Dr. Habibur Rehman Khan vs Naresh Kumar & Anr
2013 Latest Caselaw 4863 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                      Date of decision: 23rd October, 2013.

+                                RFA 16/2008

       DR. HABIBUR REHMAN KHAN                     ..... Appellant
                    Through: Mr. Rana Ranjit Singh & Mr. Jaswant
                             Singh, Advs.

                                   Versus

    NARESH KUMAR & ANR                       .....Respondents
                  Through: Mr. Mahesh Verma, Adv.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

RAJIV SAHAI ENDLAW, J.

1. The appeal impugns the judgment and decree dated 24 th September,

2007 of the Court of the learned Additional District Judge (ADJ), Delhi in

Suit No.193/2006 filed by the appellant/plaintiff for recovery of Rs.20 lakhs

jointly and severally from the two respondents/defendants, to the extent the

same declines recovery of Rs.10 lakhs to the appellant/plaintiff while

decreeing the suit of the appellant/plaintiff for Rs.10 lakhs with interest and

costs only.

2. Notice of the appeal was issued. The appeal was on 21st April, 2008

admitted for hearing. The appeal, on 1st May, 2013, on default in

appearance of the appellant/plaintiff, was dismissed in default. The

appellant/plaintiff applied for restoration and which was allowed on terms

and the counsels were also heard on the appeal and judgment reserved.

3. The appellant/plaintiff sought recovery of Rs.20 lakhs jointly and

severally from the two respondents/defendants, pleading:

(i) that the two respondents/defendants had, vide Agreement to

Sell dated 2nd March, 2006, agreed to sell to the appellant/plaintiff a

plot of land admeasuring 915 sq. yds. out of Khasra Nos.11/16, 12/20

and 20/1 situated in the area of Village Nangloi Jat at Kirori Road, in

a colony known as Kavita Colony, Nangloi, Delhi-110 041 for a total

sale consideration of Rs.89,67,000/-;

(ii) that in pursuance to the aforesaid Agreement, the

appellant/plaintiff had paid a sum of Rs.10 lakhs to the

respondents/defendants as advance money/part payment and had

agreed to pay the balance Rs.79,67,000/- at the time of registration of

the Sale Deed;

(iii) that the period for completion of the said bargain was fixed

upto 25th May, 2006;

(iv) that the respondents/defendants after execution of Agreement

to Sell approached the appellant/plaintiff to get the signatures of the

appellant/plaintiff on three forms to be submitted to the Sub-Registrar

for getting the „No Objection Certificate‟ (NOC) from the Tehsildar

Notification, as the land which was agreed to be sold and subject

matter of the Agreement to Sell could not have been transferred nor

any Sale Deed thereof got registered without getting NOC from the

Tehsildar Notification; the appellant/plaintiff signed the three forms

and returned the same to the respondents/defendants;

(v) that the appellant/plaintiff had been thereafter continuously

contacting the respondents/defendants for knowing whether the NOC

had been received by the respondents/defendants from the office of

the Sub-Registrar Notification to execute the Sale Deed;

(vi) that the appellant/plaintiff prior to 25th May, 2006 made

arrangement for payment of the balance amount of Rs.79,67,000/-

which were to be paid at the time of registration of the Sale Deed; that

on 25th May, 2006, the appellant/plaintiff was having sufficient funds

and was ready and willing to perform his part of the contract;

(vii) that the appellant/plaintiff on 25th May, 2006 contacted the

respondents/defendants who failed to give any satisfactory reply and

assured the appellant/plaintiff that the needful will be done in a short

period;

(viii) that the appellant/plaintiff believing the assurance of the

respondents/defendants did not take any action;

(ix) that thereafter the respondents/defendants had been avoiding to

give any answer to the queries of the appellant/plaintiff regarding

grant of NOC from the Tehsildar Notification;

(x) that the respondents/defendants also failed to deliver copies of

the title documents in their favour of the plot agreed to be sold so that

necessary Sale Deed could be got drafted by the appellant/plaintiff;

(xi) that the appellant/plaintiff came to know that the rates in the

area have gone high and the respondents/defendants have become

dishonest;

(xii) that the appellant/plaintiff as such got served a notice dated 25th

August, 2006 calling upon the respondents/defendants to immediately

inform the appellant/plaintiff about the status of the NOC from the

Tehsildar Notification and to deliver copies of the title documents in

their favour;

(xiii) that the respondents/defendants vide their reply dated 6 th

September, 2006 falsely claimed to have forfeited the sum of Rs.10

lakhs received from the appellant/plaintiff;

(xiv) that the respondents/defendants could not have executed any

registered the Sale Deed without the NOC from the Tehsildar

Notification as they had agreed to do in the Agreement dated 2 nd

March, 2006;

(xv) that as per Clause 6 of the Agreement to Sell, the

respondents/defendants had agreed that if they back out from the

Agreement, they will pay the double of the advance money received

from the appellant/plaintiff;

(xvi) that the respondents/defendants having not performed their part

of the contract were liable to pay a sum of Rs.20 lakhs to the

appellant/plaintiff.

Accordingly, on 11th October, 2006, the appellant/plaintiff instituted

the suit for recovery of Rs.20 lakhs with interest at the rate of 18% per

annum from the date of filing of the suit till realization.

4. The respondents/defendants contested the suit by filing a written

statement, on the grounds:

(a) that as per Clause 5 of the Agreement to Sell, in case the

appellant/plaintiff backed out from purchasing the said plot/land from

the respondents/defendants within the specified period, then the

advance money paid by the appellant/plaintiff was to stand forfeited

and the said bargain to be considered as concluded;

(b) that the appellant/plaintiff did not pay the balance sale

consideration of Rs.79,67,000/- on or about 25th May, 2006 as agreed

and in accordance with the terms and conditions of the Agreement to

Sell, the advance of Rs.10 lakhs had been forfeited and the

appellant/plaintiff was not entitled to any monies;

(c) that it was agreed that all the efforts for execution of the Sale

Deed were to be done by the appellant/plaintiff and all the expenses

for the execution of the Sale Deed were also to be incurred by the

appellant/plaintiff; this was also the practice and custom in the

market;

(d) that before entering into the Agreement to Sell, the

appellant/plaintiff had seen the property documents and at the time of

execution of the Agreement to Sell photocopies of the property

documents were taken by the appellant/plaintiff from the

respondents/defendants and he also took signatures of the

respondents/defendants on various papers/forms;

(e) that on the orders of Hon‟ble the Supreme Court, the sealing of

illegal commercial properties was going on after 2 nd March, 2006, so

the rates in the area fell down and the appellant/plaintiff could not

arrange the money and did not come forward to perform his part of

the contract;

(f) that it was for this reason only that the appellant/plaintiff,

instead of suing for specific performance of the Agreement to Sell,

had sued for recovery of money;

(g) that the respondents/defendants denied the other contents of the

plaint.

5. The appellant/plaintiff filed a replication reiterating his case and

denying the contents of the written statement.

6. On the pleadings of the parties, the following issues were framed in

the suit on 6th November, 2006:

"1. Whether the plaintiff is entitled to a sum of Rs.20,00,000/- along with interest as prayed for? OPP

2. Relief."

7. The appellant/plaintiff examined himself only in support of his case;

the two respondents/defendants besides examining themselves, examined

three other witnesses.

8. The learned ADJ has vide the impugned judgment and decree allowed

the claim of the appellant/plaintiff only for the refund of advance amount of

Rs.10 lakhs and has declined to decree the suit of the appellant/plaintiff for

the entire amount claimed of Rs.20 lakhs, finding/observing/holding:

(I) that the parties having agreed that the sale was to be completed

on or before 25th May, 2006, the question which arose for

consideration was whether the said time was of the essence of the

contract;

(II) that time was not of the essence inasmuch as had it been so, the

respondents/defendants would have issued a legal notice to the

appellant/plaintiff;

(III) that the party paying part of the purchase money as advance,

even if in breach, is entitled to refund thereof as the advance is not

liable to be forfeited as earnest money;

(IV) that the appellant/plaintiff was thus entitled to the amount of

Rs.10 lakhs given as advance;

(V) that the appellant/plaintiff was however not entitled to interest

@ 18% per annum as sought and in the facts and circumstances,

award of interest @ 9% per annum would meet the ends of justice.

Accordingly, the suit was decreed for recovery of Rs.10 lakhs with

interest @ 9% per annum from the date of filing of the suit till realization.

9. The counsel for the appellant/plaintiff has argued that the

respondents/defendants having agreed to pay double the amount of the

advance of Rs.10 lakhs received, if in breach, are liable to pay the same

without even any proof by the appellant/plaintiff of having suffered any

loss. Reliance in this regard is placed on paras 31 to 33, 35 and 38 of

Phulchand Exports Limited Vs. O.O.O. Patriot (2011) 10 SCC 300 and on

para 68 of Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd. (2003) 5

SCC 705.

10. Per contra, the counsel for the respondents/defendants has contended

that no NOC from the Tehsildar Notification was required for the purpose of

execution of the Sale Deed; that the learned ADJ has ignored the testimony

of DW-1 and DW-2; that the plot aforesaid was situated in an unauthorized

colony and the appellant/plaintiff had backed out from the transaction owing

to the sealing drive then undertaken by the Government pursuant to the

directions of the Supreme Court; that it was the appellant/plaintiff who was

in breach and not the respondents/defendants.

11. I have considered the rival contentions.

12. I must at the outset observe that the learned ADJ has in the impugned

judgment and decree failed to even consider the claim of the

appellant/plaintiff insofar as for double the amount and has proceeded to

decide the suit as if only for refund of the advance paid and in which respect

also, I am constrained to observe, the learned ADJ has not only misread the

Agreement to Sell but also applied wrong principles of law. The learned

ADJ has held that the amount of Rs.10 lakhs paid as advance money by the

appellant/plaintiff to the respondents/defendants was not forfeitable as the

same was titled as „advance‟ and not „earnest money‟ and only earnest

money could be forfeited. The learned ADJ in this regard failed to notice

that the Agreement to Sell in Clause 5 itself provided for forfeiture thereof,

in the event of the appellant/plaintiff being in breach. Not only so, the law

also, as recently noticed by me in M/s Entrepreneurs Co-op Group

Housing Society Ltd. vs. M/s Schindler India Pvt. Ltd.

MANU/DE/1940/2013 and in Lalit Kumar Bagla Vs. Karam Chand

Thapar & Bros. (CS) Ltd. MANU/DE/2870/2013 is that, (i) even in the

absence of a clause for forfeiture, there could be forfeiture, depending upon

the nature and character of the payment and the intention of the parties and

in determining which, the designation used by the parties to indicate the

nature of the sum that was paid though is relevant but not determinative; (ii)

it has to be determined, whether the money paid was intended to serve as

earnest or security for performance, necessarily implying a liability to forfeit

or as a part payment; (iii) if it is intended to serve as earnest or security for

performance, even in the absence of a clause for forfeiture, it is liable to be

forfeited upon breach of the contract by the giver; (iv) however the rule of

forfeiture has no application to money received as part payment; and, (v)

that the monies given as earnest or security for performance, once paid are

and continue to remain the property of the recipient, having been paid as a

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 can be

provided expressly or impliedly.

13. The learned ADJ has in para 18 of the impugned judgment also

erroneously observed that the contentions of both the parties, of the other

being in breach were of no avail, since the suit was not for specific

performance, inasmuch as for determining whether the sum of Rs.10 lakhs

paid by the appellant/plaintiff was liable to be forfeited or not and whether

the appellant/plaintiff was entitled to double the amount paid or not, it was

essential to decide as to who, whether the appellant/plaintiff or the

respondents/defendants were in breach of the Agreement to Sell. The

learned ADJ on the contrary, misdirected himself as to the time being of the

essence and which was not the plea of any of the parties.

14. However, since the respondents/defendants have not challenged the

decree against them for refund of Rs.10 lakhs with interest, the said question

does not arise for consideration and the discussion hereinbelow would only

be from the aspect of the entitlement of the appellant/plaintiff for recovery

of double of the said amount.

15. The Agreement to Sell, which is not in dispute, describes the

respondents/defendants as "first party" and as "owner/occupier and in

possession of the land" agreed to be sold and the appellant/plaintiff as the

second party and the terms thereof are as under:

"1. That first party has received a sum of Rs.10,00,000/- (Rs.

Ten Lac only) on dated 02/03/2006, as an advance money from the second party vide a legal receipt and the balance amount Rs.79,67,000/- (Rs. Seventy Nine Lac Sixty Seven Thousand Only) will be paid at the time of registration.

2. That the period for the completion of the said bargain is fixed upto 25/5/2006 from the date of execution of this agreement.

3. That all the expenses of the said transaction shall be paid by the second party or his nominee(s).

4. That the first party will be bound to execute the Sale Deed/GPA in favour of the second party or his nominee(s) without any extra charges.

5. That in case the second party backs out to purchase the said land/plot from the first party within the specified period then the advance money paid by him to the first party shall stand forfeited and the said bargain shall be considered as cancelled.

6. That in case the first party backs out of the terms and conditions of this agreement then the first party will pay the double of the advance money and part payment to second party.

7. That the first party hereby assure the second party that the said land under sale is free form all sorts of encumbrances whatsoever such as sale mortgage, gift, lien, lease, family disputes etc."

Though the amount of Rs.10 lakhs in the typed agreement and the

receipt accompanying the same was described as "advance money cum part

payment" but the words "cum part payment" are deleted in hand in both the

documents.

16. The appellant/plaintiff in his affidavit by way of examination-in-

chief, reiterated the contents of the plaint; with respect to the availability of

the balance sale consideration with him, he deposed that he had made

arrangement from friends who would have given the money to him at the

time of getting the Sale Deed registered. In cross-examination, (A) he

deposed that he wanted to purchase the plot to build a nursing home

thereon; (B) he admitted that he did not write any letter to the

respondents/defendants prior to serving legal notice dated 25 th August,

2006; (C) he denied that no NOC was required from the Tehsildar office for

execution of the Sale Deed; (D) he denied that he had never contacted the

respondents/defendants after the Agreement to Sell; (E) he denied that he

had entered into the deal after seeing the property documents and copies

delivered to him; (F) he denied that he had backed out of the deal as a

nursing home could not be built and run on the land in question and claimed

that he had not enquired about this; (G) he denied that he was not interested

in buying the property as the sealing drive was continuing in the locality.

17. The respondent/defendant No.1 in his affidavit by way of

examination-in-chief reiterated the contents of his written statement. He, in

his cross-examination, (i) admitted having told his counsel at the time of

getting the reply to the legal notice sent, that the appellant/plaintiff was to

obtain the NOC for getting the Sale Deed registered; (ii) admitted that it was

not so mentioned in the reply; (iii) denied that the appellant/plaintiff had not

got his signatures on blank papers for obtaining the NOC; (iv) denied that

the land agreed to be sold was agricultural land; (v) admitted that no

municipal number has been assigned to the land agreed to be sold; (vi)

denied that the appellant/plaintiff had approached the

respondents/defendants several times for copies of the documents; (vii)

deposed that construction of about 350 sq. yds. was existing on the property

agreed to be sold, though it was not mentioned in the Agreement to Sell;

(viii) admitted that construction plans were being sanctioned in the area; (ix)

deposed that he did not know as to who told him that no nursing home could

be constructed on the disputed property.

18. The respondent/defendant No.2 in his cross-examination, proved as

Ex. DW2/X, the minutes of the meeting of the Deputy Commissioners in the

office of the Divisional Commissioner, Government of NCT of Delhi in

which the issue of registration of Sale Deeds/General Power of Attorneys in

unauthorized colonies proposed to be regularized was discussed. He on

asking also produced and proved as Ex.DW-2/X-1, the documents of title of

the property agreed to be sold in favour of the respondents/defendants which

comprised of a GPA, Agreement to Sell, Will etc.

19. The respondents/defendants also examined as DW-3 one Mr. Laxmi

Narain Bansal (who is also a witness to the Agreement to Sell) who claimed

to have brokered the transaction and who inter alia deposed that Kavita

Colony in which the property is situated is a regularized colony by

Municipal Corporation of Delhi (MCD); that no NOC for registration of

Sale Deed/GPA of properties in the said colony was required; that he had

informed the said fact to the appellant/plaintiff as well as the

respondents/defendants. In cross-examination he stated, (a) that there was

no Sale Deed of the property in favour of the respondents/defendants as the

registration of Sale Deeds had been prohibited; (b) that he was related to the

respondents/defendants; (c) that he had not brought the documents of

regularization of Kavita Colony; (d) denied that he never informed the

parties of the NOC being not required.

20. The respondents/defendants examined the official from the office of

the Divisional Commissioner, Delhi who proved the minutes aforesaid EX.

DW-2/X. The respondents/defendants also examined the official from the

Town Planning Department of the MCD who proved the list of unauthorized

colonies, regularized by the MCD during the year 1978-79 as Ex.DW-5/1

and the copy of the resolution in that regard as Ex.DW-5/2. The list of

unauthorized colonies includes the Kavita Colony.

21. It is also worth mentioning that the respondents/defendants in the

reply dated 6th September, 2006 got sent to the legal notice dated 25th

August, 2006 while denying having obtained signatures of the

appellant/plaintiff on any document for obtaining the NOC and denying that

the appellant/plaintiff had contacted them at any time after the Agreement to

Sell, had not set up a case as set up in the written statement, of the

appellant/plaintiff being responsible for obtaining the NOC and having

obtained the signatures of the respondents/defendants in this regard.

22. It is in the aforesaid of affairs, the question, which of the two parties

was in breach of the Agreement to Sell, has to be decided.

23. On a conspectus of the entire evidence, I find the appellant/plaintiff to

be in breach of the Agreement to Sell, for the following reasons:

(i) the Agreement to Sell in the recitals describes the

respondents/defendants as owner/occupier in possession of the

property agreed to be sold and does not give the particulars of the title

of the respondents/defendants to the property agreed to be sold, as is

normally the case;

(ii) it is not the case of the appellant/plaintiff that the

respondents/defendants were not in occupation or possession of the

plot or not in a position to transfer such possession to the

appellant/plaintiff;

(iii) the version of the appellant/plaintiff that he had prior to the

Agreement to Sell not examined the documents of title in favour of

the respondents/defendants is against the preponderance of

probability; the appellant/plaintiff is an educated person being a

medical practitioner and it is unbelievable that he would have paid the

sum of Rs.10 lakhs without satisfying himself of the

respondents/defendants having some semblance of title to the

property;

(iv) it stands proved that the property is situated in an unauthorized

colony under regularization; the knowledge of the appellant/plaintiff

of the said fact can also safely be assumed, as a buyer of immovable

property is not only expected in law but normally carries out due

diligence of the property agreed to be purchased;

(v) the Agreement to Sell fixes the time upto 25 th May, 2006 "for

the completion of the said bargain" and Clause 4 also binds the

respondents/defendants "to execute the Sale Deed/GPA in favour of

the second party"; the same also shows that the Agreement was not

for execution of the Sale Deed only;

(vi) the appellant/plaintiff is thus deemed to be in the know of the

nature and character of the property for acquisition of which he

entered into the Agreement;

(vii) that the case set up by the appellant/plaintiff in the first missive

dated 25th August, 2006 sent after nearly more than three months of

the date fixed for completion of the bargain, of an NOC being

required, was clearly an afterthought; there is no mention in the

Agreement to Sell of any such NOC being required and the date fixed

for completion of the bargain was not made dependent upon obtaining

of any such NOC;

(viii) though the respondents/defendants in their written statement

did not deny NOC being required and rather took a plea of the

responsibility therefor being on the appellant/plaintiff but in view of it

having been established that the property was situated in an

unauthorized colony under regularization and no such plea having

been taken in the reply dated 6 th September, 2006 to the legal notice

(surprisingly by the same Advocate who drafted the written

statement), the said plea taken in the written statement is clearly an

error on the part of the Advocate for the respondents/defendants;

(ix) that even if the version of the appellant/plaintiff of such NOC

being required and signatures therefor having been obtained by the

respondents/defendants was correct, in view of the clear stipulation in

the Agreement to Sell for completion of the bargain by 25 th May,

2006, the appellant/plaintiff would have before the said date not relied

upon the oral assurances of the respondents/defendants at the risk of

forfeiture, clearly stipulated in the Agreement;

(x) not only so, the appellant/plaintiff maintained the quietus for

three months after the said date also and the legal notice ultimately

got issued appears to have been intended to obtain refund of the

amount of Rs.10 lakhs and not for specific performance of the

Agreement to Sell;

(xi) that even though the respondents/defendants in the reply to the

legal notice had not said that any NOC is required but the

appellant/plaintiff still did not chose to sue for specific performance

and sued only for refund of the amounts; the same clearly establishes

that the appellant/plaintiff, after the Agreement to Sell, did not want

to proceed with the Agreement to Sell and was only interested in

refund of his monies.

24. Once, it is held that the appellant/plaintiff and not the

respondents/defendants was in breach of the Agreement, the question of the

appellant/plaintiff being entitled to double of the amount paid, does not arise

and the impugned judgment and decree denying the said relief to the

appellant/plaintiff, does not call for any interference.

25. Though in the light of the view taken, the legal question raised by the

counsel for the appellant/plaintiff, of the appellant/plaintiff even if were to

be held to be not in breach, being entitled to double the amount without

even proving any loss, does not arise for consideration but I may observe

that the law as laid down in para 68 of Saw Pipes Ltd. (supra) to the effect

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 and that 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 a contract, is in the context of contracts in which it is

impossible for the Court to assess the compensation arising from breach and

for which contracts it has been provided that 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. The Supreme Court has not held that in no case

of breach of contract, the aggrieved party is required to prove loss or

damage and the Court can award compensation. The counsel for the

appellant/plaintiff has glossed over the words "in every case of breach of

contract" in sub-para 3 of para 68 of the said judgment. The present is not

found to be a contract of the nature in which it is not possible for the

appellant/plaintiff to assess the compensation, nor is it the case of the

appellant/plaintiff that for the reason of the compensation on account of loss

being not determinable, the parties had arrived at double the amount paid by

way of a genuine pre-estimate as the measure of reasonable compensation.

Similarly, in Phulchand Exports Limited (supra) also, the claim in

accordance with the Agreement was allowed, holding that the stipulation to

the said effect in the Agreement was for reimbursement and not in the name

of penalty and was neither punitive nor vindictive and not in terrorem. It

was yet further held that the clause of reimbursement in the event of delayed

delivery/arrival or non-delivery was not to be regarded as damages. It was

this distinction, again which has been glossed over by the counsel for the

appellant/plaintiff.

26. Before departing with the subject, I may mention that though this

Court had taken a view that even for forfeiture of earnest money, loss has to

be proved but the same was set aside by the Supreme Court in Satish Batra

Vs. Sudhir Rawal (2013) 1 SCC 345. However, the same was in the

context of forfeiture of earnest money and not in the context of payment of

double the amount by the seller, if in breach.

27. No merit is thus found in the appeal, which is dismissed with costs.

Decree sheet be drawn up.

RAJIV SAHAI ENDLAW, J OCTOBER 23, 2013 bs