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Himachal Pradesh High Court · body

2018 DIGILAW 769 (HP)

Rohit @ Rohin v. Surinder Kaur

2018-05-01

TARLOK SINGH CHAUHAN

body2018
JUDGMENT : Tarlok Singh Chauhan, J. The appellants are the defendants, who aggrieved by the impugned judgments and decrees passed by both the courts below, whereby they have been held liable to pay a sum of Rs.6,00,000/- alongwith interest @ 6% per annum from the date of filing of the suit, i.e. 3.7.2010 till its realization, have preferred the instant appeal. The parties shall be referred to as plaintiff and defendants. 2. The brief facts giving rise to the present appeal are that the plaintiff/respondent filed a suit for specific performance of agreement dated 8.8.2006 and for execution of the sale deed qua the land measuring 263.12 sq. mts. being 1/5th share in the land comprised of Khewat/Khatauni No.172/547, 548 Khasra No. 1552 (1223-72), 1558 (2-46), 2427 (45-75), 2219/1 (5-50), 2428 (38-17) measuring 1365/60 sq. mts. situated at Muhal Shatni Bihar, Patwar Circle Sanjauli, Tehsil and District Shimla. Relief of permanent prohibitory injunction was also sought restraining the defendants from changing the nature of the suit land, selling, alienating and encumbering the same and in the alternative for recovery of Rs.6,00,000/- being double of the earnest money along with interest @ 12% per annum w.e.f. 8.8.2006 till realization thereof. 3. The plaintiff claimed that late Sh. Kuldeep Kumar, predecessor-in-interest of the defendants, vide agreement dated 8.8.2006 had agreed to sell the suit land to the plaintiff for a consideration of Rs.4,00,000/-. Out of total consideration amount, she paid a sum of Rs.3,00,000/-to him as earnest money and the balance amount of Rs.1,00,000/- was agreed to be paid at the time of the execution of registration of the sale deed on or before 31.7.2009, however, Kuldeep Kumar died before the execution of the sale deed. Therefore, the plaintiff then requested the defendants being the legal heirs of Kuldeep Kumar to execute and register the sale deed as per agreement dated 8.8.2006. However, they failed to do so and ultimately the plaintiff issued a legal notice dated 8.6.2009, but even despite that the defendants refused to execute the sale deed nor refunded the double of the earnest money. It was further pleaded that the plaintiff was and is always ready and willing to perform her part of agreement dated 8.8.2006 and was present in the office of Sub-Registrar (Rural), Shimla, on 31.7.2009, but the defendants did not turn up for execution and registration of the sale deed. Hence, the suit. 4. It was further pleaded that the plaintiff was and is always ready and willing to perform her part of agreement dated 8.8.2006 and was present in the office of Sub-Registrar (Rural), Shimla, on 31.7.2009, but the defendants did not turn up for execution and registration of the sale deed. Hence, the suit. 4. The defendants contested the suit by filing written statement taking therein preliminary objections regarding maintainability, estoppel, non-joinder of necessary parties, evaluation, limitation, cause of action, the plaintiffs having not approached the Court with clean hands and having based the suit on the basis of false, forged and fabricated documents. On merits, the averments regarding execution of the agreement dated 8.8.2016 and receipt of Rs.3,00,000/- towards earnest money by late Kuldeep Kumar were denied by the defendants and it was claimed that the plaintiff had fabricated a false agreement just to usurp their land because had there been any such agreement, the same certainly would have been in the knowledge of defendants more particularly, in the knowledge of defendant No.5, who is none else but the wife of late Kuldeep Kumar. It was further averred that the said agreement dated 8.8.2006 was shrouded by suspicious circumstances on the face of it which clearly showed that the same was typed before taking signature of late Sh. Kuldeep Kumar. In addition thereto, it was averred that in the year 2009 the cost of the land measuring 1 biswa at Sanjauli was approximately Rs.1,50,000/-, whereas the sale consideration for the suit land measuring 263.12 sq.mts was only 4,00,000/-, which established that the agreement in question was false, forged and fabricated one. It was lastly pleaded that late Sh. Kuldeep Kumar was only having 1/5th share in the suit land and in fact during his life time had sold 227.25 sq. mts. of land to one Ranchain Dorje and Suraj Mani and land measuring 185.50 sq. mts. to one Dharam Prakash, therefore, he was not having any share in the suit land and as such, there was no question of his entering into an agreement to sell with the plaintiff. 5. The plaintiff filed replication to the written statement filed by the defendants denying counter allegations contained therein while reiterating and re -asserting the stand taken in the plaint. 6. From the pleadings of the parties, the learned trial court on 8.12.2011 framed the following issues:- 1. 5. The plaintiff filed replication to the written statement filed by the defendants denying counter allegations contained therein while reiterating and re -asserting the stand taken in the plaint. 6. From the pleadings of the parties, the learned trial court on 8.12.2011 framed the following issues:- 1. Whether the plaintiff is entitled for specific performance of agreement dated 8th August, 2008, as alleged? OPP 2. Whether the plaintiff is entitled for permanent prohibitory injunction, as prayed for? OPP 3. Whether the plaintiff is entitled for mandatory injunction, as prayed for? OPP 4. Whether the suit of the plaintiff is within time? OPP 5. Whether the plaintiff has no cause of action to file the present suit? OPD 6. Whether the plaintiff has not approached the Court with clean hands, if so, its effect? OPD 7. Whether the suit is not maintainable in the present form? OPD 8. Whether the plaintiff is estopped from filing the present suit due to her acts, deeds, conduct, omissions etc? OPD 9. Whether the suit is bad for non-joinder of necessary parties? OPD 10. Whether the suit of the plaintiff has not been valued properly? OPD 11. Whether the suit has been filed by the plaintiff on the basis of false, forged and fabricated documents, as alleged? OPD 12. Relief. 7. After recording the evidence and evaluating the same, the suit of the plaintiff was partly decreed vide judgment and decree dated 23.9.2015 and instead of ordering specific performance of the agreement, decree for recovery of Rs.6,00,000/- along with interest @ 6% per annum from the date of filing of the suit i.e. 3.7.2010 till realization thereof was passed in favour of the plaintiff and against the defendants, however, the relief of permanent prohibitory injunction and mandatory injunction was declined. 8 The plaintiff accepted the decree passed by the learned trial court, whereas the defendants filed an appeal before the learned first appellate court, who affirmed the findings rendered by the learned trial court and dismissed the appeal vide impugned judgment and decree dated 21.1.2017. 9. It is against both the impugned judgments and decrees rendered by the learned courts below that the defendants have filed the instant regular second appeal on the grounds taken therein. 10. It is vehemently urged by Ms. 9. It is against both the impugned judgments and decrees rendered by the learned courts below that the defendants have filed the instant regular second appeal on the grounds taken therein. 10. It is vehemently urged by Ms. Seema K. Guleria, learned counsel for the defendants, that the learned courts below have erred in law in partly decreeing the suit especially when the plaintiff has failed to prove the essential requirement of her being willing to perform her part of contract for the relief being the one based on equity, therefore, the suit of the plaintiff could not have been decreed partly. On the other hand, Mr. Shanti Swaroop, learned counsel for the plaintiff, would defend the impugned judgments and decrees passed by the learned courts below claiming that the same have been passed in accordance with law. 11. I have heard the learned counsel for the parties and have also gone through the record of the case carefully. 12. As regards denial of specific performance of contract in favour of the plaintiff, admittedly the said findings have attained finality and therefore, I need not to go into such question. However, as regards the decree for recovery of Rs.6,00,000/- along with interest that has been passed in favour of the plaintiff, I notice that both the courts below have awarded Rs.6,00,000/- in favour of the plaintiff without going into the question whether a covenant stipulating that double the amount of earnest money would be payable in the event the contract was not performed, was in fact legal in terms of the Indian Contract Act. 13. As regards the learned trial court, the reasoning qua award of Rs.6,00,000/- is found in para 24 to 26 of the judgment, which reads thus: “24. Nevertheless as per agreement to sell, Ext.PW1/C, the plaintiff having paid Rs.3,00,000/- to Kuldeep Kumar is entitled for double of the earnest money which comes to Rs.6,00,000/-. 25. The plaintiff has claimed Rs. 6,00,000/- being double of the earnest money along with interest 12% per annum from the date of receipt of earnest money i.e.8.8.2006, however she in view of Section 34 of CPC only is entitled for the interest @ 6% per annum that too from the date of the filing of the suit. 26. Resultantly, it can safely be concluded that the plaintiff is entitled for Rs. 26. Resultantly, it can safely be concluded that the plaintiff is entitled for Rs. 6,00,000/- along with interest @ 6% per annum w.e.f. the filing of the suit i.e.3.7.2010 till real ization thereof. This issue thus is partly decided in favour of the plaintiff and is answered as such while issue No.11 is decided against the defendant and is answered in negative.” 14. As regards the learned first appellate court, these findings are contained in para 22, the relevant portion thereof reads thus: “………… However, since it is revealed on the perusal of agreement Ext. PW-1/C that late Sh. Kuldeep Kumar had agreed to sell suit land measuring 263.12 sq. mts. being 1/5th share in the land comprising Khewat/Khatauni No.172/547, 548, Khasra Nos. 1552, 1558, 2427, 2219 and 2428 measuring 1315.60 sq. mts. for a sum of Rs.4,00,000/- and received Rs.3,00,000/-. The balance amount of Rs.1,00,000/- was agreed to be paid at the time of the execution and registration of the sale deed on or before 31.7.2009, failing which the plaintiff was entitled to get the sale deed executed and to become the owner in possession by specific performance of agreement through court of law, or in the alternative late Sh. Kuldeep Kumar was bound to pay back double of the amount of advance to the plaintiff. In view of such circumstances, since the plaintiff has paid Rs. 3,00,000/- to Kuldeep Kumar and as such she is entitled for the double of the earnest money paid by her to late Sh. Kuldeep Kumar i.e. to Rs. 6,00,000/-. Though the plaintiff has claimed Rs.6,00,000/- being double of the earnest money alongwith 12% per annum from the date of receipt of money i.e. 8.8.2006, however, the plaintiff is entitled to the interest @ 6% per annum in view of Section 34 of CPC from the date of filing of the present suit. 15 Section 74 of the Contract Act reads thus:- "74. 15 Section 74 of the Contract Act reads thus:- "74. Compensation for breach of contract where penalty stipulated for.-When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or,as the case may be, the penalty stipulated for. Explanation.-A stipulation for increased interest from the date of default may be a stipulation by way of penalty. Exception.-When any person enters into any bailbond, recognizance or other instrument of the same nature, or, under the provisions of any law, or under the orders of the Central Government or of any State Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of any condition of any such instrument, to pay the whole sum mentioned therein. Explanation.-A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested." 16 What would be the compensation payable on a breach of contract under Section 74 of the Contract Act has been lucidly dealt with and explained by the Hon’ble Supreme Court in Kailash Nath Associates Vs. Delhi Development Authority and another (2015) 4 SCC 136 , wherein following principles were laid down:- “43.1 Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation. 43.2 Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act. 43.3 Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section. 43.4 The Section applies whether a person is a plaintiff or a defendant in a suit. 43.5 The sum spoken of may already bepaid or be payable in future. 43.6 The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded. 43.7 Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application.” 17 As observed earlier, both the learned courts below did not go into the question whether a covenant stipulating that double the amount of earnest money would be payable in the event the contract was not performed, was legal in terms of the Indian Contract Act. It is more than settled that the imposition and the recovery of penalty on breach of a contract is legally impermissible under the Indian Contract Act. It is more than settled that the imposition and the recovery of penalty on breach of a contract is legally impermissible under the Indian Contract Act. 18 As regards liquidated damages, the court would have to scrutinize the pleadings as well as evidence in proof thereof, in order to determine that they are not in the nature of a penalty, but rather as a fair pre -estimate of what the damages are likely to arise in case of breach of the contract. This will have to be taken on the basis of the evidence led by the plaintiff to prove that the claim of twice the amount of earnest money was a fair measure being pre estimate of damages. 19 Reference in this regard can conveniently be made to the decision rendered by the Hon’ble Supreme Court in Maya Devi vs. Lalta Prasad, (2015) 5 SCC 588 , wherein Hon’ble Mr. Justice Vikramjit Sen, J, while writing a separate but a concurring judgment, held as under:- “19. The Trial Court had framed the following issues in Suit No.407/2007, from which subject of proceedings emanates: “(1) Whether the plaintiff is entitled for the suit amount? If so to what sum? OPP (2) Whether the plaintiff is entitled for the interest? If so at what rate and for which period? OPP (3) Relief.” The Trial Court having accepted the payment of Rs.1,70,000/- without insisting on any proof, did not go into the question whether a covenant stipulating that double the amount of earnest money would be payable in the event the contract was not performed, is legal in terms of the Indian Contract Act. The imposition and the recovery of penalty on breach of a contract is legally impermissible under the Indian Contract Act. As regards liquidated damages, the Court would have to scrutinize the pleadings as well as evidence in proof thereof, in order to determine that they are not in the nature of a penalty, but rather as a fair pre-estimate of what the damages are likely to arise in case of breach of the contract. No evidence whatsoever has been led by the Plaintiff to prove that the claim for twice the amount of earnest money was a fair measure or pre-estimate of damages. 20. The pronouncements of the Constitution Bench in Sir Chunilal V. Mehta & Sons Ltd. vs Century Spinning and Manufacturing Co. No evidence whatsoever has been led by the Plaintiff to prove that the claim for twice the amount of earnest money was a fair measure or pre-estimate of damages. 20. The pronouncements of the Constitution Bench in Sir Chunilal V. Mehta & Sons Ltd. vs Century Spinning and Manufacturing Co. Ltd. AIR 1962 SC 1314 , and later in Fateh Chand vs Balkishan Dass AIR 1963 SC 1405 , hold the field, making it unnecessary to refer to any other precedent for an enunciation of the law, except to appreciate the manner in which the opinion of the Constitution Benches have been applied to the factual matrix in later cases. With the number and volume of precedents increasing exponentially each year, reference to all decisions make arguments excruciatingly lengthy and judgments avoidably prolix. 21. The first important judgment of this Court on the question of Sections 73 and 74 of the Contract Act is that of the Constitution Bench in Chunilal V. Mehta. The two significant issues which arose were firstly, as to what would constitute a substantial question of law requiring the grant by the High Court of a Certificate to appeal to this Court, and secondly, the quantum of damages that can be awarded in that case owing to the breach of the subject contract. It is the second question which is relevant for the present purposes. The admitted position was that the contract had been wrongfully breached by the Defendant. A clause in the compact between the parties stipulated that in these circumstances, the Plaintiff would be entitled to receive from the Defendant “as compensation or liquidated damages for the loss of such appointment a sum equal to the aggregate amount of the monthly salary of not less than Rs.6000/- which the Firm would have been entitled to receive from the Company, for and during the whole of the then unexpired portion of the said period of 21 years if the said Agency of the Firm had not been determined.” 22. The Plaintiff had initially claimed a sum of Rs.50 Lakhs which was subsequently reduced by way of amendment of the plaint to Rs.28,26,804/-. The Plaintiff had initially claimed a sum of Rs.50 Lakhs which was subsequently reduced by way of amendment of the plaint to Rs.28,26,804/-. The Constitution Bench opined that (Chunilal vs. Mehta case, AIR p. 1319 para 11) “when parties name a sum of money to be paid as liquidated damages they must be deemed to exclude the right to claim an unascertained sum of money as damages. …. Again the right to claim liquidated damages is enforceable under S. 74 of the Contract Act and where such a right is found to exist no question of ascertaining damages really arises. Where the parties have deliberately specified the amount of liquidated damages there can be no presumption that they, at the same time, intended to allow the party who has suffered by the breach to give a go-by to the sum specified and claim instead a sum of money which was not ascertained or ascertainable at the date of the breach”. This precedent prescribes that if a liquidated sum has been mentioned in a contract to be payable on its breach, then if damages have actually been suffered, the said liquidated amount would be the maximum and upper limit of damages awardable by the Trial Court. 23. The judgment of the Constitution Bench one year later, in Fateh Chand concerns award of damages of the ‘liquidated’ sum even though actual damages may have been less. In that respect it is the converse of the factual matrix that existed before the earlier Constitution Bench in Chunilal V. Mehta. J.C. Shah, J (who authored Fateh Chand) along with Chief Justice B.P. Sinha were members of both Constitution Benches. Whilst the aspect of the liquidated damages being in the nature of a penalty or in terrorem did not arise in Chunilal V. Mehta, It did so in Fateh Chand where the complaint was that the Plaintiff, namely, Fateh Chand had agreed to sell an immovable property for Rs.1,12,500/- of which Rs.1000/- had been received/paid as earnest money. The Agreement envisaged payment of a further sum of Rs.24,000/- and it stipulated that if the vendee failed to get the Sale Deed registered thereafter, then the sum received i.e. Rs.25,000/- would stand forfeited. Fateh Chand alleging a breach of the Agreement, sought to forfeit the sum of Rs.25,000/- which was found to be impermissible in law. 24. The Agreement envisaged payment of a further sum of Rs.24,000/- and it stipulated that if the vendee failed to get the Sale Deed registered thereafter, then the sum received i.e. Rs.25,000/- would stand forfeited. Fateh Chand alleging a breach of the Agreement, sought to forfeit the sum of Rs.25,000/- which was found to be impermissible in law. 24. It was in those circumstances that the Constitution Bench opined as follows: (Fateh Chand case, AIRp. 1411, paras 10 &11) “10. 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 contract containing 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 tile 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 damage"; 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. 11. 11. 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.” After reading the entire evidence that had been recorded, the Constitution Bench found that the value of the property had not depreciated and, therefore, no damages could be awarded. 25. This is also the manner in which this facet of the law has been enunciated in England, as is evident from the following passage from Halsbury’s Laws of England (4th edn Reissue, 1998) Vol 12(1), para 1065 which reads as follows:- “1065. Liquidated damages distinguished from penalties.- The parties to a contract may agree at the time of contracting that, in the event of a breach, the party in default shall pay a stipulated sum of money to the other. Liquidated damages distinguished from penalties.- The parties to a contract may agree at the time of contracting that, in the event of a breach, the party in default shall pay a stipulated sum of money to the other. If this sum is a genuine pre-estimate of the loss which is likely to flow from the breach, then it represents the agreed damages, called ‘liquidated damages’, and it is recoverable without the necessity of proving the actual loss suffered. If, however, the stipulated sum is not a genuine preestimate of the loss but is in the nature of a penalty intended to secure performance of the contract, then it is not recoverable, and the plaintiff must prove what damages he can. The operation of the rule against penalties does not depend on the discretion of the court, or on improper conduct, or on circumstances of disadvantage or ascendancy, or on the general character or relationship of the parties. The rule is one of public policy and appears to be sui generis. Its absolute nature inclines the courts to invoke the jurisdiction sparingly. The burden of proving that a payment obligation is penal rests on the party who is sued on the obligation”. 26. The position that obtains in the United State s, obviously because of its Common Law origins and adherence, is essentially identical as is evident from these extracted paragraphs of Corpus Juris Secundum, Volume 25A (2012): 192- Liquidated damages are a specific sum stipulated to and agreed upon by the parties in advance or when they enter into a contract to be paid to compensate for injuries in the event of a breach or nonperformance of the contract. 196-In examining whether a liquidated-damages provision is enforceable, courts consider whether the damages stemming from a breach are difficult or impossible to estimate or calculate when the contract was entered and whether the amount stipulated bears a reasonable relation to the damages reasonably anticipated. 198-Liquidated damages must bear a reasonable relationship to actual damages, and a liquidated-damages clause is invalid when the stipulated amount is out of all proportion to the actual damages. 200- A penalty is in effect a security for performance, while a provision for liquidated damages is for a sum to be paid in lieu of performance. 198-Liquidated damages must bear a reasonable relationship to actual damages, and a liquidated-damages clause is invalid when the stipulated amount is out of all proportion to the actual damages. 200- A penalty is in effect a security for performance, while a provision for liquidated damages is for a sum to be paid in lieu of performance. A term in a contract calling for the imposition of a penalty for the breach of the contract is contrary to public policy and invalid. This position also finds elucidation in the following paragraph from American Restatement (Second) of Contracts 1981:- “356. LIQUIDATED DAMAGE AND PENALTIES (1) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof or loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.” 27. Returning to the facts of the present case, the so called Deed of Agreement for Earnest Money inasmuch as it postulates the payment of twice the sum received ought not to have been decreed as firstly, the contract itself could not have been specifically enforced since the Defendant was devoid of title; and secondly, the Plaintiff had not proved that he had suffered any damages and facially the stipulated sum was in the nature of a penalty. 28. In Phulchand Exports Limited Vs O.O.O. Patriot 2011(10)SCC 300, the Appellant (Seller) entered into a contract with the Respondent (Buyer) relating to the sale/purchase of 1000 MT of Indian polished rice for a total consideration of INR 12,450,000/-. The Seller loaded the rice 16 days late and the Vessel freighted by the Sellers left port (Kandla) 38 days later than the contractually stipulated time of departure. The specified destination, the port of Novorossiysk, Russia, was to be the first port of discharge, and even in this regard there is a finding that the Vessel on which the shipment had been consigned was not sailing directly to the said port, leave aside Novorossiysk being its first port of call. The ship suffered an engine failure which resulted in its requiring salvage operations near Turkey, and the entire cargo on board, including the subject consignment of rice was sold pursuant to Admiralty proceedings to compensate the cost of the rescue of the Vessel. The ship suffered an engine failure which resulted in its requiring salvage operations near Turkey, and the entire cargo on board, including the subject consignment of rice was sold pursuant to Admiralty proceedings to compensate the cost of the rescue of the Vessel. 29. The Insurance Company maintained that the lien of the cargo to compensate the costs of the rescue of the Vessel was not covered in the policy. Arbitration proceedings under the aegis of the International Court of Commercial Arbitration at the Chamber of Commerce and Industry of the Russian Federation culminated in the passing of an Award which directed the sharing of the price of the rice consignment equally between the parties. In the Award it has been opined that the Buyer had failed to forward the shipping documents and the Insurance Certificate to the Seller and thus was equally blameworthy. The defence of the Seller was that the goods had passed to the Buyer, who had already paid the entire sale price on negotiation of documents by the Seller with the concerned Bank. This Court held that despite the fact that it was a CIF contract, the consignment having been belatedly boarded on the Vessel, which Vessel thereafter sailed later than the time agreed upon by the parties, and which Vessel did not have the contracted destination Novorossiysk as the first port of call, could not have been in conformity with the contract, and hence the goods could not be viewed as having passed to the Buyer thereby shifting to it the liability of the lost shipment. 30. The other question that was raised was whether the stipulation in the contract envisaging the reimbursement of the consideration received by the Seller in the event of non-performance of the contract was in the nature of a penalty. It was in this context that Sections 73 and 74 of the Contract Act came to be considered. This Court held that the clause requiring the refund of the price of the Rice consignment could not be viewed as a penalty which is not legally recoverable in India and therefore the Award was impervious to jural interference as it was not against the public policy of India even in terms of the interpretation given in ONGC Ltd. vs Saw Pipes Ltd. (2003) 5 SCC 705 . 31. 31. After recording that the opinion of the two Constitution Benches still hold the field, I have nevertheless mentioned Phulchand Exports only for adverting/clarifying that views of this Court have remained constant till now. I must immediately clarify that it would require a Bench larger than a Five -Judge Bench to alter the legal position from what has been enunciated in Chunilal V. Mehta and Fateh Chand. The decisions of smaller Benches are relevant only for the purpose of analysing the verdict in a particular case on the predication of the elucidation of the law laid down by the Constitution Benches. This would include an oft- quoted decision in Maula Bux vs Union of India, 1969(2)SCC 554, as well as UOI vs Raman Iron Foundry, 1974 (2) SCC 231 , and BSNL vs Reliance Communication Ltd., 2011(1) SCC 394 , etc.” 20. In view of the aforesaid exposition of law, the judgments and decrees passed by both the learned courts below, awarding Rs.6,00,000/- along with interest in favour of the plaintiff without going into the question whether a covenant stipulating that double the amount of earnest money would be payable in the event the contract was not performed, was in fact legal in terms of the Indian Contract Act, cannot withstand judicial scrutiny and are, therefore, are liable to be set aside. However, it does not mean that the plaintiff is not entitled to liquidated damages for which the courts below obviously have to scrutinize the pleadings as well as the evidence led in proof thereof. 21. Accordingly, both the impugned judgments and decrees as passed by the learned courts below are set aside with a direction to the learned trial court to calculate / quantify and award the liquidated damages in favour of the plaintiff, to which she would be entitled to , after scrutinizing the pleadings as well as evidence led in support thereof. This however does not mean that the entire suit shall be re- opened for decision and it shall not be open to the plaintiff now to insist upon specific performance. Therefore, it needs to be clarified that the learned trial court will confine itself only to the question of award of liquidated damages to be awarded in favour of the plaintiff. 22. The parties through their respective counsel are directed to appear before the learned trial court on 22.5.2018. 23. Therefore, it needs to be clarified that the learned trial court will confine itself only to the question of award of liquidated damages to be awarded in favour of the plaintiff. 22. The parties through their respective counsel are directed to appear before the learned trial court on 22.5.2018. 23. The appeal is disposed of in the aforesaid terms, leaving the parties to bear their own costs. Pending application, if any, also stands disposed of.