VALMIKI J. MEHTA, J.

C.M. Appl. No. 19752/2018 (for exemption)

1. Exemption allowed, subject to all just exceptions.

C.M. stands disposed of.

RFA 404/2018 and C.M. Appl. No. 19751/2018 (for stay)

2. This Regular First Appeal under Section 96 of the Code of Civil Procedure, 1908 (CPC) is filed by the defendants in the suit impugning the judgment of the trial court dated 25.1.2018 by which the trial court though dismissed the suit for specific performance filed by the respondent/plaintiff with respect to the agreement to sell dated 21.10.2012 pertaining to subject land measuring 11 bighas 1 biswas, out of Khasra no. 38//2/2(4-13), 9(4-16) and 8/2(1-12) situated in Village Mitraon, Tehsil Najafgarh, New Delhi, however the trial court decreed the suit in favour of the respondent/plaintiff for recovery of Rs.20 lacs which was paid by the respondent/plaintiff to the appellants/defendants under the subject agreement to sell dated 21.10.2012. The total sale consideration for the agreement to sell was Rs.2,15,40,000/- out of which a sum of Rs.20 lacs was paid in advance as earnest money to the appellants/defendants by the respondent/plaintiff.

3. Trial court for decreeing the suit for recovery of money has considered this relevant aspect from paras 38 to 48 of the impugned judgment, and these paras read as under:-

“38. Here, the court would refer to Section 74 of the Indian Contract Act, 1872 which lays down the law with respect to compensation for breach of contract where a sum is named or where penalty has been stipulated. The provision read as under:-

74. Compensation for breach of contract where penalty stipulated for-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 name or, as the case may be, the penalty stipulated for.

39. Apparently, even if a sum or a penalty is mentioned in a contract, the party suffering breach would be entitled to receive only reasonable compensation from the opposite party. The stipulation in the agreement to sell dated 21.10.2012(Ex PW1/6) inter alia clause 5 relates to the penalty clause as under:-

5. That in case the second party violate the terms and condition of the agreement, then the First Party is also entitled to get the said amount of advance forfeited and the said transaction shall stand cancelled.

40. Since the amount of earnest money was not a token or nominal amount but a substantial amount of Rs.20,00,000/-, this stipulation is to be treated as a penalty.

41. The defendants can therefore not agitate as a right that the entire earnest money came to be forfeited to them and the plaintiff is not entitled to receive refund of the whole or any portion of the amount of Rs.20,00,000/-.

42. For the party suffering the breach of contract/seller to retain any earnest money amount upon forfeiture, such loss has to be specifically pleaded and proved.

43. The court would refer here to the decision of the Hon‘ble High Court in Bhuley Singh Vs. Khazan Singh & Ors RFA no. 422/11 dated 09.11.2011, which is not only relatable on facts but also refers to the principles laid upon by the Hon‘ble Supreme Court in Fateh Chand Vs. Balkishan Dass, (1964) 1 SCR 515.

44. The relevant extracts from the decision in Bhuley Singh (supra) are as under:-

5. In my opinion, the appeal deserves to be allowed as the appellant/plaintiff has rightly claimed a lesser relief of Rs.5,00,000/- instead of a sum of Rs.10,00,000/- as claimed in the plaint and which he is surely entitled to under Order 7(7) CPC. The Trial Court had framed a specific issue being issue no.2 as to whether plaintiff was entitled to recover Rs.5,00,000/- from the respondents/defendants paid against the re