1973 (2) TMI 134

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.... appellants-union of India a large quantity of rum (presumably, for the use of Defence personnel). The rum was found not to conform to the quality stipulated and was therefore rejected by the appellants. The appellants then cancelled the contract and forfeited the entire security deposit of Rs. 18, 332/- which was kept by the respondents disputing the right of the appellants to forfeit the securit....

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....ourt of Delhi, the appellants have filed this appeal by special leave. 3. Only one contention was urged on behalf, of the appellants before us: that the security deposit was taken from the respondents in order to ensure the due performance the contract and respondents having defaulted, the entire amount was liable to be forfeited. A similar contention was advanced before this Court but was reje....

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....es not amount to the imposition of a penalty. But, "where under the terms of the contract the party in breach has undertaken to pay a sum of money or to forfeit a sum of money which he was already paid to the party complaining of a breach of contract, the undertaking is of the nature of a penalty." It was further held that the amount deposited by way of security for guaranteeing the due performanc....