T. M. Kurian v. Amminikutty Joseph and Girija Devi

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE P.SOMARAJAN** **FRIDAY ,THE 22ND DAY OF FEBRUARY 2019 / 3RD PHALGUNA, 1940** ## **RSA.No. 39 of 2007** **AGAINST THE JUDGMENT AND DECREE IN AS 81/2003 DATED 6.12.05 of ADDITIONAL DISTRICT COURT,KOTTAYAM** **AGAINST THE JUDGMENT AND DECREE IN OS 724/1999 DATED 9.12.02 of ADDITIONAL MUNSIFF COURT ,KOTTAYAM** ## **APPELLANT/APPELLANT/PLAINTIFF:** **T.M.KURIAN, S/O.MATHEW, THATHAKATTU PEEDIKAYIL HOUSE, PAMPADY KARA, DO, VILLAGE.** **BY ADV. SRI.MATHEW SEBASTIAN** ## **RESPONDENTS/RESPONDENTS/DEFENDANTS:** **1 AMMINIKUTTY JOSEPH W/O.SABU JOSEPH, PLATHARA VEETTIL HOUSE,, PAMPADY KARA, DO. VILLAGE. 2 GIRIJA DEVI, W/O.MOHANAN UPARIKAL HOUSE, KANGAZHA KARA, PAMPADY VILLAGE.** **BY ADVS. SRI.B.S.SIVAJI -R1 SRI.LIJI.J.VADAKEDOM - R2** **THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON 22.02.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **RSA.No. 39 of 2007 2** ## **JUDGMENT** A suit for recovery of advance amount based on a contract for sale of immovable property ended in dismissal in both the trial court as well as the first appellate court. Aggrieved by the said decree and judgment, the plaintiff came up with this second appeal. 2. Ext.A1 is the contract for sale admitted by both the parties by which the parties have agreed to sell the property for a total sale consideration of Rs.11,25,000/-. An advance amount of Rs.50,000/was received at the time of execution of Ext. A1 agreement for sale. The agreement was not performed as stipulated in the contract and thereafter the plaintiff, the proposed purchaser came up with a suit for recovery of advance amount. Both the trial court and the first appellate court dismissed ## **RSA.No. 39 of 2007 3** the suit. A counter claim was also raised by the defendants for recovery of Rs.1,01,000/- as damages sustained by the defendants due to the non performance of part of the plaintiff. Both the trial court and first appellate court found that the defendant is not entitled to any damages and hence counter claim was dismissed. No appeal was preferred against the dismissal of counter claim. But in spite of dismissal of the counter claim both the trial court and the first appellate court dismissed the suit rejecting the claim of return of Rs.50,000/- given as advance amount. The question came up for consideration in the appeal are: i. Whether the trial court and the first appellate court went wrong in appreciating Sections 73 and 74 of the Contract Act in its correct perspective when there is a breach of contract ?. ii. In the absence of stipulated damages or ## **RSA.No. 39 of 2007 4** quantification of damages by the parties to the contract in anticipation what would be the provision which would come into play in so far as return of the advance amount ? 3. The legal position was very much settled by a Division Bench of this court (in which I was also member) in _**Micheal v. Sebastian and Others (2017**_ _**(4) KHC 52 (DB).**_ Unless there is a quantification of damages or pre-estimate of damages by the parties to contract in anticipation, the matter would come under the purview of Section 73 of the Contract Act. The legal position was very much settled by the decision drawn in Micheal's case. The relevant portion of the said judgment extracted below for reference: “ 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 ## **RSA.No. 39 of 2007 5** 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 intro 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 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. 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 ## **RSA.No. 39 of 2007 6** 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 unqualified 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”. Going by Ext.A1 contract for sale, it is clear that there is no pre-estimate, stipulation of any penalty or quantification of damages in anticipation by the parties. If that be so, there should be evidence to show the actual damages sustained by the opposite party due to the non performance of the part of the contract. The dismissal of counter claim which has attained finality would itself show that the defendant has ## **RSA.No. 39 of 2007 7** failed to show any legal injury or damages sustained by the alleged non-performance of contract by the plaintiff. Hence, the defendant is liable to return the advance amount and the matter would not have under the purview of Section 74 of the Contract Act but come under Section 73. As such the decree of trial court and the first appellate court in rejecting the recovery of advance amount is liable to be reversed. Both the courts below failed in appreciating and applying the legal position settled in its correct perspective in the instant case. Appeal is allowed in part. The decree and judgment of the trial court and the first appellate court are hereby set aside in so far as the first defendant is concerned. The plaintiff is granted a decree for recovery of Rs.50,000/- (Rupees fifty thousand only) with interest at 12% per annum from ## **RSA.No. 39 of 2007 8** the date of suit till today and thereafter at 6% per annum to the principal sum of Rs.50,000/- till the date of recovery from the first defendant. The suit as against the second defendant is hereby dismissed. Appeal allowed in part accordingly. No costs. Sd/- ## **P.SOMARAJAN, JUDGE** pm **// TRUE COPY // PA TO JUDGE**