissed the plaintiff's appeal but accepted the defendant's cross‑objections allowing him costs of the trial Court. The plaintiff has filed a second appeal in this Court. The learned counsel for the appellant urged two points. Firstly, that on the true interpretation of clause 10 the num ber of lorries to be supplied to the defendant was not of the essence of the contract. According to him, all that the parties intended was that adequate transport was to be supplied by the Board, and if instead of two lorries only one was supplied and that lorry did four trips instead of two, the intention of the parties was carried out, and that, in any case, under clause 8 of the agreement it was not open to the defendant to challenge the Executive Officer's interpretation of the terms of the agreement. Secondly, that the sum named in clause 11 (a) is penalty and since the defendant has not proved any damages resulting from the alleged breach of clause 10, the defendant is not entitled to any deduction by way of compensation without proof of actual damages suffered by him. So far as the question of construction of clauses 10 and 11 (a) of the agreement is concerned, we do not agree with the contention of the learned counsel for the appellant. It is one of the cardinal principles of interpretation of statutes which applies also to construction of legal instruments that the intention of the parties is to be gathered from the language used in the document to be construed. And if the language used is unambiguous it should be given its ordinary and natural meaning In construing the relevant clauses which are couched in simple and plain language, we would not be justified in introducing any words which are not there. The clauses as they stand are incapable of the interpretation contended for by the learned counsel for the appellant. Clause 10 simply says that two lorries shall be used in removing the rubbish and clause 11 (a) provides that the contractor will be entitled to com pensation at a given rate if one of the lorries became unservice able. The only condition attached to the right of the contractor to claim compensation is that the Cantonment area is kept clean. Reading these two clauses together it does appear to us that the parties attached particular importance to the number of the lorries to be placed at the disposal of the contractor. Otherwise, instead of providing compensation in case of one of the lorries going out of order, the agreement would have stated that in such a case the other lorry would make four trips instead of two. If that had been the intention of the parties, nothing would have been easier than to introduce these words in the agreement. The provision as to compensation, in our opinion, clearly indicates that the number of lorries to be supplied to the contractor was of the essence of the contract, and in agreement with the learned Courts below we hold accordingly. The contention of the learned counsel that under clause 11 (a) the defendant was entitled to compensation only if he incurred expenditure in hiring extra transport is also not supported by the language used in that clause which can admit only of one meaning; the Board undertook to compensate the contractor at the rate of Rs. 10 per day in case one of the lorries remained out of order for more than three days provided the contractor performed his part of the contract and got the Cantonment area cleaned. The learned counsel felt some difficulty in understanding why the Board should have agreed to pay compensation even if the contractor had to incur no expenditure in hiring extra transport or labour for the purpose of performing his part of the contract. While urging that the stipulated compensation was not intended to be a gift by the Cantonment Board, the learned counsel pointed out that both the Courts below had decided issue No. 7 against the defendant for want of evidence. The obvious reply to this argument is that clause 11 (a) neither expressly nor by necessary implication contemplates the incurring of extra expenditure by the contractor in removing the rubbish. As already pointed out, the only condition attached to the right of receiving the compensation is that the rubbish will be removed daily and it has never been the case of the plaintiff that the respondent failed to satisfy this condition. We might, however, add that the construction of these clauses presented to us no difficulty. It is quite clear that both parties contemplated some loss to the contractor if he had to carry on the work with one lorry and estimated such loss at Rs. 10 per day, the intention of the parties being not to make the assessment of the loss dependent on the proof of actual damages. In support of his contention that under section 74 of the Contract Act the defendant must prove actual damages in order to succeed in his claim for compensation, the learned counsel cited Bhai Panna Singh v. Bhai Arjun Singh (A I R 1929 P C 179) and Michel Habib Raji Ayoub v. Sheikh Suleiman El Taje El Fareuqui (A I R 1941 P C 101). In the former case there is an observation by their Lordships, which, if torn from the context, might lend some support to the proposition contended for by the learned counsel. Referring to section 74 of the Contract Act, their Lordships observed:‑ "The effect of section 74, Contract Act of 1872, is to disentitle the plaintiffs to recover simpliciter the sum of Rs. 10,000 whether penalty or liquidated damages. The plaintiffs must prove the damages they have suffered. The only evidence of loss is that of the loss on resale by Rs. 1,

000. There seems to be no ground for displacing the trial Judge's finding that this was a genuine contract. The vendors remained in possession of the rents and profits of the property until resale, amounting, according to the evidence, to Rs. 450 to 500 per mensem. There is no ground for awarding them interest. On the other hand, they have received earnest money of Rs. 500, so that their actual damage is Rs. 500." The above observation must be taken to have been made with reference to the peculiar facts of that case. In a contract for the sale of certain land it was provided that the party retracting from the contract shall pay Rs. 10,000 pashemana (damages). The contract fell through and the vendors as well as the purchasers brought suits to recover Rs. 10,000 as damages, each alleging breach of contract by the other. The trial Court held that the purchasers were guilty of breach of contract and decreed the vendors' suit, dismissing that of the purchasers. On appeal by the purchasers, the Judicial Commissioner, N. W. F. P., reversed the findings of the trial Court and dismissed the vendors' suit. The vendors went up in appeal to the Privy Council where they succeeded in having the finding of the trial Court restored. While considering the question of damages their Lordships made the observations quoted above. It is, however, clear that by making these observations their Lordships could not have meant that section 74 of the Contract Act requires that actual damages should be proved in every case, because such a construction of the section would be repugnant to the unequivocal language used by the Legislature. Section 74 enacts:‑ "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." The section does not make the right of the party complaining of the breach to receive reasonable compensation dependent on the proof of the actual loss or damage. It is, therefore, clear that what their Lordships meant was that in cases where there is evidence of actual damage or loss that evidence must be taken as the basis for assessing reasonable compensation. In view of the clear language of the section it is not possible to put any other interpretation on the observation of their Lordships. The other case relied upon by the learned counsel (A I R 1941 P C 101) was an appeal from the Supreme Court of Palestine. The appeal arose out of a suit for 2500 for breach of contract. The contract was for sale of certain land. One of the clauses of the agreement was to the following effect:‑ "The second party (the purchaser) shall pay to the first party 2500 as agreed and liquidated damages without the necessity of notice if he commits a breach of all or part of his under taking under this agreement." The plaintiff relied on Article 111 of the Ottoman Code of Civil Procedure which enacted: "If it is pointed out and pro vided in the body of the contract that in the event of failure of any of the parties is the carrying out of what he undertook, he pays to the other party a fixed amount as damages, no greater or less should be awarded." Under this Article if a sum is named in the agreement as fixed damages, "no greater or less should be awarded". But their Lordships, bearing in mind the difference between penalty and liquidated damages known to English law and introduced in the jurisprudence of Palestine by section 45 of the Palestine Order in Council, 1922, limited the application of this Article to liquidated damages as distinguished from a sum fixed, `in terrorem' covering breaches of contract of money varying degrees of importance, the possible damages from which bear no relation to the fixed sum, and which obviously have at no time been esti mated by the contracting parties. Their Lordships observed "It seems right, therefore; to conclude that now when the Code (The Ottoman Code of Civil Procedure) is applied to contracts, `damages' will be taken to mean actual damages and the article will only apply to an agreement which represents `a genuine pre‑estimate of damages.' Where there is such an agreed sum 'no more and no less' can be awarded. But if the Court applying well‑known rules has to conclude that the sum agreed was a penalty, whatever it may be called in the agreement, then the penal stipulation will not be enforced." The learned counsel emphasises the expression "actual damages" occurring in this passage. But the words "actual damages" do not connote the damages proved to have been suffered by the party complaining of the breach. If that were so, the clear words used in Article 111 which do not make its application dependent upon the proof of actual damages could not be given effect to "Actual damages" in the context can only be liquidated damages which is the result of "genuine pre‑estimate or damages." This case does not, in our opinion, support the appellant, if anything it goes against him, because it cannot be said in the present case that the daily rate of compensation was fixed "in terrorem." It may, however, be pointed out that section 74 of the Contract Act has done away with the difference between liquidated damages and penalty. The sum named may partake of the character of one or the other, it is the duty of the Court to assess and award only reasonable compensation. The two Privy Council rulings cited by the learned counsel and the other rulings bearing upon the point were considered and explained in a recent D. B. case of this Court reported as Mool Chand Behari Lal v. S. D. Chand & Company (A I R 1947 Lah. 112). After discussing the various authorities cited at the Bar, their Lord ships observed: "On a review of all these authorities, I think it is quite clear that whether some amount is paid by way of earnest money or kept in deposit for the due performances of any obligation under the contract, it is always for the Court to determine what amount, if any, would be `reasonable compensation' under the circumstances of a particular case. 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 reasonable 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. Where a party asserts that the amount mentioned as payable in case of breach, is a genuine pre‑estimate of damages' calculated by the con tracting parties, and should not on that account be disturbed, it might be established that this is so and the Court, if satisfied, will adopt it as `reasonable compensation' to be awarded. But the final say is with the Court and not with the litigant." Respectfully following these authorities we must proceed to consider the question whether the amount allowed by the Courts below as compensation under clause 11 (a) of the agreement is a reasonable compensation in the circumstances of the case. But before we do so, it is proper to deal with the contention of the learned counsel for the plaintiff that the defendant is bound by clause 8 of the agreement and we must, therefore, accept the interpretation placed by the Executive Officer on the various terms of the agreement. In support of his contention he cited The Secretary of State for India in Council v. Augustus John Arathoon (I L R 5 Mad. 173). We find ourselves unable to accept this contention. Both the learned Courts below have held the clause to be void on the ground that it is opposed to the public policy and also to the well‑known principle of natural justice that no one shall be a' judge in his own cause. It appears to us that it is also opposed to the spirit of section 28 of the Contract Act, the relevant portion of which enacts: "Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in res pect of any contract, by the usual legal proceeding in the ordinary tribunals, or which limits the time within which he may thus enforce his right, is void to that extent," It cannot be seriously disputed that the effect of clause 8 is to restrain one of the parties 1 to the contract from enforcing his rights under the contract in the ordinary legal tribunals. The case relied upon by the learned counsel is typical of cases of contracts in which the acceptance of delivery of certain goods is made dependent upon the approval of one of the parties to the contract or his agent or a third party. In other words, the appro val of such a person is made a condition precedent to the per formance of the contract. The ratio decidendi in such cases is that the person whose approval is made a condition precedent its peculiarly fitted to judge of the fitness of the goods offered. In the present case it cannot be urged that the Executive Officer was in any way "peculiarly fitted" to interpret the terms of the document in question. The clause in question is an attempt to deprive the defendant of his right to enforce his rights under the contract in a Court of law. That being the case we agree with the conclusion of the learned Courts below that neither the defendant nor the Courts are bound by clause 8 of the agreement. Coming back to the question of reasonable compensation to which the defendant may be entitled under clause 11 (a) of the agreement, the learned counsel for the appellant contended that we could not go into that question at this stage as the plea of reasonable compensation was not taken by the defendant either in the trial Court or in the lower appellate Court. This contention is devoid of all force. The defendant pleaded that he was entitled to receive the sum named in clause 11 (a) as damages for breach of clause 10 of the agreement. This plea was sufficient to attract the provisions of section 74 of the Contract Act and it was the duty of the Court to consider the question of assessment and award reasonable compensation. Since this has not been done by the Courts below, the duty is cast upon us. See Shenbagavandivam mal v. Mupidathi Ammal (A I R 1942 Mad. 720) and Radhakishan Juikishan Ginning and Pressing Factory Warud v. Jamnadas Nursery Ginning and Pressing Co. Ltd. (in Liquidation) (A I R 1940 Nag. 228). The defendant produced no evidence to prove that he had to incur additional expenses on account of the short supply of one vehicle. On a proper and fair construction of the agreement we have already expressed our view that the right of the contractor to receive compensation under clause 11 (a) did not necessarily imply the incurring of extra expenses by him. It is, however, clear that the parties contemplated some loss in case one of the lorries supplied to the contractor became unserviceable and their own es timate of that loss was Rs. 10 per day. The defendant asserted that the short supply of transport resulted in pilferage of the rubbish which was used by the occupants of some of the bungalows in the Cantonment area as manure. The defendant drew the attention of Executive officer to this fact, but since no action was taken by him, he had to approach some of the Commanding Officers of the Units stationed in Sialkot Cantonment. In support of his assertion the defendant produced certain documents. We have therefore, no reason to disbelieve the defendant on this point. It is true that the defendant has led no evidence to prove the quan tity or the value of the pilfered rubbish, but in the circumstances it was neither possible nor necessary to lead such evidence. This is only illustrative of the several ways in which the contractor without having to incur extra expenses in removing the rubbish could have suffered loss such as is contemplated in clause 11 (a) of the agreement. In assessing reasonable compensation one of the important criteria is the parties' own estimate of the contemplated damages. After considering the matter carefully, we see no good reason for interfering with that estimate. We, therefore, uphold the finding of the Courts below that the defendant is entitled to deduct from the balance of the contract money due from him compensation at the rate of Rs. 10 per day for such period during which he was supplied with only one lorry. The fact is not disputed that for 346 days only one lorry was placed at the disposal of the defendant. For the reasons stated above, we dismiss this appeal with costs. A. H. Appeal dismissed.