Delhi District Court
Sh. Ashok Kumar Khanna vs . M. C. Luthra on 9 June, 2017
CS NO. 243/16
Sh. Ashok Kumar Khanna vs. M. C. Luthra
IN THE COURT OF SHRI SHAILENDER MALIK:
ADDITIONAL DISTRICT JUDGE03: CENTRAL:
TIS HAZARI COURTS DELHI
CS No. 243/16
New CS No. 612658/16
In the matter of :
Shri Ashok Kumar Khanna
Son of Shri Sant Ram Khanna
Resident of D32
Fateh Nagar,
New Delhi ...... Plaintiff
Versus
Shri M.C. Luthra
Son of Shri Mangal Dass Luthra
Resident of House No. 691
Sector V, R. K. Puram
New Delhi
And Also at Flat No. D504
Chanakya Cooperative Group Housing Society
Sector No. 4, Plot No. 23, Dwarka
New Delhi ...... Defendant
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 1/43
CS NO. 243/16
Sh. Ashok Kumar Khanna vs. M. C. Luthra
Date of filing of the Suit : 17.11.2005
Date of reserving the Judgment : 29.05.2017
Date of passing the Judgment : 09.06.2017
JUDGMENT
(Judgment in Counter Claim) 1 By this judgment I propose to adjudicate the main suit as well as counter claim filed by the defendant. Facts arising out of the pleadings are : 2 That plaintiff has filed the suit for recovery of sum of Rs. 18,00,000/. It is stated in the plaint that plaintiff and defendant were known to each other. Since defendant is owner / allottee of flat no. D504, Chanakya Cooperative Society, Sector 4 Plot No. 23, Dwarka. Defendant wanted to sell that flat as he was in need of money. Defendant stated to have showed his inclination to plaintiff for selling the said flat to him. In this regard plaintiff and defendant stated to have entered into an agreement to sell dated CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 2/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 15.09.2005, under which defendant agreed to sell the above said flat for total sale consideration of Rs. 31,50,000/. Plaintiff agreed to purchase the above mentioned flat as per the terms and conditions mentioned in the agreement dated 15.09.2005.
3 It is further mentioned in the plaint that plaintiff made the payment of Rs.7,00,000/ on 15.09.2005. It is stated that such amount was paid as Rs.2,00,000/ by way of DD No. 112563 dated 14.09.2005 drawn on ICICI Bank, Pitam Pura. Another DD of Rs.2,00,000/ being No. 008223 dated 14.09.2005 drawn on HDFC Bank, Palam, New Delhi DD No. 00834 of Rs. 1,00,000/ dated 14.09.2005 drawn on HDFC Bank, Palam, New Delhi as well as Rs.2,00,000/ in cash. It is stated that beside above said Rs.7,00,000/ plaintiff also paid Rs.2,00,000/ to defendant on 23.09.2005. It is stated that as per Clause 3 of above mentioned agreement to sell dated 15.09.2005 it was agreed above by the parties that party no. 1 / seller will pay all the liabilities pertaining to the flat in question till CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 3/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra finalization of deal.
4 Since defendant had already received total amount of Rs. 9,00,000/ from plaintiff, plaintiff was also ready to pay the balance amount to sell consideration on or before 18.11.2005 as agreed under the agreement to sell. Balance amounts of sale consideration was very much ready and available with plaintiff. Plaintiff stated to have approached the defendant at his residence with balance sale consideration of 31.10.2005. It was agreed between the parties that plaintiff can make the payment of balance amount before 18.11.2005. Plaintiff requested the defendant to accept the balance sale consideration amount to execute the documents of title in respect of flat and to hand over its possession to him. Defendant allegedly refused to do so. It is further alleged that as per clause 3 of the agreement to sell, defendant further to clear house tax and other dues pertaining to said flat.
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 4/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 5 It is stated that since it was also stipulated under Clause 8 of agreement to sell dated 15.09.2005, that in case party no. 1 / seller could not execute the agreement to sell. He will be liable to pay double of the earnest amount. Similarly, in case party no. 2 / purchaser fails to pay the balance sale consideration within stipulated date, the earnest amount will be forfeited by party no. 1. It is stated that plaintiff upon coming to know of malafide intentions of defendant, served a legal notice dated 02.11.2005 requesting the defendant to refund the earnest amount received by him under the agreement to sell dated 15.09.2005 and also to pay Rs. 9,00,000/ as liquidated damages. It is stated that despite service of such notice, defendant failed to comply with the same. It is alleged that since defendant has failed to perform his part of obligations under the agreement to sell, he is liable to make the payment of double of the earnest amount received by the defendant. Therefore, present suit was filed for recovery of Rs.18,00,000/ being double of the amount of earnest money paid to plaintiff with interest @ CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 5/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 24%.
6 Defendant filed the written statement alongwith counter claim. In the written statement, defendant has denied that plaintiff was already known to defendant. It is pleaded that plaintiff was not even remotely known to defendant prior to agreement to sell dated 15.09.2005. It is stated that in fact plaintiff has come to the residence of defendant, few days before an agreement dated 15.09.2005. He inspected the flat in dispute and represented to defendant that he wanted to purchase the said flat for his son. However, later it turned out that plaintiff in fact was a Property Dealer and Financer. Such fact came to the knowledge of defendant only about 56 days after execution of agreement to sell dated 15.09.2005. It is pleaded that agreement to sell though was executed in favour of plaintiff, however, soon thereafter plaintiff showed his true colour and he started pressurizing defendant to execute the sale documents in favour of his nominee/ third party, to which defendant was not agreeable. It is pleaded that CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 6/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra plaintiff went to the extent of claiming that he has entered into this agreement with a view to sell that flat to some other person and thereby started devising ways to wriggle out of that agreement.
7 While it is not disputed that defendant has entered into an agreement dated 15.09.2005 with plaintiff in respect of flat no. D504, Chanakya Cooperative Group Housing Society, Sector 4, Plot No. 23, Dwarka with sale consideration of Rs. 31,50,000/ on the terms as mentioned in the agreement. It is also not disputed that plaintiff had paid Rs. 7,00,000/ on 15.09.2005 i.e. sum of Rs. 5,00,000/ by way of bank draft and Rs. 2,00,000/ in cash. However, it is denied that another sum of Rs.2,00,000/ were paid by plaintiff to defendant on 23.09.2005. It is pleaded that in fact such additional sum of Rs. 2,00,000 was paid on 25.10.2005 and not on 23.09.2005 as claimed by the plaintiff. It is further pleaded that receipt regarding additional amount of Rs. 2,00,000/ though was signed by defendants but plaintiff did not allow defendant to put CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 7/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra actual date of receiving of such additional amount of Rs.2,00,000/ i.e. on 25.10.2005.
8 It is stated that plaintiff was never possessed of sufficient funds even to pay the earnest amount in single occasions let alone being ready with the balance sale consideration. It is, however, not disputed that in terms of Clause 3 of agreement to sell, the liabilities pertaining to the flat in question up to the date of finalization of deal were to be clear by party no. 1 i.e. Defendant. However, it is specifically pleaded that though defendant was required to clear the outstanding liabilities against the said flat but there was no question of concealing any fact by defendant regarding flat, as alleged by plaintiff in para2 of his notice dated 02.11.2005.
9 It is not disputed by the defendant that he has already received sum of Rs. 9,00,000/ as earnest money, from plaintiff leaving the balance sale consideration to be Rs. 22,50,000/, which was payable by the plaintiff on or CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 8/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra before 18.11.2005. It is, however, denied that plaintiff was ready to make the payment of balance sale consideration amount. It is also denied that plaintiff had approached defendant at his residence with balance sale consideration on 31.10.2005. It is pleaded that in fact plaintiff was not having sufficient money with him to pay the balance sale consideration and it was otherwise not practically possible for plaintiff to carry a sum of Rs.22,50,000/ in cash to the residence of defendant on 31.10.2005. As such the fact stated by the plaintiff were denied. It is stated that plaintiff could not ever come to the residence of defendant on 31.10.2005 without requisite stamp papers and draft of balance sale consideration amount. While it is not denied that plaintiff has sent a legal notice dated 02.11.2005, however, it is pleaded that in that notice there is no whisper that he had even come to the residence of defendant on 31.10.2005 as claimed in the plaint. It is pleaded that plaintiff is required to establish by evidence to show that a sum of Rs. 22,50,000/ were lying credited in his bank account.
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 9/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 10 It is further pleaded in the written statement that plaintiff on one hand, has alleged in para2 of his notice dated 02.11.2005 that plaintiff came to know that defendant had taken a loan from DCHFC against that flat and loan was due on 15.09.2005, when such agreement to sell was entered into. It is alleged by the plaintiff in that notice, that defendant concealed this fact and dishonestly induced the plaintiff to pay the earnest money. It is further stated in the said notice that if plaintiff would have aware about defendant having taken the loan regarding that Flat, he would not have entered into an agreement with him. It is stated that all such facts as mentioned in para2 of notice dated 02.11.2005 of plaintiff were in fact stated only to pressurize the defendant and are contradictory to the claim of plaintiff that he had come to the residence of defendant on 31.10.2005 with balance sale consideration entirely in cash. It is stated that defendant had no cash or reasons to accept such huge amount of balance sale consideration in cash. It is stated that all the CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 10/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra facts mentioned in the plaint are in fact false and plaintiff had never visited the residence of defendant on 31.10.2005 and never offered to pay the balance sale consideration.
11 It is stated that regarding Flat, MCD has raised the liability of house tax of Rs. 1.98 lacs for period up to 31.03.2004 out of which defendant had already paid Rs.19000/ before 31.03.2003 through society. Since there was a dispute regarding house tax liabilities of all the flats in that society between the society and MCD. Society, therefore, was pursuing the matter with MCD regarding such house tax liability. It is pleaded that MCD was tentatively agreeable to reduce the total liability against defendant as well as against all the other flat owners in said society to Rs.75000 out of which defendant had already paid Rs. 19000, therefore, since the matter was already pending with MCD and defendant had already deposited a cheque of Rs. 1,79000/ towards his liability of house tax subject to any requisite settlement regarding amount of house tax, therefore, it was false to alleged that CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 11/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra defendant failed to discharge his liability of outstanding house tax as stipulated under Clause 3 of agreement to sell. It is pleaded that defendant had also cleared all his liability towards the society on account of electricity, water maintenance, ground rent and repair charges etc. Defendant stated to have paid Rs. 70,000/ to society on 31.12.2004 and further paid a sum of Rs 1,40,000/ on 10.10.2005. As such total amount of Rs. 2,10,000/ were already paid up to 31.03.2006 for discharge of all outstanding liabilities in respect of flat in question to society. It is pleaded that defendant had cleared all the outstanding dues of society.
12 It is further pleaded in the written statement that defendant has already paid Rs. 1,79,000/ towards clearance of house tax up to 31.03.2004 by way of cheque No. 059069 drawn on Syndicate Bank in the name of society. As such there was no house tax liability outstanding against the defendant for period up to 31.03.2004. So far as house tax for year 200405 has also CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 12/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra been paid to MCD whereas regarding house tax liability of 200506 same was required to be borne by the defendant as well as plaintiff proportionately with reference to the date of finalization of deal. It is stated that as a matter of gesture of goodwill defendant has already paid house tax for entire year of 20052006 vide a receipt issued by MCD. As such there was no outstanding liability against defendant but in any of the dues defendant has been pursuing the matter with all the parties and clear all the dues of society as well. It is stated that after completing all the formalities regarding discharge of liabilities against the flats, defendant as sent a telegraphic notice to plaintiff informing about the date and time for reaching to the office of Sub Registrar with stamp paper, so that defendant could execute the sale deed. It is stated that plaintiff did not send any reply to telegraphic notice dated 16.11.2005. Defendant even reached to the office of Sub Registrar on 18.11.2005 i.e. the last date of executing sale deed. Defendant stated to have waited there from 10:00 A.M. to 02:00P.M. but plaintiff did not turn up nor intimated to CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 13/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra defendant regarding purchase of stamp papers etc. 13 It is pleaded that plaintiff had been insisting the defendant to enter into another sale agreement with other person of his choice for which defendant was not agreeable. Defendant after waiting for plaintiff at the office Sub Registrar stated to have sent a speed post and defendant also sent a telegraphic notice dated 19.11.2005 to plaintiff informing that the earnest money given by plaintiff stood forfeited as per clause 8 of the agreement. It is stated that as such defendant has no liability towards the plaintiff. Other averments of the plaint were denied.
14 In the counter claim filed by the defendant, it was alleged that plaintiff though is claiming recovery of Rs.18,00,000 being double of the amount of earnest money paid in the agreement to sell dated 15.09.2005 whereas for the facts mentioned in the written statement of the defendant in fact the amount of Rs. 9 lacs paid as earnest money had stood forfeited, therefore, it is prayed in the CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 14/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra counter claim that it be declared that earnest money paid by the plaintiff stood forfeited in terms of Clause 8 of agreement to sell dated 15.09.2005. In the counter claim it was reiterated that in fact plaintiff was not having sufficient money available for payment of balance sale consideration. It was also stated that in terms of Clause 3 of agreement to sell, defendant had already cleared all the outstanding including house tax and other liabilities towards the society and MCD etc. 15 In the written statement to the counter claim, it is pleaded on behalf of the plaintiff that counter claim by the defendant is not maintainable in law. It was also stated that proper court fee has not been furnished. Even otherwise, counter claim of the defendant is devoid of cause of action because it was defendant who failed to comply with the terms of agreement to sell. An objection was also taken that counter claim of defendant is otherwise barred in view of all the provisions of Indian Stamp Act. All the facts as mentioned in the written statement as well as CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 15/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra counter claim have been denied. It is pleaded that defendant is not entitled for relief of declaration as sought in the counter claim regarding forfeiture of earnest money because defendant has been guilty of non complying the terms of agreement to sell dated 15.09.2005. It is stated that defendant since the execution of agreement started pressurizing plaintiff to execute the sale deed in favour of his nominee / third party for which plaintiff was not agreeable. Moreover, plaintiff had been requesting the defendant to clear all the outstanding dues including house tax of property in question but defendant has failed to do and also did not inform to the plaintiff well in time. Plaintiff has denied receiving of any notice from defendant.
16 On the basis of averments as come on the record of main suit as well as counter claim following issues were framed on 27.09.2006:
1) Whether the defendant had discharged his all the liabilities raised against him by CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 16/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra the concerned authority i.e. MCD/ Society, bank by the stipulated dated i.e. 18.11.2005. If not its effect? OPD.
2) Whether there is cause of action in filing the present suit in favour of the plaintiff?
OPD.
3) Whether the plaintiff is entitled to double the amount of earnest money as claimed in the plaint? OPP.
4) Whether the plaintiff was having sufficient funds available with him to perform the agreement ? OPP.
5) Whether the plaintiff is entitled to recover the suit amount from the defendant? OPP.
6) Whether the defendant is entitled to forfeit the earnest money as claimed by defendant in the counter claim? OPD.
7) Relief.
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 17/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 17 Evidence in the file of main suit as well as counter claim was jointly recorded. On behalf of the plaintiff three witnesses were examined PW1 is Plaintiff / Ashok Kumar Khanna, PW2 is Vinod Khanna, Brother of plaintiff and PW3 / Smt. Satyawati Khanna who is sisterinlaw of plaintiff. Defendant has appeared in the witness box as DW1. DW2 is Dinesh Kumar Sharma, Assistant Zonal Inspector, MCD. DW3 is Anand Kumar Makkar who is President of the Society in which the flat in question was allotted to plaintiff. DW4 is Parveen Kaur, Sr. Telegraphic Officer, BSNL. DW5 is Yudhvir Singh Clerk from the Syndicate Bank. Another witness was examined who has been numbered as DW3 Sh. Sameer Ishar Siddiqui.
18 I have heard Ld. Counsels for the parties and has gone through the evidence as well as written arguments filed on behalf of parties. My findings on each of the above mentioned issues are following: CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 18/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 19 ISSUE NO. 2 (Whether there is cause of action in filing the present suit in favour of the plaintiff? ) 20 Plaintiff has claimed the recovery of Rs.18,00,000/ in terms of clause 8 of Agreement to Sell dated 15.09.2005 being double of the earnest amount. Entering into an agreement dated 15.09.2005 is not disputed. Payment of amount of Rs.9,00,000/ as earnest amount is also not disputed, therefore, in such circumstance if plaintiff is claiming recovery of double of the earnest amount when commenting on the sustainability of the claim, however, suit is very much with a cause of action and therefore, this issue stands decided in favour of plaintiff and against defendant.
21 ISSUE NO.1,3,4,5 & 6(Whether the defendant had discharged his all the liabilities raised against him by the concerned CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 19/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra authority i.e. MCD/ Society, bank by the stipulated dated i.e. 18.11.2005. If not its effect? OPD.), (Whether the plaintiff is entitled to double the amount of earnest money as claimed in the plaint?), (Whether the plaintiff was having sufficient funds available with him to perform the agreement ?), (Whether the plaintiff is entitled to recover the suit amount from the defendant? ) & (Whether the defendant is entitled to forfeit the earnest money as claimed by defendant in the counter claim? ) 22 These issues are being taken up together because adjudication of these issues is based on similar set of facts and evidence. Before I dwell upon to contentious facts between the parties it would be appropriate to mention here admitted facts. The fact that plaintiff and defendant had entered into an agreement to sell dated 15.09.2005 in CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 20/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra respect of flat owned by defendant, is not disputed. The fact that under the said agreement to sell dated 15.09.2005, plaintiff had paid sum of Rs. 7,00,000/ on 15.09.2005 is also not disputed. The fact that plaintiff, thereafter had paid another sum of Rs. 2,00,000/ though is also not disputed, however, only dispute between the plaintiff and defendant in this regard is that according to plaintiff such amount of Rs. 2,00,000/ was paid on 23.09.2005 whereas according to defendant such amount was paid by plaintiff on 25.10.2005 and not on 23.09.2005. Fact remains it is not disputed that total sum of Rs. 9,00,000/ was paid by plaintiff to defendant under the above referred agreement to sell dated 15.09.2005. It is also not disputed fact that as per clause 3 of such agreement, which is proved on the record as Ex.PW1/1 of the liabilities in respect of such flats were to be cleared and paid by seller upto the date of finalization of deal i.e. 15.09.2005. In other words defendant was required to clear all the details / liabilities in respect of flats including ground rent, house tax, electricity, water charges etc up to CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 21/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra the date of agreement. It is also not disputed that as per clause 8 of above said agreement Ex.PW1/1, if seller fails to clear all the outstanding and fails to execute the agreement to sell, purchaser is entitled to recover double of the earnest money and similarly, if purchaser fails to execute the sale documents, seller is entitled to forfeit the amount paid as earnest money.
23 Keeping above mentioned admitted facts in mind now question for consideration in the facts of the present case is that out of plaintiff and defendant committed default in complying with the terms of the agreement for suffering the liability as per clause 8 of agreement Ex.PW1/1. Let us now examine the evidence in this regard. PW1/plaintiff in his affidavit of examination in chief has testified all those facts as are mentioned in the plaint. PW 1 testifies that on 15.09.2005 he made the payment of Rs. 7,00,000/. PW1 further says that another amount of Rs.2,00,000/ was paid by him on 23.09.2005 to defendant regarding which receipt Ex.PW1/2 was executed. PW1 CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 22/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra further says that in order to make the payment of balance sale consideration, he had arrangements of Rs. 22,50,000/ and was always ready and willing to perform his part of contract. PW1 in para 9 of his affidavit testifies that he had made arrangement of balance sale consideration by taking money from his brother / Vinod Khanna who had retired from his services, the details of which are mentioned in para9 itself. It is also mentioned that brother of the plaintiff/ Vinod Khanna gave him a loan of Rs.10,00,000/ beside this he arranged the requisite money from different persons as per the details given in the affidavit. PW2 says that in terms of clause 3 it was defendant who was supposed to clear all the liabilities regarding the flat in question up to the date of finalization of the deal. PW1 says that it was defendant who failed to pay house tax and other dues in respect of flat and thus failed to clear all the liabilities and committed default in fulfilling his part of obligations under the agreement Ex.PW1/1. PW1, further testifies that in terms of clause 8 of the agreement he has entitled for claiming double of the CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 23/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra earnest amount for the default committed by the defendant. PW1 proves legal notice dated 02.11.2005 and further testifies that defendant had given reply to such notice by reply dated 12.11.2005. PW1 says that in the reply of defendant Ex.PW1/4 he has admitted that he has to pay house tax, liability of Rs. 1,58,000/ up to year 2003 2004.
24 Relevant portion of crossexamination of PW1 will be discussed at later stage of this judgment. PW2 is Vinod Khanna who is brother of the plaintiff who has testified those facts to corroborate the case of the plaintiff. PW2 has testified that he had retired from his services and was having certain FDRs and amount available in his account along with his wife which they had paid as the flat in question was to be purchased in their name under the agreement to sell dated 15.09.2005. Similarly, testimony of PW3/ Smt. Satyawati Khanna.
25 DW1 is Defendant / M.C. Luthra who in his affidavit CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 24/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra of examination in chief has testified that plaintiff though entered into agreement to sell dated 15.09.2005 Ex.PW1/1 and had paid sum of Rs.9,00,000/ including Rs.7,00,000/ on 15.09.2005 and Rs.2,00,000/ on 25.10.2005. DW1, however, says that he had no doubt taken the loan regarding the flat from DCHFC, however, such loan was cleared before 18.11.2005 and this fact is very much evident from the letter dated 13.10.2005 of DCHFC which is Ex.DW1/1. DW1 further says that the society in which the flat in question was allotted has also issued a certificate dated 10.11.2005 certifying therein that defendant has cleared all the dues regarding the flat in question till that date. DW1 says that liability regarding house tax payable to the MCD, since there was a dispute regarding house assessment between society and MCD and MCD has raised liability of house tax of Rs. 1,98,000/ regarding which DW1 stated to have already paid Rs. 19000 on 31.03.2003 to MCD through society. DW1 says that since there was a dispute regarding house tax liability in respect of all the flats between society and MCD, CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 25/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra regarding which society was pursuing the matter but DW 1 stated to have paid Rs.75000 to society regarding clearance of all the liabilities. The statement of society in this regard is Ex.DW1/3. DW1 says that he had already deposited another cheque of rs. 1,79,000 towards the liability of house tax, to society so that society could pay requisite amount as settled with MCD. Copy of that undated cheque is Ex.DW1/4. DW1 says that he has discharged all his liabilities against outstanding house tax and other dues as such has never committed any default of terms of agreement with plaintiff.
26 DW1 says that beside given cheque no. 059069 of Rs.1,79,000/ drawn on Syndicate Bank which is Ex.DW1/4, he also paid Rs. 2530/ by cheque towards the house tax under self assessment scheme for subsequent year of 20042005 which is reflected from the bank statement Ex.DW1/5. DW1 says that he has made the entire payment of house tax for year 20052006 vide receipt dated 14.11.2005 which is Ex.DW1/6. DW1 says CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 26/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra that he also paid sum of Rs. 70,000/ to society on 31.12.2004 against receipt No. 378 which is Ex.DW1/7. DW1 stated to have paid another sum of Rs. 1,40,000/ vide receipt no. 793 dated 10.10.2005 Ex.DW1/8. Witness further says that he has been speedily pursuing to clear all the liabilities in respect of flat in question before the stipulated dated i.e. 18.11.2005 as agreed upon under the agreement Ex.PW1/1.
27 DW1 also testifies that after completing all the formalities towards the discharge of liabilities pertaining to flat in question, sent a telegraphic notice dated 16.11.2005 which is Ex.DW1/9 informing him about clearance of all the liabilities as well as calling him upon to read to reach to the office of Sub Registrar that requisite stamp papers for execution of sale deed. Witness says that plaintiff did not send any reply. DW1 says that he waited for plaintiff in the office of Sub Registrar on 18.11.2005 and thereafter he sent another notice on 18.11.2005 which is Ex.DW1/9A.
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 27/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 28 DW2 is Dinesh Kumar Sharma from MCD who has proved that earlier dispute regarding house tax was going on between Chanakya Cooperative Group Housing Society and MCD. DW2 further says that that society had made the payment of house tax in respect of plot underneath the flats of that society. Witness brought the demand and calculation notice as Ex.DW2/1. DW3 is Anant Kumar Makkar who is stated to be the President of Chanakya Cooperative Group Housing Society. This witness proved different payments made by the defendant towards clearing of all the liabilities. DW3 also proved that defendant had given an undated cheque of Rs. 1,79,000/ for payment of house tax pertaining to flat in question. DW4 is Parveen Kaur from Telegraphic Office/ BSNL who could not prove the relevant record as such record stated to have been destroyed. DW5 is Clerk from the Syndicate Bank who proves different payments made from the account of defendant from 01.04.2004 to 31.03.2005.
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 28/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 29 Considering such evidence as come on the record, so far as plaintiff is concerned, it is proved on the record that plaintiff was having sufficient money available for payment of balance sale consideration. The evidence of plaintiff that his brother Vinod Khanna was having sufficient money in the shape of FDR, as per the details given in para 9 of affidavit of PW1, duly supported with the evidence of PW2 & 3 , I find that there evidence establish that plaintiff was having sufficient money for payment of balance sale consideration. Although it was argued on behalf of defendant that in crossexamination of PW1, he has admitted that on 05.11.2005, he was not having sufficient balance in his account for preparation of bank drafts. However, such extract of crossexamination of PW1, cannot be read in separately. Testimony of PW1 must be read in totality. Reading the evidence of PW1 along with PW2 & 3, it is clear that plaintiff was having sufficient money either in his account or from the FDR and joint account of his brother and sister in law, to pay the entire balance sale consideration. Therefore, it can safely CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 29/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra be concluded that plaintiff was having sufficient funds available to perform his part of obligation under the agreement.
30 Coming now to the question of clearance of liability pertaining to the flat by defendant including payments of house tax etc. From the evidence of DW1 duly corroborated with evidence of DW2 and 3, when there is cogent evidence that defendant had not only made payment of Rs19000 towards the part payment of house tax payable to MCD, through the society which is proved from the statement Ex.DW1/3. Defendant has also paid Rs.2530/ by cheque no. 572688 towards the house tax for year 200405 as well as also paid the entire house tax for year 200506, by receipt dt 14.11.2005 of Rs.2530/ which is Ex.DW1/6. Defendant further paid Rs.70000 to society for clearance of electricity, water, maintenance and repair charges etc. vide receipt Ex.DW1/7. In the evidence of DW1 payment of Rs. 1,40,000/ by defendant to society is also proved vide receipt dt 10.10.2005 Ex.DW1/8.
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 30/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 31 Nothing has come in the crossexamination of DW1 regarding above discussed payments by defendant for clearing all the liabilities. Evidence of DW2 and 3 also make out that earlier house tax was being assessed by MCD in respect of the land which was owned by the society and therefore, dispute was going on between Chanakya Cooperative Society with MCD. In that process a demand was raised by MCD in respect of each flat for payment of Rs. 1,98,000/. It is this demand of Rs.1,98,000/, on which plaintiff is putting much emphasis to make out a case that defendant failed to clear his liability towards the flat, for implementing the terms of agreement Ex.PW1/1. But, I find that if we read the evidence of DW1 and 2, as well as DW3, situation would be very much clear that defendant put all his efforts to make payment of all the liabilities. In this regard it is important to note the evidence of DW1, when he testified that he had given a undated cheque of Rs.1,79,000/ to Society towards the liability against the house tax. So, that society could pay requisite settlement CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 31/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra amount to MCD. Copy of this cheque is Ex.DW1/4. No doubt such cheque was returned to defendant by society subsequently but fact remains that defendant took all possible steps for clearing the outstanding pertaining to flat in question. Therefore, no fault can even be attributed to defendant also in the facts and circumstance of the present case.
32 In view of such assessment of evidence as discussed above, when it has come in the evidence that as per the terms of agreement Ex.PW1/1, the sale deed was to be executed by 18.11.2005, but plaintiff admittedly filed the present suit prior thereto i.e. on 14.11.2005 in such circumstance I am of the view that plaintiff is not entitled to claim double of the earnest amount from the defendant. So far as counter claim of defendant for claiming that earnest amount of plaintiff is liable to be forfeited, law is well settled. If we go through the terms of the agreement Ex.PW1/1, stipulation in the shape of Clause 8 regarding forfeiture of earnest money cannot be termed as a penalty.
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 32/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 33 Consequences for breach of the contract are provided in Chapter VI of the Contract Act which contains three sections, namely, section 73 to section 75. As per Section 73 of the Contract Act, the party who suffers by the breach of contract is entitled to receive from the defaulting party, compensation for any loss or damage caused to him by such breach, which naturally arose in usual course of things from such breach, or which the two parties knew when they make the contract to be likely the result of the breach of contract. This provision makes it clear that such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach. The underlying principle enshrined in this section is that a mere breach of contract by a defaulting party would not entitle other side to claim damages unless said party has in fact suffered damages because of such breach. Loss or damage which is actually suffered as a result of breach has to be proved and the plaintiff is to be compensated to the extent of actual loss or damage suffered.
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 33/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 34 Section 74 of the Act entitles a party to claim reasonable compensation from the party who has broken the contract which compensation can be predetermined compensation stipulated at the time of entering into the contract itself. Thus, this section provides for preestimate of the damage or loss which a party is likely to suffer if the other party breaks the contract entered into between the two of them. In Fateh Chand v. Balkishan Das, 1964 (1) SCR 515, Supreme Court has held: "Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty. We are in the present case not concerned to decide whether a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 34/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of "actual loss or damages"; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 35/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra from the breach."
35 Thus, section 74 of Contract Act declares the law as to liability upon breach of contract where compensation is by agreement of the parties predetermined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrieved party claims relief as a plaintiff. The Section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for forfeiture of any property by way of penalty, the Court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The Court has to adjudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach.
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 36/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 36 In Maula Bux v. Union of India (UOI), 1970 (1) SCR 928, it was held: "Forfeiture of earnest money under a contract for sale of property -- movable or immovable -- if the amount is reasonable, does not fall within Section 74. That has been decided in several cases: Kunwar Chiranjit Singh v. Har Swarup, A.I.R.1926 P.C.1;
Roshan Lal v. The Delhi Cloth and General Mills Company Ltd., Delhi, I.L.R. All.166; Muhammad Habibullah v. Muhammad Shafi, I.L.R. All. 324;
Bishan Chand v. Radha Kishan Das, I.D. 19 All. 49.
These cases are easily explained, for forfeiture of a reasonable amount paid as earnest money does not amount to imposing a penalty. But if forfeiture is of the nature of penalty, Section 74 applies. Where under the terms of the contract the party in breach has undertaken to pay a sum of money or to forfeit a sum of money which he has already paid to the party complaining of a breach of contract, the undertaking is of the nature of a penalty."
CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 37/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra 37 In Shree Hanuman Cotton Mills and Others v.
Tata Air Craft Limited, 1969 (3) SCC 522, Apex Court elaborately discussed the principles which emerged from the expression "earnest money". That was a case where the appellant therein entered into a contract with the respondent for purchase of aero scrap. According to the contract, the buyer had to deposit with the company 25% of the total amount and that deposit was to remain with the company as the earnest money to be adjusted in the final bills. Buyer was bound to pay the full value less the deposit before taking delivery of the stores. In case of default by the buyer, the company was entitled to forfeit unconditionally the earnest money paid by the buyer and cancel the contract. The appellant advanced a sum of Rs. 25,000/ (being 25% of the total amount) agreeing to pay the balance in two installments. On appellant's failure to pay any further amount, respondent forfeited the sum of Rs.25,000/, which according to it, was earnest money and cancelled the contract. Appellant filed a suit for recovery of the said amount. The trial Court held that the sum was CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 38/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra paid by way of deposit or earnest money which was primarily a security for the performance of the contract and that the respondent was entitled to forfeit the deposit amount when the appellant committed a breach of the contract and dismissed the suit. The High Court confirmed the decision taken by the trial Court. Apex Court, considering the scope of the term "earnest", laid down certain principles, which are as follows:
"From a review of the decisions cited above, the following principles emerge regarding "earnest"
(1) It must be given at the moment at which the contract is concluded.
(2) It represents a guarantee that the contract will be fulfilled or, in other words, "earnest" is given to bind the contract.
(3) It is part of the purchase price when the transaction is carried out.
(4) It is forfeited when the transaction falls through by reason of the default or failure of CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 39/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra the purchaser.
(5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest."
38 In Delhi Development Authority v.
Grihstrapana Cooperative Group Housing Society Ltd., 1995 (1) SCC (Suppl.) 751, Apex Court held that the forfeiture of the earnest money was legal. In V. Lakshmanan v. B.R. Mangalgiri and Others, 1995 (2) SCC (Suppl.) 33, Supreme Court held as follows:
"The question then is whether the respondents are entitled to forfeit the entire amount. It is seen that a specific covenant under the contract was that respondents are entitled to forfeit the money paid under the contract. So when the contract fell through by the default committed by the appellant, as part of the CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 40/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra contract, they are entitled to forfeit the entire amount."
39 Law is, therefore, clear that to justify the forfeiture of advance money being part of 'earnest money' the terms of the contract should be clear and explicit. earnest money is paid or given at the time when the contract is entered into and, as a pledge for its due performance by the depositor to be forfeited in case of nonperformance, by the depositor. There can be converse situation also that if the seller fails to perform the contract the purchaser can also get the double the amount, if it is so stipulated. It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money then the forfeiture clause will not apply.
40 In view of the legal proposition as discussed above, in facts and circumstances of the case while I have already CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 41/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra held that both the parties cannot be held guilty for non compliance of terms of agreement, therefore, defendant to my mind is also not entitled for forfeiture of entire earnest amount. In peculiar facts and circumstances of the case while I decide the issue no. 1 that defendant has discharged all his liabilities, therefore, plaintiff is not entitled for double of the amount as claimed. Therefore, plaintiff to my mind is entitled for recovery of only Rs.9 lacs admittedly paid by him to defendant as earnest money however, plaintiff is entitled for such recovery of amount with interest @12 % from the date of filing of the suit till realization. Above said issues are being accordingly decided.
RELEIF In view of my findings on the issues, suit of the plaintiff is partly decreed to the extent of Rs. 9,00,000/ with interest 12 % from the date of filing of the suit till realization. Counter claim of the defendant is however CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 42/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra stands dismissed. Decree sheet be prepared accordingly. File be consigned to record room after due compliance.
Announced in the open court on Today : 09.06.2017 (SHAILENDER MALIK) ADJ03 (CENTRAL) TIS HAZARI COURTS:
DELHI CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 43/43 CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C. Luthra CS NO. 243/16 Sh. Ashok Kumar Khanna vs. M. C.Luthra 09.06.2017 Present : None.
Vide separate order dictated and announced in the open court, suit of the plaintiff is partly decreed to the extent of Rs. 9,00,000/ with interest 12 % from the date of filing of the suit till realization. Counter claim of the defendant is however stands dismissed. Decree sheet be prepared accordingly. File be consigned to record room after due compliance.
(SHAILENDER MALIK) ADJ03 (CENTRAL) TIS HAZARI COURTS DELHI/09.06.2017 CS No. 243/16 Ashok Kumar Khanna vs. M. C. Luthra Page 44/43