Varkey Thomas v. G. Vijayendra Kurup and others

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE V.CHITAMBARESH & THE HONOURABLE MR. JUSTICE SATHISH NINAN MONDAY, THE 23RD DAY OF JANUARY 2017/3RD MAGHA, 1938 AS.No. 428 of 2000 (A) ----------------------AGAINST THE DECREE AND JUDGMENT IN OS 229/1993 of PRL.SUB COURT, KOTTAYAM DATED 22-12-1999 ## APPELLANT/PLAINTIFF ---------------------------------VARKEY THOMAS, S/O. VARKEY, RESIDING AT MANDAPATHIL HOUSE, EDAMATTOM KARA, POOVARANI VILLAGE, MEENICHIL TALUK. BY ADV. SRI.T.V.GEORGE ## RESPONDENTS/DEFENDANTS: -------------------------------------------1. G. VIJAYENDRA KURUP, S/O. GOVINDA PILLAI, JASMINE HOUSE, CHAMPAKKARA KARA, KARUKACHAL VILLAGE, CHANGANACHERRY, NOW RESIDING AT NANDAVILASOM HOUSE, NEAR HOLY CROSS HOSPITAL, KARUVATTA JUNCTION, ADDOR **(DIED)*** 2. ANITHA P KURUP, W/O. G. VIJAYENDRA KURUP, -DO- -DO3. SUDHA NAIR @ SUDHA, D/O. SAROJINI DEVI, JASMINE HOUSE, CHAMPAKARA KARA, KARUKACHAL VILLAGE, CHANGANACHERRY, NOW RESIDING AT SINDHOORAM HOUSE, EDAMON P.O., ADOOR. ADDL. 4. VIVEK (MINOR, 16 YEARS), S/O. LATE G. VIJAYENDRA KURUP REPRESENTED BY HIS MOTHER AND GUARDIAN, ANITHA P KURUP, NANDAVILASOM HOUSE, GREESHMAM, NEAR SREEMOOLAM MARKET, ADOOR ADDL. 5. VINEETH (MINOR), -DO- -DO- ## ***LEGAL HEIRS OF THE DECEASED R1 ARE IMPLEADED AS ADDITIONAL R4 AND R5 VIDE ORDER DATED 16.11.2005 IN CMP NO. 3247/2001.** R4&5 BY ADV. SRI.PHILIP T.VARGHESE BY ADV. SRI.T.P.VARGHESE THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 16-01-2017, THE COURT ON 23.01.2017 DELIVERED THE FOLLOWING: 'C.R.' V.CHITAMBARESH & SATHISH NINAN, JJ. --------------------- ## A.S.No.428 of 2000 --------------------- Dated this the 23[rd] day of January, 2017 **==> picture [146 x 16] intentionally omitted <==** ## Chitambaresh, J. The suit is one for return of the amount paid as advance pursuant to Ext.A1 agreement dated 14.9.1992 executed between the plaintiff on the one part and defendant Nos.1 to 3 on the other part. The defendants agreed thereunder to sell 5.43 acres of land with a building thereon to the plaintiff at the rate of ` 1950/- per cent and the period for performance was fixed as four months. It is not in dispute that the defendants received a sum of ` 1,10,000/- as advance at the time of execution of Ext.A1 agreement itself. The balance sale consideration was to be paid at the time of execution of the sale deed after satisfying the conditions in Ext.A1 agreement. AS.No.428/2000 2 2. The plaintiff contended that the documents of title were not handed over by the defendants and that the details of some of them were left blank in Ext.A1 agreement. The property on measurement was found to be having a lesser extent of 4.61 acres as against 5.43 acres agreed upon even though centage value was fixed. It later came to light that few others (one of them being a minor) had also right over the property which was not disclosed in Ext.A1 agreement. 3. The plaintiff thereupon repudiated the contract by Ext.A9 notice dated 23.12.1992 and has filed the suit for return of the sum of ` 1,10,000/- paid as advance. The defendants contended that they were prepared to execute the sale deed at all times and that it was the plaintiff who committed the breach. The defendants added that the sum of ` 1,10,000/- paid as advance is earnest money liable to be forfeited as per the AS.No.428/2000 3 terms of Ext.A1 agreement. The defendants pointed out that they have suffered damages on account of the breach of the contract and that the amount received has been appropriated. 4. The court below has found that it was the plaintiff who committed breach of the contract in the failure to get the sale deed executed in time after paying the balance sale consideration. The court below also found that that the defendants are not obliged to return the amount received as advance in the circumstances on the explicit terms of Ext.A1 agreement. The plaintiff has come up in appeal contending inter alia that the court below has not adverted to the provisions of Sections 73 and 74 of the Contract Act, 1872. 5. We heard Mr.T.V.George, Advocate on behalf of the appellant/plaintiff and Mr.Philip.T.Varghese, Advocate on behalf of the respondents/defendants. AS.No.428/2000 4 6. It is in evidence that one Sarojini Amma and the progeny in her thavazhi who had right over the property had not joined in the execution of Ext.A1 agreement for sale. The fact that the aforementioned persons had right in the property and had not joined in the execution of Ext.A1 agreement is well conceded. But the plea of the defendants is that Sarojini Amma has executed Ext.B2 power of attorney dated 31.12.1992 and Letha Nair has filed Ext.B3 affidavit dated 5.11.1992. The stand of the defendants is that the execution of the sale deed is possible now by virtue of Ext.B2 power of attorney and Ext.B3 affidavit purporting to show the authorisation. The fact remains that the defendants had not joined all the persons who had interest in the property in Ext.A1 agreement with the plaintiff. 7. The seller is infact bound to disclose to the buyer all material aspects about the title AS.No.428/2000 5 to the property as per Section 55(1)(a) of the Transfer of Property Act, 1882. This may perhaps be the reason as to why the defendants were obliged to hand over the title deeds to the plaintiff within one week as per Ext.A1 agreement. No documents have been produced to show that the plaintiff has acknowledged the receipt of the title deeds within the stipulated time. The plaintiff would have known the existence of title in others had the title deeds been passed on by the defendants in time. The mere fact that other title holders to the property omitted in Ext.A1 agreement have since agreed to abide by its terms does not make the contract valid. This is a reason sufficient and more for the plaintiff to repudiate the contract and seek for return of the amount paid as advance as in the instant case. 8. The following excerpt from the decision in Haryana Financial Corporation and another v. AS.No.428/2000 6 Rajesh Gupta [AIR 2010 SC 338] lends support to our conclusion: “ 19.......The appellants/Corporation failed to disclose to the respondent the material defect about the non-existence of the independent 3 'Karam' passage to the property. Therefore, the appellants/Corporation clearly acted in breach of Section 55(1)(a) and (b) of the Transfer of Property Act, 1882. The aforesaid Section provides as under: (1) The seller is bound- (a) to disclose to the buyer any material defect in the property (or in the seller's title thereto) of which the seller is, and the buyer is not aware, and which the buyer could not with ordinary care discover; (b) to produce to the buyer on his request for examination all documents of title relating to the property which are in the seller's possession or power; 20. A mere perusal of the aforesaid provision will show that it was incumbent upon the appellants/Corporation to disclose to the respondent about the non-existence of the independent passage to the Unit. AS.No.428/2000 7 It was also the duty of the appellants/Corporation to inform the respondent that the passage mentioned in the revenue record was not fit for movement of vehicles. The appellant also failed to produce to the buyer the entire documentation as required by Section 55 (1)(b) of the aforesaid Section.” (emphasis supplied) 9. The plaintiff can specifically enforce Ext.A1 agreement on default committed by the defendants in the performance of the contract as per the terms thereof. The plaintiff on the same terms would forfeit the amount paid as advance if he is at fault and the defendants are willing to perform their part of the contract. The retention of the amount paid as advance by the defendants when the plaintiff was justified in repudiating the contract amounts to unjust enrichment. Even other wise the defendants are entitled to appropriate the amount received as advance only on proof of legal injury suffered on account of breach. The amount AS.No.428/2000 8 received as advance bears a sizable proportion to the total sale consideration and cannot by any stretch of imagination be stated as earnest money. The only loss said to have been suffered by the defendants is the payment of the broker fee of ` 2,500/- and the publication effected in the Malayala Manorama daily. No independent evidence has been let in by the defendants in that regard and the claim is to be rejected applying the principle that proof of damages is a sine qua non. It transpires that the defendants have since sold the property to others under Exts.B6 to B10 sale deeds and no damages have been claimed in that regard in the written statement. 10. Mr.Justice U.L.Bhat speaking for the Bench in State of Kerala v. United Shippers and Dredgers [1982 KLT 738] explained the position in law thus: “18. That the party complaining of AS.No.428/2000 9 breach of contract and claiming compensation is entitled to succeed only on proof of “legal injury” having been suffered by him in the sense of some loss or damage having been sustained on account of such breach, is clear from S.73 and 75 of the Act. S.74 is only supplementary to S.73 of the Act and it does not make any departure from the principle behind S.73 in regard to this matter. Every case of compensation for breach of contract has to be dealt with on the basis of S.73 of the Act. In a particular case where the contract itself stipulates for payment of a sum of money on the breach of contract or contains any other stipulation for penalty, the principle additionally propounded by S.74 also will have to be applied and that is why irrespective of the amount stipulated in the contract, the party suffering from the breach is entitled only to reasonable compensation which, however, shall not exceed the amount so stipulated in the contract. Whether it be a contract which stipulates a sum of money as being payable on breach of contract or whether it contains any other penal AS.No.428/2000 10 clause, or whether it is a contract which does not contain any such clause, the party complaining of breach of contract cannot successfully claim compensation unless be makes out loss or damage referable to such breach. The best measure of reasonable compensation would of course be the extent of actual loss or damage sustained. If the extent of actual loss or damage sustained is capable of being proved that provides a safe guide for the court to determine the quantum of reasonable compensation. If quantification of loss or damage is not possible, the party who has suffered on account of the breach is not without remedy. He can still request the court to assess reasonable compensation on the materials available and award the same to him. The words in S.74 'whether or not actual damage or loss is proved to have been caused thereby' have been employed to underscore the departure deliberately made by Indian Legislature from the complicated principles of English Common Law and also to emphasise that reasonable compensation can be granted even in a case where extent of actual loss or damage is AS.No.428/2000 11 incapable of proof or not proved. That is why S.74 of the Act deliberately states that what is to be awarded is reasonable compensation. In a case where the party complaining of breach of the contract has not suffered legal injury in the sense of sustaining loss or damage, there is nothing to compensate him for; there is nothing to recompense, satisfy to make amends. Therefore, he will not be entitled to compensation. (emphasis supplied) 11. The law on compensation under Section 74 of the Contract Act, 1872 has been reiterated in Kailash Nath Associates v. Delhi Development Authority [(2015) 4 SCC 146] as follows:- “43.1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable AS.No.428/2000 12 compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the court cannot grant reasonable compensation. 43.2. Reasonable compensation will be fixed on well-known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act. 43.3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the section. 43.4. The section applies whether a person is a plaintiff or a defendant in a suit. 43.5. The sum spoken of may already be paid or be payable in future. 43.6. The expression “whether or not actual damage or loss is proved to have been caused thereby” means that where it is possible to prove actual damage or loss, such proof is not AS.No.428/2000 13 dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded. 43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application.” (emphasis supplied) The penalty of forfeiture of the amount paid as advance in Ext.A1 agreement in terms of Section 74 is subject to the reasonable compensation to be awarded under Section 73 of the Contract Act, 1872. The defendants are not liable to be compensated in the absence of proof of legal injury and therefore there cannot be a forfeiture of the amount paid as advance by the plaintiff. 12. The court below erred in holding that the plaintiff has to forfeit the amount paid as AS.No.428/2000 14 advance even in the absence of proof of damages sustained by the defendants. The court below has blindly acted on the terms of Ext.A1 agreement without reference to Sections 73 and 74 of the Contract Act, 1872. The further plea of the defendants that the plaintiff was acting at the behest of one James Koshy who only had the wherewithal is irrelevant. This is because Ext.A1 agreement itself enables the plaintiff to get the sale deed executed either in his name or in the name of his nominee. The upshot of the discussion is that the impugned judgment is to be set aside and the plaintiff granted a decree against the defendants and their assets. A decree is granted for an amount of ` 1,10,000/- which will carry interest at the rate of 6% per annum from the date of plaint till realisation. A charge decree in terms of Section 55(6)(b) of the Transfer of Property Act, 1882 is not granted since there is no AS.No.428/2000 15 prayer in the plaint in that regard. The Appeal Suit is allowed. No costs. Sd/V.CHITAMBARESH, JUDGE Sd/SATHISH NINAN, JUDGE nj/20.01.2017 //TRUE COPY// P.S. TO JUDGE.