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2018 Supreme(Del) 2956
IN THE HIGH COURT OF DELHI AT NEW DELHI
VALMIKI J. MEHTA, J.
Sh. Sudesh Kakkar - Appellant
Versus
Sh. Satish Mittal - Respondent
RFA No.216 of 2017
Decided On : 30-07-2018
For the Appellant :Mr. S.K. Anand, Advocate.
For the Respondents:Mr. Sameer Nandwani, Advocate with Mr. Pankaj Singh Thakur, Advocate.
Headnote:
In a suit for recovery of money paid under an agreement to sell, the court held that the defendant was entitled to forfeit only a nominal sum of Rs.50,000/- and not a sum of Rs.9,00,000/- as claimed by the defendant inasmuch as no loss was pleaded and proved to be caused to the defendant on account of the breach of the agreement to sell by the plaintiff. The court also held that the plaintiff was entitled to interest @ 12% per annum simple from the date of the agreement to sell till the filing of the suit.
Fact of the Case:
The plaintiff filed a suit for recovery of Rs.6 lacs paid under an agreement to sell. The defendant contested the suit and pleaded that it was the plaintiff who was guilty of breach of contract. The trial court dismissed the suit holding that the plaintiff had failed to prove the loss caused to him.
Finding of the Court:
The court held that the defendant was entitled to forfeit only a nominal sum of Rs.50,000/- and not a sum of Rs.9,00,000/- as claimed by the defendant inasmuch as no loss was pleaded and proved to be caused to the defendant on account of the breach of the agreement to sell by the plaintiff. The court also held that the plaintiff was entitled to interest @ 12% per annum simple from the date of the agreement to sell till the filing of the suit.
Issues: Whether the defendant was entitled to forfeit the entire amount of Rs.6 lacs paid by the plaintiff under the agreement to sell.
Ratio Decidendi: The court held that the defendant was entitled to forfeit only a nominal sum of Rs.50,000/- and not a sum of Rs.9,00,000/- as claimed by the defendant inasmuch as no loss was pleaded and proved to be caused to the defendant on account of the breach of the agreement to sell by the plaintiff. The court also held that the plaintiff was entitled to interest @ 12% per annum simple from the date of the agreement to sell till the filing of the suit. The court relied on the following principles: * Mere breach of contract by a buyer does not entitle the seller to forfeit the amount as received, unless, loss is proved to have been caused to the prospective sellers/defendants/respondents. * A huge amount of Rs.15 lacs out of the total sale consideration of Rs.79,50,000/- cannot in law be called earnest money. * By giving a stamp of ‘earnest money’ to advance price, the latter cannot become the former. * What is to be seen is the substance and not the label. * Only a nominal amount can be an earnest money, inasmuch as, the object of such a clause is to allow forfeiture of that amount to a nominal extent as held in the case of Fateh Chand (supra).
Final Decision: The appeal was allowed. The appellant/plaintiff was granted a money decree against the respondent/defendant for a sum of Rs.5.50 lacs along with interest @ 12% per annum pendente lite and future till realization of the decretal amount. Parties were left to bear their own costs.
VALMIKI J. MEHTA, J.
1. This Regular First Appeal under Section 96 of the Code of Civil Procedure, 1908 (CPC) is filed by the plaintiff in the suit impugning the Judgment of the Trial Court dated 28.11.2016 by which trial court has dismissed the suit for recovery of money filed by the appellant/plaintiff/proposed buyer against the respondent/defendant/proposed seller. A money decree of Rs.6,46,500/- was prayed by the appellant/plaintiff on the ground that the amount of Rs.6 lacs was paid under the subject Agreement to Sell and this should be returned along with interest totaling to the amount of Rs.6,46,500/-.
2. I need not narrate the facts in detail because admittedly with respect to property no. D/E-53, Sector-3, DSIIDC Industrial Park, Bawana, Delhi-39 on 17.12.2011 parties entered into an Agreement to Sell for a total sale consideration of Rs.72.51 lacs and out of this total amount, a sum of Rs.6 lacs has admittedly been received by the respondent/defendant from the appellant/plaintiff. Pleading that it was not the appellant/plaintiff, but it was the respondent/defendant who was guilty of breach of contract, the subject suit was filed for recovery by pleading the breach that necessary infrastructure and facilities to be made by the respondent/defendant on the suit property were not built.
3. Respondent/defendant has contested the suit and pleaded that it was the appellant/plaintiff who was guilty of breach of contract because he had no moneys to complete the sale transaction. It was also pleaded by the respondent/defendant that the appellant/plaintiff had no moneys to complete the transaction and due to adverse market conditions of fall in the property price and since the appellant/plaintiff who had to sell the property further could not do so, hence the appellant/plaintiff failed to complete the sale transaction.
4. After pleadings were complete the trial court framed the sole issue with respect to entitlement of the appellant/plaintiff to the suit amount. Parties led evidence and these aspects are recorded in paras 6 and 7 of the impugned judgment and these paras read as under:-
“6. That, to prove the case, the plaintiff examined himself as PW 1 and Sh. Parima Berma as PW 2. The plaintiff has relied up on the document:
Sr. No.
Document
Exhibit
1.
Copy of Legal Notice
Ex.PW1/1
2.
Copy of Legal Notice dt. 31.03.2014
Ex.PW1/2
7. That, in order to disprove the case of the plaintiff, the defendant has examined himself as DW1 and relied upon the following documents:
Sr. No.
Documents
Exhibit
1.
Copy of reply to the legal notice already Ex.PW1/2 (mentioned as Ex.DW1/A) in the affidavit
Ex.DW1/A
2.
Photocopy of receipt No.9799 dt. 22.01.09
Mark C
3.
Photographs of CD of the boundary wall alongwith CD
Ex.DW1/D (colly)
5. Counsel for the appellant/plaintiff has argued before this Court that even assuming that the appellant/plaintiff was guilty of breach of contract, since the respondent/defendant has failed to prove the loss caused to him, especially the exact amount of loss, even assuming that the appellant/plaintiff was guilty of breach of contract, yet in law the amount paid by the appellant/plaintiff to the respondent/defendant had to be refunded. Reliance is placed upon the judgment passed by this Court in the case of M.C. Luthra Vs. Ashok Kumar Khanna 2018 (248) DLT 161 and against which an SLP was filed in the Supreme Court, which was dismissed by the Supreme Court vide order dated 15.5.2018 in SLP(C) No.11702/2018. In the judgment in the case of M.C. Luthra (supra) it has been held by this Court that mere breach of contract does not entitle a seller to forfeit the moneys which come into in his hands from a buyer of the property, and that a seller of an immovable property under an agreement to sell can forfeit the amount received
