IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE & THE HONOURABLE MR. JUSTICE P.SOMARAJAN
THURSDAY, THE 19TH DAY OF JULY 2018 / 28TH ASHADHA, 1940
AS.No. 818 of 1999
AGAINST THE DECREE AND JUDGMENT DATED 5.7.1999 IN OS.NO.40/1996 OF SUB COURT, PAYYANNUR
APPELLANT/PLAINTIFF:
KOTTILE VALAPPIL ABDUL JABBAR S/O.KUNHAMMED HAJI, AGED 32 YEARS, BUSINESS RESIDING AT CHERUKUNNU AMSOM DESOM, KANNUR.
BY ADVS.SRI.M.RAMESH CHANDER SRI.M.VIJAYAKUMAR
RESPONDENT/DEFENDANT:
MULLANTAKATH AMZA S/O.PATHUMMA, AGED 55 YEARS, BUSINESS, RESIDING AT KUNHIMANGALAM AMSOM DESOM, KANNUR DISTRICT.
BY ADV. SRI.T.V.JAYAKUMAR NAMBOODIRI
THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 19-07-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
## **A.M.Shaffique & P. Somarajan, JJ.**
**----------------------------------------------------**
## **A.S. No.818 of 1999**
**---------------------------------------------------Dated this the 19[th] day of July, 2018**
## **JUDGMENT**
## **P. Somarajan, J.**
This appeal is against the decree and judgment dated 05.07.1999 in O.S.No.40 of 1996 of Sub Court, Payyannur by the plaintiff. The suit is filed by the plaintiff for getting back the advance amount alleged to have been paid under Exhibit A1 contract for sale to the defendant for the purchase of the property covered by that contract. At the time of the contract, an amount of Rs.1,00,000/- was advanced out of the sale consideration, but the contract could not be performed in time and according to the plaintiff, it was due to the default committed by the defendant and hence filed the suit for return of the advance amount.
2. The plaintiff's claim is disputed and denied by the defendant. It was contended by the defendant that he came to the native place on two times so as to execute the document and he had also executed a power of attorney in favour of his son-in-law so as to
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enable him to execute the document in his absence. It was also contended that within the time the plaintiff never came up to execute the document and as such he is entitled to forfeit the advance amount as he has suffered damages on account of non performance of the contract for sale. It was also contended that he was forced to avail loan to purchase two properties under Exhibits B2 and B3 documents. It was actually intended to be purchased by utilizing the sale consideration that may be obtained from the plaintiff. Due to the non performance of the contract he had availed loan on high interest and thereby sustained damages. It was also submitted that he came to the native place for executing the document by spending an amount of Rs.30,000/-.
3. The lower court on consideration of pleading and evidence and after hearing both the parties dismissed the suit by its decree and judgment dated 05.07.1999 mainly on the ground that it is the plaintiff who committed breach of contract and hence the defendant is at liberty to forfeit the advance amount, against which this appeal is preferred.
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4. Heard the learned counsel appearing for the petitioner as
well as the learned counsel for the respondent.
5. Going by the impugned judgment it is clear that the lower court has dismissed the suit mainly on two grounds, finding that there is failure on the part of the plaintiff to perform his part of contract as per Exhibit A1 contract for sale and that as per the terms and conditions of Exhibit A1 contract for sale, the defendant can forfeit the advance amount received as he had sustained damages due to the non performance of the contract for sale.
6. When there is a contract between the parties quantifying the damages, it can be forfeited when there is such a clause in the contract. But, when there is no quantification of damages, the parties are governed by Section 73 of the Contract Act and in such a situation only the loss occasioned and actual damages suffered by the defendant due to the non performance of the contract by the other alone can be forfeited. In other words, there should be evidence to
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show the extent of damages suffered or extent of loss occasioned due to non performance of the contract for sale. Absolutely, no evidence was adduced by the defendant either to show the actual damages sustained and no document also produced in that behalf except Exhibits B2 and B3 documents. Exhibits B2 and B3 documents would show that the properties thereunder were purchased shortly after Exhibit A1 agreement. In fact, there is nothing to show that the properties covered by Exhibit B2 and B3 documents were intended to be purchased by utilizing the sale consideration from the plaintiff. Exhibit A1 agreement was for a period of six months. That means, time available to the plaintiff as well as the defendant to perform their part of contract under Exhibit A1 contract for sale is a long period of six months as agreed. The properties covered by Exhibits B2 and B3 documents were purchased on 26.06.1995 and 24.08.1995, within the six months period agreed under Exhibit A1. This would show that it will not have any say with respect to the non performance of the contract under Exhibit A1 and the damages, if any, suffered on account of non performance of the contract for sale. As discussed earlier, there is absolutely no evidence to show the
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actual damages suffered by the defendant. Since there is no quantification of damages in the agreement between the parties, the parties are governed by Section 73 of the Contract Act. The legal position is well settled in the decision rendered by a Division Bench of this court in **Micheal v. Sebastian and others (2017 (4) KHC 52**
## **(DB))** as follows:
_“Measure of damages in the case of breach of contract, a stipulation by way of penalty is governed by Section 74 of the Indian Contract Act and reasonable compensation not exceeding the penalty stipulated for is permissible and a guess work on the reasonableness having regard to all the circumstances of the case is also permissible. But the legal position would be different when the sum stipulated reflects a genuine pre-estimate of damages by mutual agreement which is binding on the parties irrespective of whether or not actual damage or loss is proved to have been caused thereby. Application of Section 73 would come into play only when there is no penalty stipulated for or no genuine pre-estimate of damages (liquidated damages) was arrived at by mutual agreement in the contract. Section 73 imposes on the party complaining of breach to prove the actual damages or loss caused to him thereby, including loss_
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_which would naturally arise in the usual course of things from such breach. So, Section 73 demands proof regarding the loss or damage sustained by the breach of the other party._
**==> picture [63 x 3] intentionally omitted <==**
_In this case there is no quantification or liquidation of damages in anticipation in the contract by any of the parties stipulating any sum as damages. On the other hand, the terms and conditions of the contract would show that there is only a forfeiture clause agreeing to forfeit the entire advance amount by way of damages and the same cannot be substituted in the place of quantification of damages. A mere clause agreeing to forfeit the entire advance amount alone is not sufficient to bring the matter within the purview of Section 74 of the Contract Act. There should be an un-qualified consensus ad idem in quantifying damages in anticipation by the act of parties in the contract for sale, otherwise the person who claims the benefit of forfeiture clause should prove the actual damage or loss sustained by him on account of the breach of other party. The present case would hence, fall under Section 73 of the Contract Act.”_
Earlier, a Division Bench of this Court in **State of Kerala v. United**
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**Shippers & Dredgers (1982 KLT 738)** has differentiated Section 74 apart from Section 73. Section 74 is only supplementary to Section 73 of the Act and it does not make any departure from the principle behind Section 73 regarding legal injury.
7. Yet another contention raised by the learned counsel for the respondent is that he came to India from Malaysia for the sole purpose of executing the sale deed in performance of the contract entered into by the parties. To prove the said contention, the passport was produced. Going by the passport, it is clear that he had came to India during the relevant period. But there is no satisfactory evidence to show that he came to India for the sole purpose of executing the said document. Even if it is admitted that he came to India for that purpose alone then also they will have to show and establish the actual amount expended for that purpose. No kind of guess work can be applied in calculating the actual damages sustained by the parties when there is document to show the actual extent of damages. No receipt or ticket or any other document was produced to show the actual expenditure. It was also submitted by the learned counsel for
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the respondent that due to his absence in Malaysia wherein he is conducting business he sustained loss and damages. It is now well settled that under Sections 73 of the Contract Act only direct damages which has direct cause alone can be awarded. Unless there is a direct cause, there is no scope for bringing the same within the purview of either Section 73 of the Contract Act.
8. The plaintiff is granted a decree for realization of the plaint amount which comes to Rs.1,11,150/- with interest at 6% per annum to the principal sum of Rupees one lakh from the date of suit till the date of realization with cost of suit as well as the cost of appeal from the defendant and charged upon his assets.
The appeal is allowed accordingly.
**sd/A.M. Shaffique Judge**
**sd/P. Somarajan Judge**
ahz/
