Delhi High Court
Atul Gupta vs Delhi Development Authority on 28 November, 1994
Equivalent citations: 1994(31)DRJ502, 1995RLR99
Author: R.C. Lahoti
Bench: R.C. Lahoti
JUDGMENT R.C. Lahoti, J.
(1) This is a suit for recovery of Rs.2,98,000.00 with future interest at the rate of 18% per annum.
(2) On the facts, there is no controversy. Delhi Development Authority, the defendant no.1 had built up certain flats in the Asian Games Village Complex. Though the flats were originally built for the purpose of housing the athletes and players participating in the Asian Games, subsequently it was decided to allot/ sale the flats to the public by auction. On 29.8.86, flat no.A-32, was put to auction. The plaintiffs made the highest bid of Rs.l 4,85,000.00 which was accepted. 29.8.86 the plaintiffs paid to the Dda Rs.3,71,250.00 itself, being an amount equivalent to 25% of the bid amount. Of these, Rs 10,000 .00 were paid by means of a bank draft and Rs 3,61,250/ were paid in cash. On 8-9.86, the plaintiffs were issued a letter by the defendant calling upon to pay the balance 75% amount. The plaintiffs failed to pay the balance amount. The reasons are not material. The fact remains that the bid was cancelled. Thereafter, the plaintiffs demanded refund of the 25% bid amount deposited by them. They also submitted in the alternative that even if the defendant intended to make a forfeiture, it could not exceed 20% of the deposited amount. However, the defendant did not agree. The defendant has refused to return to the plaintiffs any part of deposited money treating it as forfeited.
(3) It is common ground that sale by public auction of the flat by the defendant was governed by the Delhi Development Authority (Management and Disposal of Housing Estates) Regulations, 1968. Chapter Ii of the Regulations deals with terms and conditions of disposal of property. If the property is disposed of by sale, para 8 of the Regulations provides : "8.Manner of Payment of Disposal Price. :- (1) When a property is disposed of by sale, every applicant shall deposit a sum equal to 20 per centum of the disposal price of the property rounded to the next hundred along with the application. Such deposit shall be non-interest bearing. (2) An applicant to whom the property has been allotted shall have to pay the balance amount of the disposal price (i.e. after adjusting the deposit) within such period as maybe specified in the allotment latter. (3) If the applicant fails to pay the amount within the specified period, the allotment shall be cancelled and a sum of money equal to 20 per centum of the deposit shall be forfeited and the balance refunded. (4) In the case of such applicants as have not been allotted any property, the deposit specified in Sub-Regulation (1) shall be refunded. (5) Authority shall have the sole and exclusive right over the deposit till it is adjusted or refunded with or without deduction as provided in these regulations."
[underlining by me] (4) The defendant, however, placed reliance on the terms and conditions of allotment by auction which was notified and subject to which the sale by public auction was held. Sub para (iii), (v) and (vi) of para 4 thereof read as under: (III)The Officer conducting the auction shall normally accept subject to confirmation by the Vice-Chairman the highest bid offered at the fall of hammer at the auction and the person whose bid has been accepted shall pay as earnest money a sum equivalent to 25% of his bid either in cash or by Demand Draft in favor of the Delhi Development Authority (Housing). . If the earnest money is not paid, the auction already held in respect of the flat shall be cancelled by the Officer conducting the auction. (v) After the acceptance of the bid, the bidder will be informed of such acceptance in writing and the bidder shall, within 60 (sixty) days thereof pay to the Delhi Development Authority, the balance amount of the bid by bank draft in favor of the Delhi Development Authority (Housing), if the bid is not accepted the earnest money will be refunded to the bidder without any interest unless it may have been forfeited under para (vi) below. (vi) In case the bidder fails to pay the balance 75% of the amount of his bid to the Authority within 60 days of acceptance of the bid, the bid will stand cancelled and the earnest money shall be forfeited."
(5) It is contended by the learned counsel for the defendant that the plaintiffs having participated under the terms and conditions as notified, they would be deemed, and held, bound by the terms and conditions and having participated in the auction, they cannot now be permitted to wriggle out of the consequences flowing from the above said terms and conditions.
(6) The contention of the defendant cannot be accepted for two reasons.
(7) 1 Firstly, the defendant is an authority constituted by law. It is a public authority. It has to act within the four corners of law governing it and not beyond. It cannot also be permitted to transgress the limits of law. The Regulations have a statutory force. The Delhi Development Authority could not have at any point of time devised terms and conditions of allotment by auction in departure from the provisions of the Regutations. To the extent to which the terms and conditions run counter to the provisions of the Regulations, have to be ignored and cannot be given effect to. 6.2. Para 8 of the Regulations provides for deposit by the bidder of a sum equivalent to 20% of the disposal price of the property. Failing the deposit of the balance amount, the allotment shall have to be cancelled and a some of money equal to 20% of the deposit shall be liable to be forfeited and the balance refunded. In short, the power of forfeiture, vested in the Delhi Development Authority extend to 20% of 20% of the disposal price. Para 8(3) of the Regulations obliges the Dda to refund the balance. By formulating the terms and Conditions of allotment, inconsistent with the provisions of para 8 of the Regulations, the Delhi Development Authority conferred on itself a power of forfeiture which the Regulation governing it does not vest in it. 6.3 Though the plaintiffs have deposited 25% of the disposal price in accordance With the terms of the bid, yet in the event of an occasion arising for forfeiture, they cannot be made to suffer a forfeiture exceeding 20% of the 20% of the disposal price. The disposal price was of Rs.14,85,000.00. Twenty per cent of 20%. of it comes to Rs.59,400.00 only. Out of the amount of Rs.3,71,250.00, the defendant Dda can forfeit Rs.59,400. The balance amount of Rs.3,ll,850.00 would be liable to refund to the plaintiffs. However, it appears that the plaintiffs were under an impression that 20% of the amount of Rs.3,75,250.00 deposited by them could have been forfeited and they have confined their claim to recovery of Rs.2,98,000.00 . That much claim deserves to be allowed and not beyond' what has been claimed by the plaintiffs. 6.4 Secondly, the learned counsel for the plaintiff has placed reliance on Section 74 of the Contract. Act. It provides :- "74.Compensation for breach of contract where penalty stipulated for-[When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be; the penalty stipulated for. Explanantion. - A stipulation for increased interest from the date of default may be a stipulation by way of penalty. Explanation. - A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested.
6.5 It has been contended that the amount of Rs.3,71,250.00 deposited by the plaintiff could not be called an earnest and the terms introduced by the defendant in the terms of allotment by auction entailing forefeiture of the amount in the event of failure to pay the balance 75% by the bidder is not only contrary to the statutory regulation but is also by way of penalty. 6.6. The leading authorities laying down principals relevant to the point are Fateh Chand VS. Balkishan Dass , Maula Bux VS. Union of India, , Shree Hanuman Cotton Mills & Anr. VS. Tata Air Craft Ltd., and Union of India VS. Rampur Distillery & Chemical Co.Ltd., . 6.7 In Shree Hanuman Cotton Mills case (supra) Benjamin on 'Sale' and Eard Jowitt's Dictionary of English Law have been quoted vide paras 16 and 19 with approval. Earnest is something to bind the bargain or the contract. Giving an earnest or earnest money is a mode of signifying assent to a contract of sale or the like by giving to the vendor a nominal sum (e.g. a Shilling) as a token that the parties are in the earnest or have made up their minds. In the case at hand 25% of the purchase price could not have been a token amount given by way of earnest. 6.8 It is noteworthy that vide para 12(iv), the plaintiff has specifically alleged that no actual loss had been suffered by the defendant on account of failure of the transaction. The defendant in its written statement has not joined any pleadings stating if any loss was suffered by the defendant and if so the quantum thereof. In Fateh Chand's case (supra) their Lordships have held jurisdiction of the Court to award compensation to be likely to result from the breach. 6.9 In the case of Maula Bux (supra) their Lordships have held :- where the courts unable to assess the compensation, the sum named by the parties if it be regarded as a genuine pre-estimate may be taken into consideration as the measure of reasonable compensation, but not if the sum named is in the nature of a penalty. Where loss in terms of money can be determined, the party claiming compensation must prove the loss suffered by him. Their Lordships have further observed (vide para 9) that it was possible for the Govt. of India to lead evidence to prove the loss suffered by it which having not been done the forfeiture could not be sustained. 6.10 In the case at hand .also the defendant Dda neither pleaded nor proved the loss which might have been suffered by it on account of the transactions having fallen to ground on account of breach on the part of the plaintiff. As already stated a percentage of the amount of deposit consistently with the provisions of the Regulation was certainly liable to be forefeited but not the entire amount of Rs.25000.00 of the purchase prices. The plaintiff demanded the amount back. The defendant-DDA has unreasonably set over the demand of the plaintiff. The plaintiff, is therefore, entitled to recover the amount claimed with interest @ 12% p.a. (7) For the foregoing reason's, the suit deserves to bedecreed. It is directed that the plaintiffs are entitled to a decree for Rs.2,98,000.00 with interest at the rate of twelver per cent per annum from the date of the suit, i.e., 12.10.1968, till realisation. The plaintiffs are also held entitled to the costs of the suit.
(8) Let a decree be drawn, accordingly.