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2025 Supreme(Online)(KAR) 2357
HIGH COURT OF KARNATAKA
MR JUSTICE V KAMESWAR RAO, MR JUSTICE T.M.NADAF, JJ
M/S SUBRAMANYA CONSTRUCTION AND – Appellant
Versus
M/S B K G ENTERPRISES LLP – Respondent
COMAP 548 of 2024
The court upheld the trial Court's decision to award 18% interest on the refund of advance sale consideration due to breach of contract, affirming the independence of interest and liquidated damages stipulations.
Headnote:(A) Contract Law - Interest on Refund - The trial Court decreed the suit, directing the defendant to refund Rs.1,00,00,000/- with 18% interest from the date of suit till realization, and liquidated damages of Rs.10,00,000/- were awarded. The claim for additional interest was rejected. (Paras 1, 5, 6)
(B) Breach of Contract - The court found that the defendant breached the agreement, justifying the award of interest at 18% per annum. The stipulations regarding interest and liquidated damages were independent. (Paras 5, 7)
Facts of the case:
The appellant challenged the trial Court's decree regarding interest and liquidated damages in a contract dispute over the sale of property. The trial Court found the defendant liable for refunding the advance amount with interest due to breach of contract.
Findings of Court:
The trial Court's decision to grant interest at 18% per annum was upheld, as the defendant failed to refund the advance amount during the litigation.
Issues: The main issue was whether the grant of 18% interest was justified given the absence of an indemnity bond.
Ratio Decidendi: The court ruled that the trial Court's award of interest was justified based on the breach of contract and the stipulations in the agreement.
Result: Appeal dismissed.
ORAL JUDGMENT
(PER: HON'BLE MR JUSTICE V KAMESWAR RAO)
The challenge in this appeal is to the judgment and decree dated 15.10.2024 in Com.OS.No.265/2020 whereby, the learned LXXXV Additional City Civil & Sessions Judge, at Bengaluru (CCH-86) (Commercial Court) has decreed the suit in favour of the respondent herein by stating as under:-
“Suit of the plaintiff is decreed in part with costs.
The defendant is directed to refund the advance sale consideration of Rs.1,00,00,000/- with interest at the rate of 18% per annum from the date of suit till realization.
The defendant shall also pay liquidated damages of Rs.10,00,000/- to the plaintiff.
The claim of the plaintiff for additional interest at 2% per month on the advance amount of Rs.1,00,00,000/- from 28.12.2016 till realization is rejected.
Draw decree accordingly.”
2. At the out set, learned counsel for the appellant would submit that the appellant is liable to pay the respondent an amount of Rs.1,00,00,000/- as has been granted by the trial Court. His only submission is the grant of interest of 18% per annum by the trial Court from the date of suit till realization is untenable. No submissions have been made by the learned counsel for the appellant on the grant of liquidated damages of an amount of Rs.10,00,000/- to the respondent herein. Since the issue which falls for consideration is on the grant of interest at the rate of 18% per annum from the date of suit till realization on the amount of Rs.1,00,00,000/-, we have, with the consent of the counsel for the parties, heard them on the said issue.
3. The submission of learned counsel for the appellant is primarily by drawing our attention to clauses 28, III(ii) and III(xiv) which reads as under:-
“28. WHEREAS, the Purchaser has accepted the said offer made by the Vendor for the offered sale price and agreed to purchase the schedule property subject to the execution of Indemnity Bond by the Vendor undertaking the refund of the advance amount paid during along with cost and expenditure with interest @ 18% p.a. in case of any litigation accrues or arise after execution of this agreement.
x x x
III. ii) The vendor shall get the sale deed registered in its name from BDA within the end of December 2016 in respect of the schedule property and execute the sale deed in favour of the purchaser within 31st January, 2017, if the same is delayed, it shall pay interest at the rate of 2% per month on the advance amount of Rs.1,00,00,000/- (Rupees One Crore only) from the date of receipt of the amount to the purchaser, till execution of sale deed registered in favour of the purchaser.
x x x
III. xiv) If the vendor fails or neglects to perform his part of the contract, he shall pay a sum of Rs.10,00,000/- (Rupees Ten lakhs only) as liquidated damages along with the amount paid under this agreement to the purchaser.”
4. He contends that in terms of clause 28, the amount of 18% interest is payable in the eventuality, any indemnity bond has been executed by the appellant herein undertaking the refund of the advance amount along with cost and expenditure with interest at 18% and as no such indemnity bond was executed, the interest of 18% p.a. is not payable. That apart, it is his submission that when the agreement between the parties contemplate in the eventuality that the appellant neglects to perform his part of the contract, he shall pay an amount of Rs.10,00,000/- as liquidated damages, the grant of interest at the rate of 18% per annum is totally untenable.
5. Suffice to state the trial Court while granting interest at the rate of 18% per annum has stated as under:-
“18. Having observed that the defendant has breached the conditions of the agreement of sale as per clause 28 of the agreement the defendant is liable to refund the advance sale consideration with interest at 18% per annum. In fact the learned counsel appearing for the defendant in the course of his argument fairly conceded that the defendant is liable to refund the advance sale consideration b
