Bishan Narain and Dua, JJ.:— Hira Films of Bombay is a firm which produced the film known as “Chandni Chowk”. This firm, through its world distributing agents, Tribhavan Productions, again of Bombay, entered into an agreement with Sikand Films of Jullundur in 1953 whereunder the Jullundur firm was appointed to be the distributing agents for five years to exploit this film—Chandni Chowk—in the territories of the Punjab, Pepsu, Himachal Pradesh and Jammu and Kashmir on certain terms. The jullundur firm exploited the film for a certain period and then on 22nd February 1955 the Sikand Films filed the present suit in the Court of the Senior Sub-Judge, Jullundur, against the Bombay firm for recovery of Rs. 17,500/- as damages, for delivery of a fourth print of the film and for a declaration that the plaintiff firm was entitled to recover damages at the rate of Rs. 1,000/- per day from the date of the suit till the delivery of the fourth print. The trial Court decreed the suit for delivery of the fourth print on payment of Rs. 1,400/- and awarded Rs. 2,000/- as damages but refused to grant the declaration for future damages. Dissatisfied with this decree the plaintiff has filed the present appeal in this Court for a decree of Rs. 17,500/- as damages and for a declaration of future damages. Hira Films has filed cross-objections for the dismissal of the suit in toto.
2. The main point to be determined in this appeal is the amount of damages, if any, to which the plaintiff firm is entitled to recover from the defendants. The facts relevant for the decision of this matter are these. On November 11, 1953 the parties entered into an agreement for exploitation of this film on the terms that (1) the plaintiff firm shall advance Rs. 45,000/- to the Hira Films in certain specified installments, (2) the plaintiff firm shall spend Rs. 5,000/- on publicity on behalf of the Bombay firm, (3) the plaintiff firm shall be entitled to a commission of 20 per cent and the defendant firm will get 80 per cent on the earnings derived from the exploitation of the film. This ratio was to be altered to 30 per cent and 70 per cent respectively if the earning reached the figure of Rs. 65,000/-, (4) the plaintiff firm shall recover the advance of Rs. 45,000/-, the actual publicity expenses and its commission from the earnings and shall remit the balance to the Bombay firm, (5) the plaintiff firm shall regularly submit detailed accounts of the earnings etc. to the Bombay firm, (6) the Bombay firm shall supply three new copies of the film but the plaintiff firm could get any number of copies on payment of certain specified amounts and (7) the film was to be exploited for five years from the date of its release for exhibition. It is not necessary to take other terms of the agreement into consideration. On 27th January, 1964 the agreement was modified so as to increase the amount of the advance payable by the plaintiff firm to Rs. 51,000/-. It appears that the film was released in Delhi during December, 1954. Differences arose between the parties and the defendant firm cancelled the agreement on 16th December 1954. Thereupon the plaintiff firm filed a suit for a declaration that it was the sole distributor of the pictme for the contracted areas. The parties settled the dispute and modified the terms of the original agreement so as to further increase the amount of the advance by another Rs. 5,000/-. The Bombay firm further agreed to supply extra fourth copy on payment of Rs. 1,700/-, out of which Rs. 300/- had already been paid. Clause 4 of this agreement reads—
“We undertake to deliver you the fourth print on or before 27th January, 1955, the latest. It is unambiguously and (torn) agreed by us that the delivery of the extra fourth print will be effected by us to you by the 27th January, 1955, the latest and in case of default and delay if any made by us in this behalf we undertake and agree to pay you Rs. 1,000/- (Rupees One thousand) (torn) per day as your consolidated and agreed upon damages and……torn……(compensation) for such delay, if any, made by us till such date……torn……the delivery of the said print is actually effected by you (torn) Jullnndur City.”
The plaintiff's case is that the defendant firm did not supply the fourth copy inspire of demands and, therefore, was liable to pay damages in accordance With clause 4 of the agreement, that is, at the rate of Rs. 1,000/- per day till the date of the supply of the fourth copy. The defendants contest their liability and allege that the plaintiff firm was not ready to receive the additional copy. The trial Court held that the defendant firm Committed the breach and this finding has not been challenged before us. The damages must, therefore, be assessed on the basis that the defendant firm did not supply the fourth copy by 27-1-1955 and thus was in default.
3. It is common ground between the parties that the damages payable to the plaintiff firm are to be assessed in accordance with section 74 of the Indian Contract Act, 1872. This section reads—
“S. 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 it 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 tor.”
This section relates to contracts wherein on breach thereof liability to pay a specified amount as damages is mentioned or there is a stipulation by way of penalty. The section lays down that the person entitled to get damages is to receive reasonable compensation not exceeding the amount specified in the contract. What is reasonable compensation in a given case depends on the facts and circumstances of each case and to determine it a Court must take into consideration the entire material on the record and also consider the circumstances of the case. This section does not make any distinction between the amount mentioned in the contract as liquidated damages based on genuine pre-estimate or as a security for due performance thereof. In either case it is incumbent on Courts of law to compute reasonable compensation and it is not for the parties concerned to determine the figure. If the amount of reason able compensation exceeds the amount mentioned in the contract then the amount so mentioned therein must be treated as reasonable. Now this amount may have been fixed by the parties as a genuine pre-estimate of the loss or it may be that the amount fixed is an essential term of the contract and the parties may not have entered into agreement at all if the compensation had not been fixed at that figure or the amount may have been fixed as limiting the liability of the guilty party where actual damages are expected to exceed that figure. There is no reason why Courts should not take these factors into consideration when calculating reasonable compensation. After all it is hardly ever that reasonable compensation can be calculated with mathematical exactness and in a given case Courts may well come to the conclusion that the amount mentioned in the contract as damages represents reasonable compensation in the circumstances of the case. It is, however, clear that in all cases covered by section 74, Indian Contract Act, the amount is to be decreed as reasonable compensation and not by virtue of its mention in the contract. It is obviously for the party claiming compensation to bring the necessary material on the record Section 74 lays down that it is the duty of Courts to award reasonable compensation even when the aggrieved party has failed to prove that it had ad suffered any actual damage or loss. In such a case I take it that the Courts will award nominal or in flagrant cases even substantial compensation. It, therefore, follows that in substance the only effect of naming a sum as compensation in a contract is that the decree is in no case to exceed that amount which operates as a maximum in the case. The Privy Council in Bhai Panna Singh v. Bhai Arjun Singh . A.I.R 1929 P.C 179., has described the effect of section 74 of the Contract Act to be to disentitle the plaintiffs to recover simpliciter the sum mentioned in the contract as penalty or as liquidated damages. In Mool Chand Behari Lal v. S.D Chand and Co. . A.I.R 1947 Lah. 112., it has been laid down that 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 to the maximum fixed by the parties and that where a party asserts that the amount has been fixed as genuine pre-estimate of damages then the Court may award it, if it is satisfied that the amount so fixed is reasonable compensation. I am in respectful agreement with this decision.
4. It is true that the Indian Contract Act is based mainly on English Law but section 74 is a departure from it. Under English Law when the contract specifies an amount payable by the party in default on breach of the contract then that amount may be liquidated damages or may be penalty to secure performance. Whether it is one or the other must be determined in England by Courts of law. If the amount is fixed as liquidated damages then the party in default has to pay that amount. If, however, it is fixed as penalty then the party claiming the amount must prove the damages suffered by it subject to the maximum mentioned in the agreement (vide discussion in Halsbury's Laws of England, Third Edition, Vol. 11, page 298). The Indian Legislature has abolished distinction between liquidated damages and penalty and the consequences thereof. It is, therefore, not necessary in India for the Courts to decide whether the amount fixed in the contract has been fixed as liquidated damages or as a penalty because the result in either case is that the Courts must determine reasonable compensation.
5. Shri F.C Mittal, the learned counsel for the plaintiff firm, argued that the trial Court should have awarded as damages the amount mentioned in the contract. He urged that ordinarily the amount mentioned in the agreement should be allowed unless it is proved to be exorbitant. In support of this contention reliance was placed on Lachhman Das v. Bhoja Ram . A.I.R 1925 Lah. 284., Lekh Singh v. Dwarka Nath . A.I.R 1929 Lah. 249., and Amin Chand Bhola Singh v. The Jullundur Electric Supply Co. Ltd. . 1953 55 P.L.R 7.. In the first two decisions Sir Shadi Lal observed that the amount mentioned in the contract should ordinarily be awarded unless it is found to be opposed to equitable grounds or to be exorbitant or unconscionable. These observations were adopted by the learned Judges deciding the last case. These decisions, however, related, unlike the present case, to cases in which the damage or loss exceeded the amount mentioned in the contract. These decisions, therefore, have no application to the present case and the language used therein must be considered to be limited to the facts of those cases. For these reasons, I am of the opinion that in cases governed by section 74, Indian Contract Act, reasonable compensation has to be assessed after taking into consideration all the facts and circumstances of the case.
6. On facts it was argued on behalf of the plaintiff that reasonable compensation in the present case was in no way less than the amount mentioned in the agreement dated 21-1-1955. Reliance for this purpose was placed on the statements of Amar Nath, P.W 3, Tulsi Das, P.W 7, and Hardip Singh, plaintiff. Amar Nath of Ritz Cinema, Simla, has stated that if the picture had been supplied on 28-1-1955 then he would have collected Rs. 5,000/- per week. He has, however, not produced his account books to show that during January/February this cinema ever earned anywhere near the figure mentioned by him in his statement. It is well known that there are very few people living in Simla during January and February. In the circumstances, I find it impossible to accept his ipse dixit. Tulsi Das, P.W 7, of Lakshmi Palace, Jullundur, has stated that he would have earned about Rs. 10,000/- a month. The plaintiff's share would be then much less than Rs. 1,000/- a day. This witness has also not produced his account books to indicate that he ever earned that much money. The plaintiff has given his own estimate of loss. He has also not produced his books nor has stated that all the three copies that he had admittedly with him were fully occupied during the relevant time and that the fourth copy would have been sent to a station where its share of the income would have been Rs. 1,000/- a day. If the three copies were not being fully utilized during this time then nonsupply of fourth copy could not have caused him any loss. The other three copies fetched only Rs. 40,000/- in a year and a half. It is obvious that the parties had fixed the penalty of Rs. 1,000/- a day for the fourth copy in terrorem as otherwise the plaintiff under the original agreement was entitled to obtain any number of the copies. In the circumstances I agree with the trial Court that the plaintiff has failed to prove the actual loss suffered by him. The learned Sub-Judge has fixed Rs. 2,000/- as damages and no reason has been suggested to us for departing from this figure. The appeal for increase of compensation, therefore, fails.
7. It was brought to our notice in the course of arguments that the respondent firm had not complied with the trial Court's order directing it to supply fourth copy on payment of Rs. 1,400/-. After some discussion, however, the plaintiff stated that he did not want the fourth copy and the matter was dropped because of the plaintiff's unwillingness to take the fourth copy and to exploit if.
8. The learned counsel for the respondent firm then pressed cross-objections to the effect that no damages at all should have been awarded. These cross-objections, however, are baned by time. The respondents Nos. 1 and 3 were not served personally and they had to be served by a substituted service by publication in the Times of India. The notice was published in the issue of 13-3-1958. The cross-objections were filed in this Court on 13-6-1958 Shri Ranjot Singh Baldeo Singh Yadav, alleging himself to be the constituted attorney and secretary of respondents Nos. 1 and 3, filed an affidavit dated 17-6-1958 alleging that the cross-objections could not be filed earlier because the respondents' solicitors were unable to contact the respondents. This affidavit further goes on to say that the solicitors have obtained instructions for filing the cross-objections There is no indication why the respondents did not file file cross-objections themselves and why the deponent was unable to contact them. Moreover, it is not clear when the deponent actually contacted them. In these circumstances we are of the opinion that the affidavit is vague in terms and does not disclose sufficient cause for extension of time. The cross-objections are, therefore, dismissed as barred by time.
9. The result is that both the appeal and cross-objections fail. In the circumstances, we make no order as to costs.
Appeal dismissed.