Powers of the Wakf Board inter alia to sanction any transfer of Wakf Property:

 

• Section 32 of the Wakf Act stipulates the Powers and Functions of the Wakf Board inter alia for maintenance, control, administration etc of the wakf properties, income etc. Section 32 reads as under:

 

“32. Powers and functions of the Board. (1) Subject to any rules that may be made under this Act, the general superintendence of all Wakfs in a State shall vest in the Board established or the State; and it shall be the duty of the Baord so to exercise its powers under the Act so as to ensure that the Wakfs under the superintendence are properly maintained, controlled and administered and the income thereof is duly applied to the objects and for the purposes for which such Wakfs were created or intended:

………..

(2) Without prejudice to the generality of the foregoing power, the functions of the Board shall be:-

……..

(j) to sanction any transfer of immovable property of a Wakf by way of sale, gift, mortgage, exchange or elase, in accordance with the provisions of this Act:

            Provided that no such sanction shall be given unless at least two-thirds of the members of the Board vote in favour of such transaction……”

• In view of the above, Wakf Board alone has the power to sanction any transfer of the Wakf property and the procedure and manner of according such sanction is enshrined under Section 51 of the Wakf Act.

 Alienation of Wakf Property under the Wakf Act and Rules:

 

• As per Section 51 of the Wakf Act, the Wakf Property can be alienated only with the prior sanction of the Board. The said section provides that, before according a valid sanction to a transaction, including a sale of the Wakf property, the proposed transaction should be notified in the Official Gazette for purposes of inviting objections and suggestions. After considering the objections and suggestions as may be received pursuant to such notification and on being convinced that such transaction is beneficial to the Wakf, is consistent with the objects thereof and the consideration for the same is also adequate, the Wakf Board may accord sanction to the proposed transaction.

• Further, for a valid sanction, alteast two-thirds of the members of the Wakf Board should vote in favour of such transaction as provided under Clause j of sub-section 2 of Section 32 of the Wakf Act. Further, as per Rule 12 (1) of the A.P. Wakf Rules, 2000, the sanction accorded by the Wakf Board under Section 51 of the Act would be subject to the prior approval of the State Government and such directions as may be issued under Section 97 of the Wakf Act. However, Section 97 of the Act does not empower the State Government either to relax or to give a go-bye to the mandatory provisions of Section 51 or to accord permission to sale of Wakf land otherwise than by way of public auction. The Court has held that neither the Wakf Board nor the Government has the power to permit the sale of immovable property otherwise than by public auction and it is the only the Tribunal which is empowered to grant such permission[1].  

• As per the first proviso to Section 51 (2) of the Act, the sale of the Wakf property is ordinarily required to be by public auction, however, the second proviso to Section 51(2) carves out an exception to the first proviso and states that, the Wakf Tribunal, on application from the aggrieved Muttawalli or other person may permit such sale to be made otherwise than by public auction for reasons to be recorded by it, if it is of opinion that it is necessary so to do in the interest of the Wakf.

In view of the above, for valid sale of a Wakf property, the Wakf Board has to accord its sanction in terms of Section 51 of the Act and also an approval is required to be sought from the State Government, prior to the actual sale, in terms of Rule 12(1) of the A.P. Wakf Rules. Alienation of any Wakf Land in contravention to the procedure laid down under Section 51 renders the transaction void.

 

Acquisition of Wakf Land

 

• The land as defined under Section 3(a) of the Land Acquisition Act, 1894 does not in any manner excludes Wakf land and moreover such acquisition if for public purpose cannot be considered as violation of fundamental right to religion and worship under the Constitution of India.[2] It may be noted that the Wakf Lands can be subject matter of land acquisition[3] provided the said acquisition process is in compliance with the provisions of Section 91 of the Wakf Act. Section 91 of the Wakf Act reads as under:

“91. Proceedings under the Land Acquisition Act, 1894:- (1) If, in the course of proceedings under the Land Acquisition Act 1894 or under any law for the time being in force relating to the acquisition of land or other property, it appears to the Collector before an award is made that any property under acquisition is wakf property, a notice of such acquisition shall be served by Collector on the Board and further proceedings shall be stayed to enable the Board to appear and plead as a party to the proceeding at any time within three months from the date of the receipt of such notice. Explanation.- The reference to the Collector in the foregoing provisions of this sub- section shall, in relation to any other law referred to therein, be construed, if the Collector is not the competent authority under such other law to make an award of the compensation or other amount payable for acquisition of land or other property thereunder, as a reference to the authority under such other law competent to make such award.

(2) Where the Board has reason to believe that any property under acquisition is wakf property, it may at any time before the award is made appear and plead as a party to the proceeding.

(3) When the Board has appeared under the provisions of sub- section (1) or sub- section (2), no order shall be passed under section 31 or section 32 of the Land Acquisition Act, 1894 or under the corresponding provisions of the other law referred to in sub- section (1) without giving an opportunity to the Board to be heard.

(4) Any order passed under section 31 or section 32 of the Land Acquisition Act, 1894 or under the corresponding provisions of the other law referred to in sub- section (1) without giving an opportunity to the Board to be heard, shall be declared void if the Board, within one month of its coming to know of the order, applies in this behalf to the authority which made the order.”

 

• Section 91 of the Wakf Act protects the interest of the Wakf Board in respect of such Wakf properties which are likely to be acquired by the Collector in course of the proceedings under the Land Acquisition Act, 1894. It, therefore, requires that whenever it appears to collector that any property under acquisition is a Wakf property, he shall serve a notice on the Wakf Board before making any award and shall stay further proceedings in order to enable the Wakf Board to appear and plead as a party to such proceedings at any time within 3 months from the date of receipt of such notice. While complying with the provisions of Wakf Act, the State Government and District Collector must also follow the procedure laid down under the Land Acquisition Act, 1894 during the process of land acquisition.

 Relevant Clause under Wakf (Amendment) Bill, 2010:

 

• Clause 27 of the Wakf (Amendment) Bill, 2010 seeks to amend Section 51 of the principal Act i.e Wakf Act, 1995 which also deals with the aspect of acquisition of Wakf property for public purpose. Though this is yet to be passed by the Parliament and become an Act, for the purpose of your information, relevant portion of the said clause 27 is reproduced as under and reliance on this cannot be placed till the same is not culminated into the Act:

“Provided that nothing contained in this sub-section shall affect any acquisition of waqf properties for a public purpose under the Land Acquisition Act, 1894 or any other law relating to acquisition of land:

Provided further that —

(a) the acquisition shall not be in contravention of the Places of Public Worship (Special Provisions) Act, 1991;

(b) the purpose for which the land is being acquired shall be undisputedly for a public purpose;

(c) there shall be no alternative land being available which shall be considered as more or less suitable for that purpose; and

(d) the compensation shall be the prevailing market value plus the solatium and a equally suitable land in lieu of the acquired property to safeguard adequately the interest and objective of the waqf.’’

---

[1] M. Govinda Rao & Ors. vs. A.P. State Wakf Board & Ors, 2008(2) ALD 188

[2] Khajamia Wakf Estates v. State of Madras, AIR 1971 SC 161

[3] The Revenue Divisional Officer, Nalgonda v.A.P. State Wakf Board and Others, 2013 (1) ALD 744; Mohammad Azkar Hussain And Anr. v. Collector Of Shahabad And Ors., AIR 1960 Pat 144; Mohammed Ali Khan v. Special Land Acquisition Officer, Lucknow Nagar Mahapalika, Lucknow & Ors.., AIR 1978 All 280

Law of Liquidated Damages and Penalty

 

Relevant Provisions under the Indian Contract Act, 1972:

 

Section 73 - Compensation for loss or damage caused by breach of contract. 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, compensation 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 likely to result from the breach of it.

 

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract

 

Section 74 - Compensation for breach of contract where penalty stipulated for - 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 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 party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.

Explanation.- A stipulation for increased interest from the date of default may be a stipulation by way of penalty.

 

Under Section 74 of the Contract Act, the party claiming breach of contract is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. In view of the ruling in ONGC vs. Saw Pipes, wherever there is a pre-determined amount for the damages, in such a situation the said amount can be deducted by way of liquidated damages by way of specified amount payable by the respondent. Thus, if the compensation is named in the contract by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him.

 

The above provisions enact principles upon which damages are to be awarded by the Courts in India for breach of contracts. There are obvious differences between the two provisions. Section 73 outlines the general principles for the award of damages, which is the difference between the price or cost of the goods or services contracted for as on the date of breach, which the injured party would be entitled to. In such an instance, the injured party would have to prove the breach (of contract); the value, cost or price of the goods or services contracted for on the date of breach and the measures taken by it towards mitigation of damages. Section 74, on the other hand, dispenses with the requirement of proving actual damage once breach of contract is established, the Court is enabled to award the “reasonable compensation” not exceeding the amount specified in the contract or the amounts which can be arrived at on application of the formulae or method prescribed in the contract.

 

Case Laws:

 

1.         The Supreme Court, in Fateh Chand v. Bal Kishan Das AIR 1963 SC 1405 called Section 74 as the provision cutting through the maze of rules evolved by English Courts over a period of time to distinguish between what is considered a genuine pre-determination of damages and what is penalty and, therefore, not enforceable. The Court held as follows: -

 

“10. Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty. We are in the present case not concerned to decide whether a contract containing a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of “actual loss or damage”; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach.

 

15. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties pre-determined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrieved party claims relief as a plaintiff. The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for forfeiture of any property by way of penalty, the court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The jurisdiction of the court is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. Use of the expression “to receive from the party who has broken the contract” does not predicate that the jurisdiction of the court to adjust amounts which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract. The court has to adjudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach.

 

16. There is no evidence that any loss was suffered by the plaintiff in consequence of the default by the defendant, save as to the loss suffered by him by being kept out of possession of the property. There is no evidence that the property had depreciated in value since the date of the contract provided; nor was there evidence that any other special damage had resulted. The contact provided for forfeiture of Rs 25,000 consisting of Rs, 1039 paid as earnest money and Rs 24,000 paid as part of the purchase price. The defendant has conceded that the plaintiff was entitled to forfeit the amount of Rs 1000 which was paid as earnest money. We cannot however agree with the High Court that 13 percent of the price may be regarded as reasonable compensation in relation to the value of the contract as a whole, as that in our opinion is assessed on an arbitrary assumption. The plaintiff failed to prove the loss suffered by him in consequence of the breach of the contract committed by the defendant and we are unable to find any principle on which compensation equal to ten percent of the agreed price could be awarded to the plaintiff. The plaintiff has been allowed Rs 1000 which was the earnest money as part of the damages. Besides he had use of the remaining sum of Rs 24,000, and we can rightly presume that he must have been deriving advantage from that amount throughout this period. In the absence therefore of any proof of damage arising from the breach of the contract, we are of opinion that the amount of Rs 1000 (earnest money) which has been forfeited, and the advantage that the plaintiff must have derived from the possession of the remaining sum of Rs 24,000 during all this period would be sufficient compensation to him. It may be added that the plaintiff has separately claimed mesne profits for being kept out possession for which he has got a decree and therefore the fact that the plaintiff was out of possession cannot be taken, into account in determining damages for this purpose. The decree passed by the High Court awarding Rs 11,250 as damages to the plaintiff must therefore be set aside.”

 

2.         In the case of Maula Bux v. Union of India AIR 1970 SC 1955, the Supreme Court rejected the contention that quantified amounts spelt out in a contract for supply of potatoes to the Central Government, were, in the circumstances of the case, genuine pre-determination of what the damages were likely to be and held that such conditions were unenforceable penalties. The Court also noticed that that the Central Government did not make any effort to establish the quantum of damage suffered by it. It approved the previous ruling in Fateh Chand case.

 

3.         Similarly, in M.L. Devendra Singh v. Syed Khaja 1973 (2) SCC 515 (affirmed in P. D'Souza v. Shondrilo Naidu,(2004) 6 SCC 649) the Court accepted the same approach and further emphasized that mere stipulation of some amount would only be a piece of evidence, but inconclusive by its very nature:

 

"20. The fact that the parties themselves have provided a sum to be paid by the party breaking the contract does not, by itself, remove the strong presumption contemplated by the use of the words „unless and until the contrary is proved‟. The sufficiency or insufficiency of any evidence to remove such a presumption is a matter of evidence. The fact that the parties themselves specified a sum of money to be paid in the event of its breach is, no doubt, a piece of evidence to be considered in deciding whether the presumption has been repelled or not. But, in our opinion, it is nothing more than a piece of evidence. It is not conclusive or decisive.”

 

4.         In Oil and Natural Gas Corporation Ltd v. Saw Pipes Ltd. AIR 2003 SC 2629, the Hon’ble Supreme Court inter alia observed as under:

           

“From the aforesaid Sections, it can be held that when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss which naturally arise in the usual course of things from such breach. These sections further contemplate that if parties knew when they made the contract that a particular loss is likely to result from such breach, they can agree for payment of such compensation. In such a case, there may not be any necessity of leading evidence for proving damages, unless the Court arrives at the conclusion that no loss is likely to occur because of such breach. Further, in case where Court arrives at the conclusion that the term contemplating damages is by way of penalty, the Court may grant reasonable compensation not exceeding the amount so named in the contract on proof of damages. however, when the terms of the contract are clear and unambiguous then its meaning is to be gathered only from the words used therein. In a case where agreement is executed by experts in the field, it would be difficult to hold that the intention of the parties was different from the language used therein. In such a case, it is for the party who contends that stipulated amount is not reasonable compensation, to prove the same.”        

           

Further, in the aforesaid case, the Court summarized the legal position as follows

“(1) Terms of the contract are required to be taken into consideration before arriving at the conclusion whether the party claiming damages is entitled to the same.

(2) If the terms are clear and unambiguous stipulating the liquidated damages in case of the breach of the contract unless it is held that such estimate of damages/compensation is unreasonable or is by way of penalty, party who has committed the breach is required to pay such compensation and that is what is provided in Section 73 of the Contract Act.

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

(4) In some contracts, it would be impossible for the court to assess the compensation arising from breach and if the compensation contemplated is not by way of penalty or unreasonable, the court can award the same if it is genuine preestimate by the parties as the measure of reasonable compensation.”

 

In view of the above, a penal clause in an agreement has been characterized as a stipulation unreasonable which the courts would refuse to recognize, or give effect to. This necessarily implies that the amount of damages far exceeds what can be “reasonable compensation” in the given facts of the case. However, the Court would not, unless it is convinced that such condition far exceeds the genuine estimate of reasonable damages, interdict with the penalty condition, which the parties have agreed to include in the contract.