JUDGMENT R. Chandra, J. - This is a defendant's first appeal against the decree for Rs. 21,750/- granted to the plaintiff-respondents, by the Civil Judge, Malihabad at Lucknow. 2. Sardar Karam Jit Singh and others as legal heirs of Sardar Bahadur Singhar Singh deceased filed the suit for the recovery of Rs. 25,665/-, and the claim was decreed for Rs. 21,750/- only. It related to a transaction which had been entered into between Sardar Bahadur Singhar Singh and the Improvement Trust Lucknow. The lease-hold rights in plots Nos. 8 and 9 situated at Naka Hindola, were auctioned for a period of 999 years. Under the terms of the auction, the highest bidder was to acquire the lease-hold rights in the said plots, subject to the approval of the Trust. The auction took place on 5th December, 1947, and Sardar Bahadur Singhar Singh gave the highest bid of Rs. 87,000/- for the two plots. Under the conditions of the sale, he deposited Rs. 21,750/- besides registration expenses, through a cheque at the time of auction. The balance, namely, the three-fourth of the premium, was to be paid within ten days, from that date. It was provided that Failure to pay the remaining three-fourth of the bid money within the specified time, would entail cancellation of the bid, and forfeiture of the one-fourth of the bid money already deposited. The last date for payment was 15th December, 1947. The balance money was not deposited before that date. On 13th December, 1947 Sardar Bahadur Singhar Singh sent a letter to the Chairman of the Improvement Trust requesting him for further time to make the payment, but that prayer was turned down by the Trust, under the letter dated 18th December, 1947. He was also in formed that since he had failed to deposit the balance money within the stipulated time, namely, 15th December, 1947, the one-fourth bid money already deposited had been forfeited to the Trust. Thereafter, Sardar Bahadur Singhar Singh died, and his legal heirs made repeated efforts to persuade the Trust to extend the time, but all in vain. So, the suit was filed for refund of the money on 5th December, 1950. It was said that time was not essence of the con-tract, and the forfeiture clause vas clearly penal, and unenforceable under law. 3. The defendant resisted the claim on a variety of grounds. So, the suit was filed for refund of the money on 5th December, 1950. It was said that time was not essence of the con-tract, and the forfeiture clause vas clearly penal, and unenforceable under law. 3. The defendant resisted the claim on a variety of grounds. It was pleaded that the purchaser had failed to deposit the balance three-fourth bid money within the stipulated time, and so under the terms of the contract the Trust was fully justified in enforcing the forfeiture clause in respect of one-fourth of the consideration already paid. This was not a penal condition. The claim was also barred by limitation. 4. The trial Judge found that under the terms of the auction, the balance three-fourth of the consideration was stipulated to be paid within ten days of the sale. He, however, failed to record a clear finding on the question whether time was essence of the contract. He also held that the plaintiffs had really committed breach of the contract. He further recorded a clear finding that there was no completed contract of sale. There was only an agreement to make an offer for purchase, under the terms of auction agreed upon between the parties. The deposit of one-fourth of the bid money at the time of the auction, and further payment of the remaining three-fourth consideration within the next ten days, would alone entitle his bid to be considered by the Trust. There was no guarantee that even if all the conditions had been fulfilled by the purchaser, the transaction, of the lease-hold rights would necessarily be sanctioned by the Trust. It was also held that one-fourth of the price was not paid by way of earnest money or guarantee for completion of the offer. This was only a payment of a portion of the price or premium, and the forfeiture clause in the agreement was, clearly penal. So, the plaintiffs were found entitled to get relief under Section 74 of the Indian Contract Act. The plea of limitation was decided against the defendant. 5. The following issue was referred to a larger Bench: 6. Whether a suit based on a contract is governed by Section 97 of the Town Improvement Act or it is governed by the general law of limitation ? 7. The plea of limitation was decided against the defendant. 5. The following issue was referred to a larger Bench: 6. Whether a suit based on a contract is governed by Section 97 of the Town Improvement Act or it is governed by the general law of limitation ? 7. This question was referred to the Full Bench consisting of M. C. Desai, Chief Justice, B. N. Nigam and Ram Asrey Misra, J.J, and in accordance with the majority view, the question was answered as under: "We hold that a suit by a bidder at an auction held by the Lucknow Improvement Trust for selling land in connection with a scheme framed by it under the Town Improvement Trust Act, for refund of one-fourth price deposit by him on his bid being accepted, but which was subsequently forfeited by the Trust on account of his failure to pay the balance within the prescribed time, is not a suit in respect of an act purporting to be done by the Trust under the Act." (vide finding dated 6th November, 1961). 8. On 10th September, 1963, the following issues were referred to the trial Court for recording its findings: 1. Was the amount of Rs. 21,750/-which was th of the bid money paid by the bidder an earnest money or was, it a part payment of the Ealet consideration or was it both? 2. is the clause relating to forfeiture of Rs, 21,750/- on failure by the purchaser to pay the remaining amount of th of the bid money within ten days in the nature of a penal clause bearing in mind the circumstances of the case ? 3. Was there a completed con-tract between the parties on 5th Dec. 1947 ? if so, its effect ? 4. Whether in respect of the term that the remaining th of the bid money was to be paid within ten days of the date of auction, time was the essence of contract? If so, its effect ? 9. The trial Judge found that no completed contract of sale took place between the parties on 5th December, 1947, yet there was a contract in pursuance of which the plaintiff had made an offer along with one-fourth of the amount and in consideration of it the defendant had undertaken to consider bis offer before inviting fresh offer. He also found that time was essence of the contract. He also found that time was essence of the contract. As regards the payment of the one-fourth by the purchaser, it was held that it was part payment of the sale consideration and not an earnest money. The clause relating to forfeiture was in the nature of a penal clause within the meaning of Section 74 of the Indian Contract Act. 10. It is admitted that the auction of the lease-hold rights relating to plots 8 and 9 took place on 5th December, 1947. Sardar Bahadur Singhar Singh gave the highest bid of Rs. 87,0001/-, for both the plots. According to the terms of the sale, he also deposited Rs. 23,391/14 (Rs. 21,750/- as one-fourth of the bid money plus registration expenses,. etc.) through a cheque, the same day. The balance, namely, three-fourth of the premium was to be paid within ten days from that date. It was, provided that failure to pay the remaining three-fourth of the premium within the specified time would entail cancellation of the bid and confiscation of the one-fourth amount of the bid money already paid. The crucial date before which the entire amount was to be paid was 15th December, 1947. It is admitted that the money could not be deposited within the stipulated time. The purchaser made repeated attempts to get the time extended for payment but the Improvement Trust did not agree. So, on these facts we agree with the trial Court that the breach of contract was actually committed by the purchaser, namely, the plaintiff-respondents. The main contention of the appellant's counsel is that since the breach was committed by the purchaser, one-fourth of the bid money, which was deposited at the time of the auction, was liable to be forfeited. It has, been stressed that this payment was in the nature of the earnest money and its forfeiture could. not amount to penalty. The purpose of the deposit was by way of guarantee for due performance of the contract. So, it is urged that the respondents are not entitled to claim a refund of that amount, and the same stands legally forfeited to the Trust. 11. The primary question for consideration in the present appeal is whether Rs. 21,750/- were paid by Sardar Bahadur Singhar Singh as earnest money or only as, part of the price or premium. So, it is urged that the respondents are not entitled to claim a refund of that amount, and the same stands legally forfeited to the Trust. 11. The primary question for consideration in the present appeal is whether Rs. 21,750/- were paid by Sardar Bahadur Singhar Singh as earnest money or only as, part of the price or premium. It is settled law that if there is an agreement for sale, and if money is deposited as earnest money or as guarantee for the performance of the contract on the part of the person making the deposit, then if there is failure on the part of that person to perform the contract, the earnest money or the money deposited as security for the performance shall be forfeited, and no relief can be granted under Section 74 of the Indian Contract Act. Similarly, if there is a condition of forfeiture of the money already paid, but paid only as part of the price and not as earnest money or as guarantee for the performance of the contract, the forfeiture clause will be treated as having the effect of penalty, and relief can be granted under Section 74 of the Indian Contract Act. So, the fate of the present appeal primarily hinges on the answer to the question, whether the deposit by the purchaser, of one-fourth of the bid money, was an earnest money and a guarantee for the performance of a contract, or it was only an advance deposit of a part of the price. 12. On behalf of the appellant reliance has been placed mainly on the following cases : (Kunwar) Chiranjit Singh v. Har Stvarup, A.I.R. 1926 Privy Council, Dinanath Damodar Kale v. Malvi Mody Ranchhoddas and Co., AIR 1930 Bombay 213, Shakir Husain v. Chandoo Lal, A.I.R. 1931 Alld. 567, Naresh Chandra Guha v. Ram Chandra Samanta, 55 Calcutta Weekly Notes 765, Sree Hanuman Cotton Mills v. Tata Air Craft Ltd. 68 Calcutta Weekly Notes 476 and Fateh Chand v. Balkishan Dass, A.I.R. 1963 Supreme Court 1405. 13. 567, Naresh Chandra Guha v. Ram Chandra Samanta, 55 Calcutta Weekly Notes 765, Sree Hanuman Cotton Mills v. Tata Air Craft Ltd. 68 Calcutta Weekly Notes 476 and Fateh Chand v. Balkishan Dass, A.I.R. 1963 Supreme Court 1405. 13. In (Kunwar) Chiranjit Singh v. Har Swarup, A.I.R. 1926 Privy Council, it was held : "Earnest money is part of the purchase price when the transaction goes forward : it is forfeited when the transaction falls through, by reason for the fault or failure of the vendee." This is the well established principle of law which governs, cases of breach of contract by the vendee. 14. In Dinanath Damodar Kale v. Malvi Mody Ranchhoddas & Co., AIR 1930 Bombay 213 it was held : "There is a distinction between the penalty for breach of contract and the forfeiture of a deposit of earnest money. While the latter is a payment actually made, the former is compensation sought for breach of contract. Section 74, Contract Act, contemplates the case of recovery of compensation for breach of contract and not a case in which money has, been paid by way of earnest. "In a contract for sale of immovable property the deposit of earnest money is a guarantee for performance of the contract by the vendee and when the transaction goes forward it becomes part of the purchase price; if by default of the vendee the transaction falls through, the money is forfeited." 15. This case lays down that Section 74 of the - Contract Act has no application to a deposit by way of earnest money. 16. The case reported in Shakir Husain v. Chandoo Lal, A.I.R. 1931 Alld. 567 is not in point. No question relating to earnest money or part payment of price was involved. It related to some dispute under the , provisions of the Civil Procedure Code. 17. 16. The case reported in Shakir Husain v. Chandoo Lal, A.I.R. 1931 Alld. 567 is not in point. No question relating to earnest money or part payment of price was involved. It related to some dispute under the , provisions of the Civil Procedure Code. 17. In Naresh Chandra Guha v. Ram Chandra Sanzanta, 55 Calcutta Weekly Notes 765 it was held: "When, a contract for sale has been broken by the intending purchaser, the rights of the respective parties in regard to the earnest money that is, whether it will be forfeited, refunded or returned are determined by the golden rule of intention." "But, in the absence of a contrary intention, express or implied, in the agreement for sale, money paid by the purchaser to the vendor at the time of such agreement be it described as, earnest money or deposit or by any other nameis presumed to be earnest or security for the performance of the contract of sale, liable to be forfeited if the contract fails by reason of default on the purchaser's part; law raises, in such cases, an initial presumption in favour of the vendor, clothing him with a right to forfeit the money, the presumption, however, being rebuttable and the right defeasible by proof of a contrary intention, express or implied, in the contract in question. "There is however a fundamental distinction or difference between earnest money and part payment of price and the rule of forfeiture has no application to money received as such part payment. "The true meaning of the expression 'not merely a part payment but also an earnest or security', used to describe the money paid by the purchaser to the vendor at the time of the agreement for sale, is that until the contract is performed, the earnest money remains a security or earnest for performance of the contract of sale but it becomes a part payment of the price or purchase money immediately on such performance. In other words, in the absence of a contrary intention, express or implied in the contract of sale, the money is paid by the purchaser and received by the vendor as earnest or security and also as part payment in the sense that it will become part of the purchase money in the event of performance of the contract of sale. "Where therefore in the bainama' (agreement for sale) there was no -1- clause of forfeiture of the earnest money nor any contrary intention, ex-press or implied, in the shape of a clause for refund or return of the earnest money and the earnest money was only about 8 per cent of the stipulated price, the amount of earnest money was not.unreasonable and was liable to forfeiture." 18. This case simply lays down that the question whether the payment was made as earnest money or part of the purchase price would primarily depend upon the intention of the parties. Section 74 of the Contract Act is inapplicable to cases of earnest money, which is an amount paid really under the 'contract of security'. Earnest money is not in the nature of damages or compensation for breach of contract. 19. In Sree Hanuman Cotton Mills v. Tata Air Craft Ltd., 68 Calcutta Weekly Notes 476 it was held: "Earnest money is a part of the purchase price when the transaction goes forward and it is forfeited when the transaction falls through by reason of default or failure of the buyer. "Upon rescission of the contract by the seller on account of the wrongful refusal- by the buyer to perform it, the contract becomes void and the duty of restitution of the benefits received under it arises under Sections 64 and 65 of the Contract Act. The defaulting buyer is, therefore entitled to recover from the seller the instalments of price paid by the buyer subject to a set off by the seller for damages caused by breach of contract on the part of the buyer. But the defaulting buyer cannot recover the earnest money paid by him as a guarantee for the due performance of the bargain. The rescission of the main contract of sale does not involve the rescission of the ancillary contract of guarantee. The ancillary contract of guarantee does not become void and the seller is not obliged to restore the earliest money received by him under ancillary contract." 20. This case also lays down that earnest money is liable to forfeiture when the buyer commits the breach. Where, however, part payment of the rice has been made, the purchaser would recover it after making necessary deductions on account of damages suffered. by the vendor due to the breach of contract. 21. In Fateh Chand v. Balkishan. This case also lays down that earnest money is liable to forfeiture when the buyer commits the breach. Where, however, part payment of the rice has been made, the purchaser would recover it after making necessary deductions on account of damages suffered. by the vendor due to the breach of contract. 21. In Fateh Chand v. Balkishan. Dass, A.I.R. 1963 , Supreme Court 1405 it was held.: "It cannot be assumed that be-cause there is a stipulation for forfeiture, the amount paid must bear the character of a deposit for due performance of the contract." 22. This is an important decision by the Supreme Court. It lays down that the forfeiture clause would not necessarily convert the deposit into an earnest money or a guarantee for due performance of the contract. The nature of deposit must be proved like any other fact. 23. Likewise, on behalf of the respondents reliance has been placed on the following cases: Pasumarti Seethanna v. Thamandra Yasikalappa, 91 Indian Cases 1925, 765 (Madras High Court), Michel Habib Raji Ayoub v. Sheikh Sulaiman Ei Taii Ei Farouqui, A.I.R. 1941 Privy Council 101 and Union of India v. Shiant Sunder Lal, 1963 A.L.J. 251. In Pasumarti Seethanna v. Thamandra Yasikalappa, 91 Indian Cases 1925, 765 (Madras High Court), it was held: "Where a sum of money is paid in advance on account of a contract as a deposit and the person making the deposit commits a breach of contract, the other party is entitled to retain the full amount of the deposit as damages for breach of contract. Every payment, however, made by a party to a contract as an advance towards, the - contract is not in the nature of a deposit and is not liable to be forfeited if the party making the deposit violates, the contract. It is incumbent upon the Court to endeavour to ascertain the real intention of the parties from all the terms of the contract. Whether an advance is given as security for performance of the contract or merely in part-payment is a question of the intention of the. It is incumbent upon the Court to endeavour to ascertain the real intention of the parties from all the terms of the contract. Whether an advance is given as security for performance of the contract or merely in part-payment is a question of the intention of the. parties and where it is found that the advance is not in the nature of a deposit or a security for performance of the contract, the party to whom the advance has been made is not entitled to retain the amount of the advance unless it has suffered damage to an equivalent or greater sum owing to the default of the party making the advance." 24. This also recognises the principle, that the question whether money has been paid in advance under a contract towards security for performance of the contract or merely in part payment has to be decided according to the intention of the contracting parties. 25. In Michel Habib Raji Ayoub v. Sheikh Sulaiman Ei Taji Ei Farouqui, A.I.R. 1941 Privy Council 101, it was held: "A penal stipulation to pay the sum agreed on breach of contract cannot be enforced. Agreed liquidated damages, if to be enforced, must be the result of a 'genuine pre-estimate of damages.' They do not include a sum fixed in terrorent covering breaches of contract of many varying degrees of importance.. the possible damages from which bear no relation to the fixed sum, and which obviously have at no time been estimated by the contracting parties." "A stipulation in the contract of sale of land that on failure to pay any of the instalments of the purchase price on due date or to ,pay taxes or to take the agreed part in the appointment of a surveyor. the agreed sum of f 2500 should become payable as damages by the purchaser independently of his liability to pay instalments amounted to a stipulation by way of penalty and could not be enforced. "In a contract of sale the promise to pay the purchase price in instalments amounts to the payment of the money. A debt is constituted whether the price be for real or personal property, and whether it be due in A7 one sum or in instalments." 26. This case lays down under what conditions the forfeiture clause would amount to a penalty and money would be refundable under law. A debt is constituted whether the price be for real or personal property, and whether it be due in A7 one sum or in instalments." 26. This case lays down under what conditions the forfeiture clause would amount to a penalty and money would be refundable under law. In Union of India v. Shiam Sunder Lal, 1963 A.L.J. 251 it was held: "Where the stipulation in the contract for its breach was forfeiture of the security deposit - but the defendant did not suffer any damages by the breach of the contract the stipulation was in the nature of penalty and in the circumstances of the case the defendant was not entitled to forfeit the security deposit." 27. This also lays down the principle under which the security deposit could not be forfeited due to the breach of the contract. 28. Now, from the materials on the record it has to be ascertained what was the real intention of the parties regarding the payment of the one-fourth bid money at the time of the auction. So, the crucial question for consideration is whether the payment was made towards portion of the price only, with the liability of the forfeiture under the penal clause, or a payment by way of earnest money or guarantee for due performance of the contract.. The terms of sale of the lease-hold rights, are contained in Exts. A-I, A-6, A-3 and A-8. The relevant clauses may be reproduced below: " . . . . . . . 3. The person in whose favour the sale is knocked down shall have to pay 114th of the (premium) at once to the sale officer. The payment should be made in cash or by means of a cross cheque in the name of the Chairman Improvement Trust and the sale officer shall at once give a receipt therefor to the payer. If at the time of sale the 114th of the premium is not paid the premium (Nazrana) shall again be auctioned and the loss incurred on account of second sale shall be realised from the previous purchaser. If an excess amount is realised by the subsequent sale the previous purchaser shall not be en-titled to get the same. The remaining th of the amount of bid shall have to be paid within 10 days of the sale. 4. If an excess amount is realised by the subsequent sale the previous purchaser shall not be en-titled to get the same. The remaining th of the amount of bid shall have to be paid within 10 days of the sale. 4. If the remaining th of the (final) bid is not paid at the appointed time i.e., within 10 days of the sale the auctions shall be cancelled and the 114th amount deposited by the purchaser shall be forfeited. 11. The trust has full powers to accept or not to accept the bid of any one or exempt any plot from sale. The sale shall not be complete unless it is sanctioned by the Trust. 13. If the Trust does not accept the bid the money deposited by the purchaser shall be returned to him but the purchaser shall have no right and not be entitled to get any interest". 29. In these papers, the price has been described as premium and bid money. There are no express words to show that the payment of one-fourth of the price was by way of earnest money or guarantee for completion, of the offer. Exts. A-4 and A-9 are the certificates given by the bidder at the time of the auction that he had understood the conditions of the sale. Exts. 1 and 2 are the receipts granted by the Improvement Trust in respect of one-fourth of the money, paid by the respondents. There also it was specifically mentioned that the money was received on account of premium for the leasehold rights of plots Nos. 8 and 9 in Naka Hindola Scheme sanctioned on 5th December, 1947 for Rs. 87,000/-in part payment subject to sanction. This also clearly indicates that one-fourth payment was made towards 'part payment' of the premium. In letters Exts. A-13 and A-23 sent by the Chairman, Improvement Trust. to the respondents the consideration of the sale was described as bid money or premium. Even in the written statement in paras 17 and 18 one fourth of the amount was described as 'bid money'. In view of the above evidence, we agree with the trial Court that the deposit of the one-fourth bid money was only towards part payment of the sale consideration, and it was not an earnest money or a guarantee for due performance of the contract. In view of the above evidence, we agree with the trial Court that the deposit of the one-fourth bid money was only towards part payment of the sale consideration, and it was not an earnest money or a guarantee for due performance of the contract. We also agree with the trial Court that there was no completed contract of sale on the day the one-fourth money was deposited. Clause 11 of the conditions of sale Exts. A-1 and A-6 clearly lays down : "The Trust has full powers to accept or not to accept the bid of any one or exempt any plot from sale. the sale shall not be completed unless it is sanctioned by the Trust". It follows, that even after the bidder has deposited the entire amount, the transaction would not be complete till it was approved by the Trust. In the circumstances, no question of paying the earnest money could arise. The covenant for forfeiture of Rs. 21,750/- is manifestly a stipulation by way of penalty, and relief could be granted under Section 74 of the Indian Contract Act. 30. Next, we may examine the question whether the appellant is entitled to claim damages or compensation for breach of the contract. This shall have to be adjudged in the light of Section 74 of the Indian Contract Act, which may be reproduced as below : "When a contract has been broken, if a sum is named in the con-tract 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." 31. In the case of Fateh Chand v. Balkishan Dass, A.I.R. 1963 , Supreme Court 1405, the Hon'ble Judges made the following observations : "The section is clearly an attempt to eliminate the somewhat 'elaborate refinements made under the English Common Law in distinguishing between stipulations providing of payment of liquidated damages and stipulations in the nature of penalty. In the case of Fateh Chand v. Balkishan Dass, A.I.R. 1963 , Supreme Court 1405, the Hon'ble Judges made the following observations : "The section is clearly an attempt to eliminate the somewhat 'elaborate refinements made under the English Common Law in distinguishing between stipulations providing of payment of liquidated damages and stipulations in the nature of penalty. Under the Common Law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: "a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English Common Law, by enacting an uniform principle applicable to all stipulations naming amounts, to be paid in case of breach, and stipulations by way of penalty." 32. In the same case, they also overruled the earlier decisions, as reported in Abdul Ghani Co. v. Trustees of the Port of Bombay, I.L.R. 52 Bom. 747 and Natesan Aliyar v. Appayu Padavachi, I.L.R. 3 Mad. 1778. The Bombay High Court had held : "It will be noticed that the stun which is named in the contract either as penalty or as liquidated' damages is a sum which has not already been paid but is to be paid in case of a breach of the contract. With regard to the stipulation by way of penalty, the Legislature has chosen to qualify 'stipulation' as 'any other stipulation', indicating that the stipulation must be of the nature of an amount to be paid and not an amount already paid prior to the entering into of the contract. The section further provides that a party complaining of a breach is entitle to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or the penalty stipulated -for. Therefore, the section clearly contemplates that the party aggrieved has to receive from the party in default some amount or something in the nature of a penalty it clearly rules out the possibility of the amount which has already been received or the penalty which has already been provided for." 33. Therefore, the section clearly contemplates that the party aggrieved has to receive from the party in default some amount or something in the nature of a penalty it clearly rules out the possibility of the amount which has already been received or the penalty which has already been provided for." 33. In the Madras case the view ex-pressed was that Section 74 applied where a sum was named as penalty to be paid in future in case of breach, and not to cases where a sum was already paid and by a covenant in the contract it was liable to forfeiture. 34. The law as enunciated by the Supreme Court in the case referred to above, may be summarised below: 35. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. No compensation can be awarded when in consequence of the breach no legal injury at all had resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things or which the parties knew when they made the contract to be likely to result from the breach. 36. The expression "the contract contains any other stipulation by way of penalty" comprehensively applies to every covenant involving a penalty whether it is for payment on breach of contract of money or delivery of property in future, or for forfeiture of right to money or other property already delivered. The duty to refrain from enforcing the penalty A clause and to only award reasonable compensation is statutorily imposed upon courts by Section 74. in all cases, therefore, where there is a stipulation in the nature of penalty for forfeiture of the amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the Court has jurisdiction to award such sum only as it considers reasonable, but not exceeding the amount specified in the contract as liable to forfeiture. 37. The Court has to adjudge in every case reasonable compensation. to which the plaintiff is entitled from the defendant on breach of contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach. 38. 37. The Court has to adjudge in every case reasonable compensation. to which the plaintiff is entitled from the defendant on breach of contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach. 38. The question does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term. in the contract predetermining damages or providing for forfeiture of any property by way of penalty, the Court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The jurisdiction of the Court is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. 39. Applying these principles, to the facts of the present case, we may say at the very outset that there is no evidence that any loss was suffered by the appellant in consequence of the default by the respondents. There was a bare allegation in para. 22 of the written-statement that the defendant suffered a loss of Rs. 51,000/- on account of the breach of contract committed by the bidder but the same was not substantiated by any legal evidence. It is clear that the respondents had given an. offer of Rs, 87,000/- for both the plots. The transaction could not materialise due to the purchaser's default. There is also nothing on the record to indicate for how much the property was actually re-auctioned. The conditions of sale clearly show that the proposal was to grant the lease-hold rights for a period of 999 years, on a nominal annual rent of Re. 1/-, besides the premium (vide Exts. A-1 and A-6). In reply to the interrogatories served by the plaintiffs, the defendant furnished the information, that the plots Nos. 8 and 9 had now been leased, out for a period of 90 years on a graduated rate of annual rent of Rs. 96/--1-92/- for the first thirty years, Rs. 144/-+138/- for the second thirty years and Rs. 216/-+207/- for the next thirty years. This arrangement was clearly advantageous to the defendant-appellant, as the period of the lease was considerably reduced and the rate of rent was substantially in-creased. It is further clear that a sum of Rs. 21,750/- (besides registration expenses) was deposited by the purchaser on 5th December, 1947. 216/-+207/- for the next thirty years. This arrangement was clearly advantageous to the defendant-appellant, as the period of the lease was considerably reduced and the rate of rent was substantially in-creased. It is further clear that a sum of Rs. 21,750/- (besides registration expenses) was deposited by the purchaser on 5th December, 1947. It is reported that after the present appeal was filed, the appellant deposited the amount in Court on 25th September. 1952. It would thus appear that during the period from 5th December, 1947 to 25th September, 1952, the money remained in the use of the appellant, and it is reasonable to presume that he must have been deriving advantage from that amount throughout this period. Further, no issue was framed on this point nor was this point argued before the trial Court. It is nowhere discussed in the judgment of the trial Court. A reference to the memorandum of appeal discloses that no such ground was taken in it. The question is one of fact and it is now too late to urge it for the first time at the arguments in appeal. The trial Court has rightly found that the respondents are entitled to claim the refund of the entire money, namely, Rs. 21,750/-. 40. In this view, we find that the appeal has no merit and must fail. Accordingly, the appeal is dismissed with costs. Stay order dated 24-7-65 is vacated.