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2002 DIGILAW 93 (KAR)

L. SAROJA v. BANGALORE DEVELOPMENT AUTHORITY

2002-02-05

A.M.FAROOQ

body2002
A. M. FAROOQ, J. ( 1 ) THE petitioner in this writ petition has prayed for a writ to declare that sub-rule (9) of Rule 13 of the Bangalore Development Authority (Allotment of Sites) Rules, 1984 (hereinafter referred to as 'the Rules') insofar as the same relates to forfeiture of sital value which was deposited by the petitioner as ultra vires of the Constitution of India and to strike down the same and further for a direction to the first respondent-BDA to refund the entire sital value recovered from her for the cancelled allotment along with interest at 8% per annum from the date of receipt till the date of repayment. ( 2 ) BRIEF facts of the case are that the petitioner, an elderly lady, had applied for allotment of a site in response to a notification issued by the first respondent. On her application dated 29-8-1997, a site bearing No. 341 situated at II Block, 8th Phase, J. P. Nagar was directed to be allotted to her on a sale price of Rs. 2,90,000/-, that thereafter the petitioner as required got sworn to an affidavit dated 22-9-1997 as per Annexure-E produced along with the writ petition and also made an initial deposit of rs. 6,885. 00 and thereafter paid rest of the amount and thus altogether i he petitioner has paid a total sum of Rs. 3,04,642. 00. ( 3 ) ADMITTEDLY, the allotted site was not given possession to the petitioner at any time. The petitioner received a show-cause notice dated 11-11-1999 and 18-10-2000 as per Annexures-G and H produced along with the writ petition calling upon the petitioner to show cause why action in accordance with law should not be taken against her for not disclosing the fact that her husband owned a site at the time when the petitioner submitted the application for allotment of the site. The petitioner gave a reply to the said notice. She has stated that it was never her intention to mislead or make false statement while applying for the site. That thereafter, the first respondent by its letter dated 10-4-2000 as per Annexure-J informed the petitioner that it has cancelled the site allotted to her. It is also pertinent to note that in the order Annexure-J except stating that the site allotted has been cancelled, the first respondent did not direct imposing of any penalty on the petitioner. That thereafter, the first respondent by its letter dated 10-4-2000 as per Annexure-J informed the petitioner that it has cancelled the site allotted to her. It is also pertinent to note that in the order Annexure-J except stating that the site allotted has been cancelled, the first respondent did not direct imposing of any penalty on the petitioner. ( 4 ) IT is the case of the petitioner that since the allotment was cancelled, she was entitled to get refund of the sital value deposited by her to the first respondent and since the first respondent had not intimated anything about the refund of the same, the petitioner issued a legal notice calling upon the first respondent to refund the sital value. But since she has not received any reply from the first respondent, she has filed the writ petition. ( 5 ) THE first respondent has filed statement of objections. It is the case of the first respondent that while applying for the site, the petitioner had given false information by suppressing the fact that her husband owned an allotted site. On the said information a site was allotted and when it was found that her husband, namely, Sri L. Ramachandra owned an allotted site, the show-cause notice was issued to the petitioner calling upon the petitioner as to why the said allotment should not be cancelled and after consideration of her reply, the cancellation order was sent. ( 6 ) ACCORDING to the first respondent, Section 69 of the BDA Act provides for making rules to carry out the purposes of the Act and Section 69 (2) (h) empowers the State Government to frame rules regarding allotment or sale by auction of sites by the BDA and in exercise of the said power, Rules have been framed and Rule 10 of the said Rules prescribe the eligibility criteria and under Rule 10 (3) it is specifically provided that "no person should or any member of whose family owns a site or a house or has been allotted a site or a house by the Bangalore Development Authority or any other authority within the Bangalore Metropolitan Area, shall be eligible to apply for allotment of a site". It is stated that under Rule 13 (9) if the particulars furnished by the applicant in the prescribed application for an allotment are found to be incorrect or false, the sital value deposited shall be forfeited and the site shall be resumed by the authority and since admittedly the petitioner has not informed the first respondent about her husband owning such a site, the amount deposited by her towards the sital value is entitled to be forfeited by the respondent under the said Rule and hence the petitioner is not entitled for refund of the sital value deposited by her. ( 7 ) AFTER hearing Sri Y. N. Nagaraja, learned Counsel appearing for the petitioner and Sri C. B. Srinivasan, learned Advocate for the respondents, the only question for consideration in this writ petition is as to whether the first respondent is entitled to forfeit the entire sital value for the non-discosure by the petitioner about her husband owning an allotted site. ( 8 ) RULE 13, sub-rule (9) of the Rules reads as follows:"if the particulars furnished by the applicant in the prescribed application for allotment of site are found to be incorrect or false, the sital value deposited shall be forfeited and the site shall be resumed by the authorities". ( 9 ) SRI C. B. Srinivasan the learned Counsel appearing for the BDA relying upon the judgments of the Hon'ble Supreme Court in Director of enforcement v M/s. MCTM Corporation Private Limited and Others and Pratibha Processors and Others v Union of India and Others and also Jagjit Cotton Textile Mills v Chief Commercial Superintendent, northern Railway and Others, submitted that in view of the above mentioned rule, the BDA is entitled to forfeit the entire consideration amount deposited by the petitioner. In the case of Director of Enforcement, supra, the Hon'ble Supreme Court was considering the Foreign exchange Regulation Act, 1947 and the nature of the adjudicated proceedings under the said Act. It was held that under the said Act the officers of the Enforcement Directorate are expressly empowered by the act to adjudicate only and they have to act judicially and follow the rules of natural justice to the extent applicable and that they are not judges of criminal Courts trying an accused. It was held that under the said Act the officers of the Enforcement Directorate are expressly empowered by the act to adjudicate only and they have to act judicially and follow the rules of natural justice to the extent applicable and that they are not judges of criminal Courts trying an accused. It was held that the officers of the directorate could impose penalty for breach of civil obligation and that will not amount to conviction. In Pratibha Processors case, supra, the hon'ble Supreme Court was considering the scope of Section 61 (2) of the customs Act and in the case of Jagjit Cotton Textile Mills case, supra, the Hon'ble Supreme Court was considering the provisions of the Railways Act, 1989 and 1890 whereunder penal charges were imposed for overloading and it was held that such penal charges is not violative of article 14 and such charges were recoverable from the consignee. In none of the above judgments, the Hon'ble Supreme Court was considering the question of forfeiture of deposits made which were similar to the deposit made in the present case. In my view it is Sections 73 and 74 of the Indian Contract Act which are relevant for considering the question of forfeiture of deposits. ( 10 ) THE Hon'ble Supreme Court in Maula Bux v Union of India, it was held considering Section 74 of the Indian Contract Act that in every case for breach of contract where penalty is stipulated, it is necessary to prove the actual loss or damage. It was held by the Hon'ble Supreme court that in every case of breach of contract, the person aggrieved by the breach is not required to prove the actual loss or damage suffered by him before he could 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 breach of contract. It was held that the expression whether or not actual damage or loss is proved to have been caused thereby is intended to cover different clauses of contracts which come before the Courts. That in case of breach of some contracts, it will be impossible for the Court to assess the compensation arising from breach while in other cases compensation can be calculated in accordance with the established rules. That in case of breach of some contracts, it will be impossible for the Court to assess the compensation arising from breach while in other cases compensation can be calculated in accordance with the established rules. That where the Court is unable to assess the compensation, the sum named by the parties if it recorded 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. That where loss in terms of money can be determined the party claiming compensation must prove the loss suffered by him. Thus the Hon'ble Supreme Court in the said case held that the court may take into consideration the sum named by the parties if it could be regarded as a genuine pre-estimated compensation as a reasonable compensation. But it cannot be taken as a reasonable compensation if the sum named is in the nature of a penalty. ( 11 ) IN Fateh Chand v Balkishan Dass, the Hon'ble Supreme Court again considering Section 74 of the Contract Act has held that it declares the law as to liability upon breach of contract where compensation is by agreement of parties pre-determined or where there is a stipulation by way of penalty. It was held that Section 74 does not confer a special benefit upon any party but it merely declares the law that notwithstanding any term in the contract, pre-determined damages or providing forfeiture of any property by way of penalty, the Court will award to the part y aggrieved, only reasonable compensation not exceeding the amount named or penalty stipulated. That it is for the Court to adjudge in other cases a reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract. Such a compensation has to be ascertained having regard to the conditions existing on the date of breach. In the said case, it was further held that where a covenant in a contract for sale of certain land and building standing therein provided that if for any reason, the vendee failed to get the same registered by the date stipulated an amount of Rs. 25,000/- paid out of the price on delivery of possession shall stand forfeited and the agreement shall be deemed to be cancelled. 25,000/- paid out of the price on delivery of possession shall stand forfeited and the agreement shall be deemed to be cancelled. The Hon'ble Supreme Court held that such a stipulation in the agreement is by way of a penalty. ( 12 ) IN Union of India v Rampur Distillery and Chemical Company limited, it was held that a party to a contract taking security deposit from the other party to ensure due performance of the contract is not entitled to forfeit the deposit on ground of default when no loss is caused to him in consequence of such default. Thus the Hon'ble Supreme Court held in the said case that when no loss is caused in consequence of the breach of contract, the other party is not entitled to forfeit the deposit for the breach. ( 13 ) IN Union of India v K. H, Rao, the Hon'ble Supreme Court again considering Sections 73 and 74 of the Contract Act held that where the plaintiff had committed breach of the contract which gives the discretion to the defendants to forfeit the security deposit, such a forfeiture further would operate as a penalty but the Court cannot in view of exception to section 74 of the Contract Act directly relieve the plaintiff of the hardship on that score nevertheless the Court while assessing the damages under Section 73 could consider the actual damages suffered by the defendant and scale down the damages to that extent. ( 14 ) IN Vema Narasimha Rao v The Superintendent of Excise, Krishna and Others, a Full Bench of Andhra Pradesh High Court while considering the provisions in Excise Contract between the parties that the government is according to the contract had right to recover the amount of compensation for the short lifted quota from the licensee who commit the breach and even if such a claim does not strictly come under Rule 15 of the Retail Vend Rules under common law and subject to Section 74 of the Contract Act, the Government is entitled to recover such liquidated damages and it has to be decided in each case in the light of the facts and circumstances of the case, where a stipulation to pay a certain sum by way of compensation is genuine pre-estimated damages for breach of contract or it is so excessive and unreasonable as to amount of penalty. It was held in the first case, the Government will be entitled to no more and no less than the amount so stipulated and in the second case the government will in any case be entitled to a reasonable compensation to he determined according to the facts and circumstances of each case. ( 15 ) ADMITTEDLY the rule on which the respondent relies upon provides for penalty for not having given the required information while applying for the allotment of site. It is in the nature of penalty, and therefore, section 74 of Contract Act applies as held by the Hon'ble Supreme Court in the above cited judgments. As held by the Supreme Court in every case of contract, the person aggrieved by breach is not required to prove the actual loss or damage suffered by him before he could claim a decree and the Court is competent to award a reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. The above cited decisions also state that where loss in terms of money can be determined, party claiming compensation must prove the loss suffered by him and in other case, the Court could grant reasonable compensation. ( 16 ) IN the present case, admittedly the facts are that even though the petitioner was notified about the allotment of site, the site allotted was m fact not given to the possession of the petitioner. No material is produced by the respondent in order to show that any damage was suffered by the respondent in intimating about the allotment of site to the petitioner. Even if it is assumed that the respondent has suffered some damages in pursuing with the allotment proceedings, the damages suffered could only be nominal which could be towards the amount of labour involved in issuing notices etc. , and nothing more. Therefore, it is reasonable to forfeit Rs. 6,885. 00, the initial deposit made by the petitioner as per Annexure-C and not the entire consideration amount deposited by the petitioner with the respondent. However, the petitioner is not entitled to any interest on the amount to be refunded. ( 17 ) IT is true that the rule in question prescribes that if the allotment sought for is based on incorrect and false information, the sital value deposited shall be forfeited. However, the petitioner is not entitled to any interest on the amount to be refunded. ( 17 ) IT is true that the rule in question prescribes that if the allotment sought for is based on incorrect and false information, the sital value deposited shall be forfeited. The said rule is in the nature of penalty. The respondents are not entitled to act as a Criminal Court and impose penalty for giving false information. If at all, they can only estimate the reasonable expenditure incurred by them in the proceeding culminating in just intimating the allotment of site and recovering the deposit of the moneys. The possession of the site was also not delivered. Further while issuing notice regarding cancellation of the allotment of site under Annexure-J respondents did not direct forfeiture of the sital value and it was only when the petitioner sought for refund of the money, the respondent stated that they would forfeit the sital value. That shows that the respondents did not intend to direct forfeiture. ( 18 ) IN the result and for the above reasons, this writ petition is allowed in part and the first respondent is directed to refund the money deposited by the petitioner except the sum of Rs. 6,885. 00 which is liable to be forfeited. --- *** --- .