B. Dayal, J. - (1.) This is a defendant's Second Appeal. The plaintiff who is carrying on the business of selling Ghee at Aligarh submitted a tender to the Union of India in its railway department for supply of Ghee. This tender was accepted and a purchase order was given to the plaintiff for supply of 120 maunds of Ghee by the 27th of October, 1948. It was stipulated in the contract: "The railway administration will be at liberty to purchase elsewhere on the account and at the risk of the suppliers the said unbooked or undelivered quantity and to recover from the supplier any extra cost that may be incurred from any money due to the supplier by the railway administration and/or forfeit the security deposit in whole or in part at the discretion of the railway administration." On the back of this order again there was condition No. 11 which ran as follows:- "The security deposited by you will be liable to forfeiture by the railway in the event of the failure on the part of the contractors to fulfil this contract under terms and conditions laid down above to the satisfaction of the railway administration." It is common ground between the parties that the plaintiff did not supply any quantity of Ghee under the contract till the 27th of October, 1948 as stipulated but had made a deposit of Rs. 4,000 as security for the due performance of the contract with the railway. The railway administration informed the plaintiff after the 27th of October, 1948 that the supply not having been made within time, the transaction was rescinded. The plaintiff thereupon filed the present suit for the recovery of Rs. 4,000 deposited as security and interest thereon. The case of the plaintiff was that the railway authorities had deliberately avoided purchasing Ghee because the price of the commodity had fallen very considerably and the railway did not supply wagons which they had agreed to supply for carrying the purchased quantity to different places. The railway was therefore responsible for having broken the contract.
(2.) The defence taken by the railway administration was that the plaintiff never asked them for supply of any railway wagon and the Ghee not having been supplied, the security deposit was liable to be forfeited. The plaintiff was therefore not entitled to the amount claimed.
(3.) The lower appellate court came to the conclusion that the defendant had failed to prove any agreement between the parties that security money would be forfeited in case supply of Ghee was not made. The lower appellate court also held in the alternative that the stipulation was in the nature of penalty and since the railway had not proved any loss, the plaintiff was entitled to the refund of the amount claimed. The decree of lie trial court dismissing the plaintiff's suit was thereby reversed and the lower appellate court passed a decree for Rs. 4700 as claimed. Against that decree, the Union of India has filed the present Second Appeal, and same contention have been raised in this Court.;