JUDGMENT : Manjula Chellur, J. The appellant was the plaintiff before the learned Single Judge who is before us aggrieved by the judgment and decree dated 9.10.2012 refusing grant of any of the reliefs to the plaintiff. In brief, the facts that led to the present appeal are as under:- In response to the tender notice at Exhibit-A' issued by defendant, West Bengal State Electricity Board (for short hereinafter referred to as Board), the appellant also submitted his tender for supply of aluminum conductors. General terms and conditions came to be struck between the parties. From November, 1987, supply of aluminum conductors was commenced. According to plaintiff/appellant, it was made clear to the defendant that against orders that were placed by 30.11.1987, the supplies can be made at the rates quoted in their letter dated 11.9.1987. It is further contended that from time to time it was informed to the defendant by the appellant-plaintiff that if orders were made within a particular date then alone the supply of material will be done as indicated in their letters. 2. It is not in dispute that subsequently material was supplied between 9th March, 1988 to 28th March, 1988, at different places as per the instruction of the defendant. Further, plaintiff submitted bills for Rs. 24,42,925.60 wherein a claim for Rs. 1,02,859.57 to its increase of the cost was also indicated. Alleging penalty for delayed supply a sum of Rs. 10951.04 was deducted and a sum of Rs. 24,31,974.40 was paid to the appellant. At this stage, by letter dated 21.8.1990 defendant terminated the contract dated 31.01.1988 forfeiting the security deposit alleging penalty for delayed delivery of goods and also non-delivery of goods. 3. According to plaintiff, he had to stop delivery of the goods under order dated 14.3.1988 and as on the date of filing of the suit he contends that a sum of Rs. 9,64,136.29 was due and payable by the defendant to the plaintiff with an interest at the rate of 23.75% per annum in accordance with the special Act as applicable. Totally Rs. 29,89,511.77 was claimed as due and payable inclusive of interest upto 31.7.1993. 4. In response to the claim, respondent-defendant denying all the disputed material averments by the plaintiff filed written statement wherein they took defence that by letter dated 10.12.1987 the plaintiff expressed his willingness to supply the subject material. Totally Rs. 29,89,511.77 was claimed as due and payable inclusive of interest upto 31.7.1993. 4. In response to the claim, respondent-defendant denying all the disputed material averments by the plaintiff filed written statement wherein they took defence that by letter dated 10.12.1987 the plaintiff expressed his willingness to supply the subject material. The defendant clearly informed by letter dated 10.12.1987 that only upon completion of delivery of goods covered under the order dated 27.11.1987 within December 19,1987 further order for materials would be placed by March, 1988. Defendant further contended that they never assured increase of price of the material and, on the other hand, according to them, plaintiff offered to supply material as per the agreement. According to them, the delivery of goods was not completed within the time stipulated. Further, defendant has paid all the amounts lawfully payable for the price of the materials supplied under the said order. A sum of Rs. 2,54,704.05 was deducted in accordance with the terms and conditions. Similarly, another sum of Rs. 25,757.18 was deducted for its delayed supply of the material. As a matter of fact, the order dated 14.3.1988 indicates price variation clause to which the plaintiff agreed to and a part of the goods was supplied as per this order. According to defendant they rightly terminated the order dated 8.2.1988 and 14.3.1988 for the failure of the plaintiff to comply with the terms and conditions. Therefore, plaintiff is not at all entitled to all the amounts claimed much less the interest claimed. On the basis of the above pleadings following 8 issues were framed which read as under:- 1. Was the plaintiff entitled to increase in price of the subject material as pleaded in the plaint? 2. Was the defendant entitled to deduct any sums on account of penalty from the bills payable to the plaintiff? 3. Was the defendant entitled to forfeit the security deposit to levy penalty for late delivery or non-delivery of the goods as alleged in the written statement? 4. Is the plaintiff entitled to a decree of Rs. 29,89,511.77 p. as claimed in the plaint? 5. Is the plaintiff entitled to interest @ 23.75% as claimed or at any other rate? 6. Is the plaintiff entitled to a decree for declaration for adjudging the Bank guarantee dated 28th March, 1988 as void or to deliver up and cancellation thereof as claimed? 7. 29,89,511.77 p. as claimed in the plaint? 5. Is the plaintiff entitled to interest @ 23.75% as claimed or at any other rate? 6. Is the plaintiff entitled to a decree for declaration for adjudging the Bank guarantee dated 28th March, 1988 as void or to deliver up and cancellation thereof as claimed? 7. Is the suit barred by laws of limitation? 8. To what relief if any is the plaintiff entitled? 5. Issue No.7 with regard to limitation was held after a detailed discussion against the plaintiff opining that the suit of the plaintiff is barred by limitation. 6. So far as Issue No.1 with regard to escalation of price of the material it was held against the plaintiff. 7. Issue No.2 and 3 regarding penalty and the forfeiture of security deposit are in favour of defendant holding against the plaintiff. 8. Issue No.4 and 5 also went against the plaintiff. 9. Issue No.6 pertaining to the bank guarantee, no opinion was expressed as the bank guarantee had lapsed. 10. Ultimately, the entire suit claim was rejected and the suit came to be dismissed by the impugned judgment. The appellant-plaintiff before this Court is contending that the learned Judge was not justified in dismissing the entire suit. 11. According to learned Senior Counsel, Mr. Dhrubo Ghosh arguing for the appellant that Section 2(c), 51, 67, 70 and Section 74 of the Contract Act are relevant and there was no justification for imposing penalty. He relied upon several judgments which would be referred to later. 12. According to learned Advocate for the defendant, any amount of evidence will not help the appellant-plaintiff in the absence of any pleading. According to them, escalation of price was very much discussed and it was made clear to the appellant that as long as the contract remains, the goods had to be supplied at the rate agreed initially. But according to Counsel for the appellant it was made clear from the beginning that if the order of supply of goods was made within a particular date, the quote price would remain and the escalation price has to be after a particular period. 13. Both Counsel place reliance on the ruling in ONGC case and several other cases which would be referred to hereinafter. 14. Learned Counsel for both the parties argued at length on the doctrine of election i.e. principles of approbation and reprobation. 13. Both Counsel place reliance on the ruling in ONGC case and several other cases which would be referred to hereinafter. 14. Learned Counsel for both the parties argued at length on the doctrine of election i.e. principles of approbation and reprobation. 15. Mr. Dhrubo Ghosh, learned Senior Counsel places reliance on (1998) 6 SCC 507 [P.R. Deshpande v. Maruti Balaram Haibatti] on the principle of equitable doctrine of election or approbate and reprobate. Paragraph 8 is relevant which reads as under:- 8. The doctrine of election is based on the rule of estoppel - the principle that one cannot approbate and reprobate inheres in it. The doctrine of estoppel by election is one of the species of estoppel in pais (or equitable estoppel) which is a rule in equity. By that rule, a person may be precluded by his actions or conduct or silence when it is his duty to speak, from asserting a right which he otherwise would have had. (vide Black's Law Dictionary, 5th Edn.) 16. Learned Counsel for the respondent places reliance on AIR 1993 SC 352 [R.N. Gosain v. Yashpal Dhir] on the principle of doctrine of election of approbate or reprobate. Paragraph 10 is relevant which reads as under:- 10. Law does not permit a person to both approbate and reprobate. This principle is based on the doctrine of election which postulates that no party can accept and reject the same instrument and that "a person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage". (See: Verschures Creameries Ltd. v. Hull and Netherlands Steamship Co. Ltd., (1921) 2 KB 608, at p.612, Scrutton, L.J.). According to Halsbury's Laws of England, 4th Edn., Vol. 16, "after taking an advantage under an order (for example for the payment of costs) a party may be precluded from saying that it is invalid and asking to set it aside". (para 1508) 17. The above argument was with reference to issue 1 framed by Trial Judge relating to escalation in price, in other words, whether the plaintiff was entitled to seek increase in price of the subject material as contended by him. (para 1508) 17. The above argument was with reference to issue 1 framed by Trial Judge relating to escalation in price, in other words, whether the plaintiff was entitled to seek increase in price of the subject material as contended by him. According to the appellant-plaintiff, by virtue of first supply order placed in November, 1987 for 100 KMs of ACC Ant and 150 KMs of ACSR Weasel was placed at the agreed rate. The same was supplied by the plaintiff and later received the payment. According to the plaintiff price of the aluminum was increased by order of the Government dated on 19.1.1987, therefore, plaintiff actually demanded increased cost incurred by him on production of the material. It is not in dispute, on 30.1.1988 second purchase order was placed for supply of 1500 KMs ANT conductors to be delivered within June, 1988. According to plaintiff-appellant the price offered in the order dated 30.1.1988 did not provide enhanced rate for price of aluminum, therefore, he did not accept the offer. On 8.2.1988 third purchase order of 900 KMs ACSR RABBIT conductor was placed and goods were to be delivered within April, 1988. Apparently, plaintiff admits that an oral assurance was given by the defendant in the month of February, 1988 that they will give effect to the price increase and on such verbal assurance, plaintiff supplied 455.755 KMs of AAC on weight to weight increase basis. This supply of 455.755KMs of AAC was made between 19th March, 1988 to 23 March, 1988 at different places as per the instruction of the respondent-defendant. Prior to this an inspection came to be made of the goods on 14.3.1988 by the defendant. According to the plaintiff, letters dated 14.2.1988 and 13.2.1988 were written informing that the supply was made subject to price increase. Plaintiff submitted a bill for Rs. 24,42,925.60 along with a claim for Rs. 1,02,859.57 towards increased cost and they paid Rs. 24,31,974.40 from time to time, after due date. Defendant deducted Rs. 10951.40 alleging that it was penalty for delayed supply. 18. According to respondent-defendant, plaintiff having made supply of the material as per purchase order in terms thereof cannot approbate and reprobate, therefore, the demand for Rs. 1,02,859.57 towards increase price has no basis whatsoever. 24,31,974.40 from time to time, after due date. Defendant deducted Rs. 10951.40 alleging that it was penalty for delayed supply. 18. According to respondent-defendant, plaintiff having made supply of the material as per purchase order in terms thereof cannot approbate and reprobate, therefore, the demand for Rs. 1,02,859.57 towards increase price has no basis whatsoever. Further, it is not in dispute, said amount was demanded not by raising any additional bill but by mentioning at the footnote of Exhibit-J1 and another price escalation at Annexure-C to the plaint but unfortunately, the same is not exhibited. 19. The relevant documents are letter dated 7.11.1987, another letter dated 27.11.1987. As per letter dated 7.11.1987 they referred to memo of the respondent dated 23.10.1987 and also discussions held at the time of negotiation meeting. The plaintiff-appellant confirms the same, i.e., they accepted payment term, risk purchase clause, penalty clause and price variation clause. The letter dated 27.11.1987 is addressed by respondent to plaintiff placing initial order as stated above. A letter dated 19.1.1988 is addressed to respondent by the plaintiff wherein they have expressed inability to supply the material at the rate as agreed earlier as the material was not available and all supplies to be received in January will be at a higher rate, therefore, they must allow the price variation increase with effect from 19.1.1988. This letter is a request letter to increase the price contending that it is nothing but actual increase in the cost due to various causes to be reimbursed to the plaintiff. Apparently, there was no acceptance of the letter of request made by the plaintiff. On 30.1.1988 another purchase order was placed by respondent and the goods were supplied. According to plaintiff it was on the oral assurance of defendant agreeing to pay the enhanced price. Plaintiff relied upon two letters dated 4.2.1988 and 13.2.1988. Letter dated 4.2.1988 again refers to non-receipt of aluminum from the suppliers before 19.1.1988 and in respect of aluminum after 19.1.1988 by charging higher price. Therefore, they narrate problems of supply and request that price variation has to be allowed in the light of their letter dated 19.1.1988. On 8.2.1988 letter is addressed to plaintiff asking for supply and delivery of material in this letter. There is no reference to any of the letters of plaintiff, in other words there is no acknowledgment so far as the demand for price variation. On 8.2.1988 letter is addressed to plaintiff asking for supply and delivery of material in this letter. There is no reference to any of the letters of plaintiff, in other words there is no acknowledgment so far as the demand for price variation. Another letter dated 13.2.1988 is also relied. However even in the letter dated 13.2.1988 addressed by the plaintiff to defendant except reflecting the hope of the plaintiff that the defendant may consider the request of increased price, no reference is made with regard to oral assurance said to have been made by the defendant so far as increase in the price. On the other hand, no other material is placed to show that in response to the demand for price variation on weight to weight basis, so far as all supplies after 19.1.1988 no assurance of any nature is forthcoming. On the other hand, none of the documents or the evidence on record indicate that defendant accepted the price escalation either verbally or by written correspondence. On the other hand, the letter dated 7.11.1987 clearly indicate that all the terms put forth by defendant were accepted by plaintiff as per the tender documents. Except the contention of the plaintiff that there was verbal assurance no material is forthcoming to accept the version of plaintiff-appellant that defendant agreed to the demand of the plaintiff to allow weight to weight price increase for the supply of material in the month of March, 1988. However, on 29.4.1988 defendant categorically refused to allow such price increase while replying the letter dated 13.2.1988 addressed by plaintiff. 20. Having accepted all terms of tender including price of the material, the plaintiff could not have made such demand. However, no clinching evidence is forthcoming to accept stand of the appellant. Therefore, learned Judge was justified that plaintiff was not able to establish his stand so far as weight to weight price increase said to have been assured by the defendant. We do not find any good reason to interfere with said finding of the learned Single Judge. 21. Coming to the arguments and discussion on Issue Nos.2 & 3 whether respondent/defendant was entitled to deduct any sum on account of penalty from bills payable to the plaintiff and forfeiting the security deposit for delayed delivery or non-delivery of goods. 22. We do not find any good reason to interfere with said finding of the learned Single Judge. 21. Coming to the arguments and discussion on Issue Nos.2 & 3 whether respondent/defendant was entitled to deduct any sum on account of penalty from bills payable to the plaintiff and forfeiting the security deposit for delayed delivery or non-delivery of goods. 22. So far as terms and conditions regarding penalty and forfeiture of security deposit clauses, the letter dated 07.11.1987 indicate, the appellant/plaintiff had accepted all the clauses especially the condition by way of penalty and for forfeiture of security deposit. This is not in dispute. It also not in dispute that the conditions by way of penalty and forfeiture of security deposit in the event of breach are in the nature of pre-determined compensation. Who is responsible for such breach of conditions of the contract and by virtue of said breach whether the learned Single Judge was justified in holding the issues in favour of defendant is to be seen. 23. The contention of learned Senior Counsel, Mr. Dhrubo Ghosh is that Sections 2(c), 51, 67 & 70 of the Contract Act are relevant apart from Sections 73 & 74. We have gone through the same. It is contended on behalf of the plaintiff that supply was stopped for non-payment of amounts. According to defendant, penalty was imposed for non-supply of goods. Admitted fact is, from October, 1988 supply was stopped. According to plaintiff, defendant has to prove that some loss has occurred in order to retain amounts from the bills payable to the plaintiff supplier. It is further contended that no witness was examined on behalf of the respondents. The evidence of P.W.1 would clearly indicate the terms and conditions were accepted. Further such terms and conditions were always referred to in all the purchase orders is the stand of defendants. The total quantity to be supplied was 1694.01 MT in respect of three to four purchase orders. Suggestions in this regard were put to witness who accepted the same. 24. According to plaintiff, it is on account of not placing orders for supply of goods within December, 1987 so as to allow the plaintiff to supply them immediately, the entire problem commenced, but according to defendant, plaintiff failed to supply substantive parts of goods and virtually stopped to supply the goods taking the plea of weight to weight increase. 24. According to plaintiff, it is on account of not placing orders for supply of goods within December, 1987 so as to allow the plaintiff to supply them immediately, the entire problem commenced, but according to defendant, plaintiff failed to supply substantive parts of goods and virtually stopped to supply the goods taking the plea of weight to weight increase. It is not the case of plaintiff that defendant could not have retained 5% of total value but it is argued that defendant was not entitled to retain said amount on account of failure of defendant in not placing the orders in time and further not making payments. The predetermined compensation is ascertainable from the same contract, that is 2.5% of the value of undelivered goods and 2.5% of the total amount of outstanding payments. 25. As we were discussing with regard to escalation of price, what we notice is so far as orders pertaining to 1987 for a small quantity, there was no dispute. The dispute arose with regard to supplies made subsequent to the purchase order dated 30.1.1988. This 30.1.1988 purchase order is for supply of 1500 KMS ANT contractors. It contains various terms and conditions including the rates, clauses pertaining to security deposit, penalty for delay in completion, etc. It further says they were also entitled to purchase goods from elsewhere, if delivery of goods or dispatch of consignment is delayed at the instance of plaintiff. It also says if the defendants were to sustain any loss or damage on account of purchasing the material from elsewhere, the plaintiff had to face not only the risk of cancellation of the contract but also liable for any loss or damage caused to them. It is also not in dispute that only part of the purchase order was supplied that is 455.5 km in the month of March. Before supplying, above two letters were also addressed by the plaintiff requesting to allow price variance that is enhancement of price due to the reasons mentioned in the letters. However, no positive response was made on behalf of the defendant and according to plaintiff, it was verbal assurance. It is well-settled that if conditions of contract were reduced to writing, modification of those terms and conditions could be made by oral agreement. However, no positive response was made on behalf of the defendant and according to plaintiff, it was verbal assurance. It is well-settled that if conditions of contract were reduced to writing, modification of those terms and conditions could be made by oral agreement. Is it open to the plaintiff without supplying entire material as per the purchase order to contend that he did not supply the rest of the goods for non-payment of amount? As per this document dated 30.1.1988, the delivery of materials should be as under:- For ANT Conductor commence within one month and should be completed 500 KMS. Within March, 88 and balance 1100 KMS. Commence within April, 88 and completed @ 500 KMS per month thereafter. 26. Apparently, the delivery of goods/material did not happen as stated above. 27. So far as payment it says at a separate clause which read as under:- Payment: 90% value of the materials along with taxes and duties will be paid within 15 days by paying officer against presentation of bills supported by receipted challans signed by an Officer of the Board not below the rank of ASO under bill rediscounting scheme of IDBI. Particulars of which may be available from DY. F.A. & CAO, (F&P), WBSEB, Bidyut Bhawan, Salt Lake, Calcutta-91 against written requests or personal contact as the case may be and balance 10% valuer of materials will be paid by cheque within 30 days of submissions of bills alongwith SRV. 28. In case of non availability of the IDBI scheme our payment terms would be as under: 90% payment along with taxes and duties would be paid by cheque against bills supported by receipted challans signed by an officer not below the rank payment will be made within 30 days of submission of bills alongwith SRV. 29. As we see from records, the dispute between the parties arose because of the demand of enhancement in the price on the part of the plaintiff. The other purchase orders are 08.3.1988 and 14.3.1988. According to them, the delay in supply of goods was on account of delay in approving the goods by the defendant and so far as purchase order 14.3.1988 because of flood in Manipur they were not able to supply in time. The other purchase orders are 08.3.1988 and 14.3.1988. According to them, the delay in supply of goods was on account of delay in approving the goods by the defendant and so far as purchase order 14.3.1988 because of flood in Manipur they were not able to supply in time. According to appellant based on the assurance of price increase by the defendant, plaintiff offered materials though there was no written agreement for increase of the price. What we notice from the correspondence is, the plaintiff/appellant kept on demanding increase of cost on account of increase in the price and also gave reasons for non-supply of goods in time. Ultimately, only from May 1988, they started complaining since March 1988 they have not received their amounts. If the plaintiff wanted the price escalation and was waiting for an assurance from the defendant which obviously was not given as evident from purchase orders and other material, the plaintiff ought to have made his stand clear. But on the other hand, plaintiff delayed the supply of material which ultimately compelled the defendant to terminate the contract. If plaintiff could supply the goods as and when purchase orders were placed in terms of agreement and if the fault was with the defendant, it is one thing. But, in this case while asking escalation of price simultaneously they were not able to supply the goods in time. The delayed payment was only an excuse. The material on record especially the evidence of the witness by name Mr. Jha examined on behalf of the plaintiff clearly indicate that the deduction was on account of breach of terms of contract. 30. On going through the evidence, he submits that two purchase orders were issued on 30.1.1988, third purchase order on 08.2.1988 and fourth purchase order on 14.3.1988. Relevant questions and answer are question nos.174, 175 & 176. These answers clearly indicate that the witness admitted that security money is liable to be forfeited in case of non-completion or failure to complete the order as per the clause penalty' for delay in completion of supply. He says as per the terms of document in question the defendant was entitled to impose penalty at the rate of half percent (1/2%) of the price valued up to maximum 2-1/2. Though delay in supply is admitted he says it was because of the respondent-Board had not updated the payments. He says as per the terms of document in question the defendant was entitled to impose penalty at the rate of half percent (1/2%) of the price valued up to maximum 2-1/2. Though delay in supply is admitted he says it was because of the respondent-Board had not updated the payments. But he also admits that there was delay in supply of goods even in respect of other purchase orders. 31. In the light of above admissions in the answers of witness for appellant/plaintiff, refusing to supply the goods, till payments are made, we fail to understand how the plaintiff could avoid the forfeiture and penalty clause. 32. On this issue, plaintiff and respondents have placed reliance on several cases and so far as the appellants are concerned, they are as under:- AIR 1963 SC 1405 [Fateh Chand v. Balkishan Das] This was a case again with reference to Section 74 of Indian Contract Act. The subject matter was deed of a lease which was renewed from time to time. It granted lease-hold rights for 90 years. The lessee sold the lease-hold rights in the land together with the building to 3rd party. The terms of agreement was, for breach of contract, defendant was entitled to retain Rs. 1150/- being compensation for loss suffered by him. This was to be out of Rs. 25,000/- held under the sale agreement. In that case, Their Lordship's opined out of Rs. 25,000/- only Rs. 1,000/- received by him as earnest money and was entitled to compensation at the rate of Rs. 140/- per month and interest earned on that sum at 6% as it accrued from month to month. While discussing how the damages have to be measured, at Paragraphs 10, 15 & 16, it is mentioned as under:- 10. The claim made by the plaintiff to forfeit sum of Rs. 25,000/- received by him from the defendant must next be considered. This sum of Rs. 25,000/- consists of two items - Rs. 1,000/- received on March 21, 1949 and referred to in the agreement as earnest money' and Rs. 24,000/- agreed to be paid by the defendant to plaintiff as "out of the sale price" against delivery of possession and paid by the defendant to the plaintiff on March 25, 1949 when possession of the land and building was delivered to the defendant. The plaintiff submitted that the entire amount of Rs. 24,000/- agreed to be paid by the defendant to plaintiff as "out of the sale price" against delivery of possession and paid by the defendant to the plaintiff on March 25, 1949 when possession of the land and building was delivered to the defendant. The plaintiff submitted that the entire amount of Rs. 25,000/- was to be regarded as earnest money, and he claimed to forfeit it on the defendant's failure to carry out his part of the contract. This part of the case of the plaintiff was denied by the defendant. 15. Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty. We are in the present case not concerned to decide whether a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by s. 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 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 consequence 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. 16. 16. Before turning to the question about the compensation which may be awarded to the plaintiff, it is necessary to consider whether s. 74 applies to stipulations for forfeiture of amounts deposited or paid under the contract. It was urged that the section deals in terms with the right to receive from the party who has broken the contract reasonable compensation and not the right to forfeit what has already been received by the party aggrieved. There is however no warrant for the assumption made by 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 where upon 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. Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon courts by s. 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 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. We may briefly refer to certain illustrative cases decided by the High Courts in India which have expressed a different view. 33. They further opined that the Court has to adjudge in every case reasonable compensation for which plaintiff is entitled. If evident, on breach of contract, such compensation has to be ascertained having regard to the conditions existing on the date of the breach. 34. AIR 1970 SCC 1955 [Maula Bux v. Union of India (UOI)] is also relied. In this case, the facts involved are it was a contract of supply of potatoes wherein earnest money deposit was also made. The agreement was, if any default is committed in supplying potatoes not only the contract could be rescinded but earnest money deposit could be forfeited. In this case, the facts involved are it was a contract of supply of potatoes wherein earnest money deposit was also made. The agreement was, if any default is committed in supplying potatoes not only the contract could be rescinded but earnest money deposit could be forfeited. Trial Court held that defendant was justified in rescinding contract but amount cannot be forfeited. Appellate Court modified the decree by reducing amount of money to be returned to the plaintiff. High Court observed that earnest deposit was a guarantee for specific performance of contract. Therefore, defendant/respondent was entitled to claim the same. When the matter came up for consideration, Supreme Court observed that amount of earnest deposit was reasonable but Section 74 of the Contract Act is not applicable as there was no loss suffered by respondent due to non-performance of contract by plaintiff. Defendant has to procure material elsewhere at a higher price in the present case. 35. In Raman Iron Foundry Case reported in (1974) 2 SCC 231 , Apex Court while considering Clause 18 of the Contract between the parties opined that it applied where the purchaser has a claim for a sum presently due and payable by the contractor. Later decision in H.M. Kamaluddin Ansari overruling the decision in oil foundry case opined that wider powers vested with the Union of India to recover the amount claimed by appropriating any sum then due or which in time become due to the contractors under other contracts. 36. Above paragraphs clearly indicate depending upon the terms of agreement, if the terms are clear and unambiguous stipulating pre-estimated damages because of delay in supplying goods, same can be considered, but liquidated damages cannot be by way of penalty. 37. So far as (2003) 6 SCC 705 both the appellants and respondents' Counsel rely upon i.e. Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. The respondent company was engaged in the business of supplying of equipment for offshore oil exploration and maintenance. Casing pipes of specified sizes were needed for the said maintenance. Respondent company agreed to supply casing pipes and the same was accepted. Supply was to be made on or before 14.11.1996. Casing pipes of specified sizes were needed for the said maintenance. Respondent company agreed to supply casing pipes and the same was accepted. Supply was to be made on or before 14.11.1996. One of the terms and conditions was, in case of failure to deliver the same or any instalment thereof within scheduled time, the appellant would be entitled to recover from the respondent as liquidated damages (agreed) and not by way of penalty, equal to 1% of the contract without prejudice to any other right or remedy. It was further agreed that such liquidated damages could be recovered from the payment of the cost of material supplied by the respondent. There was 60 days delay on the part of the appellant making payments and it was also a fact that respondent could not supply the requisite materials to the respondent as it could not get the supply of raw material in time on account of general strike of steel mill workers during September and October 1996. The respondent sought extension of time for executing the order. The appellant granted time with a specific statement that amount equivalent to liquidated damages for delay in supply of pipes would be recovered. Apparently, certain amount was deducted from the cost of goods supplied and this became a dispute before the Arbitral Tribunal. The matter went up to Apex Court wherein Section 74 of the Contract Act was also discussed and Their Lordships held that compensation/damages could be awarded only if the loss is suffered because of the breach of contract. 38. Paragraphs 46, 52 & 64 read as under:- 46. From the aforesaid sections, it can be held that when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss which naturally arises in the usual course of things from such breach. These sections further contemplate that if parties knew when they made the contract that a particular loss is likely to result from such breach, they can agree for payment of such compensation. In such a case, there may not be any necessity of leading evidence for proving damages, unless the court arrives at the conclusion that no loss is likely to occur because of such breach. In such a case, there may not be any necessity of leading evidence for proving damages, unless the court arrives at the conclusion that no loss is likely to occur because of such breach. Further, in case where the court arrives at the conclusion that the term contemplating damages is by way of penalty, the court may grant reasonable compensation not exceeding the amount so named in the contract on proof of damages. However, when the terms of the contract are clear and unambiguous then its meaning is to be gathered only from the words used therein. In a case where agreement is executed by experts in the field, it would be difficult to hold that the intention of the parties was different from the language used therein. In such a case, it is for the party who contends that stipulated amount is not reasonable compensation, to prove the same. 52. Firstly, it is to be stated that in the aforesaid case the Court has not referred to the earlier decision rendered by the five-Judge Bench in Fateh Chand case or the decision rendered by the three-Judge Bench in Maula Bux case. Further, in H.M. Kamaluddin Ansari and Co. v. Union of India a three-Judge Bench of this Court has overruled the decision in Raman Iron Foundry case and the Court while interpreting similar term of the contract observed that it gives wider power to the Union of India to recover the amount claimed by appropriating any sum then due or which at any time may become due to the contractors under other contracts and the Court observed that clause 18 of the standard contract confers ample powers on the Union of India to withhold the amount and no injunction order could be passed restraining the Union of India from withholding the amount. 64. It is apparent from the aforesaid reasoning recorded by the Arbitral Tribunal that it failed to consider Sections 73 and 74 of the Indian Contract Act and the ratio laid down in Fateh Chand case wherein it is specifically held that jurisdiction of the court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; and compensation has to be reasonable. Under Section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it. This section is to be read with Section 74, which deals with penalty stipulated in the contract, inter alia (relevant for the present case) provides that 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, the party complaining of breach is entitled, whether or not actual 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. Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. Therefore, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him. Burden is on the other party to lead evidence for proving that no loss is likely to occur by such breach. Take for illustration: if the parties have agreed to purchase cotton bales and the same were only to be kept as a stock-in-trade. Such bales are not delivered on the due date and thereafter the bales are delivered beyond the stipulated time, hence there is breach of the contract. The question which would arise for consideration is - whether by such breach the party has suffered any loss. If the price of cotton bales fluctuated during that time, loss or gain could easily be proved. But if cotton bales are to be purchased for manufacturing yarn, consideration would be different. 39. The question which would arise for consideration is - whether by such breach the party has suffered any loss. If the price of cotton bales fluctuated during that time, loss or gain could easily be proved. But if cotton bales are to be purchased for manufacturing yarn, consideration would be different. 39. From the above decisions, it is clear that the aggrieved parties have a right 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. In other words, proof of actual loss or damage is dispensed with. In the present case, for breach of contract on the part of the supplier the condition by way of penalty and for forfeiture of security deposit are in the nature of pre-determined compensation. It amounts to Rs. 8.40 lacs which is just and proper. Having regard to the admitted position of the plaintiff in committing default of supplying the material in respect of three purchase orders, the admitted loss is Rs. 21,70,026.80 (i.e. Rs. 1,218 per MT). The amount deducted is pre-estimated damages as per the terms of contract and not actual damages by way of penalty and forfeiture. The amount being ascertainable or predetermined, the deductions made by the respondents falls within the ambit of reasonable deductions. Having regard to the law laid down by the Apex Court applying the said principles to the facts of the present case, we are of the opinion these two issues, Issue Nos.2 & 3 were rightly answered against the appellants by the learned Single Judge. 40. Then coming to the issue on the question of limitation, Section 18 of Limitation Act of 1963 is relevant. According to appellant, the letter dated 21.8.1990 is nothing but an acknowledgment wherein the defendant had acknowledged jural relationship with the appellant, in other words, defendant acknowledged subsisting relationship of buyer and seller as the security deposit amount was forfeited by termination only on 21.8.1990 which automatically extends period of limitation i.e. occurrence of appropriation of money of the plaintiff by virtue of Article 14 and 15 of the Act. Reliance is placed on several decisions which would be referred to later. 41. Learned Counsel Mr. Sabyasachi Chowdhury arguing for the defendant strenuously argued that the relationship between the parties was only seller and purchaser. Reliance is placed on several decisions which would be referred to later. 41. Learned Counsel Mr. Sabyasachi Chowdhury arguing for the defendant strenuously argued that the relationship between the parties was only seller and purchaser. According to him, the goods in question are received by the defendant way back in the year 1988, therefore, the claim of the plaintiff is beyond the period of limitation. He further contends, none of the words used in the letter dated 21.8.1990 converts the relationship of buyer and seller to that of creditor and debtor. He also placed reliance on AIR 1967 SC 935 [Tilak Ram & Ors. v. Nathu & Ors.] with regard to Section 19 of earlier Act (equivalent to Section 18 of present Act) Limitation Act how acknowledgment of liability could be inferred. In this case, Their Lordships opined that mere statement expressing jural relationship between the parties would not constitute acknowledgment. It must show that it was made with an intention to admit such jural relationship. 42. Learned Counsel for appellant places reliance on the following decisions:- (2006) 4 SCC 484 [Prabhakaran & Ors. v. M. Azhagiri Pillai (Dead) By Lrs. & Ors.] This is with reference to Limitation Act where Section 18 and Article 61 were subject of discussion. In this case Section 18 is relied upon where fresh limitation period accrues to the party on acknowledgment of right or liability. The question is, when such fresh limitation accrues, who has to make acknowledgment. The subject matter was a mortgage in respect of a property. It was a redemption suit. The discussion before Their Lordships was how two cases of acknowledgment are distinguishable from each other. They categorized them into two parts. One is with reference to acknowledgment by direct admission by mortgagee of liability to deliver back possession to the mortgagor or right of redemption of mortgagor and the second one is a case of acknowledgment to be implied from admission of a jural relationship. It was held in the above case that where the mortgagee, by his statement, admits the existence of mortgage or his rights under the mortgage, he admits all legal incidents of mortgage including the corresponding rights and obligations of the mortgagor. It was held in the above case that where the mortgagee, by his statement, admits the existence of mortgage or his rights under the mortgage, he admits all legal incidents of mortgage including the corresponding rights and obligations of the mortgagor. Their Lordships further opined that reference or description of jural relationship would not be enough to have fresh period of limitation but the acknowledgment must be with an intention to admit the jural relationship. Over and above, a mere reference or description of the jural relationship is not enough and the same must be evident from the statement in question, amounting to acknowledgment within the meaning of Section 18. The relevant paragraphs are 22 & 24 which read as under:- 22. It is contended by the counsel for the respondents that the statement by the mortgagee in the deed of assignment, that the assignee will be entitled to receive the amount under the original mortgage, is only an assurance made by a creditor to his assignee about the assignee's rights in respect of the mortgage assigned to him, and such a statement cannot be said to be an admission of jural relationship with the mortgagor. It is pointed out that the earlier view, that when a mortgagee sells or assigns his mortgage rights, the very fact that he was selling or assigning his rights was a clear acknowledgment of a subsisting mortgage and of his subsisting rights as a mortgagee, is no longer valid. It also pointed out that in Tilak Ram this Court clarified that the act of assignment/transfer/sale of the mortgage rights, by the mortgagee, by itself will not amount to an acknowledgment, if the document merely described the status of the mortgagee or described the right that was being transferred, without indicating any intention to admit his jural relationship with the mortgagor. It is, therefore, contended that the assignment deed in this case cannot be considered to be an "acknowledgment". 24. We may illustrate as to what is a mere reference or description of the jural relationship and what constitutes an intention to admit the jural relationship. It is, therefore, contended that the assignment deed in this case cannot be considered to be an "acknowledgment". 24. We may illustrate as to what is a mere reference or description of the jural relationship and what constitutes an intention to admit the jural relationship. If the relevant portion of the deed of assignment, sought to be relied on as an acknowledgment merely stated that "X mortgaged the schedule property in my favour under the deed of usufructuary mortgage dated (date) and I hereby assign the said mortgage in your favour", it will not be an "acknowledgment" under Section 18 of the Act. This is because it refers only to the jural relationship, but does not show an intention to admit the jural relationship with the mortgagor or admit his subsisting liability as mortgagee of being redeemed. But the position will be different, if the assignment deed further stated: "The said mortgage is subsisting" or "The rights and obligations under the said mortgage are enforceable", or "The assignee is entitled to all benefits under the said mortgage", or "The assignee is entitled to receive the amount advanced under the said mortgage", or "The assignee is entitled to all rights and liable for all obligations under the said mortgage", or "The assignee is entitled to continue in possession until the mortgage is redeemed". The use of any such words (which are illustrative and not exhaustive) would show an intention to admit the jural relationship, and therefore, amount to acknowledgment, though they may not refer to the mortgagor's right of redemption. Ultimately, it is not the form of the words, but the intention to admit the jural relationship with the mortgagor, that will determine whether a statement is an acknowledgment. 43. According to respondent, the relevant paragraphs are 20 & 23 which read as under:- 20. The said principles relating to Section 19 of the old Act fully apply to "acknowledgments" under Section 18 of the new Act. To summarise, a statement (in writing and signed) by a mortgagee can be construed as an "acknowledgment" under Section 18 of the Limitation Act, if it fulfils the following requirements: (i) The acknowledgment of liability must relate to a subsisting mortgage. (ii) The acknowledgment need not be in a document addressed to the mortgagor (person entitled to the property or right). But it should be made by the mortgagee (the person under liability). (ii) The acknowledgment need not be in a document addressed to the mortgagor (person entitled to the property or right). But it should be made by the mortgagee (the person under liability). (iii) The words used in the acknowledgment must indicate the existence of jural relationship between the parties and it must appear that the statement is made by the mortgage with the intention of admitting the jural relationship with the mortgagor. (Such intention of admitting the jural relationship need not be in express terms, but can be inferred or implied from the nature of admission and the words used, though oral evidence as to the meaning and intent of such words is excluded.) (iv) Where the statement by the mortgagee in the subsequent document (say, deed of assignment) merely refers to the mortgage in his favour which is being assigned, without the intention of admitting the jural relationship with the mortgagor, it will not be considered to be an "acknowledgment". 23. The contention ignores the purport and scope of Section 18 and proceeds on the assumption that an acknowledgment can be made only by a "debtor" and there is no question of a "creditor" making an acknowledgment. Section 18 of the Act deals not only with acknowledgment of debts, but acknowledgments with reference to all suits involving properties or rights for which limitation is prescribed under the Act. It sets out the circumstances in which a fresh period of limitation can be computed for a suit. If the suit is one for recovery of the amount due under an on-demand promissory note, no doubt, only an acknowledgment by the debtor can extend the period of limitation. But in regard to mortgages, the TP Act has created and recognised rights as well as obligations both in the mortgagor and the mortgagee (vide Chapter IV of the Transfer of Property Act, in particular, Sections 60 and 67). Section 18 of the new Act provides that where before the expiry of the prescribed period for a suit in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made by the party against whom such property or right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. An acknowledgment under Section 18 can, therefore, be by a mortgagee also, and such acknowledgment will extend the limitation for a suit against the mortgagee in respect of the property or right claimed against him. 44. Reliance is placed on AIR 1971 SC 1482 [M/s. Lakshmiratan Cotton Mills Co. Ltd. v. The Aluminium Corporation of India Ltd.] Paragraphs 11 & 20 are relevant which read as under:- 11. It is clear that the statement on which the plea of acknowledgment is founded must relate to a subsisting liability as the section requires that it must be made before the expiration of the period prescribed under the Act. It need not, however, amount to a promise to pay, for an acknowledgment does not create a new right of action but merely extends the period of limitation. The statement need not indicate the exact nature or the specific character of the liability. The words used in the statement in question, however, must relate to a present subsisting liability and indicate the existence of jural relationship between the parties, such as, for instance, that of a debtor and a creditor, and the intention to admit such jural relationship. Such an intention need not be in express terms and can be inferred by implication from the nature of the admission and the surrounding circumstances. Generally speaking, a liberal construction of the statement in question should be given. That of course does not mean that where a statement is made without intending to admit the existence of jural relationship, such intention should be fastened on the person making the statement by an involved and far-fetched reasoning. (see Khan Bahadur Shapoor Freedom Mazda v. Durga Prosad Chamaria, 1962-1 SCR 140 = ( AIR 1961 SC 1236 ) and Tilak Ram v. Nathu, AIR 1967 SC 935 at pp. 938, 939. As Fry. L. J., in Green v. Humphreys. (1884) 26 Ch D 474 at p. 481 said "an acknowledgment is an admission by the writer that there is a debt owing by him, either to the receiver of the letter or to some other person on whose behalf the letter is received but it is not enough that he refers to a debt as being due from somebody. (1884) 26 Ch D 474 at p. 481 said "an acknowledgment is an admission by the writer that there is a debt owing by him, either to the receiver of the letter or to some other person on whose behalf the letter is received but it is not enough that he refers to a debt as being due from somebody. In order to take the case out of the statute there must upon the fair construction of the letter, read in the light of the surrounding circumstances, be an admission that the writer owes the debt." As already stated, the person making the acknowledgment can be both the debtor himself as also a person duly authorised by him to make the admission. In Khan Bahadur Shapoor Freedoom Mazda's case, 1962-1 SCR 140 - ( AIR 1961 SC 1236 ) the Court accepted a statement in a letter by a mortgagor to a second mortgage to save the mortgaged property from being sold away at a cheap price at the instance of the prior mortgagee by himself purchasing it as one amounting to an admission of the jural relationship of a mortgagor and mortgagee, and therefore, to an acknowledgement within S.19. Also, an agreement of reference to arbitration containing an unqualified admission that whoever on account should be proved to be the debtor would pay to the other has been held to amount to an acknowledgement. Such an admission is not subject to the condition that before the agreement should operate as an acknowledgement, the liability must be ascertained by the arbitrator. The acknowledgement operates whether the arbitrator acts or not. (see Tejpal Saraogi v. Lallanjee Jain, Civil Appeal No.766 of 1962, D/- 8-2-1965 (SC) approving Abdul Rahim Oosman & Co. v. Ojamshee Purshottamdas & Co., ILR 56 Cal 639 - (AIR 1930 Cal 5)). 20. It must follow from these facts that there was a subsisting account in the name of the appellant-company in the books of the corporation in which interest on the balance shown therein from time to time was being credited and in which amounts in respect of items passed during the course of reconciliation were also being credited. 45. The statement in the letter (Ex.1) that "after all the above adjustments the position will be as per statement attached", that is to say, that there was balance of Rs. 45. The statement in the letter (Ex.1) that "after all the above adjustments the position will be as per statement attached", that is to say, that there was balance of Rs. 1,07,447,13.11 due and payable to the appellant-company, must clearly amount to an acknowledgment within the meaning of Section 19(1). In our view if the letter (Ex. 1) were to be looked at in the background of the controversy between the parties which controversy was, as aforesaid, limited to the question as to the correctness of the amount claimed by the appellant-company as also the correspondence which ensued in regard to it, it would be impossible to say that the letter (Ex. 1) and the statement of account enclosed therewith were merely explanatory and did not amount to an admission of the jural relationship of debtor and creditor and of the liability to pay the amount found due at the foot of the account on finalization. AIR 1961 SCC 1236 [Shapoor Fredoom Mazda v. durga Prosad Chamaria & Ors.] is relied upon. Paragraphs 6 & 12 are relevant which read as under:- 6. It is thus clear that acknowledgment as prescribed by S. 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgment is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or farfetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in S. 19, and there is really no substantial difference between the parties as to the true legal position in this matter. 12. It is now necessary to consider the document on which the plea of acknowledgment is based. This document was written on March 5, 1932. It, however, appears that on November 26, 1931, another letter had been written by respondent 2 to respondent 1; and it would be relevant to consider this letter before construing the principal document. In this letter respondent 2 had told respondent 1 that the Chandni Bazar property was being sold the next morning at the Registrar's sale on behalf of the first mortgagee and that the matter was urgent, otherwise the property would be sacrificed. It appears that the said property was subject to the first prior mortgage and respondent 2 appealed to respondent 1 to save the said threatened sale at the instance of the prior mortgagee. It is common ground that respondent 1 paid to respondent 2 Rs. 2,500/- on November 27, 1931, and the threatened sale was avoided. This fact is relevant in construing the subsequent letter. 46. Reliance is also placed in (2004) 12 SCC 360 [Food Corporation of India v. Assam State Cooperative Marketing & Consumer Federation Ltd. & Ors.,] it was held, acknowledgment in writing under Section 18 indicated existence of jural relationship such as that of debtor and creditor between the parties. This fact is relevant in construing the subsequent letter. 46. Reliance is also placed in (2004) 12 SCC 360 [Food Corporation of India v. Assam State Cooperative Marketing & Consumer Federation Ltd. & Ors.,] it was held, acknowledgment in writing under Section 18 indicated existence of jural relationship such as that of debtor and creditor between the parties. Intention to admit such jural relationship is essential which can be inferred from the clear statement contained in the acknowledgment. Paragraphs 5, 13, 14 & 15 are relied upon by the appellant which read as under:- 5. The defendants contested the suit. The principal defence raised in the written statement was that the suit was barred by time inasmuch as the cause of action, if any, had arisen to the plaintiff on 20-9-1976 and the suit was filed beyond three years from that date and as such was beyond the period of limitation. The defendants also expressed in the written statement a desire of pleading set-off and also of raising a counter claim but that was not done. After trying all the issues, the trial court held that the plaintiff was entitled to recovery of Rs. 39,36,810/- only from the Federation, but even that claim could not be decreed as the suit was filed beyond the prescribed period of limitation. Consequently, the suit was directed to be dismissed. 13. Once it is held that the two letters are proved then the next question which arises is as to their effect on limitation. 14. According to Section 18 of the Limitation Act, an acknowledgment of liability made in writing in respect of any right claimed by the opposite party and signed by the party against whom such right is claimed made before the expiration of the prescribed period for a suit in respect of such right has the effect of commencing a fresh period of limitation from the date on which the acknowledgment was so signed. It is well settled that to amount to an acknowledgment of liability within the meaning of Section 18 of the Limitation Act, it need not be accompanied by a promise to pay either expressly or even by implication. 15. The statement providing foundation for a plea of acknowledgment must relate to a present subsisting liability, though the exact nature or the specific character of the said liability may not be indicated in words. 15. The statement providing foundation for a plea of acknowledgment must relate to a present subsisting liability, though the exact nature or the specific character of the said liability may not be indicated in words. The words used in the acknowledgment must indicate the existence of jural relationship between the parties such as that of debtor and creditor. The intention to attempt such jural relationship must be apparent. However, such intention can be inferred by implication from the nature of the admission and need not be expressed in words. A clear statement containing acknowledgment of liability can imply the intention to admit jural relationship of debtor and creditor. Though oral evidence in lieu of or making a departure from the statement sought to be relied on as acknowledgment is excluded but surrounding circumstances can always be considered. Courts generally lean in favour of a liberal construction of such statements though an acknowledgment shall not be inferred where there is no admission so as to fasten liability on the maker of the statement by an involved or far-fetched process of reasoning. (See Shapoor Freedom Mazda v. Durga Prosad Chamaria and Lakshmirattan Cotton Mills Co. Ltd. v. Aluminium Corpn. of India Ltd.) So long as the statement amounts to an admission, acknowledging the jural relationship and existence of liability, it is immaterial that the admission is accompanied by an assertion that nothing would be found due from the person making the admission or that on an account being taken something may be found due and payable to the person making the acknowledgment by the person to whom the statement is made. 47. Paragraphs 7, 8 & 16 are relied upon by respondents which read as under:- 7. The issue as to limitation centres around two letters respectively dated 29-3- 1977 and 30-7-1977 marked as Exhibits 8 and 9 (Annexures P-4 and P-5). According to the plaintiff these two letters written by the Federation amount to acknowledgment of liability within the meaning of Section 18 of the Limitation Act, 1963 and have the effect of extending the period of limitation. The trial court has found the letters not proved and also not amounting to such acknowledgment of liability as may attract the applicability of Section 18 of the Limitation Act. 8. The first question which arises for consideration is whether the two letters have been proved. The trial court has found the letters not proved and also not amounting to such acknowledgment of liability as may attract the applicability of Section 18 of the Limitation Act. 8. The first question which arises for consideration is whether the two letters have been proved. Madan Pathak, PW 1 was Assistant Manager in Food Corporation of India at the relevant time. He deposed to all the relevant facts in issue and substantiated all the material plaint averments. During the course of his deposition, he stated- "Exhibit 7 is the letter given by Defendant 1 itself. In that letter Defendant 1 admitted to have received Rs. 2 crores. Exhibits 8 and 9 are the letters given by Defendant 1. We have filed this suit for non-payment of money by Defendant 1." There is no cross-examination directed on this part of the statement made by the plaintiff. There is no suggestion given that such letters were not sent by or on behalf of the Federation to the plaintiff. 16. The two letters dated 29-3-1977 and 30-7-1977 (Exhibits 8 and 9) clearly acknowledge the amount of Rs. 2 crores having been received by the Federation from the Food Corporation of India, whether by way of advance or by way of deposit. The letters also indicate that the amount of two crores was by way of advance or deposit against paddy procurement. This is admission of jural relationship of buyer and seller which stood converted into relationship of creditor and debtor on the failure of the principal transaction. However, the acknowledged liability is sought to be disowned by submitting that on an account being taken nothing would be found due and payable by the plaintiff to the Federation. Disputing the liability to repay the amount acknowledged to have been received does not dilute the fact of acknowledgement insofar as Section 18 of the Limitation Act is concerned. The two letters have the effect of extending the period of limitation prescribed for filing the suit and calculated from the date of the latter of the two letters i.e. 30-7-1977, the suit filed on 30-5-1980 was well within the period of limitation. 48. Based on the principles laid down in the above cases one has to see with reference to the facts of the present case. 48. Based on the principles laid down in the above cases one has to see with reference to the facts of the present case. We have to see several facts in order to understand whether there was acknowledgment of liability on the part of the defendant which extends time for recovery of amount as claimed in the suit by the plaintiff. The letter of the plaintiff-appellant to respondent is dated 4.6.1990 with reference to purchase order dated 30.1.1988 for 1500 KM of AAC ANT Conductor. In this letter they have categorically stated that there was verbal assurance for amendment in price variation clause and in good faith they dispatched the material. They also referred to another letter dated 16.5.1988 and other correspondence but Paragraph 8 is relevant which reads as under:- "However, no decision was taken by the Board in this respect. Moreover, the payment of the first lot of the material which we had supplied in March, 88 was inordinately delayed and most of the payment was released to us in the month of June, 88 i.e. after more than two months. Due to non-availability of I.D.B.I. Bill discounting facility with us, we had opted for direct payment and as per the condition of the tender specification the Board was obliged to pay within 15 days of submission of our Bill." 49. A letter dated 21.8.1990 is relied upon by the plaintiff to contend that this letter is in the nature of acknowledgment of debt. There are three letters. The contents and stand of the defendant-respondent is one and the same in all the letters though it refers to different quantity of supplies made. For our purpose quoting of one letter suffices:- Ref. No. P&S/P-23/87/Cond/192 P-3 Date: 21.8.1990 To M/s. G.P.Dalmia & Sons Dalmia House, Jasidih-814142. Bihar. Sub: Manufacture, testing, supply and delivery of AAC conductors against purchase order No. P&S/P- 23/87/Cond/394 P-3 dt. 30.1.1988 placed on you-Cancellation of order. Dear Sirs, We write to inform you that the above referred order had been placed on you for manufacture, testing, supply and delivery of 1500 Kms. Of AAC ANT' conductor. As per terms of the order, the scheduled period of commencement of delivery was February, 1998 and scheduled period of completion of delivery was May, 1998. Out of above you could only delivery 456.20 Kms. as on March, 1988. Of AAC ANT' conductor. As per terms of the order, the scheduled period of commencement of delivery was February, 1998 and scheduled period of completion of delivery was May, 1998. Out of above you could only delivery 456.20 Kms. as on March, 1988. Thus, the balance quantity of 1043.80 Kms are yet to be delivered by you. We had requested you in many occasions and by way of bi-lateral discussions to commence supply for the balance quantities but no fruitful result was obtained from you towards supply of the balance quantities and hence it is not worthful to keep the order alive further. Now, therefore, we hereby terminate the above referred purchase order No. P & S/P- 23/87/Cond/394P3 dated 30.1.1988 for manufacture, testing, supply and delivery of AAC/Ant. Conductors upto the above extent of actual delivery already effected uptil this date with forfeiture of security deposit and imposition of penalty for late delivery of materials and unexecuted quantities of materials as per terms of the order. Further, it may be noted that penalty already deducted will not be refunded and penalty as imposed above will also be realized, where necessary, from the unpaid bills, if any. Further, since the effective period of attachment of Bank Guarantees as furnished by you, had already been expired, we advise you to deposit 5% (five percent) of the order value in favour of West Bengal State Electricity Board to our Accounts Officer (Stores), S & P Wing, WBSEB, Bidyyut Bhavan (10th floor), Calcutta-91 within 15 (fifteen) days from the date of issue of this cancellation order. Yours faithfully, Sd/- (S.K.Ghosh) Material Controller Sd/- Illegible 50. From reading the above letter, one has to see and understand the position so far as the facts of the case in order to arrive at conclusion whether there is subsisting liability, whether the jural relationship between seller and purchaser is revived and converted to that of a creditor and debtor, whether it indicates intention of the respondent to admit jural relationship of creditor and debtor. Such intention could also be ascertained from circumstances available on record. The contents of the letter clearly indicate the relationship of a seller and buyer and further there is no indication of converting or accepting said jural relationship as that of a creditor and debtor. Such intention could also be ascertained from circumstances available on record. The contents of the letter clearly indicate the relationship of a seller and buyer and further there is no indication of converting or accepting said jural relationship as that of a creditor and debtor. Even from the other circumstances though such intention could be ascertained we fail to understand what are those circumstances which compel us to accept such stand of the respondent. All the bills raised in respect of the goods pertain to 1988, payments were also made in 1988. So far as appellant is concerned he was well aware that way back in the year 1988 cause of action arose i.e. the bills raised by him in its entirety were not paid by the defendant. 51. So far as Article 14 is concerned it pertains to period of limitation and from what date period of limitation commences, when suit is filed for recovery of price of goods sold and delivered where no fixed period of credit is agreed upon. The period of limitation is three years which runs from the date of delivery of the goods. Article 15 refers to for the price of goods sold and delivered to be paid for by bill of exchange, but no such bill being given. Three years is the period of limitation and the same starts running when the period expires. The above principles if applied to the facts of the present case, definitely cannot bring the case of appellant within the ambit of Section 18 of Limitation Act. Therefore, the claim is being of the year 1988 and the suit came to be filed in 1993 is hopelessly barred by limitation and the same was rightly answered against the plaintiff. The learned Single Judge was justified in answering the same against the appellant/plaintiff. 52. In view of rejecting the claim of the plaintiff as relevant issues are answered against the appellant's claim for a decree of the amount in the plaint along with interest at 23.75% was rightly rejected by the learned Single Judge. 53. In the light of above discussion and reasoning appeal of the appellant is accordingly dismissed. Parties have to bear their own costs.