JUDGMENT- R.J. KOCHAR, J.:---The plaintiffs have prayed for a decree against the defendants as under:--- "(a) that the defendants jointly and severally be ordered and decreed to pay to the plaintiffs a sum of Rs. 2,00,000/- as per the particulars of claim at Exhibit "F" to the plaint, together with interest thereon at the rate of 18% p.a. from the date of filing of the suit till payment or realisation. (b) that the defendants jointly and severally be ordered and decreed to pay to the plaintiffs the costs of the suit." 2. From the averments in the plaint, the suit claim appears to have arisen from a service contract between the plaintiff company and the defendant No. 1, an employee of the plaintiffs under the contract dated 25th June, 1996 and the surety agreement between the plaintiffs and the defendant Nos. 2 and 3, whereby the sureties had ensured that the defendant No. 1 would abide by the agreement failing which the defendant Nos. 2 and 3 would be liable to pay to the plaintiffs an amount of Rs. 2 lakhs as "liquidated damages". It is alleged by the plaintiffs that the defendant No. 1 has committed breach of the service agreement as he had abandoned the employment and had not completed the service for a period of two years after he was confirmed in employment from 1-4-1998. According to the plaintiffs, he had abandoned the employment before completion of the said period of two years, and therefore, the plaintiffs have become entitled to claim liquidated damages from the defendants as per the agreement dated 25th June, 1996, separately entered into between the plaintiffs and the defendant No. 1 and between the plaintiffs and defendant Nos. 2 and 3. 3. On receipt of the writ of summons, defendants Nos. 2 and 3 have entered their appearance. The plaintiffs, thereafter, have taken out summons for judgment against the defendant Nos. 2 and 3 and have prayed for ex parte decree against the defendant No. 1. It appears that as far as the defendant No. 1 is concerned the suit has been decreed. 4. The defendant Nos. 2 and 3 have filed their affidavit in reply to the summons for judgment. The defendants have raised a triable issue as to the maintainability of the suit in the frame of a summary suit. It appears that as far as the defendant No. 1 is concerned the suit has been decreed. 4. The defendant Nos. 2 and 3 have filed their affidavit in reply to the summons for judgment. The defendants have raised a triable issue as to the maintainability of the suit in the frame of a summary suit. Apart from the aforesaid substantial question of law, the defendants have also raised a question as to whether the defendant No. 1 had abandoned the employment or whether he was prevented from entering the company. On this point both the parties will have to adduce evidence to establish that there was no breach of the agreement on the part of the defendant No. 1, who had not abandoned his employment with the plaintiffs, but it was the plaintiffs who did not allow him to enter the premises on and from 14th August, 1999. 5. Shri Vernekar, the learned Counsel for the plaintiffs has neatly summarised his case as set out in the plaint. According to him, the suit claim is based on the written contract between the plaintiffs and the defendant No. 1 and the plaintiffs and the defendant Nos. 2 and 3 as sureties. The learned Advocate has pointed out from the clauses in the agreement that the plaintiffs were entitled to claim the amount of Rs. 2 lakhs from the defendant Nos. 1, 2 and 3 jointly and/or severally, as the defendant No. 1 had committed breach of the service agreement. Shri Vernekar, therefore, prayed for judgment in favour of his clients as the defendants have no defence whatsoever in nature. The last but not the least submission made by the learned Advocate was that no unconditional leave should be granted to the defendant Nos. 2 and 3 and some condition should be imposed upon them. 6. Shri Saraf, the learned Counsel for the defendants has pointed out from the plaint itself and from the agreement dated 25th June, 1996 that the plaintiffs were claiming liquidated damages of Rs. 2 lakhs. According to him, no summary suit would lie for a claim of liquidated damages. 2 and 3 and some condition should be imposed upon them. 6. Shri Saraf, the learned Counsel for the defendants has pointed out from the plaint itself and from the agreement dated 25th June, 1996 that the plaintiffs were claiming liquidated damages of Rs. 2 lakhs. According to him, no summary suit would lie for a claim of liquidated damages. According to him, the plaintiffs will have to prove damages by adducing evidence in the trial, he has also submitted on the factual merits of the case that the defendant No. 1 had not abandoned the employment and had not committed breach of the service agreement but he was prevented from entering the company on 14th August, 1998. Shri Saraf has pointed out that on this point both the parties will have to lead evidence. According to the learned Counsel, if the defendant Nos. 2 and 3 succeed in proving that the defendant No. 1 had not committed breach of the agreement and had not abandoned the employment, neither the defendant No. 1 nor the defendant Nos. 2 and 3 would be liable to pay any amount to the plaintiffs, as in that event, the plaintiffs would not become entitle to claim any amount. Shri Saraf has relied upon the judgment of the Supreme Court reported in the case of (Union of India v. Raman Iron Foundry)1, reported in A.I.R. 1974 S.C. 1265, on the point that though the parties in the agreement might have stipulated an amount as liquidated damages such named amount does not become an amount recoverable from the erring party. The amount named in the agreement as liquidated damages is merely an outside limit and the parties will have to prove the actual damages. According to the learned Counsel, therefore, though the agreement stipulated an amount of Rs. 2 lakhs, it would be only an outer limit and not exact amount to be claimed in the summary suit under Order XXXVII, Rule 2 of the Code of Civil Procedure, 1908. 7. I agree with Shri Saraf. No summary suit is maintainable for claiming liquidated damages. It is well established that in summary proceedings, the suit claim has to be ascertained, admitted and liquidated amount. A claim by way of liquidated damages cannot be called as an admitted, ascertained or liquidated amount. 7. I agree with Shri Saraf. No summary suit is maintainable for claiming liquidated damages. It is well established that in summary proceedings, the suit claim has to be ascertained, admitted and liquidated amount. A claim by way of liquidated damages cannot be called as an admitted, ascertained or liquidated amount. The party claiming damages has to prove the extent of damages and has to establish the amount of damages. The liquidated damages are not in the nature of a liquidated amount or claim as contemplated under Order XXXVII, Rule 2 of the Code of Civil Procedure. It is abundantly clear from the plaint in para 9 and also from the agreement that the plaintiffs are claiming an amount of Rs. 2 lakhs by way of liquidated damages. As held by the Supreme Court, the aforesaid amount of liquidated damages of Rs. 2 lakhs is only an outer limit and not the exact ascertained amount recoverable by the plaintiffs from the defendant Nos. 2 and 3 or even from the defendant No. 1. The plaintiffs have filed the present summary suit admitted to recover an amount of Rs. 2 lakhs by way of liquidated damages which have not been admitted, ascertained or liquidated amount. The plaintiffs will have to adduce evidence to establish the quantum of damages which they would be entitled to claim from the defendants. 8. Further according to me, the facts and conditions stipulated in para 5(a) and (b) of the agreement will require evidence, which read as follows :- 5(a) If the Trainee Commits a breach of any of the covenants contained in Clause 4 hereinbefore written, his/her training/post training employment as the case may be with the company shall stand terminated immediately and the Trainee shall forthwith pay to the company an amount of Rs. 2,00,000/- (Rupees two lakhs only) which the parties hereto expressly agree shall be liquidated damages which the company shall without prejudice to its other rights including rights, under Clause 6 hereinafter written be entitled to receive in the event the Trainee commits a breach of any of the covenants aforesaid and any other amount or amounts which may then be payable to the company by the trainee. 5(b) The trainee agrees to cause two persons acceptable to the company to execute in favour of the company a surety agreement in the form annexed to this agreement whereby the said sureties shall jointly and severally undertake to pay the company the amounts stated in sub-clause 5(a) hereinbefore written if such amounts become payable and if the trainee fails to make payment promptly to the company. If the trainee fails to provide such a surety agreement latest by the 28th day July, 1997, or within such further extension as the company may grant, then in that event the company shall have the option either to withdraw the offer of training or, as the case may be, terminate the trainee's training immediately without prior notice and without any compensation to the trainee." 9. It will be useful and relevant for our purpose to reproduce the law laid down by the Supreme Court approving judgment of our High Court, per Chagla, C.J. The relevant portion is in para 9:--- "Having discussed the proper interpretation of Clause 18, we may now turn to consider what is the real nature of the claim for recovery of which the appellant is seeking to appropriate the sums due to the respondent under other contracts. The claim is admittedly one for damages for breach of the contract between the parties. Now, it is true that the damage which are claimed are liquidated damages under Clause 14, but so far as the law in India is concerned, there is no qualitative difference in the nature of the claim whether it be for liquidated damages or for unliquidated damages. Section 74 of the Indian Contract Act eliminates the somewhat elaborate refinements 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. 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 principles applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty, and according to this principle, even if there is a stipulation by way of liquidated damages, a party complaining of breach of contract can recover only reasonable compensation for the injury sustained by him, the stipulated amount being merely the outside limit. It, therefore, makes no difference in the present case that the claim of the appellant is for liquidated damages. It stands on the same footing as a claim for unliquidated damages. Now the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not so instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not an actionable claim and this position is made amply clear by the amendment in section 6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred. This has always been the law in England and as far back as 1858 we find it stated by Wightman, J., in (Jones v. Thompson)2, 1858(27) L.J.Q.B. 234, "ex parte Charles and several other cases decide that the amount of a verdict in an action for unliquidated damages is not a debt till judgment has been signed". It was held in this case that a claim for damages does not become a debt even after the jury has returned a verdict in favour of the plaintiff till the judgment is actually delivered. It was held in this case that a claim for damages does not become a debt even after the jury has returned a verdict in favour of the plaintiff till the judgment is actually delivered. So also in (O'Driscoll v. Mancherster Insurance Committee)3, 1915(3) K.B. 499. Swinfen Eady, L.J. said in reference to cases where the claim was for unliquidated damages:--- ".......... in such cases there is no debt at all until the verdict of the jury is pronounced assessing the damages and judgment is given." The same view has also been taken consistently by different High Courts in India. We may namely a few of the decisions, namely, (Jabed Sheikh v. Taher Mallik)4, 45 Cal.W.N. 519 (S. Milkha Singh v. M/s. N.K. Gopala Krishna Mudaliar)5, A.I.R. 1956 Punj. 174 and (Iron and Hardware (India) Co. v. Firm Shamlal and Brothers)6, A.I.R. 1954 Bom. 423, Chagla, C.J., in the last mentioned case, stated the law in these terms: "In my opinion it would not be true to say that a person who commits a breach of the contract incurs any pecuniary liability, nor would it be true to say that the other party to the contract who complains of the breach has any amount due to him from the other party." “As already stated, the only right which he has is the right to go to a Court of law and recover damages. Now damages are the compensation which a Court of law gives to a party for the injury which he has sustained. But, and this is more important to note, he does not get damages or compensation by reason of any existing obligation on the part of the person who has committed the breach. He gets compensation as a result of the fiat of the Court. Therefore, no pecuniary liability arises till the Court has determined that the party complaining of the breach is entitled to damages. Therefore, when damages are assessed, it would not be true to say that what the Court is doing is ascertaining a pecuniary liability which already existed. The Court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till that determination there is no liability at all upon the defendant. " This statement in our view represents the correct legal position and has our full concurrence. The Court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till that determination there is no liability at all upon the defendant. " This statement in our view represents the correct legal position and has our full concurrence. A claim for damages for breach of contract is, therefore, not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under Clause 18, to recover the amount of such claim by appropriating other sums due to the contractor. On this view, it is not necessary for us to consider the other contention raised on behalf of the respondent, namely, that on a proper construction of Clause 18, the purchaser is entitled to exercise the right conferred under that clause only where the claim for payment of a sum of money is either admitted by the contractor, or in case of dispute, adjudicated upon by a Court or other adjudicatory authority. We must, therefore, hold that the appellant had no right or authority under Clause 18 to appropriate the amounts of other pending bills of the respondents in or towards satisfaction of its claim for damages against the respondent and the learned Judge was justified in issuing an interim injunction restraining the appellant from doing so." In the aforesaid circumstances, in my opinion, the defendants have raised a substantial point of defence in law as well as on the facts. Both the parties will have to go for full fledged trial. The defendant Nos. 2 and 3 are, therefore, entitled to get unconditional leave to defend the suit. The defendants are, therefore, granted unconditional leave to defend the suit. Defendants to file written statement within twelve weeks from today. Discovery and inspection to be completed within four weeks thereafter. Affidavit of documents to be filed within a period of four weeks thereafter. Suit is transferred to commercial cause list. Summons for judgment is dismissed accordingly. ------