Bombay High Court clarifies that liquidated damages are not payable in the absence of proof

Brief Facts

Jackie Shroff (“Petitioner”), a shareholder of Atlas Equipfin Pvt. Ltd. (“Atlas”), received a notice of placement instruction for sale of shares of Atlas to a third party (“Placement Instruction”). The Placement Instruction bore the Petitioner’s signature, which the Petitioner claimed was not his. The Petitioner filed a complaint alleging forgery with the Economic Offences Wings (“EOW”) against Ratnam Iyer (“Respondent”), another shareholder of Atlas. Subsequently, a settlement deed (“Deed”) was drawn and executed between the parties. Clause 3 of the Deed forbade the Petitioner from writing any letter or communication to any authority or person complaining about the subject matter of the Deed. The Deed also provided for keeping an amount in an escrow to be released to the  Petitioner in two tranches upon closure/withdrawal of the EOW complaint and upon receipt of sale proceeds from Atlas.

The Petitioner received only the first tranche of the amount after unconditionally withdrawing the EOW complaint. With regard to release of the second tranche, the Respondent claimed that the Petitioner had committed a breach of Clause 3 of the Deed as the Petitioner’s wife had sent emails calling the Respondent a ‘forger’.

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