IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR. JUSTICE S.S.SATHEESACHANDRAN WEDNESDAY, THE 28TH JULY 2010 / 6TH SRAVANA 1932 AS.No. 547 of 1995() -------------------- OS.87/1989 OF PRL.SUB COURT, KOZHIKODE .................... APPELLANT/PLAINTIFF: ---------------------------------- J.D.T.ISLAM ORPHANAGE COMMITTEE, REPRESENTED BY ITS SECRETARY, K.P.HASSAN HAJI, HAVING ITS OFFICE AT MARIKKUNNU, CHEVAYUR AMSOM AND DESOM, KOZHIKODE TALUK. BY SRI.M.C.SEN, SENIOR ADVOCATE, SMT.PARVATHY MENON, SRI.M.P.SREEKRISHNAN SMT.SHAHNA KARTHIKEYAN RESPONDENTS/DEFENDANTS: ------------------------------------------- 1. FATHIMA GAFFOOR, D/O.M.M.ABDUL HAMEED, WIFE OF LATE DR.P.K.ABDUL GAFOOR. 2. DR.FAZAL GAFOOR, S/O. LATE DR.P.K.ABDUL GAFOOR. 3. MRS. FABIN NISSAR, D/O.P.K.ABDUL GAFOOR. 4. MRS.FOUSIA AMEEN, D/O.P.K.ABDUL GAFOOR. RESPONDENTS ARE RESIDING AT MANAPPAT, KASABA VILLAGE, KALATHINKUNNU AMSOM AND DESOM, KOZHIKODE. SRI.P.N.K.ACHAN, SENIOR ADVOCATE & ADV. SRI.C.M.ANDREWS FOR R1 TO R4. THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 28/07/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Thottathil B.Radhakrishnan & S.S.Satheesachandran, JJ. = = = = = = = = = = = = = = = = = = = = = = = = A.S.No.547 of 1995-D = = = = = = = = = = = = = = = = = = = = = = = = Dated this the 28th day of July, 2010. Judgment Thottathil B.Radhakrishnan, J. 1.The plaintiff in a suit for recovery of advance paid under a failed contract for sale of immovable property is the appellant. 2.The subject matter of the contract for sale was a running hospital which was essentially undergoing the process of being wound up in the wake of the unexpected demise of the doctor who was running it. The defendants are his heirs. They had agreed to sell the property to the plaintiff for Rs.70 lakhs. Ext.A2, the contract for sale is dated 21.10.1985. The contract failed, the reason for which we will discuss hereafter. Ultimately, as against the agreed price of Rs.70 lakhs, the defendants had to sell off the hospital to yet AS547/95 -: 2 :- another purchaser as per Ext.B4 for Rs.40 lakhs on 28.3.1989. If we were to go by the difference between the agreed consideration under Ext.A2 and the price under Ext.B4, it is Rs.30 lakhs. 3.According to the plaintiff, the defendants committed breach in not honouring the agreement for sale. The defendants pleaded that the plaintiff did not perform its part, but committed breach and resultantly, the entire advance was adjusted by the defendants towards loss sustained by them, owing to the plaintiff's breach of Ext.A2, the contract for sale. 4.After hearing the oral evidence of the plaintiff's representative and three witnesses on the side of the defendants, including the second defendant and with the documentary evidence on record, the court below upheld the plea of the defendants that there was breach of contract by the plaintiff and the defendants were, therefore, entitled to forfeiture of the amount in deposit. AS547/95 -: 3 :- 5.In support of this appeal by the plaintiff, its learned senior counsel argued that the sequences of transactions will show that the time was never treated as of the essence of the contract for sale (Ext.A2) and that at no point of time could the plaintiff be treated as having committed breach. On the basis of the materials on record, it is further argued that there is no shred of legal evidence to fix the liability on the plaintiff to pay the defendants any amount by way of compensation in terms of law. 6.Per contra, the learned counsel appearing for the defendants supported the decree and argued that the sequence of events will show that in spite of repeated demands by the defendants, the plaintiff was at fault in performing its obligations under the contract for sale and continued to be so even until the issuance of Ext.B4 by which the defendants called upon the plaintiff to pay up the entire balance consideration at least by AS547/95 -: 4 :- 21.3.1987, the last among the dates fixed as per Ext.A2(a) endorsement on Ext.A2 contract for sale. He accordingly argued that there is no reason to disturb the finding of the court below that the defendants were entitled to forfeit the entire amount of Rs.4.25 lakhs paid by the plaintiff as advance. 7.Ext.A2 contract for sale is dated 21.10.1985. The agreed consideration was Rs.70 lakhs and an amount of Rs.25,000/- was received as advance on that day. As per Exts.A4 and A5 dated 22.2.1986 and 28.2.1986, further receipt of a total sum of Rs.3 lakhs is evidenced. It is admitted by the defendants that on 21.5.1986, a further amount of Rs.1 lakh was received. Therefore, including the amount of Rs.25,000/- received as advance while entering into Ext.A2 contract for sale, a total amount of Rs.4,25,000/- was received as part of consideration. There is no term in Ext.A2 by which the defendants could have treated that amount as security that could be forfeited. AS547/95 -: 5 :- 8.Be that as it may, in terms of Section 73 of the Contract Act, pointedly illustrated by Illustration (d) thereunder, when a contract to buy is broken by the vendee, the amount that he may have to pay the vendor by way of compensation would be the excess, if any, out of the contract price over the price which the vendor can obtain for the property at the time of the breach of the promise. Therefore, the point of time at which the breach, if any, is committed is relevant to decide as to whether any compensation for loss or damage is payable by the plaintiff to the defendants on account of the alleged breach of contract. Hence, the question would be as to whether the plaintiff committed breach of contract and if so, when? 9.Adverting to the evidence, we find that following Ext.A2 on 21.10.1985 and receipt of further amounts under the contract as stated above, Ext.A2 (a) endorsement was made on Ext.A2 on the date on which the amount of Rs.1 lakh was received. That AS547/95 -: 6 :- endorsement showed that the plaintiff was to pay Rs.20 lakhs out of the sale consideration on 20.9.1986 and the remaining part of the consideration on 21.3.1987. Ext.B3 is issued on 28.10.1986, i.e., after the amount of Rs.20 lakhs became due under Ext.A2(a) endorsement. In Ext.B3, the defendants criticized the plaintiff of having committed breach and said that if they intend to perform, the amounts should be paid within 15 days therefrom. Following that, we find that Ext.A7 is issued on 18.12.1986 by the defendants to the plaintiff stating that they are prepared to accept the whole of the consideration if paid at least on 21.3.1987, the date fixed as per Ext.A2(a) endorsement. When that was not paid, the defendants took it that the plaintiff committed breach and proceeded to make sale under alternate arrangements. It was accordingly that Ext.B4 ultimately came through on 28.3.1989. It appears that as a fore-runner to that sale, the defendants had issued an advertisement in the newspapers calling for offers. Having seen that, the AS547/95 -: 7 :- plaintiff issued Ext.A9 dated 2.12.1988 intimating the defendants that they are not entitled to sell property to any other person. To this, defendants sent Ext.A10 reply dated 20.12.1988 stating, inter alia, that the amount of Rs.4.25 lakhs has been adjusted, appropriated towards the damages sustained. 10.In Chellamma v. Ramachandran Pillai, 1963 KLT 73, this Court noted that other than penalty, the compensation that could be paid is only by way of restitution which means return or restoration of the benefit received under the contract. As already noted, in Ext.A2, there is no forfeiture clause. Obviously, therefore, the claim of the defendants for any compensation has necessarily to be on the basis of damage sustained and proved for the purpose of quantification. 11.With the sequence of events as noted above, on facts, we have also to take into consideration the ground realities which led the defendants to AS547/95 -: 8 :- retract from the sale. The defendants were facing different actions by banking institutions. They were facing different creditors. They also had to retrench workers and also doctors and other experts by paying compensation. The material evidence tends to indicate that there was a decline in the price of land at the relevant point of time. But even if we take Ext.A7 as the relevant document by which the plaintiff was given time, till 21.3.1987, to pay the whole of the balance amount or say, 15 days thereafter, we have to find as to what could be the loss or damage, if any, caused by the plaintiff to the defendants by their breach of the contract on, or any day immediately after, 21.3.1987. On record, we have the materials that evidence payment of retrenchment compensation, the depositions disclosing the need to pay off the banking institutions and the ultimate document Ext.B4 showing that nearly two years after the alleged breach, the property was sold for Rs.40 lakhs as against Rs.70 lakhs agreed under Ext.A2. But, we AS547/95 -: 9 :- have necessarily to caution ourselves against using Ext.B4 as a material document. The compensation can be determined only with reference to 21.3.1987 or a date very near to that, though we are not impressed by the submission on behalf of the plaintiff that it had not committed breach of Ext.A2 contract for sale. While it is trite that except in cases where there is a specific agreement to that effect, time is not to be treated as of the essence of a contract for sale of immovable property, Ext.A2(a) endorsement on Ext.A2 tends to suggest that there was a clear consensus ad idem between the parties that the sale cannot be dragged on indefinitely. This is clearly evidenced by the requirement that the plaintiff pays the defendants an amount of Rs.20 lakhs on 20.9.1986 and the remaining amount on 21.3.1987. These dates have been fixed, having regard to the defendants' emergent need for money to settle off their debts. Therefore, we cannot but affirm the finding of the court below that the plaintiff had committed breach of the contract for AS547/95 -: 10 :- sale. 12.On the question as to how much would be reasonable compensation payable by the plaintiff to the defendants in terms of Section 73 of the Contract Act, it has to be gauged as the compensation for such loss or damage which could be treated as one that naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it, however that, no compensation could be given for any remote or indirect loss or damage sustained by reason of the breach. Ext.A2 contract for sale itself refers to the requirement to retrench the employees. The amounts to be paid following Ext.A2 (a) endorsement were needed for the immediate requirement to pay off the creditors. Taking the overall facts and circumstances into consideration, we are of the view that an amount of Rs.1 lakh would be reasonable compensation that the defendants would be entitled to adjust from AS547/95 -: 11 :- out of the amount of Rs.4,25,000/- paid by the plaintiff as advance under Ext.A2 contract for sale. Resultantly, the defendants are liable to return to the plaintiff an amount of Rs.3.25 lakhs. In the result, the decree of the court below is reversed and the plaintiff-appellant is granted a decree for recovery of Rs.3.25 lakhs with interest thereon at 6% per annum payable from 21.2.1989, the date of institution of the suit till recovery. The parties are directed to suffer their respective costs. Sd/- Thottathil B.Radhakrishnan, Judge. Sd/- S.S.Satheesachandran, Judge. Sha/0208 AS547/95 -: 12 :- Thottathil B.Radhakrishnan & S.S.Satheesachandran, JJ. = = = = = = = = = = = = = = = = = A.S.547 of 1995-D = = = = = = = = = = = = = = = = = Judgment 28th July, 2010.