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Rabina Bibi Vs. Pulipaka Satyavathi and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 74 of 1959
Judge
Reported inAIR1963AP304
ActsTransfer of Property Act, 1882 - Sections 55; Indian Contact Act, 1872 - Sections 74
AppellantRabina Bibi
RespondentPulipaka Satyavathi and anr.
Appellant AdvocateC. Rama Rao and ;C. Poornaiah, Advs.
Respondent AdvocateK.V. Rangachari, Adv.
DispositionAppeal allowed
Excerpt:
.....as advance or consideration in contract for sale - breach of contract committed by buyer ( earnest money paid as security to performance of contract on breach can be forfeited by seller - seller not liable to refund earnest money ( held, different nomenclature used to define earnest money will not take away seller's right if it was originally agreed to be earnest money. - - the judicial committee stated at page 2: earnest money is part of the purchase price when the transaction goes forward, it is forfeited when the transaction tails through, toy reason of the fault or failure of the vendee'.thisview was followed in air1959all755 and sambayya v. a similar situation arose in air 1926 pc 1 where the earnest money mentioned in the contract of sale was mentioned in a subsequent receipt..........film co., air 1943 pc 34. these decisions enunciate the principles to be followed in respect of moneys paid as advance or deposits under contracts. whether the payment is made on account, or whether it is security for the performance of the contract, and whether forfeiture would in reality be a penalty although not expressed as such -- all these matters would have to be taken into consideration.5. it is unnecessary, in my opinion, to discuss those decisions in detail, because at the close of the lengthy arguments it was discovered that the correct meaning to the word 'bayana' is earnest money. this was the meaning adopted in kanpur i.b.w. and f. mills v. banarsi das, : air1959all755 . in brown's telugu-english dictionary at page 66 of the supplement dealing with mixed dialects used in.....
Judgment:

Krishna Rao, J.

1. This second appeal is brought by the 1st defendant in O.S. No. 46 of 1955 against we judgment and decree of the Subordinate Judge of Kakinada in A.S. No. 70 of 1957.

2. The facts in brief are as follows: Under an agreement Ex. A-1, dated 9-11-1951, executed by the 1st defendant in favour of the plaintiff, she (1st defendant) agreed to sell the plaint house to the plaintiff tar Rs. 1,600/-. She received a sum of Rs. 150/- as 'Bajana' or earnest money, and the balance was to be paid to her at the time of the registration of the sale deed for which one month's time was allowed to the plaintiff. The one month's time was subsequently extended under Ex. A-2 dated 13-12-1951, Ex. A-3 dated 28-12-1931, Ex. A-4 dated 24-1-1952, Ex. A-5 dated 1-2-1952 and Ex. A-6 dated 27-3-1952.

On each of these occasions, the plaintiff made payments towards the purchase money and got the time extended by a few days. The last extension was under Ex. A-6 for 20 days from 27-3-1952 on the payment of Rs. 200/-which was in addition to the previous payments amounting in all to Rs. 600/-. On 29-6-1952, the 1st defendant issued a notice Ex. A-7 calling upon the plaintiff to pay the amount due within a week and get the sale deed registered, failing which the amounts paid would be forfeited. The plaintiff replied by Ex. A-8 dated 7-7-1952, Stating that she would not give up her fights under the agreement, that the delay was due to her inability to raise the money and that she would pay the balance of the price as early as possible. On 24-1-1955, the plaintiff Instituted O.S. No. 46 of 1955 stating mat she was able to raise the necessary money only in the third been of December, 1954, and asking for specific performance or, in the alternative, for recovery of Rs. 800/-.

The learned District Munsif held that by Exs. A-2 to A-6, time was made the essence of the contract, that the plaintiff committed breach as she was able to raise the requisite money only in the third week of December, 1954, long after the expiry of the one week's time allowed by Ex. A-7, and that she was, therefore, not entitled to specific performance. He further held that It would be unreasonable to forfeit the entire Rs. 800/- paid by the plaintiff and that only Rs. 150/- could be treated as the earnest money and that the 1st defendant was name to pay back Rs. 650/-. On the appeal of the plaintiff, the learned Subordinate Judge held that even Rs. 150/- was part of the consideration for the sale and that it coma not be forfeited. He allowed the appeal to the extent or granting a decree for Rs. 150/- disallowed By the trial Court.

3. The ground of second appeal by the 1st detendant is that she is entitled to forfeit and is not liable to returned the Rs. 150/-.

4. The amount of Rs. 150/- paid by the plaintiff to the 1st defendant at the time of Ex. A-1 is mentioned in the document as '(Bajana)'. This is obviously a colloquial variation of the word '(Bayana)'. Elaborate arguments ware advanced by the learned counsel as this worn was translated by the 1st respondent as meaning 'advance'. On behalf of the appellant it was contended that even if the amount was an advance simpltciter, it was liable to be forfeited, because its only purpose was to secure the due performance of the contract. Reliance was placed-by the appellant on Natesa Alyar v. Appavu Pada-yachi, ILR 38 Mad 178 : (AIR 1915 Mad 896 FB), Abdul Gam and Co. v. Trustees Bombay Port : AIR 1952 Bom310, Naresh Chard v. Ram Chandra, : AIR1952Cal93 , Jagdisnpur Metal Industries v. Vijoy Oil Industries Ltd., 0043/1959 : AIR1959Pat176 and N.V. Jagannadhayya v. Ramanatna, : AIR1955Ori11 .

Sri K.V. Rangachari on behalf of the 1st respondent relied for the position that the advance paid is a benefitderived which is liable to be refunded on the following decisions: Alokeshi Dassi v. Harachand Dass, ILR 24 Cal 897, Muthuswami Aiyar v. Ramalirga Mudaliar, AIR 1926 Mad 485, Satyanarayanamurthi v. Enkalappa, 50 Mad LJ 150 : (AIR 1926 Mad 410), Rattamma v. Krisnnamurtni, 54 Mad LJ 40 : (AIR 1928 Mad 326), and Muralidhar v. International Film Co., AIR 1943 PC 34. These Decisions enunciate the principles to be followed in respect of moneys paid as advance or deposits under contracts. Whether the payment is made on account, or whether it is security for the performance of the contract, and whether forfeiture would in reality be a penalty although not expressed as such -- all these matters would have to be taken into consideration.

5. It is unnecessary, in my opinion, to discuss those decisions in detail, because at the close of the lengthy arguments it was discovered that the correct meaning to the word 'Bayana' is earnest money. This was the meaning adopted in Kanpur I.B.W. and F. Mills v. Banarsi Das, : AIR1959All755 . in Brown's Telugu-English Dictionary at page 66 of the supplement dealing with mixed dialects used in Telugu, the meanings given of the word 'Bayana' are 'earnest money' 'handsell'; advance money. The same meanings are given but in a differentorder in Sankaranarayana's Telugu-English Dictionary, aLL earnest moneys are also advances. It is clear that the use of the word 'Bayana' carries with it the meaning that it is a particular type of advance, viz., an earnest money.

Cases of earnest money are directly covered by thedecision of the Privy Council in Chiranjit Singh v. Har Swarup, AIR 1926 PC 1 wherein it was held that it is liable to be forfeited for non-performance of the contract. The Judicial Committee stated at page 2: 'Earnest money is part of the purchase price when the transaction goes forward, it is forfeited when the transaction tails through, toy reason of the fault or failure of the vendee'. Thisview was followed in : AIR1959All755 and Sambayya v. D. Ramanada, : AIR1960AP515 .....

The mention of a payment as earnest money carries with it the incident that it is intended to be security for me performance of the contract. It, as is clear from tx. A-i, the amount of Rs. 150/- was paid at the time as earnest money, there can be no doubt that it was liable to be forfeited. As the plaintiff committed breach of the contract, the trial Court was right in holding that it was properly forfeited by the 1st defendant and was not liable to be refunded to the plaintiff.

6. Sri K.V. Rangachari strongly relies on the tact that the Rs. 150/- was mentioned as 'advance'' by me 1st defendant herself in Ex. A-7, and similarly by the plaintiff in her reply Ex. A-8. He also points out that in Exs. A-2 to A-6, by which the time was extended, the first payment of Rs. 150/- was put on a par with the subsequent payments made by her each time towards the purchase money. He therefore argues that the Rs. 150/- stands on the same footing as the subsequent payments amounting to Rs. 650/- which were held by the trial court to he liable to be refunded to the plaintiff. But the mere fact that the amount was mentioned as advance in Exs. A-7 and A-8, or that it was mentioned as the consideration of the sale in Exs. A-3 to A-7, could not take away the rights of the 1st defendant if it was originally agreed under Ex. A-l to be earnest money, mere is nothing in Exs. A-2 to A-7 indicating that the 1st defendant agreed to give up her rights to forfeit the Rs. 150/-and undertook to account for it as being exclusively part, of the purchase money.

A similar situation arose in AIR 1926 PC 1 where the earnest Money mentioned in the contract of sale was mentioned in a subsequent receipt as part of a payment 'towards the sale price'. Lord Shaw held that the original contract of safe was not superseded and that there was only a financial modification in the interests of the purchaser. He observed that

'there was nothing to suggest that the owner of the estate agreed to sacrifice the stipulated earnest'. The lower appellate Court erred in basing itself on the fact that there was no express condition for forfeiture. The use of the expression 'earnest money' carries with it the meaning that it was liable to be forfeited if the vendee defaulted. Therefore, the appeal is allowed, the decree of the lower appellate Court is set aside and the decree of the trial Court is restored. The 1st respondent will pay the appellant's costs throughout. No leave.


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