ORDER
D.V. Shylendra Kumar, J.
1. In this writ petition, petitioner has questioned the legality of the action taken by the first respondent M/s. N.G.E.F. Ltd., a fully owned Government Company as per their letter dated 7/8-6-2000 (Copy at Annexure D) apprising the petitioner that it is cancelling the sale of house No. 53 situated at I Stage, Indiranagar, Bangalore, which the petitioner had purchased in a public auction conducted by the respondent and also forfeiting the Earnest Money Deposit ('EMD' for short) of Rs. 5.56.037/-for non-compliance with the terms of payment subject to which the sale was held. Petitioner has sought for directions to the respondent to accept the balance of the amount payable by the petitioner as per the terms of the sale and to execute necessary sale deed in this regard.
2. The facts leading to the above petition are that the first respondent Company had put to auction sale a property it owned,, a house bearing No. 53 situate at I Stage, Indiranagar, Bangalore. The petitioner had offered to buy the house at Rs. 1563/- per sq. ft. and at this rate the value worked out to Rs. 22,24,149/-. Petitioner was required to deposit 25% of the cost payable within seven days and the balance 75% within thirty days from the date of communication of the intimation for such payment as per Annexure A dated 11-5-1999. There was also an option to the petitioner to seek extension of time up to a maximum of 60 days thereafter subject to payment of interest at the rate of 18% per annum for the extended period.
2A. Petitioner while deposited the 25% of the cost payable which was Rupees 5,56,037/-, defaulted in remitting the balance 75%. The factual position is not disputed. The respondent, noticing that the petitioner was not making payment as per the terms of the sale, cancelled the sale in favour of the petitioner as per the communication dated 7/8-6-2000 (Annexure D) and also intimated the petitioner that the EMD and the deposit made by the petitioner totalling Rs. 5,56,037/- was being forfeited as per the terms and conditions of the sale. It is aggrieved by this action of the first respondent, the petitioner is before this Court for relief.
3. Statement of objections has been filed on behalf of the first respondent. The action on the part of the first respondent is justified by drawing attention to the very terms of the sale conditions and also the fact that the petitioner is a person who has defaulted in adhering to the conditions and as the petitioner had defaulted in remitting the balance 75% of the cost of the house, it was inevitable for the first respondent to take action for not only cancellation, taut also for forfeiture of the amount in deposit with them, which represented 25% of the sale price.
4. The matter was heard for some time and it is the submission of Sri. Devanand, learned Counsel for the petitioner that assuming that the petitioner is a defaulter and as such is not entitled for a direction to the first respondent to execute a sale deed in favour of the petitioner, the forfeiture of the amount representing 25% of the value of the house is a drastic action, penal in nature and not supported by any circumstances to deprive the petitioner of such a large amount even assuming that the petitioner is a defaulter. Though the action on the part of the first respondent is sought to be sustained by reference to Clause 13 in the very terms and conditions of sale, the question is as to whether the forfeiture of this nature is valid in law.
5. It is no doubt true, that due to the default on the part of the petitioner if it had become necessary for the first respondent to reauction the house and sell it to another purchaser, additional expenses in this regard is an amount which can be recovered from the petitioner and also any loss to the first respondent due to the delayed receipt of the value of the house. The first respondent has stated that the house had been reauctioned and full price for the house was realised by 27-10-2000. It is also indicated that on reauctioning, the house fetched a better price namely a sum of Rupees 24,37,030/- i.e. a sum of Rs. 2,12,881/- was the amount which the first respondent, received over and above the price that had been offered by the petitioner. The first respondent is definitely entitled for compensation by way of interest on the 75% of the price of the house which they could not realise from the petitioner from the date it was due from the petitioner till the realisation of this amount from the subsequent purchaser.
6. Having regard to the provisions of Section 73 of the Indian Contract Act, 1972, while the first respondent is entitled to claim compensation for the loss or damage that they have incurred due to the breach of contract by the petitioner by not remitting the full value of the house within the stipulated time, the forfeiture of 25% of the value of the house cannot be sustained as it is more in the nature of a penalty levied on the petitioner.
7. In view of this position, it was pointed out to the learned Counsel for the first respondent that they can work out the actual expenses and loss that the first respondent has incurred due to the breach committed on the part of the Commissioner and to this extent can deduct the amount from out of the deposit that the petitioner had made with the first respondent and the balance could be returned to the petitioner.
8. Learned Counsel for the first respondent has filed a memo of calculations indicating that if calculations are made on such premise and the amount is deducted from the deposit available with the first respondent after taking into account the sum of Rs. 2,12.881/- which is the additional amount realised from re-sale, the excess amount available with the first respondent is a sum of Rs. 4,06,274/-.
9. The first respondent which is 'State' within the meaning of Article 12, of the Constitution of India, is expected to act in a fair and non-arbitrary manner. It is no doubt true that the terms of the sale deed is in favour of the first respondent to deduct or forfeit the entire 25% of the price of the house if the petitioner should have committed any default. However, both on the principles of Section 73 of the Indian Contract Act as well as on Article 14 of the Constitution of India, I am of the view that the action on the part of the first respondent to forfeit the entire amount of Rs. 5,56,037/-is not sustainable. While the reauctioning of the property, due to default on the part of the petitioner is definitely justified and sustainable, forfeiture of the entire amount of Rs. 5,56,037/- cannot be sustained.
10. In the circumstances, a writ in the nature of certiorari is issued to the extent of quashing the amount demanded under Annexure D insofar as the amount is in excess of a sum of Rs. 1,49,763/-. Consequently, the first respondent is directed to refund the petitioner the sum of Rupees 4,06,474/- within a period of eight weeks from the date of receipt of a copy of this order.
11. Petition is allowed. Rule issued and made absolute.