1. -The appellants are proprietors of a cinematograph theatre at Madura. On 21st August 1941 they agreed to buy from the respondent, and the respondent agreed to sell to them, a cinematograph projector and its accessories for the sum of Rs. 4500 on conditions set out in writing. The conditions were these:
(1) The buyers were to pay as an advance the sum of Rs. 1000 which was to be treated as security for the due performance by them of the contract. In the event of default on their part, the Rs. 1000 was to be forfeited.
(2) The balance of the purchase consideration, Rs. 3500, was to be paid in ten equal monthly instalments commencing on 30th September 1941.
(3) If the buyers defaulted, the vendor had the option to adopt one of two courses. He could forfeit the advance, insist on the return of the machine and its accessories and charge rent therefore at the rate of Rs. 350 per month for every month the articles remained in the hands of the buyers. In the alternative, the vendor could demand immediate payment of the entire balance of the purchase consideration with interest at six per cent. per annum.
(4) The property in the machine was not to pass to the buyers until they had paid the purchase price in full.
On 30th September 1941 the appellants paid Rs. 350, but in October only Rs. 50 and in November only Rs. 200. The sum of Rs. 350 was tendered and accepted without prejudice after the suit had been filed. The fact that it was accepted without prejudice was not stated in the written statement, as it ought to have been. As the appellants were in default, on 26th December 1941 the respondent through his advocate wrote to the appellants demanding possession of the projector. This letter was not delivered. We have no doubt that appellant 1 himself was responsible for the non-delivery. It was tendered at his Madura address, at Mysore, Madras and again at Madura, as the post marks show. On 18th February 1942 the respondent's advocate wrote another letter demanding possession of the machine and payment of the amount due for hire. This letter was no doubt delivered, but it was not answered. The appellants allege that they wrote to the respondent on* 20th February 1942 and again on 25th February, but the respondent denies that these letters were ever received. The letter of 20th February 1942 makes no reference to the respondent's letter of the 18th of that month, but it contains the statement that the amount due in respect of the projector was Rs. 685-4-9. The letter of 25th February 1942 makes no reference to the respondent's letter of the 18th. The respondent's case is that these letters were never sent and alleged copies have been put in with the object of strengthening the appellant's case. 'We consider that this criticism is well founded. The suit was filed on 2nd March 1942. In their written statement the appellants pleaded that they had paid Rs. 1700 on 12th December 1941 and that only Rs. 313 was due at the date of suit.
2. The action was tried by Bell J. who accepted the respondent's version of the facts. The learned Judge held that (1) the respondent was entitled to forfeit the deposit of us. 1000 and to recover possession of the projector; (2) the appellants were liable in a sum of Rs. 1500 for hire of the projector at the rate of Rs. 350 per month up to the date of the plaint and for the further sum of Rs. 3150 as hire from the date of the institution of the suit to the date of the judgment; and (3) the appellants were to pay the further sum of Rs. 4500 as the value of the machine, unless they returned it to the respondent within 14 days. We agree with the learned Judge's findings on the facts. It is impossible to believe that the appellants paid the Rs. 1700 on 12th December 1941 as alleged by them. They admit that they did not get a receipt and the untrustworthy nature of their testimony is to be gathered from the statement that the machine was defective and incapable of producing sound. If it had been in this condition they would not have retained it and they themselves would have repudiated the contract. The more difficult question is whether the respondent is entitled to forfeit the deposit and to insist on the return of the projector with hire at the rate agreed upon. The respondent admits that the contract does not constitute one of hire purchase and that the case falls within Lee v. Butler (1893) 2 Q.B. 318. That this is so cannot really be doubted. In Auto Supply Co. Ltd. v. Raghunatha Chetti ('29) 16 A.I.R. 1929 Mad. 884 this Court pointed out that an essential feature of a contract for hire purchase was the option given to the prospective purchaser to terminate the contract and return the chattel. The option is absent in the present case.
3. This Court has accepted the proposition that when the circumstances warrant it can grant relief against forfeiture: see Manian Pattar v. Madras Railway Co ('06) 29 Mad. 118 and Abbakke Heggsidthi v. Kinhiamma Shetti ('06) 29 Mad. 491. In Natesa Iyer v. Appavu Padayachi ('15) 2 A.I.R. 1915 Mad. 896 a Full Bench of the Court had to consider the question whether S3. 64 and 74, Contract Act, applied in these circumstances. On 24th February 1903 A agreed to purchase from B certain lands for a sum of Rs. 41,000, of which Rs. 4000 was paid in advance. The sum of Rs. 20,000 was to be satisfied by a mortgage on the property and the balance was to be paid in cash before 24th May 1903 when the property was to be conveyed. It was agreed that the advance of Rs. 4000 was to be forfeited if there was delay on the part of the purchaser. The purchaser failed to perform the contract and the seller forfeited the deposit of the sum of Rs. 4000. According to the headnote, White C.J. and Miller J. (Sadasiva Ayyar J. dissenting) held that neither Section 64 nor Section 74, Contract Act, is applicable to a deposit of this nature because the stipulation for its forfeiture in case of breach is not one by way of penalty. We do not, however, read the majority decision as indicating that relief can never be given in a case of a deposit, but as meaning that in that case the forfeiture of the deposit was not unreasonable as it merely represented ten percent. of the purchase consideration. In fact in the course of his judgment, Miller J. pointed out that there might be cases where the Court must find that the amount of deposit or payment in advance is so great in comparison with the amount payable under the contract that the parties could not have intended it as merely security for performance, but rather as a punishment for non-performance of the contract. The learned Judge went on to add that in such cases the Court might doubtless refuse to allow the retention of the whole of the deposit.
4. Therefore what we have to consider is whether the forfeiture provisions of this contract are so unreasonable as to justify the Court in granting relief to the buyers. With regard to the advance of Rs. 1000 there does not appear to be any real ground for saying that the provision for forfeiture is unreasonable. According to appellant 1's own evidence the machine deteriorated at the rate of 20 per cent. per annum. In fact very little has been said, or could be said, by Mr. Gopalaswami Ayyangar on this question. He has rightly concentrated on the provision of the contract entitling the seller to revoke the contract for purchase and charge hire at the rate of Rs. 350 per month. At first sight this does appear to be a rather harsh provision, but on full consideration we do not think the appellants are entitled to relief. The projector was of German make and when the contract was entered into the war with Germany had been in progress for nearly two years. It was impossible to get fresh supplies from the continent of Europe and, as far as the Court knows, from England or America. The demand for such machines must have been far greater than the supply; in fact it is to be doubted whether there was any supply at all. In these circumstances we do not consider a rent of Rupees 350 a month as being unreasonable in case of default. That the appellants could make profitable use of it at this rate is shown by the fact that they have made no attempt to comply with the order of the learned Judge directing them to deliver the machine to the respondent within a fortnight of his judgment. The burden of showing a ground for relief against forfeiture is on the appellants and they have failed to discharge this burden.
5. There is, however, a further question and here the appellants are on firmer ground. As we have pointed out, the learned Judge directed the appellants to pay Rs. 4500, the full value of the machine at the date of the contract, in the event of their failure to surrender the machine to the respondent within the time fixed by him. The appellants cannot be called upon to pay the value of the machine at the date of the contract, plus hire, but merely the present value, plus hire. The 'only evidence we have of guaging its present value is the evidence with regard to depreciation and on this basis the value must be taken to be Rs. 4500 less 20 per cent. per annum from 21st August 1941 to this day. As the appellants have had the use of the machine from the date of the judgment of the learned Judge to this date they must, however, continue to pay the hire at the rate of Rs. 350 per mensem. Accordingly, we vary the decree passed by Bell J. by directing that in addition to the amount of hire awarded by him the respondent is entitled to Rs. 350 per month from the date of the decree of the trial Court to this date and by ordering the appellants to deliver the projector and its accessories to the respondent within 14 days from this date or in the alternative pay Rs. 2250 (Rs. 4500 less 20 per cent. per annum for two and a half years). The appellants have succeeded on the question of the present day value of the machine, but have otherwise failed. In the circumstances the parties will pay and receive proportionate costs. We certify for two counsel.