Contractual liquidated damages and replacement remedies barred a separate refund claim for plant investment under Section 74.

A contractual claim for refund of the plant investment was rejected where the agreement provided a distinct performance guarantee, liquidated damages, and a separate rectification or replacement remedy. Because the claimant did not invoke the replacement mechanism or incur replacement cost, it could not reframe the loss as compensation for the whole plant after alleging total failure. Section 74 of the Indian Contract Act confined recovery to reasonable compensation within the contractual limit, so the additional claim beyond the liquidated damages already awarded was disallowed.

---

---

Issues: Whether the appellant was entitled to the claim of Rs.68.15 lakhs towards loss suffered due to non-performing machinery and equipment, treated in substance as refund of the amount spent on the plant, in addition to the contractual liquidated damages already awarded.

Analysis: The contractual scheme contained a distinct performance guarantee, a liquidated damages clause, and a separate rectification or replacement clause. The claim for Rs.68.15 lakhs was not founded on the replacement mechanism in the agreement, because the appellant did not call upon the respondent to replace the machinery and then incur replacement cost. Instead, the claim was framed as a refund of the investment made on the plant after asserting that the plant had failed altogether. In that setting, the measure of compensation had to remain confined to the contractually stipulated remedy, particularly in view of Section 74 of the Indian Contract Act, 1872, which limits recovery to reasonable compensation not exceeding the amount named in the contract where a penalty or liquidated damages are stipulated.

Conclusion: The appellant was not entitled to recover the additional sum of Rs.68.15 lakhs. The contractual liquidated damages already awarded exhausted the permissible claim, and the High Court's view rejecting that amount was upheld.

Ratio Decidendi: Where a contract provides specific liquidated damages and a separate replacement remedy, a claimant cannot bypass those contractual limits and recover the cost of the whole plant as refund or damages unless the contractual replacement mechanism is actually invoked and satisfied.

---