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Fateh Chand Vs. Balkishan Das - Court Judgment

LegalCrystal Citation
CourtSupreme Court of India
Decided On
Reported inAIR1963SC1405; [1964]1SCR515
ActsIndian Contract Act, 1872 - Sections 74; Code of Civil Procedure (CPC),1908 - Sections 2(12) - Order 20, Rules 12 and 12(1)
AppellantFateh Chand
RespondentBalkishan Das
Cases ReferredIn Natesa Aiyar v. Appavu Padayschi I.L.R.
contract - breach of contract - section 74 of indian contract act, 1872 and section 2 (12) of code of civil procedure, 1908 - appeal filed by certificate against order that respondent was entitled to retain out of rs. 25000 paid by appellant under sale agreement a sum of rs. 1150 being compensation for loss suffered him and directed respondent to get from defendant compensation for use and occupation at rate of rs. 265 per mensem - respondent had not committed breach of contract - appellant failed pay balance of price - respondent was entitled to mesne profits at monthly rates with interest - held, respondent was entitled to retain out of rs. 25000 only rs. 1000 received by him as earnest money and he was entitled to compensation at rate of rs.140 per mensem and interest on that same at.....shah, j. 1. by a registered deed of lease dated may 19, 1927, which was renewed onjanuary 30, 1947, the delhi improvement trust granted leasehold rights for 90years to one dr. m. m. joshi in respect of a plot of land no. 3, 'e' block,qarol bagh, delhi, admeasuring 2433 sq. yards. dr. joshi constructed a buildingon the land demised to him. chandrawati, widow of dr. joshi, as guardian of herminor son murli manohar, by sale-deed dated april 21, 1947, sold the leaseholdrights in the land together with the building to lala balkishan das - who willhereinafter be referred to as 'the plaintiff' - for rs. 63,000/-. by anagreement dated march 21, 1949 the plaintiff contracted to sell his rights inthe land and the building to seth fateh chand - hereinafter called 'thedefendant'. it was recited in.....

Shah, J.

1. By a registered deed of lease dated May 19, 1927, which was renewed onJanuary 30, 1947, the Delhi Improvement Trust granted leasehold rights for 90years to one Dr. M. M. Joshi in respect of a plot of land No. 3, 'E' Block,Qarol Bagh, Delhi, admeasuring 2433 sq. yards. Dr. Joshi constructed a buildingon the land demised to him. Chandrawati, widow of Dr. Joshi, as guardian of herminor son Murli Manohar, by sale-deed dated April 21, 1947, sold the leaseholdrights in the land together with the building to Lala Balkishan Das - who willhereinafter be referred to as 'the plaintiff' - for Rs. 63,000/-. By anagreement dated March 21, 1949 the plaintiff contracted to sell his rights inthe land and the building to Seth Fateh Chand - hereinafter called 'thedefendant'. It was recited in the agreement that the plaintiff agreed to sellthe building together with 'pattadari' rights appertaining to the landadmeasuring 2433 sq. yards for Rs. 1,12,500/-, and that Rs. 1,000/- were paidto him as earnest money at the time of the execution of the agreement. Theconditions of the agreement were :

'(1) I, the executant, shalldeliver the actual possession, i.e. complete vacant possession of kothi(bungalow) to the vendee on March 30, 1949, and the vendee shall have to giveanother cheque for Rs. 24,000/- to me, out of the sale price.

(2) Then the vendee shall have toget the sale (deed) registered by the 1st of June, 1949. If, on account of anyreason, the vendee fails to get the said sale-deed registered by June 1, 1949,then this sum of Rs. 25,000/- (twenty-five thousand) mentioned above shall bedeemed to be forfeited and the agreement cancelled. Moreover, the vendee shallhave to deliver back the complete vacant possession of the kothi (bungalow) tome, the executant. If due to certain reason, any delay takes place on my partin the registration of the sale-deed, by 1st June 1949, then I, the executant,shall be liable to pay a further sum of Rs. 25,000/- as damages, apart from theaforesaid sum of Rs. 25,000/- to the vendee, and the bargain shall be deemed tobe cancelled.'

2. The southern boundary of the land was described in the agreement'Bungalow of Murli Manohar Joshi.'

3. On March 25, 1949, the plaintiff received Rs. 24,000/- and deliveredpossession of the building and the land in his occupation to the defendant, butthe sale of the property was not completed before the expiry of the periodstipulated in the agreement. Each party blamed the other for failing tocomplete the sale according to the terms of the agreement. Alleging that theagreement was rescinded because the defendant had committed default inperforming the agreement and the sum of Rs. 25,000/- paid by the defendantstood forfeited, the plaintiff in an action filed in the Court of the SubordinateJudge, Delhi, claimed a decree for possession of the land and buildingdescribed in the plaint and a decree for Rs. 6,500/- as compensation for useand occupation of the building from March 25, 1949, to January 24, 1950, andfor an order directing enquiry as to compensation for use and occupation of theland and building from the date of the institution of the suit until deliveryof possession to the plaintiff. The defendant resisted the claim contendinginter alia that the plaintiff having committed breach of the contract could notforfeit the amount of Rs. 25,000/- received by him nor claim any compensation.The trial Judge held that the plaintiff had failed to put the defendant inpossession of the land agreed to be sold and could not therefore retain Rs.25,000/- received by him under the contract. He accordingly directed that onthe plaintiff depositing Rs. 25,000/- less Rs. 1,400/- (being the amount ofmesne profits prior to the date of the suit) the defendant do put the plaintiffin possession of the land and the building, and awarded to the plaintiff futuremesne profits at the rate of Rs. 140/- per mensem from the date of the suituntil delivery of possession or until expiration of three years from the dateof the decree whichever event first occurred. In appeal the High Court ofPunjab modified the decree passed by the trial Court and declared 'thatthe plaintiff' was entitled to retain out of Rs. 25,000/- paid by thedefendant under the sale agreement, a sum of Rs. 11,250/-' beingcompensation for loss suffered by him and directed that the plaintiff do getfrom the defendant compensation for use and occupation at the rate of Rs. 265/-per mensem. The defendant has appealed to this Court with certificate underArt. 133(1)(a) of the Constitution.

4. The first question which falls to be determined in this appeal is as towho committed breach of the contract. The plaintiff's case as disclosed in hispleading and evidence was that he had agreed to sell to the defendant theleasehold rights in the land and building thereon purchased by him from MurliManohar Joshi by sale-deed dated April 21, 1947, that at the time of executionof the agreement the defendant had inspected the sale deed and the leaseexecuted by the Improvement Trust dated January 30, 1947 and the sketch planannexed to the lease, that the plaintiff had handed over to the defendant acopy of that plan and had put the defendant in possession of the propertyagreed to be sold, but the defendant despite repeated requests failed and neglectedto pay the balance remaining due by him and to obtain the sale deed in hisfavour.

5. The defendant's case on the other hand was that the plaintiff had agreedto sell the area according to the measurement and boundaries in the planannexed to the lease granted by the Improvement Trust and had promised to havethe southern boundary demarcated and to have a boundary wall built, that at thetime of the execution of the agreement of sale the plaintiff did not show himthe sale deed by which he had purchased the property, nor the lease obtainedfrom the Improvement Trust in favour of Dr. Joshi nor even the 'sketch plan,'that the plaintiff had given him a copy of the 'sketch plan' not at the time ofthe execution of the agreement, but three or four days after he was put inpossession of the premises and that on measuring the site in the light of theplan he discovered that there was a 'shortage on the southern sideopposite to Rohtak Road', that thereupon he approached the plaintiff andrepeatedly called upon him to put him in possession of the land as shown in theplan and to get the boundary wall built in his presence but the plaintiffneglected to do so. We have been taken through the relevant evidence by counseland we agree with the conclusion of the High Court that the defendant and notthe plaintiff committed breach of the contract.

6. The defendant's case is founded primarily on two pleas :

(i) that the plaintiff offered tosell land not according to the description in the written agreement, but accordingto the plan appended to the Improvement Trust lease, and, that he - thedefendant - accepted that offer, and

(ii) The plaintiff had undertakento have the southern boundary demarcated and a boundary wall built thereon,

7. If the case of the defendant be true, it is a singular circumstance thatthose covenants are not found incorporated in the written agreement nor arethey referred to in any document prior to the date fixed for completion of thesale. The defendant was put in possession on March 25, 1949 and he paid Rs.24,000/- as agreed. If the plaintiff did not put the defendant in possession ofthe entire area which the latter had agreed to buy, it is difficult to believethat the defendant would part with a large sum of money which admittedly was tobe paid by him at the time of obtaining possession of the premises, and in anyevent he would have immediately raised a protest in writing that the plaintiffhad not put him in possession of the area agreed to be delivered. It isimplicit in the plea of the defendant that he knew that the southern boundarywas irregular and that the plaintiff was not in possession of the area agreedto be sold under the agreement. Why then did the defendant not insist that theterms pleaded by him be incorporated in the agreement We find no rationalanswer to that question; and none has been furnished. The story of thedefendant that he agreed to purchase the land according to 'the measurement andboundaries' in the Improvement Trust Plan without even seeing that plan, isimpossible of acceptance.

8. It is common ground that according to this plan the land demised wasrectangular in shape admeasuring 140' x 160' though the conveyance was inrespect of 2433 sq. yards only. Manifestly if the land conveyed to the predecessor-in-interestof the plaintiff was a perfect rectangle the length of the boundaries must beinaccurate, for the area of a rectangular plot of land 140' x 160' would be2488 sq. yards and 8 sq. feet and not 2433 sq. yards. The plaintiff hadpurchased from his predecessor-in-interest land admeasuring 2433 sq. yards andby the express recital in the agreement the plaintiff agreed to sell that areato the defendant. At the request of the plaintiff the trial Court appointed aCommissioner for measuring the land of which possession was delivered to thedefendant, and according to the Commissioner the land 'admeasured 141/142'feet by 157/158 feet'. The Commissioner found that two constructions - alatrine and a garage - on the adjacent property belonging to Murli ManoharJoshi 'broke the regular line of the southern boundary'. The factthat the southern boundary was irregular must have been noticed by thedefendant at the time of the agreement of sale, and in any event soon after heobtained possession of the property. But for nearly three months after heobtained possession the defendant did not raise any objections in that behalf.His story that he had orally called upon the plaintiff repeatedly to put him inpossession of the land as shown in the Improvement Trust Plan cannot bebelieved. The defendant's case that a part of the land agreed to be conveyedwas in the possession of Murli Manohar Joshi was set up for the first time bythe defendant in his letter dated June 17, 1949. On June 1, 1949, the defendantinformed the plaintiff by a telegram that the latter was responsible fordamages as he had failed to complete the contract. The plaintiff by a telegramreplied that he was ready and willing to perform his part of the contract andcalled upon the defendant to obtain a sale deed. The defendant then addressed aletter on June 9, 1949, to the plaintiff informing him that the latter had toget the document executed and registered after giving clear title by June 1,1949. To that letter the plaintiff replied that the defendant had inspected thetitle-deeds before he agreed to purchase the property and had satisfied himselfregarding the plaintiff's title thereto and that the defendant had never raisedany complaint about any defect in the title of the plaintiff. The defendant'sAdvocate replied by letter dated June 17, 1949 :

'This is true that my client paid Rs. 25,000/- andgot possession of the Kothi on the clear understanding that your client hasclear title of the entire area mentioned in the agreement of sale and sketchmap attached to it. Long before 1st June, my client noticed that a certain areaof the Kothi under sale is under the possession of Shri Murli Manohar Joshi onwhich his garage stands. Again on the same side Shri Murli Manohar Joshi hasgot latrines and there is clear encroachment on the land included in the sale.It was clearly understood at the time of bargain that vacant possession of theentire area under sale will be given by your client. My client was anxious toput a wall on the side of Shri Murli Manohar Joshi and when he was actuallystarting the work this difficulty of garage and latrine came in. Your clientwas approached x x x.'

9. One thing is noticeable in this letter : according to the defendant,there was a sketch-plan attached to the agreement of sale, and that it wasknown to the parties at the time of the agreement that a part of the landagreed to be sold had been encroached upon before the agreement by MurliManohar Joshi. If there had been an 'understanding' as suggested bythe defendant and if the plaintiff had, in spite of demands made in that behalfby the defendant, failed to carry out the agreement or understanding, we wouldhave expected this version to be set up in the earliest communication and notreserved to be set up as a reply to the plaintiff's assertion that thedefendant had never complained about any defect in the title of the plaintiff.According to the written agreement the area agreed to be conveyed was 2433 sq.yards and the land was on the south bounded by the Bungalow of Murli ManoharJoshi. It is common ground that the defendant was put in possession of an areaexceeding 2433 sq. yards, and the land is within the four boundaries set out inthe agreement. But the defendant sought to make out the case at the trial thathe had agreed to purchase land according to the Improvement Trust plan - a factwhich is not incorporated in the agreement, and which has not been mentionedeven in the letter dated June 17, 1949. The assertions made by the defendant inhis testimony before the Court, show that not much reliance can be placed uponhis word. He stated that the terms of the contract relating to forfeiture ofRs. 25,000/- paid by him in the event of failure to carry out the terms of thecontract were never intended to be acted upon and were incorporated in theagreement at the instance of the writer who wrote the deed. This plea was neverraised in the written statement and the writer of the deed was not questionedabout it. The defendant is manifestly seeking to add oral terms to the writtenagreement which have not been referred to in the correspondence at the earliestopportunity. We therefore agree with the High Court that the plaintiff carriedout his part of the contract to put the defendant in possession of the landagreed to be sold, and was willing to execute the sale-deed, but the defendantfailed to pay the balance of the price, and otherwise to show his willingnessto obtain a conveyance.

10. The claim made by the plaintiff to forfeit the sum of Rs. 25,000/-received by him from the defendant must next be considered. This sum of Rs.25,000/- consists of two items - Rs. 1,000/- received on March 21, 1949 andreferred to in the agreement as 'earnest money' and Rs. 24,000/- agreed to bepaid by the defendant to plaintiff as 'out of the sale price' againstdelivery of possession and paid by the defendant to the plaintiff on March 25,1949 when possession of the land and building was delivered to the defendant.The plaintiff submitted that the entire amount of Rs. 25,000/- was to beregarded as earnest money, and he claimed to forfeit it on the defendant'sfailure to carry out his part of the contract. This part of the case of theplaintiff was denied by the defendant.

11. The Attorney-General appearing on behalf of the defendant has notchallenged the plaintiff's right to forfeit Rs. 1,000/- which were expresslynamed and paid as earnest money. He has, however, contended that the covenantwhich gave to the plaintiff the right to forfeit Rs. 24,000/- out of the amountpaid by the defendant was stipulation in the nature of penalty, and theplaintiff can retain that amount or part thereof only if he establishes that inconsequence of the breach by the defendant, he suffered loss, and in the viewof the Court the amount or part thereof is reasonable compensation for thatloss. We agree with the Attorney-General that the amount of Rs. 24,000/- wasnot of the nature of earnest money. The agreement expressly provided forpayment of Rs. 1,000/- as earnest money, and that amount was paid by thedefendant. The amount of Rs. 24,000/- was to be paid when vacant possession ofthe land and building was delivered, and it was expressly referred to as'out of the sale price.' If this amount was also to be regarded asearnest money, there was no reason why the parties would not have so named itin the agreement of sale. We are unable to agree with the High Court that thisamount was paid as security for due performance of the contract. No such caseappears to have been made out in the plaint and the finding of the High Courton that point is based on no evidence. It cannot be assumed that because thereis a stipulation for forfeiture the amount paid must bear the character of adeposit for due performance of the contract.

12. The claim made by the plaintiff to forfeit the amount of Rs. 24,000/-may be adjudged in the light of s. 74 of the Indian Contract Act, which in itsmaterial part provides :-

'When a contract has been broken, if a sum is namedin the contract as the amount to be paid in case of such breach, or if thecontract contains any other stipulation by way of penalty, the partycomplaining of the breach is entitled, whether or not actual damage or loss isproved to have been caused thereby, to receive from the party who has brokenthe contract reasonable compensation not exceeding the amount so named or, asthe case may be, the penalty stipulated for.'

13. The section is clearly an attempt to eliminate the somewhat elaboraterefinements made under the English common law in distinguishing betweenstipulations providing for payment of liquidated damages and stipulations inthe nature of penalty. Under the common law a genuine pre-estimate of damagesby mutual agreement is regarded as a stipulation naming liquidated damages andbinding between the parties : a stipulation in a contract in terrorem is apenalty and the Court refuses to enforce it, awarding to the aggrieved partyonly reasonable compensation. The Indian Legislature has sought to cut acrossthe web of rules and presumptions under the English common law, by enacting auniform principle applicable to all stipulations naming amounts to be paid incase of breach, and stipulations by way of penalty.

14. The second clause of the contract provides that if for any reason thevendee fails to get the sale-deed registered by the date stipulated, the amountof Rs. 25,000/- (Rs. 1,000/- paid as earnest money and Rs. 24,000/- paid out ofthe price on delivery of possession) shall stand forfeited and the agreementshall be deemed cancelled. The covenant for forfeiture of Rs. 24,000/- ismanifestly a stipulation by way of penalty.

15. Section 74 of the Indian Contract Act deals with the measure of damagesin two classes of cases (i) where the contract names a sum to be paid in caseof breach and (ii) where the contract contains any other stipulation by way ofpenalty. We are in the present case not concerned to decide whether a covenantof forfeiture of deposit for due performance of a contract falls within thefirst class. The measure of damages in the case of breach of a stipulation byway of penalty is by s. 74 reasonable compensation not exceeding the penaltystipulated for. In assessing damages the Court has, subject to the limit of thepenalty stipulated, jurisdiction to award such compensation as it deemsreasonable having regard to all the circumstances of the case. Jurisdiction ofthe Court to award compensation in case of breach of contract is unqualified exceptas to the maximum stipulated; but compensation has to be reasonable, and thatimposes upon the Court duty to award compensation according to settledprinciples. The section undoubtedly says that the aggrieved party is entitledto receive compensation from the party who has broken the contract, whether ornot actual damage or loss is proved to have been caused by the breach. Therebyit merely dispenses with proof of 'actual loss or damages'; it doesnot justify the award of compensation when in consequence of the breach nolegal injury at all has resulted, because compensation for breach of contractcan be awarded to make good loss or damage which naturally arose in the usualcourse of things, or which the parties knew when they made the contract, to belikely to result from the breach.

16. Before turning to the question about the compensation which may beawarded to the plaintiff, it is necessary to consider whether s. 74 applies tostipulations for forfeiture of amounts deposited or paid under the contract. Itwas urged that the section deals in terms with the right to receive from theparty who has broken the contract reasonable compensation and not the right toforfeit what has already been received by the party aggrieved. There is howeverno warrant for the assumption made by some of the High Courts in India, that s.74 applies only to cases where the aggrieved party is seeking to receive someamount on breach of contract and not to cases where upon breach of contract anamount received under the contract is sought to be forfeited. In our judgmentthe expression 'the contract contains any other stipulation by way ofpenalty' comprehensively applies to every covenant involving a penaltywhether it is for payment on breach of contract of money or delivery ofproperty in future, or for forfeiture of right to money or other propertyalready delivered. Duty not to enforce the penalty clause but only to awardreasonable compensation is statutorily imposed upon courts by s. 74. In allcases, therefore, where there is a stipulation in the nature of penalty forforfeiture of an amount deposited pursuant to the terms of contract whichexpressly provides for forfeiture, the court has jurisdiction to award such sumonly as it considers reasonable, but not exceeding the amount specified in thecontract as liable to forfeiture. We may briefly refer to certain illustrativecases decided by the High Courts in India which have expressed a differentview.

17. In Abdul Gani & Co. v. Trustees of the Port of Bombay : AIR1952Bom310 , the Bombay High Court observed as follows :-

'It will be noticed that the sum which is named inthe contract either as penalty or as liquidated damages is a sum which has notalready been paid but is to be paid in case of a breach of the contract. Withregard to the stipulation by way of penalty the Legislature has chosen toqualify 'stipulation' as 'any other stipulation', indicating that thestipulation must be of the nature of an amount to be paid and not an amountalready paid prior to the entering into of the contract. The section furtherprovides that a party complaining of a breach is entitled to receive from theparty who has broken the contract reasonable compensation not exceeding theamount so named or the penalty stipulated for. Therefore, the section clearlycontemplates that the party aggrieved has to receive from the party in defaultsome amount or something in the nature of a penalty : it clearly rules out thepossibility of the amount which has already been received or the penalty whichhas already been provided for.'

18. In Natesa Aiyar v. Appavu Padayschi I.L.R. (1913) Mad. 178., theMadras High Court seems to have held that s. 74 applies where a sum is named aspenalty to be paid in future in case of breach, and not to cases where a sum isalready paid and by a covenant in the contract it is liable to forfeiture.

19. In these cases the High Courts appear to have concentrated upon thewords 'to be paid in case of such breach' in the first condition ins. 74 and did not consider the import of the expression 'the contractcontains any other stipulation by way of penalty', which is the secondcondition mentioned in the section. The words 'to be paid' whichappear in the first condition do not qualify the second condition relating tostipulation by way of penalty. The expression 'if the contract containsany other stipulation by way of penalty' widens the operation of thesection so as to make it applicable to all stipulations by way of penalty,whether the stipulation is to pay an amount of money, or is of anothercharacter, as, for example, providing for forfeiture of money already paid.There is nothing in the expression which implies that the stipulation must beone for rendering something after the contract is broken. There is no groundfor holding that the expression 'contract contains any other stipulationby way of penalty' is limited to cases of stipulation in the nature of anagreement to pay money or deliver property on breach and does not comprehendcovenants under which amounts paid or property delivered under the contract,which by the terms of the contract expressly or by clear implication are liableto be forfeited.

20. Section 74 declares the law as to liability upon breach of contractwhere compensation is by agreement of the parties pre-determined, or wherethere is a stipulation by way of penalty. But the application of the enactmentis not restricted to cases where the aggrieved party claims relief as aplaintiff. The section does not confer a special benefit upon any party; itmerely declares the law that notwithstanding any term in the contractpredetermining damages or providing for forfeiture of any property by way ofpenalty, the court will award to the party aggrieved only reasonablecompensation not exceeding the amount named or penalty stipulated. Thejurisdiction of the court is not determined by the accidental circumstance ofthe party in default being a plaintiff or a defendant in a suit. Use of theexpression 'to receive from the party who has broken the contract'does not predicate that the jurisdiction of the court to adjust amounts whichhave been paid by the party in default cannot be exercised in dealing with theclaim of the party complaining of breach of contract. The court has to adjudgein every case reasonable compensation to which the plaintiff is entitled fromthe defendant on breach of the contract. Such compensation has to beascertained having regard to the conditions existing on the date of the breach.

21. There is no evidence that any loss was suffered by the plaintiff inconsequence of the default by the defendant save as to the loss suffered by himby being kept out of possession of the property. There is no evidence that theproperty had depreciated in value since the date of the contract; nor was thereevidence that any other special damage had resulted. The contract provided forforfeiture of Rs. 25,000/- consisting of Rs. 1000/- paid as earnest money andRs. 24,000/- paid as part of the purchase price. The defendant has concededthat the plaintiff was entitled to forfeit the amount of Rs. 1,000/- which waspaid as earnest money. We cannot however agree with the High Court that 10 percent of the price may be regarded as reasonable compensation in relation to thevalue of the contract as a whole, as that in our opinion is assessed onarbitrary assumption. The plaintiff failed to prove the loss suffered by him inconsequence of the breach of the contract committed by the defendant, and weare unable to find any principle on which compensation equal to ten percent ofthe agreed price could be awarded to the plaintiff. The plaintiff has beenallowed Rs. 1,000/- which was the earnest money as part of the damages. Besideshe had use of the remaining sum of Rs. 24,000/-, and we can rightly presumethat he must have been deriving advantage from that amount throughout thisperiod. In the absence therefore of any proof of damage arising from the breachof the contract we are of opinion that the amount of Rs. 1,000/- (earnestmoney) which has been forfeited, and the advantage that the plaintiff must havederived from the possession of the remaining sum of Rs. 24,000/- during allthis period would be sufficient compensation to him. It may be added that theplaintiff has separately claimed mesne profits for being kept out of possessionfor which he has got a decree and therefore the fact that the plaintiff was outof possession cannot be taken into account in determining damages for thispurpose. The decree passed by the High Court awarding Rs. 11,250/- as damagesto the plaintiff must therefore be set aside.

22. The other question which remains to be determined relates to the amountof mesne profits which the plaintiff is entitled to receive from the defendantwho kept the plaintiff out of the property after the bargain had fallenthrough. It is common ground that the defendant is liable for retainingpossession to pay compensation from June 1, 1949 till the date of the suit andthereafter under O. 20, r. 12(c) C.P. Code till the date on which thepossession was delivered. The trial Court assessed compensation at the rate ofRs. 140/- per mensem. The High Court awarded compensation at the rate of Rs.265/- per mensem. In arriving at this rate the High Court adopted a highlyartificial method. The High Court observed that even though the agreement forsale of the property was for a consideration of Rs. 1,12,500/- the plaintiffhad purchased the property in 1947 for Rs. 63,000/- and that at the date of thesuit that amount could be regarded as 'the value for which the propertycould be sold at any time.' The High Court then thought that the properrate of compensation for use and occupation of the house by the defendant whenhe refused to give up possession after failing to complete the contract shouldhave some relation to the value of the property and not to the price agreed assale price between the parties, and computing damages at the rate of five percent on the value of the property they held that Rs. 3,150/- was the annualloss suffered by the plaintiff by being kept out of possession, and on thatfooting awarded mesne profits at the rate of Rs. 265/- per mensem prior to thedate of the suit and thereafter. The plaintiff is undoubtedly entitled to mesneprofits from the defendant and 'mesne profits' as defined in s. 2(12) of theCode of Civil Procedure are profits which the person in wrongful possession ofproperty actually received or might with ordinary diligence have receivedtherefrom, together with interest on such profits, but do not include profitsdue to improvements made by the person in wrongful possession. The normalmeasure of mesne profits is therefore the value of the user of land to theperson in wrongful possession. The assessment made by the High Court ofcompensation at the rate of five per cent of what they regarded as the fairvalue of the property is based not on the value of the user, but on anestimated return on the value of the property, cannot be sustained. TheAttorney-General contended that the premises were governed by the Delhi &Ajmer-Merwara; Rent Control Act XIX of 1947 and nothing more than the 'standardrent' of the property assessed under that Act could be awarded to the plaintiffas damages. Normally a person in wrongful possession of immovable property hasto pay compensation computed on the basis of profits he actually received orwith ordinary diligence might have received. It is not necessary to consider inthe present case whether mesne profits at a rate exceeding the rate of standardrent of the house may be awarded, for there is no evidence as to what the'standard rent' of the house was. From the evidence on the record it appearsthat a tenant was in occupation for a long time before 1947 of the house indispute in this appeal and another house for an aggregate rent of Rs. 180/- permensem, and that after the house in dispute was sold, the plaintiff receivedrent from that tenant at the rate of Rs. 80/- per mensem, and to the vendor ofthe plaintiff at the rate of Rs. 106/- per mensem. But this is not evidence ofstandard rent within the meaning of the Delhi and Ajmer-Merwara Rent ControlAct, XIX of 1947.

23. The Subordinate Judge awarded mesne profits at the rate of Rs. 140/- permensem and unless it is shown by the defendant that that was excessive we wouldnot be justified in interfering with the amount awarded by the SubordinateJudge. A slight modification, however, needs to be made. The plaintiff is notonly entitled to mesne profits at the monthly rate fixed by the Trial Court,but is also entitled to interest on such profits vide s. 2(12) of the Code ofCivil Procedure. We, therefore, direct that the mesne profits be computed atthe rate of Rs. 140/- per mensem from June 1, 1949 till the date on whichpossession was delivered to the plaintiff (such period not exceeding threeyears from the date of decree) together with interest at the rate of sixpercent on the amount accruing due month after month.

24. The decree passed by the High Court will therefore be modified. It isordered that the plaintiff is entitled to retain out of Rs. 25,000/- only Rs.1,000/- received by him as earnest money, and that he is entitled tocompensation at the rate of Rs. 140/- per mensem and interest on that sum atthe rate of six percent as it accrues due month after month from June 1, 1949,till the date of delivery of possession, subject to the restriction prescribedby O. 20 r. 12(i)(c) of the Code of Civil Procedure. Subject to thesemodifications, this appeal will be dismissed. In view of the divided success,we direct that the parties will bear their own costs in this Court.

25. Decree modified.

26. Appeal dismissed.

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