B.S.N.L vs Reliance Communication Ltd

The Supreme Court addressed whether clause 6.4.6 of the Interconnect Agreement between BSNL and Reliance Infocomm is a penalty or a pre-estimate of damages. The Court held that the clause is a pre-estimate of damages, emphasizing that it is essential to distinguish between penalties and genuine pre-estimates of loss under contract law. The judgment clarified that the enforcement of such clauses must align with the principles of fairness and reasonableness as established in the Indian Contract Act, 1872, particularly Sections 73 and 74.