BADHAVA SINGH Vs. CHARAN SINGH

JUDGEMENT

(1.) THIS is a first appeal by the defendants Badhava Singh and Suhava Singh in a suit for damages for breach of contract for sale of land. 2. On 25th July, 1949, the defendants had entered into an agreement with the plaintiffs Charan Singh and Chanan Singh by which the former agreed to sell to the latter 2 squares of land Nos. 1and 7, measuring 50 bighas in chak 53 G. V. , Tehsil Anoopgarh for a sum of Rs. 16,000/- and the veendes paid a sum of Rs. 200/- by way of earnest money on the same date. The sale was to be completed on or before the 15th of December, 1949, when the balance of the purchase money was to be paid by the vendees. It was also agreed between the part is that they would share the cost of registration, stamp paper and certain other necessary charges half and half A further stipulation was that if the defendant-vendors failed to complete the sale, they would be liable to refund the earnest money and in addition to pay a sum of Rs. 4000/-as damages for breach of contract, and it was similarly provided that if the vendees failed to complete the sale, they would be liable to forfeiture of this earnest money and to pay a further sum of Rs. 2000/- as damages for breach of contract. Some ten days before the final date for the completion of the sale, the defendants sold the land in question to Sohan Singh and others and executed a sale-deed in their favour on the 5th December, 1949. As the plaintiffs had come to know of the sale by the defendants in favour of the third party, they sent a telegraphic protest to the defendants and also made an application before the Registrar asking for postponement of the registration of the sale-deed on the very day, that is, 5th December, 1949, but the Registrar refused to the accede to the request of the vendees, and the document was registered. The plaintiffs, therefore, instituted the suit out of which the present appeal has arisen, on 6th December, 1949, claiming the refund of Rs. 2000/- in lieu of the earnest money and the stipulated sum of Rs. 4000/- as damages. The defendants admitted having executed the agreement Ex. P-l dated 25th July, 1949, but resisted the suit on two grounds; firstly, that the contract for sale had been broken by the plaintiffs inasmuch as they had refused to pay half the share of the expenses which were required for the completion of the sale and for obtaining the permission of the authorities concerned to the sale which was rendered necessary on account of the circumstance that the defendants were Sikh Jats and the plaintiffs Seni Jats, and a sale from the one to the other required permission of competent authority before it could be validly effected. In the second place, the defendants contended that the damages asked for by the plaintiffs were in the nature of a penalty and, were, therefore, illegal. The trial court decreed the plaintiffs suit for a sum of Rs. 6000/ -. Its findings are (1) that the defendants and not the plaintiffs were responsible for the breach of the contract for sale, (2) that no permission was necessary for the completion of the sale as non was required under any law and (3) that the sum of Rs. 4000/- named in Ex. P-l as damages was in no way excessive and was in fact a reasonable compensation to which the plaintiffs were entitled in the circumstances of this case. In this connection, the trial court also came to the conclusion that the defendants had broken the contract as they had re-sold the land in dispute for Rs. 6000/- in excess of the price of Rs. 16,000/- stipulated between them and the plaintiffs The defendants have now come up in appeal. 3. Learned counsel for the defendants did not contest before us the finding of the trial court that no permission was necessary for the completion of the sale. We shall, there fore, say nothing about this point. The points on which he attacked the decision of the court below are two in number. In the first place, he contended that the defendants were not responsible for the infringement of the contract and the plaintiffs were at fault in this regard. The case of the defendants originally was that the plaintiffs had refused to pay half of the expenses of registration, stamp paper and certain other incidental charge, and in spite of repeated demands, they finally declined to on the 4th December. 1949. As the defendants were in urgent need of money, they were reduced to the necessity of selling the suit land to Sohan Singh and others, and, therefore they were not at all to blame in the matter. THIS case was sought to be proved by the evidence of D. Ws. Pal Singh and Bhap Singh apart from the Statements of the defendants themselves at the trial. What the defendants actually sought to prove at the trial, however, was that when Badhava Singh want to the plaintiffs to obtain their half share of the expenses, the plaintiffs expressed their under utter inability to furnish the requisite money and stated that they would not purchase the land as they had no means to do so. Badhava Singh further said that owing to the helplessness of the plaintiffs, he had gone to the length of agreeing that he would forego the damages which the plaintiffs would have to pay for breach of the contract and that he would be satisfied with the forfeiture of the earnest money only. THIS defendant would have us believe also that the plaintiffs had agreed to this and that they had consented to come to Raisinghnagar on the 5th December. 1949, to execute the necessary document embodying the aforesaid terms and that the plaintiffs come to Raisinghnagar but refused to execute the deed and so the deal with Sohan Singh and others was effected. Not only this, the defendant further stated that the sale in favour of Sohan Singh and others was agreed to by the defendants at the instance of the plaintiffs. D. Ws. Palsingh and Bhapsingh more or less support the story. We entirely concur in the finding of the court below that the version put forward b / the defendants at the trial is so absurd that it cannot be believed. The facts to which these witnesses have sworn during the course of the trial did not find any place in the written statement at all and are completely contrary to the course of normal human conduct. If the plaintiffs were unable to find the money for the completion of the sale, we are quite certain that they would not have dared to sent any protest whatsoever, much less by a telegram, to the defendants, or file an application before that Registrar praying for postponement of they registration. It is quite clear from the evidence of the Registrar Shri Baney Singh that the plaintiffs had submitted their application to him before the document had been registered we cannot also forget in this connection that the re-sale made by the defendants was actually made 10 days before the date fixed between the parties for the completion of the contract. In face of these broad and incontrovertible facts, we do not feel the necessity of discussing the evidence of the plaintiffs at any length which has been led to show that although the plaintiffs asked the defendants for completion of the sale from time to time, the latter were putting it off and eventually made a re-sale in favour of Sohan Singh and others. We have, therefore, no hesitation in coming to the conclusion that the defendants were responsible for the breach of contract and not the plaintiffs. 4. We are then left with the question whether the plaintiffs are entitled to the sum of Rs. 4000/- by way of damages, which was awarded to them by the trial court It was strenuously contended before us that the said sum was in the nature of the penalty and the lower court fell into serious error in awarding it to the plaintiffs. It was further argued that the trial court did not frame a proper issue on this point and wrongly put the burden thereof on the defendants instad of on the plaintiffs. Reliance was placed on Bhai Panna Singh vs. Bhai Arjun Singh (l), a decision of their Lordships of the Privy Council. It was argued that the imperfect Wording and wrong allocation of the burden of proof of this issue misled the defendants and has resulted in grave injustice to them inasmuch as they have had no opportunity of rebutting the evidence led by the plaintiffs to show that the consideration for the re-sale Was not the ostensible one of Rs. 19,000/- but Rs. 6,000/- in excess there of that is, Rs. 22,000/ -. 5. We propose first to deal with the precise effect of sec. 74 of the Contract Act in this connection. Sec. 7 of the Contract Act in so for as it is material for our present purposes reads as fallows : " When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, "the party complaining of the breach is entitled, whether 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 may be, the penalty stipulated for. " 6. The first case to which we were referred for interpreting the aforesaid section was Lachhman Das vs. Bhoja Ram

(2.) IN that case the parties to the contract for sale of certain land had provided that in the even of a breach, thereof, an identical sum would be paid as damages by either party failing to perform his part of the contract. It was held that in the absence of any equitable ground, the stipulated sum should be decreed as damages. The same view was adopted in Lekh Singh vs. Dwarka Nath (3), although in this case only the vendor was, under the agreement, fastened with liability to pay a sum of Rs. 2,000/- in the event of a breach on his part. It was held that where the parties have mentioned a fixed sum in case of breach, the court should award the stipulated sum as damages unless there is something to show that amount is exorbitant or unconscionable. 7. Then came the decision of their Lord-ships of the Privy Council in Bhai Panna Singh vs. Bhai Arjun Singh (1) There the vendors had agreed to sell a building to the vendees for Rs 1,05,000/-,and in the event of a breach the party responsible for the breach was to pay a sum of Rs. 10,000/- to the other party. The vendors eventually sold the property to another purchaser at Rs. 1,04,000/- as the original vendees had broken the contract. Their Lordship held as to the amount of damages that the effect of sec. 74 is to disentitle the plaintiffs to recover,simpliciter,the sum fixed in the contract whether penalty or liquidated damages. The plaintiffs must prove the damages they have suffered. " It was further held that the only evidence of loss was the loss of Rs. 1000/- suffered by the vendors on re-sale. 8. We will next refer to Mahadeoprasad vs. Siemens Ltd.