Name of the case : M/S Kailash Nath ASSO.

V Delhi development Authority and

Anrs on 9 jan,2015

Parties of the Case:

 Plaintiff – Kailash Nath Asso.

Defendant- Delhi Development Authority And Anrs

Facts of the case –

Appellants make highest bid for a plot in an auction conducted by the Delhi Development Authority
(DDA). There was a relevant provisions in the conditions of auction which read as the highest bidder
shall at the fall of the hammer buy 25% of the bid amount as earnest money either in cash or by
bank .Draft in favor DDA. If the earnest money is not paid the auction held in respect of that plot will
be cancelled .Further ,when the bid is accepted by  DDA ,the intending purchaser shall be informed of
such acceptance in writing until intending purchaser shall, within 3 months there of buy to the DDA
the balance 75% amount of the bid, in cash or by Bank Draft.
On 18/02/1982,the DDA acknowledged the receipt of 25%,accepted the appellant ‘s bid and directed
the appellant to deposit the remaining 75% by 17/05/1982, However , as there was a general recession
in the industry ,the appellant and persons similarly placed made representation .Sometime in May
1982 for extending the time for payment of the remaining amount .

The High Power Committee recommend for the extension of time. Specially mentioned the appellants
name as a person who should be given more time to pay the remaining balance .The central
government informed the DDA vide a letter that the land auctioned to the appellant was not Nuzul
land and , therefore , the central government would have nothing further to do with the matter .

The DDA forwarded the cancellation letter to the appellant without giving any notice whereas other
persons had been allowed to pay the balance 75% premium and were in fact allotted other plots
.Appellant pleaded for discrimination. Under Article 14 as appellant stated that they were entitled to
the same treatment.

Issues-

1. Whether there was breach of contract on the pact of appellant?

2 .Whether the DDA comes under the definition of Article 12 of the Indian constitution ?
3. Whether the respondent is allowed to forfeit the earned money under section 73 and section 74 of
the Indian contract Act?

Relevant case laws –

 Shree Hanuman cotton Mills and ors v Tata Air craft ltd on 28 oct,1969.
 Anand Ram Mangturan v Bholaram Tanumal on 13 March, 1945
 T.P Daver v Lodge Victoria on 12 Dec , 1962

Relevant Provisions –

 Section 74 of the Indian Contract Act, 1872

 Section 73 of the Indian Contract Act, 1872
 Section 75 of the Indian Contract Act, 1872
 Section 63 of the Indian Contract Act, 1872
 Section 20 of the Indian Contract Act, 1872
 Article 14 of the Indian Constitution
 Article 226 of the Indian Constitution

Legal Rules –
A breach of contract is a violation of any of the agreed upon terms and conditions of a binding
contract. In relation to this , Section 75 of the Indian Contract Act, 1872 states that A person
who rightfully rescinds a contract is entitled to compensation for any damage which he has
sustained through the non- fulfillment of the contract”

Analysis-

Section 74 is to be read with section 73 and, therefore, in every case of breach of contract, the
person aggrieved by the breach is not required to prove actual lass or damage suffer by him
before he can claim a decree. The court is competent to award reasonable compensation in a
case of breach even if no actual damage is proved to breach even if no actual damage is proved
to have been suffered in consequence of the breach of a contract.

Term of the contract are required to be take into consideration before arriving at the conclusion
whether the party claiming damage is entitled to the same. In the present case, for feature of
earnest money took place long after an agreement had been reached. It is obvious that the
amount shout should be forfeited on the fact of the present case without any loss being shown.

In fact it has been shown that far from the suffering of any loss, DDA has received a much
higher amount on re – auction of the same plot of the land.
(Additional facts) -the appellant for multiple times wrote letters calling upon defendant to give
an offer to deposit of balance 25% of the premium so as to bring the total payment to 50% of
the total premium. Therefore, no offer was made to the plaintiff without any notice any
compliance for payment, the letter of cancellation dated 6.10.1993 issued. It appears that
defendant itself was not aware of the land being non Nazul land.

Further, the facts says that appellant replied his willingness to pay the entire 75% with 18%
interest and therefore, there was no breach of contract on the part of appellant. Since the DDA
sold the plot to the third party it three times more than it to be sold to the appellant, there was no
loss.

Further, as the state or instrumentality of state comes under the definition covered under Article
12of the Indian Constitution against which the Fundamental rights can be claimed when
violated. Here, the respondent is an instrumentality of the State, the claim of the appellant
against the arbitrary action of the first respondent is acceptable because once the state or an
instrumentality of the state is a party of the contract, it has an obligation in law to act fairly,
justly and reasonably which is the requirement of Article 14 of the Constitution.

Section 74 of the Indian contract, 1872 which reads of the consequence of breach of contract it
is in fact sandwich between section 73 and 75 which deals with compensation for loss or
damage cause by breach of contract and compensation for damage which a party may sustain
through non fulfilment of contract after such party rightfully rescinds such contract. It is
important to note that like section 73 and 75, compensation is payable for breach of contract
under section 74 only where damage or loss is caused by such breach. As, there no such laws or
damage shown on the part of DDA whereas it gains three time more premium by re-auctioning
as it supposed to got from appellant.
CONCLUSION:-

To examine the issue of whether there was breach of contract in the part of appellant? The
appellant under this case shown his willingness to pay the amount as directed by the letter of
DDA which was forwarded to him in compliance with the recommendation of High Power
Committee for extension of time for payment of premium of 75% how able the DDA without
any notice of compliance for payment cancelled the contract and forwarded with the letter of
cancellation to the appellant. And sold the plot in three times more premium to the third party
and no loss was caused to the DDA with so that there was no breach of contract on the part of
appellant.

Further, the issue whether the DDA comes under the definition of Article 12 of the Indian
constitution? Here, the DDA is the instrumentality of the state the claim of that appellant against
the arebitary action of the respondent is acceptable because once the state or instrumentality of
state under article 12 comes into contract it is necessary to act just fair and reasonably.
Therefore, DDA as instrumentality of the state clearly comes under the definition of article 12
and hence responsible for any violation of Fundamental rights of the appellant. And thus, appeal
is allowed.

Lastly, whether the respondent allowed to forfeit the earnest money under section 73 and 74 of
Indian contract act? Since section 74 awards reasonable compensation for the damage or loss
caused by breach of contract is sine qua non for the applicability of the section. The section
applied whether a person is plaintiff or a defendant in a suit. Here be appellant is liable to allow
for future for the breach of contract under section 73 and 74 taken under consideration that
DDA a made profit from re-auction and thus no loss caused to DDA, hence forfeiture of the
earnest money would not be in accordance with the agreement or in accordance with the law.
As the DDA comes under instrumentality of the state, therefore, appeal made by the appellant is
allowed by the Supreme Court against the arbitary action of the DDA.
Name of the Parties - Iyya Kannu v Kulund na Gounder on 9 January 2018 (Madras High
Court)                      

Parties to the case -

Plaintiffs - Iyya kanna 
Defendant- Kulundha Gounder 

Facts:-

The plaintiff father and the first defendant are son of one kulundha Gounder. After the death of kulundha
Gounder.The properties devolved in between the plaintiff’s father and the first defendant when the plaintiff was
asked about 3 years, his father was died. Immediately after the death of plaintiff’s father, the plaintiff was
brought to by his maternal grandfather. However, receives the benefits from the joint family properties. Since
the first defendant has managed the properties as kartha in the capacity of the kartha of family. Thereafter, the
first defendant stopped to pay the benefit to the plaintiff and therefore plaintiff requested the first defendant to
allot his share of the property through partition. The first Defendant denied the partition. Aggrieved over the
same the plaintiff filed a suit for partition asking 50% of the share in the joint family property. Earlier to this, a
sale deed was executed in the favor of first defendant by the plaintiff of the alleged property. It was held by the
learned judge that the appellant was 17 years 5 months and 15 days at the time of execution.

Issues-
1. Whether the appellant was competent to be transferor in the light of Section 7 of the Transfer of
the Property Act?

2. Whether the alleged transfer by minor is void or not?

Legal Rules –

For competency to contract, Section 11 of the Indian Contract Act, 1872 states that “Every person is
competent to contract who is of the age of majority according to the law to which he is subject, and
who is of sound mind and is not disqualified from contracting by any law to which he is subject.”

Relevant Case Laws –

 Dharmodas Ghose v Mohori Bibee &anothers.

 Hari Satyam Bnerjee & Others v Mahadev Banerjee & others AIR 1983 76
 Kuppuswami Chettair v A.S.PA Armugan Chettair.
 Navendra Nath v Hrishikesh AIR 1919 cal 875
 Relevant Provisions –

 Section 11 of the Indian Contract Act, 1872

 Section 2 (h) of the Indian Contract Act, 1872
 Section 10 of the Indian Contract Act, 1872
 Section 7 of the Transfer of Property Act, 1882

Analysis –

The allegedly disputed sale deed was executed by the first defendant as the appellant on the date of execution
was admitted to be minor. Therefore, the minor executed the sale deed in favour of any person is not binding on
the plaintiff and it is void. Accordingly, the allegedly sale deed executed by the plaintiff in the year 1948 is not
binding on the plaintiff. The plaintiff was born on 02.07.1930 and the sale deed was executed on 17.02.1948 at
the time, the appellant was minor and in order to prove the age of the plaintiff, the defendants has not taken any
steps either to file a document. In the absence of any material to prove the plaintiff is major, the minor
agreement or sale deed is void.
Section 7 of the Transfer of the Property Act, 1882 provides that every person competent to contract and
entitled to transferable property in manner allowed and prescribed by any law for the time being in force.
Section 4 of the Act states that Chapters and Sections of that Act which relate to Contract are to be taken as part
of the Indian Contract Act, 1872

The present case, therefore, facts within the provisions of the Indian Contract Act, 1872 Then, to turn to the
contract Act, Section 2 (g) states that an agreement nit enforceable by law is said to be void. Section 10 in this
regard, “ All agreement are contracts if they are made by free consent of parties competent to Contract, for a
lawful consideration and with a lawful object, and are not hereby expressly declared to be void”.
Then the section 11 is most important, as defining who are meant by ‘persons competent to contract’. “Every
person is competent to contract who is of the age of majority according to the law to which he is subject, and
who is of sound mind, and is not disqualified from contracting by any law to which he is subject.” Looking at
these sections all the mentioned provisions makes it essential that all contracting parties should be competent to
contract, and expressly provides that a person who by reason minority is in competent to contract cannot make a
contract within the meaning of the Act.
Therefore, the appellant who was minor at the time of execution of sale deed constitutes the sale deed void and
no- binding.

CONCLUSION

To examine the first issue, whether the appellant was competent to be transferor in the light of the section 7 of
the Transfer of Property Act? Here, the Section 7 states that every person who is competent to transfer such
property. For competency of Contract we must refer to the Section 11 of the Indian Contract Act, 1872 which
talks about who persons are competent to contract, one must attain majority and must be not of unsound mind to
enter into contract. In the instant case, the appellant was minor at the time of execution of sale deed. Therefore,
he was not competent to be transferor in the light of section 7 of the Transfer of Property Act of the alleged sale
deed.
Further, issue: whether the alleged transfer by a minor void or not? On going through Section 7 of the Transfer
of Property Act which states that only competent person to contract make transfer of the property. Further
Section 11 of the Act states that the Person who is attain majority and not of unsound mind is only competent
person to make contract. Otherwise, the agreement stands void. Here, the reference to Mohori Bibee v
Dharmodas, where it has been held by the hon’ble court that minor who enters into the contract is void ab initio
and stands non-binding.

Therefore, the appellant who was minor on the date of execution of sale deed who executed sale deed of
property in allegation to in the favour of his maternal uncle who is the first respondent is not binding on hi, and
it is void and hence the appeal is allowed.