1. Plaintiff sued for recovery of Rs. 1,497-5-0, advances made by him as purchaser to defendants as vendors in respect of a sale of gunnies and damages. The lower courts have found that the transaction fell through owing to plaintiff's default. Therefore, there is no question of damages but the lower appellate court has decreed the return of plaintiff's advance of Rs. 750, though without interest, except from date of suit. The second defendant appeals, 1st defendant files a memo. of objections.
2. The question for determination is, strictly speaking, one of fact, whether there was an implied contract between the parties that the money paid in advance should be treated as security for plaintiff's fulfilment of the bargain and as such liable to be forfeited on plaintiff's default. There can only be an implied contract, because no express stipulation is to be found in the agreement itself, Ex. A, which merely runs 'You have paid advance Rs. 750 at Rs. 15 per bale. Hence the same has been received.'
3. Looking at the language of this instrument, can it be inferred that the advance was made as a guarantee for the performance of the contract?
4. In the English cases it has usually been so inferred that a deposit is paid as guarantee. In Collins v. Stimson (1833) 11 QBD 142 and Howe v. Smith (1884)27 ch.D 89 the word 'deposit' has been held to carry that inference. Lord Bowen in the latter case observes:
It is a deposit...and the special clause in the contract does not deprive the deposit of the character which it would bear if there were no special clause ... a deposit in the ordinary parlance of businessmen is a security for the completion of the purchase.
5. Then Lord Fry explains how that common understanding has grown up deriving this idea of security from Phoenician and Roman sources. So that it may be said that if the money paid in advance is intended to be a deposit of this character and the buyer is unwilling to pay for the goods, the seller may retain the deposit, of., Halsbury's Laws of England, Vol. 25, page 237. Benjamin on Sales is equally clear as regards an undoubted deposit.
A deposit is no doubt not recoverable (Ed. VI, p. 1084).
where part of the price has been paid otherwise than as a deposit (and, as in this case, there is no question of damages) the buyer may perhaps be entitled to recover the part of the price paid (p. 1090).
7. That in sales of goods apart from conveyances of real property it is not customary to give money paid in advance the peculiar characteristic of a deposit is laid down by the learned Chief Justice of this Court in Satyanarayanamurti v. Erikalappa (1925) 50 MLJ 150.
I can content myself with saying that it is never the practice in mercantile contracts to hold that whatever be the damage suffered or not suffered the seller is to be entitled to keep the deposit.
8. This, of course, is not, as was suggested, a ruling running counter to the established English cases, but a statement that in mercantile contracts in England as a matter of fact it is not inferred that money paid in advance is, in the absence of words to that effect, a deposit by way of security.
9. That being so, it would be indeed hazardous to infer that in the Kistna District where a vendor accepts what he calls 'advance' he is taking a deposit clothed with all the implications which that term has acquired in the West through the course of European civilization. Far safer is the finding of the learned Subordinate Judge that, as the defendants neither alleged nor proved that the advance was earnest money and as it was treated merely as part payment of purchase money in the account books of the defendants, it is not a deposit in the strict sense of the word. Even if that finding can be canvassed in second appeal; there is no reason why it should be reversed.
10. In a case of this sort which turns on the interpretation of a particular contract, little is to be gained by considering how Courts have interpreted other contracts. In Manian Paltar v. The Madras Railway Co. by its Agent and Manager ILR (1905) M 118 : 1905 16 MLJ 37 and Natesa Aiyar v. Appavu Padayachd : (1913)24MLJ488 there was a clause of forfeiture; in The President, Vellore Taluk Board v. Gopalaswami Naidii ILR (1913) M 801 the deposit was in terms by way of security; it was a deposit as earnest money in Roshan Lal v. The Delhi Cloth and General Mills Co., Ltd., Delhi ILR (1910) A 166 and also in Muhammad Habibullah v. Muhammad Shafi ILR (1919) A 324. In Bishan Chand v. Radha Kishen Das ILR (1897) A 489 it is also found that the money was paid as a guarantee, for the ruling is based on Ex parte Barrett. In re Parncll (1875) LR 10 Ch. App. 512 which proceeds on that assumption.
11. Therefore the finding of the lower court in this matter is confirmed and the appeal is dismissed with costs.
12. The 1st respondent in a memo. of objections claims interest on the advance ordered to be returned and also damages. It is stipulated in Ex. A that the advance should bear interest at 1/2 per cent. per mensem. The lower appellate court disallows interest because it was not claimed apart from damages. The mere fact that damages were also wrongfully claimed can hardly invalidate a legitimate claim for interest. So far, the memo of objections must be allowed. 1st respondent is entitled to interest at the contract rate. But there is no reason for holding, nor was it pressed in argument that the lower courts have erred in disallowing damages. So far the memo of objections fails. Therefore 1st respondent will not have the costs of this memorandum.
13. I agree.