1. ' The appellant had applied for the post of Technical Foreman in the PIDC. He was selected and nominated to undergo a course of technical training in France at the expense of the respondent, on executing a bond. This letter, dated 22-5-1958 provided that in case of misconduct or unsatisfactory progress the appellant could be recalled back and would be liable to pay the amount spent on the training. It further provided that after successful completion the applicant would be obliged to serve the respondent for a period of 5 years on a salary of Rs,300-20-600. The letter also provided that before proceeding abroad the applicant and his surety will have to execute a surety bond for Rs,10,000. This offer was accepted by the appellant, who jointly with Flight/Lieut. S.M. Nawaz executed a bond (Exh.9) on 30-5-1958. Finally letter, dated 11-2-1959 (Exh.10) was issued containing the terms and conditions of the service. Clause 5(iii) inter alia provided that the appointment will be terminable at any time without previous notice if the appellant would be guilty of any insubordination, intemperence or misconduct, and the appellant would be liable to refund to the respondent the amount equivalent to the expenditure incurred on the appellant's during the training as maintained in the books of account of the respondent plus interest at 41$ thereon. The applicant proceeded on training abroad and on successful completion joined the service. In 1962 the PIDC was bifurcated and the appellant's service was transferred to WPIDC. On 21-7-1962 the applicant applied for being released from service w.e.f . 2-9-1962. Again on 24-5-1963 the applicant repeated his request stating that he would not be able to continue after 1-8-1963. He further requested that his leave due to him should be adjusted and he should be relieved. The respondent by his letter (Exh.20) replied as follows:-- "We refer to your application, dated 24-5-1963 and inform you that you can be relieved of your duties, w.e.f, . 1-8-1963 (A.N.) provided you pay. In cash a sum of Rs,833,33. (Rupees eight hundred and thirty-three and thirty-three paisa) being the proportionate amount of bonded money for the unexpired period of your contract after adjusting the salary in lieu of 33 days earned leave to your credit."
2. ' It seems that the applicant did not reply to this letter and on 18-7-1963 (Exh.12) applied for earned leave from 2-8-1963 to 16-8-1963 for 15 days. From the endorsement on Exh.12 it seems that it was approved; It seems that thereafter he proceeded on leave. On 10-11-1963 a telegram was sent by the respondent that the leave required by application dated 18th October has not been sanctioned and the appellant should immediately report on duty at Multan at once otherwise service will be terminated under clause 5(iii). On 14-1-1964 services of the appellant were terminated as he absented from duty without permission and failed to join to duty in spite of instructions. The appellant was called upon to pay Rs,10,000 in terms of the bond executed by him. After serving legal notice the respondent filed suit for recovery of Rs,10,000 which was decreed by the trial Court and confirmed by the first appellate Court. The appellant had defended the suit on several grounds. However, the only ground pressed in this appeal is that the respondent was entitled to recover damages which it may have suffered not exceeding Rs .10,000. According to the appellant as the respondent has failed to establish that it has suffered any damage merely on the basis of the bond the appellant cannot be held liable to pay Rs,10,000. The relevant part of the bond necessary for consideration of the contention of the parties is reproduced as follows:- ' KNOW ALL MEN BY THESE PRESENTS that we, the Bounden No,1 and F/Lt. S.M. Nawaz Technical Adjt.
3. 102 M.U.P.A.F. Drigh Road, Karachi (hereinafter called Bounden No,2) in consideration of the aforesaid nomination and the expenditure involved therein DO HEREBY BIND ourselves and each of us, our and each of our heirs, executors, administrators to pay to the Corporation upon demand and without demur the sum of Rupees ten thousand.
4. ' It was pointed out that in the event of breach of any of the above condition or in the event "of his conduct or the progress of his training in his service under the foregoing clause his bond will be liable to be deducted.
5. ' Mr.Khalilur Rehman the learned counsel for the appellant has contended that the appellant had asked for leave, which was not granted and he was not released although the respondent had agreed to relieve him on payment of Rs,833 which could have been adjusted from the gratuity, provident fund, and other dues of the appellant. In this regard the finding of the Courts below is that the offer made by the respondent's letter (Exh.20) was not accepted by the appellant therefore, he cannot avail of the benefits of that letter. The appellant had applied for being released and in reply the respondent had offered him to release after adjustment of his leave and upon payment of Rs,833.33 by him. Instead of availing of this opportunity the appellant by his letter, dated 18-7-1963 applied for 15 days' leave. This implies that he wanted to continue in service or that he did not accept the offer because neither he-replied nor Rs,833.33 was paid by him. The learned counsel stated that verbally the appellant had conveyed the acceptance but I am not inclined to accept it nor the Courts below have accepted this plea. There can be no doubt that the appellant abstained from duty and was dismissed for misconduct under terms and conditions of service. The bond clearly provides that in consideration of the nomination and for training abroad and expenditures involved therein, the executant i.e. The appellant bound himself on demand to pay Rs,1000. It further contemplated that if the appellant commits breach of service agreement or his services are terminated for misconduct then on demand by the respondent the appellant and his surety will refund all money expended in respect of the travelling, expenses training, tuition fee and residence, etc. With interest at the rate of 4%.
6. ' Mr. Khalilur Rehman has contended that even if it is held that the appellant has committed breach, the respondent would not be entitled to recover Rs,10,000 from the appellant, as a matter of course. He further contended that the case is governed by section 74 of the Contract Act and the respondent is entitled to recover reasonable damages suffered by it not exceeding Rs,10,000. While referring to section 74 of the Contract Act, the learned counsel referred to Aziz Ahmad v. Manzoor Ahmad PLD 1961 Kar. 305 wherein late Justice A.S. Faruqui after considering various authorities observed: -- "Section 74 seeks to resolve the difficulties in the common law doctrine of damages. It dispenses with fine distinctions between the claim of damages based on the principle of liquidated damages and those imposed by way of penalty. It makes provision for both and the principle laid down is that where a sum is named or a penalty is stipulated the party complaining of the breach is entitled to a reasonable compensation not exceeding the amount so named or the penalty so stipulated. And though it says that "whether or not actual damage or loss is proved to have been caused" it lays down that the compensation to be given to the injured party should be a reasonable one within the maximum stipulated in the contract. It must, therefore, "follow that merely because a sum has been named in the contract the party complaining of the breach cannot claim that sum as a matter of course, because the Court will grant only a reasonable compensation and no more whatever may be the figure named. It must also follow that where a sum has been named in the contract the party complaining of breach is entitled to some damages. In exercising the unqualified discretion granted to it by this section the. Court will naturally act with care and caution and in accordance with recognised principles. Where therefore the sum named is the result of an honest and genuine pre-estimate of damages having regard to the nature of the transaction and the circumstances of the case the Court may not find much difficulty in awarding an amount not far different from the one named unless the contrary is proved. But where the sum has been stipulated as 'in terrorem' to work as a deterrent to compel a party to fulfil the main contract and no certain date can be found for the determination of the "reasonable compensation", the Judge may experience a real difficulty. In such cases, the Court will look to the nature of the transaction, the position of the parties at the time of the bargain and the comparative undue advantage or disadvantage which might result to the parties by the enforcement of the penal clause."
7. ' Again in Messrs General Iron Steel Works v. Fazal Muhammad PLD 1967 Kar.1 while referring to sections 73 and 74 of the Contract Act, it was observed that, "where the parties have not contemplated a fixed amount as damages its estimate is to be made in accordance with section
73. But if the parties have pre-estimated the damages, it will be assessed in accordance with the principles laid down by section 74". It was held:-- ".Thus if the plaintiff fails to prove the actual damages suffered by him he will not be entitled to recover simpliciter damages on the basis of the liquidated damages provided in the contract. It is his duty to prove damages in a given case. Each case would depend on its own facts. In assessing damages under this provision of law there is a duty cast on the Court to award reasonable compensation to an aggrieved party that should not exceed the amount so named in the contract.
8. In determining reasonable compensation a Court of law shall have to take into consideration the means available to a party to mitigate the damages. But the fact that a party failed to utilise such opportunity would not necessarily absolve the party at fault from his liability under the contract. It would be for consideration in each case whether any such opportunity was not accepted for good and reasonable ground."
9. ' The learned counsel for the appellant has also relied on Syed Sibt-e-Raza v. Habib Rank Ltd. PLD 1971 SC 743. In this case the appellant was an employee as Auditor in the respondent bank.
10. According to the agreement he was to serve the bank for five years and if he refused to serve for the full period he was liable to pay Rs,2,000 as damages.' Soon after joining service he resigned on the ground of illness. The bank forfeited Rs,2,000 which had been deposited as security. The appellant filed suit for refund of Rs,2,000. The bank established by evidence that it had spent more than Rs,2,000 on the training of the appellant. Relying on the earlier judgment the following observation was made: -- "It is clear that section 73 covers cases of breach of contract where no amount of compensation is stipulated in the agreement itself, and the compensation has to be assessed strictly on the basis of the loss which has accrued to either of the contracting parties in the usual course of things on account of such breach, or which the parties knew when they made the contract, to be the likely result of the breach, section 74 provides for cases where a sum is named in the contract itself as the amount to be paid in the case of the breach of the contract, or if the contract contains and other stipulation by way of penalty, the party complaining of the breach has to be compensated, regardless of the proof of any actual damages or loss, and is entitled to receive from the party who has broken the contract reasonable compensation nor exceeding the amount so named, or the penalty so stipulated."
11. ' The learned counsel also referred to PLD 1982 Kar. 590 in which similar observations have been made. In this regard reference has also been made to Fateh Chand v. Kishandas AIR 1963 SC 1405.
12. From these authorities it is clear that the law is well-settled that in cases where an agreement provides for a fixed amount of penalty or damages for the breach, the party complaining of the breach cannot recover this amount as a matter of course. The plaintiff will be entitled to damage suffered by him but he will not be entitled to recover exceeding the amount fixed under the agreement. Section 74 casts a duty upon the Court to determine the reasonable compensation which can be awarded to the party complaining of the breach. It is, therefore, to be considered whether in the present case the respondents are entitled to claim the entire amount of Rs,10,000.
13. ' Mr. Abbasi, the learned counsel for the respondent has contended that there are two clauses in the bond one is in respect of forfeiture of Rs,10,000 and the other is contained in the closing part of the bond whereby the respondent is entitled to recover the expenses incurred on the training and travelling of the appellant. If the interpretation o the learned counsel is accepted then it has to be seen whether an evidence has been led to prove the amount spent by the respondent. There is no evidence to show what amount has been spent. In fact no a word has been uttered by the respondent's witness, nor any document B has been produced to that effect. The contention that the respondent is entitled to recover Rs,10,000 as the bond contemplates such recover can hardly be justified in view of the observations made by the aforestated authorities. The respondent, in spite of the bond, ought t have established the expenses incurred on appellant's training and th damage suffered by it due to the breach of the agreement committed by the appellant in not serving the entire tenure of contractual period of 5 years.
14. ' A perusal of the evidence of the parties will show that the respondent by its letter Exh.20 stated that it was prepared to relieve the appellant from 1st August, 1963 after adjusting his leave provided he pays Rs,833.33 being the proportionate amount for the period he has served and the remaining period for which he wanted to be relieved. This was, a method of calculating the damages which the respondent may have suffered. Although the offer made by this letter was not accepted by the appellant, in the absence of any proper evidence to prove damages suffered by the respondent reliance can be placed on this letter to indicate that at one stage the respondent was prepared to relieve the appellant from the unexpired period of service on payment of Rs,833.33. These peculiar facts of this case cannot lead to a rule that where a bond has been executed by a party for serving a fixed period and in breach thereof he has to pay a fixed sum, he can obtain release before the expiry of that period, on payment of proportionate amount of the bonded money for the unexpired period. This cannot be a rule for determining the liability of the executant. The liability is to be governed as provided by section 74 of the Contract Act. For the purpose of this case and in the special circumstances, facts and'evident of the parties I will assess Rs,833.33 the reasonable damage as established by the respondent for breach of agreement.
15. ' The learned counsel for the appellant contended that in the written statement the appellant had made claim for his dues towards overtime for 199 days, four months gratuity, and difference in salary amounting to Rs,10,374. In the prayer clause contained in the written statement/counter- claim the appellant had prayed that he is entitled to a decree for the amount claimed. The appellant's claim whether termed as set off or counter-claim, could be entertained on payment of proper court-fee which has not been paid till todate. I am therefore not inclined to consider this claim at all.
16. ' I therefore allow the appeal, set aside the judgment and decree passed by the learned Courts below and pass a decree in favour of the respondent in the sum of Rs,833.33 with full costs throughout and interest @ 4$ per annum from 13th August, 1964 till payment.