This appeal against a judgment decreeing refund of advance payment with interest was dismissed. The High Court upheld the trial court's finding that forfeiture clauses without justifiable loss are unenforceable and affirmed the award of costs.
The first appeal is dismissed; interlocutory applications dismissed; costs follow the event.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE A.HARIPRASAD
&
THE HONOURABLE MRS. JUSTICE SHIRCY V.
MONDAY, THE 08TH DAY OF JULY 2019 / 17TH ASHADHA, 1941
RFA.No.51 of 2018
AGAINST THE JUDGMENT AND DECREE DATED 28-07-2017 IN OS 89/2016 of SUB COURT AT PUNALUR, KOLLAM.
APPELLANT/1ST DEFENDANT :
V.N. SATHIKUMARI, D/O. NARAYANAN, VILAYIL PUTHEN VEEDU, AGASTHYACODE MURI, ANCHAL VILLAGE.
BY ADVS.
SRI.M.R.ANANDAKUTTAN SMT.M.A.ZOHRA SMT.P.SHEENA RAJAN SRI.MAHESH ANANDAKUTTAN
RESPONDENTS/PLAINTIFF & 2ND DEFENDANT :
2 GANESAN, S/O. SUKUMARAN, VILAYIL VEEDU, VADAMON MURI, ANCHAL VILLAGE - 691 305
BY ADVS.
SRI.A.R.DILEEP SRI.GEORGE VARGHESE(PERUMPALLIKUTTIYIL) SRI.MANU SEBASTIAN SRI.P.J.JOE PAUL SRI.RAJAN G. GEORGE
THIS REGULAR FIRST APPEAL HAVING COME UP FOR ADMISSION ON 08.07.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
R.F.A No.51 of 2018 2
A.HARIPRASAD & SHIRCY.V, J J.
R.F.A No.51 of 2018
Dated this the 8th day of July, 2019
J U D G M E N T
A.HARIPRASAD, J
Heard the learned counsel for the appellant and respondents.
the Court of Subordinate Judge, Punalur, in O.S No.89 of 2016. The suit is
one for specific performance of Ext.A1 agreement executed between the
parties and for a permanent prohibitory injunction. In the alternative, the
first respondent/plaintiff had claimed refund of the advance amount with
interest also. Admittedly, the properties scheduled to the plaint belonged to
the appellant. Parties entered into Ext.A1 agreement to sell the property for
R.F.A No.51 of 2018 3
a consideration of Rs.1.77 Lakhs per cent in respect of a total extent of
17.60 ares. It is the case of the plaintiff/first respondent that out of the total
sale consideration of Rs.76.11 Lakhs, Rs.15 Lakhs was paid to the appellant
as advance towards the sale consideration. The period of agreement was
fixed as six months. Plaintiff/first respondent contended that due to non co-
operation of the appellant, the sale deed could not be executed and hence
the suit was filed.
maintainable. It is also alleged that the first respondent/plaintiff could not
mop up sufficient funds to proceed with the transaction. Due to the inaction on the part of the first respondent/plaintiff, the appellant/first defendant suffered loss. Therefore, he is entitled to forfeit the entire advance amount paid. Second defendant also supported the case of the first
defendant.
R.F.A No.51 of 2018 4
testimony of two witnesses on the side of the plaintiff and five on the side of
the defendants. Exts.A1 to A9 and Exts.B1 to B6 are the documents
produced by the contesting parties. Exts.C1 to C5 are the Commissioner's plans and reports. After considering the evidence on record, the court below decreed the suit in part allowing the plaintiff/first respondent to
recover the advance amount of Rs.15 Lakhs from the first
defendant/appellant with interest at the rate of 9% per annum along with
costs of the proceedings.
has considered all the relevant legal factors correctly and marshalled the
evidence to arrive at a conclusion that Ext.A1 agreement was properly
executed between the parties. Contention of the appellant that as per the
stipulations in the agreement, she is entitled to forfeit the advance amount
R.F.A No.51 of 2018 5
paid is not sustainable in law. It is well settled principle that clauses in
contracts stipulating to pay penalty without justification are said to be
clauses in terrorem and therefore not enforceable. In this case, there is no believable material to hold that the appellant suffered any loss. Therefore,
the court below is perfectly justified in allowing the plaintiff to recover amount from the appellant. It is also pointed out by the learned counsel for
the respondents that although the trial court has rejected the plea of specific performance of contract, the plaintiff has not preferred any appeal.
submissions at the Bar, we do not find any reason to interfere with well reasoned judgment of the court below.
exorbitant costs are mulcted on the appellant by the court below without
any justification. This submission also cannot be accepted in the light of the
R.F.A No.51 of 2018 6
normal rule that costs shall follow the event. Here, if this Court direct the
plaintiff to forego the costs, he will suffer huge loss. Therefore, the plea for
exclusion of costs is hereby rejected.
In the result, the appeal is dismissed finding that there is no merit.
All pending interlocutory applications will stand dismissed.
A. HARIPRASAD,
JUDGE.
SHIRCY.V, JUDGE
amk
3 issues framed by the court
Whether the High Court can interfere with the trial court's order decreeing refund of advance amount in a specific performance suit.
Whether penalty clauses in contracts for forfeiture of advance amount without justification are enforceable.
Whether the learned trial court committed any error in awarding costs to the plaintiff.
V.N. Sathikumari
Suresh Kumar
Ganesan
A.Hariprasad
Shircy.V
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
