The main legal point established is the limitation on the forfeiture of amounts specified in the contract and the application of Section 74 of the Contract Act to determine reasonable compensation.

VALMIKI J. MEHTA, J (ORAL)

1. The present suit has been filed by the plaintiff for recovery of Rs.30,90,000/- alongwith interest at 24% per annum. The total amount of Rs.30,90,000/- is split up into four parts, one amount of Rs.50,000/- being the earnest money amount, second amount of Rs.20 lacs being two months advance licence fee, thirdly of interest claim of Rs.40,000/- upto the date of the suit, and fourthly the claim of Rs.10 lacs towards loss of reputation.

2. The causes of action which are stated in the plaint, though run into several parts, however, learned counsel for the plaintiff at the stage of final arguments confined his claim to the recovery of Rs.20 lacs arguing that on account of failure of the plaintiff to comply with the formalities for creation of a licence for the restaurant space, at best the defendant in terms of Clause 2 of the general terms and conditions of the tender could have forfeited an amount of Rs.50,000/- but not the entire amount with it of Rs.20,50,000/-. It is prayed that the plaintiff be refunded the amount of Rs.20 lacs, and the defendant be held entitled to forfeit only the sum of Rs.50,000/-.

3. The facts of the case are that the defendant on 12.2.1996 by insertion of advertisements in newspapers invited tenders for licence of an air conditioned restaurant space measuring 5426 sq. ft. (approximately) located at Palika Parking Complex, Connaught Place, New Delhi. Since the first highest tenderer failed to complete the formalities, therefore, after forfeiting the earnest money amount of such tenderer, the plaintiff was offered the restaurant on licence vide the letter dated 30.7.1996 (Ex.PW1/4) of the defendant. As per the terms and conditions of auction (Ex.P-2), the plaintiff had to deposit a total amount of six months’ license fee, of which, an amount of Rs.20 lacs was the advance licence fee for two months, and Rs.40 lacs was to be kept as interest fee security deposit by the defendant. The plaintiff was also liable to pay advance AC charges for one month. Though there are allegations and counter-allegations, the plaintiff alleging that defendant was guilty of concealment of facts etc etc, and, the defendant relying on the terms and conditions of the tender to show that what was offered was “as is where is basis” and the plaintiff was in fact duty bound to inspect the premises and not raise any objection on any ground thereafter, I am not required to go into such aspects in the present judgment.

4. I have already stated above that counsel for the plaintiff has gone on the basis that the plaintiff has committed breach by not completing the formalities and because of which the contract of license could not be entered into between the parties. On that basis it was argued that in terms of Clause 2 of the terms and conditions of the allotment, the defendant had only a right to forfeit the earnest amount of Rs.50,000/- and no right to forfeit any other/more amount. Relying on the term no.2, it is argued that in case of non completion of formalities, the specific forfeiture which has been provided is only of Rs.50,000/- and nothing more. It is also argued that there is no other clause of forfeiture in the terms and conditions as per which the amounts were given by the plaintiff to the defendant and thus neither advance license fee nor security deposit (if the same had been deposited) could be forfeited.

5. The following issues were framed by this Court on 9.9.1997:-

“1. Whether the plaintiff is a company duly incorporated under the companies Act and Shri Harish Bhasin is competent to institute the present suit? OPP

2. Whether the defendant is entitled to forfeit the earnest money and the security deposit amount, of the plaintiff? OPD

3. Whether the plaintiff is entitled to claim damages, if so, to what amount? OPP

4. Whether the plaintiff is entitled to claim interest, if so, at what rate and on which amount? OPP

5. To what amount the plaintiff is entitled to recover from the defendant? O