Balwant Singh vs Ram Charan
2012 Latest Caselaw 829 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                     RFA No.911/2003

%                                                      7th February, 2012

BALWANT SINGH                                          ..... Appellant
                               Through:   Mr. R.S.Tomar, Adv. with
                                          Appellant in person.

                      versus


RAM CHARAN                                             ..... Respondent

Through: None.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?

VALMIKI J. MEHTA, J (ORAL)

1. This matter is on the Regular Board of this Court since

2.2.2012. Today, it is effective item no.18 on the Regular Board. No one

appears for the respondent although it is 12:45 P.M. I have heard counsel

for the appellant and after perusing the record am proceeding to dispose of

the appeal.

2. Learned counsel for the appellant/plaintiff on instructions

from the appellant/plaintiff who is present in person confines his relief in

the appeal to refund of the amount of `2,70,000/- which is paid under the

subject agreement to sell along with interest at 9% per annum simple from

the date of payment which is the date of agreement to sell viz. 24.8.2001.

3. The present appeal impugns the judgment and decree of the

Trial Court dated 29.9.2003 dismissing suit for specific performance under

the agreement to sell dated 24.8.2001 with respect to the suit property no.

688-A, Khasra No.53 situated in the Abadi known as Gosian Mohalla,

Township, Najafgarh, New Delhi. The property is situated on a plot

admeasuring 105 sq.yds. It was not disputed before the Trial Court that

when the agreement to sell dated 24.8.2001 was entered into for a total

consideration of `8,30,000/-, of which a sum of `2,70,000/- was received

by the respondent/defendant.

4. The respondent/defendant claims to have forfeited this amount

on account of breach of contract by the appellant/plaintiff. There are

however no pleadings or evidence to the effect that forfeiture has taken

place because the respondent/defendant has suffered a loss. Before an

amount can be forfeited which is paid as an advance price under an

agreement to sell, it is necessary to plead and prove that the loss has been

caused to the proposed seller/defendant. This is a ratio of the Constitution

Bench judgment of the Supreme Court in the case of Fateh Chand Vs

Balkishan Dass, (1964) 1 SCR 515; AIR 1963 SC 1405 and relevant paras

8,10,15 and 16 of this judgment read as under:-

8. The claim made by the plaintiff to forfeit the amount of Rs 24,000 may be adjusted in the light of Section 74 of the Indian Contract Act, which in its material part provides:-

"When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or as the case may be, the penalty stipulated for."

The section is clearly an attempt to eliminate the sometime elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty.

10. Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty. We are in the present case not concerned to decide whether a contract containing a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. The section undoubtedly

says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of "actual loss or damage"; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach.

15. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties pre-determined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrieved party claims relief as a plaintiff. The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for forfeiture of any property by way of penalty, the court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The jurisdiction of the court is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. Use of the expression "to receive from the party who has broken the contract" does not predicate that the jurisdiction of the court to adjust amounts which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract. The court has to adjudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach.

16. There is no evidence that any loss was suffered by the plaintiff in consequence of the default by the defendant, save as to the loss suffered by him by being kept out of possession of the property. There is no evidence that the property had depreciated in value since the date of the contract provided; nor was there evidence that any other special damage had resulted. The contact provided for forfeiture of Rs 25,000 consisting of Rs, 1039 paid as earnest money and Rs 24,000 paid as part of the purchase price. The defendant has conceded that the plaintiff was entitled to forfeit the amount of Rs 1000 which was paid as earnest money. We cannot however agree with the High Court that 13 percent of the price may be regarded as reasonable compensation in relation to the value of the contract as a whole, as that in our opinion is assessed on an arbitrary assumption. The plaintiff failed to prove the loss suffered by him in consequence of the breach of the contract committed by the defendant and we are unable to find any principle on which compensation equal to ten percent of the agreed price could be awarded

to the plaintiff. The plaintiff has been allowed Rs 1000 which was the earnest money as part of the damages. Besides he had use of the remaining sum of Rs 24,000, and we can rightly presume that he must have been deriving advantage from that amount throughout this period. In the absence therefore of any proof of damage arising from the breach of the contract, we are of opinion that the amount of Rs 1000 (earnest money) which has been forfeited, and the advantage that the plaintiff must have derived from the possession of the remaining sum of Rs 24,000 during all this period would be sufficient compensation to him. It may be added that the plaintiff has separately claimed mesne profits for being kept out possession for which he has got a decree and therefore the fact that the plaintiff was out of possession cannot be taken, into account in determining damages for this purpose. The decree passed by the High Court awarding Rs.11,250 as damages to the plaintiff must therefore be set aside.

(Underlining added)

5. As per the provision of Order 7 Rule 7 of the Code of Civil

Procedure, 1908 (CPC), Court can modulate the relief which can be given

in the facts and circumstances of the case, though the relief is not

specifically asked for. I am also empowered to modulate the relief in terms

of Order 41 Rule 33 CPC since the respondent/defendant does not dispute

of having received the amount of `2,70,000/-. Since specific performance

was not granted to the appellant/plaintiff, therefore, the

respondent/defendant cannot have unjust enrichment by retaining the

amount of `2,70,000/-, although no loss is pleaded or proved to be caused

in terms of the ratio of the judgment in the case of Fateh Chand(supra).

6. The appellant/plaintiff is also entitled to a reasonable rate of

interest on the amount of `2,70,000/- which has been received by the

respondent/defendant, inasmuch as, surely the respondent/defendant would

have received the benefit in the form of accretion to the principal amount of

`2,70,000/- by interest thereupon or from the investment which would have

been made out of the amount of `2,70,000/- received. Interest is, in fact, a

recompense also with respect to the fact that with passage of time,

purchasing power of money falls. Considering all aspects of the matter, I

feel that interest at 9% per annum simple in favour of the appellant/plaintiff

and against the respondent/defendant will meet the ends of justice.

7. Accordingly, this appeal is allowed by passing a decree in

favour of the appellant/plaintiff and against the respondent/defendant for a

sum of `2,70,000/- along with interest at 9% per annum simple from

24.8.2001 till payment. Parties are left to bear their own costs. Decree

sheet be prepared. Trial Court record be sent back.

VALMIKI J. MEHTA, J FEBRUARY 07, 2012 ak