Sh. K G Krishnamurthi vs Ms. Vijyeta Gupta
- Court
- Delhi High Court
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Reserved on: 14 August, 2026
nd
Pronounced on: 2 November, 2026
nd
Uploaded on: 2 November, 2026
# CNR No. DLHC010216422021
+ RFA 268/2021, CM APPL. 21677-21678/2021
SH. K.G. KRISHNAMURTHY
S/o Late Sri K. Kottaya
R/o C-490, YojnaVihar, Delhi.
.....Appellant
Through: Mr. Sunil Kumar, Advocate.
versus
MS. VIJYETA GUPTA
W/O Sh. Ashish Gupta
R/o B-68, Suraj Mal Vihar,
Delhi.
.....Respondents
Through: Mr. Arjun Sanjay, Advocate.
CORAM:
HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA
J U D G M E N T
NEENA BANSAL KRISHNA, J.
1. This Regular First Appeal under Section 96 read with Order XLI of
the Code of Civil Procedure has been filed against the Judgment and Order
dated 04.03.2021, whereby the suit bearing CS No.207/2017 was decreed in
favour of the Plaintiff/Respondent for Recovery of Rs.1,50,00,000/- along
with pendent lite and future interest @ 4% per annum. The Counter-Claim
RFA 268/2021 Page 1 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
bearing C.S. No.477/2020 filed by the Defendant/Appellant, Sh. K.G.
Krishnamurthy for Rs. 1,00,00,000/- was dismissed.
2. The facts in brief, as narrated in the Plaint, are that the Defendant,
Sh. K.G. Krishnamurthy approached her husband, Sh. Ashish Gupta, in
February 2016, for the sale of his property bearing No. C-490, Yojna Vihar,
Delhi, admeasuring 336.87 Sq. Yards (hereinafter referred to as “ suit
property ”) vide Agreement to Sell dated 15.02.2016.
3. The Plaintiff asserted that at the time of the preparation of the draft
Agreement, she had made it clear that she would be obtaining a housing loan
for the purchase of the suit property and that Clauses 4 and 5 were
incorporated in the Agreement for this purpose. It was further asserted that
the Agreement was to be executed and registered upon receipt of the original
documents relating to the suit property from the Defendant.
4. The Plaintiff paid a total sum of Rs.1,50,00,000/- (1,05,00,000/- in
cash and Rs.45,00,000/- vide DD No. 501393 dated 15.02.2016) on the
presumption that the Defendant shall perform all the duties and obligations,
as mentioned in the draft Agreement.
5. The Plaintiff further asserted that, despite having received
₹1,50,00,000/-, the Defendant failed to provide the original Lease Deed,
which was necessary for obtaining a housing loan for the purchase of the suit
property. Consequently, she could not avail of the loan, and the processing
fee paid for the purpose, was forfeited by the Bank
6. It was further asserted that since she along with other family
members, was in need of a residence, she purchased another property for
which she availed housing finance from Axis Bank.
RFA 268/2021 Page 2 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
7. The Plaintiff stated that the Defendant, with mala fide intention,
issued a Legal Notice dated 30.09.2016 calling upon her to pay the balance
consideration. In her Reply dated 10.12.2016, the Plaintiff sought refund of
Rs.1,50,00,000/- on the ground that the Defendant had failed to fulfil his
obligation; however, the amount was not refunded.
8. Aggrieved, the Plaintiff filed the Suit for Recovery of
Rs.1,50,00,000/- along with pendent lite and future interest @ 18% per
annum.
9. The Defendant, Sh. K.G. Krishnamurthy , in his Written Statement
and also the Counter-Claim, took the preliminary objection that, in terms
of Clause 8 of the Agreement to Sell dated 15.02.2016 and Legal Notice
dated 30.09.2016, the earnest money stood forfeited, and the Agreement
stood cancelled. He further stated that because of this act of the Plaintiff, he
had to undergo losses as he intentionally delayed in purchasing the property
and therefore, he was entitled to seek damages of Rs. 1,00,000,00/-.
10. It was also stated that the Plaintiff had not paid the requisite Court Fee
and that the Suit was without a cause of action.
11. On merits, the Defendant averred that the Plaintiff, along with her
husband and one Mr. Batra, had approached him for purchase of the suit
property, pursuant to which the Agreement dated 15.02.2016 was prepared
and duly witnessed. It was stated that Mr. Batra had also written the
Plaintiff‟s name in capital letters below her signatures and that the Plaintiff
had admitted the execution of the draft Agreement to Sell dated 15.02.2016.
12. It was further asserted that the Plaintiff had not placed on record any
document to show that she had sought the original title documents between
15.02.2016 and 10.05.2016, i.e., when she entered into another Agreement
RFA 268/2021 Page 3 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
until 10.12.2016, when the plea regarding non-supply of documents was
taken up for the first time only in the Reply to the Legal Notice, but, by then,
because of lapse of time, the earnest money stood forfeited.
13. It was further asserted that copies of the necessary documents had
been supplied to the Plaintiff, at the time of execution of the Agreement to
Sell. Further, he stated that Clauses 4 and 5 of the Agreement did not
specifically require the supply of original documents. Although in Clause 5
of the Agreement, it was mentioned that “ the buyer will be availing home
loan and necessary documents, legal/KYC, will be provided by the seller ”,
he had supplied to the Plaintiff copies of all the documents relating to the
suit property. The Plaintiff never sought original documents, nor placed on
record any document to show that she had ever asked for original documents
from the Defendant.
14. It was claimed that the Plaintiff concealed the fact that she purchased
another property, vide Agreement to Sell dated 10.05.2016 and had also
deposited the title papers before the bank, on 17.05.2016.
15. The Defendant further claimed that the Plaintiff had breached the
terms of the Agreement and that the earnest money stood forfeited, as the
Agreement to Sell Clauses had been flouted by the Plaintiff. Therefore, by
her own conduct, she cannot seek the refund of the amount by asserting that
it is by way of prevalence.
16. The Defendant further asserted that he had performed his obligations
under the Agreement and had given the Plaintiff one more opportunity to
pay the balance amount by 20.10.2016 instead of the stipulated date of
15.08.2016. In paragraph 8 of the Legal Notice dated 30.09.2016, the
Defendant wrote to the Plaintiff as under:
RFA 268/2021 Page 4 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
"My client tried to contact you numerous times, but you
neither acknowledged nor you have the courtesy to call
my client and explain the difficulty which prevent you
from performing your part of the contract."
17. Moreover, it was averred that the Plaintiff had failed to arrange the
balance sale consideration, resulting in forfeiture of the earnest money under
Clause 8 of the Agreement. He stated that he had visited the office of the
Sub-Registrar on 16.08.2016, but the Plaintiff had failed to appear.
18. It was, therefore, submitted that the suit of the Plaintiff was liable to
be dismissed.
19. The Appellant/Defendant, K.G. Krishnamurthy, had also filed a
Counter-Claim bearing CS No. 477/2020 seeking recovery of
₹1,00,00,000/- from Mrs. Vijeta Gupta, by asserting that he had suffered
damages on account of the Plaintiff having failed to honour the Agreement
to Sell.
20. The Plaintiff, Vijeta Gupta, in her Written Statement to the Counter-
Claim, took the preliminary objection that the Agreement to Sell dated
15.02.2016 was a forged document, bearing forged signatures, and that she
had never signed the Agreement, as the original Agreement is in her custody.
She denied that the Counter-Claimant was entitled to forfeit the earnest
money.
21. The Plaintiff, in her Replication to the Main Suit, reaffirmed the
assertions made in the plaint and denied the averments made in the Written
Statement.
RFA 268/2021 Page 5 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
22. The Defendant, in his Replication to the Written Statement filed in
the Counter-Claim, reaffirmed the assertions made in the Counter-Claim.
23. The issues on the pleadings in the Suit were framed on 20.08.2018 ,
as under :
“(1) Whether plaintiff is entitled for decree of
recovery as prayed for along with pendent lite and future
interest @ 18 % per annum from the date of filing of suit
till realization ? (OPP)
(2) Whether plaintiff is entitled for relief to restrain
the defendant from creating any third party interest in the
subject property ? (OPP) (re-framed vide order dated
01.02.2021).
(3) Whether the plaintiff has not paid requisite court
fee? (OPD)
(4) Relief.”
24. The issues on the Counter-Claim were framed on 20.08.2018 as
under:
“(1) Whether the counter-claimant is entitled for
decree of counter-claim or damages as prayed for?
(OPC/C)
(2) Whether the counter-claimant is entitled for
interest @ 12 % per annum compoundable quarterly
from the date of filing of the counter claim along with
pendent lite and future interest till realization as prayed
for ? (OPC/C)
(3) Relief.”
25. The evidence in both the suits was recorded together. In support of her
case, the Plaintiff examined herself as PW-1 , who tendered evidence by way
of affidavit and proved the Agreement to Sell dated 15.02.2026 as PW1/1,
copy of document relating to property No. 118, Shreshtha Vihar as Mark A,
Legal Notice dated 30.09.2016 as PW1/2, copy of reply dated 10.12.2016 as
RFA 268/2021 Page 6 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
Mark B, Postal receipts of dispatch of the reply along with tracking report as
Ex. PW1/3.
26. PW-2, Manish Gupta , brother-in-law of the Plaintiff, tendered his
evidence by way of Affidavit, Ex. PW2/A and deposed on similar lines as
PW-1.
27. PW-3, Sumit Chhabra , Real Estate Agent, tendered his evidence by
way of Affidavit, Ex. PW 3/A and supported the testimony of the Plaintiff.
28. The Defendant, K.G. Krishnamurthy , examined himself as DW-1 ,
who tendered his evidence by way of Affidavit and proved the copy of the
receipt dated 16.08.2016 issued from the office of the Sub-Registrar as
Mark. DW1/2 and reply dated 10.12.2016 to the legal notice as Ex. DW1/3.
29. DW-2, Srikanth Koneru , son of the Defendant , corroborated the
testimony of DW-1.
30. The learned District Judge , in the judgment dated 04.03.2021,
referred to the evidence of the Plaintiff to conclude that it was not
established by her that she had ever sought the original documents of title of
the property from the Defendant nor had she mentioned any date and month
when she had orally requested the Defendant for the same. Further, it was
observed that she had not placed any written communication from the Bank
which required her to provide the original perpetual Sub-Lease Deed of the
suit property, for the purpose of sanctioning the loan.
31. Further, it was observed that it was for the Defendant to prove that he
had suffered damages on account of non-performance of the Agreement to
Sell dated 15.02.2016. It was held that the Defendant had failed to prove that
he had suffered any damages on account of breach of the Agreement to Sell,
as the News- Paper Articles relied upon by him, were general and they
RFA 268/2021 Page 7 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
were not supported with any Certificate under Section 65B Indian Evidence
Act,
32. Consequently, the Plaintiff was held entitled to recovery of ₹1, 50,
00,000/- along with pendent lite and future interest @ 4% per annum.
However, the Counter-Claim of the Defendant for recovery of damages of
₹1, 00, 00,000/-, was dismissed .
33. Aggrieved by the Decree of the Suit and dismissal of the Counter
Claim, the Defendant/Appellant has filed the present Appeal.
34. The grounds of challenge are that the Trial Court has not appreciated
that the Defendant/Appellant, to prove his losses, had filed a registered Sale
Deed dated 23.05.2016 in respect of property bearing No. 118,
ShresthaVihar, Delhi, ad-measuring 300.10 sq. yards, purchased by the
plaintiff on 20.05.2016, for a sale consideration of ₹4,25,00,000/-.
35. It is contended that the Defendant/Appellant was not required to file
any other Sale Deed, since the other property purchased by the Respondent,
was at a distance of 0.5 km from the suit property. Both properties were
situated in the same locality, but the best evidence has been ignored by the
learned trial court.
36. It is contended that YojanaVihar and ShresthaVihar are adjacent to
each other and are in the same locality and both the colonies come under the
jurisdiction of the VivekVihar Sub-Registrar Office and belong to the same
category for stamp duty classification. It is contended that from the Sale
Deed dated 23.05.2016, the price of the suit property, along with similar
properties in the same locality, stood established.
37. It is further contended that the Plaintiff/Respondent had agreed to
purchase the suit property for ₹12,80,00,000/-, whereas a similarly situated
RFA 268/2021 Page 8 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
property was purchased by her for ₹4,25,00,000/-, that is, at a much lesser
price. It is, therefore, evident that the price of the suit property was declining
and the Appellant suffered a loss of sale price.
38. Further, it has not been considered that the prices of the property had
gone down by 10% to 15%, as is evident from the Economic Survey
conducted by „ Hindustan Times‟ and „Times of India‟ , published vide
Articles dated 09.11.2017 and 31.01.2017, respectively.
39. These crucial Reports have been erroneously overlooked on the
ground that they were not supported by a Certificate under Section 65B of
the Indian Evidence Act. It is contended that the Trial Court ought to have
taken judicial notice of the reports submitted by the Ministry of Housing and
Urban Affairs before the Parliamentary Committee regarding the decrease in
prices of property in all major cities in India ought to have been taken.
40. Further, the Plaintiff/Respondent conveniently backed out of buying
the Suit Property and never indicated her willingness and readiness to
purchase the suit property by paying the balance sale consideration. The
appellant suffered the loss of an opportunity to sell the suit property to any
other person since the Respondent had agreed to purchase it.
41. It was contended that the judgment of the Supreme Court in Fateh
Chand v. BalkishanDass , AIR 1963 SC 1405, entitles the Appellant to
forfeit a reasonable amount, without proving any damages in case of breach
of an Agreement, which judgment was not considered by the learned trial
court.
42. Furthermore, it is settled law that in case of breach of the Agreement,
the affected party has to prove the loss and not the quantum of loss, in order
RFA 268/2021 Page 9 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
to forfeit the earnest money, as agreed upon by the parties at the time of
entering into the Agreement.
43. Further, the Plaintiff/Respondent has not approached the court with
clean hands. It has been held by the Apex Court on numerous occasions that
a person who approaches the court with tainted hands is not entitled to any
relief. The conduct of the Plaintiff/Respondent was not bona fide throughout
the transaction. In fact, she purchased another property without informing
the Appellant. After receiving the Legal Notice from the Appellant calling
upon her to perform her part of the obligation, the Plaintiff/Respondent filed
a false Suit for recovery on false averments.
44. It is, therefore, submitted that the impugned Judgment be set aside
and the suit of the Plaintiff be dismissed while the counter-claim of the
appellant/Defendant be allowed.
45. A prayer is also made that additional evidence be permitted to be led
by the Appellant under Order XLI Rule 27 CPC , in regard to the loss of
price.
46. The Defendant/Appellant, in his additional Written Submissions,
reiterated the assertions made in his pleadings as well as the grounds of
Appeal.The Appellant has relied upon the judgment of Desh Raj & Ors. vs.
Rohtash Singh [2022] 18 SCR 65, K.R. Suresh vs. R. Poornima & Ors .
[2025] 6 SCR 22 and Satish Batra vs. Sudhir Rawal [2012] 9 SCR 662.
Submissions heard and record perused .
47. The present dispute arises out of the Agreement to Sell between the
parties dated 15.02.2016 in respect of the suit property, along with the entire
superstructure, for a total sale consideration of Rs. 12,80,00,000/-. The
Agreement to Sell dated 15.02.2016 stipulated that the balance sale
RFA 268/2021 Page 10 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
consideration was to be paid on or before 15.08.2016. Also, admittedly, part
sale consideration of Rs.1,50,00,000/- was paid by the Plaintiff to the
defendant/Appellant.
48. The relevant clauses of the Agreement to Sell as relied upon by the
parties are produced under:
49. It is not in dispute that the Plaintiff purchased another property
bearing No. 118, Shrestha Vihar, Delhi, ad-measuring 300.10 sq. yards for a
sale consideration of ₹4,25,00,000/-, vide Agreement to Sell dated
RFA 268/2021 Page 11 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
10.05.2016, which was before the expiry of the first Agreement to Sell. It is
also not in dispute that the Plaintiff, even though she purchased the above-
mentioned Property on 10.05.2016,had not given any Notice to the
Defendant.
50. The question which arises for consideration is whether the Plaintiff
was entitled to recovery of ₹1,50,00,000/- which she had admittedly paid
under the Agreement to Sell, and whether the Defendant was entitled to
damages in the sum of ₹1,00,00,000/-.
51. The first aspect which emerges is that, though the amount of
₹1,50,00,000/- was described as the bayana (earnest money) in the
Agreement to Sell dated 15.02.2016, the balance consideration of Rs.
11,30,00,000/- was payable on or before 15.08.2016. Furthermore, Clause 5
of the Agreement to Sell recorded that the Plaintiff would avail a loan
facility to pay the balance sale consideration.
52. The Apex Court in a plethora of judgments, has explained the
distinction between “earnest money” and “advance/part payment.”
53. The term “advance/part-payment” means money, in whole or in
part, forming part of the consideration of an Agreement, paid before the
same becomes fully payable. On the other hand, “ earnest money ” means a
sum of money given for the purpose of binding a contract, which is forfeited
in case the contract does not materialise.
54. In the case of Shree Hanuman Cotton Mills vs. Tata Air Craft Ltd. ,
(1969) 3 SCC 522, while dealing with the concept of earnest money it was
held as under:-
RFA 268/2021 Page 12 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
“16. Benjamin, in his book on 'Sale, 8th Edition, after
referring to clause 17 of the Statute of Frauds and S. 4(1) of
the Sale of Goods Act, 1893 providing for giving "something
in earnest to bind the -contract, or in part payment", says, at
p. 219 :
" give something in earnest' or 'in part payment,' are often
treated as meaning the same thing, although the language
clearly intimates that the earnest is something to bind the
bargain,' or, 'the contract,' whereas it is manifest that there
can be no part payment till after the bargain has been bound,
or closed."
The author further states that there are two distinct
alternatives, viz., a buyer may give the seller money or a
present as a token or evidence of the bargain quite apart from
the price, i.e., earnest, or he may give him part of the agreed
price -to be set off against the money to be finally paid, i.e.,
part payment and that if the buyer fails -to carry out the
contract and it is rescinded, cannot recover the earnest, but
he may recover the part payment. But this does not affect the
seller's right to recover damages for breach of contract unless
it as by way of deposit or guarantee in which case it is
forfeited. It is further stated that an earnest does not lose its
character because the same thing might also avail as a part
payment.
…
18. Halsbury, in "Laws of England", Vol. 34, III Edition, in
paragraph 189 at p. 118, dealing with deposit, states :
RFA 268/2021 Page 13 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
"Part of the price may be payable as a deposit. A part
payment is to be distinguished from a deposit or earnest. A
deposit is paid primarily as security that the buyer, will duly
accept and pay for the goods, but, subject thereto, forms part
of the price. Accordingly, if the buyer is unable or unwilling to
accept and pay for the goods, the seller may repudiate the
contract and retain the deposit."
Earl Jowitt, in his Dictionary of English Law , says
"Giving an earnest or earnest-money is a mode of signifying
assent to a contract of sale or the like, by giving to the vendor
a nominal sum (e.g., a shilling) as a token that the parties are
in earnest or have made up their minds."
…
21. …, the following principles emerge regarding
“earnest”:
(1) It must be given at the moment at which the contract is
concluded.
(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.”
55. The Apex Court again, in the case of Videocon Properties Ltd. vs.
Bhalchandra Laboratories , (2004) 3 SCC 711, examined the nature and
character of the earnest money deposit and observed that earnest money
RFA 268/2021 Page 14 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
fulfils a dual purpose; first , it operates as part-payment of the purchase price
and; secondly , as security for the performance of the contractual obligations.
Thus, its true character and purpose can only be examined on a close reading
of the agreement, and the relevant contextual factors. Further, the words
used in the agreement alone cannot be determinative of the true nature of the
amount advanced. Instead, the intention of the parties and the surrounding
circumstances serve as more appropriate indicators. The relevant
observations are reproduced herein below:
“14. […….] Further, it is not the description by words
used in the agreement only that would be determinative of
the character of the sum but really the intention of parties
and surrounding circumstances as well, that have to be
looked into and what may be called an advance may
really be a deposit or earnest money and what is termed
as `a deposit or earnest money' may ultimately turn out to
be really an advance or part of purchase price. Earnest
money or deposit also, thus, serves two purposes of being
part payment of the purchase money and security for the
performance of the contract by the party concerned, who
paid it.”
56. The three-judge Bench of the Apex Court in the Case of Central Bank
of India vs. Shanmugavelu , (2024) 6 SCC 641, reiterated the difference
between the “earnest money” and the “advance money”. It was held that if
earnest money is adjusted towards the sale consideration, it loses its
character of earnest money and becomes part-payment. It was held that the
earnest money can be treated as part-payment of sale consideration, only if
the contractual terms under the Agreement are honoured. An advance is a
RFA 268/2021 Page 15 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
part to be adjusted at the time of final payment. If the promise defaults in
carrying out the contract, he loses the earnest money, but may recover part
payment, leaving untouched the promisor‟s right to recover the damages.
57. Applying the aforesaid principles to the facts of the present case, the
amount of ₹1,50,00,000/- cannot be treated as earnest money liable to
forfeiture, merely based on its description as bayana in the Agreement to
Sell. The total sale consideration was ₹12,80,00,000/-, with the balance
amount of ₹11,30,00,000/- payable on or before 15.08.2016. Clause 5 further
recorded that the Plaintiff would avail a loan facility to pay the balance sale
consideration. A conjoint reading of these terms indicates that the amount of
₹1,50,00,000/- constituted part payment of the sale consideration, intended
to be adjusted against the purchase price,at the time of completion of the
transaction.
58. While the learned Trial Court rightly observed that the Plaintiff had
failed to place on record any document showing that the loan had been
availed, or that an Application had been made for obtaining the loan, or that
the original documents had been sought from the Defendant for that purpose,
the main aspect for considerationis whether the Defendant was entitled to
forfeit the amount received by him under the Agreement to Sell.
59. In this regard, it would be pertinent to refer to Section 73 and 74 of
the Indian Contract Act, 1872, which reads as under:
“73. Compensation for loss or damage caused by breach
of contract.— When a contract has been broken, the party
who suffers by such breach is entitled to receive, from the
party who has broken the contract, compensation for any
loss or damage caused to him thereby, which naturally
RFA 268/2021 Page 16 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
arose in the usual course of things from such breach, or
which the parties knew, when they made the contract, to
be likely to result from the breach of it. Such
compensation is not to be given for any remote and
indirect loss or damage sustained by reason of the
breach.
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
compensation not exceeding the amount so named or, as
the case may be, the penalty stipulated for.”
60. A plain reading of Section 73 makes it evident that a party who suffers
on account of breach of contract is entitled to compensation for the loss or
damage caused to it by such breach. Section 74 further provides that, even
where a sum is named in the contract as payable in case of breach, the
aggrieved party is entitled only to reasonable compensation, not exceeding
the amount so named or the penalty stipulated.
61. The Constitution Bench of the Supreme Court in Fateh Chand v.
Balkishan Das , (1964) 1 SCR 515, held that the words “whether or not
actual damage or loss is proved” in Section 74 merely dispense with proof
of the precise quantum of loss and do not dispense with the existence of
RFA 268/2021 Page 17 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
legal injury. “ Section 74 does not justify the award of compensation where,
in consequence of the breach, no legal injury has resulted”.
62. The principles were comprehensively restated by the Supreme Court
in Kailash Nath Associates v. Delhi Development Authority , (2015) 4 SCC
136, wherein it was held as under:
“ 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.
…
43.6. 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.”
63. Thus, the party claiming compensation or seeking forfeiture of an
amount stipulated under the contract is required to establish that it has
suffered legal injury or loss on account of the breach. Where the loss is
capable of being proved, the same is required to be established by evidence.
It is only where the loss is difficult or impossible to quantify that the
stipulated amount, if it represents a genuine pre-estimate of loss, may be
awarded as reasonable compensation.
64. From the aforesaid judgments, it emerges that the Defendant had to
prove that he had suffered a loss on account of non-performance of the
RFA 268/2021 Page 18 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
Agreement to Sell dated 15.02.2016. The only evidence relied by the
Defendant in this regard is the Sale Deed dated 10.05.2016, of the property
purchased by the Plaintiff for a consideration amount of ₹4,25,00,000/-,
instead of the property of the Defendant, in respect of which Agreement to
Sell dated, was executed between the parties. The said property was claimed
by the defendant to be similarly situated in the vicinity and admeasured
almost the same area, that is, 300.10 sq. yards, which was comparable to
336.87 sq. yards of the suit property.
65. The issue herein was not that the Plaintiff was able to purchase a
similarly situated property at more than half less value, but the burden was
on the Defendant that value of his property depreciated or that he was
compelled to sell his property at a lesser price or even that during this time
the value of his property depreciated to the extent claimed by him.
However, no positive evidence has been led to establish any fall in real
estate price of his property, to the extent claimed by the Defendant.
66. The Defendant has merely relied upon two Newspaper Reports
published in Hindustan Times and The Times of India . These Reports are
essentially general in nature and referred to the general trends in the real
estate business, but cannot, by themselves, establish that the value of the suit
property had depreciated to the extent claimed by the Defendant.
67. The Plaintiff may have been able to secure a better deal in purchasing
a similarly situated property at a much lower consideration, but that, in itself,
is not sufficient to conclude that the value of the suit property had also
depreciated or had fallen from ₹12,80,00,000/- to ₹4,25,00,000/-.
68. The contention of the Defendant is essentially speculative and is not
supported by any cogent evidence to establish that, on account of non-
RFA 268/2021 Page 19 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
performance of the Agreement to Sell dated 15.02.2016, he had suffered loss
or that the value of his property had diminished to ₹4,25,00,000/-. There
may have been various circumstances which enabled the Plaintiff to
purchase the other property at a much lower consideration, but that, in itself,
cannot be a ground to hold that the value of the suit property had
correspondingly diminished to ₹4,25,00,000/-. For the same reasons, there is
not an iota of evidence to show how and in what manner the Defendant
suffered a loss of ₹1,00,00,000/-, as claimed by him.
69. The learned Trial Court, therefore, rightly held that the Defendant had
failed to prove that he had suffered any loss on account of non-performance
of the Agreement to Sell and was, consequently, not entitled to forfeit the
amount paid by the Plaintiff under the Agreement to Sell.
70. The Appellant has filed CM APPL. 21678/2021 under Order XLI
Rule 27 read with Section 151 CPC for placing on record additional
documents, which are as under:
a. New notification of the Circle Rate dated 26.02.2021
to establish that the circle rates have been substantially
reduced (Annex. A-15)
b. The sale deed of Plot No. 162, Yojna Vihar, dated
18.08.2016 ad. Measuring 298.9 sq. mts., similar to the
Suit Property (Annex. A-16)
c. New Editions of reports of The Hindustan Times and
Times of India dated 31.01.2017 and 09.11.2017
reflecting a reduction ofproperty prices by 10% to 15%.
71. It is, therefore, submitted that the Appellant be allowed to prove these
additional documents in proof of his claim of loss.
RFA 268/2021 Page 20 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
72. Order XLI Rule 27 provides for production of additional evidence in
the Appellate Court in the following circumstances:
“27. Production of Additional Evidence in Appellate
Court.
(1) The parties to an appeal shall not be entitled to
produce additional evidence, whether oral or
documentary, in the Appellate Court, But if:
(a) the Court from whose decree the appeal is preferred
has refused to admit evidence which ought to have been
admitted, or
(aa) the party seeking to produce additional evidence
establishes that notwithstanding the exercise of due
diligence, such evidence was not within his knowledge or
could not, after the exercise of due diligence, be produced
by him at the time when the decree appealed against was
passed, or
(b) the Appellate Court requires any document to be
produced or any witness to be examined to enable it to
pronounce judgment, or for any other substantial cause,
the Appellate Court may allow such evidence or
document to be produced, or witness to be examined.”
73. In the present case, the documents sought to be produced by the
Appellant were neither placed before the learned Trial Court nor was any
request to take them on record refused. Moreover, these documents were not
unavailable at the time of the trial before the learned ADJ. Further, these are
not documents which would enable the Appellate Court to pronounce its
judgment.
74. None of the conditions stipulated under Order XLI Rule 27 CPC for
permitting the production of additional evidence has been satisfied by the
Appellant. The Appellant is merely seeking to lead further evidence to
RFA 268/2021 Page 21 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08
substantiate his contentions, having failed to establish his claim before the
learned Trial Court by producing cogent evidence.
75. Further, the Sale Deed of the similarly situated property is of 2016,
which was available at the relevant time. Moreover, the subsequent Circle
Rates of the year 2021 cannot be taken into consideration for deciding the
present Suit, which was instituted in the year 2017 . Likewise, the relevant
Survey Reports had been produced, which had been considered.
76. The Appellant has failed to establish any of the circumstances
warranting the production of additional evidence under Order XLI Rule
27 CPC. Accordingly, the Application seeking permission to lead
additional, evidence is dismissed.
Conclusion:
77. Thus, the learned District Judge has rightly decreed the Suit of the
Plaintiff for recovery of ₹1,50,00,000/- along with interest @ 4% per
annum, and has rightly dismissed the Counter-Claim of the Appellant.
78. There is no merit in the Appeal, which is accordingly dismissed. The
pending Applications are also disposed of, accordingly.
(NEENA BANSAL KRISHNA)
JUDGE
NOVEMBER 2, 2026
va
RFA 268/2021 Page 22 of 22
Signature Not Verified
Digitally Signed
By:VIKAS ARORA
Signing Date:02.11.2026
17:19:08