To say that actual proof of loss is not required, but some loss must be proved nonetheless is to walk a fine line. The Judicial Committee held this was a penalty, since it was not a definite sum, but was liable to great fluctuation in amount dependent on events not connected with the fulfilment of the contract.
If such sum is a genuine pre estimate of loss it is termed liquidated damages, and if it bears no reflection on the loss suffered, it is termed a penalty.
Union of India v. Meetings of general body of subscribers.
Chitty on contracts 33rd edition pdf
For instance, chit fund companies can collect subscriptions up to 10 times its net worth; it can legally conduct bids even when only two members of a group are present; there is no deposit insurance for investors; and there is no regulator. Prized subscriber to furnish security. Union of India v. In such cases the burden of proof would be on the party who contends that the stipulated amount is not reasonable. Century Spg and Mfg Co. Shah and Arun Kumar JJ. The latter are penal, the former are not. The proposed Bill aims to overcome these loopholes. Ahmad Ali v. On the first point it is submitted that to read these requirements of s. However, the genuine pre-estimate of damages test does not apply in such cases. It is submitted that the correct interpretation would be to read s. Wallis v. That case concerned what was expressed to be a liquidated damages clause. Form of chit agreement.
Substitution of subscribers. Appeal against decision of Registrar or nominee.
It is stated in the Chitty that the purpose of fixing a sum is to facilitate recovery of damage without the difficulty and expense of proving actual damage; or to avoid the risk of under compensation, where the rules on remoteness of damage might not cover consequential, indirect or idiosyncratic loss; or to give the promisee an assurance that he may safely rely on the fulfillment of the promise. Adoni Ginning Factory v. Cessation of winding up proceedings on insolvency of foreman, etc. Form of chit agreement. Books, records, etc. Indian decisions tend to follow and incorporate the principles laid down in English decisions. The oldest reported case relating to penalties appears to date from ,  but even that case is decided on the basis that penalties were already generally considered unenforceable. A shortcoming of this Act is that it vests the responsibility of framing the rules with the state governments. The major distinction between English and Indian law upon the point is that under English law, penalties are irrecoverable. The penalty rule is an interference with freedom of contract. On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties. Such sum was to be deducted from the payment. Right to appeal. Cellulose Acetate Silk Co. However, the decision in Dunlop in was taken to authoritatively restate the law.
This award was challenged before the Supreme Court as having been decided contrary to the terms of the contract and prima facie illegal. Contact Us Search In a contract, the parties may name a sum to be payable in the event of breach.
Aggregate amount of chits. Some have even been running for over years. Has the party who seeks to establish that the clause is a penalty shown that the amount payable under the clause was imposed in terrorem, or that it does not constitute a genuine pre-estimate of loss for the purposes of the Dunlop case, and, if he has shown the latter, is there some other reason which justifies the discrepancy between i and ii above?
The proposed Bill aims to overcome these loopholes.
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