Law:

Section:

(a) Contract--- ----Octroi contract---Penal clause in agreement---Enforcement---Scope---Default in payment of instalments---Penalty, imposition of--- Estoppel, principle of---Applicability---Interpretation of an instrument---Requirements---Octroi contract was executed between plaintiff-contractor and defendants---Plaintiff agreed to deposit monthly instalments on the last day of each month failing which he was required to be penalized at the rate of 1% per day for late payment---Defendants before imposing penalty were required to serve three day's notice upon the contractor for doing the needful and in case of failure to pay instalment the penalty was to be imposed---Plaintiff committed default in payment of instalments and penalty---Plaintiff filed suit against the said penalty which was dismissed by the Trial Court but Appellate Court decreed the same---Validity---Entire clause of contract for the purpose of imposition of penalty should be read and a part thereof could not be interpreted in isolation from the rest of the contents of said clause---Plaintiff for invoking penal clause should have been served with a notice for payment of instalments within three days when first ever default was committed and contract should have been cancelled for non-payment of instalments---Defendants never opted to invoke the penal clause as per agreed terms but they waited till expiry of contract---Defendants after receiving entire contract amount had started recovery of penalty by pressing into service the penal clause of the contract---Defendants remained quiet in continuous default of contractor for his non-payment of monthly instalments within due time for eight months and had accepted amount being deposited after stipulated period---Principle of acquiescence was applicable in the present case---Defendants could not press into service the penal clause of contract after expiry of contract period---Three day's notice was sine qua non for invoking the penal clause of contract and in absence of said notice no penalty could be imposed---Controversy should have been resolved on the agreed terms and conditions of contract---Defendants had not served any notice to the plaintiff…

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