Shri Manjit Singh Mehta vs Shri Prabhjot Singh
2011 Latest Caselaw 1010 Del

         THE HIGH COURT OF DELHI AT NEW DELHI

%             Judgment Pronounced on: 21.02.2011

+      CS(OS) No. 1879/2010

SHRI MANJIT SINGH MEHTA                 .....Plaintiff

                           - versus -

SHRI PRABHJOT SINGH                      .....Defendant

Advocates who appeared in this case:
For the Plaintiff:      Mr.B.L. Garg and Ms. Meenakshi
                        Kotwal, Advocate.

For the Defendant:         Nemo.

CORAM:-
HON'BLE MR JUSTICE V.K. JAIN

1. Whether Reporters of local papers may
   be allowed to see the judgment?                         No

2. To be referred to the Reporter or not?                  No

3. Whether the judgment should be reported                 No
   in Digest?

V.K. JAIN, J. (ORAL)

1. This is a suit for recovery of Rs.50,24,000/-. The case

of the plaintiff is that he had entered into an

agreement with the defendant to purchase the entire

Ground Floor of property No.700, Dr. Mukherjee

Nagar, Delhi, built on a land measuring 160 sq.yds.,

along with proportionate share of freehold rights

underneath the aforesaid building. The sale

consideration is stated to have been fixed at Rs.19

lacs.

2. The plaintiff claims to have paid a sum of Rs.10 lacs to

the defendant in cash vide receipt dated 20 th February,

2008. A further payment of Rs.6 lacs is alleged to have

been made4 to the defendant on 7 th April, 2008. It is

further alleged that the defendant cancelled the

Agreement on 25th April, 2008 and agreed to pay

double the amount of earnest money and part payment

i.e., Rs.32 lacs to him. The defendant issued a

cheque dated 25th April, 2008 for Rs.32 lacs drawn on

Indian Overseas Bank, Pitam PUra. The cheque when

presented to the Bank on 14th July, 2008 for

encashment, was dishonoured with the remarks

"Funds Insufficient". A complaint filed by the plaintiff

against the defendant under Section 138 of the

Negotiable Instruments Act is stated to be pending

before the learned Metropolitan Magistrate, Delhi. The

plaintiff has also claimed interest at the rate of 24%

per annum with effect from 25th April, 2008 amount to

Rs.18,24,000/-, thereby making a total claim of

Rs.50,24,000/- against the defendant.

3. The defendant did not contest the suit6 despite service

of summons on him and was proceeded ex parte on 3 rd

February, 2011. Though Vaklatnama on his behalf

was filed on 28th January, 2011, no written statement

was filed by him.

4. In his affidavit by way of evidence, the plaintiff has

stated that vide Agreement to Sell `Ex.PW1/1', he had

agreed to purchase the Ground Floor of property

No.700, Dr. Mukherjee Nagar, Delhi, from the

defendant along with a proportionate share of freehold

rights underneath the building for a total

consideration of Rs.19 lacs and had paid a sum of

Rs.10 lacs to the defendant in cash, which was

acknowledged vide receipt `Ex.PW1/2'. He further

states that a sum of Rs.6 lacs was paid by him to the

defendant vide receipt `Ex.PW1/3'. The Agreement to

Sell is stated to have been cancelled vide cancellation

of deal `Ex.PW1/4'.

5. A perusal of the Agreement to Sell executed between

the parties on 20th February, 2008 would show that

the defendant Shri Prabhjot Singh, who claimed to be

the owner of the entire ground floor of property

No.700, Dr. Mukherjee Nagar, Delhi, had agreed to sell

the same to the plaintiff for a consideration of Rs.19

lacs and had received a sum of Rs.10 lacs from the

plaintiff as earnest money.

6. The receipt executed by the defendant while receiving

Rs.10 lacs from the plaintiff on 20th February, 2008

confirms the deal between the parties. A perusal of the

document `Ex.PW1/4' would show that the defendant

cancelled the deal bet4ween him and the plaintiff and

expressed his willingness to pay penalty for the deal,

equivalent to double the amount of the deal. Double

the amount of the deal, ordinarily would amount to

Rs.38 lacs, since the defendant had agreed to sell the

ground floor of property No.700, Dr. Mukherjee Nagar,

Delhi, to the plaintiff for a total consideration of Rs.19

lacs, though the plaintiff has claimed receiving only

Rs.32 lacs since according to him the understanding

was that the defendant would refund double the

amount which he had paid to him. The cheque for a

sum of Rs.32 lacs(`Ex.PW1/5') was issued by the

defendant to the plaintiff on 25th April, 2008.

`Ex.PW1/7' is the certified copy of the Memo issued by

the Indian Overseas Bank, Pitam Pura Branch on 5 th

July, 2008, which shows that the cheque `Ex.PW1/5'

when presented to the Bank was dishonoured for want

of sufficient funds.

7. I see no reason to disbelieve the testimony of the

plaintiff which otherwise stands corroborated from

documentary evidence such as the Agreement to Sell,

Receipts and cancellation documents executed by the

defendant and finds further corroboration from issue

of cheque `Ex.PW1/5' which when presented to the

Bank was dishonoured for want of sufficient funds.

The plaintiff is, therefore, entitled to the aforesaid

principal sum of Rs.32 lacs from the defendant.

8. There is no agreement between the parties for interest.

No custom or usage of trade can be applicable in a suit

of this nature. Interest cannot be awarded as damages,

by a Civil Court. However, since the defendant issued

a cheque, which is a negotiable instrument, to the

plaintiff, interest can be awarded to the plaintiff under

Section 80 of Negotiable Instruments Act, which reads

as under:-

Interest when no rate specified.-When no rate of interest is specified in the instrument, interest on the amount due thereon shall, [notwithstanding any agreement relating to interest between any parties to the instrument], be calculated at the rate of [eighteen per centum] per annum, from the date at which the same ought to have been paid by the party charged, until tender or realization of the amount due thereon, or until such date after the institution of a suit to recover such amount as the Court directs.

Explanation- When the party charged is the endorser of an instrument dishonoured by non-payment, he his liable to pay interest only form the time that he receives notice of the dishonour.

9. In Nath Sah vs. Lal Durga Sah, AIR 1936 Allahabad,

160, a Division Bench of Allahabad High Court held

that where no rate of interest is specified in a written

instrument, then, notwithstanding any contract to the

contrary, the interest is to be calculated at the rate of

6% per annum and the date from which such interest

should be calculated should be the date on which the

Principal amount ought to have been paid. In that

case the suit was based on a promissory note which

contained no mention of any liability to pay interest

and the defendant had denied his liability to pay any

interest.

In Ghasi Patra vs. Brahma Thati: AIR 1962,

Orissa 35, the pronote payable on demand did not

provide for payment of interest. It was contended

before the High Court that under Section 80 of

Negotiable Instruments Act , interest could have been

allowed only from the date of demand and not for any

earlier period and since no demand was proved in the

case, no interest should have been allowed from the

date of the execution of the pronote till the date of the

suit. It was held that the plaintiff was entitled to

interest under Section 80 of Negotiable Instruments

Act from the date of execution of the pronote. In taking

this view, the High Court followed the decision of

Bombay High Court in Ganpat Tukaram v. Sopana

Tukaram, AIR 1928 Bombay 35, where it was held that

where a promissory note is payable on demand, but is

silent as to interest, the interest can be awarded under

Section 80 of Negotiable Instruments Act at 6% per

annum from the date of the promissory note. A

Division Bench of Patna High Court in Bishun Chand

v. Audh Bihari Lal, AIR 1917 Pat 533 also took the

view that if the handnote is payable on demand but

does not provide for the payment of interest, it carries

interest at the rate of 6% per annum from the date of

execution of the hand note until the realisation of the

debt.

In P. Mohan vs. Basavaraju AIR 2003,

Karnataka, 213, the suit was based on cheques which

when presented were dishonoured. There was an

agreement between the parties not to pay interest. It

was held by Karnataka High Court that in view of the

provisions of Section 80 of Negotiable Instruments Act,

the defendant/appellant would be entitled to pay

interest and that agreement between the parties not to

pay interest would be valid only until the cheques were

dishonoured.

10. In the case before this Court, there is no agreement

between the parties that no interest will be paid by the

defendant to the plaintiff. I find no justification for

restricting the scope of Section 80 of Negotiable

Instruments Act to only those cases, where the

instrument provides for payment of interest, but the

rate of interest is not specified and thereby allow

unjust enrichment to a person who has defaulted in

honouring his contractual obligation with respect to

repayment of Principal sum. In my view, the provisions

of Section 80 of Negotiable Instruments Act would

equally apply to those cases where no term regarding

payment of interest is contained in the instrument.

Since the aforesaid provision, as amended, carries

interest at the rate of 18% per annum, consequently,

the plaintiff is entitled to interest at the rate of 18% per

annum under Section 80 of Negotiable Instruments Act

and the interest would be payable from the date on

which the cheque was issued to the plaintiff.

11. Calculated at the rate of 18% per annum, the amount

of interest from the date of the cheque till the

institution of the suit comes to Rs.13,68,000/-.

Accordingly, the plaintiff is entitled to the aforesaid

amount as interest.

12. For the reason given in the preceding paragraphs, a

decree for recovery of Rs.45,68,000/- with

proportionate cost and pendentelite and future interest

at the rate of 6% per annum is hereby passed in favour

of the plaintiff and against the defendant.

13. Decree sheet be drawn accordingly.

(V.K. JAIN) JUDGE

FEBRUARY 21, 2011 vk