“ 40. From the above, it is clear that this Court held that Maula Bux case [Maula Bux v. Union of India, (1969) 2 SCC 554; (1970) 1 SCR 928] was not, on facts, a case that related to earnest money. Consequently, the observation in Maula Bux[Maula Bux v. Union of India, (1969) 2 SCC 554; (1970) 1 SCR 928] that forfeiture of earnest money under a contract if reasonable does not fall within Section 74, and would fall within Section 74 only if earnest money is considered a penalty is not on a matter that directly arose for decision in that case. The law laid down by a Bench of five Judges in Fateh Chand case [Fateh Chand v. Balkishan Dass, (1964) 1 SCR 515; AIR 1963 SC 1405] is that all stipulations naming amounts to be paid in case of breach would be covered by Section 74. This is because Section 74 cuts across the rules of the English common law by enacting a uniform principle that would apply to all amounts to be paid in case of breach, whether they are in the nature of penalty or otherwise. It must not be forgotten that as has been stated above, forfeiture of earnest money on the facts in Fateh Chand case [Fateh Chand v. Balkishan Dass, (1964) 1 SCR 515; AIR 1963 SC 1405] was conceded. In the circumstances, it would therefore be correct to say that as earnest money is an amount to be paid in case of breach of contract and named in the contract as such, it would necessarily be covered by Section 74.
