1. The decree-holder respondent obtained a decree for money against the judgment-debtor appellant on the basis of a contract dated 9th August 1939. It was a contract by which the judgment-debtor undertook to sell 10,000 maunds of sugarcane juice to the decree-holder at the rate of Rs. 33 per hundred maunds. It was a term of the contract that the judgment-debtor would pay one anna per maund as damages if she supplied less than 8000 maunds, that is, she was to pay one anna per maund on the difference between the amount supplied and the 8000 maunds. On the same date, the judgment-debtor executed a receipt saying that she had received a sum of Rs. 1100 from the decree-holder as the price of sugarcane juice. The payment of this amount in advance was contemplated by the contract itself and it was provided that this amount should be set off against the price of sugarcane juice supplied except that a sum of Rs. 100 should not be deemed to have been paid back till the transaction was concluded. When the decree-holder sought to execute the decree, the judgment-debtor made an application under Section 8, Debt Redemption Act, praying that the amount decreed should be reduced under the provisions of the Act. Both the Courts below have held that the judgment-debtor was an agriculturist but that the sum of Rs. 1100 did not amount to a loan. The decree-holder had claimed the return of this sum together with damages under the terms of the contract on the allegation that sugarcane juice had not been supplied and that a decree was passed on the finding that his allegations were correct. The Original judgment has been read to me and it appears that the defence was that this sum of Rs. 1100 was earnest money and that there had been a breach of the contract owing to the decree-holder's own default. This defence had been overruled. It has been urged before me that the sum of Rs. 1100 was at least a loan within the meaning of the Debt Redemption Act and reliance has been placed on the decision in Har Prasad v. Sewa : AIR1938All461 That case, however, does not lay down any general rule of law. It depends entirely upon the construction of the contract which was then before the Court. The learned Judges said:
It has been strenuously contended on behalf of the decree-holder that the advance of Rs. 1086 was in substance and in fact a payment in advance of part of the purchase price. If that were so, then it might well be argued that the decree in question was not a decree based upon a loan as defined by the Act but a decree for damages for breach of an agreement to sell or a claim for return of the purchase money as the consideration had wholly failed.
They went on to say:
There was clearly no sale of the crop in this case because under the agreement the crop still remained the property of the judgment-debtors and such could not have been the case if there had been an out and out sale. Accordingly it cannot be said that the advance of Rs. 1086 was a payment in advance of part of the purchase price of a sale of the crop.
It seems to me that there can be no doubt that an advance payment of the price of commodity sold cannot be a loan within the meaning of the Debt Redemption Act. There is a very narrow distinction between a loan and an advance payment of the purchase price of a commodity. Whether any particular advance is a loan or part payment must depend upon the construction of the agreement between the parties. If it appeared that the money was advanced by way of financing a party who had promised in consideration of the advance eventually to sell a commodity, the transaction would doubtless be a loan. On the other hand, if there was a definite agreement to sell and a definite understanding that money paid was part of the purchase price, I do not think that that transaction could possibly be a loan. In the present case, it was stated in terms that 10,000 maunds of sugarcane juice had been sold and that Rs. 1100 had been received on account of the price of sugarcane juice. In the case on which learned Counsel for the appellant has relied there were considerations which showed that the money advanced was by way of a loan. It was, for instance, secured by a mortgage of a certain area of cane. There was a covenant that it would be repaid if sugarcane juice was not eventually supplied.
2. On the whole, bearing the two agreements in mind and construing the terms of the agreement with which I am concerned, I am of opinion that the learned Judges of the Court below were right that this transaction was not a loan within the meaning of the Debt Redemption Act. I, therefore, dismiss the appeal with costs. Leave to appeal is refused.