M/S Entrepreneurs Co-Op ... vs M/S Schindler India Pvt. Ltd. Q
2013 Latest Caselaw 2898 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                            Date of decision: 10th July, 2013.

+                         CS(OS) 1100/2005

       M/S ENTREPRENEURS CO-OP GROUP
       HOUSING SOCIETY LTD.                        ..... Plaintiff
                   Through: Mr. Kawal Nain, Ms. Kavita Batra and
                            Ms. Bhavya Nain, Advocates.

                                Versus

       M/S SCHINDLER INDIA PVT. LTD.               ..... Defendant
                    Through: Mr. Babit Singh Jamwal and Mr.
                             Puneet Singh Bindra, Advocate.
       CORAM:
       HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

                              JUDGMENT

% 10.07.2013

1. The plaintiff has sued for recovery of principal sum of Rs.19 lakhs

together with interest @ 24% per annum till the date of institution of the suit

of Rs.9,05,753.43 paise, i.e. total Rs.28,05,753.43 paise pleading:

(i) that the plaintiff, a Co-operative Group Housing Society had

entered into the Agreement dated 6th December, 1999 with the

defendant whereunder the defendant undertook to supply, install and

commission fourteen Schindler smart machine room less TM 001

lifts/elevators @ Rs.9,30,000/- per lift for a total price of

Rs.1,30,20,000/- at the flats to be constructed for the members of the

plaintiff Society at Plot No.9, Sector-22, Dwarka, Phase-I, New Delhi;

(ii) that the aforesaid sum of Rs.19 lakhs was paid as advance by the

plaintiff to the defendant under the said Agreement;

(iii) that the plaintiff vide letters dated 1 st May, 2003 and 27th May,

2003 asked the defendant to supply the lifts;

(iv) that the defendant vide letter dated 30th July, 2003 notified the

plaintiff that the validity of the contract had expired and the price of

the lifts had escalated since December, 1999 and it was not possible

for the defendant to execute the contract at the agreed prices and

further notified the plaintiff that the revised price of the lifts was to be

Rs.10,79,000/- per lift;

(v) that the aforesaid revised price was not acceptable to the

plaintiff and the plaintiff thus asked for refund of the advance which

the defendant failed to refund inspite of legal notice;

Hence this suit. The plaintiff has also claimed interest @ 24%

per annum from the date of institution of suit.

2. The defendant has contested the suit pleading:

(a) that though as per the Agreement, the entire sum of Rs.19 lakhs

was payable by the plaintiff to the defendant by 31st December, 1999

but the plaintiff paid only the first installment of Rs.10 lakhs and paid

the balance amount of Rs.9 lakhs on or about 14 th March, 2000;

(b) that the suit for recovery of the said amount of Rs.19 lakhs thus

should have been filed by 14 th March, 2003 and at the time of

institution on 23rd July, 2005 the claim therefor was barred by time;

(c) that the sum of Rs.19 lakhs was paid under the Agreement dated

6th December, 1999 by way of earnest money which acted as a

commitment on the part of the plaintiff that the plaintiff would honor

its obligations under the Agreement failing which the defendant would

incur losses; that the defendant on the basis of representations of the

plaintiff had to undertake initial preliminary work so as to be ready

and prepared to supply elevators of the specifications as per

Agreement when intimated by the plaintiff;

(d) no refund of the said sum of Rs.19 lakhs was envisaged under

the Agreement and on the contrary the Agreement provided for

forfeiture of earnest money by the defendant in the event of default by

the plaintiff;

(e) that the plaintiff after inducing the defendant to commit the

performance of the Agreement has failed to adhere to the terms

thereof;

(f) that the plaintiff failed to place any instructions for installation

of the elevators during the validity of the Agreement for a period of

three years;

(g) that an Agreement containing reciprocal promises must be

fulfilled by both parties to the Agreement and any party failing to

perform its part of the obligations mandated under the Agreement

cannot seek any remedy against the other;

(h) that the instructions for installation of the elevators were to be

tendered within a reasonable time before expiry of the Agreement; the

prices of the elevators were kept immune from escalation until 31 st

December, 2002 and the defendant subjected itself to considerable risk

and losses by agreeing to a check on price escalation for nearly three

years; the plaintiff however failed to instruct the defendant to install

any elevators;

(i) that the plaintiff has concealed that though it had in the year

1999 entered into an agreement for installation of 14 elevators at an

agreed price of Rs.9,30,000/- per elevator; the Agreement clearly

provided that the only situation warranting a refund was if the

defendant were to fail to deliver the elevators within six months from

the date of written intimation by the plaintiff or an intervening force

majeure event; the plaintiff however, did not place any intimation for

installation of elevators under the Agreement for more than four years;

the plaintiff wrote a letter dated 14 th March, 2000 requesting for

extension since the blocks (where the elevators were to be installed)

were not ready for installation of elevators; the defendant agreed to

extend the validity of the Agreement upto 14 th March, 2003; the date

earlier agreed of 31st December, 2002 was however kept unaltered; in

or about April, 2000, the defendant reminded the plaintiff of its

commitment; in response thereto the plaintiff vide its letter dated 12th

April, 2000 informed that they would be constructing a basement and

therefore four elevators were to be respecified for one more stop at the

basement; the plaintiff further informed that instead of 14 elevators as

initially agreed, only 12 elevators would need to be installed; the

defendant vide its letters dated 24th April, 2000 and 9th March, 2001

informed the plaintiff of the consequent increase in price;

(j) that the defendant again vide its letter dated 29th July, 2002 drew

the attention of the plaintiff that the price agreed was valid till 31 st

December, 2002 only; the plaintiff neither replied to the said letter nor

placed any order and ultimately instructed installation vide its letters

dated 1st May, 2003 and 27th May, 2003 which were beyond the

validity of the Agreement which had expired on 14 th March, 2003; the

defendant vide its letter dated 30 th July, 2003 so informed the plaintiff

and intimated the revised cost of Rs.10,79,000/- per elevator;

(k) that the defendant vide its letter dated 16 th March, 2004 again

called upon the plaintiff to renew/revalidate the expired Agreement

since the material for installation and commissioning of elevators was

ready for delivery and the defendant was incurring costs towards

warehousing and other expenses;

(l) that a reply dated 26 th October, 2004 was also given to the legal

notice;

The defendant has also controverted the authority of the person

instituting the suit, signing and verifying the plaint on behalf of the

plaintiff.

3. No replication was filed.

4. On the pleadings of the parties, the following issues were framed on

26th September, 2006:

"1. Whether the suit is filed by a duly authorized person? OPP

2. Whether the plaintiff is entitled to the suit amount? OPP

3. Whether the plaintiff is entitled to interest, if so, at what rate and from what date? OPP

4. Whether the plaintiff has not adhered to the terms of the agreement? OPD"

5. The plaintiff examined two witnesses and closed its evidence. The

defendant has examined one witness and closed its evidence. No evidence in

rebuttal was led by the plaintiff.

6. The counsels for the parties have been heard.

7. My issue-wise findings are as under:

8. Re: Issue No.1. Whether the suit is filed by a duly authorized person? OPP

8.1. The suit has been instituted and the plaint signed and verified on

behalf of the plaintiff by Mr. Ashok Kumar Ralhan claiming to be the

President of the plaintiff‟s Society. The certificate issued by the office of the

Registrar, Co-operative Societies, Delhi Administration, New Delhi of

registration of the plaintiff as a Society under the Delhi Co-operative

Societies Act, 1972 has been proved as Ex.PW1/2. Mr. Ashok Kumar Ralhan

appearing as PW1 in his affidavit Ex.PW1/A by way of examination-in-chief

has deposed that he was vide resolution of the members of the Managing

Committee of the plaintiff Society in the meeting held on 23rd July, 2005 and

extract whereof is proved as PW1/1 authorized to file, sign and verify and

institute the present suit. PW2 Mr. Krishan Kumar Bhalla in his affidavit

PW2/A by way of examination-in-chief has deposed that he is the Vice-

President of the plaintiff Society and has also proved the resolution dated

23rd July, 2005 Ex.PW1/1 authorizing Mr. Ashok Kumar Ralhan. PW1 in his

cross-examination on 29th January, 2009 has deposed that he was appointed

as the President from the year 2002 till 2006 and after about one and a half

year again became the President. PW2 was not cross-examined at all on the

aspect of authority of Mr. Ashok Kumar Ralhan to institute the suit. The

plaintiff besides placing the extract of the resolution dated 23 rd July, 2005

authorizing Mr. Ashok Kumar Ralhan to institute the suit has also placed on

record the original minute book of the meetings of the Managing Committee

of the plaintiff‟s Society.

8.2. As would be apparent from the above, the defendant has failed to

cross-examine the witnesses of the plaintiff who have deposed about the

authority of Mr. Ashok Kumar Ralhan to institute the suit and sign and verify

the plaint on behalf of the plaintiff. There is no challenge to the signatory of

the plaint being President of the plaintiff Society also; he, for this reason

also, would be competent to institute the suit and sign and verify the plaint

on behalf of the plaintiff which is a juristic person.

8.3. Even otherwise it may be mentioned that the deficiency if any in

authority for institution of the suit, as held in Uday Shankar Triyar Vs. Ram

Kalewar Prasad Singh (2006) 1 SCC 75, Vidyawati Gupta Vs. Bhakti Hari

Nayak (2006) 2 SCC 777 and Grafitek International Vs. K.K. Kaura 96

(2002) DLT 835 are not to be fatal to the suits. The present suit is being

pursued in the name of the plaintiff Society and the recovery of monies in the

event of success, would also be in favour of the plaintiff Society and the

money would go to the plaintiff Society only.

8.4. I accordingly decide Issue No.1 in favour of the plaintiff and against

the defendant.

9. Re: Issue No.2. Whether the plaintiff is entitled to the suit amount? OPP

9.1. Before discussing the respective contentions of the parties aforesaid, it

is expedient to analyze the Agreement dated 6 th December, 1999 Ex.P1.

Under the said Agreement:

(i) The defendant agreed to sell and the plaintiff agreed to purchase

elevators on the terms and conditions contained therein;

(ii) Out of the total price of Rs.1,30,20,000/-, Rs.10 lakhs was

payable immediately on signing of the Agreement, Rs.9 lakhs by 31 st

December, 1999: 60% on receipt of entire material on site at Dwarka,

Delhi, 15% on physical completion of the lifts, 5% on commissioning

and handing over of the lifts/elevators and balance 5% after six months

of commissioning of lifts;

(iii) The quoted prices were not to be subject to any escalation till

31st December, 2002 i.e. for a period of little over three years from the

date of execution of the Agreement;

(iv) The material of each lift/elevator was to be delivered within six

months of the written intimation from the plaintiff to the defendant;

(v) If the defendant was to be unable to deliver the lifts beyond six

months, then the plaintiff was entitled to refund of the advance of

Rs.19 lakhs along with interest @ 24% per annum and to the

compensation as specified for non-delivery;

(vi) In case of force majeure, the advance paid was not to be

forfeited but rather the contract was to be renegotiated giving due

consideration to the payment of advance "three years ago" by the

plaintiff.

9.2. It may be highlighted that the amount of Rs.19 lakhs paid by the

plaintiff, is in the Agreement described as „advance‟ and not as „earnest

money‟ and there is no clause in the Agreement of forfeiture thereof.

9.3. It was at the outset enquired from the counsel for the defendant,

whether the defendant in the absence of any Agreement entitling the

defendant to forfeit the advance and without having made any claim against

the plaintiff for recovery of compensation for any loss or damage even if any

suffered by the defendant for the breach alleged by the defendant of the

Agreement, could forfeit the said amount. Attention of the counsel for the

defendant in this regard was invited to the judgment of the Constitution

Bench of the Supreme Court in Fateh Chand Vs. Balkishan Dass AIR 1963

SC 1405 laying down that even where penalty within the meaning of Section

74 of the Indian Contract Act is stipulated for breach, without proving the

loss the same cannot be recovered. It was also pointed out to the counsel for

the defendant that though the defendant in the written statement as aforesaid

has taken a plea of the Agreement having provided for forfeiture of the

earnest money in the event of default by the plaintiff, no such clause was

found.

9.4. The counsel for the defendant, though could not pinpoint any clause in

the Agreement entitling the defendant to forfeit the advance, argued that the

absence of a clause for refund should be read as an implied clause of

forfeiture. Reliance was further placed on the force majeure clause which

provides that "in case of a force majeure condition due to which the contract

cannot be completed in the stipulated time, the advance shall not be

forfeited" to contend that the same also implies a right otherwise of the

defendant to forfeit. Reference was also made to Shri Hanuman Cotton

Mills Vs. Tata Air Craft Limited (1969) 3 SCC 522.

9.5. Per contra, the counsel for the plaintiff has referred to:

(a) Baldev Steel Ltd. Vs. Empire Dyeing & Manufacturing Co.

Ltd. 92 (2001) DLT 471 laying down in paras 29 and 30 thereof that a

party is not disentitled from recovering the advance even if in breach

because breach of the contract would only entitle the other party to sue

for damages but not to forfeit the advance and this legal position can

be altered by a special forfeiture clause which may defeat the right to

recover even an advance amount. It was further held that advance is in

the nature of a trust or quasi trust, earmarked for payment of price for

the goods to be supplied which could not be diverted or forfeited for

other purposes, including for an alleged breach of contract;

(b) Dilip Kumar Bhargava Vs. Urmila Devi Sharma 182 (2011)

DLT 646 laying down that there cannot be forfeiture even if the paying

party is guilty of breach unless the receiving party has suffered loss in

the bargain;

(c) Sudhir Rawal Vs. Satish Batra (2011) 126 DRJ 246, judgment

dated 9th November, 2011 of this Court in RFA No.422/2011 titled

Bhuley Singh Vs. Khazan Singh and judgment dated 17th May, 2012

of this Court in RFA No.51/2012 titled Ms. Kriti Kohli Vs. Sh. Hari

Nand, all to the same effect.

The counsel for the plaintiff has further contended that Shri

Hanuman Cotton Mills (supra) is not applicable to the facts of the

present case since the amount paid thereunder was by way of earnest

money and the Agreement contained a specific clause for forfeiture

thereof.

9.6. The counsel for the defendant in rejoinder relied on Satish Batra Vs.

Sudhir Rawal (2013) 1 SCC 345 allowing the appeal against the judgment

aforesaid of this Court relied upon by the counsel for the plaintiff. However,

it may be mentioned that in that case also the amount was described as

„earnest‟ and the contract contained a provision for forfeiture thereof and in

that context the Supreme Court held that where the amount represents the

guarantee that the contract would be fulfilled and which is part of the

contract price when the transaction is carried out and to be forfeited when the

transaction falls by the reason of the default or failure of the giver, forfeiture

is permissible.

9.7. The counsel for the defendant has also referred to Section 55 of the

Contract Act, 1872. However, I fail to see the relevance thereof.

9.8. Before discussing the matter further, it is necessary to notice some

further facts.

9.9. The defendant vide its letter dated 16th March, 2000 Ex.P4 to the

plaintiff acknowledged the receipt under cover of letter dated 14 th March,

2000 of the balance advance of Rs.9 lakhs and increased the validity of the

Agreement upto 14 th March, 2003.

9.10. The aforesaid letter shows that the objection of the defendant to the

delay on the part of the plaintiff in payment of Rs.9 lakhs was waived by the

defendant and the defendant cannot be now allowed to derive any advantage

therefrom.

9.11. The Architect of the plaintiff vide their letter dated 1 st May, 2003

informed the defendant that out of six blocks, shaft of 5 blocks were ready

for installation of lifts and requested the defendant to inspect the same,

supply the material and start the erection of the lifts. A reminder dated 27th

May, 2003 was also sent by the said Architects to the defendant. Though

both the said letters were denied by the defendant and no exhibit mark has

been put thereon but the defendant vide its letter dated 30 th July, 2003

(proved as Ex.P-5) to the plaintiff in response to the letters dated 1 st May,

2003 and 27th May, 2003 informed that the validity of the contract had

expired and the price of lifts had escalated substantially since December,

1999 and it was not possible for the defendant to execute the contract at the

agreed price; revised price of Rs.10,79,000/- per lift was also intimated to the

plaintiff. The defendant has not proved any other letters of 1 st May, 2003

and 27th May, 2003 to which the said response was sent and the letters dated

1st May, 2003 and 27th May, 2003 thus have to be held to have stood proved.

9.12. Before proceeding further with the discussion, I may notice that

though the defendant in its written statement has also taken a plea of the suit

claim being barred by time but neither was any issue pressed thereon nor any

argument urged. However the onus to satisfy that the suit claim is within

time being also on the Court, I record that the defense of the defendant of

limitation is misconceived. The amount of Rs.19 lakhs was paid in the year

1999-2000 as advance to be adjusted in the purchase price under an

Agreement, the period of completion whereof, according to the defendant

also was till the year 2003. The plea of having forfeited the said amount was

also taken by the defendant in response to the legal notice dated 16th March,

2004 and the suit was filed about one year therefrom. The said claim in my

opinion would fall in the residuary Article 113 of the Schedule to the

Limitation Act with the limitation therefor being three years from the date

when the right to sue accrues which in my opinion accrues only upon the

defendant refusing to refund the amount and the suit has been filed within

three years therefrom. Reference in this regard can be made to India Trade

Promotion Organisation Vs. India International Textile Machinery

Exhibitions Society 199 (2013) DLT 40 (DB).

9.13. Coming back to, whether in the absence of any clause in the agreement

of forfeiture, the amount of Rs.19 lakhs could be forfeited or not, though a

Single Judge of the Madras High Court in Mohammad Sultan Rowther Vs.

Naina Mohammad AIR 1973 Mad 233 did hold, in the context of an

agreement relating to sale of immovable property that in the absence of a

specific clause in the contract forfeiture is not permissible, but the legal

position as held by other Courts is found to be otherwise. Reference in this

regard may first be made to Howe Vs. Smith [1881-1885] All ER Rep 201

which was a case of contract for sale of land without any clause as to what

was to happen to the amount paid as deposit on default of the purchaser. It

was held that a deposit in common parlance is understood as a security for

completion of the purchase and the purchaser who has made the deposit

cannot insist on abandoning the contract and yet recover the deposit because

that would enable him to take advantage of his own wrong. Finding the

purchaser in that case to be in default, even in the absence of a clause for

forfeiture the purchaser was held not entitled to refund of the deposit. It

would thus be seen that the answer to, whether in the absence of a clause for

forfeiture there could be forfeiture or not was made dependant on the nature

and character of the payment.

9.14. In Dies Vs. British & International Mining & Finance Corporation

Ltd. [1939] 1 KB 724 which was in the context of sale of goods, an

argument was raised that though in the case of contract of sale of immovable

property, the existence of a clause for forfeiture was necessary to effect

forfeiture, but not so in contracts of sale of goods. It was however held that

there is no distinction in this respect between the contracts for sale of goods

and contracts for sale of immovable property. It was further held that where

the contract is silent, the matter of forfeiture has to be decided on the

principle of law insofar as the intention of the parties can be ascertained from

designation used to indicate the nature of the sum that was paid. A

distinction was carved out between a payment designated as deposit and one

designated as part payment and it was held that a deposit, in the event of the

contract being performed, goes in diminution of the purchase price, and in

the interval between contract and completion operates as an earnest or

guarantee that the contract shall be performed i.e. acts as liquidated damages

in the event of breach of contract. It was further held that while a

deposit/earnest could be forfeited, part payment could not be even if the

purchaser who had made part payment was in default and the only remedy of

the seller was to sue for damages.

9.15. The aforesaid view was followed by the High Court of Calcutta in

Naresh Chandra Guha Vs. Ram Chandra Samanta AIR 1952 Cal 93 where

though the payment was designated as Bayana, there was no clause neither

for its forfeiture nor for its return and it was held that the agreements

containing covenants or clauses of forfeiture are to be treated on the same

footing as agreements without the same provided of course there is no clause

for return or refund of the money in question. It was further held that the

nature of the money in question has to be determined i.e. whether it was

intended to serve as earnest or security for performance, necessarily implying

a liability to forfeit or as part payment. It was yet further held that the said

designation has to be made by applying the golden rule of intention of the

parties. Monies described as earnest or deposit, it was held are to be

presumed to be earnest or security for performance liable to be forfeited even

in the absence of a clause therefor. It was however held that the rule of

forfeiture has no application to money received as part payment.

9.16. This Court also in In Re: R.K. Staple Spinning Mills P. Ltd.

MANU/DE/0374/1971 for the reason of the money being described as

earnest, even in the absence of a clause for forfeiture held the same liable to

forfeiture.

9.17. Recently again this Court in State Bank of India Vs. Union of India

199 (2013) DLT 697 citing with approval Howe, Dies and Naresh Chandra

Guha supra and certain other judgments held that earnest money once paid

is and continues to remain the property of the recipient; it is paid under what

is termed as contract of security which is distinct and separate from real or

pure contract and the right to forfeiture arises under a contract of security,

which could be provided expressly or impliedly.

9.18. Before applying the aforesaid principles to the facts in hand, mention

may also be made of Videocon Properties Ltd Vs. Dr. Bhalchandra

Laboratories (2004) 3 SCC 711 dealing with a contract of sale of

immovable property. The Supreme Court reiterated that earnest money is

part of the purchase price when the transaction goes forward and is forfeited

when the transaction falls through by reason of failure or fault of purchaser

and it is not the description by words used in the agreement that would be

determinative of the character of the sum but really the intention of the

parties and the surrounding circumstances as well will have to be looked

into and what may be called advance may really be a deposit or earnest

money and what is termed as deposit or earnest money may ultimately turn

out to be an advance or part of purchase price.

9.19. Similarly in Satish Batra supra the Supreme Court held that to justify

the forfeiture of advance as earnest money the terms of the contract should

be clear and explicit and part payment of purchase price cannot be forfeited

unless it is a guarantee for due performance of the contract.

9.20. The principle has also been succinctly crystallized in paragraphs 508

and 510 of Volume 88 of the 5 th Edition of the Halsbury‟s Laws of England

under the head „Claim by the party in breach to recover money paid‟:-

"A party who commits a breach of contract may be able to bring a restitutionary claim against the innocent party

to recover payments made to the innocent party prior to the termination of the contract. The right to recover will only arise where the contract has been discharged as a result of the innocent party electing to terminate the contract. When seeking to ascertain the rights of the party in breach to recover money paid, the courts have drawn a distinction between deposits and part payments. The distinction between the two is a matter of construction which in large part turns on the purpose for which the payment was made. Where the language used in the contract is neutral, then a payment will generally be interpreted as part payment so that it is, in principle, recoverable."

xxxxx

"Where the money has been paid prior to the discharge of the contract not as a deposit or earnest for performance but as a prepayment of the purchase price, the right of the party in breach to recover the sum so paid depends on the construction of the particular contract between the parties. Where the contract is one of sale and no property in the goods has passed to the buyer, the money will generally be recoverable by the purchaser either because the right of the vendor to retain the prepayment is conditional upon completion of the contract so that, when completion does not take place as a result of the discharge of the contract, the condition upon which the vendor retains the money fails with the result that the money is recoverable by the purchaser or on the ground that the consideration for the payment has wholly failed. Where the contract is one for work and materials, the prepayment is less likely to be recoverable. This is particularly so where the recipient of the money incurs expenditure in the performance of the contract: the prepayment in such a case is unlikely to be recoverable either because it is an unconditional payment or on the ground that the failure of

consideration in such a case is not total."

9.21. The payment of Rs.19 lakhs under the subject contract is described as

advance and not as earnest. It is otherwise also not found to be in the nature

of a guarantee for fulfilling of the contract; rather the same is only in the

nature of a consideration to peg till 31st December, 2002 the prices prevalent

and agreed upon in December, 1999. This is amply clear from the force

majeure clause which while providing for renegotiation, provides for

weightage to be given to the advance held by the defendant for three years in

determining the renegotiated price.

9.22. It is also not borne out from the subject contract that the defendant

thereunder was required to do any work whatsoever till receipt of written

intimation from the plaintiff and which according to the defendant was not

received within the period of validity of three years of the Agreement. This

is obvious from the fact that after the receipt of the said written intimation

from the plaintiff, the defendant had six months‟ time to deliver the material

for each lift. If the contract had intended the defendant to keep the material

for each lift ready immediately after the signing of the Agreement, there was

no need for giving the period of six months to the defendant for delivery

thereafter. Though the defendant in the evidence, has vaguely sought to

suggest that the defendant had worked under the Agreement but no

foundation for the same has been laid in the pleadings as aforesaid. The

defendant has not pleaded as to what work it had done under the Agreement

till the receipt of communication dated 1st May, 2003 and 27th May, 2003

from the Architects of the plaintiff. Significantly, the defendant on the

expiry of the validity of the Agreement also did not issue any communication

intimating to the plaintiff of the forfeiture of the advance or of any losses

suffered by it. No claim for such losses has been made as aforesaid. Though

the witness of the defendant Mr. Amjad Sayyed in his affidavit Ex.DW1/A

by way of examination-in-chief has vaguely suggested that the plaintiff

wanted the defendant to begin procuring the material for installation of the

lifts and be in a ready state as soon as the plaintiff had completed the

infrastructural requirements for installation work but has shied away from

deposing as to what procurements were made at what price and as to how the

same have been wasted. Further, if the defendant were to have already

acquired the material, there would have been no question of escalation.

9.23. As aforesaid, the amounts received as earnest money/deposit vest in

the receiver from the very day of the receipt to be applied either towards

price or to be forfeited. Per contra, amounts received as purchase price are

advance in the hands of the seller, subject to fulfillment of the contract. The

defendant though a company, required in law to maintain accounts and have

them audited, has not led any evidence of the treatment given to the sum of

Rs.19 lacs in its books of accounts. Adverse inference thus has to be drawn

against the defendant that it is continuing to show the amount of Rs.19 lacs

in its books of accounts as advance.

9.24. Issue No.2 is accordingly decided in favour of the plaintiff and against

the defendant and the plaintiff is found entitled to refund from the defendant

of the advance of Rs.19 lakhs.

10. Re: Issue No.4. Whether the plaintiff has not adhered to the terms of the agreement? OPD

10.1. In the light of the discussion above, this issue is redundant.

10.2. Even otherwise I am unable to return a finding of the plaintiff having

not adhered to the terms of the Agreement. As aforesaid, the consideration

for advance of Rs.19 lakhs was not performance of the Agreement, but only

to peg the price. The only effect of the failure of the plaintiff to send

intimation to the defendant before 14 th March, 2003 of its readiness to have

the elevators installed was to disentitle the plaintiff from the price agreed to

in the year 1999 and cannot have any other consequence. Upon the parties in

the year 2003-2004 being unable to arrive at a consensus of the new prices,

the amount of Rs.19 lakhs paid as advance, became refundable by the

defendant to the plaintiff irrespective of the failure of the plaintiff to avail of

the 1999 price.

10.3. Similarly, the changes in the specifications made by the plaintiff

would have no relevance in the light of the aforesaid.

10.4. The Issue No.4 is also thus decided in favour of the plaintiff and

against the defendant.

11. Re: Issue No.3. Whether the plaintiff is entitled to interest, if so, at what rate and from what date? OPP

11.1. The plaintiff has claimed interest @ 24% per annum, not with effect

from December, 1999/March, 2000 when the advance was paid but only with

effect from 30th July, 2003.

11.2. I have already held above that the plaintiff, upon the parties being

unable to arrive at a consensus as to the new price, became entitle to refund.

Accordingly, the claim of the plaintiff to interest with effect from 30 th July,

2003 is found to be justified.

11.3. As far as the rate of interest is concerned, the parties had in the

contract Ex.P1 agreed to interest @ 24% per annum for default on the part of

the defendant. For the said reason, I do not find any ground to interfere with

the claim at the said rate for the pre-suit institution period. However, as far

as the interest pendente lite and future is concerned, considering the rate of

interest paid by the Nationalized Banks on fixed deposits and considering the

nature of the transaction, award of interest @ 10% per annum is deemed

expedient.

11.4. Issue No.3 is decided accordingly.

12. Resultantly, a decree is passed in favour of the plaintiff and against the

defendant for recovery of Rs.28,05,753.43 paise together with interest @

10% per annum on the sum of Rs.19 lakhs from the date of institution of the

suit till realization. The plaintiff shall also be entitled to costs of the suit.

Decree sheet be drawn up.

RAJIV SAHAI ENDLAW, J JULY 10, 2013 bs