Total initial energy of two particles
$=\frac{1}{2}m_1u_1^2+\frac{1}{2}m_2u_2^2$
Total final energy of two particles
$=\frac{1}{2}m_2v_2^2+\frac{1}{2}m_1v_1^2+ \varepsilon $
Using energy conservation principle,
$\frac{1}{2}m_1u_1^2+\frac{1}{2}m_2u_2^2 =\frac{1}{2}m_1v_1^2+\frac{1}{2}m_2v_2^2 +\varepsilon $
$\therefore \, \, \, $ $\frac{1}{2}m_1u_1^2+\frac{1}{2}m_2u_2^2 -\varepsilon =\frac{1}{2}m_1v_1^2+\frac{1}{2}m_2v_2^2$