JUDGMENT.-The plaintiff in O.S. No. 112 of 1972 in the Court of the Subordinate Judge of Udamalpet is the appellant. He filed a suit for recovery of Rs. 10,175 with interest and costs. The suit property belonged to defendants 1 to 3, who are brothers and also their mother Muthammal and their brother Chinnappa Goundar. The extent of the property is 14 acres and 9½ cents. The plaintiff purchased Chinnappa Goundar’s 1/5th share. Muthammal, the mother of the first three defendants, executed a settlement deed in favour of her daughter-in-law, the fourth defendant. Thus, the four defendants had 4/5th share in the said property. There was an agreement between the plaintiff and the four defendants on 28th April, 1971 marked as Exhibit B-2 in the case regarding the sale of that 4|5th share in the said property. The consideration for the sale was Rs. 58,000. Time for completing the transaction was three months. A sum of Rs. 10,000 was paid as advance on 24th May, 1971. The agreement contemplated delivery of possession to the plaintiff on his payment of Rs. 10,000 as advance. The balance was payable before the Sub-Registrar. The agreement provided that in case the plaintiff did not pay the balance and have the sale deed registered, he would lose the advance of Rs. 10,000. The defendants could take over possession of the property and harvest the crops. If the defendants failed to execute the sale deed, then the plaintiff could take proceedings in Court. As damages the plaintiff could adjust a sum of Rs. 10,000 and pay the balance of Rs. 38,000 in Court. In the receipt that was given on 24th May, 1971 marked as Exhibit A-1 it was stated that the defendants would discharge their liabilities and that in case the sum of Rs. 10,000 was not sufficient to discharge all the debts, then they would render an account to the plaintiff and receive the amount 15 days prior to the expiry of the period of three months and receive the balance before the Sub-Registrar as provided in "the agreement. The period of three months would elapse by 27th July, 1971. 10,000 was not sufficient to discharge all the debts, then they would render an account to the plaintiff and receive the amount 15 days prior to the expiry of the period of three months and receive the balance before the Sub-Registrar as provided in "the agreement. The period of three months would elapse by 27th July, 1971. On 22nd July, 1971 there was a public notice in the newspaper ‘Malai Murasu’ on behalf of one Kunjammal, the sister of the defendants, in which it was stated that the defendants were illegally trying to sell the properties of the father, Muthu Gounder, that the properties belonged to Chellammal and Kunjammal, the daughters of Muthu Goundar and that the defendants had no right to transfer them. The plaintiff alleged that on seeing this notice he sent a telegram calling back the sum of Rs. 10,000. The defendants did not comply with this telegraphic request and sent instead a reply notice through their counsel on ‘9th August, 1971 (Exhibit A-3). There was a reply to it from the plaintiff’s counsel dated 25th August, 1971, under Exhibit A-4 and the suit came to be filed subsequently for the recovery of the sum of Rs. 10,000 with interest. 2. Defendants 1, 3 and 4 were absent and set ex parte. The second defendant alone contested the suit. In brief his defence was that the actual consideration for the sale of the property was Rs. 80,000, that the plaintiff paid Rs. 10,000 on 24th May, 1971, that he agreed to make another payment of Rs. 22,000 within one month and the balance in two months thereafter and that the plaintiff was not in a position to raise necessary funds, so that he set up his (defendant’s) sisters to make this publication so as to claim the refund of the sum of Rs. 10,000. It was contended that the sum of Rs. 10,000 was not returnable to the plaintiff under the terms of the agreement. 3. The learned Subordinate Judge held that the plaintiff committed breach of contract and that even if the defendants were at default, the plaintiff could only file a suit for specific performance and could not get back the sum of Rs. 10,000. The suit was accordingly dismissed and the plaintiff is now in appeal in this Court. 4. Two questions arise in this appeal. 10,000. The suit was accordingly dismissed and the plaintiff is now in appeal in this Court. 4. Two questions arise in this appeal. The first is whether there was a breach of contract at the instance of the plaintiff and the second is whether the defendants are entitled to forfeit the sum of Rs. 10,000. The contention of the defendants that the property was agreed to be sold, not for Rs. 58,000 as stated in Exhibit B-2, but for Rs. 80,000 has absolutely no evidence to support it. The consideration as set out in Exhibit B-2 will thus be the only amount that was payable by the plaintiff to the defendants for the purchase of the said property. The plaintiff had already purchased 1/5th share from Chinnappa Goundar, the brother of defendants 1 to 3. It is not as if the plaintiff was unware of the existence of the two sisters of the defendants. In his evidence he stated that he had decided not to purchase the property even before the publication in ‘Malai Murasu’. According to him, he was confirmed in his view on seeing Exhibit A-2 publication. The submission that the plaintiff was not in a position to proceed further with the performance of the contract only because of the publication in ‘Malai Murasu’ is thus inconsistent with his own evidence. It was stated by the learned counsel for the respondents that the real reason behind the plaintiff’s non-performance of his part of the contract was that he could not muster the necessary funds. Whatever may be the reason, there has been a breach on the part of the plaintiff. There was no representation on behalf of the defendants before the agreement that their sister had nothing to do with the property so as to enable the plaintiff to rely on the advertisement. The plaintiff went about the purchase even without obtaining an encumbrance certificate and making any other enquiry. He was thus prepared to take a chance in purchasing the property. His statement that he did not pursue the transaction because of the publication in ‘Malai Murasu’ is not convincing. In these circumstances the finding of the Court below that there was a breach at the instance of the plaintiff cannot be interfered with. 5. The next question is whether the defendants are entitled to retain or forfeit the sum of Rs. 10,000 received from the plaintiff. In these circumstances the finding of the Court below that there was a breach at the instance of the plaintiff cannot be interfered with. 5. The next question is whether the defendants are entitled to retain or forfeit the sum of Rs. 10,000 received from the plaintiff. In Exhibit B-2 it was only stated that within a month from the date of the agreement the plaintiff would pay a sum of Rs. 10,000 and obtain a receipt. This sum was not referred either as an earnest money or as an advance. It was thus only in the nature of a part-payment. It is in this context that the provision of section 74 of the Indian Contract Act has to be considered. That provision runs as follows:- "74. When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for". 6. It was pointed out by the Privy Council in Bhai Panna Singh and others v.Bhai Arjun Singh and others1, that the effect of section 74 was to disentitle the plaintiffs to recover simpliciter the sum fixed in the contract, whether penalty or liquidated damages, and that the plaintiffs must prove the damages they had suffered. In a later case in Michel Habib Haji Ayoub and others v. Sheikh Suleiman Ei Taji Ei Farouqui2, where there was a stipulation in the contract of sale of land that on failure to pay any of the instalments of the purchase price on the due date or to pay taxes or to take the agreed part in the appointment of a surveyor, the agreed sum of £ 2500 should become payable as damages by the purchaser independently of his liability to pay instalments, it was held that such stipulation for payment of £ 2500 amounted to a stipulation by way of penalty and could not be enforced. At page 103 Lord Atkin speaking for that Judicial Committee observes as. At page 103 Lord Atkin speaking for that Judicial Committee observes as. follows: "Agreed liquidated damages, if to be enforced, must be the result of a "genuine pre-estimate of damages" to use the illuminating phrase of Lord Dunedin. They do not include a sum fixed in terrorem 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. It seems right therefore to conclude that.......... "damages" will be taken to mean actual damages ........ But if the Court applying well-known rules has to conclude that the sum agreed was a penalty, whatever it may be called in the agreement, then the penal stipulation will not be enforced". 7. The applicability of section 74 to a case like this has been considered by the Supreme Court in more than one decision. In Fateh Chand v. Balkishan Das3, there was a covenant in a contract for sale of certain lands and building to the effect that "if for any reason the vendee failed to get the sale deed registered by the date stipulated, the amount of Rs. 25,000 (Rs. 1,000 paid as earnest money and Rs. 24,000 paid out of the price on delivery of possession) shall stand forfeited and the agreement shall be deemed cancelled". It was held that the covenant for forfeiture of Rs. 24,000 was manifestly a stipulation by way of penalty. At page 1410 it was pointed out as follows-: "The section is clearly an attempt to eliminate the somewhat elaborate refinement made under the English common law in distinguishing between stipulations providing for 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 a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulation by way of penalty“. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulation by way of penalty“. Again in paragraph 10 at page 1411, the Supreme Court observed as follows: ”Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases: (1) where the contract names a sum to be paid in case of breach; and (2) where the contract contains any other stipulation by way of penalty........The measure of damages, in the case of breach of a stipulation by way of penalty is by section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. 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 the duty to award compensation according to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of “actual loss or damages”; it does not justify the award of compensation when in consequences of the breach no legal injury at all has 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. ......Duty not to enforce the penalty clause but only to 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 an amount deposited pursuant to the terms of the 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“. 8. In all cases, therefore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of the 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“. 8. In Maula Bux v. Union of India1, under the terms of the contract the party in breach had undertaken to pay a sum of money or to forfeit a sum of money which he had already paid to the party complaining of a breach of contract. It was held that the undertaking was in the nature of a penalty, that section 74 applied thereto and that the forfeiture of earnest money under a contract for sale of property, if the amount was reasonable, did not fall within section 74 of the Contract Act. Dealing with the words” whether or not actual damage or loss is proved to have been caused thereby “ the Supreme Court observed at pages 933 and 934 as follows:- "It is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree, and the Court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. But the expression "whether or not actual damage or loss is proved to have been caused thereby" is intended to cover different classes of contracts which come before the Courts. In case of breach of some contracts it may be impossible for the Court to assess compensation arising from breach, while in other cases compensation can be calculated in accordance with established rules. Where the Court is unable to assess the compensation, the sum named by the parties if it be regarded as a genuine pre-estimate may be taken into consideration as the measure of reasonable compensation, but not if the sum named is in the nature of a penalty. Where loss in terms of money can be determined, the party claiming compensation must prove the loss suffered by him". 9. Where loss in terms of money can be determined, the party claiming compensation must prove the loss suffered by him". 9. It is clear from these decisions that the undertaking to pay a sum of money or to forfeit a sum of money fixed in terrorem without reference to any estimated damages on breach of the contract is in the nature of a penalty and that the party claiming compensation must prove the loss suffered by him. This last-mentioned judgment of the Supreme Court has again been followed in Union of India v. Rampen Distillery & Chemical Co.1‘. 10. Judged in the light of these decisions the undertaking to pay the sum of Rs. 10,000 without reference to any actual damages is only in the nature of a penalty. The duty of the Court ‘not to enforce the penalty’ arises in this case. The stipulation in any contract for payment of any particular sum of forfeiture of the amount already paid as advance is relevant only to fix the maximum amount that could be awarded as against the party in breach. The Court has to exercise the discretion to award only such amount as may reasonably be estimated to be damages arising out of the breach. Where it is possible to prove actual damage sustained as here, it is necessary for the party not in breach to prove the actual amount of damages suffered, so that to that extent the amount already paid may be allowed to be retained. In the present case there is no proof of any amount actually suffered as damages. In these circumstances there is no scope for any cut being effected out of the amount paid to the defendants. The defendants are bound to repay the sum of Rs. 10,000. There is no justification for awarding interest prior to the suit. 11. There will be a decree for the sum of Rs. 10,000 accordingly with interest from the date of plaint till date of realisation. The appeal is accordingly allowed with costs. 12. In the view that I have taken, it is unnecessary to go into the additional documents. Therefore, C.M.P.No. 444 of 1975 is dismissed.