Case: Fateh Chand Vs. Balkishan Das

plaintiff failed to prove the loss suffered by him in consequence of the breach of the contract committed by the defendant and we are unable to find any principle on which compensation equal to ten percent of the agreed price could be awarded to the plaintiff. The plaintiff has been allowed Rs.1,000/- which was the earnest money as part of the damages. Besides he had use of the remaining sum of Rs.24,000/- and we can rightly presume that he must have been deriving advantage from that amount throughout this period. In the absence therefore of any proof of damage arising from the breach of the contract, we are of opinion that the amount of Rs.1,000/- (earnest money) which has been forfeited, and the advantage that the plaintiff must have derived from the possession of the remaining sum of Rs. 24,000/- during all this period would be sufficient compensation to him. It may be added that the Plaintiff has separately claimed mesne profits for being kept out of possession for which he has got a decree and therefore the fact that the plaintiff was out of possession cannot be taken into account in determining damages for this purpose. The decree passed by the High Court awarding Rs. 11,250/- as damages to the plaintiff must therefore be set aside. 19. The other question which remains to be determined relates to the amount of mesne profits which the plaintiff is entitled to receive from the defendant who kept the plaintiff out of the property after the bargain had fallen through. It is common ground that the defendant is liable for retaining possession to pay compensation from June 1, 1949 till the date of the suit and thereafter under O. 20 R. 12(c) C.P. Code till the date on which possession was delivered. The trial Court assessed compensation at the rate of Rs.140/- per mensem. The High Court awarded compensation at the rate of Rs. 265/- per mensem. In arriving at this rate the High Court adopted a highly artificial method. The High Court observed that even though the agreement for sale of the property was for a consideration of Rs. 1,12,500/- the plaintiff had purchased the property in 1947 for Rs.63,000/- and that at the date of the suit that amount could be regarded as the value for which the property could be sold at any time. The High Court then thought that the proper rate of compensation for use and occupation of the house by the defendant when he refused to give up possession after failing to complete the contract should have some relation to the value of the property and not to the price agreed as sale price between the parties, and computing damages at the rate of five per cent on the value of the property they held that Rs.3,150/was the annual loss suffered by the plaintiff by being kept out of possession, and on that footing awarded mesne profits at the rate of Rs.265/- per mensem prior to the date of the suit and thereafter. The plaintiff is undoubtedly entitled to mesne profits from the defendant, and mesne profits as defined in S.2(12) of the Code of Civil Procedure are profits which the person in wrongful possession of property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but do not include profits due to improvements made by the person in wrongful possession. The normal measure of mesne profits is therefore the value of the user of land to the person in wrongful possession. 20. The assessment made by the High Court of compensation at the rate of five per cent of what they regarded as the fair value of the property is based not on the value of the user, but on an estimated return on the value of the property cannot be sustained. The Attorney-General contended that the premises were governed by the Delhi and Ajmer-Merwara Rent Control Act XIX of 1941 and nothing more than the standard rent of the property assessed under that Act could be awarded to the plaintiff as damages. Normally a person in wrongful possession of immovable property has to pay compensation computed on thee basis of profits he actually received or with ordinary diligence might have received. It is not necessary to consider in the present case whether mesne profits at a rate exceeding the rate of standard rent of the house may be awarded, for there is no evidence as to what the standard rent of the house was.From the evidence on the record it appears that a tenant was in occupation for a long time before 1947 of the house in dispute in this appeal and another house for an aggregate rent of Rs.180/- per mensem, and that after the house in dispute was sold, the plaintiff received rent from that tenant at the rate of Rs.80/- per mensem, and the vendor of the plaintiff at the rate of Rs.106/- per mensem. But this is not evidence of standard rent within the meaning of Delhi and Ajmer-Merwara Rent control Act, XIX of 1947. 21. The Subordinate Judge awarded mesne profits at the rate of Rs. 140/- per mensem and unless it is shown by the defendant that that was excessive we would not be justified in interfering with the amount awarded by the Subordinate Judge. A slight modification, however, needs to be made. The plaintiff is not only entitled to mesne profits at the monthly rate fixed by the Trial Court, but is also entitled to interest on such profits: vide S. 2 (12) of the Code of Civil Procedure. We, therefore, direct that the mesne profits be computed at the rate of Rs. 140/- per mensem from June 1, 1949 till the date on which possession was delivered to the plaintiff (such period not exceeding three years from the date of decree) together with interest at the rate of six per cent on the amount accruing due month after month. 22.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]we agree with the conclusion of the High Court that the defendant and not the plaintiff committed breach of the contractWe agree with the Attorney-General that the amount of Rs.24,000/- was not of the nature of earnest money. The agreement expressly provided for payment of Rs.1,000/- as earnest money, and that amount was paid by the defendant. The amount of Rs.24,000/- was to be paid when vacant possession of the land and building was delivered, and it was expressly referred to as out of the sale price. If this amount was also to be regarded as earnest money, there was no reason why the parties would not have so named it in the agreement of sale. We are unable to agree with the High Court that this amount was paid as security for due performance of the contract. No such case appears to have been made out in the plaint and the finding of the High Court on that point is based on no evidence. It cannot be assumed that because there is a stipulation for forfeiture the amount paid must bear the character of a deposit for due performance of the contractSection 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty. We are in the present case not concerned to decide whether a contract containing a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by S. 74 reasonable compensation not exceeding the penalty stipulated for.In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated, but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of actual loss or damage; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breachThe expression if the contract contains any other stipulation by way of penalty widens the operation of the section so as to make it applicable to all stipulations by way of penalty, whether the stipulation is to pay an amount of money, or is of another character, as, for example, providing for forfeiture of money already paid. There is nothing in the expression which implies that the stipulation must be one for rendering something after the contract is broken. There is no ground for holding that the expression contract contains any other stipulation by way of penalty is limited to cases of stipulation in the nature of an agreement to pay money or deliver property on breach and does not comprehend covenants under which amounts paid or property delivered under the contract, which by the terms of the contract expressly or by clear implication are liable to be forfeitedThere is no evidence that any loss was suffered by the plaintiff in consequence of the default by the defendant, save as to the loss suffered by him by being kept out of possession of the property. There is no evidence that the property had depreciated in value since the date of the contract provided; nor was there evidence that any other special damage had resulted. The contract provided for forfeiture of Rs.25,000/consisting of Rs.1,000/- paid as earnest money and Rs.24,000/- paid as part of the purchase price. The defendant has conceded that the plaintiff was entitled to forfeit the amount of Rs.1,000/- which was paid as earnest money. We cannot however agree with the High Court 13 per cent of the price may be regarded as that reasonable compensation in relation to the value of the contract as a whole, as that in our opinion is assessed on an arbitrary assumption. The plaintiff failed to prove the loss suffered by him in consequence of the breach of the contract committed by the defendant and we are unable to find any principle on which compensation equal to ten percent of the agreed price could be awarded to the plaintiff. The plaintiff has been allowed Rs.1,000/- which was the earnest money as part of the damages. Besides he had use of the remaining sum of Rs.24,000/- and we can rightly presume that he must have been deriving advantage from that amount throughout this period. In the absence therefore of any proof of damage arising from the breach of the contract, we are of opinion that the amount of Rs.1,000/- (earnest money) which has been forfeited, and the advantage that the plaintiff must have derived from the possession of the remaining sum of Rs. 24,000/- during all this period would be sufficient compensation to him. It may be added that the Plaintiff has separately claimed mesne profits for being kept out of possession for which he has got a decree and therefore the fact that the plaintiff was out of possession cannot be taken into account in determining damages for this purpose. The decree passed by the High Court awarding Rs. 11,250/- as damages to the plaintiff must therefore be set asideIt is not necessary to consider in the present case whether mesne profits at a rate exceeding the rate of standard rent of the house may be awarded, for there is no evidence as to what the standard rent of the house was.From the evidence on the record it appears that a tenant was in occupation for a long time before 1947 of the house in dispute in this appeal and another house for an aggregate rent of Rs.180/- per mensem, and that after the house in dispute was sold, the plaintiff received rent from that tenant at the rate of Rs.80/- per mensem, and the vendor of the plaintiff at the rate of Rs.106/- per mensem. But this is not evidence of standard rent within the meaning of Delhi and Ajmer-Merwara Rent control Act, XIX of 1947The Subordinate Judge awarded mesne profits at the rate of Rs. 140/- per mensem and unless it is shown by the defendant that that was excessive we would not be justified in interfering with the amount awarded by the Subordinate Judge. A slight modification, however, needs to be made. The plaintiff is not only entitled to mesne profits at the monthly rate fixed by the Trial Court, but is also entitled to interest on such profits: vide S. 2 (12) of the Code of Civil Procedure. We, therefore, direct that the mesne profits be computed at the rate of Rs. 140/- per mensem from June 1, 1949 till the date on which possession was delivered to the plaintiff (such period not exceeding three years from the date of decree) together with interest at the rate of six per cent on the amount accruing due month after month.