The central legal point established in the judgment is that in cases of breach of contract, the entitlement to recover a specified amount is subject to proving the loss or damage suffered, as provided under Section 73 and Section 74 of the Indian Contract Act, 1872.

Rajiv Sahai Endlaw, J.

1. The appeal impugns the judgment and decree (dated 12th April, 2013 of the Court of the Addl. District Judge-01, South District, Saket Courts, New Delhi in Suit No.262/11 filed by the respondent) against the appellant/defendant and in favour of the respondent/plaintiff of recovery of Rs.11 lacs. The said recovery from the appellant/defendant was ordered in enforcement of a clause in the Agreement of Sale of immovable property executed by the appellant/defendant in favour of the respondent/plaintiff, of payment by the appellant/defendant to the respondent/plaintiff of double the amount of earnest money paid by the respondent /plaintiff at the time of execution of Agreement to Sell, in the event of appellant/defendant being in breach of the said Agreement. Not finding any discussion in the impugned judgment on the proof of any loss or damage suffered by the respondent/plaintiff by the breach on the part of the appellant/defendant and being of the view that as per the dicta of the Constitution Bench in Fateh Chand Vs. Balkishan Dass AIR 1963 SC 1405 that in the absence of any loss or damage being proved, the mere existence of such a clause in the Agreement does not justify recovery of the amount by way of penalty, notice of the appeal was issued, the Trial Court record requisitioned and subject to the deposit by the appellant/defendant in this Court of the decretal amount of Rs.11 lacs, execution was stayed. The appellant/defendant had deposited the said sum of Rs.11 lacs in this Court.

2. After notice, considering that the appeal entailed a purely legal question, with the consent of the counsels, the appeal was finally heard and judgment reserved.

3. Need is not felt to set out in detail the controversy, it being not disputed:-

(a) that at the time of Agreement to Sell a sum of Rs.8 lacs was paid by the respondent/plaintiff/purchaser to the appellant/defendant/vendor;

(b) that as per the Agreement to Sell, upon the appellant/defendant/vendor being in breach, he was liable to “refund the double of the advance/earnest money”;

(c) the appellant/defendant/vendor did not present for payment/encash the cheque for Rs.1 lac out of total Rs.8 lacs received from the respondent/plaintiff/purchaser; thus the total payment received by the appellant/defendant/vendor was of Rs.7 lacs only;

(d) that the appellant/defendant/vendor was in breach of the Agreement to Sell;

(e) that the appellant/defendant/vendor prior to the institution of the suit refunded Rs.4 lacs to the respondent/plaintiff/purchaser;

(f) that the respondent/plaintiff/purchaser did not opt to sue for specific performance but sued for recovery of Rs.11 lacs only i.e. for Rs.16 lacs being double the advance/earnest money of Rs.8 lacs less Rs.1 lac cheque whereof was not encashed by the appellant/defendant/vendor and less Rs.4 lacs refunded by the appellant/defendant/vendor;

(g) the respondent/plaintiff/purchaser has not pleaded/proved any loss having been suffered on account of the breach of the Agreement to Sell by the appellant/defendant/vendor and pegged her case only on the clause in the Agreement to Sell of payment of double the amount of advance/earnest money.

4. The counsel for the respondent/plaintiff/purchaser during the hearing pegged his case on Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd. (2003) 5 SCC 705 and the judgments cited therein and further contended that since Fateh Chand supra was concerned only with Section 74 of the Indian Contract Act, 1872 and did not consider Section 73 of the said Act, hence Saw Pipes Ltd. supra is not per incurium to the said extent.

5. Section 73 of the Contract Act provides that when a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to b