# Dr. Vaibhavi Dhasmana v. State of U.P. & Anr

- **Citation:** (2022) 9 ILRA 1364
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-09-13
- **Case number:** Writ-C No. 5940 of 2022
- **Bench:** Pankaj Bhatia
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/dr-vaibhavi-dhasmana-v-state-of-u-p-anr-48999
- **Pages:** 7

## Headnote

Civil Law- Indian Contract Act, 1872-
Section
74-
UP
NEET
Counseling
-
Forfeiture of Security Deposit- Petition for
refund of security deposit- The stipulation
of forfeiture of security is clearly by way
of a penalty and in view of illustration as
contained in Section 74, the stand taken
by the respondent cannot be accepted and
the State at best can claim reasonable
compensation for the los suffered on
account of breach of contract. As no loss
has been shown to be caused to the
respondent by way of resignation coupled
with the fact that the seat of the State has
not gone vacant, the State cannot even
claim reasonable compensation.

The security amount deposited by the petitioner
cannot be forfeited by taking recourse to
Section 74 of the Contract Act as neither the
State has suffered any loss and nor has the seat
gone vacant due to the resignation of the
petitioner. (Para 16, 19, 20)

Writ Petition allowed. (E-3)

Judgements/Case law relied upon:-

Fateh Chand Vs Balkishan Dass - AIR 1963 SC
1405

## Text

1364 INDIAN LAW REPORTS ALLAHABAD SERIES
below cannot be said to be illegal, illogical
and improbable and not based on material
on record or is based on erroneous views
and is against the settled position of law.
So, this Court is satisfied that there is
absolutely no hope of success in this appeal
and accordingly, no interference is called
for.

15. Leave to appeal is refused.

16. Application for leave to appeal is
rejected.

17. Accordingly, the appeal does not
survive, and in view of above, the appeal is
also dismissed.

18. No order as to costs.

19. Copy of this judgment be sent to
the court below for its compliance.
----------
(2022) 9 ILRA 1364
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 13.09.2022

BEFORE

THE HON'BLE PANKAJ BHATIA, J.

Writ-C No. 5940 of 2022

Dr. Vaibhavi Dhasmana ...Petitioner
Versus
State of U.P. & Anr. ...Respondents

Counsel for the Petitioner:
Pawan Kumar Nigam, Ram Babu Singh

Counsel for the Respondents:
C.S.C., Kshitij Mishra

Civil Law- Indian Contract Act, 1872-
Section
74-
UP
NEET
Counseling
-
Forfeiture of Security Deposit- Petition for
refund of security deposit- The stipulation
of forfeiture of security is clearly by way
of a penalty and in view of illustration as
contained in Section 74, the stand taken
by the respondent cannot be accepted and
the State at best can claim reasonable
compensation for the los suffered on
account of breach of contract. As no loss
has been shown to be caused to the
respondent by way of resignation coupled
with the fact that the seat of the State has
not gone vacant, the State cannot even
claim reasonable compensation.

The security amount deposited by the petitioner
cannot be forfeited by taking recourse to
Section 74 of the Contract Act as neither the
State has suffered any loss and nor has the seat
gone vacant due to the resignation of the
petitioner. (Para 16, 19, 20)

Writ Petition allowed. (E-3)

Judgements/Case law relied upon:-

Fateh Chand Vs Balkishan Dass - AIR 1963 SC
1405

(Delivered by Hon'ble Pankaj Bhatia, J.)

1. Heard learned counsel for the
petitioner and Shri Sanjay Bhasin, learned
Senior Advocate assisted by Shri Kshitij
Mishra, learned counsel appearing for
respondent no.2.

2. Present petition has been filed
seeking refund of the security amount
deposited by the petitioner after first round
of counseling.

3. The facts in brief are that,the
petitioner participated in the UP NEET
Counseling 2021 and was allotted seat in
M.D. Anesthesia by respondent no.2, the
State Counseling Board. Subsequently and
prior to the second round of counseling, the
petitioner got admission in Hemwati
Nandan Bahuguna Uttarakhand Medical
9 All. Dr. Vaibhavi Dhasmana Vs. State of U.P. & Anr.
1365
Education
University,
Dehradun
on
28.1.2022, which fact was informed by the
petitioner to the respondents on 31.1.2022
alongwith a copy of the allotment letter. In
the said application, there was a request for
refund of the security deposit also.

4. The respondents did not pass any
order on the request of the petitioner for
refund of the security deposit, as such, the
present petition has been filed.

5. Submission of learned counsel for
the petitioner is that the State itself has issued
Government Order dated 7.10.2021 wherein
it is specifically stated in Clause 8(a)(I) that
there is a provision for refund of the entire
security deposit in the case of a resignation
on the ground that the petitioner has been
granted admission in a private medical
college.

6. In the light of the said Government
Order, it is argued that the security amount
deposited by the petitioner amounting to
Rs.2,00,000/- is bound to be refunded.

7. Learned counsel for the petitioner
further places reliance on the directions given
in the judgment dated 16.12.2021 passed in
Petition(s) for Special Leave to appeal (C)
No(s).10487 of 2021; Nihila P.P. v. The
Medical Counseling Committee (MCC) &
Ors. wherein the Supreme Court ,referred to
the modified scheme of allotment of All India
Quota which recorded that in terms of the
modified scheme, there will be an option for
up-gradation and free exit, only in Round 1 of
the AIQ counseling. In the light of the said,
he argues that the security deposit is liable to
be refunded.

8. Shri Sanjay Bhasin, learned Senior
Advocate on the other hand argues that in
terms
of
Clause
8(a)(II)
of
the
Government Order dated 7.10.2021, the
entire security deposit was liable to be
forfeited. Clause 8 is being quoted below:

"8. त्याग-पत्र भिये िाने के सींबींध में-

(ि) यगि अभ्यथी शैक्षगर्ि सत्र 2021-22
िी प्रथम िाउखिगलंि से आवंगटर् होिर
प्रिेश िे गिसी भी मेगडिल / डेण्टल िी सीट
पर प्रवेश प्राप्त िर लेर्ा है र्त्पश्चार्् :-

(I) अभ्यथी आल इखण्डया या अन्य प्रिेश
िी िाउखिगलंि िे माध्यम से गिसी अन्य पर
आवंटन प्राप्त िरर्ा है और वह प्रिेश िी
प्रथम िाउखिगलंि से प्रवेगशर् सीट से त्याि
पत्र िेना चाहर्ा है (त्याि पत्र िे समय अन्य
िाउखिगलंि से आवंटन िा प्रमार् पत्र प्रस्तुर्
िरना अगनवायत होिा) र्ो ऐसे अभ्यथी गद्वर्ीय
िाउखिगलंि िी च्वाईस गफगलंि से िो गिन
प वत (उिाहरर्ाथत यगि गद्वर्ीय चक्र िी
िाउखिगलंि 24.09.2021 से प्रारम्भ होनी है,
र्ो अभ्यथी 21.09.2021 िो सायं 4.00 बजे
र्ि) अपनी सीट से त्याि पत्र िे सिर्ा है ऐसी
खस्थगर् में अभ्यथी द्वारा जमा िी ियी
गसक्ोररटी धनरागश र्था गशक्षर् शुल्क से
गनम्नानुसार िटौर्ी िरर्े हुए वापस गिया
जाएिा:-
- राजिीय क्षेत्र िे मेगडिल / डेण्टल िालेजों
में प्रवेगशर् अभ्यगथतयों िी जमा समस्त शुल्क िे
10 प्रगर्शर् िी िटौर्ी िरर्े हुए शेष धनरागश
र्था धरोहर धनरागश (Security Money)
वापस िेय होिी।
- गनजी क्षेत्र मेगडिल / डेण्टल िालेजों में
प्रवेगशर् अभ्यगथतयों िी जमा गशक्षर् शुल्क से
10 प्रगर्शर् िी िटौर्ी िरर्े हुए शेष धनरागश
र्था धरोहर धनरागश (Security Money)
वापस िेय होिी।

(II) प्रथम चक्र िी िाउखिगलंि से
आवंटन िे पश्चार् यगि अभ्यथी द्वारा आवंगटर्
िालेज में प्रवेश ले गलया जार्ा है र्था अभ्यथी
िो
आल
इखण्डया
/
अन्य
प्रिेश
िी
1366 INDIAN LAW REPORTS ALLAHABAD SERIES
िाउखिगलंि से िोई भी आवंटन प्राप्त नहीं
होर्ा है, गफर भी अभ्यथी गनधातररर् गर्गथ
(गद्वर्ीय चक्र िी च्वाईस गफगलंि से िो गिन
पहले) से प वत त्याि पत्र िेर्ा है र्ो ऐसी िशा में
जना िी धरोहर धनरागश (Security Money)
जब्त िर ली जायेिी र्था गशक्षर् शुल्क में से
50 प्रगर्शर् िी िटौर्ी िरर्े हुए शेष धनरागश
वापस गिया जाएिा।

यगि अभ्यथी िे द्वारा गनधातररर् गर्गथ िे
पश्चार् त्याि पत्र गिया जार्ा है र्ो ऐसी िशा में
जमा िी ियी धरोहर धनरागश (Security
Money) व गशक्षर् शुल्क जब्त िर गलया
जायेिा।

(ख) रािकीय क्षेत्र के मेभिकल / िेण्टल
कालेि ीं हेिु -

प्रिेश िी गद्वर्ीय चक्र िी िाउंगसगलंि
समाप्त होने िे पश्चार्् प्रवेगशर् अभ्यथी िो सीट
ररक्क िरने िी अनुमगर् नहीं होिी, गफर भी
यगि अभ्यथी अपनी सीट से त्याि पत्र िेर्ा है र्ो
अभ्यथी द्वारा जमा िी ियी धरोहर धनरागश र्था
समस्त शैक्षगर्ि शुल्क जब्त िर गलया जायेिा
व साथ ही साथ रू0 5,00,000/- (रुपये पााँच
लाि मात्र) िा बाण्ड प्रभावी मानर्े हुए उक्त
धनरागश सरिार िे पक्ष में िेय होिी, गजसे
अभ्यथी िो आवंगटर् िालेज में जमा िराना
होिा।

(ग) भनिी क्षेत्र के मेभिकल / िेण्टल
कालेि ीं हेिु -

शासनािेश
संख्या:686/71-4-202115/2018 टी0 सी0, गिनांि 16 जुलाई, 2021 िे
क्रम में प्रिेश िी गद्वर्ीय चक्र िी िाउंगसगलंि
समाप्त होने िे पश्चार्् प्रथम व गद्वर्ीय चक्र से
प्रवेगशर् अभ्यथी िो सीट ररक्त िरने िी
अनुमगर् नहीं होिी, गफर भी यगि अभ्यथी मापअप राउण्ड से िो गिन प वत अपनी सीट से त्याि
पत्र िेर्ा है, र्ो अभ्यथी द्वारा जमा िी ियी
धरोहर धनरागश र्था उत्तिे द्वारा र्त्समय जमा
गिये िये गशक्षर् शुल्क िा 50 प्रगर्शर् जब्त
िर गलया जायेिा।

मॉप अप राउण्ड िे पश्चार् गनजी क्षेत्र िे
मेगडिल
िालेजो/
गवश्वगवद्यालयों/
डेण्टल
िालेजों में प्रवेगशर् अभ्यथी पाठ्यक्रम प र्त िरने
से प वत यगि सीट से त्याि पत्र िेर्ा है र्ो उक्त
पाठ्यक्रम िी समस्त शैक्षगर्ि शुल्क (Tuition
Fee) सम्बखन्धर् मेगडिल िालेज/गवश्वगवद्यालय/
डेण्टल िालेज िो िेय होिी और गसक्ोररटी
धनरागश जब्त िर ली जायेिी र्था यगि अभ्यथी
िो गसक्ोररटी धनरागश वापस िी जा चुिी है
र्ो वह भी उसे जमा िरना होिा।"

9. He further argues that even in terms
of
the
brochure/guidelines
issued
in
pursuance to which the petitioner had
applied, there was a clear stipulation that
the security deposit shall be forfeited in
respect of candidates who do not join after
the first round of counseling or resign after
joining and the said brochure/guidelines
were in nature of an offer which was
accepted by the student and thus there was
a contract created in between the parties by
which the petitioner is bound.

Relevant extracts of the document
issued as guidelines are quoted herein
below:

"For detailed information see the
Government Order Dated 7 October, 2021

....

Step-5:- Seat Allotment:

1.....

2.....

3. (a) If Seat allotted (First Round):-
In case

i. Candidate does not join or after
joining resigns from the seat, security
money will be forfeited. For participation
in second round of counseling security
money will have to be deposited again.

ii. Candidate joins the college in first
round but wants to upgrade his/her seat,
9 All. Dr. Vaibhavi Dhasmana Vs. State of U.P. & Anr.
1367
he/she will remain eligible for second
counseling and can fill the choices for
second round of counseling.

....."

10. Shri Bhasin further places reliance
on Section 74 of Indian Contract Act. He
argues that even in the allotment letter issued
to the petitioner as contained in Annexure - 4,
it was clearly stipulated that in case the
candidate does not take admission after
allotment, the security deposit will be
forfeited. He further argues that the judgment
of the Supreme Court relied upon by the
petitioner refers to free exit only on upgradation whereas in the present case, the
case of the petitioner is not that of upgradation but that of resignation on account
of the allotment subsequently elsewhere.

11. He further argues that even
otherwise the judgment of the Supreme Court
pertains to the allotment of All India Quota
whereas the issue at hand relates to UP NEET
Counseling,
thus,
the
same
has
no
applicability to the facts of the present case as
the directions issued in the said judgment
pertain to All India Quota seats.

12. In rejoinder, learned counsel for the
petitioner argues that the petitioner was
allotted seat in the All India Quota seats and
thus, the judgment of the Supreme Court is
applicable to the facts of the present case.

13. In the light of the arguments as
advanced by the parties, this Court is to
consider as to whether the confiscation of
security deposit, is bad in law? and whether
the petitioner is entitled to refund of security
amount ?

14. Considering the first submission
that the security deposit was liable to be
refunded in terms of the Government Order
dated 7.10.2021. On plain reading of
Clause 8 of the said Government Order, I
am of the firm view that the case of the
petitioner would fall under Clause 8(a)(I)
and not under Clause 8(a)(II) as is being
argued
by
learned
counsel
for
the
respondent. Clearly, in terms of Clause
8(a)(I), the petitioner is entitled for refund
of entire security deposit.

15.

Reverting
to
the
second
submission of Shri Bhasin that there was a
contract which flows from the offer and
acceptance
as
made
through
the
brochure/guidelines/allottment
letter,
in
between the parties and in terms of the
Section 74 of the Indian Contract Act, the
respondents are well within their right to
forfeit the security deposit, Section 74 of
the Indian Contract Act with illustrations is
quoted herein below:

"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.

Exception.--When any person enters
into any bail-bond, recognizance or other
instrument of the same nature, or, under the
provisions of any law, or under the orders
of the Central Government or of any State
Government, gives any bond for the
1368 INDIAN LAW REPORTS ALLAHABAD SERIES
performance of any public duty or act in
which the public are interested, he shall be
liable, upon breach of the condition of any
such instrument, to pay the whole sum
mentioned therein.

Explanation.--A person who enters
into a contract with Government does not
necessarily thereby undertake any public
duty, or promise to do an act in which the
public are interested.

Illustrations

(a) A contracts with B to pay B Rs.
1,000, if he fails to pay B Rs. 500 on a
given day. A fails to pay B Rs. 500 on that
day. B is entitled to recover from A such
compensation, not exceeding Rs. 1,000, as
the Court considers reasonable.

(b) A contracts with B that, if A
practises as a surgeon within Calcutta, he
will pay B Rs. 5,000. A practises as a
surgeon in Calcutta. B is entitled to such
compensation; not exceeding Rs. 5,000, as
the Court considers reasonable.

(c) A gives a recognizance binding him
in a penalty of Rs. 500 to appear in Court
on
a
certain
day.
He
forfeits
his
recognizance. He is liable to pay the whole
penalty.

(d) A gives B a bond for the repayment
of Rs. 1,000 with interest at 12 per cent. at
the end of six months, with a stipulation
that, in case of default, interest shall be
payable at the rate of 75 per cent. from the
date of default. This is a stipulation by way
of penalty, and B is only entitled to recover
from A such compensation as the Court
considers reasonable.

(e) A, who owes money to B a moneylender, undertakes to repay him by
delivering to him 10 maunds of grain on a
certain date, and stipulates that, in the
event of his not delivering the stipulated
amount by the stipulated date, he shall be
liable to deliver 20 maunds. This is a
stipulation by way of penalty, and B is only
entitled to reasonable compensation in case
of breach.

(f) A undertakes to repay B a loan of
Rs.
1,000
by
five
equal
monthly
instalments, with a stipulation that in
default of payment of any instalment, the
whole shall become due. This stipulation is
not by way of penalty, and the contract may
be enforced according to its terms.

(g) A borrows Rs. 100 from B and
gives him a bond for Rs. 200 payable by
five yearly instalments of Rs. 40, with a
stipulation that, in default of payment of
any instalment, the whole shall become
due. This is a stipulation by way of
penalty."

16. In the present case, the guidelines
issued and annexed, specifically provides
that the detailed information contained in
the Government Order dated 7.10.2021
would guide the issues pertaining to the
counseling, forfeiture and the payments, as
such, the information given to the student
contained a clear stipulation that the
provisions of Government Order dated
7.10.2021 would govern, however, even
assuming that the guidelines given to the
student and its acceptance form a separate
contract (as argued by respondents), the
stipulation of forfeiture of security is
clearly by way of a penalty and in view of
illustration as contained in Section 74, the
stand taken by the respondent cannot be
accepted and the State at best can claim
reasonable
compensation
for
the
los
suffered on account of breach of contract.
As no loss has been shown to be caused to
the respondent by way of resignation
coupled with the fact that the seat of the
State has not gone vacant, the State cannot
even claim reasonable compensation.

17. Scope of Section 74 of the Indian
Contract Act was considered and explained
9 All. Dr. Vaibhavi Dhasmana Vs. State of U.P. & Anr.
1369
by the Hon'ble Supreme Court in the case
of Fateh Chand v. Balkishan Dass - AIR
1963 SC 1405 wherein the Hon'ble
Supreme Court has held as under:

"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.

11. Before turning to the question about
the compensation which may be awarded to
the plaintiff, it is necessary to consider
whether Section 74 applies to stipulations
for forfeiture of amounts deposited or paid
under the contract. It was urged that the
section deals in terms with the right to
receive from the party who has broken the
contract reasonable compensation and not
the right to forfeit what has already been
received by the party aggrieved. There is
however, no warrant for the assumption
made by some of the High Courts in India,
that Section 74 applies only to cases where
the, aggrieved party is seeking to receive
some amount on breach of contract and
not to cases where upon breach of contract
an amount received under the contract is
sought to be forfeited. In our judgment the
expression "the contract contains any
other stipulation by way of penalty"
comprehensively applies to every covenant
involving a penalty whether it is for
payment on breach of contract of money or
delivery of property in future, or for
forfeiture of right to money or other
property already delivered. Duty not to
enforce the penalty clause but only to award
reasonable
compensation
is
statutorily
imposed upon courts by Section 74. In all
cases,
therefore,
where
there
is
a
stipulation in the nature of penalty for
forfeiture of an amount deposited pursuant
to the terms of contract which expressly
provides for forfeiture, the court has
jurisdiction to award such sum only as it
considers reasonable, but not exceeding the
amount specified in the contract as liable to
forfeiture. We may briefly refer to certain
illustrative cases decided by the High Courts
in India which have expressed a different
view."
1370 INDIAN LAW REPORTS ALLAHABAD SERIES

18. Testing the third argument as
raised in between the parties with regard to
the judgment of the Supreme Court, learned
counsel for the petitioner argues that, the
contract, even if for the sake of arguments
is considered to be correct, would stand
superseded by the subsequent judgment of
the Supreme Court whereas Shri Bhasin
argues that the contract would not get
affected by the said judgment inasmuch as
the directions contained were based upon
an affidavit filed by Directorate General of
Health Services (DGHS) for counseling for
50% All India Quota seats.

19. Be that as it may, once I have held
that even by virtue of Section 74 of the
Indian Contract Act, the respondents -
authorities are not entitled to impose a
penalty over and above what they can
establish as a loss caused to them, thus, the
said argument becomes redundant and
cannot be considered.

20. Thus, holding that the petitioner is
entitled in terms of the Government Order
dated 7.10.2021 for refund of the entire
security deposit and the respondents are not
entitled to resort to penal clause as
contained in the guidelines for recovering
damages over and above what they can
establish, the present petition deserves to
be allowed and is ordered accordingly.

21. Respondent No.2 i.e. Director
General (Medical Education & Training),
Chairman, Counseling Board, U.P. NEET
PG - 21, Lucknow, U.P. is directed to
refund
the
amount
of
Rs.2,00,000/-
deposited by the petitioner as security
deposit to her within a period of four weeks
from today. 22. In the event the amount is
not refunded within a period of four weeks
from today, the same shall carry interest at
the rate of 6% per annum from the date of
application
for
refund
till
payment
/realisation.
----------
(2022) 9 ILRA 1370
APPELLATE JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 23.092022

BEFORE

THE HON'BLE DEVENDRA KUMAR
UPADHYAYA, J.
THE HON'BLE SHREE PRAKASH SINGH, J.

Special Appeal No. 408 of 2021

Gaya Prasad Yadav ...Appellant
Versus
State of U.P. & Anr. ...Respondents

Counsel for the Appellant:
Mohd. Shujauddin Waris

Counsel for the Respondent:
C.S.C.

A. Civil Law - Service Law - Disciplinary
Action Post Employee's Retirement - U.P.
Police Officers of Subordinate Ranks
(Punishment and Appeal) Rules, 1991 - R.
14 - Civil Service Regulations, Article 351A - if departmental proceedings are
instituted against the government servant
prior to the government servant attains
the age of superannuation and retires,
then in that eventuality the departmental
proceedings can continue & no sanction of
the Governor is required for continuance
of
the
departmental
proceedings
-
however, departmental enquiry initiated
against
the
employee,
before
his
retirement, could be continued only for a
limited purpose for determining whether
or not he is entitled for pensionary
benefits and gratuity - if the employee is
found to be guilty of grave misconduct or
is found to have caused pecuniary loss to
the Government, in such a situation, it is
only
the
Governor
(i.e.
the
State
Government in accordance with the Rules
of Business) who can take certain action
permissible under Article 351-A of the CSR