9911796707
TMI Blog1963 (1) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... e land and the building to Seth Fateh Chand-hereinafter called 'the defendant'. It was recited in the agreement that the plaintiff agreed to sell the building together with 'pattern' rights appertaining to the land admeasuring 2433 ' sq. yards for Rs. 1,12,500/-, and that Rs. 1,000/- wire paid to him as earnest money at the time of the execution of the agreement. The conditions of the agreement were : "(1) I, the executant, shall deliver the actual possession, i. e. complete vacant possession of kothi (bungalow) to the vendee on March 30, 1949, and the vendee shall have to give another cheque for Rs. 24,000/- to me, out of the sale price. (2) Then the vendee shall have to get the sale (deed) registered by the 1st of June, 1949. If, on account of any reason, the vendee fails to get the said sale-deed registered by June, 1949, then this sum of Rs. 25,000/- (twenty-five thousand) mentioned above shall be deemed to be forfeited and the agreement cancelled. Moreover, the vendee shall have to deliver back the complete vacant possession of the kothi (bungalow) to me, the executant. if due to certain reason, any delay takes place on my part in the registration of the sale-deed, by 1st Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 11,250/-" being compensation for loss suffered by him and directed that the plaintiff do get from the defendant compensation for use and occupation at the rate of Rs. 265/- per mensem. The defendant has appealed to this Court with certificate under Art. 133(1)(a) of the Constitution. The first question which falls to be determined in this appeal is as to who committed breach of the contract. The plaintiff's case as disclosed in his pleading and evidence was that he had agreed to sell to the defendant the leasehold rights in the land and building thereon purchased by him from Murli Manoharjoshi by sale-deed dated April 21, 1947, that at the time of execution of the agreement the defendant had inspected the sale deed and the lease executed by the Improvement Trust dated January 30, 1947 and the sketch plan annexed to the lease, that the plaintiff had handed over to the defendant a copy of that plan and had put the defendant in possession of the property agreed to be sold, but the defendant despite repeated requests failed and neglected to pay the balance remaining due by him and to obtain the sale deed in his favour. The defendant's case on the other hand was that the plaintiff h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defendant that lie knew that the southern boundary was irregular and that the plaintiff was not in possession of the area agreed to be sold under the agreement. Why then did the defendant not insist that the terms pleaded by him be incorporated in the agreement ? We find no rational answer to that question ; and none has been furnished. The story of the defendant that he agreed to purchase the land according to 'the measurement and boundaries' in the Improvement Trust Plan without even seeing that plan, is impossible of acceptance. It is common ground that according to this plan the land demised was rectangular in shape admeasuring 140' x 160' though the conveyance was in respect of 2433 sq. yards only. Manifestly if the land conveyed to the predecessor-ininterest of the plaintiff was a perfect rectangle the length of the boundaries must be inaccurate, for the area of a rectangular plot of land 140' x 160' would be 248 sq. yards and 8 sq. feet and not 2433 sq. yards. The plaintiff had purchased from his predecessor-ininterest land admeasuring 2433 sq. yards and by the express recital in the agreement the plaintiff agreed to sell that area to the defendant. At the request of the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment on the land included in the sale. It was clearly understood at the time of bargain that vacant possession of the entire area under sale will be given by your client. My client was anxious to put a wall on the side of Shri Murli Manohar " joshi and when he was actually starting the work this difficulty of garage and latrine came in. Your client was approached x x x." One thing is noticeable in this letter : according to the defendant, there was a sketch-plan attached to the agreement of sale, and that it was known to the parties at the time of the agreement that a part of the land agreed to be sold had been encroached upon before the agreement by Murli Manoharjoshi. If there had been an "understanding" as suggested by the defendant and if the plaintiff had, in spite of demands made in that behalf by the defendant., failed to carry out the agreement or understanding, we would have expected this version to be set up in the earliest communication and not reserved to be set up as a reply to the plaintiff's assertion that the defendant had never complained about any defect in the title of the plaintiff. According to the written agreement the area agreed to be conveyed was 2433 sq. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 1,000/- which were expressly named and paid as earnest money. He has, however, contended that the covenant which gave to the plaintiff the right to forfeit Rs. 24,000/- out of the amount paid by the defendant was stipulation in the nature of penalty, and the plaintiff can retain that amount or part thereof only if he establishes that in consequence of the breach by the defendant, he suffered loss, and in the view of the Court the amount or part thereof is reasonable compensation for that loss. We agree with the Attorney- General that the amount of Rs. 24,000/- was not of the nature of earnest money. The agreement expressly provided for payment of Rs. 1,000/- as earnest money, and that amount was paid by the defendant. The amount of Rs. 24,000/was to be paid when vacant possession of the land and building was delivered, and it was expressly referred to as "out of the, sale price." If this amount was also to be regarded as earnest money, there was no reason why the parties would not have so named it in the agreement of sale. We are unable to agree with the High Court that this amount was paid as Security for due performance of the contract. No such case appears to have been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case not concerned to decide whether a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by s. 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of tile case. jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according, to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of "actual loss or damages"; does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to be paid and not an amount already paid prior to the entering into of the contract. The section further provides that a party complaining of a breach is entitled to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or the penalty stipulated for. Therefore, the section clearly contemplates that the party aggrieved has to receive from the party 'in default some amount or something in the nature of a penalty : it clearly rules out the possibility of the amount which has already been received or the penalty which has already been provided for." In Natesa Aiyar v. Appavu Padeyschi (1913) I.L.R. 38 Mad. 178, the Madras High Court seems to have held that s. 74 applies where a sum is named as penalty to be paid in future in case of breach, and not to cases where a sum is already paid and by a covenant in the contract it is liable to forfeiture. In these cases the High Courts appear to have concentrated upon the words "to be paid in case of such breach" in the first condition in s. 74 and did not consider the import of the expression "the contract contains any other stipulation by way of penalty", which is the second cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no evidence that any loss was suffered by the plaintiff in consequence of the default by the defendant save as to the loss suffered by him by being kept out of possession of the property. There is no evidence that the property had depreciated in value since the date of the contract; nor wag there evidence that any other special damage had resulted. The contract provided for forfeiture of Rs. 25,000/- consisting of Rs. 1000/-paid as earnest money and Rs. 24,000/- paid as part of the purchase price. The defendant has conceded that the plaintiff was entitled to forfeit the amount of Rs. 1,000/- which was paid as earnest money. We cannot however agree with the High Court that 10 per cent of the price may be regarded as reasonable compensation in relation to the value of the contract as a whole, as that in our opinion is assessed on arbitrary assumption. The plaintiff failed to prove the loss suffered by him in consequence of the breach of the contract committed by the defendant, and we are unable to find any principle on which compensation equal to ten percent of the agreed price could be awarded to the plaintiff. The plaintiff has been allowed Rs. 1,000/-which was the earnest m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he plaintiff by being kept out of possession, and on that footing awarded mesne profits at the rate of Rs. 265/-per mensem prior to the date of the suit and thereafter. The plaintiff is undoubtedly entitled to mesne profits from the defendant and 'mesne profits' as defined in s. 2 (12) of the Code of Civil Procedure are profits which the person in wrongful possession of property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but do not include profits due to improvements made by the person in wrongful possession. The normal measure of mesne profits is therefore the value of the user of land to the person in wrongful possession. The assessment made by the High Court of compensation at the rate of five per cent of what they regarded as the fair value of the property is based not on the value of the user, but on an estimated return on the value of the property, cannot be sustained. The Attorney- General contended that the premises were governed by the Delhi & Ajmer-Merwara Rent Control Act XIX of 1947 and nothing more than the 'standard rent' of the property assessed under that Act could be awarded to the plaintiff a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
