Delhi District Court
Sh. Kishor Kumar Rajora vs Sh. Mukesh Rajore on 1 April, 2022
CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022
: IN THE COURT OF :
Dr. V.K. DAHIYA
ADDITIONAL DISTRICT JUDGE01:
SOUTHWEST DISTRICT: DWARKA COURTS:
NEW DELHI
Civil Suit no. 43/2016 (16457 / 2016)
In the matter of:
Sh. Kishor Kumar Rajora
S/o Sh. Ram Chander Rajora
R/o E304, Happy Home Apartments,
Plot no. 12A, Sector 7, Dwarka
New Delhi 110 075
........ Plaintiffs
VERSUS
1. Sh. Mukesh Rajore,
S/o Sh. B.S. Rajore,
R/o Plot no. 1, Pocket 9,
Sector 24, Rohini, Delhi
2. Sai Mahima Hospitality Pvt. Ltd.
(Through its Director)
Sh. Mukesh Rajore,
Motel1, RICCO Industrial Area
Sahajahanpur, District Alwar
Rajasthan
Also at : Plot no. 1, Pocket 9,
Sector 24, Rohini, Delhi
Page nos. 1 of 24
CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022
3. Sh. Rajesh Khera
R/o A4/79, Sector 16,
Rohini, New Delhi 110 085
4. Sh. Inder Jit Sharma,
R/o F14/21, Sector 15,
Rohini, New Delhi 110 085
...............Defendant
Date of Institution of Suit : 23.01.2016
Date of reserving judgment : 30.03.2022
Date of pronouncement : 01.04.2022
Appearance:
(i) Sh. Dharmraj Ohlyan, Advocate, Ld. Counsel for plaintiff
(ii) Sh. Y.P. Sikri, Advocate, Ld. Counsel for defendant
SUIT FOR RECOVERY OF RS. 20,00,000/ (RUPEES TWENTY
LAKHS)
J U D G M E N T:
1. The present suit has been filed by the plaintiff against the defendant seeing recovery of Rs.20,00,000/ (Rupees Twenty Lakhs) along with interest.
2. Brief facts relevant for disposal of the present suit are like this:
(i) It is averred that defendant no. 1 met plaintiff through a common friend namely Sh. Harbans Lal Rajora and, thereafter, defendant no. 1 and plaintiff became friends. The defendant no. 1 in the month of October 2012, approached plaintiff at his Page nos. 2 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 residence and apprised him that he is in the business of hotel industry in the name and style of M/s Sai Mahima Hospitality Pvt.
Ltd./defendant no. 2 (in short, the said company) and having hotel in the name of Palm Miraz, Motel1 at Ricco industrial area, Shahjahanpur, District Alwar, Rajasthan, and is having 12 running rooms in existence. The plaintiff visited the said hotel and agreed to for purchase of three lakhs shares from defendant no.
1. The defendant no. 1 further apprised plaintiff that he proposed to sell 35% i.e. 1.05 lakhs numbers of shares of the above said three lakhs shares for the total value of Rs. 1,13,40,000/. It is also agreed between the parties that shares for the value of the paid amount, at any stage, shall be transferred immediately. It was also agreed between the parties that when defendant no.1 shall handover the copies of the documents pertaining to the said company, at the earliest, to which plaintiff agreed.
(ii) It is averred that plaintiff on 29.10.2012 transferred ₹ 4.5 lakhs through RTGS from his account no. 172104000021401, IDBI Bank, Sector 5, Dwarka New Delhi to the account of the said company for the said purpose. The plaintiff and defendant no. 1 entered into a written agreement dated 01.02.2013 (in short, the said agreement) with regard to the above said transfer of 35% share, at the residence of plaintiff. Plaintiff on the same day paid an amount of ₹ 5.5 lakhs in cash to defendant no. 1 against the receipt duly executed by defendant no. 1 at the residence of Page nos. 3 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 plaintiff. The defendant no.1 asked for the transfer of the shares for the value of the said amount already paid and supply of the copies of documents as agreed, however, defendant no. 1 assured plaintiff that he will take plaintiff to Alwar, Rajasthan as the documents are at Alwar with his chartered accountant and the copy of the title documents of the said company shall also be supplied on the same day.
(iii) It is averred that defendant no.1 on 18.04.2013 again approached for the urgent need of money at the residence of plaintiff and, consequently, plaintiff transferred an amount of ₹ 1.5 lakhs through NEFT from the account of his firm namely M/s Titiksha India. The plaintiff inquired from defendant no.1 that he is ready to make the balance payment to defendant no.1 and asked defendant no.1 to transfer the share and supply copy of title documents to plaintiff, however, defendant no. 1 submitted that he is busy in some other issues and, therefore, he will get the same done in near future.
(iv) Defendant no.1 on 04.06.2013 came to the residence of plaintiff and has again shown the urgent need of money, and considering the relations between the parties, plaintiff again transferred a sum of ₹ 2.5 lakhs in the account of defendant no. 1 through RTGS. Plaintiff, thereafter, informed all the above said events to his common friend Sh.Harbans Lal Rajora, Sh.Giriraj Page nos. 4 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 Arora and Sh. Anil Aggarwal. On the assurance of the above said persons a meeting was organised at the residence of plaintiff with the defendant no. 1 on 16.08.2013. The plaintiff, on the assurance of defendant no. 1 and the collective decision taken by the above said persons paid an amount of ₹ 6 lakhs in cash to defendant. The defendant, therefore, has in total received an amount of ₹ 20 lakhs from plaintiff.
(v) It is averred that plaintiff, thereafter, made several calls to defendant no.1 for transfer of the shares and supply of the documents of the said company, however, defendant no.1 avoided the same. The plaintiff consequently, requested defendant no.1 to return the amount of ₹ 20 lakhs paid by him to defend no.1, however, to the utter shock and surprise, the defendant no.1 refused to pay back the said amount and also stopped responding to the phone call of plaintiff. Plaintiff finding no other alternative, got issued a legal demand notice dated 18.02.2014. The defendant no. 1 replied the said legal notice dated 03.04.2014 wherein he has admitted the payment of ₹ 20 lakhs.
(vi) It is averred that plaintiff in the first week of January 2015, went to the house of defendant no. 1 and asked him to either comply with the terms and conditions of the said agreement or refund him the amount of ₹ 20 lakhs along with interest @ 24% Page nos. 5 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 per annum. However, defendant no. 1 threatened plaintiff with the dire consequences of his life and his family members. The plaintiff, thereafter, came to know that defendant no. 1 has also cheated the other shareholders of the said company and defendant no. 1 never had 3 lakh shares of the said company in his name at any point of time. The plaintiff had also visited the above said hotel but was shocked to see that the said hotel has been completely demolished and the debris was lying on the spot. The plaintiff had approached defendant no. 3 and 4 and apprised them regarding the fraud committed by defendant no. 1 with the plaintiff. The plaintiff was surprised to know that defendant no. 3 and defendant no. 4 have filed a criminal case against defendant no.1 and going to file a civil suit as well. The defendant no. 3 and 4 clearly expressed their intention to sell the property in question to some other party at the earliest as they did not want to put themselves in any litigation. Hence the present suit.
3. After filing of the suit, summons for settlement of issues was issued to the defendants. Defendant no. 1 filed written statement and, inter alia, submitted that the present suit is liable to be dismissed under the provisions of Indian Companies Act in as much as the dispute is regarding transfer of the share of the said company and the same can be adjudicated by the competent authority under the Companies Act / the Company Law Board. The Civil Court has no jurisdiction to try and decide any dispute Page nos. 6 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 pertaining to the provision of the Companies Act.
4. It is also submitted that the suit is liable to be dismissed for mis joinder of cause of action and mis joinder of parties. The plaintiff has filed the suit against the defendant no. 1 and defendant no.2, which is an independent legal entity under the law and, therefore, no suit can be filed against defendant no.
2. The defendant no. 1 was always ready and willing to perform his part of the contract hence the suit for recovery is not maintainable. It has been mutually agreed between the parties that if there is any breach or default on the part of the second party/plaintiff then the first party/defendant no.1 shall have all right to forfeit the advance/earnest money. The plaintiff shall have only the right through court of law for specific performance of the contract and there is no right between the parties for recovery as alleged.
5. It is also submitted that this court does not have pecuniary jurisdiction to try and decide the present dispute as the dispute is pertaining to the shares amounting to Rs. 1,05,00,000/ and, therefore, the matter being a dispute of commercial nature should be dismissed outrightly. The plaintiff had approached defendant no. 1 for the purchase of share in terms of the said agreement, whose terms and conditions were duly reduce into writings. Defendant no. 1 was always ready and willing to perform his part of the contract. The plaintiff is at fault and has not Page nos. 7 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 performed his part of the contract in as much as it was agreed between the parties that all the shares of the value of Rs. 1,13,40,000 shall be transferred by the defendant to plaintiff, if the total payment is paid by the plaintiff to defendant no. 1 on or before 31.05.2013, which plaintiff failed to comply with.
6. Written statement has also been filed on behalf of defendant no. 2 and, interalia, it is submitted that the suit of plaintiff is liable to be dismissed under the provisions of Indian Companies Act as the dispute in respect of the present matter is regarding transfer of 1,20,000 shares of the said company by defendant no. 2 and the same can be adjudicated by the competent authority under the Companies Act/Company Law Board. The Civil Court has no jurisdiction to try and decide any dispute pertaining to the provisions of Companies Act.
7. It is submitted that the said company is an independent legal entity and, therefore, no suit can be filed against defendant no. 2 in the manner in which it has been filed. The plaintiff has no cause of action in favour of defendant no.2 to file the present suit. It is submitted that there is no default on the part of defendant no. 2 for performing any part of the contract.
8. It is submitted that it has been mutually agreed between the parties that if there shall be any breach or default on the part of plaintiff then the defendant no. 1 shall have the right to Page nos. 8 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 forfeit the earnest money and even the plaintiff shall have only right through court of law for specific performance of the said contract and there is no legal right between the parties for recovery as alleged. The suit of the plaintiff is liable to be dismissed as this court has no pecuniary jurisdiction to try the present suit.
9. Defendant no. 3 and 4 have also filed the written statement and, interalia, submitted that plaintiff has no cause of action to file the present suit against defendant no. 3 and 4 and the same is liable to be dismissed. Defendant no. 3 and 4 have purchased the said property. It is submitted that admittedly the said property is not situated within the jurisdiction of this court, therefore, this court even did not have the territorial jurisdiction to try the present suit.
10. Replication to the written statement of defendant nos.1 to 4 filed wherein the contents as mentioned in the plaint were reiterated and those stated in the written statement were denied.
11. On the basis of pleadings of the parties, following issues were framed by ld. pre decessor of this court vide order dated 13.04.2017 : Issues
1. Whether the court has no jurisdiction, in view of preliminary Page nos. 9 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 objection no. (2) of the written statement of defendant no. 1 and preliminary objection no. (1) of the written statement of defendant no. 2 ? OPD 1&2
2. Whether the suit is not maintainable in the present form, in view of preliminary objection no. (3) of the written statement of defendant no. 1 and preliminary objection no. (2) of the written statement of defendant no. 2 ? OPD 1 & 2
3. Whether the suit is not maintainable, in view of preliminary objection no. (7) of the written statement of defendant no. 1 and preliminary objection no. (5) of the written statement of defendant no. 2 ? OPD 1& 2
4. Whether there is no cause of action against defendant nos. 3 & 4, in view of preliminary objection no. (2) of the written statement of defendant nos. 3 & 4 ? OPD 3 & 4
5. Whether the plaintiff is entitled to recover a sum of Rs.
20,00,000/, if so, from whom ? OPP
6. If the answer to the aforesaid issue is in affirmative, whether the plaintiff is entitled to claim interest thereupon, if so at what rate and for which period ? OPP
7. Relief ;
12. Thereafter, parties to the suit were called upon to substantiate their case by leading evidence.
13. Plaintiff no. 1 appeared as PW1 and testified through his affidavit by way of evidence Ex.PW1/A and relied on the following documents :
(i) Statement of IDBI Bank of Dependant no. 1 is Ex. PW1/B,
(ii) Agreement regarding transfer of shares between plaintiff and defendant no.1 is ex. PW1/C,
(iii) Bank statement of federal bank pertaining the plaintiff Page nos. 10 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 company is Ex. PW1/D,
(iv) Bank statement of South Indian Bank pertaining the plaintiff company is Ex. PW1/E,
(v) Legal notice sent by plaintiff to defendant is Ex. PW1/F,
(vi) Reply to the legal notice is Ex. PW1/G,
14. Thereafter plaintiffs evidence was closed and matter was listed for recording of defendants evidence.
15. Defendant no. 1 appeared as DW1 and testified through his affidavit by way of evidence Ex.DW1/A and reiterated the contents of written statement which are not reproduced herein for sake of brevity. He relied on following documents :
(i) Memorandum of Article of Association is Ex. DW1/B,
(ii) Copy of written agreement dated 01.02.2013 is Ex. DW1/C,
(iii) Copy of receipt dated 01.02.2013 of Rs. 20 lakhs is Ex.
DW1/D,
(iv) Reply to the legal notice dated 18.02.2014 is Ex. DW1/E.
16. Defendant has also got examined Sh. D.C. Khandelwal, Chartered Accountant as DW2 , who has proved on record the documents Ex. DW1/B. He has deposed on the lines of defendant. Thereafter, defendants evidence was closed.
17. I have heard the counsel for the parties and with their assistants have gone through the record and have considered the rival contentions raised by Ld counsels for the parties and my issue wise findings are as under : Page nos. 11 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 Issue no. 1
18. The burden to prove this issue is on the defendants, as to how the Civil Court has no jurisdiction and Company Law Board has jurisdiction to try the present suit in respect of the transferring of the share of the said company by defendant no. 1 in favour of plaintiff and in the absence of any evidence, this issue is decided in favour of the plaintiff and against the defendants.
Issue no. 2
19. The burden to prove this issue is on the defendants. It is submitted that the suit is not maintainable against defendant no. 2 which is independent legal entity. In this regard, it may be noted that plaintiff has pleaded and proved that defendant no. 1 is the director of defendant no. 2. The defendant no. 1 had agreed to sale share of the said company. The defendant no. 1 dispose off the immovable properties to defendant no. 3 & defendant no. 4, therefore, on this ground, suit cannot be dismissed. Therefore this issue is decided in favour of plaintiff and against defendants.
Issue no. 4
20. The burden to prove this issue is on defendant no. 3 and defendant no. 4, and defendant no. 3 & 4 pleaded that there is no cause of action in favour of plaintiff against defendant no. 3 and defendant no. 4 in respect of the present lis, in which plaintiff, on the one side, and defendant no. 1 on the other side, are involved. Defendant no.3 and defendant no. 4 pleaded that they Page nos. 12 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 are the bona fide purchaser of the immovable property having purchased from defendant no.1 for consideration. This fact has not been controverted by the plaintiff, therefore, issue no. 4 is decided against plaintiff and in favour of defendant no. 3 and 4.
Issue no. 3,5 & 6
21. The burden to prove issue no. 2 is on defendant no. 1 and defendant 3, and burden to prove issue no. 5 and 6 is on the plaintiff. Plaintiff appeared as PW1 and reiterated the contents of the plaint, which are not reproduced for the sake of brevity. PW1 has also testified that he has made the payment for purchasing 1.05 lakhs shares out of 3 lakh shares owned by defendant no. 1 of the said company/defendant no. 2 for the sale consideration of Rs. 1,13,40,000 and paid the part payment of Rs. 20 lakhs in the following manner :
Date Amount Mode Account
29.10.2012 4.5 lakhs RTGS Account no. 172104000021401 IDBI
Bank, Sector 5 Dwarka
01.02.2013 5.5 lakhs Cash
18.04.2013 1.5 lakhs NEFT From the account of Titiksha India,
through Federal Bank
04.06.2013 2.5 lakhs RTGS
16.08.2013 6 lakhs Cash
Total 20 lakhs
22. It may be noted that the said amount was paid by plaintiff to defendant no. 1 in terms of agreement exhibited as Ex. DW1/C (Ex. PW1/C) and the relevant contents of the same are reproduced as under.
Page nos. 13 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 "Whereas the first party is the Director of M/s Sai Mahima Hospitality Pvt. Ltd. at Motel1, RICCO Industrial Area, Shajahanpur, District Alwar, Rajasthan.
The above mentioned company has total 3,00,000 numbers of share and the first party has agreed to transfer the number of share (35%) it is 1,05,000 out of the total share on the following terms :
That the second party shall pay total amount of Rs. 1,13,40,000/ (Rupees One Crore Thirteen Lakh Forty Thousand Only) to the first party against the above mentioned transfer share including bank loan. In which the second party has paid Rs. 10,00,000/ (Rupees Ten Lakhs Only) to the first party on 01.02.2013 and remaining payment will be paid by the second party on or before 31.05.2013.
That at the time of making final payment the first party shall handover all necessary documents of the transferring the share to the second party That the first party assures the second party that the above mentioned share is free from all sorts of encumbrances such as mortgage, gift, sale, litigation, attachment and proceedings of any nature. If proved, the first party shall be liable and responsible for the same.
That the transfer and all other charges and expenses of the transfer of the abovesaid share will be paid by the second party.
That in case of breach of any clause by the first party, the second party shall have every right to get the share and get the necessary documents through Court of law through a specific performance act after paying remaining final payment to the first party.
Page nos. 14 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 That the first party agrees to indemnify the second party against all charges and liabilities that the second party might incur subsequently to the transfer on due consideration of the said shares.
In the even of the breach of any clause of this agreement by the second party, the first party shall have the right to terminate this agreement and forfeit the advance/earnest money which is received by him. And in case of breach of any clause of this agreement by the first party or the first party does not give possession of the above mentioned share according to the terms of this agreement then the first party will have to pay the double of the earnest money/advance received by him."
23. PW1 further testified that after getting the above said amount, defendant avoided plaintiff and neither come forward to transfer the said share nor had supplied the copy of the documents of the said company and when plaintiff demanded the suit amount back, defendant no. 1 flatly refused to return the said amount despite service of legal notice.
24. Defendant appeared as DW1 and has relied on the written statement, contention of which are not reproduced for the sake of brevity. He admitted that he entered into the agreement Ex. DW1/D(Ex. DW1/C). The plaintiff has paid the amount of ₹ 20 lakhs and plaintiff has further promised to pay the amount of ₹93,40,000 up to 31.05.2013. Plaintiff further requested defendant to continue working on the said project by constructing Page nos. 15 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 more rooms. The defendant believing the version of plaintiff, started the project, but plaintiff did not make the payment as per the the agreement. He has paid the amount of ₹ 20 lakhs. The defendant in terms of the agreement Ex. DW1/C was supposed to transfer 1.05 lakhs shares to the plaintiff for sale consideration of ₹ 1,13,40,000 to be paid on or before 31.05.2013.
25. DW1 further testified that the defendant was under
continuous stress of repayment of bank loans in as much as the bank has initiated proceedings under SARFAESI Act against defendant no. 1 and defendant no. 2 and on persistent followup, plaintiff has paid an amount of Rs.2.5 lacs on 04.06.2013. The plaintiff failed to fulfill his commitment which led to worsening of the financial position of defendant and defendant was compelled to raise funds on higher rate of interest. The defendant has to bear the expenses of office of about ₹ 2 lakhs per month. The defendant has received an amount of ₹ 20 lakhs out of which 8.5 lakhs in the account of the company and another 11.5 lakhs in cash in 1213 trenches.
26. DW1 further testified that plaintiff had met the branch manager of bank of defendant no.1 namely State Bank of Bikaner and Jaipur several times to know the liability of the said company. The defendant was constrained to sell his immovable property to third party to clear the bank dues on 26.06.2014. The defendant, through notice dated 03.04.2014 Ex. DW1/E informed plaintiff that Page nos. 16 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 he has suffered enormous financial losses for nonfulfillment of the commitment made by the plaintiff.
27. In crossexamination DW1 admitted that plaintiff and defendant used to visit K.K. Khandelwal chartered accountant of defendant no. 1 regarding the documents related to transfer of the said company shares by defendant no. 1 in favour of the plaintiff. The defendant sold his immovable properties to defendant no.3 and defendant no. 4 in the year 2014. The defendant has shown the complete documents of the said company to the plaintiff and he has repaid the bank loan after disposing of the said assets.
28. It is admitted case of the parties that plaintiff has paid an amount of ₹ 20 lakhs for purchase of the said shares of the said company from defendant no. 1 and as per the terms and conditions of the said agreement, the plaintiff was to pay an amount of ₹ 1,13,40,000 on or before 31.05.2013.
29. It may be noted that it is contention of learned counsel for plaintiff that defendant failed to handover the relevant documents for transfer of the said shares in the name of plaintiff, therefore, plaintiff has not paid the remaining amount. However it is the contention of learned counsel for the defendant that plaintiff failed to perform his part of the contract/agreement Ex. PW1/C and the amount of ₹ 20 lakhs stood forfeited as per the terms and conditions of the said agreement.
Page nos. 17 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022
30. It may be noted that plaintiff has sought return of the amount of ₹ 20 lakhs so paid by plaintiff to defendant in terms of the said agreement Ex. PW1/C. Now, the question arises as to whether the plaintiff is entitled to the return of the amount of ₹ 20 lakhs or the defendant is entitled to 4 feet the said amount in terms of the terms and conditions of the said agreement Ex. PW1/C. Before proceeding further, it may be noted that Section 37 of the Contract Act, 1872 reads as under :
"Obligation of the parties to contracts : The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law.
31. As per the above said provision parties to the contract must either perform or offer to perform their respective promises. However, in the present case, the plaintiff has pleaded that he has paid an amount of ₹ 20 lakhs out of the total amount of ₹ 1,13,40,000 and in the legal notice Ex. PW1/F, plaintiff has pleaded that plaintiff has ever been ready and willing to perform his part of the contract.
32. It may also be noted that Section 39 of the Indian Contract Act provides as under:
"When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance."
Page nos. 18 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022
33. A bare perusal of the Section depicts that it applies to cases of what are called executory contracts and not to executed contracts. This Section applies to all breaches which occurred before the expiry of the last date on which the agreement can be performed in the whole or in part, though, it also covers all earlier breaches. This Section further provides that where a party has by its own conduct made it impossible for himself to perform his agreement in its entity within the stipulated time, the other party is legally entitled to put an end to the agreement without incurring any liability for damages. An agreement can be repudiated either by words expressive of intention not to perform the agreement or the conduct from which the said intention can be gathered. The mere failure to perform a contract without more cannot be said to be a reproduction of it.
34. The defendant, as per the mandate of the abovesaid section, was entitled to put an end to the said agreement on 31.05.2013, however, the defendant admittedly received the part payment from the plaintiff even after expiry of last date of such payment i.e. 31.05.2013. Defendant, therefore, cannot said to have repudiated the said contract/agreement. It cannot be held that the said agreement has ever been repudiated by defendant at any point of time.
35. It may be noted that the plaintiff has time and again and through legal notice demanded the relevant document for Page nos. 19 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 performance of his part of the agreement, so far as further payment of the sale consideration of the shares of the said company. However, defendant has led no evidence in support of his contention that plaintiff has failed to perform his part of the contract. Therefore, it can be safely concluded that it is the defendant who failed to perform his part of the contract and plaintiff has ever been ready to perform the contract.
36. Otherwise also, even if, it is presumed for the sake of argument, though not admitted that plaintiff has also committed the breach of the terms and conditions of the said agreement, even then the question arises as to whether the defendant is entitled to forfeit the said amount. In this regard, it may be noted that the section 74 of the Contract Act lays down the principle for asking the other defaulting parties, the liquidity damages or penalty.
37. The said section is reproduced as under:
"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".
38. The basic principle with regard to the claim of liquidity damages is as follows:
Page nos. 20 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 (1) no claim for such damages is maintainable unless the promisee is proved to have sustained loss due to the default of the promisor;
(2) whatever the quantum of the loss so sustained, the claim cannot exceed the sum stipulated in the contract; (3) only reasonable sum can be awarded as damages which in a given situation may be less than the sum stipulated; (4) what is reasonable sum depends on facts; (5) court may proceed on the assumption that the sum stipulated that the sum stipulated reflects the genuine pre estimate of the parties as to the probable loss and such clause was intended to dispense with the proof thereof and (6) it will always be open to the promisor to show that no loss was suffered or that the estimate so made is falsified by the change in the situation or that the loss suffered was less.
39. A bare perusal of the abovesaid principle of law depicts that even if the plaintiff has failed to perform his part of the contract, though not proved by defendant, even then, the defendant is not entitled to ask for liquidity damages or could invoke the clause of the said agreement by way of forfeiture of the said amount either as a penalty or by way of liquidated damages. The mandate of section 74 of Indian Contract Act is that the defaulting party is to pay the reasonable damages not exceeding the amount so named only to the other party. The amount cannot be recovered by the other party from the party in default by way the penalty in as much as the damages as penalty only are prohibited by virtue of section 74 of the Indian Contract Act. In this regard, though not quoted reliance is placed upon Nar Singh Page nos. 21 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 Prasad vs Shailender Kumar Mishra judgment passed in RFA No.702/2017 by Hon'ble High Court of Delhi, wherein it has been observed as under :
"43. On a conspectus of the above authorities, the law on compensation for breach of contract Under Section 74 can be stated to be as follows:
43.1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
43.2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
43.3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.
43.4. The Section applies whether a person is a Plaintiff or a Defendant in a suit.
43.5. The sum spoken of may already be paid or be Page nos. 22 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022 payable in future.
43.6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine preestimate of damage or loss, can be awarded.
43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application."
From the above discussion, it can be safely concluded that the defendant has failed to perform its part of the contract of said agreement and the defendant is not found entitled to forfeit the said amount of Rs. 20,00,000/ paid by plaintiff to defendant for part payment of the sale consideration for purchase of Rs. 1,05,000/ of the share of the said company.
40. The plaintiff has claimed pendentelite and future interest @ 20% p.a., however, the defendant has failed to lead any evidence with respect to the interest as has been mutually agreed by the parties. Keeping in view prevailing interest rate of bank, I hold that the grant of pendentelite and future interest 6% p.a. on the amount of Rs. 20 lakhs will meet the ends of justice.
Page nos. 23 of 24 CS no. 43/2016 Kishore Kumar Rajora v. Mukesh Rajore & ors. DOD : 01.04.2022
41. In view thereof, the suit of plaintiff is "decreed" as follows :
a) Decree in the sum of Rs.20,00,000/ (Rupees Twenty Lakhs Only) alongwith pendentelite and future interest @ 6% p.a. from the date of filing of the present suit till its realization, is passed in favour of plaintiff and against defendant.
b) Plaintiff is also entitled to cost.
Decree Sheet be drawn accordingly.
File be consigned to the Record Room.
Digitally
signed by
Announced in the open court on VIJAY VIJAY KUMAR
DAHIYA
01st Day of April 2022 KUMAR Date:
DAHIYA 2022.04.20
14:50:43
+0530
(V.K. DAHIYA)
ADDL. DISTRICT JUDGE01 (SOUTH WEST)
DWARKA DISTRICT COURTS: NEW DELHI.
Page nos. 24 of 24