Delhi District Court
West District vs Amarjeet Kaur Page1/26 on 20 December, 2019
IN THE COURT OF SH. HASAN ANZAR, ADJ-06
WEST DISTRICT, TIS HAZARI COURTS, DELHI
CS No. 8191/16
Balveer Singh
S/o Harbhajan Singh
R/o H no. M-83, Hari Nagar Clock Tower
New Delhi -64
.........Plaintif
Versus
Amarjeet Kaur
W/o Sh Sarbhjeet Singh,
WZ 109, Sant Nagar, New Delhi -18
...... Defendant
Date of Institution: 31.05.2016
Date reserved for Order: 20.12.2019
Date of Order: 20.12.2019
JUDGMENT
1. Plaintiff has filed the present suit for recovery of Rs. 14 lakhs against the defendant alongwith pendente lite and future interest.
Case of plaintiff
2. It is the case of the plaintiff that defendant represented herself to be the lawful owner and in possession of built up property bearing no. 36 measuring CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page1/26 150 sq yards out of Khasra no. 26/19 situated in the area of village Nilothi, Colony known as Chander Vihar, B Block, Nilothi Extension (hereinafter referred as Suit property) .
3. It is further averred that based on representation of defendant, plaintiff entered into an agreement for sell and purchase of the Suit Property on 21.04.2016 for a total sale consideration of Rs. 31 lakhs. It is further averred that earlier plaintiff paid a sum of Rs. 7 lakhs in cash on 12.04.2016 in presence of witness Sh. Didar Singh. It is also averred that at the time of making the part payment defendant handed over the photocopy of documents of suit property.
4. It is further averred that plaintiff came to know that another lady by the name of Balvinder Kaur, resident of Mumbai claimed herself to be the owner of suit property and she made a complaint against defendant in the Local Police Station and after coming to know about the fact plaintiff sought return of the advance payment of Rs 7 Lakhs and defendant assured to return the said amount in the first week of May, 2016.
5. It is also averred that as per the agreement to sell vide Ex PW1/2 the defendant is liable to return the double amount of the bayana amount. It is also stated that plaintiff made a complaint to Local Police Station on 09.05.2016 vide DD entry no. 50B.
6. It is also averred that a legal notice dated 11.05.2016 requiring the plaintiff to return back the double amount of Bayana amount i.e. Rs 14 lakhs was sent but defendant did not reply the said legal notice.
CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page2/267. On the basis of aforementioned fact, plaintiff filed a civil suit for recovery of Rs 14 lakhs alongwith interest from defendant.
Case of defendant
8. Defendant filed her written statement and took a plea that suit filed by plaintiff is based on material concealment of fact and thus plaintiff is not entitled for any relief. Suit has not been valued properly for the purpose of court fees and jurisdiction.
9. On merits, it is contended by defendant that she is the owner of suit property and had agreed to sell the suit property for a total sum of Rs 31 lakhs. It is also stated although Rs 7 lakh was agreed to be paid to defendant by plaintiff however plaintiff only paid Rs 2 lakhs and promised that after getting a prospective buyer remaining amount will be paid. It is also stated that plaintiff on one pretext or other told the defendant that he would be paying an amount of Rs 5 lakhs in few days however remaining amount was not paid. It is also stated that both Balvinder Kaur and present plaintiff are working in collusion with each other. It is also stated that defendant is the lawful owner of property. Defendant made reference of the complaint made to police. Defendant also justified that she is the owner of suit property by referring to certain documents. Defendant asserted that she has marketable title in respect of suit property. Defendant stated that she is ready and willing to execute the contract.
CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page3/26Issues :
10. Upon completion of pleadings, vide order dated 26.10.2017 following issues were framed:-
Issue no.1 Whether the plaintiff is entitled for money decree, as prayed ?
OPP Issue no.2 Whether the plaintiff is entitled for interest, if yes, at what rate and for what period ? OPP Issue no.3. Whether the plaintiff has not approached to the court with clean hand and suppressed material facts ? OPD Issue no.4. Whether the suit has not been properly valued for the purpose of jurisdiction and court fees ? OPD Issue no.5:- Relief.
Evidence of Parties
11. In support of its case, plaintiff examined himself as PW-1 by way of affidavit Ex.PW1/A and relied upon the documents Ex.PW1/1 to Ex.PW1/5 and relied upon documents i.e EX PW1/1 is Bayana Receipt; EX PW1/2 is the agreement to sell; Ex PW1/3 is legal notice dated 11.05.2016; Ex PW-1/4 copy of postal receipts and courier receipt; EX PW1/5 is the tracking report.
12. Plaintiff also examined PW2 Sh Didar Singh.
13. On statement of ld counsel for plaintiff, PE was closed vide order dated CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page4/26 12.03.2019.
14. Defendant did not examine any witness in support of her case.
15. I have heard counsel for plaintiff and perused the case file.
16. My issue wise finding is as hereunder:-
17. Issue no.1 and 2 :
Issue no.1 Whether the plaintiff is entitled for money decree, as prayed ?
OPP Issue no.2 Whether the plaintiff is entitled for interest, if yes, at what rate and for what period ? OPP Both issues are interconnected with each other and therefore same is being taken up together for the purpose of discussion. Plaintiff has prayed for recovery of Rs 14 Lakhs alongwith interest from the defendant. Plaintiff examined himself as PW-1 and deposed on the line of his plaint. Reading of the plaint, written statement and deposition of PW-1 would make it clear that following facts stands admitted:-
i) Execution of Agreement to sell (Ex PW1/2)
ii) Execution of Bayana receipt (Ex PW1/1) It is an admitted case of parties that total sale consideration was Rs 31 lakhs. Plaintiff asserts that vide agreement agreement to sell (ExPW 1/2) and bayana receipt (Ex PW1/1) amount of Rs 7 lakhs was paid to defendant where as CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page5/26 defendant asserts that she has received an amount of Rs 2 lakhs only.
18. Both the parties have blamed each other for non execution of sale deed whereas plaintiff asserts that defendant did not have title in respect of suit property whereas defendant asserts that she has title in respect of suit property and is ready to execute the sale deed.
19. PW1 in his deposition stated that he has made payment of Rs 7 lakhs to the defendant and in this respect the agreement Ex PW 1/2 and bayana receipt Ex PW1/1 clearly notes that defendant has received an amount of Rs 7 lakhs whereas defendant states that she has only received Rs 2 lakhs. Once Ex PW1/1 and PW1/2 are admitted by defendant then onus would be on the defendant to establish that she did not receive an amount of Rs 7 lakhs.
20. The testimony of plaintiff was not put to any challenge by defendant as defendant did not cross examine the plaintiff and testimony of the plaintiff to the effect that payment of Rs 7 Lakhs was made to defendant remain unrebutted and unchallenged and furthermore defendant failed to substantiate her allegations that only Rs 2 Lakhs was received from plaintiff and more over, such a plea is against Sec 91 and 92 of Indian Evidence Act.
21. Furthermore, agreement to sell and bayana receipt was witnessed by an attesting i.e. PW2 i.e. who identified the signature of both plaintiff and defendant and defendant even did not cross examine the attesting witness and therefore, it stands established that factum of receipt of Rs 7 Lakhs as noted in CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page6/26 Receipt and also mentioned in Agreement to sell are beyond pale of doubt.
22. Plaintiff has also proved the legal notice Ex PW1/3 by filing its tracking report in which plaintiff has made categoric assertion that an amount of Rs 7 lakhs was paid to the defendant and defendant despite service of legal notice did not answer the legal notice sent on behalf of plaintiff. It is relevant to note that this legal notice has sent on behalf of plaintiff is in close proximity to the transaction i.e. Agreement to sell and this legal notice being a contemporaneous document would go on to establish the genuineness of claim of plaintiff that amount of Rs 7 Lakhs was paid to defendant.
23. Hence, in view of the above-mentioned discussion it stands established that defendant has received an amount of Rs 7 lakhs from plaintiff as a part payment towards the sale consideration qua the suit property.
24. It is the case of the plaintiff that defendant did not have proper document in respect of suit property whereas defendant took a stand in her written statement that she is the owner of property and made a reference to various documents. However defendant did not step into a witness box to deny the assertion of plaintiff that defendant has valid document in respect of suit property. It is the case of the plaintiff that defendant showed her photocopy of some documents and later on he became aware of the fact that one Balvinder Kaur is the owner of property and due to which he requested defendant to return back the bayana amount. It is for the defendant to prove that she is the owner of suit property.
CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page7/2625. Even otherwise, even it is assumed that plaintiff has wrongfully terminated the agreement to sell even then plaintiff would be entitled for recovery of the Bayana amount unless defendant justifies that she had suffered loss due to cancellation of agreement by pleading and proving the loss, in the present case, defendant neither pleaded nor proved any loss. Therefore, defendant cannot forfeit the earnest money on the pretext that she is ready to execute the sale deed.
26. Agreement dated 21.04.2016 (vide Exhibit PW-1/2) would reveal that in Clause 7 it was noted that in the event of failure who execute the sale deed plaintiff would be entitled for double of the bayana amount.
27. Necessary sequel to the above discussion would pose other questions whether in the suit for recovery of money for one and other reasons, the agreement to sell is not fructified and even if it is accepted that plaintiff was not at fault, , whether plaintiff would be entitled for the recovery of double of The agreement to sell Ex PW1/2 provided forfeiture of earnest money in the case of default on the part of plaintiff and payment of double amount in the case of breach by defendant. Both these clauses are required be considered in light of Section 74 of Indian Contract Act, 1870 and which read as under ;
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 CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page8/26 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.
28. Applicability of Section 74 of Contract Act, has come up for consideration in the celebrated case of Fateh Chand Vs Balkishan Das AIR 1963 SC 1405, it was held by Hon'ble Supreme Court ;
Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties pre-determined, 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 jurisdiction of the court is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. Use of the expression "to receive from the party who has broken the contract" does not predicate that the jurisdiction of the court to adjust amounts CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page9/26 which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract. 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..
29. The question as to whether a plaintiff could seek the double amount of earnest money directly came for the consideration before Hon'ble Delhi High Court in Ram Mehar vs Murari Lal and others. RFA No. 177/1999 dated and Hon'ble Delhi High Court after referring to number of judgments and precedents applied the analogy of "forfeiture of earnest money" and held that likewise, the principle pertaining to forfeiture of earnest money that losses have to be proved. It was held as under ;
It is argued that the trial Court could not have on the basis of a clause in the Agreement to Sell entitling payment of double the amount passed such a decree inasmuch as the same would be violative of the Section 74 of the Contract Act, 1872 as the clauses such as the subject clause are clauses in terrorem.
2. Learned counsel for the respondents has however pleaded with the Court that at least some damages ought to be granted. This request made by the learned counsel for the respondents, is a request which I cannot accept inasmuch as CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page10/26 before damages can be granted, the damages have to be pleaded and proved in accordance with law. Counsel for the respondents does not dispute that there is no pleading or proof with respect to any loss having been caused to the respondents/plaintiffs. I have had an occasion to consider the issue with respect to entitlement to damages and validity of a clause entitling double the payment as being violation of Section 74 of the Contract Act, 1872 in the judgment of Dilip Kumar Bhargava Vs. Urmila Devi Sharma & Ors. decided on 31.3.2011 in RFA No.129/2011. Paras 3 to 7 of this judgment are relevant and the same read as under:-
"3. Learned counsel for the appellant relies upon the Constitution Bench decision of the Supreme Court in the case of Fateh Chand Vs Balkishan Dass, (1964) 1 SCR 515; AIR 1963 SC 1405 and more particularly its paras 8,10,15 and 16 which read as under:-
8. The claim made by the plaintiff to forfeit the amount of Rs 24,000 may be adjusted in the light of Section 74 of the Indian Contract Act, which in its material part provides:-
"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 CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page11/26 reasonable compensation not exceeding the amount so named or as the case may be, the penalty stipulated for." The section is clearly an attempt to eliminate the sometime elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty.
10. 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 contract containing 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 CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page12/26 compensation not 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 damage"; 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 from the breach.
15. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties pre-determined, 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.CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page13/26
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 jurisdiction of the court is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. Use of the expression "to receive from the party who has broken the contract" does not predicate that the jurisdiction of the court to adjust amounts which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract. 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. 16. 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 CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page14/26 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 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 CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page15/26 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)
4. To the same effect are the observations in Maula Bux Vs. UOI, 1969 (2) SCC 554, and para 4 of which reads as under:-
"4. Under the terms of the agreements the amounts deposited by the plaintiff as security for due performance of the contracts were to stand forfeited in case the plaintiff neglected to perform his part of the contract. The High Court observed that the deposits so made may be regarded as earnest money. But that view cannot be accepted. According to Earl Jowitt in "The Dictionary of English Law" at p. 689 : "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 earnest or have made up their minds." As observed by the Judicial Committee in Kunwar Chiranjit Singh v. Har Swarup A.I.R.1926 P.C.1 Earnest money is part of the purchase price when the transaction goes forward : it is forfeited when the transaction falls through, by reason of the fault or failure of the vendee.
In the present case the deposit was made not of a sum of money by the purchaser to be applied towards part payment CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page16/26 of the price when the contract was completed and till then as evidencing an intention on the part of the purchaser to buy property or goods. Here the plaintiff had deposited the amounts claimed as security for guaranteeing due performance of the contracts. Such deposits cannot be regarded as earnest money.
Section 74 of the Contract Act provides : 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. There is authority, no doubt coloured by the view which was taken in English cases, that Section 74 of the Contract Act has no application to cases of deposit for due performance of a contract which is stipulated to be forfeited for breach : Natesa Aiyar v. Appavu Padayachi I.L.R. [1913] Mad. 178 Singer Manufacturing Company v. Raja Prosad I.L.R.[1909] Cal. 960 Manian Patter v. The Madras Railway Company I.L.R.[1906] Mad.188 But this view is no longer good law in view of the judgment of this Court in Fateh Chand's case MANU/SC/0258/1963 : [1964]1SCR515 : [1964]1SCR515 .CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page17/26
This Court observed at p. 526 :
"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.... The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for."
The Court also observed :
"It was urged that the section deals in terms with the right to receive from the party who has broken the contract reasonable compensation and not the right to forfeit what has already been received by the party aggrieved. There is however no warrant for the assumption made by some of the High Courts in India, that Section 74 applies only to cases where the aggrieved party is seeking to receive some amount on breach of contract and not to cases whereupon breach of contract an amount received under the contract is sought to be forfeited. In our judgment the expression "the contract contains any other stipulation by way of penalty"
comprehensively applies to every covenant involving a penalty whether it is for payment on breach of contract of money or delivery of property in future, or for forfeiture of right to money or other property already delivered. Duty not to enforce the penalty clause but only to award reasonable CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page18/26 compensation is statutorily imposed upon courts by Section
74. In all cases, therefore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the court has jurisdiction to award such sum only as it considers reasonable but not exceeding the amount specified in the contract as liable to forfeiture.", and that, "There is no ground for holding that the expression "contract contains any other stipulation by way of penalty" is limited to cases of stipulation in the nature of an agreement to pay money or deliver property on breach and does not comprehend covenants under which amounts paid or property delivered under the contract, which by the terms of the contract expressly or by clear implication are liable to be forfeited."
5. In Union of India Vs. Raman Iron Foundry (1974) 2 SCC 231 there are similar conclusions. Para 11 of this judgment reads as under:-
"11. Having discussed the proper interpretation of Clause 18, we may now turn to consider what is the real nature of the claim for recovery of which the appellant is seeking to appropriate the sums due to the respondent under other contracts. The claim is admittedly one for damages for breach of the contract between the parties. Now, it is true that the damages which are claimed are liquidated damages under CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page19/26 Clause 14, but so far as the law in India is concerned, there is no qualitative difference in the nature of the claim whether it be for liquidated damages or for unliquidated damages. Section 74 of the Indian Contract Act eliminates the somewhat elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine preestimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties : a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce it, awarding to aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty, and according to this principle, even if there is a stipulation by way of liquidated damages, a party complaining of breach of contract can recover only reasonable compensation for the injury sustained by him, the stipulated amount being merely the outside limit. It, therefore makes no difference in the present case that the claim of the appellant is for liquidated damages. It stands on the same footing as a claim for unliquidated damages. Now the law is well settled that a CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page20/26 claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due From the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages.................The Court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till that determination there is no liability at all upon the defendant."
(Underlining added)
6. A contract pertaining to breach of an Agreement to Sell is a contract where loss can be calculated, the loss ordinarily being the lesser value of the immovable property on the date of the contract. Such contracts of Agreements to Sell, being contracts where damages can be calculated, even if, there is a provision of forfeiture of a huge amount of Rs.5 lacs, the same would be a Clause in terrorem. The Clause being in the nature of a penalty or in terrorem, such forfeiture of a huge amount cannot be allowed unless damages are actually proved, the law being that Section 74 only provides the outer limit of damages which can be awarded. The court always awards reasonable compensation depending upon the outer CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page21/26 limit of compensation/damages which are prescribed under the contract, and which are in the nature of liquidated damages under Section 74 of the Contract Act. The present case, and other similar cases of breaches of Agreements to Sell, must be distinguished from those class of cases where loss cannot be proved and which contracts were the subject matter before the Supreme Court in the cases reported as O.N.G.C. Vs. Saw Pipes Ltd., 2003 (5) SCC 705 and Sir Chunilal V. Mehta & Sons Ltd. Vs. Century Spinning and Manufacturing Co. Ltd. AIR 1962 SC 1314 (1).
7. On reading of the aforesaid decisions of the Supreme Court it becomes clear that there cannot be forfeiture of an amount which is paid by a buyer under an Agreement to Sell to the respondents, even if, the buyer is guilty of breach of contract because the seller who has received monies, cannot forfeit the monies unless he has suffered loss in the bargain. A seller ordinarily suffers loss under an Agreement to Sell only if value of the property decreases as per the breach committed by the buyer/plaintiff/appellant and in the present case no loss has been pleaded or proved by the respondents. Even assuming therefore that the appellant/plaintiff is guilty of breach of contract, the respondent no.1, at best, can forfeit only a reasonable amount and not an amount of Rs.10 lacs out of the total sale consideration of Rs.55 lacs. It could not be argued with any conviction by the learned counsel for the CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page22/26 respondent no.1/defendant no.1 that there are any pleadings in the trial court that the respondent no.1/defendant no.1 has been caused loss in any manner including by the value of the property having gone down. It is because of lack of any pleadings in this behalf that the respondent no.1/defendant no.1 led no evidence as to any fall in the value of the property by a specific amount of Rs.10 lacs so as to entitle him to forfeit the amount of Rs.10 lacs received as advance price."
30. Although plea of forfeiture was specifically not taken, however in the Written Statement it has been stated that demand of refund of earnest money is raised on behalf of plaintiff is based on malafide and therefore question of refund does not arise (paragraph no. 8 of Written statement). The issue with regard to forfeiture of earnest money was also considered by Hon'ble High Court of Delhi in M.C. Luthra Vs. Ashok Kumar Khanna 2018 (248) DLT 161, wherein the law relating to the forfeiture of earnest money was dealt in an exhaustive manner as per which it was held that only a nominal amount could be forfeited as an earnest money. It was further held that if a defendant seeks to forfeit the earnest money then defendant has to prove the loss, in the present case, no evidence has been led on behalf of Defendant to prove any loss.
31. Therefore, in the absence of any evidence of loss, defendant cannot forfeit the earnest money of Rs 7 Lakhs in view of Section 74 of Contract Act, 1872 and also in light of judgment of Fateh Chand (Supra) and MC Luthra(Supra).
32. The plaintiff has prayed for return of double the amount of earnest money CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page23/26 i.e Rs 14 lakhs alongwith interest. Reading of the judgments as referred above of Hon'ble High Court Delhi had exhaustive dealt and considered the judgement of judgments of Hon'ble Supreme Court and Delhi High Court that like defendant who seeks forfeit the earnest money (Bayana) and the plaintiff seeking the recovery of the double amount of earnest money, are required to prove the loss , perusal of plaint and deposition of plaintiff vide Exhibit PW-1/1 would evince that neither such loss was pleaded nor any evidence was lead to prove that plaintiff suffered any loss. Hence, plaintiff would not be entitled for the double of advance money as claimed by the plaintiff view of the ratio of aforesaid judgments as referred in earlier paragraphs.
33. Award of Interest In the present case, as per the admitted case of both parties, an amount of Rs 7 Lakhs stands paid by defendant. The question would be whether plaintiff would be entitled for interest Hon'ble Delhi High Court in Ramesh Chander vs Shiva Promoters Ltd, RFA No. 211/2017 dated 21.8.2018 has relied upon South Eastern Coalfields Ltd. Vs. State of M.P. and ors., (2003) 8 SCC 648 and which holds that interest is payable in equity in certain circumstances. South Eastern Coalfields Ltd. (supra) reads as under:-
"21. Interest is also payable in equity in certain circumstances. The rule in equity is that interest is payable even in the absence of any agreement or custom to that effect though subject, of course, to a contrary agreement. Interest in equity has been held to be payable on the CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page24/26 market rate even though the deed contains no mention of interest. Applicability of the rule to award interest in equity is attracted on the existence of a state of circumstances being established which justify the exercise of such equitable jurisdiction and such circumstances can be many."
In the present case, agreement to sell was entered on 21.04.2016 and out of Rs 31 Lakhs, plaintiff paid Rs 7Lakhs for the purchase of immovable property. Rates in immovable property has not much appreciated for the last few and other factors such as defendant took benefit of the amount taken from the plaintiff and the prevalent interest rates in last few years, it would be just and proper to award an interest at the rate of 8 percent per annum on Rs 7 Lakhs from 11.05.2016 ( from the date of legal notice ) Therefore, issue no.1 and 2 are decided in favour of plaintiff and against defendant.
34. Issue no 3 :Whether the plaintiff has not approached to the court with clean hand and suppressed material facts ? OPD Onus to prove this issue was on the defendant however, defendant did not enter into the witness box and failed to prove that hat material facts were suppressed by plaintiff. Accordingly, issue no 3 is decided against defendant and in favour of plaintiff.
35. Issue no 4 : Whether the suit has not been properly valued for the purpose CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page25/26 of jurisdiction and court fees ? OPD Onus to prove this issue was on the defendant. Plaintiff has claimed recovery of Rs 14 lakhs and on which advalorem court fees of Rs 12250/- was paid on the relief sought, therefore, plaintiff has properly valued the suit for the purposes of jurisdiction and court fees and had paid correct court fees. Accordingly, issue no 4 is decided against defendant and in favour of plaintiff.
36. RELIEF In view of the findings recorded in Issue No. 1 to 4, the Suit filed by plaintiff is decreed in favour of plaintiff. It is held that the plaintiff is entitled for money decree of Rs 7 Lakh alongwith interest at the rate of 8 percent per annum against defendant from 31.05.2016 till the date of its realisation along with the cost. Decree sheet be prepared.
File be consigned to record room as per rules.
Announced in the Open Court
on 20.12.2019 (Hasan Anzar)
Additional District Judge-06
West District, THC
CS No. 8191/16 Balveer Singh vs Amarjeet Kaur Page26/26