TMI Blog1963 (1) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... years from the date of decree) together with interest at the rate of six percent on the amount accruing due month after month. The decree passed by the High Court will therefore be modified. It is ordered that the plaintiff is entitled to retain out of ₹ 25,000/- only ₹ 1,000/received by him as earnest money, and that he is entitled to compensation at the rate of ₹ 140/- per mensem and interest on that sum at the rate of six percent as it accrues due month after month from June 1, 1949, till the date of delivery of possession, subject to the restriction prescribed by O,20 r. 12 (i) (c) of the Code of Civil Procedure. Subject to these this appeal will be dismissed. - Civil Appeal No. 287 of 1960 - - - Dated:- 15-1-1963 - SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR, P.B. WANCHOO, K.N. GUPTA, K.C. DAS SHAH, J.C., JJ. For the Appellant : M. L. Bagai, S. K. Mehta and K. L. Mehta For the Respondent Mohan Behari Lal, JUDGMENT The Judgment of the Court was delivered by SHAH, J.-By a registered deed of lease dated May 19, 1927, which was renewed on January 30, 1947, the Delhi Improvement Trust granted leasehold rights for 90 years to one Dr. M. M.Joshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement was rescinded because the defendant had committed default in performing the agreement and the sum of Rs. 25,000/- paid by the defendant stood forfeited, the plaintiff in an action filed in the Court of the Subordinate judge, Delhi, claimed a decree for possession of the land and building described in the plaint and a decree for Rs. 6,5001 as compensation for use and occupation of the building from March 25, 1949, to January 24, 1950, and for an order directing enquiry as to compensation for use and occupation of the land and building from the date of the institution of the suit until delivery of possession to the plaintiff. The defendant resisted the claim contending inter alia that the plaintiff having committed breach of the contract could not forfeit the amount of Rs. 25,000/received by him nor claim any compensation. The trial judge held that the plaintiff bad failed to put the defendant in possession of the land agreed to be sold and could not therefore retain Rs. 25,000/received by him under the contract. He accordingly directed that on the plaintiff depositing Rs. 25,000/less Rs. 1,400/- (being the amount of mesne profits prior to the date of the suit) the defenda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he site in the light of the plan lie discovered that there was a "shortage on the southern side opposite to Rohtak Road",that thereupon lie approached the plaintiff and repeatedly called upon him to put him in possession of the land as shown in the plan and to get the boundary wall built in his presence but the plaintiff neglected to do so. We have been taken through the relevant evidence by counsel and we agree with the conclusion of the High Court that the defendant and not the plaintiff committed breach of the contract. The defendant s case is founded primarily on two pleas (i)that the plaintiff offered to sell land not according to the description in the written agreement, but according to the plan appended to the Improvement Trust lease, and, that he--the defendant-accepted that offer, and (ii)The plaintiff had undertaken to have the southern boundary demarcated and a boundary wall built thereon, If the case of the defendant be true, it is a singular circumstance that those covenants are not found incorporated in the written agreement nor are they referred to in any document prior to the date fixed for completion of the sale. The defendant was put-in possession on March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions in that behalf. His story that he had orally called upon the plaintiff repeatedly to put him in possession of the land as shown in the Improvement Trust Plan cannot be believed. The defendant s case that a part of the land agreed to be conveyed was in the possession of Murli Manohar Joshi was set up for the first time by the defendant in his letter dated June 17, 1949. On June 1, 1949, the defendant informed the plaintiff by a telegram that the latter was responsible for damages as he had failed to complete the contract. The plaintiff by a telegram replied that he was ready and willing to perform his part of the contract and called upon the defendant to obtain a sale deed. The defendant then addressed a letter on June 9, 1949, to the plaintiff informing him that the latter had to get the document executed and registered after giving clear title by June 1, 1949. To that letter the plaintiff replied that the defendant had inspected the title-deeds before he agreed to purchase the property and had satisfied himself regarding the plaintiff s title thereto and that the defendant had never raised any complaint about any defect in the title of the plaintiff. The defendant s Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract relating to forfeiture of Rs. 25,000/- paid by him in the event of failure to carry out the terms of the contract were never intended to be acted upon and were incorporated in the, agreement at the instance of the writer who wrote the deed. This plea was never raised in the written statement and the writer of the deed was not questioned about it. The defendant is manifestly seeking to add oral terms to the written agreement which have not been referred to in the Correspondence at the earliest opportunity. We therefore agree with the High Court that the plaintiff out his part of the contract to put the defendant in possession of the land agreed to be sold, and was willing to execute the sale-deed, but the defendant failed to pay the balance of the price, and otherwise to show his willingness to obtain a conveyance. The claim made by the plaintiff to forfeit the sum of Rs. 25,000/- received by him from the defendant must next be considered. This sum of Rs. 25,000/- consist of two items- Rs.1,000/- received on March 21, 1949 and referred to in the agreement as earnest money and Rs. 24,000/- agreed to be paid by the defendant to plaintiff as "out of the sale price" against del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her 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 named or, as the case maybe, the penalty stipulated for." The section is clearly an attempt to eliminate the somewhat elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine preestimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: a stipulation in a contract in terrors is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty. The second clause of the contract provides that if for any reason the vender fails to get the sale-deed registered by the date stipulated, the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for the assumption made by some of the High Courts in India, that s. 74 applies only to cases where the aggrieved party is seeking to receive some amount on breach of contract and not to cases where upon breach of contract an amount received under the contract is sought to be forfeited. In our judgment the expression "the contract contains any other stipulation by way of penalty" comprehensively applies to every covenant involving a penalty whether it is for payment on breach of contract of money or delivery of property in future, or for forfeiture of right to money or other property already delivered. Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon courts by s. 74. In all cases, therefore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the court has " jurisdiction to award such sum only as it considers reasonable, but not exceeding the amount specified in the contract as liable to forfeiture. We may briefly refer to certain illustrative cases decided by the High Courts in India which have expressed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that the expression "contract contains any other stipulation by way of penalty" is limited to cases of stipulation in the nature of an agreement to pay money or deliver property on breach and does not comprehend covenants under which amounts paid or property delivered under the contract which by the terms of the contract expressly or by clear implication are liable to be forfeited. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties predetermined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrieved party claims relief as a plaintiff. The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for forfeiture of any property by way of penalty, the court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The jurisdiction of the court, is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. Use of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch he has got a decree and therefore the fact that the plaintiff was out of possession cannot be taken into account in determining damages for this purpose. The decree passed by the High Court awarding Rs. 11,250/- as damages to the plaintiff must therefore be set aside. The other question which remains to be determined relates to the amount of mesne profits which the plaintiff is entitled to receive from the defendant who kept the plaintiff out of the property after the bargain had fallen through. It is common ground that the defendant is liable for retaining possession to pay compensation from June 1, 1949 till the date of the suit and thereafter under O. 20, r. 12 (c) C. P. Code till the date on which the possession was delivered. The trial Court assessed compensation at the rate of Rs. 140/- per mensem. The High Court awarded compensation at the rate of Rs. 265/-per mensem. In arriving at this rate the High Court adopted a highly artificial method. The High Court observed that even though-the agreement for sale of the property was for a consideration of Rs. 1,12,500/the plaintiff had purchased the property in 1947 for Rs. 63,000/- and that at the date of the suit that amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute was sold, the plaintiff received rent from that tenant at the rate of Rs. 80/- per mensem, and to the vendor of the plaintiff at the rate of Rs. 106/per mensem. But this is not evidence of standard rent within the meaning of the Delhi and Ajmer- Merwara Rent Control Act, XIX of 1947. The Subordinate judge awarded mesne profits at the rate of Rs. 140/- per mensem and unless it is shown by the defendant that was excessive we would not be justified in interfering with the amount awarded by the Subordinate judge. A slight modification, however, needs to be made. The plaintiff is not only entitled to mesne profits at the monthly rate fixed by the Trial Court, but is also entitled to interest on such profits vide s. 2(12) of the Code of Civil Procedure. We, therefore, direct that the mesne profits be computed at the rate of Rs. 140/per mensem from June 1, 1949 till the date on which possession was delivered to the plaintiff (such period not exceeding three years from the date of decree) together with interest at the rate of six percent on the amount accruing due month after month. The decree passed by the High Court will therefore be modified. It is ordered that the plaintiff is en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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