ABDUL QADEER CHAUDHRY, J.---This appeal by the leave of the Court is directed against the judgment of the High Court dated 12-4-1978.
2. The facts, in brief, are that a contract for construction of residential buildings was awarded to the appellant by the respondents. According to the contract, the work was to be completed within twelve months. The work was divided into two groups, i.e., group `A' and group B'. Clause 46 of the Contract requires that group A's work to be completed within a period of nine months and group B's work within a period of twelve months. There were provisions regarding the bonus and recovery of liquidated damages. The Contract was made on 19-7-1971. Group A' work was completed on 4- 11-1972 and group B' work was completed on 6-3-1973. As the appellant failed to complete the work within the stipulated period, the respondents had deducted Rs.5,08,000 from the bills of the appellants as liquidated damages in pursuance of the conditions of the Contract. The appellant challenged the action of the respondents by a Civil suit. The suit was contested and ultimately it was dismissed by the trial Court. This order was challenged in first appeal before the Peshawar High Court which was dismissed by it on 12-4-1978. Leave to appeal was granted to consider the question "whether a defendant was required to produce evidence to show the loss caused to it by the plaintiffs breach of contract, even in those cases in which the plaintiff had agreed to be bound by the defendant's estimate of damages because of the difficulty of asses sing the actual damage suffered by the defendant".
3. It was held by the High Court that it was not necessary for the respondents to prove loss caused to it by tile appellant's breach of contract. Clause 46 of the Contract reads as hereunder:-- "3(i) The Contractor shall earn by way of bonus daily sum of Rs.1,000 (Pakistani Rupees) for each calendar day not exceeding thirty (30) calendar days by which the Actual Completion Date in respect of Group `A' works precedes the Contract completion date on respect of Group `A' works.
(ii) The Contractor shall earn by way of bonus daily sum of Rs.500 (Pakistani Rupees) for each calendar day not exceeding thirty (30) calendar days by which the Actual completion date in respect of Group 'B' Works precedes the Contract completion date in respect of Group 'B' works.
4(i) If the Contractor shall fail to complete Group `A' works on the Contract Completion date in respect of the said Group, he shall pay to Wapda as liquidated damages for such default the daily sum of Rs.2,000 for each calendar day by which the Actual Completion date in respect of Group 'A' works succeeds the Contract Completion date in respect of the said Group.
(ii) If the Contractor shall fail to complete Group `B' works on the Contract Completion date in respect of the said Group, he shall pay to Wapda as liquidated damages for such default the daily sum of Rs.1,000 for each calendar day which the Actual Completion date in respect of Group B' works succeeds the Contract Completion date in respect of the said Group."
4. The real controversy between the parties is with regard to the interpretation of clause 46 of the Contract. According to the appellant, it is a penal clause and penalty is not recoverable under section 74 of the Contract Act. According; to the respondents, as the amount had been mentioned as liquidated damages in the Contract, they had rightly deducted the amount from the bills of the appellant. Construction of "contract" is to be made which is in consonance with intention of the parties and language of contract. This contract has three significant features. First, that the contract was to be completed within the stipulated period. Second, if the contractor completes the work before the stipulated time, he would be entitled to bonus. Third, if he fails to complete the work within the time allowed in the contract then he shall pay the amount prescribed in clause 46 of the Contract as liquidated damages. Incentive had been given to complete the work before the time allowed to him for the completion of the work. Thus, there were reciprocal promises between the contractor and the department. The contracting parties had determined the pre-estimate of the expected loss. As the appellant had failed to perform his part of the contract he was, therefore, obliged to make the payment to the respondents under the terms of the contract. Liquidated damages is not a punishment. The parties may by an agreement fix a specified amount as liquidated damages to avoid the difficulty that may be found in settling the actual damages that may accrue against the defaulting party on the breach of contract. The manifest intention is to get rid of "' future calculation and disputes. Where an amount is mentioned in the contract as penalty payable on breach of contract, the parties are entitled to recover actual damages not exceeding the amount mentioned in the contract but in case of liquidated damages, a party is entitled to recover the same from the opposite party in case of breach of contract. However, where the Court considers that the amount mentioned in the contract as liquidated damages is oppressive, or highly penal in nature the Court may refrain to grant such amount and itself determine the amount which is reasonable in the circumstances of a particular case. The High Court has considered the legal position and observed as hereunder:------ "The whole principle of the law which emerges from the various authorities quoted above ii that the parties who entered into a contract no doubt expected that the contract would be carried out, but they also contemplated the possibility of the contract not being carried out and provided for such a case. If in making provision for breach of the contract the promisee stipulates from the promisor, on the breach only for such condition as the Court would deem reasonable in the circumstances, then there is no penalty and the stipulation is not penal but if, on the other hand the Court would, on a proper consideration come to the conclusion that the stipulation was put in not by way of a reasonable compensation to the promisee but in order that by reason of its burdensome or oppressive character, it may operate interrorem over the promisor so as to drive him to fulfil the contract, then the stipulation is one by way of penalty. Applying this provision, it is obvious that the amount stipulated for the two works reasonably was pre-estimate of the loss which could have accrued due to the breach of the contract. The works in groups `A' and `B' both were for the accommodation of the staff concerned with the main project of Tarbela Dam and in this period if the staff was to be accommodated by alternate arrangement it positively put the defendant under huge financial loss, and on the question whether a sum stipulated to be payable under a contract is liquidated damages or penalty, the appropriate tests have been worked out in a number of leading cases, and they are conveniently brought together that measure of damages in a case of breach of a stipulation and assessing the Court has, subject to the limit stipulated, jurisdiction to award compensation in case of breach of contract, as unqualified except to the maximum stipulated, and section 74 of the Contract Act undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether, or not actual damages 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 the loss or damage which naturally arose in the usual course of things, or which the party knew they made the contract, to be likely to result from the breach. In the agreement, in the instant case, the plaintiff was also entitled to a bonus of Rs.1,000 for each calendar day not exceeding 30 calendar days by which the actual completion date in respect of group `A' works preceded the contract completion date, and Rs.500 for each calendar day not exceeding 30 calendar days, by which the actual completion date in respect of group 'B' works preceded the contract completion date in respect of group B' works."
We approve the above observation of the High Court.
5. Learned counsel for the appellant had referred to Kayson v. Ahmed Juvenile Industries PLD 1963 (W.P.) Kar. 766; Haji Suleman v. Eastern Rice Syndicate PLD 1976 Kar. 277; Abdullah v. Karim Haider PLD 1975 Kar. 385, Bliai Panna Singh v. Firm Bhai Arjan Singh 33 C.W.N. 949 (Privy Council) and Alijaz Ahmed v. Arvin Fabrics PLD 1983 Kar. 63, in support of his contention that a party cannot under section 74 of the Contract Act recover simplicitcr that sum whether as penalty or liquidated damages but must prove the actual damages they have suffered. These authorities are inapt in view of the judgment of this Court in Province of West Pakistan v. Mistri Patel PLD 1969 SC 80, Wherein it had been held as hereunder:------ "Section 74 of the Contract Act does not recognise the difference that exists in the English law between liquidated damages and penalty. Under the Common Law a genuine pre-estimate of damages agreed upon by the parties is regarded as liquidated damages. But a stipulation in a contract in terrorem is a penalty. In the case of liquidated damages the contract is binding upon the parties. In the case of penalty, however, the Court refuses to enforce it and awards to the aggrieved party reasonable compensation. The argument that section 74 of the Contract Act deals only with the right to receive from the party who has broken a contract reasonable compensation and not the right to forfeit what has already been received by the aggrieved party cannot be accepted in view of the terms of the section. The cases in which such a view has been taken appear to have ignored the expression "the contract contains any other stipulation by way of penalty" in the section. This expression is comprehensive enough to include cases of forfeiture of money or any property already delivered as well as cases of recovery of money or any property on the basis of a promise to pay."
6. This Court in Sibte Raza v. Habib Bank Ltd. PLD 1971 SC 743 observed as follows:-- "Section 73 of the Contract Act, 1872 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 he the likely result of the breach. Section 74 provided 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 any other stipulation by way of penalty, the party complaining of the breach has to be compensated, regardless of the proof of any actual damage or loss, and is entitled to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named, or the penalty so stipulated. Since the amount is stipulated in the present case, by whatever name it may be described, whether liquidated damages, penalty, recompense or earnest money, the respondent Bank, on breach of contract by the appellants, was entitled to receive reasonable compensation not exceeding the amount of Rs.2,000 as provided in the contract."
7. Now, coming to the facts of the present case, the amount of contract is Rs.6,03,300. The appellant's own case is that due to the breach of the contract, some damages had accrued to the appellant. Reference has been made to Ex. P.W.3/2 wherein Rs.1,25,400 has been mentioned as the damages caused to the respondents. In Ex. D.W.1/P/1 Rs.45,400 have been recommended.
Ex.P.W.3/2 is a letter from the General Manager, WAPDA, Tarbela Dam Project addressed to the Managing Director, WAPDA. For the approval of the authority wherein it has been clearly stated that "On receipt of approval the negotiation with the Contractor will be made". This was only a proposal from the General Manager and it was not accepted by the authority. It is also not mentioned that this proposal was made on the direction of the authority. It is not clear as to who had prepared this document. It is mentioned in EX.D.W.1/P/1 that "the interest that the Contractor might have paid for this amount to the bank would be in the order of Rs.80,000. It is, therefore, likely that liquidated damages may be further reduced from Rs.1,25,400 to Rs.45,400 only". It is nobody's case that abovementioned documents were prepared at the instance of contracting parties, The High Court has considered EX.D.W.1/P/1 and discussed it in Para. 13 of its judgment which reads as hereunder: - -- "But in this letter reference has been made to clauses 3 to 7. Clause 3 relates to the advances paid to the labourers who left the site at the time of War and the total amount covered by this item is Rs.27,056. Clause 4 relates to the increase in the cost of labour between December 1971 to February 1973 and the total amount comes to Rs.10,34,689.50, while clause 5 relates to increase to the cost of Electrical goods and the total amount covered under this item is Rs.2,32,383.04. Clause 6 covers increase in the cost of construction materials to the tune of Rs.25,08,575.50 and clause 7 deals with the increase in the wages of supervisory staff for the period between 14-1-1972 to 31-3-1973 and the total amount is Rs.4,775. Para 13 of this letter, reproduced above, contains a recommendation to offer to the Contractor a sum of Rs.1,25,400 to final settlement of Special Risk claims. Therefore, this letter has no bearing on the case of the plaintiff, which is evident from the contents of Ex.P. V.3/2. In fact, plaintiff had put in a claim under the Special Risk clause which was scrutinised by the General Manager and Project Director."
The document relied upon has no relevancy to the disputed matter as such no reliance can be placed on this document.
8. The facts of the case reveal that the appellant requested for extension of time for the execution of the work which was refused. It was specifically noted that the appellant was negligent in carrying out the work. There is no dispute that the appellant is guilty of breach of contract. He has to pay the damages to the respondent. The respondents' case is that as the appellant failed to complete the work within the stipulated period, they had suffered damages. The appellant as per terms of agreement was liable to pay damages to the respondents.
9. There are concurrent findings of' fact of two court, below. The appeal has no merit and the same is consequently dismissed with no order as to costs.