PRAVEEN TALWAR Vs. NARESH KUMAR MITTAL & ORS

JUDGEMENT

(1.) This Regular First Appeal under Section 96 of the Code of Civil Procedure, 1908 (CPC) is filed by the defendant no. 3 in the suit impugning the Judgment of the trial court dated 28.09.2006 by which the trial court has decreed the suit filed by the respondent no. 1/plaintiff against the appellant/defendant no. 3 for recovery of double the amount of earnest money paid by the respondent no.1/plaintiff to the appellant/defendant no. 3 under the Agreement to Sell dated 16.05.1997.

(2.) The facts and issues need not be narrated in detail, noting that there was admittedly an Agreement to Sell dated 16.05.1997 whereby the appellant/defendant no. 3 agreed to sell to the respondent no.1/plaintiff the subject/suit property being Flat No. B-41, Lawyers' Co-operative Group Housing Society, Manu Apartments, Mayur Vihar Phase-1, Delhi-110091. The total sale consideration was fixed at Rs. 30,25,000/-, out of which the respondent no.1/plaintiff paid a sum of Rs. 2,00,000/- to the appellant/defendant no. 3. Pleading that it was the appellant/defendant no. 3 who was guilty of breach of contract and that the respondent no.1/plaintiff always ready and willing to perform his part of the contract including by making the balance payment of Rs. 28,25,000/, the subject suit was filed for seeking double the amount of earnest money as is provided in the last clause of the Receipt-cum-Agreement dated 16.05.1997, and which reads as under:-

(3.) Learned counsel for the appellant/defendant no. 3 has argued that the mere fact and assuming that the appellant/defendant no. 3 was guilty of breach of contract, that in itself would not entitle the respondent no. 1/plaintiff to double the amount of earnest money, inasmuch as the law is that damages fixed of a sum of Rs. 2,00,000/- i.e. the amount of Rs. 2,00,000/- over and above the price paid of Rs. 2,00,000/-, are liquidated damages falling under Section 74 of the Indian Contract Act, 1872, and that under Section 74 of the Contract Act there cannot be a claim for liquidated damages in case the nature of contract is such that damages can otherwise be assessed and the same are thereafter proved. It is argued that in case of breach of an agreement to sell, specific amount of damages caused can always be proved by the buyer by showing the higher price of the property on the date of the breach, and the difference in the contract price with the higher price on the date of breach would be the specific amount of damages which can be awarded in case the seller is found guilty of breach of contract, but in the present case, the respondent no. 1/plaintiff has failed to prove the specific amount of damage caused and hence the respondent no. 1/plaintiff is not entitled to damages for an amount of Rs. 2,00,000/- merely because a contractual clause provides so. Reliance in support of the argument urged on behalf of the appellant/defendant no. 3 is placed upon the judgment delivered by this Court in the case of Ram Mehar v. Murari Lal, 2011 183 DLT 769 which is argued to be on all fours with the facts and issues in the present case. Reliance is also placed upon the judgment passed by this Court in the case of M.C. Luthra v. Ashok Kumar Khanna, 2018 248 DLT 161, which in detail lays down the ratio that there cannot be a claim of damages unless and until damages are pleaded to have been caused and proved in accordance with law during trial. The facts in the case of M.C. Luthra (supra) were that a seller wanted to forfeit the earnest money, a position which is exactly opposite to the facts of the present case, wherein the seller is not forfeiting the money by applying the principles of liquidated damages under Section 74 of the Contract Act, but the buyer is seeking double the amount of earnest money paid as liquidated damages. An SLP filed against the judgment in the case of M.C. Luthra (surpa) has been dismissed by the Hon'ble Supreme Court vide Order dated 15.05.2018 in SLP (C) 11702/2018.