M/S S.P. VIRMANI & SONS PVT. LTD. v. M/S OTC EXCHANGE OF INDIA

1. For the reasons stated in this application, the delay of 70 days in filing the review petition is condoned, subject to just exceptions. C.M. stands disposed of.

REVIEW PETITION No. 105/2018 in RFA No. 576/2005

2. By this review petition respondent seeks review of the judgment passed by this Court on 30.10.2017 by which the appeal of the appellant/plaintiff was allowed by setting aside the impugned 2018:DHC:1678 judgment thereby decreeing the suit for a sum of Rs.6,23,000/- along with interest at 7½% per annum simple.

3. Counsel for the respondent/review petitioner argues for no fault of the respondent/review petitioner as the respondent/review petitioner was not represented by its Advocate when the RFA was heard and allowed, and it is argued that there are various grounds which ought to have been argued but have not been argued, and which could have resulted in the impugned judgment dated 30.10.2017 not being passed, and therefore the review petition be allowed.

4. I have gone through the grounds/arguments urged on behalf of the respondent/review petitioner and each of the grounds/arguments relied upon by the respondent are already exhaustively dealt with in paras 6(i) to 6(iii) and paras 7 and 8 of the impugned judgment by holding that the entitlement of the respondent was to forfeit the application amount only after grant of dealership and admittedly no dealership was granted to the appellant/plaintiff because appellant/plaintiff had failed to fulfill the necessary formalities including of giving of an undertaking and which was not given. Also, in paras 7 and 8 of the impugned judgment passed by this Court on 30.10.2017 it is recorded that no loss has been caused to the respondent/review petitioner and therefore even assuming there was a contract but since no loss is pleaded and proved therefore the application money of the appellant/plaintiff could not have been forfeited. I also note that even as per the admitted terms and conditions on account of the applicant not completing formalities only an appropriate amount could be forfeited and not entire application amount and this aspect has been dealt with in paras 6(i) to 6(iii) of the impugned judgment. The relevant paras 6(i) to 6(iii), 7 and 8 read as under:- “6.(i) In my opinion, appellant/plaintiff is entitled to succeed and the impugned judgment has to be set aside because it is seen that on the record of this case, there is no Clause 16 of Annexure-1 to the application form and all that is there on record of the trial court is Clause 11(A) of the procedure of selection which specifies that the onetime non-refundable dealership fee would be of Rs.[6] lacs and dealership is non-transferable. Once therefore there is no clause providing for forfeiture for noncompliance of formalities, the respondent/defendant could not have forfeited the amount received by it for prospective dealership. Even assuming for the sake of arguments that there is a Clause 16 of Annexure- 1 to the letter dated 24.8.1995, and which in addition to what is stated in Clause 11(A) of the procedure for selection provides that if the dealership is terminated the fee of Rs.[6] lacs is non-refundable by the respondent/defendant, even then this clause will come into operation only if dealership is granted. Admittedly, no dealership was granted to the appellant/plaintiff or its sister concern. The issue therefore of forfeiture of dealership fee could only be if the dealership is granted and thereafter cancelled.

(ii) Most importantly I may note that in terms of the same application form containing procedure for selection, in Clause 11(B) and (C) thereof, it is specifically provided that processing fee is only Rs.2,000/- and in case a person is not selected as a dealer, then, after deducting the processing fee of Rs.2,000/-, the remaining amount of Rs.98,000/- would be refunded.

(iii) Also the undertaking Ex.D[2] dated 21.2.1995 given by the appellant/plaintiff only provides that in case of any non-compliance of the undertaking dealership will lapse and decision of the respondent/defendant will be accepted but this undertaking nowhere provides that even before dealership is granted, then, the amount of Rs.6,25,000/- lacs which is given by an applicant, who is a prospective dealer, would stand forfeited for noncompliance of formalities. As already stated above, in terms of Clause 11(B) and (C) of the procedure for selection, in case of non-appointment as a dealer there would only be a processing fee charge of Rs.2,000/- and that no other amount would be deducted by the respondent/defendant. In my opinion therefore the appellant/plaintiff is entitled to succeed by respondent/defendant being directed to refund a sum of Rs.6,23,000/instead of a sum of Rs.6,25,000/-, along with interest from the date of service of the legal notice dated 21.3.1997 (Ex.PW1/6).

7. In my opinion there is also a legal issue on the basis of which this appeal has to be allowed and the suit for recovery filed by the appellant/plaintiff has to be decreed. This is because of the provisions of Sections 73 and 74 of the Indian Contract Act, 1872. In law merely because there is a breach of contract such breach is not actionable unless because of the breach loss is caused to the aggrieved party. There can be forfeiture of an amount paid under a contract only when the aggrieved party is caused loss. Two relevant judgments in this regard are the judgments of the Constitution Bench of the Supreme Court in the case of Fateh Chand Vs. Balkishan Dass AIR 1963 SC 1405 and the recent judgment of the Supreme Court in the case of Kailash Nath Associates Vs. Delhi Development Authority and Another, (2015) 4 SCC 136. The relevant paras in the judgment in the case of Kailash Nath Associates (supra) are paras 34, 43 and 43.[1] to 43.[7] and these paras read as under:-

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:

43.1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.

43.2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.

43.3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.

43.4. The Section applies whether a person is a Plaintiff or a Defendant in a suit.