JUDGMENT T. S. Krishnamoorthy Iyer, J. 1. The defendant in O. S. 143 of 1958 on the file of the Sub Court of Cochin, the State of Kerala, is the appellant. The appeal arises out of a suit filed by the respondents who are the partners of G. L. Kilikar, a firm registered under the Cochin Partnership Act, Act XXIV of 1112 and doing business in Mattancherry, Cochin, against the appellant for recovery of Rs. 68,321 8 1 on the following facts disclosed by the plaint. 2. The respondents were appointed sole agents by the Travancore Cochin Government under the agreement Ext. P. 25 dated 11-5-1950 for the sale of the products, including plywood tea chest panels, battens, plywood commercial sheets. manufactured by the Travancore Plywood Industries, Punalur, (hereinafter referred to as Plywood Industries) belonging to the then State of Travancore Cochin for the States of Madras, Travancore Cochin Mysore and Coorg' for a period of one year from 11-5-1950 with an option to the respondents to continue for a like period or for such other period not exceeding four years to be notified to the appellant two months prior to the date of the expiry of Ext. P. 25 agreement. The date of the commencement of the agreement was subsequently altered to 1-11-1950 by Ext. P. 26 dated 8-1-1952. Along with Ext. P. 25 the respondents deposited Rs. 10,000/- with the appellant in the shape of 3% 1958 Mysore Government bonds as security for the due fulfilment of the terms of the contract evidenced by Ext. P. 96. It is agreed between the parties that the respondents were given an extension of the term under Ext. P. 25 till 31-10-1955. The appellant terminated the agency of the respondents with effect from 10-1-1954 by the issue of Ext. P. 88 dated 10-12-1953. The respondents issued the original of Ext. P. 93 dated 15-12 1953 to the appellant under S.80 of the Civil Procedure Code, claiming Rs. 50,000/- by way of damages for wrongful termination of the agency before the expiry of the term as extended and for the return of the deposit of Rs. 10,000/- with the accumulated interest thereon. The suit was filed on 24-1-1955 for the recovery of Rs. 50,000/- by way of damages for wrongful termination of the agency before the expiry of the term as extended and for the return of the deposit of Rs. 10,000/- with the accumulated interest thereon. The suit was filed on 24-1-1955 for the recovery of Rs. 57,571-8-1 being damages alleged to be due to the respondents assessed on account of loss of commission which they would have earned during the period between 10-1-1954 and 31-10-1955 and also for the recovery of the deposit and the accumulated interest thereon. By an amendment of the plaint which was allowed by the trial court, the respondents claimed an enhanced amount of Rs. 70,020.12 by way of damages. 3. The appellant contended in main that the termination of the agency by issue of Ext. P. 88 was not wrongful, that the respondents were not entitled to claim damages on the ground of wrongful termination of agency, that the respondents did not suffer any damages on that score, and that the damages claimed were excessive. The respondents if at all are entitled only to commission which might have been earned less such expenses which would have to be incurred for earning such commission. The appellant also claimed Rs. 3,449/- as damages due to it under Clause.12 of Ext. P. 25 and prayed for a set off of this amount along with certain other amounts alleged to be due to the appellant under accounts against the sum of Rs. 10,000/- and interest thereon claimed by the respondents. The trial court held that there was defect in the quality of the supplies made by the Plywood Industries, there was no fault on the part of the respondents and the deficiency in sales in the third year of the agency was due to the defect in quality of the tea chest panels manufactured by the Plywood Industries the termination of the agency before the expiry of the term of the contract was not legal and therefore the respondents were entitled to commission on all supplies made by the Plywood Industries on the basis of orders placed with it during the agency period terminating on 31-10-1955, It was also found that the appellant was not entitled to claim any damages from the respondents by virtue of the provision contained in Clause.12 of Ext. P. 25. P. 25. In the result, the trial court decreed the suit in terms of the plaint and refused the prayer of the appellant for set off. The Travancore Plywood Industries was subsequently incorporated as a company and has been impleaded as the second appellant. 4. C. M. P. 3344 of 1965 was filed by the appellants for permission to incorporate certain additional grounds in the appeal memorandum. In view of the reasons disclosed in the affidavit filed in support of the petition we have allowed the same. 5. Two questions were raised before us by the learned advocate appearing for the appellants. The first was, that the termination of the agency before the expiry of the term was legal and proper. The second was, that the quantum of damages awarded by the learned trial Judge assuming that the termination was wrongful was excessive. We shall take up the first question for consideration. 6. Before discussing whether the termination of the agency before the expiry of the term is legal and lawful, it is necessary to extract the relevant clauses in Ext. P.25: Clause 1. The agents are given the sole distributorship for the products of the Travancore Plywood Industries including plywood tea chest panels, battens, plywood commercial sheets and such other products as may be mutually agreed upon for the Province of Madras, the State of Travancore Cochin, the Mysore State and Coorg. Clause 3. The agents shall sell the articles at prices ruling with the Travancore Plywood Industries or with the South Indian Plywood Manufacturer's Association whichever are lower at the time of acceptance of buyers' order or orders by the agents. Clause 5. The agents shall be entitled to a commission of 5% on sales up to Rs. 5 lakhs and 71/2% on sales over and above the Rs. 5 lakhs. Clause 6. The commission shall be payable on all supplies made against orders placed by the agents with the Travancore Plywood Industries either within the agency or outside and all supplies made by the Travancore Plywood Industries either through the agents or otherwise within the agency area. Clause 9. The quality of the articles supplied shall conform to standards prescribed by the Forest Research Institute, Dehra Dun and marked with seal of the Travancore Plywood Industries at their expense. The Travancore Plywood Industries shall be solely responsible for the quality of the supplies. Clause 10. Clause 9. The quality of the articles supplied shall conform to standards prescribed by the Forest Research Institute, Dehra Dun and marked with seal of the Travancore Plywood Industries at their expense. The Travancore Plywood Industries shall be solely responsible for the quality of the supplies. Clause 10. Claims for shortages replacements for defective manufacture or defective cutting or difference in size or for the supplies not conforming to the specifications in any other manner whatsoever are to be met by the Travancore Plywood Industries at their own cost and expenses. The Agents shall be kept fully indemnified against all claims arising from any of the above defects or for cancellation of contracts by buyers on grounds of defective supplies. Clause 12. The Agents guarantee a minimum annual sale of rupees Five lakhs worth of the products of the Travancore Plywood Industries. If at the end of twelve months from the date of commencement of this contract the actual value of the goods sold on which the Agents are eligible for commission as per Clause.5 supra is found to be less than Rs. 5 lakhs due to default on the part of the Agents, then damages computed on the basis and in the proportion of Rs. (2,000) two thousand for every lakh of rupees worth of goods by which the actual sales for that year fall short of the guaranteed annual sale of Rs. 5 lakhs shall be paid by the Agents to the Government. The Travancore Plywood Industries shall not, however, be liable to pay damages if the full quantity intented for could not be supplied for want of stock. Clause 13. On breach by the Agents of all or any of the terms and conditions herein contained it shall be open for the Government to terminate the contract forthwith without prejudice to the rights of either party accrued before the date of such termination." 7. It is necessary to mention at this stage that the appellants terminated the agency of the respondents for two reasons which were mentioned in Ext. P. 88. The first was that the respondents failed to secure orders for the minimum sale for 5 lakhs of rupees during the year of the contract 1-11-1952 to 31-10-1953 inspite of repeated requests made by the appellant. P. 88. The first was that the respondents failed to secure orders for the minimum sale for 5 lakhs of rupees during the year of the contract 1-11-1952 to 31-10-1953 inspite of repeated requests made by the appellant. The second reason was, that the appellants were satisfied that the respondents were not diligent in procuring sales for the products of the Plywood Industries as per the terms of Ext. P. 25 and thereby they neglected their duties as agents. These two reasons given in Ext. P. 88 were attacked by the respondents and they stated in the plaint that the decrease in the volume of business transacted in the third year of the agency was not the result of any act or omission on their part, but was traceable only to the breach of the contract committed by the appellants in the sense, that they failed to maintain the guaranteed standard of quality of the products manufactured and that business magnates and estate owners like the Kannan Devan Hills Produce Company Limited, Munnar, were not willing to purchase the goods. It was further stated by the respondents that on a true construction of Clause.12 of Ext. P. 25 the appellants would be justified to cancel the sales agency only on failure to pay the compensation stipulated therein. 8. It is seen from the statements of sales Exts. P. 29, P. 30, and P. 31 that the realisation by sale of the products of the Plywood Industries for the first year of the contract (from 1-11-1950 to 31-10-1951) was Rs. 5,10,000/-, for the second year of the contract (from 1-11-1951 to 31-10-1952) was Rs. 6,75,000/- and for the third year of the contract (from 1-11-1952 to 31-10-1953) was only Rs. 3,35,196-3-8. It cannot therefore be gainsaid that in the third year of the agency the respondents did not maintain the minimum annual sale for Rs. 5,00,000/- of products of the Plywood Industries as undertaken in Clause.12 of Ext. P, 25. The reason given by the respondents for the shortfall of business during the third year of the agency was the inferior quality of the products manufactured by the Plywood Industries which resulted in the refusal of the Kannan Devan Hills Produce Company Limited, Munnar, to purchase the products of the appellants. The attempt of the respondents to establish this case set up in the plaint was in the following manner. The attempt of the respondents to establish this case set up in the plaint was in the following manner. The principal purchaser of the products of the Plywood Industries was the Kannan Devan Hills Produce Company Limited, Munnar (hereinafter referred to as K. D. H. P. Company). They were dissatisfied with the quality of the products of the Plywood Industries. From March 1953, they began receiving complaints from their customers regarding the bad quality of the tea chest panels supplied by the Plywood Industries as a result of which tea packed in the chests was damaged. This resulted in the refusal on the part of the K. D. H. P. Company to go in for the products of the Plywood Industries and therefore there was a lull in the market for such products. The shortfall during the third year of the agency was therefore attributable to the failure of the Plywood Industries to conform to the requisite standard in the production of the chest panels and the shortfall was not due to any fault on the part of the respondents and therefore the termination of the agency before the expiry of the term was illegal. The second plaintiff examined as P. W. 2 says: "In the third year the sales dwindled. By the third year I mean the period from 1-11-1952 to 11-10-1953. What is the reason for the reduction in sales (Q). Because one of the important groups who bought these products got complaints from their buyers of tea in foreign markets that the production supplied by the defendant were defective and the tea packed in chest made of those panels supplied by the defendant was spoiled. Then they decided not to place any more orders for defendant's goods (A)." The appellants denied this contention and according to them, the deficiency in the sales below that guaranteed in Ext. P. 25 for the third year was not due to any deterioration in the quality of goods, but was due to the omission on the part of the respondents to secure business for the sale of the products of the Plywood Industries. The respondents did not contend that the Plywood Industries did not use reasonable care in the manufacture of their products. 9. Ext. P. 28 is the Indian standard specification for plywood tea chest prescribed by the Indian Standards Institution, Delhi, and Ext. The respondents did not contend that the Plywood Industries did not use reasonable care in the manufacture of their products. 9. Ext. P. 28 is the Indian standard specification for plywood tea chest prescribed by the Indian Standards Institution, Delhi, and Ext. P. 28 (b) is the standard prescribed by the Forest Research Institute, Dehra Dun. It is necessary to mention that there was no specific case raised by the respondents either in the pleadings or at the time of the arguments that the plywood panels manufactured by the Travancore Plywood Industries did not conform to the standard prescribed in Ext. P. 28 and Ext. P. 28 (b). That there was no complaint on the part of any of the customers regarding the quality of the tea chest panels supplied by the appellants till 14-1-1953 is clear from Ext. D1, letter by the respondents to the appellants. The significant portion of Ext. D 1 is given below: "While we are anxious to place as many orders with you as you can cope with we are afraid the present condition of the Tea Industry in India, as you might be aware, is very far from satisfactory." The poor quality of the tea chest panels manufactured by the Plywood Industries was sought to be established by the respondents in view of certain complaints disclosed in the correspondence between the K. D. H. P. Company and the Manager of the Plywood Industries, the correspondence between K. D. H. P. Company and James Finlay & Co., in Calcutta. Before dealing with the correspondence referred to above, it is necessary to mention certain facts admitted by both parties. The Plywood Industries was supplying only tea chest panels to the K. D. H. P. Company during the relevant period. The supply to the K. D. H. P. Company was on an average ten lakhs of pieces every year. The sizes of the panels generally required in the market were panels necessary for the manufacture of chests of the sizes 19" x 19" x 24", 18" x 18" x 20", 16" x 16" x 16", 13" x 13" x 15" and 12" x 12" x 12". This was till 1-4-1953. On 1-4-1953 due to Central Excise Regulation and higher duty imposed on small packings the sizes below 16" x 16" x 16", ceased to be in demand. This was till 1-4-1953. On 1-4-1953 due to Central Excise Regulation and higher duty imposed on small packings the sizes below 16" x 16" x 16", ceased to be in demand. The tea chests were assembled in the factory of the several tea estates belonging to the K. D. H. P. Company. Apart from plywood panels supplied by the Plywood Industries, battens made of soft wood corner metal fittings and Aluminium linings are required for assembling tea chests and excepting the plywood panels the K. D. H. P. Company was purchasing the other component parts for the making of tea chests from others including the respondents. Battens were supplied by the respondents to the K. D. H. P. Company. 10. Ext. P. 1 is the letter dated 19-3-1953 by the General Manager of the K. D. H. P. Company, Munnar, to the Manager, Plywood Industries. The said letter reads as thus: "I am sending to you under separate cover a lid panel used for chest No. 1796 of Chundavurrai Export Invoice No. 8 and you will observe that the panel is of very poor manufacture as a result of the plays having crumbled and bad adhesive being used." The lid panel forwarded under Ext. P. 1 was examined by the Manager of the Plywood Industries and the reasons for the defects noted in Ext. P. 1 are stated in Ext. P. 10 dated 13-4-1953 thus: "The glue lines of the inner veneer have apparently dried out before hydraulic pressure is applied to the bundle of glued stock, containing hundreds of such panels taken to the press at a time. On an average about 0. 75% to 1.0% of the daily glued stock show such defects and are rejected daily while selecting and packing the panels for despatch. By the carelessness of the sorting section this particular panel which ought have been rejected is now seen to have been included by mistake in the selected panels. There is no apparent defect noted in the glue. When the glue line dries out, naturally there is no binding between the face veneers and the core and in the absence of such binding the veneers which are free will naturally crumble down in handling." 11. It is noteworthy that in Ext. There is no apparent defect noted in the glue. When the glue line dries out, naturally there is no binding between the face veneers and the core and in the absence of such binding the veneers which are free will naturally crumble down in handling." 11. It is noteworthy that in Ext. P. 1 no complaint was raised regarding the quality of the plywood used by the Plywood Industries for the manufacture of panels, The only complaint was that the panel was of very poor manufacture. 12. The next reference by the learned advocate for the respondents was to the complaint made by M/s P. R. Buchanan & Co., London, and forwarded to K. D. H. P. Company, by M/s James Finlay & Co., Ltd., Calcutta, by their letter Ext. P. 17 dated 9 4 1953 enclosing Ext. P. 17 (a) the copy of the letter addressed to M/s James Finlay & Co. Ltd., Calcutta, by M/s P. R. Buchanan & Co., London, The complaint in Ext. P. 17 (a) referred to a chest sent to P. R. Buchanan & Co. London, under Kanniamally Inv. Ext. 60. The nature of the complaint disclosed in Ext. P. 17(a) is as follows: "We are sending you under separate cover by sea mail a sample of plywood taken from a chest forwarded under Kanniamally Inv. Ext. 60. You will see that this plywood, although manufactured by one of the approved factories, namely Travancore Plywood Industries, is of very poor quality, so much so that the nails have pulled out of it. This is by no means an exceptional case. A large quantity of packages required cooperating on arrival in warehouse, all of them being of plywood from the above mentioned source." Ext. P. 17 contained a request by James Finlay & Co., Ltd., to the Manager. K. D. H. P. Company to take up the matter strongly with the appellant and ascertain whether or not they were in a position to supply the estates in the south with better quality shooks. The General Manager of the K. D. H. P. Company sent a letter Ext. P. 32 dated 14 4 1953 to the Chief Conservator of Forests, Trivandrum, who was the Ex Officio Director in charge of the Plywood Industries, extracting the contents of Ext. P. 17(a). Ext. The General Manager of the K. D. H. P. Company sent a letter Ext. P. 32 dated 14 4 1953 to the Chief Conservator of Forests, Trivandrum, who was the Ex Officio Director in charge of the Plywood Industries, extracting the contents of Ext. P. 17(a). Ext. P. 32 wound up in these terms: "In view of the adverse report received on your plywood, I am considering placing my orders elsewhere. In the meantime, I shall be obliged if you will kindly take the matter up with the Manager, Travancore Plywood Industries, Punalur and forward his explanation to me at your earliest convenience." An enquiry was made at the instance of the Chief Conservator of Forests regarding the complaint raised in Ext. P. 32 as a result of which the original of Ext. P. 13 explanation from the Manager of the Plywood Industries was received by the Chief Conservator of Forests, Trivandrum. The copy of the explanation Ext. P. 13 was forwarded by the Chief Conservator of Forests to the General Manager, K. D. H. P. Company with his covering letter Ext. P. 12 dated 26-6-1953 in reply to Ext. P. 32. It is necessary to extract here a portion contained in Ext. P. 13: "The glueing of the panel in the centre is quite alright and the veneers do not separate easily. However, at the edges in some places, especially where nails are seen to have been driven through, the core veneer is also split and fallen away. At this point, the veneers are seen to have been somewhat affected by staining fungi. Besides, it also appears that the panel has been subject to contact with water and I feel that such a glue failure at certain points are due to such long exposure to either rain water or sea water, There does not appear to be any glue starvation at these points of failure. Perhaps, one of the contributory factors for the failure may be due to quick drying of the glue before full pressure is applied to the made up panels, as in such cases the glue line would not have developed its maximum strength." In the meanwhile, another complaint was received from M/s. P. R. Buchanan & Co., London, by James Finlay & Co., Ltd., Calcutta. The date on which this complaint was received by the latter is not in evidence. The date on which this complaint was received by the latter is not in evidence. The letter received from M/s P. R. Buchanan & Company, by James Finlay & Co., Ltd., is also not produced in the suit. But Ext. P. 20 dated 25-11-1953 copy of the letter from James Finlay & Company Ltd., Calcutta, to the General Manager, K. D. H. P. Company, contains an extract of the complaint made by P. R. Buchanan & Company in the following terms: "There have also been a number of instances of teas being contaminated by what is believed to be in the immaturity of the wood used for chest battens and also by a strong smelling cement used in the manufacture of the plywood panels. This type of taint is, we understand, not in the majority of cases, strong enough to affect blending, but, recently, the tea in two packages of Fngs. Ex Thermally Inv. No. 9 was found to be badly contaminated in this way and unusable by the Buyers. The chests were manufactured by Travancore Plywood Industries, Punalur and perhaps you may wish this instance reported also." This complaint was also forwarded by the K. D. H. P. Company to the Manager to the Plywood Industries by their letter Ext. P. 36 dated 22-12-1953, a copy of which has also sent to the respondents by the K. D. H. P. Company. In Ext. P. 36 the K. D. H. P. Company wrote to the Manager, Plywood Industries, that in the sale of two chests of Thenmally Fannings referred to in Ext. P. 36 a loss of Rs. 45-5-4 was incurred by the Company which had to be reimbursed by the appellant. Ext. P. 14 dated 20-3-1954 the letter from the Manager, Plywood Industries to the Manager, K. D. H. P. Company, discloses that the Plywood Industries denied their liability for any damages claimed in Ext. P. 36. It was mentioned in Ext. P. 14 that the smell complained of in Ext. P. 20 and Ext. P. 36 could not be due to the timber or glue used by the Plywood Industries for manufacturing the panels. According to the Manager of the Plywood Industries, the smell could have arisen on account of the species of timber used for battens or due to spillings on chests enroute. In reply to Ext. P. 14, the K. D. H. P. Company wrote Ext. According to the Manager of the Plywood Industries, the smell could have arisen on account of the species of timber used for battens or due to spillings on chests enroute. In reply to Ext. P. 14, the K. D. H. P. Company wrote Ext. P. 6 dated 25-3-1954 wherein it was observed thus: "It was found that the teas were contaminated by the strong smelling cement used in the manufacture of the plywood panels in the Travancore Plywood Industries, Punalur. You will observe from the attached Invoice copy, which please return after perusal, that all the panels used for packing the Invoice were ex T. P. I. Ltd.,' and there is therefore no question of the chests being made up of panels from your factory as well as panels from other firms. As the strong smelling cement used in your panels is the cause of the contamination reported by the buyers on account of which this company has sustained a loss of Rs. 45-5-4, you will appreciate that your factory is responsible for this loss." Subsequently after some correspondence in view of the smallness of the amount claimed as damages the appellant paid the sum of Rs. 45-5-4 to the K. D. H. P. Company. 13. In addition to the complaints referred to above, the Anglo American Direct Tea Company, Toronto, made a complaint about the quality of the tea chest panels supplied by the Plywood Industries to James Finlay & Company Ltd., Calcutta, under Ext. P. 39 dated 23-9-1953 which was reported to the K. D. H. P. Company by the James Finlay & Company under Ext. P. 38 dated 10-10-1953. The nature of the complaint made by the Anglo American Direct Tea Company to James Finlay & Company Ltd., extracted in Ext. P. 38 is in these terms: "This plywood when first removed from its wrapping definitely had a most pungent cheesy smell, which can possibly be attributed to the gum used for laminating and not to the actual plywood. The nature of the complaint made by the Anglo American Direct Tea Company to James Finlay & Company Ltd., extracted in Ext. P. 38 is in these terms: "This plywood when first removed from its wrapping definitely had a most pungent cheesy smell, which can possibly be attributed to the gum used for laminating and not to the actual plywood. The four samples received representing four chests of the break carry the same unpleasant taint and in the event of a claim there would appear to be no option but to meet it, although we would instruct Anglo American to do all possible to render the tea saleable in another direction." This complaint was reported by the K. D. H. P. Company to the Chief Conservator of Forests under Ext. P. 4 dated 16-10-1953 requesting him to cause a thorough enquiry to be made and for a detailed advice regarding the matter. 14. On the basis of the correspondence referred to above, it was argued by the respondents' advocate that there was really an apprehension on the part of the K. D. H. P. Company to go in for the panels manufactured by the Plywood Industries because of the defective quality. It must be remembered that the products supplied by the Plywood Industries to the K. D. H. P. Company were not tea chests but were only tea chest panels of certain sizes prescribed and the tea chests were made by the K. D. H. P. Company in their own factories with these panels and also with the battens and other components obtained from other sources. 15. The defects disclosed by the correspondence discussed above and noted in the panels supplied by the Plywood Industries were the following: (a) The lid panel used for chest No. 1796 was of very poor manufacture as a result of the plys having been crumbled and bad adhesive being used. (b) The Plywood from a chest forwarded under Kanniamally Inv. Ext. 60 was of poor quality so much so the nails have pulled out of it. (c) Contamination of tea by what is believed to be in the immaturity of the wood used for chest battens and also by a strong smelling cement used in the manufacture of the plywood panels which affected the tea only in two packages. Ext. 60 was of poor quality so much so the nails have pulled out of it. (c) Contamination of tea by what is believed to be in the immaturity of the wood used for chest battens and also by a strong smelling cement used in the manufacture of the plywood panels which affected the tea only in two packages. (d) Four tea chests contained a most pungent cheesy smell, which can possibly be attributed to the gum used for laminating and not to the actual wood. 16. The above defects were not conceded by the Plywood Industries. At any rate in the large supplies made by the Plywood Industries, the defects noted in a few of the panels used for not more than half a dozen tea chests do not justify the conclusion that the panels manufactured by the Plywood Industries were of such poor quality as to relieve the respondents of their obligation under Ext. P. 25 to canvass orders for the sale of the articles for the amount guaranteed in every year. 17. It is disclosed by Ext. D1 dated 14 1 1953, letter by the respondents to the Plywood Industries that an order for the manufacture of 24,600 sets plywood tea chest panels for 18" x 18" x 20" size for M/s K. D. H. P. Company was placed with the Plywood Industries. In Ext. D 5 dated 31-3-1953, the K. D. H. P. Company wrote to the Manager, Plywood Industries, that they were having large stocks of plywood panels for all sizes of chests and therefore they shall not be in the market for plywood panels for some considerable time. It is the case of the respondents that in spite of Ext. D 5, the K. D. H. P. Company was in need of more panels and they placed orders with them for the supply of tea chest panels during the period from 25-4-1953, to 19-6-1953. These orders are evidenced by Exts. P. 98 to P. 103. The orders placed with the respondents by the K. D. H. P. Company under Exts. P. 98 to P. 103 were for the supply of panels for 31,000 chests of the size 16" x 16" x 16", for 9,000 chests of the size 16" x 16" x 18" and for 22,500 chests of the size 20" x 18" x 18". The orders placed with the respondents by the K. D. H. P. Company under Exts. P. 98 to P. 103 were for the supply of panels for 31,000 chests of the size 16" x 16" x 16", for 9,000 chests of the size 16" x 16" x 18" and for 22,500 chests of the size 20" x 18" x 18". It is admitted by the respondents that they placed these orders for execution with the Western India Plywoods Ltd., Baliapattam, North Malabar. The orders placed with the Western India Plywoods Ltd., are evidenced by Exts. P. 112 to P. 112 (e). The question naturally arises why these orders were not placed by the respondents with the Plywood Industries even though it was admitted by P. W. 2 that the Plywood Industries was normally manufacturing sizes mentioned in Ext. P. 109. The answer given by P. W. 2 in his evidence is as follows: "The orders covered by Exts. P. 98 to P. 103 were placed with me. The supplies as per these orders were not obtained from the defendant because K. D. H. P. definitely asked me not to make supplies of defendant's production against these orders.................... The instructions were oral. These Exts. P. 98 to P. 103 orders were given to me personally. Supply as per their orders were not obtained from the defendant as I was expressly told not to do so by K. D. H. P." P. W. 1 is the Senior Secretary to the General Manager of the K. D. H. P. Company. He did not speak to any direction issued to the respondents that they should not place the orders under Exts. P. 98 to P. 103 with the Plywood Industries The evidence of P. W. 2 on this aspect is so vague and indefinite that it cannot be acted upon. The particular officer who issued the special directions with reference to the orders in Exts. P. 98 to P. 103 was not disclosed. In Ext. P. 32 Mr. Blair Hill on behalf of the General Manager of the K. D. H. P. Company only stated that in view of the adverse report received he was considering placing his orders elsewhere. This was on 14-4-1953. By Ext. P. 32, they had also requested for the explanation of the Manager of the Plywood Industries which was forwarded to them with the covering letter Ext. This was on 14-4-1953. By Ext. P. 32, they had also requested for the explanation of the Manager of the Plywood Industries which was forwarded to them with the covering letter Ext. P. 12 dated 26-6-1953. So no decision could have been taken by the K. D. H. P. Company not to purchase the goods of the Plywood Industries at any rate till 26-6-1953. The K. D. H. P. Company had not informed either the Manager of the Plywood Industries or the Chief Conservator of Forests about the said decision. P. W. 2 says thus in his evidence: "K. D. H. P. stopped placing orders with the defendant. K. D. H. P. wrote to the defendant saying that no more orders should be placed in April 1953. Early may 1953 General Manager Mr. R. Walker went on leave to U. K. He came back only in November 1953. The decision to stop placing orders was taken by Walker. So his subordinates could not change the decision in his absence. So there was delay in getting cancellation of that decision. After his return we got the cancellation order reserved." P. W. 1 says as follows: "At a particular stage my Company stopped placing orders with Travancore Plywood Industries for Tea chest. The reason is that we received adverse reports on the products of that firm from our customers through our higher authorities. These complaints are reflected in the correspondence referred to above. After we stopped our orders, plaintiff came to us and pleaded for continuing our orders with Travancore Plywood Industries. They seem to be sincere in their persuasions to us for placing further orders. They said that they would ensure our future supplies up to our expected quality. The decision of our company not to place further orders with Plywood Industries was taken by our General Manager Mr. R. Walker. Then Walker went on furlough to England. He returned after about 6 months. Normally we cannot change his decision in his absence. After his return, as a result of the persuasions of the plaintiff, the General Manager deputed one of his estate Manager to proceed to Punalur and inspect the stock and make a report about the quality of the stock. The report was favourable and orders began to be resumed." 18. Normally we cannot change his decision in his absence. After his return, as a result of the persuasions of the plaintiff, the General Manager deputed one of his estate Manager to proceed to Punalur and inspect the stock and make a report about the quality of the stock. The report was favourable and orders began to be resumed." 18. The decision alleged to have been taken by the K. D. H. P. Company not to place any orders for the purchase of the products of the Plywood Industries rests purely on oral evidence. No records of K. D. H. P. Company, were produced in the case embodying any such decision. P. W. 1 was only the Head Clerk to the Traffic Manager of the K. D. H. P. Company till 1954. He did not depose how he came to know about the decision taken by Mr. Walker. It is stated by P. W. 1 that there is no record embodying that decision which according to him was taken by Mr. Walker in March or April 1953. In view of Ext. D 5 and Ext. P. 32, it is not possible to believe this statement of P. W. 1. Further in Ext. P. 87 dated 4-6-1953 copy of the letter from the respondents to the Plywood Industries the reason alleged is as follows: "In view of the revised Excise Regulations which came into effect in April 1953, they would not be hereafter ordering for chests of a size smaller than 16" x 16" x 15"." It is seen from the evidence of P. W. 1 and P. W. 2 that Mr. Walker went on leave in May 1953 and returned by September 1953. During his absence Mr. T. Blair Hill was the General Manager. Mr. T. Blair Hill was available when P. W. 1 was examined. He was not examined. Mr. Walker was not examined in these circumstances, it is not possible to believe P. W. 1 and P. W. 2 when they stated that a decision was taken by Mr. Walker not to purchase the goods of the Plywood Industries. 19. D. W. 1 was the Manager of the Plywood Industries from 1947 to 1954. He deposed that after Ext. Walker was not examined in these circumstances, it is not possible to believe P. W. 1 and P. W. 2 when they stated that a decision was taken by Mr. Walker not to purchase the goods of the Plywood Industries. 19. D. W. 1 was the Manager of the Plywood Industries from 1947 to 1954. He deposed that after Ext. D6 dated 31 3 1953 he met the General Manager of the K. D. H. P. Company with the Chief Conservator of Forests and requested them for periodical orders and the General Manager promised to consider the request favourably. They were not informed about their decision. 20. There is also another circumstance to show that the alleged decision 1 could not be a fact. Ext. P. 108 dated 19-6-1953 is the letter by the Chief Conservator of Forests to the respondents informing them that the sales of May 1953 of the Plywood Industries is very poor on account of lack of orders for execution and requesting them to procure orders immediately for the supply of plywood from the factory. There was no reply to Ext. P. 108 from the respondents. Ext. P. 108 was followed up by Ext. P. 57 dated 13-7-1953, Ext. P. 59 dated 17-7-1953, Ext. P. 107 dated 18-7-1953. No reply was sent to any of these letters by the respondents prior to the receipt of Ext. P. 107. When Ext. P. 107 was received, the respondents sent Ext. P. 60 dated 20-7-1953 to the Chief Conservator of Forests desiring to have a personal discussion with him at Trivandrum. One of the respondents met the Chief Conservator of Forests on 24-7-1953 at Trivandrum. This fact was communicated to the Manager, Plywood Industries, by the telegram Ext. P. 61 dated 25-7-1953 and a confirmatory letter Ext. P. 62 of the same date. It was not suggested by the respondents that at that meeting the Chief Conservator of Forests was informed about the decision of Mr. Walker. The Manager of the Plywood Industries sent Ext. P. 105 dated 3-9-1953 to the respondents. The relevant portion of Ext. P. 105 is extracted below: "You are already aware that accumulating stock without sales in a manufacturing concern is detrimental to the interest of the concern and will only handicap further production. Walker. The Manager of the Plywood Industries sent Ext. P. 105 dated 3-9-1953 to the respondents. The relevant portion of Ext. P. 105 is extracted below: "You are already aware that accumulating stock without sales in a manufacturing concern is detrimental to the interest of the concern and will only handicap further production. You are also aware that the Government of India have been very helpful to us in the matter of restricting imports of Tea chests for 1953. In the first half of the year no imports have been allowed and for the second half a token of only 5% of the requirements is allowed. As such, if not now at least after a few weeks tea gardens should be going in for fresh stock. Government have already issued me orders to explain the poor sales during the recent months and to take all immediate steps to see that stocks are kept moving from our godowns so that good money is not locked up. You will, therefore, do the needful immediately in the matter and keep me informed always of the steps you are making in finding out a market for our products. If no tangible results are forthcoming shortly Government will view the matter very seriously and it may affect your position as our Sole Agents. Please, therefore, give the matter sufficient importance it deserves and see that the entire stock of plywood panels with us is sold or at least orders booked for the same before the month is out and send me weekly progress reports of the orders booked by you in this connection." Ext. P. 105 was followed up by another letter dated 12-9-1953. The respondents sent the letter Ext. P. 40 dated 23-9-1953 purporting to be a reply to the letter of 1st August 1953. It was in Ext. P. 40 that for the first time the respondents pleaded the excuse that the quality was bad. This they did only when the Plywood Industries threatened by Ext. P. 105 to take action. Apart from stating that the lack of orders from K. D. H. P. Company was due to the complaints they received from their foreign customers, even Ext. P. 40 did not mention anything about the alleged decision or direction issued by Mr. Walker. Before leaving this part of the case, it is necessary to refer to Ext. Apart from stating that the lack of orders from K. D. H. P. Company was due to the complaints they received from their foreign customers, even Ext. P. 40 did not mention anything about the alleged decision or direction issued by Mr. Walker. Before leaving this part of the case, it is necessary to refer to Ext. P. 85 dated 12-10-1953 from the Manager, Plywood Industries, to the respondents. This refers to four orders evidenced by Exts. D4 to D4 (c) placed by the respondents with the Plywood Industries on 1-10-1953 and 8-10-1953. Probably the respondents were compelled to place these orders with the Plywood Industries in view of the stiff attitude taken by the Manager of the latter under Ext. P. 105 which is dated 3-9-1953. The conduct of the respondents in having placed orders with the Plywood Industries obviously shows that they must have been satisfied with the quality of the panels manufactured by the Plywood Industries. In this connection it is necessary to note that P. W. 2 swears that the panels manufactured by the Plywood Industries were to be inspected by the Zonal Inspector under the Government of India and according to P. W. 2 this is one of the conditions of the Plywood chest panels. It is nobody's case that on inspection any defects were noted in the panels manufactured by the Plywood Industries. 21. The correspondence produced in the case shows that there was an obvious reason why the respondents and the K. D. H. P. Company were not inclined to go in for the articles of the Plywood Industries. Ext. D2 is the letter dated 2-4-1953 written by the respondents to the Plywood Industries. It is stated in Ext. D2 thus: "We had a detailed discussion with Mr. Hill (I. Blair Hill of K. D. H. P. Company) regarding the 5000 sets 13" x 13"x15" panels about which you had written to M/s. Kannan Devans. Mr. Hill informs us that the representatives of almost all Factories are calling on him frequently and offering various prices for plywood panels. Although he had written to you that he is offered Rs. 2-9-0 per set F. O. R. Alwaye by other Factories, he tells us that there are many factories who are prepared to go below even this figure provided he would place an order. Although he had written to you that he is offered Rs. 2-9-0 per set F. O. R. Alwaye by other Factories, he tells us that there are many factories who are prepared to go below even this figure provided he would place an order. He has therefore asked us to suggest that you accept the price of Rs. 2-9-0 per set F. O. R. Alwaye which in his opinion is a fair and reasonable price under the present conditions of the market. Speaking from our own experience, we make bold to inform you that there is practically no plywood factory in South India barring the Travancore Plywood Industries who strictly adhere to the Association prices. In view of the lack of demand for plywood, most factory owners are anxious to secure whatever stray orders that they come at so that they could at least keep the factories working. When things have taken such a bad turn, we would strongly urge the necessity of revising your attitude towards Association prices so that other Factories may not try to take your place in Estates from where you have been getting orders so long". Ext. P. 106 is the reply by the Manager, Plywood Industries, to Ext. D2. Ext. P. 106 is dated 13- 4-1953. The relevant portion of Ext. P. 106 with reference to the request made in Ext. D2 for reduction of prices of the articles of the Plywood Industries is as follows: "If some manufacturers offer lower prices and other concessions, due to distress selling, such sales cannot influence our price structure nor does the Association countenance such underhand dealings. It will be your endeavour to explain all these factors to Messrs. The Kannan Devan Hills Produce Company Ltd. and to Mr. Blair Hill in particular so that such opportunist offers are not accepted by them in preference to our offers which are always steady and reasonable in rates. It will also be within your responsibility to find out other big customers within and without our State, who will place orders on us for their requirements." In this connection, it will be worthwhile to refer to the evidence of P. W. 1 who speaks in these terms: "Did Mr. Blairhill ask plaintiff to supply panels at a price lower than that fixed by S. I. Plywood Manufactures Association in March or April 1953? (Ans) He might have asked. Blairhill ask plaintiff to supply panels at a price lower than that fixed by S. I. Plywood Manufactures Association in March or April 1953? (Ans) He might have asked. I am not sure of it. We were guided by the prices fixed by the Association, but were not bound by it." The above furnishes ample evidence to show that at about the time when Ext.D2 was written there was really a desire both on the part of the respondents and the K. D. H. P. Company to go in for panels not at the prices fixed by the South India Plywood Association, but at much reduced prices. In the nature of the evidence discussed above, it is not possible to accept the case put forward by the respondents that there was really a decision taken by Mr. Walker not to purchase the goods manufactured by the Travancore Plywood Industries, & Punalur and that the goods manufactured by the Plywood Industries were not of the standard prescribed. 22. The K. D. H. P. Company received their orders on 5-12-1953 by Ext. P. 21. It is admitted by the parties that subsequent to the date of Ext. P.21 K.D.H.P, Company was regularly purchasing panels from the Plywood Industries as before and this resulted in the increase in the sales for the fourth and fifth year. It was vehemently argued on behalf of the respondents that this revival was as a result of the efforts of the respondents after the return of Mr. Walker from leave by the end of September 1953 and as a result of inspection by one of the members of the K.D.H.P. Company at the instance of Mr. Walker of the goods in the Plywood Industries. It was not disputed by the appellant that there was an inspection. But it is seen from the evidence that the report of inspection is available in the office of the K. D. H. P. Company and no attempt was made on the part of the respondents to have the report filed in the case. It is therefore not possible to know anything about the contents of the report. But it is seen from the evidence that the report of inspection is available in the office of the K. D. H. P. Company and no attempt was made on the part of the respondents to have the report filed in the case. It is therefore not possible to know anything about the contents of the report. The fact that K. D. H. P. Company revived their orders as a result of the inspection goes to show that the goods manufactured by the Plywood Industries were of standard quality and even if there was any lull in view of certain complaints received from their foreign customers that must have been the result of an apprehension in the minds of a few customers of the K. D. H. P. Company and not due to any real defect in the quality of goods manufactured by the Plywood Industries. 23. We have already come to the conclusion that it is not possible to hold that the panels and other products manufactured by the Plywood Industries were below the standard prescribed or were of inferior quality. The only point the respondents have made out is that for a short time K.D.H.P. Company did not place orders and they revived placing orders after an inspection. This by itself did not prove conclusively that the market fell on account of defects in the quality of the goods of Plywood Industries. Under Ext. P. 25 the respondents were appointed sole agents for the sale of plywood tea chest panels, battens and plywood commercial sheets for the territories of Travancore Cochin State, Madras Province, Mysore State and Coorg. It is admitted by the respondents that K. D. H. P. Company was longstanding customer of the Plywood industries even before the date of Ext. P. 25 and even during the currency of Ext. P. 25 prior to its determination by Ext. P. 88 the K. D. H. P. Company was placing their orders directly with the Plywood Industries even though the respondents were getting the benefit of such orders for payment of their commission. As was stated in Ext. P. 106 in reply to Ext. D2 it was the duty of the respondents to find other customers for purchasing the products of the Plywood Industries even if K. D. H. P. Company refused to go in for the same. The areas mentioned in Ext. As was stated in Ext. P. 106 in reply to Ext. D2 it was the duty of the respondents to find other customers for purchasing the products of the Plywood Industries even if K. D. H. P. Company refused to go in for the same. The areas mentioned in Ext. P. 25 for canvassing orders by the respondents are Travancore Cochin, Madras Province, Mysore and Coorg. It was not the case of the respondents that the K. D. H. P. Company was the only customer in those territories. Though it was stated in Para.6 (a) of the plaint that the decrease in the volume of business transacted in the third year of the Agency was not the result of any act of omission or commission on the respondents' part but was traceable only to the breach of the contract by the first appellant in the sense that it refused or failed to maintain the guaranteed standard of quality in the products manufactured, and business magnates and estate owners like the Kannan Devan Hills Produce Company could not be pacified, there is no evidence to show that estate owners other than K. D. H. P. Company were dissatisfied with the goods manufactured by the Plywood Industries and they refused to place orders for the same with the respondents. Probably complaints received by the K. D. H. P. Company through James Finlay & Company of Calcutta about the dissatisfaction on the part of P. R. Buchanan & Company and Anglo American Tea Company Limited there was some hesitation on the part of the K. D. H. P. Company to go in for the articles manufactured by the Travancore Plywood Industries. This would not in any way justify the respondents from not fulfilling their obligations under Clause.12 of Ext. P.25. Under the terms of the contract it was the duty of the respondents to have secured orders from other tea chest manufacturers in the area stipulated in Ext. P.25. From the above, it can be seen that the obligation on the part of the respondents to secure an annual minimum sale of Rs. 5,00,000/- worth of products of the Travancore Plywood Industries under Clause.12 of Ext. P. 25 was violated and this is not attributable to any default on the part of the appellants in maintaining the standard prescribed under Ext. P.28 and P.28 (b). 5,00,000/- worth of products of the Travancore Plywood Industries under Clause.12 of Ext. P. 25 was violated and this is not attributable to any default on the part of the appellants in maintaining the standard prescribed under Ext. P.28 and P.28 (b). The failure to reach the minimum sale enjoined in Clause.12 of Ext. P.25 was attributable only to the default on the part of the respondents to book the orders from tea chest manufacturers within the area comprised in Ext. P.25. 24. A contract of agency is determinable either by act of parties or by operation of law. According to S.201 of the Indian Contract Act as agency may be terminated by the principal revoking his authority; or by the agent renouncing the business of the agency, or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated an insolvent. The enumeration given in S.201 of the Indian Contract Act is not exhaustive and there are cases of termination for reasons other than those given in S.201 of the Act. If a term of the agency is fixed in the agreement it is determined on the expiration of the term. The agency may be terminated before the expiry of the term in accordance with an express reservation in the contract or for reasonable cause. The right to cancel an agency may also depend upon some stipulation in the contract. If the right to cancel an agency is reserved in case the agent fails to do a specified amount of business within a certain period the contract may be cancelled if that condition is violated. Under contracts of such kind cancellation may be rightfully made only when it appears that there has been a failure to comply with the conditions prescribed. S.205 of the Indian Contract Act is in these terms: "Compensation for revocation by principal, or renunciation by agent. Under contracts of such kind cancellation may be rightfully made only when it appears that there has been a failure to comply with the conditions prescribed. S.205 of the Indian Contract Act is in these terms: "Compensation for revocation by principal, or renunciation by agent. Where there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause." Where there is a contract, express or implied, that the agency should be continued for any period of time, the principal cannot terminate it by exercising his option of revocation before the expiry of that period without sufficient cause, but if he does and the revocation is good, the principal becomes liable and must make compensation to the agent for the previous revocation of the agency. Even though there is an employment for a definite term and no right to terminate it exists, such employment may actually be terminated and the employee discharged before the expiration of that term subject to the employer's liability to make compensation for the wrongful discharge. The principal who commits a breach of the duty to keep the agent employed during the fixed period cannot be compelled to keep the agent in his employment but can be made liable for such loss due to the wrongful termination. Liability to pay compensation under S.205 of the Contract Act arises only when the agency is terminated without sufficient cause. Every agent impliedly covenants that he possesses, and will in the execution of his undertaking and duties exercise, a reasonable degree of skill, knowledge and ability. If, therefore, an agent though employed for a definite period, proves not to possess that reasonable degree of skill, or if possessing the same, he neglects or refuses to exercise it, the principal may properly terminate his authority without liability to make any compensation. Clause.13 of Ext. P. 25 provides that on breach by the agents of all or any of the terms and conditions contained in Ext. P. 25 it shall be open for the appellants to terminate the contract forthwith without prejudice to the rights of either party accrued before the date of such termination. Clause.13 of Ext. P. 25 provides that on breach by the agents of all or any of the terms and conditions contained in Ext. P. 25 it shall be open for the appellants to terminate the contract forthwith without prejudice to the rights of either party accrued before the date of such termination. It was argued by the appellants that the failure on the part of the agent to procure a minimum of sale for Rs. 5,00,000/- every year is a condition the non fulfilment of which will give a right of cancellation to the principal and further the omission on the part of the respondents to procure orders from other estate owners for the products of Plywood Industries constitutes sufficient cause within the meaning of S.205 of the Contract Act. But it was contended by the respondents that the right of cancellation under Clause.13 of Ext. P.25 can arise only on failure of the payment of damages on demand by the appellants contemplated in Clause.12 of Ext. P. 25. We are not inclined to accept this interpretation given to Clause.12 of Ext. P.25 by the learned advocate for the respondents. Even accepting this argument the damages were demanded by the appellants from the respondents by the issue of the notice Ext. P.93 and since it is not the case of the respondents that such damages were paid the right of cancellation arose under Ext. P.25. We have already held that the failure on the part of the respondents to procure orders for the sale for Rs. 5,00,000/- during the third year of the agency constitutes default on the part of the respondents which entitles the appellants to revoke the agency under Ext. P.25. Even if this conclusion is not possible to disentitle the respondents in their claim for damages it is enough for the appellants to show that the revocation of the agency was with sufficient cause. Whether there was sufficient cause for the termination of the agency under Ext. P.25 must depend upon the circumstances and facts of the case. In the performance of their duties the respondents were bound to be diligent and bound to exercise such skill in the performance of their duties. Whether there was sufficient cause for the termination of the agency under Ext. P.25 must depend upon the circumstances and facts of the case. In the performance of their duties the respondents were bound to be diligent and bound to exercise such skill in the performance of their duties. The silence of the respondents to take any effective steps to procure orders in spite of the several letters of the appellants and the absence of any evidence in this case to show that the respondents as is expected of them in the usual course of business as agents for the sale of the products of the Plywood Industries approached other estate owners like the K. D. H. P. Company to book orders for the products of the Plywood Industries, shows that the respondents were not diligent and skilful in their work as selling agents. Under Ext. P.25, the respondents were under an obligation vigorously to promote the sale of the products of the Plywood Industries and to effectuate the sale of as much products as they could throughout the entire period of contract subject to the minimum mentioned in Clause.12 of Ext.P.25. The evidence adduced in the case shows that the respondents I did not make any steady effort to sell the products of the Plywood Industries and they did not do their best to promote the sale of such products. This failure on the part of the respondents constitutes sufficient cause justifying the termination of the agency under Ext. P.25 before the expiry of the term. 25. The second question raised by the learned advocate for the appellant relates to the quantum of damages decreed by the trial court. The damages awarded by the court below come to Rs. 70,020.12. This represents the commission on the total money value of the orders placed during the unexpired portion of the agency period. There is no dispute between the parties regarding the total money value of the orders placed during the said period. But the learned advocate for the appellant contended that even if it is found that the revocation of the agency before the expiry of the period is wrongful the respondents are not entitled to the entire amount. There is no dispute between the parties regarding the total money value of the orders placed during the said period. But the learned advocate for the appellant contended that even if it is found that the revocation of the agency before the expiry of the period is wrongful the respondents are not entitled to the entire amount. In computing the compensation for breach of the contract, it is contended by the appellants deductions are to be made for the amount of expense which would necessarily be incurred in selling the goods and also in case the agent was not required to devote his time exclusively for selling the principal's goods to the value of his time used for other employment. Speaking generally the rules which guide the court in assessing damages for breach of other contracts apply also to the breach of contract of agency. Though there is an observation in the judgment of the trial court that the appellants had no case that the basis adopted in the plaint in fixing the measure of damages was objectionable it was submitted before us that that statement is wrong. In the written statement it was definitely alleged that the basis of the claim for damages is also wrong and untenable and that the working of the contract necessarily involves considerable labour and expense for procuring sales and the profit arising therefrom is only the commission less expenses due regard being also given in working the contract. Had it not been for the finding entered by us that the respondents were guilty of the breach of contract and therefore they are not entitled to claim the damages we would have been inclined to send the case back for assessing the quantum of damages in accordance with the principles stated above. In view of our finding, that the respondents are not entitled to any damages that is not necessary. 26. The respondents also claimed the return of Rs. 10,000/- with the accumulated interest thereon the amount deposited as security for the working of the contract in Ext.P.25. The appellants claimed a set off of Rs. 6,890-0-6 as on 31-3-1954 against the security deposit. This claim for set off was overruled by the trial court and there is no appeal against that portion of the decree. 10,000/- with the accumulated interest thereon the amount deposited as security for the working of the contract in Ext.P.25. The appellants claimed a set off of Rs. 6,890-0-6 as on 31-3-1954 against the security deposit. This claim for set off was overruled by the trial court and there is no appeal against that portion of the decree. No provision in Ext.P.25 was brought to our notice to hold that in view of the breach of contract on the part of the respondents they were not entitled to claim back the security deposit. We have therefore to hold that the respondents are entitled to a decree for the recovery of the sum of Rs. 10,750/-. 27. In the result, the judgment and decree of the trial court are set aside to the extent of disallowing the respondents their claim for damages. The respondents are given a decree only for the sum of Rs. 10,750/- with interest thereon at 3% from 24 1 1955 the date of the institution of the suit. The suit will stand dismissed in other respects. The appeal is allowed to the above extent. The parties are entitled to receive and pay costs in proportion to their success and failure in both the courts.