MAYA DEVI Vs LALTA PRASAD
Bench: K.S. RADHAKRISHNAN,VIKRAMAJIT SEN
Case number: C.A. No.-002458-002458 / 2014
Diary number: 7664 / 2012
Advocates: BHASKAR Y. KULKARNI Vs
M. A. KRISHNA MOORTHY
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2458 OF 2014 [Arising out of SLP (C) No.23069 of 2012)
Maya Devi .. Appellant
Versus
Lalta Prasad .. Respondent
J U D G M E N T
K. S. RADHAKRISHNAN, J.
1. Leave granted.
2. The appellant herein filed an Objection Petition
under Order 21 Rule 58 CPC, when the decree obtained
by the respondent in Civil Suit No.407 of 2007 was
sought to be executed. Suit was filed for the recovery
of an amount of Rs.3,40,000/- with interest, which was
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sought to be realized, on the property covered by an
agreement for sale dated 3.11.2003 between the
judgment debtor and decree holder. The appellant
claimed that she became the absolute owner of the suit
property by virtue of a registered General Power of
Attorney dated 12.5.2006 and that she has been in
actual physical possession of the suit property. The
Petition was contested by the decree holder/respondent
stating that the applicant/objector had no legal right,
title or interest and that the execution of the General
Power of Attorney and its registration would not confer
any ownership right in favour of the appellant/objector.
Reliance was also placed on the judgment of this Court
in Suraj Lamp and Industries Private Limited
Through Director v. State of Haryana & Anr.
(2009) 7 SCC 363. The Executing Court vide its order
dated 23.7.2010 dismissed the Objection Petition filed
by the appellant. Aggrieved by the same, the appellant
preferred Execution First Appeal No.23 of 2010 before
the High Court of Delhi at New Delhi. The High Court
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also placed reliance on the judgment of this Court in
Suraj Lamp and Industries Private Limited (supra)
and dismissed the appeal holding that the documents
relied upon by the appellant would not confer
ownership or possession over the property in her
favour. The High Court also vide its order dated
24.1.2011 upheld the order of the Executing Court.
Aggrieved by the same, this appeal has been preferred
by the appellant.
3. Shri Rajesh Kumar, learned counsel appearing for
the appellant submitted that the ratio laid down by this
Court in Suraj Lamp and Industries Private Limited
(supra) was wrongly applied by the Executing Court as
well as the High Court. Learned counsel submitted that
in the final judgment which is reported in Suraj Lamp
and Industries Private Limited (2) Through
Director v. State of Haryana & Anr. (2012) 1 SCC
656, this Court has clarified the position that the
judgment would not affect the validity of sale
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agreements and powers of attorney executed in
genuine transactions and that the judgment would
operate only prospectively. Learned counsel also
submitted that the alleged agreement executed
between the respondent and one Prem Chand Verma
on 3.11.2003 was a collusive one, subsequently
created, to get over the registered Power of Attorney
executed on 3.6.1982 between the appellant and wife
of Prem Chand Verma, viz. Nirmal Verma. Learned
counsel also pointed out that Civil Suit No.407 of 2007
was preferred by the respondent herein against Prem
Chand Verma based on the deed of agreement dated
3.11.2003 created for the said purpose. Referring to
the above-mentioned judgment, learned counsel further
pointed out that Prem Chand Verma did not contest the
Suit and he was declared ex-parte and a decree was
passed in favour of the respondent. Learned counsel
pointed out that the decree was obtained by collusion
and practicing fraud on the Court and the Executing
Court has committed an error in rejecting the Objection
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filed by the appellant herein, so also by the High Court
by not appreciating the facts in the correct perspective.
4. Shri K. Krishna Kumar, learned counsel for the
respondent, submitted that both the Executing Court
and High Court have correctly applied the principles
laid down in Suraj Lamp and Industries Private
Limited (supra). Learned counsel pointed out that any
process which interferes with regular transfers under
deeds of conveyance properly stamped, registered and
recorded in the registers of the Registration
Department, is to be discouraged and deprecated and
the Executing Court has rightly declined to give its seal
of approval to General Power of Attorney, Agreement
for Sale, etc. dated 12.5.2006.
5. I am of the view that the Executing Court as well
as High Court have committed a grave error in not
properly appreciating the objections filed by the
Appellant. We are in this case concerned with the
question whether we must give credibility to the
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registered General Power of Attorney executed on
12.5.2006 between Nirmal Verma and the appellant or
on the alleged Agreement for Sale executed on
3.11.2003 between the respondent and Prem Chand
Verma, husband of Nirmal Verma. Further, we have to
examine the manner in which Civil Suit No.407 of 2007
was decreed without contest by Prem Chand Verma,
husband of Nirmal Verma.
6. The registered Power of Attorney was executed by
none other than the wife of Prem Chand Verma and the
appellant herein on 12.5.2006 in respect of the
property in question for a sale consideration of
Rs.70,000/-, which was received by Nirmal Verma in
cash in advance and she acknowledged the same
before the Sub-Registrar, Delhi. On the same day,
Nirmal Verma, wife of Prem Chand Verma. handed over
physical vacant possession of the land and building
situated thereon and from 12th May, 2006 onwards, the
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appellant is in possession of the above-mentioned
property.
7. We are, in this case, therefore, concerned with the
legal validity of a General Power of Attorney executed
by none other than the wife of Prem Chand Verma
against whom a decree has been obtained by the
respondent without any proper contest and the court
proceeded against him ex-parte. These facts speak for
itself. Evidently, the collusive decree was obtained by
the respondent to get over the registered Power of
Attorney executed in favour of the appellant and, it is in
this perspective, we have to understand and apply the
ratio laid down by this Court in Suraj Lamp and
Industries Private Limited (2) (supra).
8. Paragraph 27 of the judgment of this Court in
Suraj Lamp and Industries Private Limited (2)
(supra) reads as follows :
“27. We make it clear that our observations are not intended to in any way affect the
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validity of sale agreements and powers of attorney executed in genuine transactions. For example, a person may give a power of attorney to his spouse, son, daughter, brother, sister or a relative to manage his affairs or to execute a deed of conveyance. A person may enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings and in that behalf execute an agreement of sale and grant a power of attorney empowering the developer to execute agreements of sale or conveyances in regard to individual plots of land or undivided shares in the land relating to apartments in favour of prospective purchasers. In several States, the execution of such development agreements and powers of attorney are already regulated by law and subjected to specific stamp duty. Our observations regarding “SA/GPA/will transactions” are not intended to apply to such bona fide/genuine transactions.”
9. In the above judgment, it has been stated that the
observations made by the Court are not intended to in
any way affect the validity of sale agreements and
powers of attorney executed in genuine transactions. I
am of the view that the Power of Attorney executed on
12.5.2006 in favour of the Appellant by the wife of Prem
Chand Verma is a genuine transaction executed years
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before the judgment of this Court. Facts will clearly
indicate that the Agreement for Sale dated 3.11.2003
was created by none other than the husband of Nirmal
Verma, who had executed the General Power of
Attorney and possession was handed over to the
Appellant. That being the fact situation, in my view, the
Objection filed by the Appellant under Order 21 Rule 58
in execution has to be allowed. I, therefore, hold that
the Executing Court can execute the decree in Civil Suit
No.407 of 2007, but without proceeding against the
property referred to in registered Power of Attorney
dated 12.5.2006.
10. The appeal is allowed, as above, and the
impugned orders are set aside. There shall, however,
be no order as to costs.
……………………………..J. (K. S. Radhakrishnan)
New Delhi, February 19, 2014.
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 2458 OF 2014
[Arising out of SLP©No.23069 of 2012]
MAYA DEVI .…..APPELLANT
vs
LALTA PRASAD …..RESPONDENT
J U D G M E N T
VIKRAMAJIT SEN,J.
1 I have perused the judgment of my learned and
esteemed Brother Radhakrishnan, and I entirely and
respectfully agree with his conclusion that the appeal
deserves to be allowed. My learned Brother has
succinctly analysed the sterling judgment in Suraj Lamp
and Industries Private Limited vs State of Haryana (2009)
7 SCC 363, which has been rendered by a Three-Judge
Bench of this Court. I completely concur with the view
that since General Power of Attorney (GPA) in favour of
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the Appellant was executed and registered on
12.05.2006, it could not be impacted or affected by the
Suraj Lamp dicta. Furthermore, a reading of the order
of the Executing Court as well as of the High Court
makes it palpably clear that both the Courts had applied
the disqualification and illegality imposed upon GPAs by
Suraj Lamp, without keeping in mind that the operation
of that judgment was pointedly and poignantly
prospective. This question has been dealt with by my
esteemed Brother most comprehensively.
2 What strikes us as a perverse, certainly misplaced
or inconsistent approach, is that if the Appellant does
not possess any title to the property predicated on the
GPA executed in her favour by Smt. Nirmal Verma (the
wife of the Judgment Debtor Shri Prem Chand Verma),
this legal infirmity would inexorably invalidate the title
of Smt. Nirmal Verma herself, thereby denuding any
titular claim of her husband, the Judgment Debtor, and
rendering the property impervious to the subject
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execution proceedings. Additionally, there is not even a
semblance of a right in favour of the Judgment Debtor
whose wife was not even impleaded in the suit or in the
execution. The impugned judgment notes this
contention but fails to address it. The evidence of the
Decree Holder has not been filed and therefore the
judicial records were summoned from the High Court.
3 The Statement of the Respondent/Decree Holder
reads thus:-
“Ex. No. 224/2009
DHW-1: Sh.Lalta Prasad, S/o Sh. Naubat Ram, aged 58 years, R/o 1908, Gali Mata Wali, Chandni Chowk, Delhi-6.
ON S.A.
I, hereby, tender my affidavit in my evidence. The same be read as part and parcel of my statement. My affidavit is Ex. DHW-1/A(running in 2 pages) which bears my signatures at point A and B on page 1 & 2.
XXXXXX by Sh. Pradeep Chaudhary Adv. for objector.
I have passed 11th standard. The affidavit Ex. DHW-1/A was prepared in the office of my
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counsel. My counsel has explained me contents of the same to me before I signed the same. Whatever I stated to my counsel was incorporated in Ex. DHW-1/A. The Agreement with Prem Chand Verma was entered on 11.11.2003. I had seen original documents of the property at that time in possession of Prem Chand Verma. He also gave me some copies of the same.
Remaining cross-examination of the witness is deferred till 12.00 P.M.
RO&AC
BRIJESH KUMAR GARG ADJ CENTRAL-18
DELHI/ 29.01.10
DHW-1: Sh.Lalta Prasad, recalled for his further cross-examination at 12.50 P.M.
ON S.A.
XXXXXX by Sh. Pradeep Chaudhary Adv. for objector.
I have no knowledge that Smt. Maya Devi had purchased the suit property from Smt. Nirmal Verma. The documents filed by the objectors are forged and fabricated documents. I have no knowledge that Smt.
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Nirmal Verma purchased the suit property from one Sh. Rajender Kumar.
Sh. Prem Chand Verma was my friend for the last about 30 years. It is correct that Sh. Prem Chand Verma had already expired on 7.10.2008. It is wrong to suggest that Sh. Rajender Kumar was the owner of the property and he sold the property to Nirmal Verma from whom Smt. Maya Devi purchased the suit property. It is wrong to suggest that Sh. Prem Chand Verma was never the owner of the suit property. It is wrong to suggest that I have filed a false affidavit and I am deposing falsely in the court today.
RO&AC
BRIJESH KUMAR GARG
ADJ CENTRAL-18
DELHI/ 29.01.10”
It discloses that the Decree Holder has failed altogether
to disprove the title of the Appellant, and he has
maintained that the Defendant/Judgment Debtor was
the owner, which is admittedly not the actual legal
position. If the Decree Holder has been defrauded by
the Defendant/Judgment Debtor, largely because of the
former’s careless disregard to conduct a title-search, he
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must face the legal consequences; they cannot be
transferred/imposed upon a third party to its detriment.
In the wake of the Decree Holder/Plaintiff denying the
title of Smt. Nirmal Verma, the Courts below erred in
proceeding against her property.
4 Both the Courts below have preferred the view that
the Appellant, who has been in possession from the date
of the execution of the registered GPA in her favour, has
been introduced into the scene in order to defeat the
interests of the Respondent, which is a perverse
approach for reasons that shall be presently explained.
The documents purportedly in favour of the
Respondent/Decree Holder are unregistered and the
alleged payment made by him to Shri Prem Chand
Verma is in cash. Therefore, there is no justification for
favouring the view that the alleged transaction between
Shri Prem Chand Verma and the Respondent/Decree
Holder was genuinely prior in time to the execution of
the registered Power of Attorney in favour of the
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Appellant Smt. Maya Devi by Smt. Nirmal Verma, and
the former simultaneously and contemporaneously was
put into possession of the property by the latter.
5 There can be no gainsaying that when the
probative value of documents is to be assessed,
specially those dealing with the creation of any interest
in property or its transfer, of a value exceeding Rs.100/-,
obviously documents which have been duly registered
regardless of whether or not that was legally mandatory,
would score over others. A perusal of the judgment
shows that whether the sum of Rs.1,70,000/- allegedly
paid by the Plaintiff in Suit No.407 of 2007, namely, Shri
Lalta Prasad to Shri Prem Chand Verma was in cash or
through a traceable Bank transaction or through a
registered acknowledgment has not been cogitated
upon. Proof of payment by the Plaintiff to the
Defendant/husband of the previous owner of the
property has not been adjudicated upon. It is not
controverted that the Appellant Smt. Maya Devi has
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been in possession of the property in question from May,
2006. A reading of the judgment by which the Suit was
decreed for a sum of Rs.3,40,000/- does not shed any
light on the circumstances which made the Plaintiff wait
to initiate legal action till after the property was sold and
its possession delivered to the Appellant. I, therefore,
disbelieve the genuineness of the so-called “Deed of
Agreement for Earnest Money” allegedly executed
almost three years earlier on 03.11.2003. And, I would
rather discount the veracity of the document dated
3.11.2003, then looking upon the Power of Attorney and
other documents executed in favour of the Appellant
Smt. Maya Devi by Smt. Nirmal Verma as mala fide.
What is important is that it is not disputed that the title
and possession of the property which has been brought
within the sweep of the execution proceedings, was
never held in any capacity by the Defendant/Shri Prem
Chand Verma, but by his wife, Smt. Nirmal Verma. To
give even a semblance of a case to the Plaintiff Lalta
Prasad, the Deed of Agreement for Earnest Money
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should have been between the Plaintiff/Decree
Holder/Respondent and Smt. Nirmal Verma.
6 The Trial Court had framed the following issues in
Suit No.407/2007, from which subject of proceedings
emanates:
“(1) Whether the plaintiff is entitled for the suit amount? If so to what sum? OPP
(2) Whether the plaintiff is entitled for the interest? If so at what rate and for which period? OPP
(3) Relief.”
The Trial Court having accepted the payment of
Rs.1,70,000/- without insisting on any proof, did not go
into the question whether a covenant stipulating that
double the amount of earnest money would be payable
in the event the contract was not performed, is legal in
terms of the Indian Contract Act. The imposition and
the recovery of penalty on breach of a contract is legally
impermissible under the Indian Contract Act. As
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regards liquidated damages, the Court would have to
scrutinize the pleadings as well as evidence in proof
thereof, in order to determine that they are not in the
nature of a penalty, but rather as a fair pre-estimate of
what the damages are likely to arise in case of breach of
the contract. No evidence whatsoever has been led by
the Plaintiff to prove that the claim for twice the amount
of earnest money was a fair measure or pre-estimate of
damages.
7 The pronouncements of the Constitution Bench in Sir
Chunilal V. Mehta & Sons Ltd. vs Century Spinning and
Manufacturing Co. Ltd. AIR 1962 SC 1314, and later in Fateh
Chand vs Balkishan Dass AIR 1963 SC 1405, hold the field,
making it unnecessary to refer to any other precedent for an
enunciation of the law, except to appreciate the manner in
which the opinion of the Constitution Benches have been
applied to the factual matrix in later cases. With the
number and volume of precedents increasing exponentially
each year, reference to all decisions make arguments
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excruciatingly lengthy and judgments avoidably prolix. The
first important judgment of this Court on the question of
Sections 73 and 74 of the Contract Act is that of the
Constitution Bench in Chunilal V. Mehta. The two
significant issues which arose were firstly, as to what would
constitute a substantial question of law requiring the grant
by the High Court of a Certificate to appeal to this Court, and
secondly, the quantum of damages that can be awarded in
that case owing to the breach of the subject contract. It is
the second question which is relevant for the present
purposes. The admitted position was that the contract had
been wrongfully breached by the Defendant. A clause in the
compact between the parties stipulated that in these
circumstances, the Plaintiff would be entitled to receive from
the Defendant “as compensation or liquidated damages for
the loss of such appointment a sum equal to the aggregate
amount of the monthly salary of not less than Rs.6000/-
which the Firm would have been entitled to receive from the
Company, for and during the whole of the then unexpired
portion of the said period of 21 years if the said Agency of
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the Firm had not been determined.” The Plaintiff had
initially claimed a sum of Rs.50 Lakhs which was
subsequently reduced by way of amendment of the plaint to
Rs.28,26,804/-. The Constitution Bench opined that “when
parties name a sum of money to be paid as liquidated
damages they must be deemed to exclude the right to claim
an unascertained sum of money as damages. …. Again the
right to claim liquidated damages is enforceable under S. 74
of the Contract Act and where such a right is found to exist
no question of ascertaining damages really arises. Where
the parties have deliberately specified the amount of
liquidated damages there can be no presumption that they,
at the same time, intended to allow the party who has
suffered by the breach to give a go-by to the sum specified
and claim instead a sum of money which was not
ascertained or ascertainable at the date of the breach”.
This precedent prescribes that if a liquidated sum has been
mentioned in a contract to be payable on its breach, then if
damages have actually been suffered, the said liquidated
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amount would be the maximum and upper limit of damages
awardable by the Trial Court.
8 The judgment of the Constitution Bench one year later,
in Fateh Chand concerns award of damages of the
‘liquidated’ sum even though actual damages may have
been less. In that respect it is the converse of the factual
matrix that existed before the earlier Constitution Bench in
Chunilal V. Mehta. J.C. Shah, J (who authored Fateh
Chand) along with Chief Justice B.P. Sinha were members of
both Constitution Benches. Whilst the aspect of the
liquidated damages being in the nature of a penalty or in
terrorem did not arise in Chunilal V. Mehta, It did so in
Fateh Chand where the complaint was that the Plaintiff,
namely, Fateh Chand had agreed to sell an immovable
property for Rs.1,12,500/- of which Rs.1000/- had been
received/paid as earnest money. The Agreement envisaged
payment of a further sum of Rs.24,000/- and it stipulated
that if the vendee failed to get the Sale Deed registered
thereafter, then the sum received i.e. Rs.25,000/- would
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stand forfeited. Fateh Chand alleging a breach of the
Agreement, sought to forfeit the sum of Rs.25,000/- which
was found to be impermissible in law. It was in those
circumstances that the Constitution Bench opined as follows:
“10. Section 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 de- cide 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 compen- sation 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 reason- able having regard to all the circumstances of tile case. Jurisdiction of the Court to award compen- sation in case of breach of contract is unqualified except as to the maximum stipulated; but com- pensation has to be reasonable, and that im- poses upon the Court duty to award compensa- tion according to settled principles. The section undoubtedly says that the aggrieved party is en- titled to receive compensation from the party who has broken the contract whether or not ac- tual damage or loss is proved to have been
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caused by the breach. Thereby it merely dis- penses 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 breach. 11. Before turning to the question about the compensation which may be awarded to the plaintiff, it is necessary to consider whether S. 74 applies to stipulations for forfeiture of amounts deposited or paid under the contract. It was urged that the section deals in terms with the right to receive from the party who has broken the contract reasonable compensation and not the right to forfeit what has already been received by the party aggrieved. There is however no warrant for the assumption made by some of the High Courts in India, that S. 74 applies only to cases where the aggrieved party is seeking to receive some amount on breach of contract and not to cases where upon breach of contract an amount received under the contract is sought to be forfeited. In our judgment the expression "the contract contains any other stipulation by way of penalty" comprehensively applies to every covenant involving a penalty whether it is for payment on breach of contract of money or delivery of property in future, or for forfeiture of right to money or other property already delivered. Duty not to enforce the
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penalty clause but only to award reasonable compensation is statutorily imposed upon Courts by S. 74. In all cases, therefore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the Court has jurisdiction to award such sum only as it considers reasonable, but not exceeding the amount specified in the contract as liable to forfeiture.”
After reading the entire evidence that had been
recorded, the Constitution Bench found that the value of
the property had not depreciated and, therefore, no
damages could be awarded.
9 This is also the manner in which this facet of the
law has been enunciated in England, as is evident from
the following passage from Halsbury’s Laws of England
(4th edn Reissue, 1998) Vol 12(1), para 1065 which reads
as follows:-
“1065. Liquidated damages distinguished from penalties.- The parties to a contract may agree at the time of contracting that, in the event of a breach, the party in default shall pay a stipulated sum of money to the other. If this
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sum is a genuine pre-estimate of the loss which is likely to flow from the breach, then it represents the agreed damages, called ‘liquidated damages’, and it is recoverable without the necessity of proving the actual loss suffered. If, however, the stipulated sum is not a genuine pre-estimate of the loss but is in the nature of a penalty intended to secure performance of the contract, then it is not recoverable, and the plaintiff must prove what damages he can. The operation of the rule against penalties does not depend on the discretion of the court, or on improper conduct, or on circumstances of disadvantage or ascendancy, or on the general character or relationship of the parties. The rule is one of public policy and appears to be sui generis. Its absolute nature inclines the courts to invoke the jurisdiction sparingly. The burden of proving that a payment obligation is penal rests on the party who is sued on the obligation”.
10 The position that obtains in the United States,
obviously because of its Common Law origins and
adherence, is essentially identical as is evident from
these extracted paragraphs of Corpus Juris Secundum,
Volume 25A (2012):
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192- Liquidated damages are a specific sum stipulated to
and agreed upon by the parties in advance or when they
enter into a contract to be paid to compensate for injuries in
the event of a breach or nonperformance of the contract.
196-In examining whether a liquidated-damages provision is
enforceable, courts consider whether the damages
stemming from a breach are difficult or impossible to
estimate or calculate when the contract was entered and
whether the amount stipulated bears a reasonable relation
to the damages reasonably anticipated. 198-Liquidated
damages must bear a reasonable relationship to actual
damages, and a liquidated-damages clause is invalid when
the stipulated amount is out of all proportion to the actual
damages. 200- A penalty is in effect a security for
performance, while a provision for liquidated damages is for
a sum to be paid in lieu of performance. A term in a
contract calling for the imposition of a penalty for the breach
of the contract is contrary to public policy and invalid. This
position also finds elucidation in the following paragraph
from American Restatement (Second) of Contracts 1981:-
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“356. LIQUIDATED DAMAGE AND PENALTIES
(1) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof or loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.”
11 Returning to the facts of the present case, the so called
Deed of Agreement for Earnest Money inasmuch as it
postulates the payment of twice the sum received ought not
to have been decreed as firstly, the contract itself could not
have been specifically enforced since the Defendant was
devoid of title; and secondly, the Plaintiff had not proved
that he had suffered any damages and facially the stipulated
sum was in the nature of a penalty.
12 In Phulchand Exports Limited Vs O.O.O. Patriot
2011(10)SCC 300, the Appellant (Seller) entered into a
contract with the Respondent (Buyer) relating to the
sale/purchase of 1000 MT of Indian polished rice for a total
consideration of INR 12,450,000/-. The Seller loaded the
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rice 16 days late and the Vessel freighted by the Sellers left
port (Kandla) 38 days later than the contractually stipulated
time of departure. The specified destination, the port of
Novorossiysk, Russia, was to be the first port of discharge,
and even in this regard there is a finding that the Vessel on
which the shipment had been consigned was not sailing
directly to the said port, leave aside Novorossiysk being its
first port of call. The ship suffered an engine failure which
resulted in its requiring salvage operations near Turkey, and
the entire cargo on board, including the subject consignment
of rice was sold pursuant to Admiralty proceedings to
compensate the cost of the rescue of the Vessel. The
Insurance Company maintained that the lien of the cargo to
compensate the costs of the rescue of the Vessel was not
covered in the policy. Arbitration proceedings under the
aegis of the International Court of Commercial Arbitration at
the Chamber of Commerce and Industry of the Russian
Federation culminated in the passing of an Award which
directed the sharing of the price of the rice consignment
equally between the parties. In the Award it has been opined
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that the Buyer had failed to forward the shipping documents
and the Insurance Certificate to the Seller and thus was
equally blameworthy. The defence of the Seller was that
the goods had passed to the Buyer, who had already paid
the entire sale price on negotiation of documents by the
Seller with the concerned Bank. This Court held that despite
the fact that it was a CIF contract, the consignment having
been belatedly boarded on the Vessel, which Vessel
thereafter sailed later than the time agreed upon by the
parties, and which Vessel did not have the contracted
destination Novorossiysk as the first port of call, could not
have been in conformity with the contract, and hence the
goods could not be viewed as having passed to the Buyer
thereby shifting to it the liability of the lost shipment. The
other question that was raised was whether the stipulation in
the contract envisaging the reimbursement of the
consideration received by the Seller in the event of non-
performance of the contract was in the nature of a penalty.
It was in this context that Sections 73 and 74 of the Contract
Act came to be considered. This Court held that the clause
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requiring the refund of the price of the Rice consignment
could not be viewed as a penalty which is not legally
recoverable in India and therefore the Award was impervious
to jural interference as it was not against the public policy of
India even in terms of the interpretation given in ONGC Ltd.
vs Saw Pipes Ltd. (2003) 5 SCC 705.
13 After recording that the opinion of the two Constitution
Benches still hold the field, I have nevertheless mentioned
Phulchand Exports only for adverting/clarifying that views
of this Court have remained constant till now. I must
immediately clarify that it would require a Bench larger than
a Five-Judge Bench to alter the legal position from what has
been enunciated in Chunilal V. Mehta and Fateh Chand.
The decisions of smaller Benches are relevant only for the
purpose of analysing the verdict in a particular case on the
predication of the elucidation of the law laid down by the
Constitution Benches. This would include an oft-quoted
decision in Maula Bux vs Union of India, 1969(2)SCC 554, as
well as UOI vs Raman Iron Foundry, 1974(2)SCC 231, and
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BSNL vs Reliance Communication Ltd., 2011(1) SCC 394,
etc.
14 Now I come to the next aspect of the case. The
Execution proceedings were initiated by the
Respondent/Decree holder on 27.10.2007 under Order XXI
Rule 11 of the Code of Civil Procedure (‘CPC’ hereinafter). It
transpired that Attachment Orders came to be passed. The
application dated 3.7.2008, being Objections under Order
XXI Rule 58 read with Section 151 CPC was preferred by the
Appellant Smt. Maya Devi pleading, inter alia, that the
Decree Holder had wrongly scheduled her property in the
Execution Application; that she was the absolute and real
owner thereof having purchased it on 12.05.2006 from Smt.
Nirmal Verma, wife of Prem Chand Verma (Judgment
Debtor); that she has no other connection or concern with
the Judgment Debtor or with his wife in any manner
whatsoever. The Appellant, therefore, respectfully prayed
that her aforesaid property may kindly be released from the
Schedule. Plaintiff/Decree Holder Shri Lalta Prasad,
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Respondent before us, countered by pleading that the
Objections had been filed at the behest of the Judgment
Debtor to avoid the satisfaction of the decree; that the
Appellant/Objector was not the absolute and real owner of
the suit property; that the duly registered General Power of
Attorney executed by Smt. Nirmal Verma was forged and
fabricated; that Smt. Nirmal Verma was none else than the
wife of the Judgment Debtor. The Appellant has supported
her stance by filing her own affidavit. In the Execution
proceedings, the Plaintiff/Decree Holder/Respondent in
cross-examination of the Appellant has only suggested that
the documents were fabricated in collusion with Smt. Nirmal
Verma. How this was possible, since they are duly
registered documents, is difficult to comprehend. The other
question put in cross-examination was that Smt. Nirmal
Verma was never the owner of the property; and that Smt.
Maya Devi’s Objections were filed at the behest of Smt.
Nirmal Verma. All these suggestions had been denied. If
Smt. Nirmal Verma had no title, the consequence would be
that the property would revert to her predecessor-in- title,
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thereby placing the property beyond the pale of the
Execution proceedings.
15 The following issues were framed in the Execution
proceedings:-
(i) Whether the objector/applicant Smt. Maya Devi is the absolute owner of the disputed property No.X-20, Gali No.5, Brahampuri, Delhi? If so its effect? OP Applicant.
(ii) Whether the judgment and decree dated 6.10.2007
are executable against the objector Smt. Maya Devi?
OP DH.”
Smt. Nirmal Verma had also participated in the Execution
proceedings and had filed her affidavit dated 22.10.2008 by
way of evidence, asseverating therein that she had sold the
property to Smt. Maya Devi by executing a registered
General Power of Attorney, Agreement to Sell, Affidavit,
Receipt, Possession Letter, Will Deed, which were duly
notorised on 12.05.2006. She further stated that she had
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purchased the property from Shri Rajinder Parshad by means
of similar documentation all of which were handed over by
her to Smt. Maya Devi at the time of selling of the said
property. Very significantly, she stated that her husband
Prem Chand Verma/Judgment Debtor had expired on
8.10.2008.
16 In this backdrop, it needs to be kept in prospective that
Order XXI Rule 97 to Rule 101 of CPC envisage the
determination of all questions in Execution proceedings and
not by way of an independent suit. The Executing Court,
therefore, was duty bound to consider and decide the
Objections filed by the Appellant with complete care and
circumspection. I regret to record that this has not been
done. The Objections came to be dismissed on 23.7.2010
with brevity bordering on dereliction of duty, in the following
manner:-
“…. It has been submitted by the counsel for the objector that the applicant is the absolute owner of the suit property by virtue of General Power of Attorney which was registered on 12.5.2006 and she is in actual physical
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possession of the suit property but the counsel for the DH has stated that the objector has no legal right, title or interest as the execution of the General Power of Attorney and its registration does not confer any ownership right in favour of the applicant/objector. The counsel for DH has also relied upon the judgment of the Hon’ble Supreme Court in case titled as Suraj Lamp and Industries Private Limited Vs State of Haryana and Another reported as (2009) 7 Supreme Court Cases 363.”
17 A perusal of the above will show that the Executing
Court ignored and overlooked the important submission of
the Appellant stating that she was the absolute owner of the
suit property and that she had no truck whatsoever either
with the Judgment Debtor Shri Prem Chand Verma or his wife
Smt. Nirmal Verma beyond purchasing the subject property
from the latter. What has also escaped the attention of the
Court is that Suraj Lamp has prospective operation, thereby
rendering it inapplicable to the subject 2006 transaction.
Secondly, if the General Power of Attorney in favour of the
Appellant Smt. Maya Devi was bereft of legal efficacy, the
ownership of Smt. Nirmal Verma would also be invalid, and
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sequentially the property would have no connection
whatsoever with the Judgment Debtor since he had
purportedly derived title only through a Will. Unfortunately,
this is also the approach which has been preferred by the
High Court in terms of the impugned order. The High Court
has also wrongly applied Suraj Lamp and has also
neglected to reflect upon the Appellant’s plea that she is (i)
the actual owner of the suit property having purchased it for
valuable consideration, and (ii) being a third party not
connected in any mala fide manner with the Judgment
Debtor, and (iii) not having received prior notice of any
action of late Shri Prem Chand Verma, was imperious to
Execution proceedings. A miscarriage of justice, of
monumental proportions, has taken place on an un-
substantiated presumption that one of the assets of the
Judgment Debtor had been illegally transferred to defeat the
decree. The Appellant before us had no other recourse
than to file Objections under Order XXI Rule 58 CPC.
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18 Finally another aspect which has come to the fore, is
the approach of the Trial Court in the adjudication of the suit.
The plaint contains an averment that the suit property had
already been sold. The Defendant Shri Prem Chand Verma,
(his wife Smt. Nirmal Verma was not impleaded) had
appeared in the Trial Court and filed his Written Statement in
which, whilst admitting the documentation executed
between the parties, he had denied that he had been served
with any legal notice and set up the defence that he was
entitled to forfeit the amount received by him because the
Plaintiff/Decree Holder had failed to pay the balance sale
consideration as envisaged in the Deed of Agreement for
Earnest Money. After filing his Written Statement he
stopped appearing, and the suit proceeded ex-parte.
Significantly, the Deed of Agreement for Earnest Money as
well as the Written Statement predicate Defendant’s title on
a Will, and in this context there is no evidence on record that
it had taken effect because of the death of the Testator. In
the event, as is to be expected, no appeal against the
judgment and decree came to be filed, and, therefore, the
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decision was not tested before or scrutinized by the
Appellate Court. The absence of the Defendant does not
absolve the Trial Court from fully satisfying itself of the
factual and legal veracity of the Plaintiff’s claim; nay, this
feature of the litigation casts a greater responsibility and
onerous obligation on the Trial Court as well as the
Executing Court to be fully satisfied that the claim has been
proved and substantiated to the hilt by the Plaintiff.
Reference to Shantilal Gulabchand Mutha vs Tata
Engineering and Locomotive Company Limited, (2013) 4 SCC
396, will be sufficient. The failure to file a Written
Statement, thereby bringing Order VIII Rule 10 of the CPC
into operation, or the factum of Defendant having been set
ex parte, does not invite a punishment in the form of an
automatic decree. Both under Order VIII Rule 10 CPC and on
the invocation of Order IX of the CPC, the Court is
nevertheless duty-bound to diligently ensure that the plaint
stands proved and the prayers therein are worthy of being
granted. .
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19 I am fully mindful of the fact that the Appellant has not
taken any steps for setting aside the ex parte decree against
late Shri Prem Chand Verma. This is only to be expected
since the Appellant/Objector has no reason to evince or
harbour any interest in the inter se dispute between the
Decree Holder and the Judgment Debtor. Indeed, if the
Appellant had made any endeavour to assail or nullify the
decree, it would be fair to conclude that she had been put up
by the Judgment Debtor in an endeavour to defeat the
decree. In these circumstances, my in-depth analysis of
the law pertaining to decreeing what is essentially a penalty
clause may, on a perfunctory or superficial reading, be
viewed as non essential to the context. This, however, is
not so. On a conjoint reading of Order XXI Rule 58 CPC and
the fasciculus of Order XXI comprising Rules 97 to 104, it
becomes clear that all questions raised by the Objector have
to be comprehensively considered on their merits. In the
case in hand, the decree from which the Execution
proceedings emanate is not one for delivery of possession,
but is a simple money decree. Order XXI proscribes the
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filing of a separate suit and prescribes that all relevant
questions shall be determined by the Court. Objection under
Order XXI should be meaningfully heard so as to avoid the
possibility of any miscarriage of justice. It is significant in
this regard that Rule 103 ordains that where any application
has been adjudicated upon under rule 98 or rule 100, the
order made thereon shall have the same force and be
subject to the same conditions as to an appeal or otherwise,
as if it were a decree. I shall only advert to the decisions of
this Court in Brahmdeo Chaudhary vs Rishikesh Prasad
Jaiswal, (1997) 3 SCC 694, Shreenath vs Rajesh, (1998) 4
SCC 543, and Tanzeem-e-sufia vs Bibi Haliman, (2002) 7 SCC
50, where proceedings were under the aforesaid fasciculus
of Order XXI comprising Rules 97 to 104, in which the
Objectors had set up a title distinct or different from that of
the Judgment Debtor and the Court had protected their
interest. The Appellant before us is a third party and has
been brought into the lis by a side wind in that her property
is sought to be attached with the intention of satisfying a
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decree in which she was not directly or intrinsically
concerned.
The Appellant/Objector who has approached the Court under
Order XXI Rule 58 is more advantageously or favourably
placed inasmuch as she is a third party so far as the decree
is concerned, and her property is not the subject-matter of
the decree. It is thus clear to me that the Courts below
have in a hurried, if not prejudiced manner, rejected the
Objections merely because of some sympathy towards the
Decree Holder. The Objections deserved to be allowed
without disturbing the decree, leaving all other remedies
open to the Decree Holder/Respondent, including
proceedings against the Estate of the Judgment Debtor.
20 I respectfully agree with my learned Brother that the
Appeal deserves to be allowed and the impugned orders
require to be set aside.
............................................J. [VIKRAMAJIT SEN]
New Delhi
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February 19, 2014.