“DRAFT SUIT FOR MONEY AS DAMAGES FOR FRAUD”

Project submitted to

Dr. Parvesh Kumar Rajput

(Faculty: Drafting, Pleading & Conveyance)

Project submitted by

Prateek Pandey

Semester VIII

Roll no. 118

Section B

HIDAYATULLAH NATIONAL LAW UNIVERSITY, RAIPUR, C.G

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 Acknowledgements
I would like to take this opportunity to express my deep sense of gratitude towards my course
teacher, Ms. Neha Sinha for giving me essential guidance and encouragement necessarily
required throughout the course of the project.

I would also like to thank the University for providing me the internet and library facilities which
were indispensable for getting relevant content on the subject, as well as subscriptions to online
databases and journals, which were instrumental in writing relevant text.

Prateek Pandey

VIIIth Semester

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 Research Methodology

This project work is descriptive& analytical in approach. It is largely based on primary,

secondary & electronic sources of data. Books & other references as guided by faculty of DPC
are primarily helpful for the completion of this project.

Objectives of This Project

Various objectives are to be achieved by this project; which are mentioned below.

 To understand the concept of ‘Suit for recovery’.

 To learn to draft a suit for recovery of money as damages for fraud.

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 CONTENTS

Contents
Research Methodology ................................................................................................................................. 3
Objectives of This Project ............................................................................................................................. 3
Various objectives are to be achieved by this project; which are mentioned below. ................................ 3
 To understand the concept of ‘Suit for recovery’. ............................................................................ 3
 To learn to draft a suit for recovery of money as damages for fraud. ............................................... 3
INTRODUCTION ............................................................................................................................................. 5
Kinds Of Damages ..................................................................................................................................... 5
Measuring interest damages .................................................................................................................. 11
Other related provisions ............................................................................................................................. 12
Suit for Damages for fraud .......................................................................................................................... 14
Statement of Jurisdiction ............................................................................................................................ 14

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 INTRODUCTION
The term ‘damages’ may be defined as the monetary compensation payable by the defaulting
party to the aggrieved party for the loss suffered by him. The aggrieved party may therefore
bring an action for damages against the party who is guilty of the breach of the contract, and the
party, guilty of the breach, id liable to pay damages to the aggrieved party. The primary aim of
damages is to compensate the aggrieved party, and to place him in the same position which he
would have occupied had the breach of contract not occurred. It may, therefore, be noted that the
damages are given by way of compensation for the loss suffered by the aggrieved party, and not
for the purpose of punishing the default party.

Kinds Of Damages
Law recognizes various kinds of damages or losses. Once the court has determined which loss
may be recovered, it is then faced with the problem of quantifying the loss, i.e. determining just
how just how much the aggrieved party should receive. The kinds of damages are as follows:

1) Compensatory Damages –

There are two categories of compensatory damages. The first category, general damages,
includes all those damages that arise naturally from breach of contract. The second category
called special damages arise due to the special circumstances foreseeable by the parties at the
time of making contract.

a) General damages (ordinary damages) – there are damages that arise naturally from the breach
of contract. They are restricted to the ‘direct and proximate’ consequences and not to the remote
or indirect losses or consequences of the breach of a contract.

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In the case of Hadley v. Baxendale1, the crankshift of a mill broke and it was necessary for it to
be sent to the manufacturers as a pattern for the new one. The mill owners engaged carriers for
this purpose, but the carriers delayed delivery, and the mill owners were unable to use the mill
for longer than if there had been no delay. Consequently, the loss of profits suffered by the
millers was greater than if no delay had occurred. The millers sued the carriers for such loss of
profits. The courts held that since the only information given by the millers was that the article to
be carried was the broken shaft of a mill, and it was not made known to them that the delay
would result in loss of profits, they were not liable for the loss of profits.

b) Special damages – these are the consequential damages caused by the breach of contract due
to the existence of special circumstances. Such damages are awarded by the courts only when at
the time of making a contract, these special circumstances were forseeable by the party
committing the breach.

In the case of Victoria Laundry Limited v. Newman Industries Limited2 , V the launders and
dyers required a bolier for the purpose of expanding their business. V entered into an agreement
with N where N was to supply the Bolier on June 5th. Due to the fault of N, the Bolier was not
delivered till November 8th. Consequently, V could not service his new customers and had a loss
of lucrative profits worth 278 Pounds. V claimed this loss from N. N contended that he did not
know about V’s lucrative business contacts. The court held that V could recover the loss of
ordinary laundry profits but not the loss resulting from some lucrative contacts with specific
customers because N was not aware of these contacts and such a loss was not in contemplation
of both the parties when the contract was made.

If the special circumstances was already in the knowledge of the party responsible for the breach
of contract, the formality of communicating them to him may not be necessary.

1
[1984] 9 Exch. 34
2
[1949] 2 KB 528.

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In the case of Simpson v. London & North Western Railway Company3, S a manufacturer used
to exhibit his samples of his equipment at agricultural exhibitions. He delivered his samples to
railway company to be exhibited at New Castle. On the occasion he wrote “must reach at New
Castle on Monday certain”. On the account of negligence on the part of railway company, the
samples reached only after the exhibition was over. S, claimed damages from railway company
for his loss of profits from the exhibition. The court held that the railway company was liable to
pay these damages as it had the knowledge of special circumstances, and must have
contemplated that a delay in delivery might result in such loss.

c) Measuring of compensatory damages-

Section 73, of the Indian Contract Act, 1872, provides that, “When a contract has been broken,
the party who suffers by such breach is entitled to receive, from the party who has broken the
contract, compenssation for any loss or damage caused to him thereby, which naturally arose in
the usual course of things from such breach, or which the parties knew when they made the
contract, to be liekly to result from the breach of it. Such compensation is not given for any
remote and indirect loss or damage sustained by the reason of the breach.”

This section warrants the need to assess such damages, general or special, according to the facts
of the case.

In the case of a contract for sale or purchase general rule as regards to measuring of the
damage is that –

i. The damage would be assessed on the difference between the contract price and the
market price on the date of the breach.
In the case of Jamal v. Moola Dawood Sons & Co.4, M agreed to purchase certain shares
from J on a particular date and subsequently declined to purchase them on that date. The
difference between contract price and market price on that date was Rs. 1, 09, 218. J
later on sold those shares and the actual loss amounted Rs. 79, 862. J sued M claiming

3
[1876] 1 Q.B.D. 274
4
[1916] 43. I.A. 6.

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 Rs. 1, 09, 218 as damages. The courts held that he was entitled to Rs, 1, 09, 218, because
the damages are meausred according to the circumstances existing on the date of breach.
ii. Under a contract of sale of goods, damages can be claimed for breach of condition, or
warranty and such damages include all damages flowing from the breach.
In the case of Jackson v. Walson & Sons5, J’s wife died from poisoning caused by the
tinned fish supplied by W. in an action for damages for breach, the court held that J was
entitled to damages incurred by – employing extra servants by reason of the loss of
wife’s services during illness, medical expenses, pecuniary loss occasioned by the death
of his wife.
iii. If the seller is selling services rather than something tangible and the buyer breaches the
contract, the calculation of general damages is somewhat different.

d) Duty to mitigate damages suffered-

The way in which liability for contract damages is limited by the courts imposing a duty on the
party who has been harmed by a breach of contract to mitigate the damages resulting from the
breach. In other words, the party who has been harmed may not sit idly and watch the damages
accumulate. Moreover the party is supposed to act prudently to minimize such damages.

In the case of Neki v. Pribhu6, A took a shop from B on rent and paid one month’s rent in
advance. B could not give possession of shop to A. there were other shops available in the
vicinity but A chose not to do business for eight months. After eight months, A sued B for breach
of contract claiming damages including advance rent and loss of profits for eight months. The
court held that he was entitled to a refund of his advance and nothing more, as he failed in his
duty to minimize the loss by not taking another shop in the neighbourhood.

In another case, Derbshire v. Warran [1963], D was the owner of ‘X’ brand of car which was
damaged in an accident by negligence of W. D was informed that the pre-accident value of the
car was 85 pounds and the estimated cost of repair was 192 pounds, and as such an uneconomic
proposition. D, however, decided to have the car repaired and claimed the damages from W

5
[1909] 2 KB 193.
6
100 I.C. 662.

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amounting to 137 pounds (192 pounds – 80 pounds claimed from insurance 25 pounds the cost
of hiring another vehicle until his car was repaired). W argued that D could have purchased a
similar vehicle in the open market for 85 pounds; he should have not taken this uneconomic step.
The court accepted this view and awarded the replacement value of the vehicle, i.e., 30 pounds
(85 pounds replacement price 25 pounds cost of hiring another vehicle – 80 pounds claimed from
the insurance).
2) Vindictive Damages
At time breach of contract by one party not only results in monetary loss to the injured party but
also subjects him to disappointment and mental agony. In such cases monetary compensation
alone cannot provide an appropriate remedy to the sufferings of the injured party. Thus there is a
need for vindictive damages.

Vindictive damages do not form part of the law of contract. The concept is borrowed from
English law. There are two kinds of contracts where Indian courts consider awarding
vindictive damages:
i. Breach of contract to marry. In this case the amount of damages will depend upon the extent of
injury to the party’s feeling. One may be ruined, other may not mind so much.
ii. Where a banker refuses to honour the cheque of a customer while having his money in his
hands, and the customer thereby suffers loss of reputation.

3) Nominal Damages –
Sometimes, a person brings a legal action for breach of contract and proves that a breach actually
occurred but fails to prove that any actual damage has been suffered. This may happen, for
example, because of the rules for measuring damages and requirement that damages should be
foreseeable and proved with certainity. In such a situation, injured party is awarded nominal
damages.

Such damages are awarded simply to recognise the right of the injured party to claim damages,
and are of very small amount.

For ex:

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A contracted to purchase ‘LML Scooter’ from B, a dealer, for Rs. 25, 000. But A failed to
purchase the Scooter. However, the demand for the Scooter far exceeded the supply and B could
sell the Scooter to Z for Rs. 25, 000, i.e., without any loss of profit. Here if B makes a claim
upon A for breach of contract, he will be entitled to nominal damages only.

4) Liquidated Damages And Penalty-

The contracting party may stipulate in the contract a sum of money to be paid in case the contract
is broken by either party. It may be termed as ‘liquidated damages’ or ‘penalty’ depending upon
the purpose to fix the sum.

The purpose of fixing a sum as ‘liquidated damages’ is to compensate the injured party for the
loss to be incurred by the breach of the other. Thus it is a fair pre-estimation of the loss to be
caused by non-performance of the contract.

The purpose of providing a ‘penalty’ in a contract is to discourage a party from breaching it and
to provide a special punishment if the contract is breached anyway. Thus it is a sum which has
no relation to the probable loss, and generally is disproportionate to the damages likely to accrue
as a result of the breach.

The above differentiation is required to understand the position of English Law in this respect.
English Law awards ‘liquidated damages’ as compensation, irrespective of the fact whether the
sum so specified is more or less than the actual damages. But does not allow the sum specified as
‘penalty’ on the ground that only the government, not private individuals can determine
appropriate remedies for breach of contract.

Indian Contract Law differs from English law in this matter. It does not recognise any difference
between ‘liquidated damages’ and ‘penalty’. Nor does it allow any sum fixed by the parties as
damages. It says that the injured party is entitled to a reasonable compensation in case of breach
subject to the maximum of the amount fixed as ‘liquidated damages’ or ‘penalty’ by the parties
to the contract.

Section 74 of the indian Contract Act, 1872, provides that, “when a contract has been broken, if a
sum is named in the contract as the amount to be paid in case of such breach, or if the contract

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contains any other stipulation by way of penalty, the party complaining of the breach is entitled,
whether or not actual damage or loss is proved to have been caused thereby, to receive from the
other party who has broken the contract reasonable compensation not exceeding the amount so
named or, as the case may be the penalty stipulated for.”

Thus in India, the sum named in the contract is not aawarded as damages. It is left to the court to
ascertain the actual loss or reasonable compensation and award the same, which will, however,
not exceed the sum named in the contract.

For ex:

A agreed to sell B his house for Rs. 1, 05, 000, provided that on breach of contract, the defaulting
party will pay Rs. 10, 000 as damages to the other. B broke the contract and A resold the house
for Rs. 1, 04, 000. A sued B and claimed Rs. 10, 000. It was held that A cannot recover Rs. 10,
000 as liquidated damages or penalty, he could only get the actual loss suffered by him, i.e., Rs.
1000.7

Exception to the rule in the context of ‘penalty’ –

Section 74 provides that when any person enters into a bailbond, recognizance or other
instrument of the same nature, or under the provisions of any law, or under the orders of the
Central Government, gives any bond for the performance of any public duty or act in which the
public are interested, he shall be liable, upon breach of condition of any instrument, to pay the
whole sum mentioned therein.

Measuring interest damages –

By and far the large number of cases decided under section 74 relate to stipulations providing for
interest. These stipulations are discussed below.

Stipulations for enhanced rate of interest –

7
Panna Singh v. Arjan Singh [1929] 23 CWN 949.

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Such a stipulation occuring in a contract may have twofold character :

i) Stipulation for increased interest from the rate of bond. This is always considered as
‘penalty’.
ii) Stipulation for increased interest from the date of default. It may or may not be in the
nature of penalty. It is a question of fact to be considered in each case. Generally if
the rate of interest payable on default si unreasonable, the court considers it as a
penalty.

Explanation to Section 74 provides that – a stipulation for the increased interest from the date
of default may be stipulation by way of penalty.

2) Stipulations for compound interest – following rules are deduced from various past
judicial decisions in this regard :

i) A stipulation for payment of compound interest in place of simple interest at the same rate
is not considered as penalty.

ii) A stipulation for payment of compound interest in place of simple interest at a higher rate
is considered as penalty.

3) Stipulations for payment of interest at a lower rate, if interest is paid regularly on due dates
–

A stipulation to accept interest at reduced rate if it is paid punctually does not make the
original rate of interest a penalty.

Other related provisions

Two important aspects in the context of compensation by way of damages are:

1) Cost of bringing a suit in the court of law, and

2) Treatment of ‘earnest money’, or ‘secuirty deposit’ in contracts.

Cost of suit – when a party brings upon a suit in the court of law, he incurs expenditure thereby.
If his point is proved in the suit, he is entited to recover the cost of suit in addition to the

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damages from the defaulter party. However, it is under the descretion of the court to award or not
to award such costs.

‘Earnest Money’ and ‘Security Deposit’ – sometimes a party to the contract is required to deposit
some money with the other party. This is generally done with a view to ensure performance of
the contract. The money so deposited may be either ‘earnest money’ or ‘security deposit’.

The ‘earnest money’ is part of the purchase price paid in advance. When the transaction goes
through it is adjusted against the bill. When transaction fails through by reason of default or
failure of the buyer, the other party can rescind the contract and retain the earnest money. Thus,
the earnest money is liable to be forfeited.

In the case of Shree Hanuman Cotton Mills v. Tata Aircraft Ltd. 8 , A contracted with B to
purchase from him aeroscrap for Rs. 1, 00, 000 and paid rs. 25, 000 as earnest money, being 25%
of the purchase price. One of the conditions of the contract was that if A failed to pay the
balance, contract would be cancelled and earnest money would be forfeited. A defaulted in
paying the balance and in consequence, B forfeited the deposit. A filed a suit for recovery of the
deposit. The court held that the deposit was intended as earnest money, and the seller was
entitled to forfeit it.

The ‘security deposit’ is deposited only as a security for performance of the contract. It is not a
part of the purchase price. Thus when a contract is completed it is not adjusted against the
purchase price. Law considers it as ‘penalty’. Thus it is not liable to be forfeited.

8
AIR 1970 SC 1986.

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 Suit for Damages for fraud

Statement of Jurisdiction

The plaintiff has reached the honorable Court of Civil Judge (SD), Raipur under Section 16 of

The Code of Civil Procedure 1908.

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In the Court of Civil Judge (SD) Raipur, (c.g)

Original Suit No. ………… Feb 12/ 2017…….

Prahlad Das, aged 29 years
S/O Keshav Das ........................................................ Plaintiff
HIG-04, Rajiv Nagar, Raipur, (c.g)
Vs.

Charu Verma.
D/O Akhil Kumar Verma ....................................................... Respondent
HIG-05, Rajiv Nagar, Raipur, (c.g)

RESPECTFULLY SHWETH:

1. That the defendant in the suit represented that she owned a property, an extent of 57 cents
punja land in S.No.244/1 in Pachayankuppam village, Raipur Taluk and offered to sell the
same. Having considered the representation, the plaintiff agreed to purchase the said land for a
sum of Rs.60,00,000/- and the agreement was reduced into writing on 06.04.2016.
2. That the defendant received part of the sale consideration, Rs.20,00,000/- as advance amount
and the balance of Rs.40,00,000/- was agreed to be paid within three months to the plaintiff,
in turn, the defendant agreed to execute a sale deed in favour of the plaintiff.
3. The plaintiff has stated that he had entered into the agreement of sale, believing the words of
the respondent and also paid part of the sale consideration, Rs.20,00,000/-. Subsequently, the
plaintiff came to know to his shock and surprise that there was a suit pending between one
K.Veerappan, Kaliyamurthy, Pugazhendhi and S. Ramesh in O.S.No.520/2017 on the file of
the Additional District Munsif, Raipur in respect of the suit property and that the said Ramesh
filed Crl.O.P.No.14379 of 2016 on the file of the High Court against the said Pugazhendhi and

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 one Koutham Raja, questioning the transactions in respect of the property covered under the
suit agreement.
4. That in support of the same, the plaintiff had stated that he filed supporting documents.
Subsequently, according to the Plaintiff, he issued legal notice to the defendant, rescinding the
agreement for sale, dated 06.04.2016 entered into between the plaintiff and the defendant and
asked the defendant to return the advance amount with interest. The defendant having
admitted the receipt of advance amount of Rs.20,00,000/- from the Plaintiff, raised frivolous
and unsustainable defence. Hence, the plaintiff filed this suit, seeking a money decree for the
return of the advance amount with interest and costs.
5. That the respondent be directed herein that a sum of Rs.21,04,000/- to be paid with 6%
interest p.a., for the principal amount, Rs.20,00,000/- from the date of filing of the suit till the
date of recovery of the said amount and for costs
6. That there were no prior proceedings between the parties and there is no collusion between the
applicant and Shyam relating to the subject-matter of present petition.
7. That this court has jurisdiction to entertain this application as the marriage was celebrated at
(the parties reside or last resided within the jurisdiction of this court).

Signature of Plaintiff
……………………….
Verification

I, Prahlad Das, aged 29 years S/O Keshav Das, residing at HIG-05, Rajiv Nagar, Raipur, (c.g) do
hereby solemnly affirm and say as follows:

Verified that the contents of Paras No.1 to 5 of the plaint are true and correct to best of my
knowledge and Paras No. 6 & 7 of the plaint are true to best of my knowledge and belief and
information received by me.
Verified at ____ on _____.
I sign this verification on this 12th day of February at the Court House at Raipur

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Plaintiff’s Signature.
………………………

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