Delhi District Court
Ram Niwas Sharma vs Gulshan Kumar on 15 January, 2019
IN THE COURT OF SH. SANJEEV KUMAR-I,
ADDITIONAL DISTRICT JUDGE-12 (CENTRAL)
TIS HAZARI COURTS, DELHI.
Suit No. 165/05 (Old)
New CSDJ No.18656/2016
Ram Niwas Sharma
S/o Late Sh. Pandit Ram Swarup
R/o 37, Masjid Moth (Village)
New Delhi.
At present:-
27A, Masjid Moth, New Delhi ........Plaintiff
Versus
Gulshan Kumar
S/o Sh. Asa Nand
R/o 70, National Park,
Lajpat Nagar,
New Delhi-110024. .......Defendant
Date of institution : 27.05.2005
Date of reserving order : 12.12.2018
Date of decision : 15.01.2019
SUIT FOR SPECIFIC PERFORMANCE,
PERMANENT AND MANDATORY INJUNCTION AND
RECOVERY OF DAMAGES
JUDGMENT
1. Vide this judgment, I shall decide the suit for specific performance, permanent and mandatory injunction and recovery of CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 1 of 75 damages filed by plaintiff.
2. Brief facts as stated in the plaint are that plaintiff has entered into an agreement to sell with the defendant on 23.05.2002 with respect to purchase of the suit property i.e. ground floor portion having independent entrance from north side measuring 1800 sq. ft. in the building constructed on Plot no.37, Khasra no.429 Min situated at village Masjid Moth, New Delhi for a sale consideration of Rs.18 lakhs and in pursuance of the said settlement, defendant has already received Rs.1 lakhs by way of cheque at the time of signing of the agreement and Rs.17 lakhs were to be given in the following manners - Rs.1 lakh on June, 2002, Rs.4 lakhs on September 2002, Rs.4 lakhs on January 2003 and Rs.8 lakhs at the time of handing over vacant and physical possession of the said ground floor on or before 31.03.2003. Plaintiff has paid Rs.3,50,000/- to the defendant.
3. It is further averred by the plaintiff that at the time of agreement, defendant had assured that property under sale is free from all kinds of encumbrances and assured the plaintiff that after receiving the final payment he will execute the relevant documents CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 2 of 75 i.e. GPA, SPA, Will, Agreement to Sell, undertaking, affidavit etc. in favour of the plaintiff and got the permissible documents registered with the office of sub-registrar. Defendant has also assured the plaintiff for common stairs case, passage, submersible pump and overhead water tank shall be provided for whole building and defendant will provide separate space for two scooters in the basement and separate electricity meter.
4. It is further averred by the plaintiff that defendant did not construct the said portion as per specifications given in the said agreement and has not provided the agreed parking area, therefore plaintiff stopped giving him the next installments. Plaintiff has sent a legal notice through his counsel on 05.05.2005 asking him to perform his part of the contract but defendant has failed to do so therefore plaintiff has filed the fresh suit for specific performance seeking relief that plaintiff be put in the full possession of the suit property and said directions that property be constructed as per specifications given in the agreement and also sought relief of injunctions restraining defendant, his agents and employees from CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 3 of 75 selling, alienating or creating third party interest in the suit property.
5. Summons of the suit were sent to the defendant and defendant has filed written statement in which defendant has taken the preliminary objection that plaintiff has defaulted in the payment due on June 2002, September 2002 and January 2003, therefore agreement stood revoked and advance of Rs.1 lakh was forfeited. Further the objection was taken that the suit is barred by limitation and that the suit is bad for misjoinder of party/ person who has already received the possession of the ground floor which is subject matter of the agreement dated 23.05.2002.
6. On merits, the defendant has admitted the contents of the plaint to the extent that agreement dated 23.05.2002 was got executed, however it is stated that the same stood terminated and advance given by plaintiff stood forfeited and agreement was validly terminated for non-payment of dues. The defendant has denied that the property was not constructed as per the specification given in the agreement and has not provided the agreed parking area. It is also denied that defendant has not shown inside of the said portion to the CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 4 of 75 plaintiff. Further the defendant has denied that plaintiff has made a payment of Rs.3,50,000/- or that defendant was ever careless or misbehaved or deliberately neglected towards his part of contract. Thus the defendant has prayed for dismissal of the suit.
7. Plaintiff has filed replication to the written statement in which he has denied the contents of the written statement as incorrect and reiterated the contents of the plaintiff as true and correct.
8. After completion of the pleadings, the following issues were framed vide order dated 23.05.2006:-
1. Whether the agreement dt. 23-5-02 stands revoked and advance of Rs.1 lakh forfeited by the defendant as the plaintiff defaulted in payment due on June, 2002, September 2002 and January 2003. If so, its effect? OPD
2. Whether the suit property has been delivered to the buyer who had made the payment for the same. If so, its effect? OPD CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 5 of 75
3. Whether the plaintiff was/ is ready and willing to perform the agreement dt. 23-2-05? OPP
4. Whether the suit of the plaintiff is barred by limitation?
5. Whether the suit of the plaintiff is bad for misjoinder of cause of action and relief with regard to damages for dafamation?
6. Relief.
9. In order to prove his case, the plaintiff has examined himself as PW-1; Sh. Krishan Kaushik, LDC MCD Building Department South Zone as PW2; Sh. B.L. Sharma, Deputy Manager, State Bank of Saurashtra as PW3; Sh. S.K. Govila, Manager, Allahabad Band as PW4; Sh. Murli Manohar, his son as PW5; Ms. Shelly Sharma as PW6; Sh. Gian Chand, CTO, Union Bank of India as PW7 and Sh. Lav Kumar as PW8.
10. On the other hand, defendant has examined Sh. Sanjay Rawat, Record Keeper, Sub-Registrar-V as DW1; Sh. Ramesh CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 6 of 75 Tuteja as DW2; Sh. Ishwar Chand Sharma, UDC, House Tax, MCD, R.K.Puram as DW3; Sh. Gulshan Kumar (defendant himself) as DW4; Sh. Asa Nand as DW5 and Sh. Vivek Sharma as DW6.
11. Arguments were heard from Ld. Counsel for the plaintiff Sh. Vinod Bhaskar as well as Ld. counsel for the defendant Sh. Suresh Sharma and Sh. Nagesh Kapoor. Both the counsels for the parties have almost argued on the same lines which they have taken in their respective pleadings.
12. I have considered the submissions of the parties and gone through the record. Issue no.1 and 3 are interconnected therefore I shall decide the same together.
ISSUE NO.1 "Whether the agreement dt. 23-5-02 stands revoked and advance of Rs.1 lakh forfeited by the defendant as the plaintiff defaulted in payment due on June, 2002, September 2002 and January 2003. If so, its effect? OPD"
And CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 7 of 75 ISSUE NO.3.
"Whether the plaintiff was/ is ready and willing to perform the agreement dt. 23-2-05? OPP"
13. The onus to prove issue no.3 is upon the plaintiff and issue no.1 is upon the defendant. In order to prove his case, plaintiff have examined himself as PW1. In his evidence led by way of affidavit Ex.PW1/A, he has almost reiterated the same contents as stated by him in the plaint, therefore same are not repeated here. He has proved the following documents :-
(i) Site plan as Ex.PW1/1.
(ii) Copy of legal demand notice dated 05.05.05 as
Ex.PW1/A.
(iii) Reply dated 25.05.05 is Mark-B.
(iv) Copy of NOC no.1105 dated 28.03.02 as Ex.PW1/2.
(iii) Agreement to sell dated 23.05.02 as Ex.PW1/3.
(iv) Certificate of payment to the defendant of Rs.1,00,000/-
by cheque no.115501 dt. 23.05.02 and Rs.1,00,000/- by cheque no.115504 dated 27.06.02 is Ex.PW1/4. CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 8 of 75
(v) Certificate of payment to the defendant of Rs.50,000/-
by cheque no.250462 dated 05.10.02 is Ex.PW1/5.
(vi) Letters dt. 16.10.02, 23.12.02 and 18.02.03 with UPC are Ex.PW1/6 to Ex.PW1/8 respectively.
(vii) Copy of ration card as Ex.PW1/9.
(viii) List of MCD/South Zone displayed on internet as Ex.PW1/10.
(ix) Receipt as Ex.PW1/11.
14. In his cross-examination, PW1 has stated that he was shown the documents i.e. NOC issued by Land & Estate department. He was not aware that the defendant was a builder and volunteered that he was told by him that he is the owner of the suit property. He denied the suggestion that he was supplied documents along with the agreement copy by the defendant. He denied the suggestion that he did not leave the house where he was residing on instructions of the defendant. He denied the suggestion that there was no unauthorized construction on the site of the suit property and everything was done in accordance with the site plan. He denied the CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 9 of 75 suggestion that he was to be given documents of the suit property after making final payment and further deposed that only MCD can tell if permission to construction is required on lal dora land or not and volunteered that suit property does not fall in lal dora and the same is situated in the urbanized village. He denied the suggestion that letters Ex.PW1/6 to Ex.PW1/8 are forged.
15. PW2 Sh. Krishan Kaushik, LDC, MCD Building department, South Zone has brought the summoned record i.e. copy of the FIR of Building Department, MCD which he proved as Ex.PW2/1, the show cause notice for construction of the building as Ex.PW2/2, office order of J.E. as Ex.PW2/3 and show cause notice on behalf of A.E. for construction of building as Ex.PW2/4 and office proceedings as Ex.PW2/5. In his cross-examination, he has stated that he do not have any personal knowledge.
16. PW3 Sh. B.L. Sharma, Dy. Manager, State Bank of Saurashtra has proved the statement of account of Sh.Gulshan Kumar as Ex.PW3/1.
17. PW4 Sh. S.K. Govila, Manager, Allahabad Bank, Uday CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 10 of 75 Park has proved the letter Ex.PW1/5 confirming the payment of cheque bearing no.250462 dated 05.10.2002 issued by Sh.M.M. Sharma in favour of Sh.Gulshan Kumar for Rs.50,000/-, through Sh.Anil Kumar who presented the same to the bank counter. In his cross-examination, he stated that the said cheque was encashed by Sh. Anil Kumar. Anybody can encash a bearer cheque. In a bearer cheque there is no requirement to verify the signatures of the person encashing the cheque. He admitted the suggestion that signature of Anil Kumar on Ex.PW4/1 at point A is appended with signature of Sh.M.M. Sharma at point B. He cannot say if at the time of encashing Ex.PW4/1 Sh. Murli Manohar Sharma was present or not.
18. PW5 Sh. Murli Manohar led his evidence by way of affidavit Ex.PW5/A in which he deposed that Sh.Gulshan Kumar and Sh. Ram Niwas Sharma entered into an agreement to sell and purchase on 23.05.2002 for the purchase of property on plot (house) no.37, Masjid Moth Village, New Delhi and after the agreement Sh. Ram Niwas Sharma handed over the possession of the suit property to Sh. Gulshan Kumar @ Gulshan Arora on 29.05.2002. At the time CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 11 of 75 of agreement, Sh. Ram Niwas Sharma gave a cheque of Rs.1 lakh to Sh. Gulshan Kumar and Sh. Gulshan Kumar promised to give copies of property and related documents to Sh. Ram Niwas Sharma and to construct building as per site plan as per MCD by-laws. On 05.10.2002, Sh. Ram Niwas Sharma gave Rs.1 lakh in cash and Rs.50,000/- by cheque to Sh.Gulshan Kumar at his residence and Sh.Gulshan Kumar handed over the cheque of Rs.50,000/- for collecting the money from bank to his servant Anil Kumar. He accompanied Sh. Anil Kumar to the bank to see that the cheque is encashed without any problem and after getting money from bank, Anil Kumar went to the site of work. While receiving the cheque and cash of Rs.1 lakh, Gulshan Kumar assured to give all the copies of the documents to the plaintiff. In his cross-examination, he stated that in the year 2002 he was doing business of computer hardware. He was income tax payee and shown his income approximately Rs.1,15,000/- in the AY 2001-02 and 2002-03. He deposed that he had handed over a bearer cheque in the name of Sh.Gulshan Kumar to Sh.Gulshan Kumar on 05.10.2002 at his residence and at that time Ms.Shelly Sharma, Lav Kumar Sharma, Sh. Ram Niwas CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 12 of 75 Sharma, Smt. Krishna Sharma and Sh. Anil Kumar were present. He admitted the suggestion that he identified Sh. Anil Kumar in the bank and also attested his signatures at the back of the said cheque and volunteered that he identified Sh. Anil Kumar at the instance of Sh.Gulshan Kumar. He denied the suggestion that Sh. Anil Kumar was not employee of Sh.Gulshan Kumar and Sh. Anil Kumar withdrawn the said amount at his instance.
19. PW6 Ms. Shelly Sharma has led her evidence by way of affidavit Ex.PW6/A in which she deposed that Sh. Ram Niwas Sharma entered into an agreement to sell and purchase for the purchase of property on plot (house) no.37, Masjid Moth Village, New Delhi with Sh. Gulshan Kumar and paid Rs.1 lakh in cash and Rs.50,000/- by cheque issued by Murli Manohar Sharma in the name of Sh. Gulshan Kumar. In her cross-examination, she stated that Sh. Ram Niwas Sharma is her maternal grandfather. At the time of payment by Sh. Ram Niwas Sharma, Sh.Murli Manohar Sharma, Sh. Lav Kumar Sharma were present.
20. PW7 Sh.Gian Chand, CTO, Union Bank of India had CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 13 of 75 proved the statement of accounts of account no.7227 in the name of Ram Niwas Sharma as Ex.PW7/1 and deposed that cheque bearing no.115501 and 115504 dated 23.05.02 and 27.06.02 for Rs.1 lakh each have been honoured by their bank. In his cross-examination, he stated that statement of accounts Ex.PW1/4 has been signed by Sh.Dharmender Sarkar, Officer Scale-III.
21. PW8 Lav Kumar has led his evidence by way of affidavit Ex.PW8/A in which he deposed on the same line as deposed by PW5 and PW6. In his cross-examination, he deposed that on 05.10.2002, the cash payment of Rs.1 lakh has been made to Sh.Gulshan Kumar in his presence. On that day he had gone to the plaintiff residence for repairing his monitor. When he reached there, Sh. Gulshan Kumar and family members of plaintiff were already there. He is not aware whether any receipt issued by Sh. Gulshan Kumar after taking Rs.1 lakh from the plaintiff. He had knowledge about payment of Rs.1 lakh in cash and Rs.50,000/- in cheque as talks were going on between the parties there.
22. It is contended by Ld. Counsel for the plaintiff that from CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 14 of 75 the testimony of the plaintiff witnesses it is proved that it is the defendant who did not perform his part of the contract as he did not get sanction site plan from the municipal authorities for construction of the building due to said reasons the property was booked for unauthorized construction by the municipal authorities and even demolition action was taken. Therefore the plaintiff has valid and justified reason to withheld the installments of September 2002 and January 2003. He further argued that plaintiff was always ready and willing to perform his part of the contract and sent legal notice dated 05.05.05 Ex.PW1/A asking the defendant to perform his part of the contract, therefore plaintiff is entitled for decree of specific performance.
23. On the other hand, defendant as stated above has examined six witnesses. He has examined Sh. Sanjay Rawat, Record Keeper, Sub-registrar-V, Mehrauli as DW1 who has proved general power of attorney of Sh. Asa Nand having registration no.4891 in book IV, Vol.No.2154 on pages 176 to 179 dated 21.04.2004 and Will of Sh.Asa Nand having registration no.4332, in CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 15 of 75 book no.III, Vol.No.1220 on pages 184 to 185 dated 21.04.04, as Ex.DW1/1 & Ex.DW1/2 respectively. In his cross-examination, he has stated that he has no personal knowledge of the case.
24. The defendant has also examined Sh.Ramesh Tuteja as DW2 who deposed that he has signed on the document Ex.DW1/1 i.e. GPA dated 21.04.2004 as witness. In his cross-examination, he stated that he knows that Sh. Asa Nand executed the GPA Ex.DW1/1 in favour of Smt. Alka Arora. He do not know from where the property as mentioned in Ex.DW1/1 came to Sh. Asa Nand. He do not know if Sh.Gulshan Kumar was also the owner of the said property. He also do not know whether Sh.Gulshan Kumar has entered into any agreement with Sh.Ram Niwas Sharma.
25. DW3 Sh. Ishwar Chand Sharma, UDC from House Tax Department, MCD has produced the summoned record of property bearing no.37, Village Masjid Moth, New Delhi which is collaboration agreement dated 15.04.2002 between Sh. Jagdish Kumar Saini S/o Sh.B.S. Saini and Sh.Sunil Bharal S/o Sh.P.K. Bharat and Sh. Gulshan Kumar S/o Sh.Asa Nand which he proved as Ex.DW3/1. He CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 16 of 75 proved the letter dated 05.02.2004 addressed to Deputy/ Asstt. Assessor & Collector, MCD, Green Park that the property has been sold to Sh.Asa Nand S/o Sh.Kewal Ram as Ex.DW3/2. In his cross- examination, he has stated that he do not have any personal knowledge of the case.
26. Defendant has examined himself as DW4. In his evidence led by way of affidavit Ex.DW4/A, he has deposed that he was authorized vide colloboration agreement dated 15.04.2002 Ex.DW3/1 to enter into agreement to sell Ex.PW1/3 with the plaintiff and as per the agreement the balance amount of Rs.17 lakhs was to be payable by the plaintiff in the following manner:-
a) Rs.1 lakh on June, 2002,
b) Rs.4 lakhs on September 2002
c) Rs.4 lakhs on January 2003
d) Rs.8 lakhs at the time of handing over vacant and
physical possession of the said ground floor on or before 31.03.2003.
27. He further deposed that in the month of November CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 17 of 75 2002, a legal notice was sent to Sh.Ram Niwas by his counsel for the payment of installment/ payment due on September 2002 with specific intimation of forfeiture of said amount in case of default/ non- payment. The plaintiff has concealed the fact in the suit that he defaulted in the payment due on September 2002 and January 2003, therefore agreement stood revoked and payment of Rs.2 lakhs has been forfeited. He further deposed that his father being the owner of suit property has sold the same to Mrs. Alka Arora. He proved the following documents :-
(i) Reply dated 25.05.2005 as Ex.DW4/1.
(ii) Courier receipt and proof of delivery for the reply sent to
Sh.Iqram Khan as Ex.DW4/2 and Ex.DW4/3
respectively.
(iii) Courier receipt and proof of delivery for the reply sent to Sh. Ram Niwas Sharma as Ex.DW4/4 and Ex.DW4/5 respectively.
(iv) Registry slip of the reply to the notice sent to Sh.Iqram Khan, Advocate as Ex.DW4/6 and UPC as Ex.DW4/7. CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 18 of 75
28. In his cross-examination, DW4 deposed that cheque bearing no.250462 of Rs.50,000/- issued by Sh.Murli Manohar Sharma in favour of Sh.Gulshan Arora was encased or not is a matter of record. He stated that he do not remember whether he had supplied letter dated 28.05.2002 issued by ADM (LA), Delhi to plaintiff at the time of signing of the agreement dated 23.05.2002 and volunteered that he had supplied entire chain of documents and papers pertaining to the subject property. He stated that he did not receive any letter dated 16.10.02, 23.12.02 and 18.02.03 issued by the plaintiff. He denied the suggestion that at the time of execution of the agreement to sell he had given the site plan to the plaintiff assuring that he will get it sanctioned from the concerned authorities. He admitted that the MCD had punctured a part of the suit property i.e. third floor. He denied the suggestion that MCD has shown the entire suit property as unauthorized construction and volunteered that it is only with regard to the third floor. He stated that the owners of the suit property were Sh.Sunil Kumar Bharat and Sh.Jagdish Saini and he had entered into a collaboration agreement with them. He admitted that he had not followed MCD by-laws at the time of CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 19 of 75 raising the construction in the suit property and volunteered that none of the properties constructed in the vicinity of the suit property have been constructed as per the MCD plans/ by-laws and nobody had got sanctioned the building plan from the MCD before raising construction. In response to the question that his father in his affidavit has shown himself as GPA holder whereas in his affidavit he has shown himself as the owner of the suit property, the witness answered that whether his father was the owner or he was owner did not make any difference as he was ready to perform the terms of the agreement. He stated that GPA of his father is as per the terms of the collaboration agreement. He admitted that Alka Arora is his bhabhi and his father has sold the property to Alka Arora through registered GPA/ agreement to sell etc. He denied the suggestion that said transaction is a sham transaction and done in order to defeat the rights of the plaintiff.
29. DW5 Sh. Asa Nand led his evidence by way of affidavit Ex.DW5/D1 in which he is the attorney of Sh.Jagdish Kumar Saini and Sh. Sunil Bharal vide GPA Ex.DW3/1. He further deposed that CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 20 of 75 he has sold the suit property to Mrs. Alka Arora and GPA, registered Will, Receipt and Possession letter all dated 21.04.04 and the possession of the suit property has been given to Mrs. Alka Arora. In his cross-examination, he deposed that he is GPA holder of Sh.Jagdish Kumar Saini and Sh. Sunil Bharal. He has sold the suit property to Smt. Alka Arora along with his son Gulshan Kumar and he has received the consideration amount by cheque. The do not remember the exact figure of the cheque. He admitted that Mrs. Alka Arora is his daughter-in-law. He admitted that his son has entered into an agreement with the plaintiff for the sale of suit property and volunteered that same could not be sold to the plaintiff as he was unable to pay the consideration. He has sold and handed over the possession to other 14 or 15 persons who have paid the money.
30. DW6 Vivek Sharma led his evidence by way of affidavit Ex.DW6/A in which he deposed that he is Advocate and in the month of November 2002, Sh. Gulshan Kumar had approached him for serving a legal notice to Mr. Ram Niwas regarding default in installment as mentioned in the agreement dated 23.05.2002 CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 21 of 75 entered into his client and Mr. Ram Niwas. He sent the legal notice dated 14.11.2002 to plaintiff which he proved as Ex.DW6/1, copy of registered AD and UPC as Mark-A & B respectively. In his cross- examination, he denied the suggestion that he did not give the notice correctly.
31. It is contended by Ld. Counsel for the defendant that to get the relief of specific performance plaintiff has to prove that plaintiff was ready and willing to perform his part of the contract not only on the day when the suit was filed but till the date of judgment. The plaintiff has failed to lead any evidence that he has the money to pay the balance sale consideration. He further argued that plaintiff has failed to make the payment as per the schedule specified in the agreement for payment of the consideration amount as he did not pay the amount which fall due on September 2002 and January 2003, therefore it is plaintiff who is responsible for breaking the term of agreement and not defendant he was always ready to perform his part of contract and even send legal notice EXDW1/6 to pay the amount as per schedule mention in the agreement but plaintiff fails CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 22 of 75 to pay hence defendant hence the agreement stood terminated therefore defendant sold the suit property to Smt. Alka Arora. Hence, plaintiff is not entitled for specific performance of the contract as suit property was already sold prior to filing of the suit.
32. I am agree with the contention of Ld. Counsel for the defendant that plaintiff to get relief of specific performance of the contract has to proved that that he was always ready and willing to perform his part of contract. In this regard I rely upon judgement Madan Mohan vs Sheel Gulati 2015(3) CLJ 806 Del. The relevant portion of the judgement is reproduced as below:
" 22. In N.P. Thirugnanam v. R. Jagan Mohan Rao: (1995) 5 SCC 115, the Court found that the Appellant was dabbling in real estate transaction without means to purchase the property and observed:
(SCC pp.117-18, para 5) "5....Section 16(c) of the Act envisages that Plaintiff must plead and prove that he had performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than those terms the performance of which has been prevented or waived by the Defendant. The continuous readiness and willingness on the part of the Plaintiff is a condition precedent to grant the relief of specific performance. This circumstance is material and relevant and is required to be considered by the court while granting or refusing to grant the relief. If the Plaintiff fails to either aver or prove the same, he must fail. To adjudge whether the Plaintiff is ready and willing to perform his part of the contract, the court must take into consideration the conduct of the Plaintiff prior and subsequent to CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 23 of 75 the filing of the suit along with other attending circumstances. The amount of consideration which he has to pay to the Defendant must of necessity be proved to be available. Right from the date of the execution till date of the decree he must prove that he is ready and has always been willing to perform his part of the contract. As stated, the factum of his readiness and willingness to perform his part of the contract is to be adjudged with reference to the conduct of the party and the attending circumstances. The court may infer from the facts and circumstances whether the Plaintiff was ready and was always ready and willing to perform his part of the contract."
(underlining added)
(iii) In the above reproduced para 22 of the judgment in the case of Narinderjit Singh (supra), the Supreme Court has relied upon its earlier judgment in the case of N. P. Thirugnanam Vs. R. Jagan Mohan Rao (1995) 5 SCC 115 [para 5 of which judgment has been reproduced in para 22 of the judgment in the case of Narinderjit Singh (supra)] and this para makes it more than abundantly clear that amount of consideration which a buyer must pay to the seller must be necessarily proved to be available and only on proof of which readiness and willingness would stand established.."
33. Now reverting back to the case. Plaintiff neither in the plaint nor in his evidence led through affidavit Ex.PW1/A has deposed that he is ready and willing to perform his part of contract. Entire thrust of his evidence is on the aspect that defendant has not performed his part of contract.
34. As per agreement to sale EXPW1/3 Rs.4 lakhs on September 2002 and Rs.4 lakhs on January 2003 and Rs.8 lakhs at CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 24 of 75 the time of handing over the vacant and physical possession of the said portion of ground floor on or before 31.03.2003. As per own admission of plaintiff/PW1 he has paid Rs. 100,000/- at the time of execution of agreement to sale vide cheque dt. 23.05.2002 and Rs. 100,000/- by way of cheque dt. 27.06.2002. Though he deposed that he paid Rs.50,000/- on 05.10.2002 through cheque no.250462 drawn on Allahabad bank from the account of his son Sh. Murli Manohar and Rs.1 lakh cash but the defendant has denied the receiving of the said payments. Even if I presume the same has been given by the plaintiff even than he has failed to make the payment according to terms of the agreement as by September 2002 he has to make the payment of Rs. 600,000/- whereas he has only paid Rs. 200,000/-. He had allegedly paid Rs. 150,000/- on 05.10.2002. Hence admittedly he had not paid any amount in September 2002 out of Rs. 400,000/- which he had to pay in September 2002. Further plaintiff has to Rs. 400,000/- in January 2003 but he did not pay any amount in January 2003. Hence as per own admission of plaintiff by January 2003 he has to pay Rs. 1000000/- but he has only paid Rs. 350,000/-. Thus plaintiff himself CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 25 of 75 has broken the terms of agreement.
35. As far as contention of Ld. Counsel for the plaintiff that defendant did not construct his portion as per the specifications given in the agreement, therefore plaintiff did not make the payment, I found that in the agreement Ex.PW1/3 there is not specification given regarding quality of construction of the suit property. The conditions which is mentioned in the agreement are as under:-
"6. That the stairs, passage, submersible pump and overhead water tank shall be common for the whole building. 6a. That the parking space for two scooters in the Basement will be provided by the first party to the second party.
7. That a separate Electric meter shall be provided to the second party exclusively for the said portion."
36. In my view all the conditions mentioned above was to be fulfilled at the time of handing over the possession of the suit property i.e. in March 2003 when plaintiff has to pay last balance amount of Rs. 800,000/-. Hence, for compliance of these conditions plaintiff was not entitled to stop the installment of September and January and at the best he can only stop last payment of Rs. 800,000/- which he has to pay at the time of handing over the CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 26 of 75 possession to him or execution of sale document as at that he could say to the defendant that first fulfill all the condition of agreement and only then he will pay balance Rs. 800,000/-. Moreover plaintiff in his testimony has not given any date or month when he demanded from defendant to comply these condition. Hence, in these circumstances in my view it is plaintiff who is more at fault than defendant and broken the condition of the agreement.
37. As far as contention of the Ld. Counsel for plaintiff that defendant did not provide the documents of ownership. The plaintiff has not mentioned in his testimony when he demanded said documents from the defendants. Further, as evident from the testimony of plaintiff/ PW1 he was the tenant in the same building and handed over the possession of the property to the defendant to reconstruct the same hence he was very well aware wether defendant was the owner or not and should have seen/taken the documents of ownership at the time of agreement.
38. As far as contention of the Ld. Counsel for the plaintiff that defendant has not constructed the suit property after obtaining CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 27 of 75 sanction from the MCD. Again at the cost of repitition I would say that plaintiff should have check the same at the time of entering into agreement to sell and handing over of his tenanted portion in suit property.
39. Further in my view if plaintiff was not satisfied that building is not being constructed as per terms of agreement he immediately after stopping the September payment or at least January/March payment he should have sent the letter demanding compliance of the terms of contract from the defendant. In my view, plaintiff was never interested in performing his part of contract that is why for almost 2½ years probably he did not have money to pay balance sale consideration and that is why plaintiff did not take any action against the defendant for execution of the sale documents as first notice he sent to the defendant is dated 05.05.2005 i.e. after 2 years and 2 months. No expalanation has been given by the plaintiff why he waited for more than two year in sending notice to defendant.
40. Further as per testimony of plaintiff, he has already paid CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 28 of 75 Rs.3,50,000/- to the defendant and thus as per his own admission a sum of Rs.14,50,000/- was remained balance (though defendant has refused the same) though defendant has stated that only Rs.2 lakhs has been paid by the plaintiff but whatever the case may be at least plaintiff has to show that he has balance sale consideration of Rs.14,50,000/- which he has to pay by March 2003.
41. Plaintiff had not deposed that he had the amount of Rs.14,50,000/- at the time when he has to make the payment or at the time of filing of the suit or till date. Nor he has produced any document that he has said amount in his bank account or that he could arrange the same. Though in his cross-examination, he has deposed that he retired from government service as a teacher and received Rs.6 lakhs as retirement benefit and his GPF was still pending with the government but he did not produce any document to support the said contention. The other witness examined by the plaintiff also did not speak a single word with respect that plaintiff has money to pay balance sale consideration. Hence, I held that plaintiff has failed to prove that he was ready and willing to perform CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 29 of 75 his part of the contract.
42. In these circumstances, in my view plaintiff is not entitled for discretionary relief of specific performance of the contract dated 23.05.2002.
43. As far as issue no.1 i.e. forfeiture of the amount paid by the plaintiff is concerned, Ld. Counsel for the defendant has contended that since plaintiff has not paid the balance sale consideration as per schedule, therefore defendant has forfeited the amount of Rs.2 lakhs paid by the plaintiff and in this regard he submits that defendant has sent the legal notice in the month of November, 2002 through his counsel i.e. Sh. Vivek Sharma when plaintiff failed to make the payment of September 2002 but despite service of notice plaintiff fails to pay the balance sale consideration hence agreement stood terminated therefore defendant is entitled to forfeit the amount paid by the plaintiff.
44. On the other hand, Ld. Counsel for the plaintiff has argued that since defendant has failed to perform his part of the CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 30 of 75 contract that he has not constructed the building as per the specifications as mentioned in the agreement and defendant cannot take benefit of his wrong and cannot forfeit the amount. He further argued that even otherwise defendant cannot forfeit the amount paid by plaintiff even if plaintiff has defaulted in payment of his part of contract.
45. I have considered the submissions. DW4 has deposed in his evidence that his father being the owner of suit property sold the same to Asha Arora. This admission of the defendant proved that he was not the owner of the suit property though he has entered into agreement to sale with the plaintiff in the capacity of owner. Further DW3 has deposed that a collaboration agreement dt. 15.04.2002 was entered between the Jagdish Kumar Saini, Sunil Kr. Bharwal and Gulshan Kumar on 15.04.2002 EXDW3/1. He has further deposed that above said persons wrote letter to the Dy. Assessor and Collector vide letter dt. 15.01.2003 that suit property has already been sold to Asa Nand. Hence defendant was not the owner of suit property at the time of execution of agreement to sell with plaintiff but CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 31 of 75 it was his father. Hence he cannot sell the suit property to the plaintiff. There may be some force in the contention of Ld. Counsel for defendant that father of the defendant could transfer the property to plaintiff had plaintiff paid the balance sale consideration and there is a collaboration agreement Ex.DW4/1 in his favour which authorize him to sell. But that does not make the defendant owner of the property. Further admittedly father of plaintiff has sold the suit property to Smt.Alka Arora on 21.04.2004. The defendant had not sent any legal notice to the plaintiff for termination of agreement. Legal notice EX.DW6/1 was only with respect to payment of due amount and not termination of agreement hence the agreement between plaintiff and defendant was still subsisting. Hence defendant himself was at fault therefore he had no right to forfeit the amount paid by plaintiff. Hence, in my view both plaintiff and defendant are guilty for breach of agreement, therefore defendant act of forfeiting the amount paid by plaintiff is not legally sustainable.
46. Secondly even otherwise also defendant cannot forfeit the amount even if plaintiff has not performed his part of the contract CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 32 of 75 and i.e. did not pay the balance sale consideration. As per section 73 of the Contract Act, on breach of a contract the party who suffered by such breach is entitled to receive from the party who has broken the contract compensation for any loss or damages caused to him thereby which naturally arose in the usual course of thing from such breach or which the party knows when they make the agreement or likely from the breach of it.
47. Further, as per section 74 of the Indian Contract Act, when a contract has been broken if some is name in the contract as amount to be paid in case of such breach or if it contains any other stipulation by way of penalty the party complaining of the breach is entitled whether or not actual loss or damage is prove to have been caused thereby to receive the reasonable compensation not actually the amount so named i.e. penalty stipulated for.
48. In Maya Devi vs Lalita Parsad [Civil Appeal No. 2458 of 2014 arising out of SLP (C) No.23069 of 2012] Hon'ble Supreme Court while relying upon previous judgments of Supreme Court in Fateh Chand vs Balkishan DassAIR1963SC1450 held that CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 33 of 75 order of trial Court granted double of payment of earnest money in breach of contract has held that only damages which are actually suffered can be granted. The relevant portion of the judgment is reproduced as below:-
"8. ... in Fateh Chand concerns award of damages of the 'liquidated' sum even though actual damages may have been less. In that respect it is the converse of the factual matrix that existed before the earlier Constitution Bench in Chunilal V. Mehta. J.C. Shah, J (who authored Fateh Chand) along with Chief Justice B.P. Sinha were members of both Constitution Benches. Whilst the aspect of the liquidated damages being in the nature of a penalty or in terrorem did not arise in Chunilal V. Mehta, It did so in Fateh Chand where the complaint was that the Plaintiff, namely, Fateh Chand had agreed to sell an immovable property for Rs.1,12,500/- of which Rs.1000/- had been received/paid as earnest money.
The Agreement envisaged payment of a further sum of Rs.24,000/- and it stipulated that if the vendee failed to get the Sale Deed registered thereafter, then the sum received i.e. Rs.25,000/- would stand forfeited. Fateh Chand alleging a breach of the Agreement, sought to forfeit the sum of Rs.25,000/- which was found to be impermissible in law. It was in those circumstances that the Constitution Bench opined as follows:CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 34 of 75
"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 S. 74 reasonable 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 tile 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 CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 35 of 75 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.
11. Before turning to the question about the compensation which may be awarded to the plaintiff, it is necessary to consider whether S. 74 applies to stipulations for forfeiture of amounts deposited or paid under the contract. 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 S. 74 applies only to cases where the aggrieved party is seeking to receive some amount on breach of contract and not to cases where upon 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 CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 36 of 75 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 compensation is statutorily imposed upon Courts by S. 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."After reading the entire evidence that had been recorded, the Constitution Bench found that the value of the property had not depreciated and, therefore, no damages could be awarded.
9. This is also the manner in which this facet of the law has been enunciated in England, as is evident from the following passage from Halsbury's Laws of England (4th edn Reissue, 1998) Vol 12(1), para 1065 which reads as follows:- "1065. Liquidated damages distinguished from penalties.- The parties to a contract may agree at the time of contracting that, in the event of a breach, the party in default shall pay a stipulated sum of money to the other. If this sum is a genuine pre-estimate of the loss which is likely to flow from the breach, then it represents the agreed damages, called 'liquidated damages', and it is CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 37 of 75 recoverable without the necessity of proving the actual loss suffered.
If, however, the stipulated sum is not a genuine pre- estimate of the loss but is in the nature of a penalty intended to secure performance of the contract, then it is not recoverable, and the plaintiff must prove what damages he can. The operation of the rule against penalties does not depend on the discretion of the court, or on improper conduct, or on circumstances of disadvantage or ascendancy, or on the general character or relationship of the parties. The rule is one of public policy and appears to be sui generis. Its absolute nature inclines the courts to invoke the jurisdiction sparingly. The burden of proving that a payment obligation is penal rests on the party who is sued on the obligation".
10. The position that obtains in the United States, obviously because of its Common Law origins and adherence, is essentially identical as is evident from these extracted paragraphs of Corpus Juris Secundum, Volume25A (2012):192- Liquidated damages are a specific sum stipulated to and agreed upon by the parties in advance or when they enter into a contract to be paid to compensate for injuries in the event of a breach or nonperformance of the contract. 196-In examining whether CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 38 of 75 a liquidated-damages provision is enforceable, courts consider whether the damages stemming from a breach are difficult or impossible to estimate or calculate when the contract was entered and whether the amount stipulated bears a reasonable relation to the damages reasonably anticipated.
198-Liquidated damages must bear a reasonable relationship to actual damages, and a liquidated-damages clause is invalid when the stipulated amount is out of all proportion to the actual damages. 200- A penalty is in effect a security for performance, while a provision for liquidated damages is for a sum to be paid in lieu of performance. A term in a contract calling for the imposition of a penalty for the breach of the contract is contrary to public policy and invalid. This position also finds elucidation in the following paragraph from American Restatement (Second) of Contracts 1981:-
"356. LIQUIDATED DAMAGE AND PENALTIES (1) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof or loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty."CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 39 of 75
11. Returning to the facts of the present case, the so called Deed of Agreement for Earnest Money inasmuch as it postulates the payment of twice the sum received ought not to have been decreed as firstly, the contract itself could not have been specifically enforced since the Defendant was devoid of title; and secondly, the Plaintiff had not proved that he had suffered any damages and facially the stipulated sum was in the nature of a penalty."
49. Recently Delhi High Court in case Satish Kakkar vs Sh. Sudesh Kakkar vs Sh. Satish Mittal on 30 July, 2018 RFA No.216/2017 has while discussing all the previous judgement on the aspect of forfeiture of amount paid by buyer has held that only amount can be forfeited to the extent of actual loss suffer by the seller. The relevant portion of the judgment is reproduced as below:
"33. Section 74 occurs in Chapter 6 of the Indian Contract Act, 1872 which reads ―Of the consequences of breach of contract‖. It is in fact sandwiched between Sections 73 and 75 which deal with compensation for loss or damage caused by breach of contract and compensation for damage which a party may sustain through nonfulfillment of a contract after such party rightfully rescinds such contract. It is important to note that CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 40 of 75 like Sections 73 and 75, compensation is payable for breach of contract under Section 74 only where damage or loss is caused by such breach.
34. In Fateh Chand v. Balkishan Das, 1964 SCR (1) 515, this Court held:
"The section is clearly an attempt to eliminate 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 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. ....
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 CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 41 of 75 penalty. We are in the present case not concerned to decide whether a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74reasonable 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 damages"; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 42 of 75 contract, to be likely to result from the breach."(At page 526, 527) 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 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."(At page 530) CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 43 of 75
35. Similarly, in Maula Bux v. Union of India (UOI), 1970 (1) SCR 928, it was held:
"Forfeiture of earnest money under a contract for sale of property- movable or immovable-if the amount is reasonable, does not fall within Section 74. That has been decided in several cases :Kunwar Chiranjit Singh v. Har Swarup, A.I.R.1926 P.C.1; Roshan Lal v. The Delhi Cloth and General Mills Company Ltd., Delhi, I.L.R. All.166; Muhammad Habibullah v. Muhammad Shafi, I.L.R. All. 324; Bishan Chand v. Radha Kishan Das, I.D. 19 All. 49. These cases are easily explained, for forfeiture of a reasonable amount paid as earnest money does not amount to imposing a penalty. But if forfeiture is of the nature of penalty, Section 74 applies. Where under the terms of the contract the party in breach has undertaken to pay a sum of money or to forfeit a sum of money which he has already paid to the party complaining of a breach of contract, the undertaking is of the nature of a penalty. Counsel for the Union, however, urged that in the present case Rs.
10,000/- in respect of the potato contract and Rs. 8,500 in respect of the poultry contract were genuine pre-estimates of damages which the Union was likely to suffer as a result of breach of contract, and the plaintiff was not entitled to any relief against forfeiture. Reliance in support of this CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 44 of 75 contention was placed upon the expression (used in Section 74 of the Contract Act), "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". It is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree, and the Court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. But the expression "whether or not actual damage or loss is proved to have been caused thereby" is intended to cover different classes of contracts which come before the Courts. In case of breach of some contracts it may be impossible for the Court to assess compensation arising from breach, while in other cases compensation can be calculated in accordance with established rules. Where the Court is unable to assess the compensation, the sum named by the parties if it be regarded as a genuine pre-estimate may be taken into consideration as the measure of reasonable compensation, but not if the sum named is in the nature of a penalty. Where loss in terms of money can be CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 45 of 75 determined, the party claiming compensation must prove the loss suffered by him.
In the present case, it was possible for the Government of India to lead evidence to prove the rates at which potatoes, poultry, eggs and fish were purchased by them when the plaintiff failed to deliver "regularly and fully" the quantities stipulated under the terms of the contracts and after the contracts were terminated. They could have proved the rates at which they had to be purchased and also the other incidental charges incurred by them in procuring the goods contracted for. But no such attempt was made."(At page 933,934)
36. In Shree Hanuman Cotton Mills and Anr. v. Tata Aircraft Limited, 1970 (3) SCR 127 it was held:
"From a review of the decisions cited above, the following principles emerge regarding "earnest":
(1) It must be given at the moment at which the contract is concluded (2) It represents a guarantee that the contract will be fulfilled or, in other words, 'earnest' is given to bind the contract. (3) It is part of the purchase price when the transaction is carried out.
(4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser.CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 46 of 75
(5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest" (At page 139) "The learned Attorney General very strongly urged that the pleas covered by the second contention of the appellant had never been raised in the pleadings nor in the contentions urged before the High Court. The question of the quantum of earnest deposit which was forfeited being unreasonable or the forfeiture being by way of penalty, were never raised by the appellants. The Attorney General also pointed out that as noted by the High Court the appellants led no evidence at all and, after abandoning the various pleas taken in the plaint, the only question pressed before the High Court was that the deposit was not by way of earnest and hence the amount could not be forfeited. Unless the appellants had pleaded and established that there was unreasonableness attached to the amount required to be deposited under the contract or that the clause regarding forfeiture amounted to a stipulation by way of a penalty, the respondents had no opportunity to satisfy the Court that no question of unreasonableness or the stipulation being by way of penalty arises. He further urged that the question of unreasonableness or otherwise regarding earnest money does not at all arise when it is forfeited according to the terms of the contract.CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 47 of 75
In our opinion the learned Attorney General is well founded in his contention that the appellants raised no such contentions covered by the second point, noted above. It is therefore unnecessary for us to go into the question as to whether the amount deposited by the appellants, in this case, by way of earnest and forfeited as such, can be considered to be reasonable or not. We express no opinion on the question as to whether the element of unreasonableness can ever be considered regarding the forfeiture of an amount deposited by way of earnest and if so what are the necessary factors to be taken into account in considering the reasonableness or otherwise of the amount deposited by way of earnest. If the appellants were contesting the claim on any such grounds, they should have laid the foundation for the same by raising appropriate pleas and also led proper evidence regarding the same, so that the respondents would have had an opportunity of meeting such a claim."(At page142)
37. And finally in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, it was held:
"64. It is apparent from the aforesaid reasoning recorded by the Arbitral Tribunal that it failed to consider Sections 73 and 74 of the Indian Contract Act and the ratio laid down in Fateh Chand case [AIR 1963 SC 140: (1964) 1 CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 48 of 75 SCR 515 at p. 526] wherein it is specifically held that jurisdiction of the court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; and compensation has to be reasonable. Under Section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it. This section is to be read with Section 74, which deals with penalty stipulated in the contract, inter alia (relevant for the present case) 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, the party complaining of breach is entitled, whether or not actual 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. Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. Therefore, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 49 of 75 the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him.
67........In our view, in such a contract, it would be difficult to prove exact loss or damage which the parties suffer because of the breach thereof. In such a situation, if the parties have pre- estimated such loss after clear understanding, it would be totally unjustified to arrive at the conclusion that the party who has committed breach of the contract is not liable to pay compensation. It would be against the specific provisions of Sections 73 and 74 of the Indian Contract Act. There was nothing on record that compensation contemplated by the parties was in any way unreasonable. It has been specifically mentioned that it was an agreed genuine pre-estimate of damages duly agreed by the parties. It was also mentioned that the liquidated damages are not by way of penalty. It was also provided in the contract that such damages are to be recovered by the purchaser from the bills for payment of the cost of material submitted by the contractor. No evidence is led by the claimant to establish that the stipulated condition was by way of penalty or the CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 50 of 75 compensation contemplated was, in any way, unreasonable. There was no reason for the Tribunal not to rely upon the clear and unambiguous terms of agreement stipulating pre-estimate damages because of delay in supply of goods. Further, while extending the time for delivery of the goods, the respondent was informed that it would be required to pay stipulated damages.
68. From the aforesaid discussions, it can be held that: (1) Terms of the contract are required to be taken into consideration before arriving at the conclusion whether the party claiming damages is entitled to the same.
(2) If the terms are clear and unambiguous stipulating the liquidated damages in case of the breach of the contract unless it is held that such estimate of damages/compensation is unreasonable or is by way of penalty, party who has committed the breach is required to pay such compensation and that is what is provided in Section 73 of the Contract Act.
(3) Section 74 is to be read along with Section 73 and, therefore, in every case of breach of contract, the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree. The court is competent to award reasonable compensation in case of breach even if no actual damage CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 51 of 75 is proved to have been suffered in consequence of the breach of a contract.
(4) In some contracts, it would be impossible for the court to assess the compensation arising from breach and if the compensation contemplated is not by way of penalty or unreasonable, the court can award the same if it is genuine pre- estimate by the parties as the measure of reasonable compensation."
38. It will be seen that when it comes to forfeiture of earnest money, in Fateh Chand's case, counsel for the appellant conceded on facts that Rs.1,000/- deposited as earnest money could be forfeited. (See: 1964 (1) SCR Page 515 at 525 and 531).
39. Shree Hanuman Cotton Mills & Another which was so heavily relied by the Division Bench again was a case where the appellants conceded that they committed breach of contract. Further, the respondents also pleaded that the appellants had to pay them a sum of Rs.42,499/- for loss and damage sustained by them. (See: 1970 (3) SCR 127 at Page 132). This being the fact situation, only two questions were argued before the Supreme Court: (1) that the amount paid by the plaintiff is not earnest money and (2) that forfeiture of earnest money can be legal only if the amount is considered reasonable. (at page 133). Both CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 52 of 75 questions were answered against the appellant. In deciding question two against the appellant, this Court held:-
"But, as we have already mentioned, we do not propose to go into those aspects in the case on hand. As mentioned earlier, the appellants never raised any contention that the forfeiture of the amount amounted to a penalty or that the amount forfeited is so large that the forfeiture is bad in law. Nor have they raised any contention that the amount of deposit is so unreasonable and therefore forfeiture of the entire amount is not justified. The decision in Maula Bux's [1970]1SCR928 had no occasion to consider the question of reasonableness or otherwise of the earnest deposit being forfeited. Because, from the said judgment it is clear that this Court did not agree with the view of the High Court that the deposits made, and which were under consideration, were paid as earnest money. It is under those circumstances that this Court proceeded to consider the applicability of Section 74 of the Contract Act. (At page
143)"
40. From the above, it is clear that this Court held that Maula Bux's case was not, on facts, a case that related to earnest money. Consequently, the observation in Maula Bux that forfeiture of earnest money under a contract if reasonable does not fall within Section 74, and would fall CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 53 of 75 within Section 74 only if earnest money is considered a penalty is not on a matter that directly arose for decision in that case. The law laid down by a Bench of 5 Judges in Fateh Chand's case is that all stipulations naming amounts to be paid in case of breach would be covered by Section
74. This is because Section 74 cuts across the rules of the English Common Law by enacting a uniform principle that would apply to all amounts to be paid in case of breach, whether they are in the nature of penalty or otherwise. It must not be forgotten that as has been stated above, forfeiture of earnest money on the facts in Fateh Chand's case was conceded. In the circumstances, it would therefore be correct to say that as earnest money is an amount to be paid in case of breach of contract and named in the contract as such, it would necessarily be covered by Section 74.
41. It must, however, be pointed out that in cases where a public auction is held, forfeiture of earnest money may take place even before an agreement is reached, as DDA is to accept the bid only after the earnest money is paid. In the present case, under the terms and conditions of auction, the highest bid (along with which earnest money has to be paid) may well have been rejected. In such cases, Section 74 may not be attracted on its plain CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 54 of 75 language because it applies only ―when a contract has been broken‖.
42. In the present case, forfeiture of earnest money took place long after an agreement had been reached. It is obvious that the amount sought to be forfeited on the facts of the present case is sought to be forfeited without any loss being shown. In fact it has been shown that far from suffering any loss, DDA has received a much higher amount on re-auction of the same plot of land.
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:-
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 CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 55 of 75 cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
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
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.
4. The Section applies whether a person is a plaintiff or a defendant in a suit.
5. The sum spoken of may already be paid or be payable in future.
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 pre-estimate of damage or loss, can be awarded.CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 56 of 75
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.
44. The Division Bench has gone wrong in principle. As has been pointed out above, there has been no breach of contract by the appellant. Further, we cannot accept the view of the Division Bench that the fact that the DDA made a profit from re-auction is irrelevant, as that would fly in the face of the most basic principle on the award of damages - namely, that compensation can only be given for damage or loss suffered. If damage or loss is not suffered, the law does not provide for a windfall." (emphasis added)
15. In sum and substance what is held by the Constitution Bench of the Supreme Court in the cases of Fateh Chand (supra) and the recent judgment in Kailash Nath Associates (supra) is that whenever there is a breach of contract then earnest money which is forfeited because of the breach, whether by a plaintiff or a defendant in a contract, the forfeiture is of that amount which are in fact liquidated damages specified under a contract and that for claiming damages under a contract, whether liquidated under Section 74 of the Contract Act or unliquidated CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 57 of 75 under Section 73 of the Contract Act, existence of loss is a sine qua non. In other words, if no loss is caused to a seller who has in his pocket monies of buyer, then the seller can only forfeit a nominal amount unless the seller has pleaded and proved that losses have been caused to him on account of the breach of contract by the buyer. Once there is no pleading of loss suffered by a seller under an agreement to sell, then large amounts cannot be forfeited though so entitled to a seller under a clause of an agreement to sell/contract entitling forfeiture of 'earnest money' because what is forfeited is towards loss caused, and that except a nominal amount being allowed to be forfeited as earnest money, any forfeiture of any amount, which is not a nominal amount, can only be towards loss if suffered by the seller. Thus if there is no loss which is suffered by a seller then there cannot be forfeiture of large amounts which is not a nominal amount, simply because a clause in a contract provides so. The following has been held in the judgment in the case of Kailash Nath Associates (supra):-
(i) As per the facts existing in the case of Kailash Nath Associates (supra) the Single Judge of the High Court had held that since no damages were suffered by DDA therefore DDA could not forfeit the earnest money. (Para 30 of Kailash Nath Associates's case (supra)).CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 58 of 75
(ii) The Division Bench of the High Court however set aside the judgment of the Single Judge by holding that amount tendered as earnest money can be forfeited because and simply forfeiture of amount called as earnest money can be forfeited in terms of the contract. (Para 30 of Kailash Nath Associates's case (supra) reproducing Para 39 of the Division Bench judgment of the High Court).
(iii) Supreme Court in the case of Kailash Nath Associates (supra) as per Para 44 of its judgment holds that the Division Bench of the High Court had gone wrong in principle because compensation can be awarded (where there is breach of contract) only if loss or damage is suffered i.e where there is no loss or damage suffered as a result of breach of contract no compensation can be awarded as law does not provide for a windfall i.e large amounts though called contractually as earnest money cannot be forfeited unless loss is pleaded and proved to have been suffered. These observations have cross- reference to Para 34 of the judgment of Kailash Nath Associates's case (supra) where with reference to the para of Fateh Chand's case (supra) it is held that the language of Section 74 of the Contract Act that 'whether or not damage or loss is proved to have been caused by breach' is the language that such language only discharges proof of actual loss but that does not justify award of CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 59 of 75 compensation where in consequence of breach no injury/loss has at all resulted.
(iv) Earnest money is an amount to be paid in case of breach of contract, and named in contract as such, and that forfeiture of earnest money is covered under the entitlement to liquidated damages underSection 74 of the Contract Act vide Para 40 in the case of Kailash Nath Associates (supra).
(v) The language of Section 74 of the Contract Act that "whether or not actual loss or damage is proved to have been caused thereby" means only that where it is difficult or impossible to prove loss caused by the breach of contract then the liquidated damages/amount (being the amount of earnest money) can be awarded vide Para 43(6) of Kailash Nath Associates's case (supra) but where nature of contract is such that loss caused because of breach can be assessed and so proved then in such cases loss suffered must be proved to claim the liquidated damages of earnest money. This finding has cross reference to Para 37 of judgment in Kailash Nath Associates's case (supra) where the observations of Supreme Court in Para 67 of the case of ONGC Ltd. Vs. Saw Pipes Ltd. (2003) 5 SCC 705 are quoted that liquidated damages are awarded where it is difficult to CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 60 of 75 prove exact loss or damage caused as a result of breach of contract.
(vi) Even where liquidated damages can be awarded under Section 74 of the Contract Act because loss or damages cannot be proved in a contractual breach yet if the liquidated damages (earnest money) are a penalty amount by its nature i.e prescribed liquidated damages figure is unreasonable, then for the liquidated damages amount or earnest money amount forfeiture cannot be granted/allowed and that only reasonable amount is allowed as damages with the figure of liquidated damages being the upper limit vide Para 43(1) of Kailash Nath Associates's case (supra).
16. Similar ratio as has been laid down by the Supreme Court in Kailash Nath Associates's case (supra) was also the ratio of the judgment of the Supreme Court in the case of V.K. Ashokan Vs. Assistant Excise Commissioner and Others (2009) 14 SCC 85 and paras 66 to 71 of this judgment reads as under:-
"66. There is another aspect of the matter which cannot be lost sight of. If damages cannot be calculated and the terms of the contract provides therefor only for penalty by way of liquidated damages, having regard to the provisions contained in Section 74 of the Indian Contract CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 61 of 75 Act a reasonable sum only could be recovered which need not in all situations even be the sum specified in the contract. (See Maula Bux vs. Union of India and Shree Hanuman Cotton Mills vs. Tata Air Craft Ltd.)
67. Section 74 of the Contract Act reads as under:
"74. Compensation for breach of contract where penalty stipulated for-When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for."
68. There are authorities, no doubt coloured by the view which was taken in English cases, that Section 74of the Contract Act would have no application to cases of deposit for due performance of a contract which is stipulated to be forfeited for breach, e.g.,. Natesa Aiyar v. Appavu Padayachi, Singer Manufacturing Company v. Raja Prosad; Manian Patter v. The Madras Railway Company, but this view no longer is good law in view of the judgment of this Court in Fateh Chand vs. Balkishan Das. CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 62 of 75
69. This Court in Fateh Chand case observed at pp. 526- 27 (of SCR):
―10. Section 74 of the 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: (AIR p. 1411, para 11)―11. 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 where upon 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 CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 63 of 75 right to money or other property already delivered. Duty not to enforce the penalty clause but only to award reasonable 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, ―14. ... 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.‖ (AIR p. 1412, para 14)
70. Forfeiture of earnest money under a contract for sale of property whether movable or immovable, if the amount is reasonable, would not fall within Section 74. That has been opined in several cases.
(See Kunwar Chiranjit Singh v. Har Swarup; Roshan Lal v. Delhi Cloth and General Mills Co. Ltd.; Mohd. Habib-ullah v. Mohd. Shafi ; Bishan Chand v. Radha Kishan Das.) CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 64 of 75 These cases have explained that forfeiture of a reasonable amount paid as earnest money does not amount to imposing a penalty. But if forfeiture is of the nature of penalty, Section 74 applies.
71. Where under the terms of the contract the party in breach has undertaken to pay a sum of money or to forfeit a sum of money which he has already paid to the party complaining of a breach of contract, the undertaking is of the nature of a penalty. (See Maula Bux and Saurabh Prakash v. DLF Universal Ltd. )"
(emphasis added)
17. All the judgments of the Supreme Court which have been relied upon in Satish Batra's case (supra) are of a Bench strength lesser than the Constitution Bench strength of the Supreme Court in Fateh Chand's case (supra) and the law is well settled that it is the judgment of the larger Bench of the Supreme Court which will prevail over the judgment of a Bench strength of lesser number of judges. Also, as already stated above, in the recent judgment in Kailash Nath Associates's case (supra) Supreme Court has now clarified that a forfeiture of an earnest money necessarily falls under Section 74 of the Contract Act i.e before forfeiture can take place it must be necessary that loss must be caused. Also, Supreme Court CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 65 of 75 has further clarified in Kailash Nath Associates's case (supra) that it is very much possible that forfeiture of an amount can be in the nature of penalty and if the amount which is allowed to be forfeited under the contract is in the nature of penalty then Courts are empowered to treat the amount of liquidated damages (earnest money) as one in the nature of penalty clause and that earnest money amount only represents the upper limit of damages which are allowed to be forfeited in terms of the forfeiture clause, and actual forfeiture only of a lesser and a reasonable amount should be allowed instead of the large amount/penalty as stated under a contract as being entitled to be forfeited and that too merely because a contractual clause allows such a forfeiture."
50. Now reverting back to the case. In the present case, defendant through the testimony of the witnesses have not deposed that he has suffered any loss due to the breach of contract by the plaintiff. Further on perusal of the agreement to sell, I found that there is no condition in the contract that in case seller break the contract he would liable to pay any particular amount as penalty or the amount which has been already paid by the plaintiff to the defendant will be forfeited. Therefore, in these circumstances, in my CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 66 of 75 view the defendant cannot forfeit the amount which was paid by the plaintiff to the defendant in pursuance of the agreement to sell dated 23.05.2002. Hence, defendant is liable to return the said amount. Now the question arise what amount has been paid by the defendant to the plaintiff.
51. According to the plaintiff he has paid Rs.3,50,000/- to the defendant whereas according to defendant he has only received Rs.2 lakhs from the plaintiff i.e. Rs.1 lakh at the time of entering into the agreement and Rs.1 lakh on 27.06.2002 by way of cheque no.115504.
52. The plaintiff/PW1 in his testimony has deposed that he has paid Rs.3,50,000/-to the defendant in the following manners:-
a) Rs.1,00,000/- by cheque no.115501 dt. 23.05.02 drawn on Union Bank of India, Lodhi Colony, Delhi.
b) Rs.1,00,000/- by cheque no.115504 dated 27.06.02 drawn on Union Bank of India, Lodhi Colony, Delhi.
c) Rs.50,000/- by cheque no.250462 dated 05.10.02 drawn on Allahabad Bank, Anand Lok, Delhi of the account of CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 67 of 75 his son Sh.Murli Manohar.
d) Cash Rs.1,00,000/- in the presence of Sh.G.K. Pachauri and Ms. Shelly Sharma.
53. In his cross-examination, no suggestion has been given to the plaintiff that payment as alleged by the plaintiff in his affidavit Ex.PW1/A has not paid to the defendant. Hence, said aspect of the plaintiff testimony remain unrebutted.
54. Further PW5 Murli Manohar has supported the testimony of plaintiff that on 05.10.2002 Sh. Ram Niwas gave Rs.1 lakh in cash and Rs.50,000/- by cheque to Sh.Gulshan Kumar at his residence. In his cross-examination, he denied the suggestion that the cheque of Rs.50,000/- was never encashed by defendant Sh. Gulshan Kumar. Further he has stated that said cheque was handed over at his residence. He has given the cheque of Rs.50,000/- which was a bearer cheque in the name of Sh. Gulshan Kumar to Sh. Gulshan Kumar on 05.10.02. At that time Ms. Shelly Sharma, Lav Kumar Sharma, Sh. Ram Niwas Sharma, Smt. Krishna Sharma and Sh. Anil Kumar were present. He denied the suggestion that Sh. Anil CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 68 of 75 Kumar was not the employee of Sh. Gulshan Kumar or that Sh. Anil Kumar was his person. Further he has stated that Rs.1 lakh was given by his father to Sh. Gulshan Kumar in his presence. Hence nothing much has come out in his cross-examination to disbelieve his testimony.
55. PW6 Shelly Sharma also in her evidence led by way of affidavit Ex.PW6/A has deposed the same facts as deposed by PW5. In her cross-examination no suggestion has been given that Rs.1 lakh in cash and Rs.50,000/- by cheque were not paid to Sh. Gulshan Kumar.
56. Similarly, PW8 has also deposed in his testimony the same facts as stated by PW5 and PW6. In his cross-examination, he stated that he has knowledge of payment of Rs.1 lakh by cash and Rs.50,000/- by cheque as the talks were going on between the parties in his presence. Though he has denied that cheque or cash payment was made.
57. In view of the above facts and circumstances, in my view testimony of PW1 is duly corroborated by testimony of PW5, CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 69 of 75 PW6 and PW8, hence I held that plaintiff has been able to proved that he paid a sum of Rs.3,50,000/- to the defendant.
58. Even otherwise though defendant/ DW4 in his examination-in-chief has deposed that amount of Rs.2,00,000/- paid by plaintiff was forfeited which means plaintiff paid a sum of Rs. 2,00,000/- but defendant in his cross-examination has not absolutely denied the receiving of Rs.3,50,000/- from the plaintiff. In his cross-examination, he has given the vague reply that he cannot say whether plaintiff has paid Rs.3,50,000/- to him and after the execution of the agreement to sell to him and volunteered that he can tell the exact amount only after seeing the receipt. This answer of the defendant led to inference that he was not absolutely denting receiving of Rs 350,000/-. In my view defendant cannot forget what amount has been paid to him by the plaintiff and his answer should not be depend upon the production of receipt by the plaintiff.
59. As stated above, defendant has wrongly forfeited the amount paid by the plaintiff, therefore defendant is liable to return the same to the plaintiff. Hence, issue no.1 is decided in favour of the CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 70 of 75 plaintiff and against the defendant and issue no.3 is decided in favour of the defendant and against the plaintiff. ISSUE NO.2 "Whether the suit property has been delivered to the buyer who had made the payment for the same. If so, its effect? OPD"
60. The onus to prove this issue is upon the defendant. Defendant/DW4 in his testimony has deposed that his father being owner of suit property has sold the same to Smt. Alka Arora W/o Sh.N.K. Arora. He has proved the GPA dated 21.04.04 Ex.DW1/1 and Will Ex.DW1/2 executed by his father in favour of Smt. Alka Arora. Both GPA and Will are duly registered with sub-registrar as proved from testimony of DW1. In his cross-examination, he admitted the suggestion that Smt. Alka Arora is his bhabhi. No suggestion has been given to him by plaintiff counsel that these documents are false. Hence nothing much has come out in his testimony to disbelieve the same.
61. I am not agree with the contention of Ld. Counsel for the CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 71 of 75 plaintiff that since defendant father has sold the property to his daughter in law therefore same is a sham transaction as there is bar imposed by any statue that a father-in-law cannot sod property to his daughter in law.
62. Defendant has also examined Sh. Asa Nand as DW5 who has deposed that he is attorney of Sh. Jagdish Kumar and Sh. Sunil Bharal and he has sold the suit property to Smt. Alka Arora W/o Sh.N.K. Arora vide registered GPA, registered Will, receipt and possession letter all dated 21.04.2004 and the possession of the suit property has been handed over to her. In his cross-examination, he stated that he has sold the suit property to Smt. Alka Arora along with his son Gulshan Kumar and he has signed the documents. Hence, nothing much has came out to disproved the testimony of DW5 In these circumstances, I held that defendant has been able to prove that the suit property has been sold to Smt. Alka Arora by his father. Hence, issue no.2 is decided in favour of the defendant and against the plaintiff.
CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 72 of 75 ISSUE NO.4 "Whether the suit of the plaintiff is barred by limitation?"
63. Issue no.4 has already been dropped by my Ld. Predecessor vide order dated 11.05.2016.
ISSUE NO.5 "Whether the suit of the plaintiff is bad for misjoinder of cause of action and relief with regard to damages for dafamation?"
64. The onus to prove this issue is upon the defendant as in the written statement defendant has taken the preliminary objection that suit is bad for misjoinder of the party/ person who has already received the possession of the ground floor which is subject matter of agreement dated 23.05.02 but in my view merely because suit property has been sold to third person either by defendant or any other person it is not mandatory for the plaintiff to add the purchaser as party as purchaser is a stranger to the contract between plaintiff and defendant. Hence, I held that suit is not liable to be dismissed for misjoinder of party because plaintiff has fail to join the purchaser of suit property Alka Arora as party.
CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 73 of 75
65. Further though the plaintiff in his testimony has deposed that plaintiff has misbehaved with him and threatened to sell the suit property to someone else as a result pf which he suffered a lot in his reputation but in my view mere threat to sell the property particular when defendant himself was not complying the terms of agreement and did not pay the amount as per schedule fixed in the agreement therefore the threat given by defendant to sell the suit property to the third party cannot be consider as defamation. Hence I held that plaintiff has failed to proved through his testimony that any defamation was committed by the defendant therefore he is not entitled to any damages for defamation. Hence, issue no.5 is decided accordingly partly in favour of the plaintiff and partly against the defendant.
RELIEF
66. In view of my findings of issue no.3 and 4, I held that plaintiff is not entitled to the relief of specific performance of contract and relief of permanent and mandatory injunction and demand for apology from defendant, hence said relief are declined. CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 74 of 75
However, since defendant has wrongly forfeited the amount of Rs.3,50,000/ paid by the plaintiff, therefore, defendant is liable to refund the said amount alongwith interest. Hence, I passed a decree of Rs.3,50000/ in favour of plaintiff and against the defendant. Further, plaintiff will be entitled to simple interest @10% per annum on the said amount from the date of filing of the suit till the date of decree and thereafter till its realization. Plaintiff is also entitled to proportionate costs of the suit. Decree sheet be prepared accordingly.
File be consigned to record room.
Announced in the open Court on 15.01.2019 (Sanjeev Kumar-I) Additional District Judge-12, (Central), Tis Hazari Courts, Delhi.
Digitally
signed by
SANJEEV
SANJEEV KUMAR
KUMAR Date:
2019.01.15
17:08:42
+0530
CS No. 18656/2016 Ram Niwas Sharma Vs. Gulshan Kumar Page 75 of 75