JUDGMENT V.P. Mathur, J. - This is a defendants' appeal directed against the judgment and decree passed by Sri Sanwal Singh, the then IInd Additional Civil Judge, Kanpur in Original Suit No. 34 of 1971 on 14-5-1975, whereby he partly decreed the suit of the plaintiff-respondent for a sum of Rs. 34575- 38 P. with pendente lite and future interest at the rate of six per cent per annum with proportionate costs. 2. Briefly stated the suit was filed by M/s. Gauri Prasad Gopal Chand against the Food Corporation of India for a total sum of Rs. 37,597.38 P. and 12 per cent per annum pendente lite and future interest thereon with the allegations that the plaintiff Firm was a registered one and dealt in the manufacture of different kinds of pulses. They were also working as Commission Agent and grain, Oil, seeds and Jute dealers. In pursuance of an agreement dated 19-5-1969 as revised by plaintiff's letter dated 8-7-1969 and duly accepted by the defendants, the plaintiff agreed to supply 200 metric tonnes of Arhardal of ASC specification to the defendants; one of the terms of the agreement as contained in the letter dated 8-7-69 was to the effect that on the basis of weighment recorded in the Food Corporation of India Godown, the defendants would pay 90 per cent of the costs supplied on receipt of goods at the said Godown and on presentation of the bills along with the Godown acknowledgment receipt within three working days of the presentation of the Bill. It was also agreed that balance of 10 per cent would be paid by the Food Corporation of India (hereinafter to be mentioned as FCI). On the issue of sample slips by the M.G.D. Lucknow after deducting quality cuts etc. if any. 3. In pursuance of this agreement, the plaintiff supplied Arhardal worth Rs. 2,36,694.28 Paise. It was accepted and consumed by the Military department except 210 bags which were rejected. As 90% of the price of the total goods supplied, a sum of Rs. 2,11,577-80p. was paid to the plaintiff. The plaintiff, therefore. became entitled to the balance of 10 per cent after the acceptance of the consignment bills which were duly submitted on 5-1-1970. The balance due thus came to Rs. 24096-93 paise but the defendants withheld the amount. The plaintiff had also deposited a sum of Rs. 2,11,577-80p. was paid to the plaintiff. The plaintiff, therefore. became entitled to the balance of 10 per cent after the acceptance of the consignment bills which were duly submitted on 5-1-1970. The balance due thus came to Rs. 24096-93 paise but the defendants withheld the amount. The plaintiff had also deposited a sum of Rs. 5,000/- with the Regional Manager of the defendants in respect of the aforesaid supply. In view of the terms of the contract, this amount was also liable to be refunded after the supply had been completed. In spite of repeated demands, the amount has not been paid. Therefore the plaintiff will be entitled to interest on this amount at the rate of one per cent per month. 4. On 24-11-1969 an additional supply of 69 tonnes of Arhardal of the same specification at the rate of Rs. 117.70 p. per Quintal subject to the above terms and conditions of the contract was despatched by the plaintiff. This supply consisted of 726 bags. Two hundred forty-two bags were accepted and the rest were rejected, and delivery of the rejected goods was delayed. The plaintiff was entitled to a sum of Rs. 24096-93 Paise being the ten per cent of the price of the goods supplied and accepted, Rs. 5000/- as refund of security deposit plus Rs. 600/- interest thereon from 5-1-1970 to the date of the suit, and Rs. 23182-45 P. in respect of the claims detailed in Schedule-A about which only a sum of Rs. 7900-45 P. is presently claimed. The total claim of the plaintiff was of a sum of Rs. 37,597.38 paise with pendente lite and future interest at the rate of 12% per annum. 5. The defence was a denial of plaintiff's status as a registered Firm and of the status of Sri Gauri Prasad as its registered partner and therefore, the bar of S. 69 of the Indian Partnership Act was claimed. It was admitted that the plaintiff agreed to supply 200 tonnes of Arhardal of the given specification on the terms and conditions contained in plaintiff's letter dated 19-9-1969. There was a condition that the amount of penalty, if any, imposed by the Military Authorities on the defendants for the rejection and delay in replacement, shall be borne by the plaintiff. Modifications proposed by the plaintiff in its letter dated 8-7-1969 were also accepted. There was a condition that the amount of penalty, if any, imposed by the Military Authorities on the defendants for the rejection and delay in replacement, shall be borne by the plaintiff. Modifications proposed by the plaintiff in its letter dated 8-7-1969 were also accepted. There was an agreement that the F.C.I. will pay 90% of the costs on the basis of weighment recorded at its Godown on the presentation of bill etc. within three working days and the balance of 1.0% will be paid after the Military Grains Depot Lucknow issued sample slips. In pursuance of this agreement, the plaintiff did supply 200 tonnes of Dal contained in 2107 bags. Two hundred ten bags weighing 19.950 tonnes were rejected by the Military Authorities and the plaintiff was called upon to remove the said goods at his costs and supply fresh stock and to refund the 90% of the costs of this rejected stock which he had already received. The plaintiff was, according to the agreement, to replace the rejected goods at his own costs for re-tendering to the Military Authorities. He however, did not do so. Ultimately he removed the said rejected goods and deposited back the 90% of the costs thereof. He, however, did not replace the rejected goods. The plaintiff deposited Rs. 5000/- as earnest money and he is not entitled to refund of the same on account of the failure of the supply of the covenanted quantity of the Dal. No question of grant of interest arises. Further the offer of the plaintiff to supply 69 Metric tonnes of the Dal at the same rate was also accepted. He supplied 726 bags out of which 484 bags were rejected, as they did not correspond to the stipulated standard. He did not replace the same in spite of demands. Subsequently when he supplied them afresh, the same were again rejected. He was, therefore, called upon to deposit 90% of the costs and to remove the rejected goods which he did, but thereafter he did not replace the same and insisted on payment of ten per cent of the cost. There was a meeting on 5-1-1970 at Lucknow between the parties and the entire matter was discussed and the plaintiff agreed to replace the rejected goods. He, however, did not honour his commitment. The claim for Rs. 3,523-50 paise as given in Schedule-A was disputed. There was a meeting on 5-1-1970 at Lucknow between the parties and the entire matter was discussed and the plaintiff agreed to replace the rejected goods. He, however, did not honour his commitment. The claim for Rs. 3,523-50 paise as given in Schedule-A was disputed. He is only entitled to transport charges in respect of only 843 bags, as 210 bags had already been rejected. As regards the remaining 242 bags, the position is the same. The plaintiff is not entitled to marking and stitching charges at the rate of Rs. 1.50 p. per bag and is not entitled to any amount for Dhala making and thus his claim to Rs. 1053/- is not tenable. His claim for losses etc. is not well founded. A sum of Rs. 998.98P and Rs. 35/- are payable to the plaintiff but the claims contained in Schedule-B are denied. 6. On these pleadings the learned Court below framed following five issues : 1. Whether the suit is barred by S. 69 of the Indian Partnership Act? 2. Whether the goods supplied by the plaintiff were not of the quality contracted for? If so its effect? 3. Whether the plaintiff is entitled to the interest claimed? 4. Whether the plaintiff is entitled to Rs. 10% of the price of goods supplied, Rs. 5000/- deposited as security, Rs. 600/- as interest and Rs. 7900.45 P. on account of the description given in the Schedules A and B of the plaint? 5. To what relief, if any, is the plaintiff entitled? 7. Issue No. 1 was taken up and disposed of as a preliminary issue and it was found that the plaintiff was a registered firm and Gauri Prasad was the registered partner. Therefore, the suit was held to be in order and the bar of S. 69 of the Indian Partnership Act was not available to be pleaded. 8. Before me two points arise because the finding on the issues Nos. 2, 3, 4 and 5 have all been challenged. The first point is whether the plaintiff will be entitled to the refund of Rs. 5000/- deposited by way of security or earnest money, to Rs. 600/- as interest thereon, to Rs. 8. Before me two points arise because the finding on the issues Nos. 2, 3, 4 and 5 have all been challenged. The first point is whether the plaintiff will be entitled to the refund of Rs. 5000/- deposited by way of security or earnest money, to Rs. 600/- as interest thereon, to Rs. 7900.45 P. on account of descriptions given in Schedules A and B of the plaint and to 10% of the price of the goods supplied; and (2) whether in view of the law applicable to such transactions, the defendants will be entitled to forfeit the amount of Rs. 5000/-. I will take the second point first. 9. A perusal of the agreement entered into by the parties will show that in para 3 of Ext. A-1 it was stipulated that the plaintiff had to deposit a sum of Rs. 5000/- as earnest money for the contract and it was stipulated that this amount was liable to be forfeited in the event of breach of any term and condition of the contract, without prejudice to any other right of the F.C.I. that may arise due to failure of the plaintiff to keep the contract. It was further stipulated that the earnest money will be refunded on the satisfactory completion of the contract. In para 4 of the same exhibit, it was stipulated that the delivery of the entire quantity of 200 tonnes of Arhar Dal of the specified quality had to be completed by the 13th July 1969, failing which, the F.C.I. will have the option to make purchases at plaintiffs risk and cost in addition to forfeiture of the earnest money. By a subsequent letter Ext. A-3 vide condition No. 2, the plaintiff further extended a guarantee for the acceptance of the stock of goods supplied by the Military Authorities and undertook that in case of rejection, the plaintiff will replace the stock at his own costs for retendering to the Military Authorities. 10. There was some dispute between the parties as regards the nature of deposit of Rs. 5000/-. It was contended before the trial court that it was according to the words used in the agreement, not a security deposit but a deposit by way of earnest money. In the case of Maula Bux v. Union of India, AIR 1970 SC 1955 . 5000/-. It was contended before the trial court that it was according to the words used in the agreement, not a security deposit but a deposit by way of earnest money. In the case of Maula Bux v. Union of India, AIR 1970 SC 1955 . A similar case came up before the Supreme Court in which the observation by the High Court was that the deposit made should be regarded as earnest money. This observation was however negatived. A reference was made to page 689 of the Dictionary of Indian Law which reads : "Giving an earnest or earnest-money is a mode of signifying assent to a contract of sale or the like by giving to the vendor a nominal sum as a token that the parties are in earnest or have made up their minds." A reference was also made to the observation of the Judicial Committee in the case of Chiranjit Singh v. Harswarup AIR 1926 PC 1 wherein it was held that "Earnest money is part of the purchase price when the transaction goes forward. It is forfeited when the transaction falls through by reason of the fault or failure of the vendee". 11. In Maulabux's case ( AIR 1970 SC 1955 ) it was held that the deposit was not made by the purchaser to be applied towards the part payment of the price when the contract was completed and till then as evidencing an intention on the purchasers' part to buy the property or goods. On the contrary the plaintiff (vendor) had deposited the amounts claimed as security for guaranteeing due performance of the contracts. Such deposits cannot be regarded as earnest money. 12. The other important point decided in Maula, Bux's case was that S. 74 of the Contract Act was clearly applicable to such cases also. A reference was made to a number of cases including Natesa Aiyar v. Appavu Padayachi AIR 1915 Mad 896 (FB), through which it was held that S. 74 of the Contract Act will have no application to cases of deposit for due performance of a contract which is stipulated to be forfeited for breach. But it was held that in view of the judgment in Fateh Chands' case Fateh Chand v. Bal Kishan Das, AIR 1963 SC 1405 , the above case did not lay down a good law. But it was held that in view of the judgment in Fateh Chands' case Fateh Chand v. Bal Kishan Das, AIR 1963 SC 1405 , the above case did not lay down a good law. The observation is "There is however no warrant for the assumption made by the some of the High Courts in India that S. 74 applies only to cases where the aggrieved party is seeking to receive some amount on breach of contract and not to cases whereupon breach of contract an amount received under the contract is sought to be forfeited. In our judgment 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." "There is no ground for holding that the expression 'contract contains any other stipulation by way of penalty' is limited to cases of stipulation in the nature of an agreement to pay money or deliver property on breach and does not comprehend covenants under which amounts are paid or property delivered under the contract, which by the terms of the contract expressly or by clear implication are liable to be forfeited." 12A. In Maula Bux's case (supra) it was observed that forfeiture of earnest money under a contract for sale of property, if the amount is reasonable will not fall within S. 74, because forfeiture of a reasonable amount paid as earnest money does not amount to imposing a penalty. But if a forfeiture is of the nature of penalty, S. 74 applies. Where under the terms of the contract the party in breach has undertaken to pay a sum of money or to forfeit a sum of money which he had already paid to the party complaining of the breach of contract, the undertaking if the nature of a penalty. 13. In view of this law laid down by the Supreme Court, there is now no dispute left in this respect. In' the present case also the agreement was in the nature of imposition of penalty of Rs. 13. In view of this law laid down by the Supreme Court, there is now no dispute left in this respect. In' the present case also the agreement was in the nature of imposition of penalty of Rs. 5000/-, in case of default of any of the terms of the covenant reserving in the vendee, a right also to seek further relief in case he had to purchase some items from the open market. In view of these facts I am in agreement with the learned Trial court that the F.C.I. was not entitled to forfeit the amount of Rs. 5000/-. They could be entitled only to such sum, as they proved to be reasonable to meet the expenses that they might have incurred or losses that they might have suffered on account of the breach of contract by the plaintiff-respondent. There was no proof of sufferance of any such loss etc. and the FCI have not adduced any evidence in this respect. Therefore, the total amount of Rs. 5000/- deposited by way of security was to be refunded. 14. Coming in the other point the claim to interest of Rs. 600/- was rightly discarded by the Court below and this point has not been agitated before me. There is a claim of Rs. 3523.50P by way of incidental charges, and Rs. 2107 on account of Dhala making. About these two items P.W. 1 Gauri Prasad Jhawar has clearly stated in his deposition that these amounts were settled at the meeting dated 5-91970. The Court below has recorded a finding of fact in this respect. The testimony of Sri Jhawar has been accepted in toto and that of the defence witness Sri Mahajan D.W. 1 has been rejected in this respect "because Sri Mahajan admitted that in the meeting dated 5-9-1970 a large number of points were considered and formed the subject matter of discussion. He also admitted that the matters mentioned in the schedules of the plaint were discussed. He however conveniently forgot as to what rates of amounts were settled. There is positive and clear evidence of Gauri Prasad Jhawar (P.W. 1) that the rates and amounts as given in Schedule-B were agreed upon. The fact that certain rates and amounts were agreed upon, is also admitted to the defence witness Sri Mahajan. I will therefore accept the learned trial Court's finding on this point also. 15. There is positive and clear evidence of Gauri Prasad Jhawar (P.W. 1) that the rates and amounts as given in Schedule-B were agreed upon. The fact that certain rates and amounts were agreed upon, is also admitted to the defence witness Sri Mahajan. I will therefore accept the learned trial Court's finding on this point also. 15. The main dispute remains about the ten per cent amount to which the plaintiff respondent could be entitled. This calls for a mathematical calculation only. There is no dispute that according to the agreement for the supplies made, 90% price was to be paid within three days of the submission of the bills etc. and 10% was to be paid later on. It is not disputed that this ten per cent price has not been paid. We have only to find as to what amount will be due by way of ten per cent. There is dearth of direct evidence on this point on both the sides. Nevertheless from the admitted pleadings we can come to a conclusion in this respect. In para 5 of the plaint it was clearly contended that goods supplied were worth Rs. 2,36,694.28P. in all. For these goods, the 90% payment that was made amounted to Rs. 2,11,577.80P. Undoubtedly 210 bags out of the supply, were subsequently rejected. For these 210 bags a refund of Rs. 211150.00 being the 90% per cent price was admittedly made by the plaintiff to the defendants. It, therefore, means that when the 90% price of these rejected goods amounted to Rs. 21,150.00 the ten per cent still due would come to Rs. 2350/-. In this manner the total price of the 210 bags will come to Rs. 23500.00/- were subsequently removed by the plaintiff respondent and in lieu thereof he deposited a sum of Rs. 21150/- by way of 90 per cent of the price with the FCI. If out of the total value of the consignment which comes to Rs. 236694.28, a sum of. Rs. 23500/- is deducted by way of the price of the rejected articles, the total price of the articles supplied and accepted will come to Rs. 2,13,194.28P. Similarly on the other side a total amount of Rs. 2,11,577.80P. was admittedly paid by way of 90% of the price of the total supply. Out of this a sum of Rs. Rs. 23500/- is deducted by way of the price of the rejected articles, the total price of the articles supplied and accepted will come to Rs. 2,13,194.28P. Similarly on the other side a total amount of Rs. 2,11,577.80P. was admittedly paid by way of 90% of the price of the total supply. Out of this a sum of Rs. 23,500/- which is the price of the rejected goods was refunded and should be deducted and this will bring us to a figure of Rs. 1,88,077.80 as the 90% price of the goods supplied. If we deduct from the first figure the second figure (Rs. 2,13,194,28P) (Rs. 1,88,077-80) the amount of ten per cent due on the consignment accepted will come to Rs. 25,116.48P. The plaintiff has however claimed only a sum of Rs. 24,096.93 P. and since it is less than what was due to him, it appears that the learned counsel during the course of the arguments before the trial court admitted the figure, as will appear from the judgment of the learned Court below where he deals with this refund of ten per cent of the price. 16. The next dispute is about the shortage of stock to the extent of 1050 Kilograms. For this, an amount of Rs. 1236.37 P. is claimed by the plaintiff. This shortage occurred in the rejected goods. Admittedly the rejected goods were not released to be lifted by the Suppliers namely the plaintiff immediately. Gauri Prasad Jhawar (P.W. 1) has said that when his 210 bags were rejected, he went to remove the same. There is evidence to prove that there was no arrangement for weighment of these goods in the Military Godown. Therefore he brought the goods to his own godown and weighed them there. He says that he requested the Officer of the defendants who was present at the Reserve Grains Depot of the Army to have the goods weighed but the officer showed his inability by saying that there was no arrangement for weighment. D.W. 1 Sri Mahajan however says that there was arrangement for weighment and the plaintiff did not request for weighment before lifting and removing the stock. Mr. Mahajan was admittedly not present at that place at that time. He had already been transferred. D.W. 1 Sri Mahajan however says that there was arrangement for weighment and the plaintiff did not request for weighment before lifting and removing the stock. Mr. Mahajan was admittedly not present at that place at that time. He had already been transferred. He even does not know for how long the stock remained lying in the Reserve Grains Depot and when the same was ultimately removed. He even does not know whether the goods were removed at all and whether there was any shortage. There is no other evidence on the side of the FCI. Therefore, the statement of P.W. 1 has to be accepted and has been rightly accepted as correct. I am in agreement with the learned Court below that the consignment of 210 bags which-was rejected, remained lying with the Military Authorities for long. Out of this consignment also samples must have been taken without which the same could not be rejected. Therefore the shortage is possible. 1 will in agreement with the learned Trial Court hold the plaintiff entitled to Rs. 1236.37P. for shortage of the goods. 17. In the result the suit was rightly decreed for Rs. 34575,38P. together with pendente lite and future interest at the rate of 60 per cent per annum and proportionate costs. There is no force in this appeal which is hereby dismissed with costs.