Delhi District Court
Civ Dj No.610576/16 vs Sh. Harish Gulati on 23 April, 2022
IN THE COURT OF SHRI MANISH SHARMA
ADDITIONAL DISTRICT JUDGE01, WEST TIS HAZARI COURTS,
DELHI
Civ DJ No.610576/16
Sh. Suresh Kumar,
S/o Sh. Ramphal,
R/o G129, 2nd Floor,
Pushkar Enclave,
New Delhi110063. ... Plaintiff
Versus
Sh. Harish Gulati,
S/o late Sh. M. M. Gulati,
R/o Flat No.54, Cottage Enclave,
BlockA4, Paschim Vihar,
New Delhi110063. ... Defendant
Counsel for the Parties:
For Plaintiff : Sh. Rambir Sharma
For Defendant: Sh. B. Krishan
Date of Filing : 07.05.2015
Date of Reserving Judgment : 07.04.2022
Date of Judgment : 23.04.2022
JUDGMENT
The facts, as stated out in plaint, are as under:
The defendant was the owner of Flat No. 54, Cottage Enclave, Block A4 Paschim Vihar, New Delhi, 110063 (in short "the suit property"). In Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.1 of 20 JuneJuly, 2012, the plaintiff expressed his intention to the defendant to purchase the suit property. Consequently, they entered into an agreement to sell dt. 10.07.2012 (Ex.PW1/1). Defendant assured him that he is the sole and absolute owner of the suit property, and he has a clear and marketable title of the property. Defendant further assured him that the suit property was constructed as per the rules, and he has not violated any government notification. On defendant's assurance, plaintiff agreed to purchase the suit property. The terms and conditions of the agreement were reduced to writing duly signed by them. The said agreement was made in two originals, each of which was kept by the parties. The sale consideration of the suit property was agreed to be Rs.1,48,50,000/. Plaintiff paid a sum of Rs.15,00,000/ upfront, and the balance sale consideration were to be paid on or before 06.11.2012. On payment of the final installment, the defendant was required to execute sale deed in plaintiff's favour. The plaintiff, after executing the agreement to sell (Ex.PW1/1), observed that a major part of the construction in the suit property premises was unauthorised and the defendant had done several violations of municipal laws and regulations. It was also discovered later that the suit property was built and raised without sanctioned plans and, therefore, it was likely to get demolished by the MCD/Govt authorities, and the occupants could face punitive action. The defendant never disclosed this fact to the plaintiff, which actually constitutes fraud. Therefore, he deceived the plaintiff and made him sign the agreement (Ex.PW1/1) by withholding vital and material facts. There was a complete misdescription and misrepresentation of legal status of the suit property. Accordingly, plaintiff refused to make any further payment Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.2 of 20 and sought recovery of advance money of Rs.15,00,000/ paid to the defendant. The plaintiff has abrogated the agreement to sell as the contract became infructuous and the defendant became liable to return Rs.15,00,000/ with interest with costs.
Initially the defendant promised to refund the advance money, but later he stated procrastinating the matter. In June 2014, he finally refused to refund Rs. 15,00,000/ Finding no other option, plaintiff issued a legal notice dt. 09.11.2014 (Ex. PW1/3) demanding back Rs. 15,00,000/ with 12 % interest per annum. The said notice was duly served upon the defendant however, he chose not to reply to the said notice. Hence, by way of instant suit, plaintiff has sought to recover an amount of Rs.15,00,000/ with interest from the defendant.
The facts stated in the written statement, may be taken note of:
2. The defendant averred that the suit is not maintainable in its present form as this court lacks pecuniary jurisdiction to entertain the instant suit.
The plaintiff has manipulated clause 7 of the agreement to sell (Ex. PW1/1). The foremost issue involved in this suit is based on unequivocal and unambiguous averments made in clause 7 of the agreement to sell. The plaintiff has failed to comply with the provisions order VI Rules 4, 14A, 15 of the Code of Civil Procedure, 1908 and the plaint is liable to be rejected. The plaintiff has relied upon the forged agreement to sale dt. 10.07.2012 (Ex. PW1/1) by making interpolations and cuttings in clause 7 of the agreement. The plaintiff's is also liable to be prosecuted and Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.3 of 20 punished as per Section 340 of the Cr.P.C. The plaintiff has approached this Court with unclean hands, and he does not deserve any relief from this court.
3. The defendant admitted the agreement to sell (Ex.PW1/1) and receipt of Rs.15,00,000/ qua sale of the suit property. The plaintiff, his wife and relatives inspected the property prior to purchasing it in the presence of property dealers. Plaintiff was aware of the additional construction made by the defendant in the additional space on the roof top of second floor flat; it was also made known to the plaintiff that an additional coverage on the space on the roof top of second and third floor exist prior to 2001, and RWA/maintenance agency/the DDA had no objection to the construction. After deliberation, they mutually entered into a agreement to sell qua the suit property on a condition that defendant would get the property converted into free hold and he would clear all the doubts regarding the existence of additional construction in the original flat. It was only on this condition they entered into agreement to sell (Ex PW1/1) visavis the suit property accepting the additional construction carried out by the defendant with the implied consent of the authorised agency of the vicinity and RWA. The additional coverage is done by almost all flat owners of the vicinity. This fact regarding conversion of the leasehold right to freehold right from DDA over the suit property was deliberately incorporated in the alleged agreement dt. 10.07.2012. The original agreement dt. 10.07.2012 executed between plaintiff and defendant has without any cutting, erasing and interpolation. The terms and conditions, which were originally entered Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.4 of 20 between the plaintiff and the defendant concerning the suit property, have not been deliberately placed on record. Defendant had obtained freehold rights in respect of the suit property by getting it converted from leasehold to freehold by paying usual charges to DDA. He also obtained the consent of RWA/maintenance agency within the agreed period of four months from the date of alleged agreement (Ex. PW1/1). Thus, he cleared all the alleged shadow of doubts on the preexisting extra coverage done in the suit property. He further denied that the agreement was reduced into writing containing two originals thereof. The original agreement was executed in presence of the witnesses, who were instrumental in striking the deal between them. The plaintiff is liable to place on record the original agreement dt. 10.07.2012 which did not contain any cutting/interpolation, and the copy of agreement dt. 10.07.2012 (Ex. PW1/1) is not the original copy of the agreement. Plaintiff paid a sum of Rs.10,00,000/ vide cheque bearing No. 004060 dt. 07.07.2017 drawn on State Bank of India. However, the said cheque bounced on 09.07.2012. The defendant informed this fact to the plaintiff thereafter, it came in the knowledge of the defendant that plaintiff had no money to pay balance amount of Rs.1,33,50,000/. The defendant performed his part of the obligation and got the property converted to freehold within stipulated time of four months, and he also obtained requisite permission from the authorities concerned to transfer the property in plaintiff's favour. Thus, on 12.10.2012, the defendant was fully equipped and competent to execute a proper sale deed in plaintiff's favour and he intimated the plaintiff about the same. On 04.11.2012, the defendant also sent a written communication to Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.5 of 20 the plaintiff reminding him to perform his part of the obligation and requested him to prepare the draft sale deed, but it was of no avail. On 06.11.2012 the defendant visited the office of SubRegistrar, SubDistrict IIA, Nangloi Delhi where the sale deed was to be registered but neither the plaintiff appeared for executing it nor he communicated anything to the defendant. Thus, it is established that the plaintiff has failed to perform his part of the obligation in the contract to pay the balance sale consideration of Rs. 1,33,50,000/. The property was ready for proper conveyance after getting converted to freehold. Further, the defendant had handed over all the copies pertaining to the documents to the plaintiff at the time of entering into the agreement to sell. Thus, the suit of plaintiff may be dismissed as the defendant has rightly forfeited the earnest money paid by the plaintiff. The plaintiff has also not served him with any legal notice and has not demanded money from him at any point of time.
REPLICATION
4. Plaintiff filed replication in response to the written statement of de fendant wherein he has reiterated and reaffirmed the contents of the plaint as true and correct and denied the contrary averments made in the written statement.
5. From the pleadings of the parties, vide order dt. 18.11.2015, following issues were framed:
1. Whether the plaintiff has made addition/ alteration/ Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.6 of 20 interpolation in the agreement to sell dated 10.07.2012, if so, its effect? OPD
2. Whether the suit filed by the plaintiff is liable to be rejected under the provisions of order 7 Rule 11 CPC? OPD
3. Whether the plaintiff is entitled for recovery of the suit amount as prayed for ? OPP
4. Whether the plaintiff is entitled for pendent lite and future interest, if yes, at what rate and for what period? OPP. 5 Relief.
EVIDENCE
6. In evidence, the plaintiff examined himself as PW1 and relied upon agreement to sell/ bayana agreement as Ex.PW1/1, Bank payment slip of Rs. 10 lakh as Ex.PW1/2 and Legal Notice as Ex.PW1/3.
Plaintiff has also examined Sh. Rajesh Kumar and Sh. Anil Kumar as PW2 and PW3. They filed their evidence by way of affidavit as Ex.PW2/A and Ex.PW3/A and deposed on the line of pleadings.
On the other hand, defendant stepped into the witness box and examined himself as DW1 and tendered his evidence by way of affidavit as Ex.DW1/A. He also relied upon following documents:
a. Photocopy of Agreement to Sell and Purchase dt. 10.07.2020 as MarkDW1/A. b. Photocopy of Conveyance Deed dt. 12.10.2012 as MarkDW1/B. c. Affidavit dated 06.11.2012 as Ex.DW1/C. Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.7 of 20 d. Photocopy of application dated 06.11.2012 for inspection of record before Sub Registrar mentioned as MarkDW1/D. e. Receipt for inspection Ex.DW1/E. f. Copy of letter dated 04.11.2012 and its postal receipt as Ex.DW1/F & Ex.DW1/G.
7. Arguments heard. Record perused. Issue wise finding is given in the succeeding paragraphs.
Issue No.2: Whether the suit filed by the plaintiff is liable to be rejected under the provisions of order 7 Rule 11 CPC? OPD The onus to prove this issue was on the defendant. The defendant has failed to prove that the plaint is liable to be rejected. The Plaint contains sufficient facts, which require appreciation of evidence, trial and final adjudication. I find no ground on which the plaint is liable to be rejected. In preliminary objection defendant has averred that the plaintiff has no locus standi to file the present suit, as no cause of action had ever arisen in favour of the plaintiff to file the present suit against the defendant. However, he has failed to prove as to how the plaintiff has no locus standi to file the present suit against the defendant or the plaint is bereft cause of action. In view of the above, issue nos.2 is decided in plaintiff's favour and against the defendant.
Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.8 of 20 Issue No.1: Whether the plaintiff has made addition/alteration/ interpolation in the agreement to sell dated 10.07.2012, if so, its effect? OPD It is apparent that in the clause 7 of the agreement to sell dt. 10.07.2012 (Ex. PW1/1) the word mentioned is 'deleted' and crossed by two lines; it contains penalty clause in case of default/ breach of contract by any of the parties. Plaintiff averred that parties opted for deletion of the penalty clause. He further averred that he has not manipulated or made alteration in the agreement to sell (Ex. PW1/1). It is the defendant who has committed breach of contract and failed to perform his part of the obligation. He has deliberately withheld material facts pertaining to unauthorised constructions made in the suit property. Thus, the plaintiff was constrained not to make further payments towards balance sale consideration.
The defendant on the other averred that the plaintiff has deliberately deleted clause 7 of the agreement to sell (Ex. PW1/1) wherein a stipulation was entered for breach of contract. Defendant proved the copy of the agreement (PW1/B) and (Mark A) wherein no such deletion is made. He averred that the plaintiff, in order to escape his liability, deliberately manipulated and forged the agreement. It is the plaintiff who committed breach of contract therefore, the earnest money paid by him is liable to be forfeited. Thus, the earnest money paid by the him is liable to be forfeited. The clause 7 is reproduced as under:
"7 That in case the first party fails to complete the transaction within the stipulated period as specified above then it is the discretion of the Second party either to take the Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.9 of 20 double the amount of the Bayana/ earnest money from the First party or to complete the transaction through suit for specific performance of the contract from the Court of law on the cost and expenses of the first party, and on the other hand if the Second party fails to make the full and final payment within the period as specified above, the bayana amount shall be forfeited and the transaction shall be deemed to be canceled with immediate effect."
To my mind, the deletion of clause 7 of the agreement (Ex. PW1/1) in any manner, is not countersigned or acknowledged by any of the parties. Therefore, the deletion cannot be taken into consideration and clause 7 of the agreement shall be read as it was originally incorporated, and the parties shall be liable as if it was not deleted. The rights of defendant will not be prejudiced. This issue is therefore decided in plaintiff's favour and against the defendant.
Issue No.3: Whether the plaintiff is entitled for recovery of the suit amount as prayed for ? OPP and Issue No.4:. Whether the plaintiff is entitled for pendent lite and future interest, if yes, at what rate and for what period? OPP.
Both these issues are interconnected and are decided together for the sake brevity as it require common appreciation of facts and evidence.
It is admitted case of both the parties that they entered into agreement to sell dt. 10.07.2012 (Ex.PW1/1). The sale consideration of the suit property was agreed to be Rs. 1,48,50,000/. Plaintiff paid a sum of Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.10 of 20 Rs.15,00,000/ to the defendant and the balance sale consideration were to be paid by 06.11.2012. The plaintiff averred that he was restrained from making any further payment to the defendant, as there was some unauthorised construction in the suit property and the defendant deliberately withheld material facts and fraudulently made him sign the contract. Therefore, he has aptly rescinded the contract and claimed back Rs.15,00,000/ with interest.
Per contra it is the case of the defendant that the plaintiff had no money to make the balance payment. And in order to escape his liability as stipulated in clause 7 of the agreement, he has deliberately deleted the said clause to his use and; as per the aforesaid clause, the entire earnest money is liable to get forfeited.
To decide this issue it will be relevant to refer to the evidence of PW1. He interalia deposed:
" ...I personally visited the property no. 54 cottage enclave about 10 days prior to entering into agreement to sell with the defendant. The proposal with respect to sale and purchase of 54 cottage enclave was made known to me by one Sri Anil Kumar and Shri Rajat. Sh Anil and Sh. Rajat accompanied me when I with my family members physically inspected the property 54 cottage enclave. I did not inspect the property after my first visit prior to entering into agreement of sale and purchase in respect of 54 cottage enclave. I did not verify the ownership document of the defendant pertaining to 54 cottage enclave prior to entering into agreement to sell and purchase. Again said, I had verified the ownership documents in the name of defendant in respect of property and no.54, cottage enclave on my first visit prior to entering into agreement. I did not enquire about ownership of 54 cottage enclave from the RWA of that area (society office). I also inspected the ground floor and first floor property no.53, call to Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.11 of 20 enclave which is just below property 54, cottage enclave i.e. on ground and first floor. I also saw the adjoining flats on the left and right of the property no.53 cottage enclave. I do not know as to what was the limit of dwelling unit and what was the public land in front and back of 53, enclave. I cannot say as to whether there was any protrusion visibly seen in flat no.54 and flat no.53 cottage enclave. It is correct that front elevation/facade of 53 and 54 cottage enclave was inconformity with each other. I never made any inquiry with respect to property no.54 cottage enclave from the MCD regarding unauthorised construction in the property no.54 cottage enclave also I did not make any inquiry as to whether property no.54, cottage enclave has been booked by the MCD for any sort of any unauthorised construction. It is wrong to suggest that there was no unauthorised construction in property no.54, cottage enclave. I was not shown the conveyance of free hold of conveyance of conversion from lease hold and free hold by the defendant in respect of property no.54 cottage enclave. Vol. I was informed by the defendant that he had applied for conversion from lease hold to free hold to the DDA... "
It is on the plaintiff to establish that there was unauthorised construction in the suit property. It can be seen from the evidence that the plaintiff, before executing the agreement to sell, visited the suit property; therefore, it cannot be presumed that he was unaware of unauthorised construction in the suit property, if any. On plaintiff's request, the defendant took initiative to convert the suit property from leasehold to freehold. He approached various authorities for the same. None of the authorities raised any objection and even other similar flats were constructed in a similar fashion. Thus, it cannot be said that the defendant was at some fault. Moreover, it's the duty of the plaintiff to check the property and its documents prior to purchasing it. Even if there is some illegality or unauthorised construction, the duty is cast upon the plaintiff to check and verify all such apparent flaws before entering into a contract to Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.12 of 20 purchase an immovable property. It cannot be reasonably presumed that even after visiting the property he could not ascertain the illegality in the construction of suit property. The plaintiff has also not even proved that he had sufficient money to purchase the suit property. Further, as deposed by the defendant that other properties are also constructed in a similar fashion, and the plaintiff has not placed any document or any notice issued by MCD, DDA or any other authority objecting to the additional construction. The plaintiff has not even examined any witness from any of the departments to ascertain the illegality in the construction. Therefore, it can be safely held it is the plaintiff who committed breach of the contract. Now for determining the liability of the plaintiff it is imperative to refer section 73 and 74 of the contract Act.
Section 73. Compensation for loss or damage caused by breach of contract:
When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.13 of 20 and had broken his contract.
Explanation. In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the nonperformance of the contract must be taken into account.
Section 74 of the contract Act:
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.
Explanation.-- A stipulation for increased interest from the date of default may be a stipulation by way of penalty.] Exception When any person enters into any bailbond, recognizance or other instrument of the same nature or, under the provisions of any law, or under the orders of the 1 [Central Government] or of any 2 [State Government], gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein.
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.
In order to assess damages for breach of contract it would be fruitful to consider the following judgments:
Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.14 of 20
1. In Fateh Chand versus Balkishan Das AIR 1963 SC 1405, it is held:
"There is no evidence that the property had depreciated in value since the date of the contract; nor was there evidence that any other special damage had resulted. The contract provided for forfeiture of Rs. 25,000/ consisting of Rs. 1000/paid as earnest money and Rs. 24,000/ paid as part of the purchase price. The defendant has conceded that the plaintiff was entitled to forfeit the amount of Rs. 1,000/ which was paid as earnest money. We cannot however agree with the High Court that 10 per cent of the price may be regarded as reasonable compensation in relation to the value of the contract as a whole, as that in our opinion is assessed on arbitrary assumption. The plaintiff failed to prove the loss suffered by him in consequence of the breach of the contract committed by the defendant, and we are unable to find any principle on which compensation equal to ten percent of the agreed price could be awarded to the plaintiff. The plaintiff has been allowed Rs. 1,000/which was the earnest money as part of the damages. Besides he had use of the remaining sum of Rs. 24,000/, and we can rightly presume that lie must have been deriving advantage from that amount throughout this period. In the absence therefore of any proof of damage arising from the breach of the contract we are of opinion that the amount of Rs. 1,000/ (earnest money) which has been forfeited, and the advantage that the plaintiff must have derived from the possession of the remaining sum of Rs. 24,000/during all this period would be sufficient compensation to him. It may be added that the plaintiff has separately claimed mesne profits for being kept out of possession for which he has got a decree and therefore the fact that the plaintiff was out of possession cannot be taken into account in determining damages for this purpose.' The decree passed by the High Court awarding Rs. 11,250/ as damages to the plaintiff must therefore be set aside. "
Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.15 of 20
2. In case of Bhuley Singh vs Khazan Singh & Ors, it is held in the judgment :
"There is no evidence that any loss was suffered by the plaintiff in consequence of the default by the defendant, save as to the loss suffered by him by being kept out of possession of the property. There is no evidence that the property had depreciated in value since the date of the contract provided; nor was there evidence that any other special damage had resulted. The contact provided for forfeiture of Rs 25,000 consisting of Rs, 1039 paid as earnest money and Rs 24,000 paid as part of the purchase price. The defendant has conceded that the plaintiff was entitled to forfeit the amount of Rs 1000 which was paid as earnest money. We cannot however agree with the High Court that 13 percent of the price may be regarded as reasonable RFA No.422/2011 Page 4 compensation in relation to the value of the contract as a whole, as that in our opinion is assessed on an arbitrary assumption. The plaintiff failed to prove the loss suffered by him in consequence of the breach of the contract committed by the defendant and we are unable to find any principle on which compensation equal to ten percent of the agreed price could be awarded to the plaintiff. The plaintiff has been allowed Rs 1000 which was the earnest money as part of the damages. Besides he had use of the remaining sum of Rs 24,000, and we can rightly presume that he must have been deriving advantage from that amount throughout this period. In the absence therefore of any proof of damage arising from the breach of the contract, we are of opinion that the amount of Rs 1000 (earnest money) which has been forfeited, and the advantage that the plaintiff must have derived from the possession of the remaining sum of Rs 24,000 during all this period would be sufficient compensation to him. It may be added that the plaintiff has separately claimed mesne profits for being kept out possession for which he has got a decree and therefore the Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.16 of 20 fact that the plaintiff was out of possession cannot be taken, into account in determining damages for this purpose. The decree passed by the High Court awarding Rs.11,250 as damages to the plaintiff must therefore be set aside."
(Underlining added) Learned counsel for the appellant also argued that a Court is always empowered under Order VII Rule 7 CPC to grant a lesser relief than as originally claimed and therefore, instead of grant of decree for Rs.10,00,000/ suit can always be decreed for Rs.5,00,000/ being the advance price paid, inasmuch as, the undisputed position which emerged in the suit was that there were no pleadings nor any evidence led on behalf of the respondents/defendants that any loss was caused to the respondents/defendants, and which entitled the respondents/defendants to forfeit the amount."
3. In Kailash Nath Associates vs Delhi Development Authority and Anr (2015)4 SCC 136, it is held in the judgment :
"there cannot be forfeiture of an amount paid under an agreement to sell oncee no loss is pleaded and proved by a proposed seller under an agreement to sell."
4. In case of Satish Batra Vs Sudhir Rawal (2013) 1SCC 345, it is held in the judgment :
"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 Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.17 of 20 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."
5. In Videocon Properties Ltd. Vs Dr Balachandra Laboratories (2004) 3 SCC 711, it is held in the judgment :
The further aspect that requires to be noticed is as to the nature and character of earnest money deposit and in that context the distinguishing features, which help to delineate the differences, if any. The matter is not, at any rate, res integra. In (Kunwar) Chiranjit Singh vs. Har Swarup [AIR 1926 P.C. 1], it was held that the earnest money is part of the purchase price when the transaction goes forward and it is forfeited when the transaction falls through, by reasons of the fault or failure of the purchaser. This statement of law had the approval of this Court in Maula Bux vs. Union of India [AIR 1970 SC 1955]. Further, it is not the description by words used in the agreement only that would be determinative of the character of the sum but really the intention of parties and surrounding circumstances as well, that have to be looked into and what may be called an advance may really be a deposit or earnest money and what is termed as `a deposit or earnest money' may ultimately turn out to be really an advance or part of purchase price. Earnest money or deposit also, thus, serves two purposes of being part payment of the purchase money and security for the performances of the contract by the party concerned, who paid it.
6. In case of V. Ashokan v. CCE 2009 (14) SCC 85 wherein it was held that :
"forfeiture of a reasonable amount is not penalty but if forfeiture is of a large amount the same is in the nature of penalty attracting the applicability of Section 74."
Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.18 of 20 In my opinion, the defendant has admitted the agreement to sell (Ex. PW1/1) and acknowledged that he has received a sum of Rs. 15 Lacs towards sale consideration from the plaintiffs out of Rs. 1,48,50,000. Merely, the plaintiffs have failed to make him the balance payment, it will not entitle him to forfeit the entire advance money of Rs. 15 Lacs. Defendant has failed to prove that he has suffered damages due to breach of the contract. The defendant has forfeited more that 10% of the total consideration to be paid by the plaintiffs. Defendant has not even remotely alleged that he has suffered damages due to breach of the contract. Insofar as the stipulation in the contract for liquidated damages, the defendant is entitled for reasonable damages. Section 73 of the Contract Act provides that when a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Section 74 provides that 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 the penalty stipulated.
Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.19 of 20 In the situation herein, the defendant has not even pleaded that he has suffered any loss due to the breach of agreement entered between the parties. Thus, the defendant has failed to prove any loss suffered by him in terms of Section 73 or 74 of Indian Contract Act, 1872. The plaintiffs shall bear reasonable damages for committing breach of contract. The defendant is therefore entitled to forfeit Rs.2,00,000/ on account of damages and he is liable to return the remaining amount of Rs.13,00,000/ to the plaintiff. This issue is thus answered in plaintiff's favour and against the defendant.
Relief:
Plaintiff suit stands decreed against the defendant in the sum of Rs.13,00,000/ together with pendente lite and future interest thereon @ 4% per anuum. Costs of the suit is also awarded to the plaintiff. Decree sheet be Digitally signed prepared. File be consigned to Record Room. by MANISH MANISH SHARMA SHARMA Date:
2022.04.28 16:58:04 +0530 Announced in open Court (Manish Sharma) today i.e. 23.04.2022. Additional District Judge01, West Tis Hazari Courts, Delhi.
Civ DJ No.610576/16 Suresh Kumar vs. Harish Gulati Page No.20 of 20