Saturday, 10 September 2016

S 74 of contract Act is applicable when only “when a contract has been broken”

 It must, however, be pointed out that in cases where a public
auction is held, forfeiture of earnest money may take place even
before an agreement is reached, as DDA is to accept the bid only after
the earnest money is paid. In the present case, under the terms and
conditions of auction, the highest bid (along with which earnest
money has to be paid) may well have been rejected. In such cases,
Section 74 may not be attracted on its plain language because it
applies only “when a contract has been broken”.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 193 OF 2015
[ARISING OUT OF SLP (CIVIL) NO.32039 OF 2012]
M/s. Kailash Nath Associates 
V
Delhi Development Authority & Anr. .
Dated:January 09, 2015.
Citation:AIR 2015 SC(Supp)780

2. The present appeal arises out of a public auction conducted by
the Delhi Development Authority (“DDA”) wherein the appellant
made the highest bid for Plot No.2-A, Bhikaji Cama Place, District
Centre, New Delhi for 3.12 Crores (Rupees Three Crores Twelve
Lakhs). As per the terms and conditions of the auction, the appellant,
being the highest bidder, deposited a sum of Rs.78,00,000/- (Rupees

Seventy Eight Lakhs), being 25% of the bid amount, with the DDA,
this being earnest money under the terms of the conditions of auction.
The relevant provisions in the conditions of auction read as follows:
“(ii) The highest bidder shall, at the fall of the hammer,
pay to the Delhi Development Authority through the
officer conducting the auction, 25% of the bid amount as
earnest money either in cash or by Bank Draft in favour
of the Delhi Development Authority, or Cheque
guaranteed by a Scheduled Bank as “good for payment
for three months” in favour of the Delhi Development
Authority. If the earnest money is not paid, the auction
held in respect of that plot will be cancelled.
(iii) The highest bid shall be subject to the acceptance of
Vice-Chairman, DDA or such other officer(s) as may be
authorized by him on his behalf. The highest bid may be
rejected without assigning any reason.
(iv) In case of default, breach or non-compliance of any
of the terms and conditions of the auction or mis
-representation by the bidder and/or intending purchaser,
the earnest money shall be forfeited.
(v) The successful bidder shall submit a duly filled-in
application in the form attached immediately after the
close of the auction of plot in question.
(vi) When the bid is accepted by the DDA, the intending
purchaser shall be informed of such acceptance in writing
and the intending purchaser shall, within 3 months
thereof, pay to the Delhi Development Authority, the
balance 75% amount of the bid, in cash or by Bank Draft
in favour of the Delhi Development Authority or by
Cheque guaranteed by a Scheduled Bank as “good for
payment for three months” in favour of the Delhi
Development Authority. If the bid is not accepted, the
earnest money will be refunded to the intending

purchaser without any interest unless the earnest money
is forfeited under para 2 (iv) above.”
3. On 18.2.1982, the DDA acknowledged the receipt of
Rs.78,00,000/- (Rupees Seventy Eight Lakhs), accepted the
appellant’s bid and directed the appellant to deposit the remaining
75% by 17.5.1982. However, as there was a general recession in the
industry, the appellant and persons similarly placed made
representations sometime in May, 1982 for extending the time for
payment of the remaining amount. The DDA set up a High Powered
Committee to look into these representations. The High Powered
Committee on 21.7.1982 recommended granting the extension of time
to bidders for depositing the remaining amount of 75%. Based on the
High Powered Committee’s report, by a letter dated 11.8.1982, the
DDA extended time for payment upto 28.10.1982 with varying rates
of interest starting from 18% and going upto 36%.
4. Another High Powered Committee was also set up by the DDA
in order to find out whether further time should be given to the
appellant and persons similarly situate to the appellant.
3Page 4
5. The second High Powered Committee recommended that the
time for payment be extended and specifically mentioned the
appellant’s name as a person who should be given more time to pay
the balance amount. Despite the fact that on 14.5.1984 the DDA
accepted the recommendations of the second High Powered
Committee, nothing happened till 1.12.1987. Several letters had been
written by the appellant to DDA from 1984 to 1987 but no answer was
forthcoming by the DDA.
6. Vide a letter dated 1.12.1987, which is an important letter on the
basis of which the fate of this appeal largely depends, the DDA stated
as follows:
“WITHOUT PREJUDICE’
DELHI DEVELOPMENT AUTHORITY
VIKAS SADAN
I.N.A.
New Delhi-23……198… .
No.F.32(2)/82/Impl.-I/4
From: DIRECTOR (C.L)
DELHI DEVELOPMENT AUTHORITY
To,
M/s. Kailash Nath & Associates,
1006, Kanchanjanga Building,
4Page 5
18, Bara Khamba Road,
New Delhi-110001.
Sub: Regarding payment of balance premium in respect
of Plot No.2-A situated in Bhikaji Cama Place
 Distt. Centre.
Sir,
With reference to the above subject, I am directed to
inform you that your case for relaxing the provisions of
Nazul Rules, 1981, to condone the delay for the payment
of balance premium in installments was referred to the
Govt. of India, Min. of Urban Development. Before the
case is further examined by the Govt. of India, Min. of
Urban Development, you are requested to give your
consent for making payment of balance amount of 75%
premium within the period as may be fixed alongwith
18% interest charges p.a. on the belated payment. Further
the schedule of payment and conditions if any will be as
per the directions issued by the Ministry of Urban
Development, Govt. of India. It is, however, made clear
that this letter does not carry any commitment.
Your consent should reach to this office within 3 days
from the date of issue of this letter.
Dated 1.12.87
Yours faithfully,
Sd/
DIRECTOR (C.L)”
7. The appellant replied to the said letter on the same day itself in
the following terms:
“KAILASH NATH & ASSOCIATES
5Page 6
Tel.: 3312648, 3314269
1006, KANCHENJUNGA,
18, BARAKHAMBA ROAD,
NEW DELHI-II0001
Regd. Ack. Due.
December 1, 1987.
The Director (C.L.),
Delhi Development Authority,
Vikas Sadan, I.N.A.,
New Delhi-l 10023.
Subject: Payment of balance premium in respect of
plot No.2-A Bhikaji Cama Place Distt.
Centre, New Delhi.
Dear Sir,
We are thankful to you for your letter No. F.30(2)/82-
Impl.- I/4 dated nil received by us this afternoon, on the
above subject.
We hereby give our consent that we shall make the
payment of the balance amount of 75% premium within
the period as may be fixed as per the schedule of
payment and conditions, if any imposed, as per the
directions issued by the Ministry of Urban Development,
Govt. of India, alongwith 18% interest charges per
annum on the belated payment.
We now request you to kindly convey us your formal
approval to our making the said payment in installments
as requested for.
Thanking you,
Yours faithfully
For KAILASH NATH & ASSOCIATES,
Sd/
6Page 7
Partner
Advance copy sent through Special Messenger.”
8. The Central Government informed the DDA vide a letter dated
1.3.1990 that the land auctioned to the appellant was not Nazul land
and, therefore, the Central Government would have nothing further to
do with the matter. Meanwhile, the appellant filed Writ Petition
No.2395 of 1990 in the Delhi High Court in which it claimed that
persons similar to the appellant, namely, M/s. Ansal Properties and
Industries Private Limited and M/s Skipper Tower Private Limited had
been allowed to pay the balance 75% premium and were in fact
allotted other plots. Pleading Article 14, the appellant stated that they
were entitled to the same treatment.
9. By a judgment and order dated 2.9.1993, the Delhi High Court
held that as the auction was held as per terms and conditions of the
auction, a dispute regarding the same is a matter of contract and
cannot be gone into in proceedings under Article 226 of the
Constitution. It was further observed that on facts, the Court found no
force in the contention raised on behalf of the appellant regarding
discrimination. An SLP against this order was also dismissed on
16.12.1993 by the Supreme Court stating that the appellant is at
7Page 8
liberty to take whatever steps are permitted to the appellant under law
to challenge forfeiture of earnest money, which had been done by a
letter of 6.10.1993. This letter is also important for the correct
determination of this appeal and is set out hereinbelow:-
“REGD.A.D.
DELHI DEVELOPMENT AUTHORITY
VIKAS SADAN
I.N.A.
New Delhi-23, 6.10.1993
No.F.32(2)/82/CL/3816
From: DY. DIRECTOR (CL).
To,
M/s. Kailash Nath & Associates,
1006, Kanchanjanga Building,
18, Bara Khamba Road,
New Delhi-l10001.
Subject: Plot No.2-A in Bhikaji Cama Place Distt. Centre.
Sir,
Consequent upon your failure to deposit the balance 75%
premium of the aforesaid plot and dismissal of C.W.P. No.
2395 of 1990 by the Hon’ble High Court, Delhi, I am
directed to inform you that the bid/ allotment of the said
plot in your favour has been cancelled and earnest money
amounting to Rs.78,00,000/- deposited by you at the time
of auction has been forfeited.
Yours faithfully,
8Page 9
Sd/
(JAGDISH CHANDER)
DEPUTY DIRECTOR (CL)”
10. The appellant then filed a suit for specific performance on
17.2.1994 and in the alternative for recovery of damages and recovery
of the earnest amount of Rs.78,00,000/- (Rupees Seventy Eight
Lakhs). Shortly after the suit was filed, on 23.2.1994, the DDA reauctioned
the premises which fetched a sum of Rs.11.78 Crores
(Rupees Eleven Crores Seventy Eight Lakhs).
11. The learned Single Judge by a judgment and order dated
10.9.2007 dismissed the appellant’s suit for specific performance and
damages but ordered refund of the earnest money forfeited together
with 9% per annum interest. The learned Single Judge held:-
“65. Defendant No.1 instead of following the aforesaid
course, found merit in the representations received not
only from the plaintiff but such similar situated parties.
It is in view thereof that the matter went as far as setting
up of two committees to repeatedly examine the matter
and to come to a conclusion. The case of defendant no.1
was that the material produced by the plaintiff and such
similar persons gave rise to a cause to extend the time
for making the payment subject to certain terms and
conditions. However, in view of the perception of
defendant no.1 that the consent of UOI, defendant no.2,
would be required, the land being Nazul land, the file
was forwarded to defendant no.2. The matter did not rest
at this since thereafter UOI did grant such consent but
9Page 10
sent back the file of the plaintiff only on account of the
fact that the land in question was not Nazul land. The net
effect of this is that there was no permission required
from the UOI and the decision taken by defendant no.1 to
extend the time period for making the payment, thus,
stood as it is.
66. In my considered view, it is not open for defendant
no.1 to state that while it recommended the case of other
similarly situated parties in case of Nazul land to the
Government and obtained permission for grant of
extension of time, in case of non-Nazul land where such
permission was not required, a different parameter was
required to be followed. It may be mentioned at the cost
of repetition that the plaintiff was a party which
volunteered to pay interest @18% per annum unlike
some of the other parties. There is merit in the
contention of learned Counsel for the plaintiff that
defendant no.1 after treating the contract as subsistent
having extended time for making the payment was at
least required to give a notice to the plaintiff to perform
the agreement prior to terminating the agreement and
could not straightaway terminate the same. This
conclusion can draw strength from the observations in
Halsbury Laws of England (supra) referred to aforesaid
as also in Webb v. Hughes (supra). It is clearly a case
where there has been waiver of the time being essence of
the contract by conduct of the parties and, thus,
defendant no.1 was required to give notice on the day
appointed for completion of the contract failing which
only termination could take place.
67. There were numerous communications exchanged
between the parties. The recommendations of the two
high-powered committees constituted by defendant no.1
made its recommendations which were accepted by
defendant no.1 vide its resolution dated 14.5.1984 (Ex.
DW2/P-4). Having accepted the recommendations, in
the case of the plaintiff defendant no.1 was required to
do nothing further but mistakenly referred the case to
10Page 11
UOI for its approval assuming the case to be one of
Nazul land. Plaintiff sent repeated reminders vide letters
dated 9-12-1985 (Ex.P-11), 20-10-1986 (Ex.P-12), 10-
12-1986(Ex.P-13), 10-02-1987 (Ex.P-14), 11-04-
1987(Ex.P-16), 10-08-1987(Ex.P-17) and 10-10-1987
(Ex.P-18) calling upon defendant no.1 to give an offer of
deposit of balance 25% of the premium so as to bring the
total payment equivalent to 50% of the total premium
and for release of the possession of the land to the
plaintiff for purpose of construction. Defendant no.1
vide its letter received on 1.12.1987 by the plaintiff
(Ex.P-19) sought the consent of the plaintiff to abide by
the recommendations of the high-powered committee and
the consent was duly given on the even date (Ex.P-20).
Thereafter no offer was made to the plaintiff and without
any notice of compliance for payment, the letter of
cancellation dated 6.10.1993 (Ex.P-26) was issued. It
appears that defendant no.1 itself was not aware of the
land being non-Nazul land as the first communication
was addressed to the plaintiff only on 1.3.1990.
68. The present case is one where defendant no.1 has
not even suffered a loss. The plot was to be purchased by
the plaintiff at Rs.3.12 crores and it was finally sold to a
third party at Rs.11.78 crores, i.e. almost three and a half
times the price. During this period defendant no.1
continued to enjoy the earnest money of the plaintiff of
Rs.78.00 lacs.
69. In view of the prolonged period, exchange of
communications, the plaintiff making various offers but
not complying with the initial terms, defendant no.1
taking its own time in the decision making process, I am
of the considered view that the plaintiff is entitled to the
refund of the earnest money of Rs.78.00 lacs but no
further amount is liable to be paid to the plaintiff.”
11Page 12
12. DDA appealed against the Single Judge’s judgment to a
Division Bench of the Delhi High Court. The Division Bench set
aside the judgment of the Single Judge holding that the forfeiture of
the earnest money by the DDA was in order.
13. Shri Paras Kuhad, learned Senior Advocate appearing on behalf
of the appellant, urged that time may have been of the essence under
the original terms and conditions of the auction. However, time had
been extended on several occasions and, therefore, ceased to be of the
essence. In answer to the letter dated 1.12.1987, the appellant
promptly replied and said it would be willing to pay the entire 75%
with 18% interest and, therefore, there was no breach of contract on
the part of the appellant. Further, since the DDA sold the plot for
11.78 Crores (Rupees Eleven Crores Seventy Eight Lakhs), there was
no loss caused to the DDA and, hence forfeiture of earnest money
would not be in accordance with the agreement or in accordance with
law.
14. Shri Amarendra Sharan, learned Senior Advocate appearing on
behalf of the DDA, rebutted these contentions and added that the case
was covered by the judgment in Shree Hanuman Cotton Mills &
12Page 13
Anr. v. Tata Aircraft Ltd., 1970 (3) SCR 127. He argued further
that since the letter of 1.12.1987 had been issued under a mistake of
fact, it would be void under Section 20 of the Contract Act and the
said letter should, therefore, be ignored. If it is ignored, then the
termination of the contract and the forfeiture of earnest money are
completely in order as the appellant was in breach. The fact that the
DDA ultimately sold the plot for a much larger sum, according to
learned counsel, would be irrelevant inasmuch as the contractual term
agreed upon between parties would entitle him to forfeit earnest
money on breach without any necessity of proving actual loss.
15. Having heard learned counsel for the parties, it is important at
the very outset to notice that earnest money can be forfeited under
sub-clause (iv) set out hereinabove, only in the case of default, breach,
or non-compliance of any of the terms and conditions of the auction,
or on misrepresentation by the bidder. It may be noted that the balance
75% which had to be paid within three months of the acceptance of
the bid, was not insisted upon by the DDA. On the contrary, after
setting up two High Powered Committees which were instructed to
look into the grievances of the appellant, the DDA extended time at
13Page 14
least twice. It is, therefore, very difficult to say that there was a breach
of any terms and conditions of the auction, as the period of three
months which the DDA could have insisted upon had specifically
been waived. It is nobody’s case that there is any misrepresentation
here by the bidder. Therefore, under sub-clause (iv), without more,
earnest money could not have been forfeited.
16. The other noticeable feature of this case on facts is that DDA
specifically requested the appellant to give their consent to make the
balance payable along with 18% interest charges on belated payment.
This was on the footing that the Nazul Rules of 1981 would be
relaxed by the Central Government. The reason why the letter is
marked “without prejudice” and the DDA made it clear that the letter
does not carry any commitment, is obviously because the Central
Government may not relax the provision of the Nazul Rules, in which
case nothing further could be done by the DDA. If, however, the
Central Government was willing to condone the delay, DDA would be
willing to take 75% of the outstanding amount along with 18%
interest.
14Page 15
17. Mr. Sharan argued that since the Central Government ultimately
found that this was not a Nazul land, the letter was obviously based on
a mistake of fact and would be void under Section 20 of the Contract
Act. We are afraid we are not able to accept this plea. Long after the
Central Government informed DDA (on 1.3.1990) that the property
involved in the present case is not Nazul land, the DDA by its letter of
6.10.1993 cancelled the allotment of the plot because the appellant
had failed to deposit the balance 75%. DDA’s understanding,
therefore, was that what was important was payment of the balance
75% which was insisted upon by the letter dated 1.12.1987 and which
was acceded to by the respondent immediately on the same date.
Further, Mr. Sharan’s argument that since the letter was “without
prejudice” and since no commitment had been made, they were not
bound by the terms of the letter also fails to impress us. The letter
was without prejudice and no commitment could have been given by
the DDA because the Central Government may well not relax the
Nazul Rules. On the other hand, if the Central Government had, later
on, relaxed the Nazul Rules, DDA could not be heard to say that
despite this having been done, DDA would yet cancel the allotment of
the plot. That this could not have been done is clear because of the
15Page 16
aforesaid construction of the letter dated 1.12.1987 and also because
DDA is a public authority bound by Article 14 and cannot behave
arbitrarily.
18. It now remains to deal with the impugned judgment of the
Division Bench.
19. The Division Bench followed the judgment of Tilley v.
Thomas, (1867 3 Ch.A 61) and distinguished the judgment in Webb
v. Hughes, V.C.M. 1870. It further went on to follow Anandram
Mangturam v. Bholaram Tanumal, ILR 1946 Bom 218 and held:
“The decision holds that the principle of law is that
where, by agreement, time is made of the essence of the
contract, it cannot be waived by a unilateral act of a
party and unless there is consensus ad-idem between the
parties and a new date is agreed to, merely because a
party to a contract agrees to consider time being
extended for the opposite party to complete the contract,
but ultimately refuses to accord concurrence would not
mean that the party has by conduct waived the date
originally agreed as being of the essence of the
contract.” (At para 32)
20. In our judgment, Webb’s case would directly apply to the facts
here. In that case, it was held:
 “But if time be made the essence of the contract, that
may be waived by the conduct of the purchaser; and if
the time is once allowed to pass, and the parties go on
negotiating for completion of the purchase, then time is
16Page 17
no longer of the essence of the contract. But, on the
other hand, it must be borne in mind that a purchaser is
not bound to wait an indefinite time; and if he finds,
while the negotiations are going on, that a long time will
elapse before the contract can be completed, he may in a
reasonable manner give notice to the vendor, and fix a
period at which the business is to be terminated.”
21. Based on the facts of this case, the Single Judge was correct in
observing that the letter of cancellation dated 6.10.1993 and
consequent forfeiture of earnest money was made without putting the
appellant on notice that it has to deposit the balance 75% premium of
the plot within a certain stated time. In the absence of such notice,
there is no breach of contract on the part of the appellant and
consequently earnest money cannot be forfeited.
22. Tilley v. Thomas, (1867 3 Ch.A 61) would not apply for the
reason that the expression “without prejudice” was only used as stated
above because the Central Government may not relax the Nazul
Rules.
23. In Anandram Mangturam v. Bholaram Tanumal, ILR 1946
Bom 218, two separate judgments were delivered, one by Chief
Justice Stone and the other by Chagla,J. as he then was. Stone C.J.
held:-
17Page 18
“In my judgment, reading the correspondence as a
whole, it at no stage passed from the melting pot of
negotiations to crystallize as an agreement to extend the
time for the performance of the contract. The attitude of
the purchaser throughout the correspondence was:
“Satisfy us that you are doing your best to obtain the
goods from your suppliers and we will then consider
fixing a new date for delivery of the goods to us”. On the
other hand the attitude of the vendors throughout the
correspondence was to avoid the purchaser's demand
and to simply say: “You know that we cannot effect
delivery from our suppliers and until we do so we cannot
deliver the goods to you”. There was never in my
judgment any consensus ad-idem, no agreement, express
or implied, to extend the time either to any particular
date or to the happening of some future event. Mere
forbearance in my opinion to institute proceedings or to
give notice of rescission cannot be an extension of the
time for the performance of a contract within the
meaning of s. 63 of the Contract Act.” (at 226 & 227)
Chagla, J. in a separate judgment held:-
“Under s. 55 of the Indian Contract Act, the promisee
is given the option to avoid the contract where the
promisor fails to perform the contract at the time fixed in
the contract. It is open to the promisee not to exercise the
option or to exercise the option at any time, but it is clear
to my mind that the promisee cannot by the mere fact of
not exercising the option change or alter the date of
performance fixed under the contract itself. Under s. 63
of the Indian Contract Act, the promisee may make
certain concessions to the promisor which are
advantageous to the promisor, and one of them is that he
may extend the time for such performance. But it is clear
again that such an extension of time cannot be a
unilateral extension on the part of the promisee. It is only
at the request of the promisor that the promisee may
agree to extend the time of performance and thereby
bring about an agreement for extension of time.
18Page 19
Therefore it is only as a result of the operation of s. 63 of
the Indian Contract Act that the time for the performance
of the contract can be extended and that time can only be
extended by an agreement arrived at between the
promisor and the promisee.” (at 229)
24. The aforesaid judgment would apply in a situation where a
promisee accedes to the request of the promisor to extend time that is
fixed for his own benefit. Thus, in Keshavlal Lallubhai Patel and
Ors. v. Lalbhai Trikumlal Mills Ltd 1959 SCR 213, this Court
held:-
“The true legal position in regard to the extension of
time for the performance of a contract is quite clear
under s. 63 of the Indian Contract Act. Every promisee,
as the section provides, may extend time for the
performance of the contract. The question as to how
extension of time may be agreed upon by the parties has
been the subject-matter of some argument at the Bar in
the present appeal. There can be no doubt, we think, that
both the buyer and the seller must agree to extend time
for the delivery of goods. It would not be open to the
promisee by his unilateral act to extend the time for
performance of his own accord for his own benefit.”
25. However, such is not the position here. In the present case, the
appellant is the promisor and DDA is the promisee. In such a
situation, DDA can certainly unilaterally extend the time for payment
under Section 63 of the Contract Act as the time for payment is not for
19Page 20
DDA’s own benefit but for the benefit of the appellant. The present
case would be covered by two judgments of the Supreme Court. In
Citi Bank N.A. v. Standard Chartered Bank, (2004) 1 SCC Page
12, this Court held:
“50. Under Section 63, unlike Section 62, a promisee
can act unilaterally and may
(i) dispense with wholly or in part, or
(ii) remit wholly or in part,
the performance of the promise made to him, or
(iii) may extend the time for such performance, or
(iv) may accept instead of it any satisfaction which he
thinks fit.”
26. Similarly in S. Brahmanand v. K.R. Muthugopal, (2005) 12
SCC 764 the Supreme Court held:
“34. Thus, this was a situation where the original
agreement of 10-3-1989 had a “fixed date” for
performance, but by the subsequent letter of 18-6-1992
the defendants made a request for postponing the
performance to a future date without fixing any further
date for performance. This was accepted by the plaintiffs
by their act of forbearance and not insisting on
performance forthwith. There is nothing strange in time
for performance being extended, even though originally
the agreement had a fixed date. Section 63 of the
Contract Act, 1872 provides that every promisee may
extend time for the performance of the contract. Such an
agreement to extend time need not necessarily be
reduced to writing, but may be proved by oral evidence
20Page 21
or, in some cases, even by evidence of conduct including
forbearance on the part of the other party. [See in this
connection the observations of this Court in Keshavlal
Lallubhai Patel v. Lalbhai Trikumlal Mills Ltd., 1959
SCR 213 : AIR 1958 SC 512, para 8. See also in this
connection Saraswathamma v. H. Sharad Shrikhande,
AIR 2005 Kant 292 and K. Venkoji Rao v. M. Abdul
Khuddur Kureshi, AIR 1991 Kant 119, following the
judgment in Keshavlal Lallubhai Patel (supra).] Thus, in
this case there was a variation in the date of
performance by express representation by the defendants,
agreed to by the act of forbearance on the part of the
plaintiffs. What was originally covered by the first part of
Article 54, now fell within the purview of the second part
of the article. Pazhaniappa Chettiyar v. South Indian
Planting and Industrial Co. Ltd. [AIR 1953 Trav Co 161]
was a similar instance where the contract when initially
made had a date fixed for the performance of the
contract but the Court was of the view that “in the events
that happened in this case, the agreement in question
though started with fixation of a period for the
completion of the transaction became one without such
period on account of the peculiar facts and
circumstances already explained and the contract,
therefore, became one in which no time was fixed for its
performance” and held that what was originally covered
by the first part of Article 113 of the Limitation Act, 1908
would fall under the second part of the said article
because of the supervening circumstances of the
case.”(at Page 777)
27. Coming to the application of Article 14, the Division Bench in
paragraph 37 stated:-
“37. Now, in India, reasonableness in State action is a
facet of Article 14 of the Constitution of India and in the
field of contract would have a considerable play at the
precontract stage. Once parties have entered into a
21Page 22
contractual obligation, they would be bound by the
contract and the only reasonableness would be of the
kind envisaged by the Supreme Court in the decision
reported as AIR 1963 SC 1144 T.P. Daver v. Lodge
Victoria No.363 SC Belgaum & Ors. On the subject of a
member of a club being expelled, and the relationship
being a contract as per the rules and regulations of the
club, adherence whereto was agreed to by he who
became a member of the club and the management of the
club, the Supreme Court observed that in such private
affairs, it would be good faith in taking an action which
is rooted in the minds of modern men and women i.e. in a
modern democratic society and no more. The decision
guides that where a private affair i.e. a contract is so
perverted by a party that it offends the concept of a fairplay
in a modern society, alone then can the action be
questioned as not in good faith and suffice would it be to
state that anything done not in good faith would be
unreasonably done.”
28. It will be noticed at once that T.P. Daver v. Lodge Victoria No.
363, S.C. Belgaum, 1964 (1) SCR 1, is not an authority on Article 14
at all. It deals with clubs and the fact that rules or bye-laws which
bind members of such clubs have to be strictly adhered to. On the
other hand in ABL International Ltd. v. Export Credit Guarantee
Corpn. of India Ltd., (2004) 3 SCC 553 at paras 22 and 23, the
Supreme Court held:
“22. We do not think the above judgment in VST
Industries Ltd. [(2001) 1 SCC 298 : 2001 SCC (L&S)
227] supports the argument of the learned counsel on the
question of maintainability of the present writ petition. It
is to be noted that VST Industries Ltd.[(2001) 1 SCC
22Page 23
298 : 2001 SCC (L&S) 227] against whom the writ
petition was filed was not a State or an instrumentality of
a State as contemplated under Article 12 of the
Constitution, hence, in the normal course, no writ could
have been issued against the said industry. But it was the
contention of the writ petitioner in that case that the said
industry was obligated under the statute concerned to
perform certain public functions; failure to do so would
give rise to a complaint under Article 226 against a
private body. While considering such argument, this
Court held that when an authority has to perform a
public function or a public duty, if there is a failure a
writ petition under Article 226 of the Constitution is
maintainable. In the instant case, as to the fact that the
respondent is an instrumentality of a State, there is no
dispute but the question is: was the first respondent
discharging a public duty or a public function while
repudiating the claim of the appellants arising out of a
contract? Answer to this question, in our opinion, is
found in the judgment of this Court in the case of Kumari
Shrilekha Vidyarthi v. State of U.P. [(1991) 1 SCC 212 :
1991 SCC (L&S) 742] wherein this Court held: (SCC pp.
236-37, paras 22 & 24)
“The impact of every State action is also on
public interest. … It is really the nature of its
personality as State which is significant and
must characterize all its actions, in whatever
field, and not the nature of function,
contractual or otherwise, which is decisive of
the nature of scrutiny permitted for examining
the validity of its act. The requirement of
Article 14 being the duty to act fairly, justly
and reasonably, there is nothing which
militates against the concept of requiring the
State always to so act, even in contractual
matters.”
23. It is clear from the above observations of this Court,
once the State or an instrumentality of the State is a
party of the contract, it has an obligation in law to act
23Page 24
fairly, justly and reasonably which is the requirement of
Article 14 of the Constitution of India. Therefore, if by
the impugned repudiation of the claim of the appellants
the first respondent as an instrumentality of the State has
acted in contravention of the abovesaid requirement of
Article 14, then we have no hesitation in holding that a
writ court can issue suitable directions to set right the
arbitrary actions of the first respondent.”
29. Based on the facts of this case, it would be arbitrary for the
DDA to forfeit the earnest money on two fundamental grounds. First,
there is no breach of contract on the part of the appellant as has been
held above. And second, DDA not having been put to any loss, even if
DDA could insist on a contractual stipulation in its favour, it would be
arbitrary to allow DDA as a public authority to appropriate
Rs.78,00,000/- (Rupees Seventy Eight Lakhs) without any loss being
caused. It is clear, therefore, that Article 14 would apply in the field of
contract in this case and the finding of the Division Bench on this
aspect is hereby reversed.
30. We now come to the reasoning which involves Section 74 of
the Contract Act. The Division Bench held:
“38. The learned Single Judge has held that the property
was ultimately auctioned in the year 1994 at a price
which fetched DDA a handsome return of Rupees 11.78
crores and there being no damages suffered by DDA, it
could not forfeit the earnest money.
24Page 25
39. The said view runs in the teeth of the decision of the
Supreme Court reported as AIR 1970 SC 1986 Shree
Hanuman Cotton Mills & Anr. V. Tata Aircraft Ltd. which
holds that as against an amount tendered by way of
security, amount tendered as earnest money could be
forfeited as per terms of the contract.
40. We may additionally observe that original time to pay
the balance bid consideration, as per Ex.P-I was May
18, 1982 and as extended by Ex. P-8 was October 28,
1982. That DDA could auction the plot in the year 1994
in the sum of Rupees 11.78 crore was immaterial and not
relevant evidence for the reason damages with respect to
the price of property have to be computed with reference
to the date of the breach of the contract.”
31. Section 74 as it originally stood read thus:
“When a contract has been broken, if a sum is named in
the contract as the amount to be paid in case of such
breach, the party complaining of the breach is entitled,
whether or not actual damage or loss is proved to have
been caused thereby, to receive from the party who has
broken the contract reasonable compensation not
exceeding the amount so named.”
32. By an amendment made in 1899, the Section was amended to
read:
“74. Compensation for breach of contract where penalty
stipulated for.— When a contract has been broken, if a
sum is named in the contract as the amount to be paid in
case of such breach, or if the contract contains any other
stipulation by way of penalty, the party complaining of
the breach is entitled, whether or not actual damage or
loss is proved to have been caused thereby, to receive
from the party who has broken the contract reasonable
25Page 26
compensation not exceeding the amount so named or, as
the case may be, the penalty stipulated for.
Explanation.—A stipulation for increased interest from
the date of default may be a stipulation by way of
penalty.
Exception.—When any person enters into any bail-bond,
recognizance or other instrument of the same nature, or,
under the provisions of any law, or under the orders of
the Central Government or of any State Government,
gives any bond for the performance of any public duty or
act in which the public are interested, he shall be liable,
upon breach of any condition of any such instrument, to
pay the whole sum mentioned therein.
Explanation.—A person who enters into a contract with
Government does not necessarily thereby undertake any
public duty, or promise to do an act in which the public
are interested.”
33. Section 74 occurs in Chapter 6 of the Indian Contract Act, 1872
which reads “Of the consequences of breach of contract”. It is in fact
sandwiched between Sections 73 and 75 which deal with
compensation for loss or damage caused by breach of contract and
compensation for damage which a party may sustain through nonfulfillment
of a contract after such party rightfully rescinds such
contract. It is important to note that like Sections 73 and 75,
compensation is payable for breach of contract under Section 74 only
where damage or loss is caused by such breach.
26Page 27
34. In Fateh Chand v. Balkishan Das, 1964 SCR (1) 515, this
Court held:
“The section is clearly an attempt to eliminate the
somewhat elaborate refinements made under the English
common law in distinguishing between stipulations
providing for payment of liquidated damages and
stipulations in the nature of penalty. Under the common
law a genuine pre-estimate of damages by mutual
agreement is regarded as a stipulation naming liquidated
damages and binding between the parties: a stipulation
in a contract in terrorem is a penalty and the Court
refuses to enforce it, awarding to the aggrieved party
only reasonable compensation. The Indian Legislature
has sought to cut across the web of rules and
presumptions under the English common law, by
enacting a uniform principle applicable to all
stipulations naming amounts to be paid in case of
breach, and stipulations by way of penalty.
….
 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 decide whether 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 Section 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
27Page 28
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 damages"; 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.”(At page 526, 527)
 Section 74 declares the law as to liability upon breach
of contract where compensation is by agreement of the
parties pre-determined, or where there is a stipulation by
way of penalty. But the application of the enactment is
not restricted to cases where the aggrieved party claims
relief as a plaintiff. The section does not confer a special
benefit upon any party; it merely declares the law that
notwithstanding any term in the contract predetermining
damages or providing for forfeiture of any property by
way of penalty, the court will award to the party
aggrieved only reasonable compensation not exceeding
the amount named or penalty stipulated. The jurisdiction
of the court is not determined by the accidental
circumstance of the party in default being a plaintiff or a
defendant in a suit. Use of the expression "to receive
from the party who has broken the contract" does not
predicate that the jurisdiction of the court to adjust
amounts which have been paid by the party in default
cannot be exercised in dealing with the claim of the party
complaining of breach of contract. The court has to
adjudge in every case reasonable compensation to which
the plaintiff is entitled from the defendant on breach of
the contract. Such compensation has to be ascertained
having regard to the conditions existing on the date of
the breach.”(At page 530)
28Page 29
35. Similarly, in Maula Bux v. Union of India (UOI), 1970 (1)
SCR 928, it was held:
 “Forfeiture of earnest money under a contract for
sale of property-movable or immovable-if the amount is
reasonable, does not fall within Section 74. That has
been decided in several cases :Kunwar Chiranjit Singh v.
Har Swarup, A.I.R.1926 P.C.1; Roshan Lal v. The Delhi
Cloth and General Mills Company Ltd., Delhi, I.L.R.
All.166; Muhammad Habibullah v. Muhammad
Shafi, I.L.R. All. 324; Bishan Chand v. Radha Kishan
Das, I.D. 19 All. 49. These cases are easily explained, for
forfeiture of a reasonable amount paid as earnest money
does not amount to imposing a penalty. But if forfeiture is
of the nature of penalty, Section 74 applies. Where under
the terms of the contract the party in breach has
undertaken to pay a sum of money or to forfeit a sum of
money which he has already paid to the party
complaining of a breach of contract, the undertaking is
of the nature of a penalty.
Counsel for the Union, however, urged that in the present
case Rs. 10,000/- in respect of the potato contract and
Rs. 8,500 in respect of the poultry contract were genuine
pre-estimates of damages which the Union was likely to
suffer as a result of breach of contract, and the plaintiff
was not entitled to any relief against forfeiture. Reliance
in support of this contention was placed upon the
expression (used in Section 74 of the Contract Act), "the
party complaining of the breach is entitled, whether or
not actual damage or loss is proved to have been caused
thereby, to receive from the party who has broken the
contract reasonable compensation". It is true that in
every case of breach of contract the person aggrieved by
the breach is not required to prove actual loss or damage
suffered by him before he can claim a decree, and the
Court is competent to award reasonable compensation in
case of breach even if no actual damage is proved to
have been suffered in consequence of the breach of
29Page 30
contract. But the expression "whether or not actual
damage or loss is proved to have been caused thereby" is
intended to cover different classes of contracts which
come before the Courts. In case of breach of some
contracts it may be impossible for the Court to assess
compensation arising from breach, while in other cases
compensation can be calculated in accordance with
established rules. Where the Court is unable to assess the
compensation, the sum named by the parties if it be
regarded as a genuine pre-estimate may be taken into
consideration as the measure of reasonable
compensation, but not if the sum named is in the nature
of a penalty. Where loss in terms of money can be
determined, the party claiming compensation must prove
the loss suffered by him.
In the present case, it was possible for the Government of
India to lead evidence to prove the rates at which
potatoes, poultry, eggs and fish were purchased by them
when the plaintiff failed to deliver "regularly and fully"
the quantities stipulated under the terms of the contracts
and after the contracts were terminated. They could have
proved the rates at which they had to be purchased and
also the other incidental charges incurred by them in
procuring the goods contracted for. But no such attempt
was made.”(At page 933,934)
36. In Shree Hanuman Cotton Mills and Anr. v. Tata Aircraft
Limited, 1970 (3) SCR 127 it was held:
“From a review of the decisions cited above, the
following principles emerge regarding "earnest":
(1) It must be given at the moment at which the contract
is concluded.
30Page 31
(2) It represents a guarantee that the contract will be
fulfilled or, in other words, 'earnest' is given to bind the
contract.
(3) It is part of the purchase price when the transaction
is carried out.
(4) It is forfeited when the transaction falls through by
reason of the default or failure of the purchaser.
(5) Unless there is anything to the contrary in the terms
of the contract, on default committed by the buyer, the
seller is entitled to forfeit the earnest” (At page 139)
“The learned Attorney General very strongly urged that
the pleas covered by the second contention of the
appellant had never been raised in the pleadings nor in
the contentions urged before the High Court. The
question of the quantum of earnest deposit which was
forfeited being unreasonable or the forfeiture being by
way of penalty, were never raised by the appellants. The
Attorney General also pointed out that as noted by the
High Court the appellants led no evidence at all and,
after abandoning the various pleas taken in the plaint,
the only question pressed before the High Court was that
the deposit was not by way of earnest and hence the
amount could not be forfeited. Unless the appellants had
pleaded and established that there was unreasonableness
attached to the amount required to be deposited under
the contract or that the clause regarding forfeiture
amounted to a stipulation by way of a penalty, the
respondents had no opportunity to satisfy the Court that
no question of unreasonableness or the stipulation being
by way of penalty arises. He further urged that the
question of unreasonableness or otherwise regarding
earnest money does not at all arise when it is forfeited
according to the terms of the contract.
 In our opinion the learned Attorney General is well
founded in his contention that the appellants raised no
31Page 32
such contentions covered by the second point, noted
above. It is therefore unnecessary for us to go into the
question as to whether the amount deposited by the
appellants, in this case, by way of earnest and forfeited
as such, can be considered to be reasonable or not. We
express no opinion on the question as to whether the
element of unreasonableness can ever be considered
regarding the forfeiture of an amount deposited by way
of earnest and if so what are the necessary factors to be
taken into account in considering the reasonableness or
otherwise of the amount deposited by way of earnest. If
the appellants were contesting the claim on any such
grounds, they should have laid the foundation for the
same by raising appropriate pleas and also led proper
evidence regarding the same, so that the respondents
would have had an opportunity of meeting such a
claim.”(At page 142)
37. And finally in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC
705, it was held:
“64. It is apparent from the aforesaid reasoning recorded
by the Arbitral Tribunal that it failed to consider Sections
73 and 74 of the Indian Contract Act and the ratio laid
down in Fateh Chand case [AIR 1963 SC 140: (1964) 1
SCR 515 at p. 526] wherein it is specifically held that
jurisdiction of the court to award compensation in case
of breach of contract is unqualified except as to the
maximum stipulated; and compensation has to be
reasonable. Under Section 73, when a contract has been
broken, the party who suffers by such breach is entitled
to receive compensation for any loss caused to him which
the parties knew when they made the contract to be likely
to result from the breach of it. This section is to be read
with Section 74, which deals with penalty stipulated in
the contract, inter alia (relevant for the present case)
provides that when a contract has been broken, if a sum
32Page 33
is named in the contract as the amount to be paid in case
of such breach, the party complaining of breach is
entitled, whether or not actual loss is proved to have
been caused, thereby to receive from the party who has
broken the contract reasonable compensation not
exceeding the amount so named. Section 74 emphasizes
that in case of breach of contract, the party complaining
of the breach is entitled to receive reasonable
compensation whether or not actual loss is proved to
have been caused by such breach. Therefore, the
emphasis is on reasonable compensation. If the
compensation named in the contract is by way of penalty,
consideration would be different and the party is only
entitled to reasonable compensation for the loss suffered.
But if the compensation named in the contract for such
breach is genuine pre-estimate of loss which the parties
knew when they made the contract to be likely to result
from the breach of it, there is no question of proving such
loss or such party is not required to lead evidence to
prove actual loss suffered by him.
67……..In our view, in such a contract, it would be
difficult to prove exact loss or damage which the parties
suffer because of the breach thereof. In such a situation,
if the parties have pre-estimated such loss after clear
understanding, it would be totally unjustified to arrive at
the conclusion that the party who has committed breach
of the contract is not liable to pay compensation. It
would be against the specific provisions of Sections 73
and 74 of the Indian Contract Act. There was nothing on
record that compensation contemplated by the parties
was in any way unreasonable. It has been specifically
mentioned that it was an agreed genuine pre-estimate of
damages duly agreed by the parties. It was also
mentioned that the liquidated damages are not by way of
penalty. It was also provided in the contract that such
damages are to be recovered by the purchaser from the
bills for payment of the cost of material submitted by the
contractor. No evidence is led by the claimant to
establish that the stipulated condition was by way of
33Page 34
penalty or the compensation contemplated was, in any
way, unreasonable. There was no reason for the Tribunal
not to rely upon the clear and unambiguous terms of
agreement stipulating pre-estimate damages because of
delay in supply of goods. Further, while extending the
time for delivery of the goods, the respondent was
informed that it would be required to pay stipulated
damages.
68. From the aforesaid discussions, it can be held that:
(1) Terms of the contract are required to be taken into
consideration before arriving at the conclusion whether
the party claiming damages is entitled to the same.
(2) If the terms are clear and unambiguous stipulating
the liquidated damages in case of the breach of the
contract unless it is held that such estimate of
damages/compensation is unreasonable or is by way of
penalty, party who has committed the breach is required
to pay such compensation and that is what is provided in
Section 73 of the Contract Act.
(3) Section 74 is to be read along with Section 73 and,
therefore, in every case of breach of contract, the person
aggrieved by the breach is not required to prove actual
loss or damage suffered by him before he can claim a
decree. The court is competent to award reasonable
compensation in case of breach even if no actual damage
is proved to have been suffered in consequence of the
breach of a contract.
(4) In some contracts, it would be impossible for the
court to assess the compensation arising from breach
and if the compensation contemplated is not by way of
penalty or unreasonable, the court can award the same if
it is genuine pre-estimate by the parties as the measure of
reasonable compensation.”
34Page 35
38. It will be seen that when it comes to forfeiture of earnest
money, in Fateh Chand’s case, counsel for the appellant conceded on
facts that Rs.1,000/- deposited as earnest money could be forfeited.
(See: 1964 (1) SCR Page 515 at 525 and 531).
39. Shree Hanuman Cotton Mills & Another which was so
heavily relied by the Division Bench again was a case where the
appellants conceded that they committed breach of contract. Further,
the respondents also pleaded that the appellants had to pay them a sum
of Rs.42,499/- for loss and damage sustained by them. (See: 1970 (3)
SCR 127 at Page 132). This being the fact situation, only two
questions were argued before the Supreme Court: (1) that the amount
paid by the plaintiff is not earnest money and (2) that forfeiture of
earnest money can be legal only if the amount is considered
reasonable. (at page 133). Both questions were answered against the
appellant. In deciding question two against the appellant, this Court
held:-
“But, as we have already mentioned, we do not propose
to go into those aspects in the case on hand. As
mentioned earlier, the appellants never raised any
contention that the forfeiture of the amount amounted to
a penalty or that the amount forfeited is so large that the
forfeiture is bad in law. Nor have they raised any
35Page 36
contention that the amount of deposit is so unreasonable
and therefore forfeiture of the entire amount is not
justified. The decision in Maula Bux's [1970]1SCR928
had no occasion to consider the question of
reasonableness or otherwise of the earnest deposit being
forfeited. Because, from the said judgment it is clear that
this Court did not agree with the view of the High Court
that the deposits made, and which were under
consideration, were paid as earnest money. It is under
those circumstances that this Court proceeded to
consider the applicability of Section 74 of the Contract
Act. (At page 143)”
40. From the above, it is clear that this Court held that Maula
Bux’s case was not, on facts, a case that related to earnest money.
Consequently, the observation in Maula Bux that forfeiture of earnest
money under a contract if reasonable does not fall within Section 74,
and would fall within Section 74 only if earnest money is considered a
penalty is not on a matter that directly arose for decision in that case.
The law laid down by a Bench of 5 Judges in Fateh Chand’s case is
that all stipulations naming amounts to be paid in case of breach
would be covered by Section 74. This is because Section 74 cuts
across the rules of the English Common Law by enacting a uniform
principle that would apply to all amounts to be paid in case of breach,
whether they are in the nature of penalty or otherwise. It must not be
36Page 37
forgotten that as has been stated above, forfeiture of earnest money on
the facts in Fateh Chand’s case was conceded. In the circumstances,
it would therefore be correct to say that as earnest money is an amount
to be paid in case of breach of contract and named in the contract as
such, it would necessarily be covered by Section 74.
41. It must, however, be pointed out that in cases where a public
auction is held, forfeiture of earnest money may take place even
before an agreement is reached, as DDA is to accept the bid only after
the earnest money is paid. In the present case, under the terms and
conditions of auction, the highest bid (along with which earnest
money has to be paid) may well have been rejected. In such cases,
Section 74 may not be attracted on its plain language because it
applies only “when a contract has been broken”.
42. In the present case, forfeiture of earnest money took place long
after an agreement had been reached. It is obvious that the amount
sought to be forfeited on the facts of the present case is sought to be
forfeited without any loss being shown. In fact it has been shown that
far from suffering any loss, DDA has received a much higher amount
on re-auction of the same plot of land.

43. On a conspectus of the above authorities, the law on
compensation for breach of contract under Section 74 can be stated to
be as follows:-
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 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.
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.

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.
4. The Section applies whether a person is a plaintiff or a
defendant in a suit.
5. The sum spoken of may already be paid or be payable in
future.
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
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.
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.

44. The Division Bench has gone wrong in principle. As has been
pointed out above, there has been no breach of contract by the
appellant. Further, we cannot accept the view of the Division Bench
that the fact that the DDA made a profit from re-auction is irrelevant,
as that would fly in the face of the most basic principle on the award
of damages – namely, that compensation can only be given for
damage or loss suffered. If damage or loss is not suffered, the law
does not provide for a windfall.
45. A great deal of the argument before us turned on notings in files
that were produced during cross-examination of various witnesses.
We have not referred to any of these notings and, consequently, to any
case law cited by both parties as we find it unnecessary for the
decision of this case.
46. Mr. Sharan submitted that in case we were against him, the
earnest money that should be refunded should only be refunded with
7% per annum and not 9% per annum interest as was done in other
cases. We are afraid we are not able to agree as others were offered
the refund of earnest money way back in 1989 with 7% per annum
interest which they accepted. The DDA having chosen to fight the

present appellant tooth and nail even on refund of earnest money,
when there was no breach of contract or loss caused to it, stands on a
different footing. We, therefore, turn down this plea as well.
47. In the result, the appeal is allowed. The judgment and order of
the Single Judge is restored. Parties will bear their own costs.
…..…………………J.
(Ranjan Gogoi)
…..…………………J.
(R.F. Nariman)
New Delhi;
January 09, 2015.

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