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Roshan Lal Vs. the Delhi Cloth and General Mills Company Limited - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAllahabad
Decided On
Judge
Reported in7Ind.Cas.794
AppellantRoshan Lal
RespondentThe Delhi Cloth and General Mills Company Limited
Excerpt:
vendor and purchaser - repudiation of contract by purchaser--earnest money--right to recover. - - first of all, he failed to pay the entire earnest money agreed to be paid by him, and he also failed to take delivery of the goods and pay 1 for them. the plaintiff, who sued for the recovery of the earnest money, failed to perform his contract within a reasonable time, and it was held by the court of appeal, affirming the decision of kay, j. , that the deposit, although to be taken as part payment, if the contract was completed, was also a guarantee for the performance of the contract, and that the plaintiff, having failed to perform his contract within a reasonable time, had no right to a return of the deposit. it may well be that there may be circumstances which would justify this court..........in this appeal is whether a purchaser who has repudiated a purchase is entitled to recover earnest money paid by him on entering into the contract. the contract in this case was for the purchase of 500 bales of cotton yarn, and the agreement was that the purchaser would deposit rs. 5 per bale as earnest money with the defendant company; and that if that was not done within two days of the contract, the defendant company would be at liberty either to adhere to or cancel the contract. the purchaser paid a sum of rs. 1,300 as earnest money, which left a balance of earnest money still unpaid. it has been found by the lower appellate court that the purchaser repudiated the contract. he was guilty of two breaches: first of all, he failed to pay the entire earnest money agreed to be paid by.....
Judgment:

1. The question in this appeal is whether a purchaser who has repudiated a purchase is entitled to recover earnest money paid by him on entering into the contract. The contract in this case was for the purchase of 500 bales of cotton yarn, and the agreement was that the purchaser would deposit Rs. 5 per bale as earnest money with the defendant company; and that if that was not done within two days of the contract, the defendant company would be at liberty either to adhere to or cancel the contract. The purchaser paid a sum of Rs. 1,300 as earnest money, which left a balance of earnest money still unpaid. It has been found by the lower appellate Court that the purchaser repudiated the contract. He was guilty of two breaches: first of all, he failed to pay the entire earnest money agreed to be paid by him, and he also failed to take delivery of the goods and pay 1 for them. Upon these findings the lower appellate Court dismissed the plaintiff's claim. His suit was for recovery of the sum of Rs. 1,30), which was paid by him as earnest money.

2. We think that the Court below was right in the view which it took. The question whether earnest money is recoverable has been considered in a number of cases and it would appear that no invariable rule can be laid down on the subject. In the case of Collins v. Stimson (1883) 11 Q.B.D. 142 : 52 L.J.Q.B. 440 : 48 L.T. 828, Baron Pollock stated the law upon the subject in the following terms: 'According to the law of vendor and purchaser, the inference is that such a deposit is paid as a guarantee for the performance of the contract, and where the contract goes off by default of the purchaser, the vendor is entitled to retain the deposit.'

3. In the case of Howe v. Smith (1848) 27 C.D. 89 : 53 L.J. Ch. 1055 : 50 L.T. 573 : 32 W.R. 802 : 48 J.P. 773, the question was considered whether a sum, which was paid on the purchase of real estate as a deposit and in part payment of the purchase money, was recoverable. The plaintiff, who sued for the recovery of the earnest money, failed to perform his contract within a reasonable time, and it was held by the Court of Appeal, affirming the decision of Kay, J., that the deposit, although to be taken as part payment, if the contract was completed, was also a guarantee for the performance of the contract, and that the plaintiff, having failed to perform his contract within a reasonable time, had no right to a return of the deposit.

4. Again, in the case of ex parte Barrell, in re Parnell (1885) L.R. 10 Ch. 512 : 33 L.T. 115 : 23 W.B. 846, in which by a contract for sale of real estate it was stipulated that a portion of the purchase money should be paid immediately and the residue on completion of the contract, it was held on non-fulfilment of the contract by the purchaser that the vendor was entitled to retain the deposit. Sir W.M. James, L.J., in his judgment says: 'The money was paid to the vendor as a guarantee that the contract should be performed. The trustee refuses to perform the contract and then says give me back the deposit'. There is no ground for such a claim,' Sir G. Mellish, L.J., in his judgment observes: 'it appears to me clear that even where there is no clause in the contract as to the forfeiture of the deposit, if the purchaser repudiates the contract, he cannot have back the money, as the contract has gone off through his default.'

To the same effect is the ruling of Knox and Burkitt, J.T., in the case of Bishan Chand v. Radha Kishan Das 19 A. 489. The contract in that case was for the purchase of a decree for money. Through default of the purchaser the purchase was not carried out, and it was held that the purchaser could not recover the deposit which had been paid by him in pursuance of the contract.

5. We have said that no hard and fast rule can be laid down on this subject. As was said by Cotton, L.J., in the case, Howe v. Smith (1848) 27 C.D. 89 : 53 L.J. Ch. 1055 : 50 L.T. 573 : 32 W.R. 802 : 48 J.P. 773. 'I do not say that in all cases where this Court would refuse specific performance, the vendor ought to be entitled to retain the deposit. It may well be that there may be circumstances which would justify this Court in declining, and which would require the Court, according to its ordinary rules, to refuse, to order specific performance, in which it could not be said that the purchaser had repudiated the contract, or that he had entirely put an end to it so as to enable the vendor to retain the deposit. In order to enable the vendor so to act, in my opinion, there must be acts on the part of the purchaser which not only amount to delay sufficient to deprive him of the equitable remedy of specific performance, but which would make his conduct amount to a repudiation on his part of the contract.' Such a case as would entitle a purchaser to a return of the earnest money is that of Alokeshi Dassi v. Harachand Das 24 C. 897 : 1 C.W.N. 705. In that case the defendant vendor unsuccessfully denied the contract in toto and there was no repudiation of the contract by the plaintiff, and it was held that the plaintiff purchaser was entitled to a refund of the deposit made by him. The present case is unlike that case according to the finding of the lower appellate Court. The plaintiff in this case was in default in that he repudiated the contract, although full opportunity was given to him of completing it. We think that the lower appellate Court rightly dismissed his suit.'

6. We accordingly dismiss this appeal with costs, including fees in this Court on the higher scale.


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