RAMESHWARLAL Vs. BALA BUX TAMRA

JUDGEMENT

(1.) THIS is a second appeal by the defendants Rameshwarlal and Gopi Kishan in a suit for damages.

(2.) ON 16-3-1962 the defendants had entered into an agreement with the plaintiff Balabux by which the former agreed to sell to the latter plots Nos. 1 to 12 measu-ring 3158 sq. yds. and a bungalow situated in Ajmer. The bungalow was agreed to be sold for Rs. 13,000/- and the plots at the rate of Rs. 11. 75 per sq. yds. The plaintiff paid Rs. 5,000/- as earnest money. The agreement was executed by the defendants on their own behalf and on behalf of their brother's widow Mst. Ajodhia Bai, who was at Indore. The sale was to be completed within one month when the remaining purchase money was to be paid by the vendee. It was agreed between the parties that if the vendors failed to complete the sale they would be liable to refund the earnest money and further pay a sum of Rs. 5,000/- as damages for the breach of contract. It was also agreed that in case the vendee failed to complete the sale, he will be liable to forfeiture of the earnest money amounting to Rs. 5,000/ -. ON 14-12-62 the plaintiff instituted the present suit for recovery of earnest money amounting to Rs. 5,000/- and the stipulated damages amounting to Rs. 5,000/-, total Rs. 10,000/- on the ground that the defendants had broken the contract. It was alleged that the defendants failed to get the signature of their brother's widow on the agreement Ex. 1; that they failed to execute the sale-deed within the stipulated period of one month; and that during this period the plaintiff received notices from two persons in whose favour certain portions of the land sought to be sold to the plaintiff had been earlier agreed to be sold to others by the defendants. The defendants admitted having executed the agreement Ex. 1 dt. 16-3-62. They resisted the suit mainly on two grounds - (1) that time was not the essence of the contract and it was the plaintiff who backed out from the contract and (2) that the claim for damages amounting to Rs. 5,000/- over and above the refund of earnest money was not liable to be decreed in view of the provisions of sec. 74 of the contract Act. The trial judge held that the defendants and not the plaintiff were responsible for the breach of contract. It has been further held that the plaintiff was entitled to recover the amount of earnest money as well as the sum of Rs. 5,000/- named in Ex. 1 as damages. The su:t was accordingly decreed for Rs. 10,000/ -. ON appeal, the defendant-appellants did not challenge the trial court's finding that the defendants were responsible for the breach of contract. The only point that was urged before the appellate court was that the plaintiff was not entitled to recover the amount of Rs. 5,000/- claimed as damages. The learned District Judge placing reliance on the principles laid down in the case of Badhava Singh vs. Charan Singh (l) affirmed the decree passed by the trial court and dismissed the appeal, The reasons which persuaded the learned District Judge to dismiss the appeal are contained in paras 3 and 9 of the judgment. They run as follows - "8. Applying the above principles to the present case, it is to be noted that it has been stipulated in agreement Ex. 1 that either party in the event of breach would be liable to pay a sum of Rs. 5,000/- to the other by way of damages. In the case of breach by the vendors, they were held liable to refund the earnest money and were to pay a sum of Rs. 5,000/- as damages to the vendee and in case of breach on the part of the vendee the amount of Rs. 5,000/- as earnest money with the vendors was to be forfeited. The question to be considered is whether the amount of Rs. 5,000/- as damages for the breach by the vendors would be termed as "reasonable compensation. " The plaintiff's version is that he wanted to construct a cinema house on the piece of land covered by Ex. 1 and that he had to incur heavy loss because of the defendants' failure to have completed the contract as he was forced to dismantle his own bungalow for the construction of a cinema house called Ajanta Cinema. The bungalow, which was dismantled by the plaintiff for the construction of a cinema-house had also been purchased by the plaintiff from these very defendants some-time back for a sum of Rs. 32,000/ -. Defendant Rameshwarlal does not deny the fact of the sale of the bungalow to the plaintiff. He has also admitted that the said bungalow has been got dismantled by the plaintiff and a cinema house has been constructed. The cost of dismantling alone was not less then Rs. 4,000/ -. Besides, the plaintiff had to keep ready money either at his house or at the bank to the tune of Rs. 50,000/- to meet the cost of the land and the house covered by Ex. 1. To that extent, the plaintiff was deprived to utilise the money in his, business. 9. The estimate of damages amounting to Rs. 5,000/- seems very much a reasonable compensation for the breach and cannot be characterised as a sum fixed in terrorem. If the plaintiff had committed the breach, he would have lost Rs. 5,000/- which he had advanced as earnest money. It was likewise provided that if the defendants committed the breach they would as well be liable to pay damages amounting to Rs. 5,000/ -. The plaintiff had to demolish his own residential bungalow, which he had purchased from the very defendants at a cost of Rs. 32,000/- on account of the breach of agreement Ex. 1 the suggestion on behalf of the defendants that the plaintiff purchased that bungalow for construction of the cinema house does not seem to be true. Had it been so, there would have hardly been any necessity for the plaintiff to again enter into the deal contained in Ex. 1, by which the plaintiff purported to purchase the piece of land for the construction of a cinema house with necessary facilities of car parking, cycle stand etc. These facilities could not be provided on the site where the plaintiff has constructed the cinema after demolishing his bungalow. The plaintiff had also to keep block amount equivalent to the purchase money covered by Ex. 1 The trial court's finding that the amount of Rs. 5,000/- claimed by the plaintiff as damages is quite reasonable and is not in terrorem seems to be justified and does not call for any interference by this Court. " Having lost in the appellate court the defendants have preferred this second appeal.

(3.) IN my opinion in the circumstances of the case the plaintiff is entitled to the loss suffered by him in consequence of the breach of contract. Doubtless the plaintiff is entitled to recover the earnest money amounting to Rs. 5,000/- as also the interest thereon, as the defendants must have derived benefit on that amount. Looking to the prevailing market rate of interest during the period 1962-65, the interest 12% per annum appears to be reasonable. The amount of Rs. 5,000/- was paid to the defendants as earnest money on 16-3 62. The trial court decreed the suit on 30th July, 1965. The amount of interest @ 12% on the sum of Rs. 5,000/- from 16. 3-62 to 30-7-65 comes to Rs. 2,025/ -. The plaintiff has in his statement that he kept with him ready cash to the tune of Rs. 40,000/- to Rs. 50,000/- to meet the sale price of the property. It is further deposed that he was willing to purchase the suit property upto the time he received telegrams informing him of prior agreements to sale of certain portions of the suit property. The telegrams were received by the plaintiff on 14-4 62. He is, therefore, entitled to a month's interest on a sum of Rs. 40,000/-, which comes to Rs. 400/- @ 12% per annum. The plaintiff has further deposed in his statement that he had incurred an expenditure of Rs. 4,000/- in dismantling his bungalow. IN my opinion he cannot get this amount or part thereof for the simple reason that no allegation to that effect was made in the plaint. That apart this expenditure cannot be regarded to have been incurred in consequence of the breach of contract.