1. The defendant is the appellant. The suit is for return of advance paid by the plaintiff.
2. The plaintiff's case is that he is a grain merchant carrying on business in Salem, that on 28-9-1964, the defendant who is doing business at Bangalore city made an offer to the plaintiff on phone to sell a ready bilty of gram consignment consigned from Uchana to Bangalore at the rate of Rs. 104 per bag 93 kg. gross F. O. R. (Bilticut) dispatching station that the plaintiff accepted the offer and confirmed the same by telegram dated 29-9-1964 directing the defendant to forward the railway receipt along with the hundi drawn in his name through Bank that on the same day at the request of the defendant, he sent a sum of Rs.10,000 by way of advance, that he sent it by a draft on the Canara Banking Corporation Ltd., enclosed in his letter in full confirmation of the agreement and calling upon the defendant to draw hundi with the relative railway receipt that there was no reply from the defendant, that on 3-10-1964 the plaintiff reminded the defendant stating that the agreement would become automatically cancelled if there was any unnecessary delay in drawing the hundi and that the defendant failed to reply even to this letter. It would appear that there was a Government ban on the export of gram out of the Punjab State. The plaintiff's case that the defendant taking advantage of the rise in prices sent a letter dated 15-10-1964 stating that the goods had arrived and calling upon the plaintiff to send a man with balance amount that the defendant's silence till 15-10-1964 amounted to an implied acceptance of the cancellation of the contract by the plaintiff that he sent a telegram dated 16-10-1964 calling upon the defendant to return the advance paid that the defendant wrote back on 17-10-1964 calling upon the plaintiff to make payment in Bangalore against delivery that the said letter was received by the plaintiff on 20-10-1964 that on 23-10-1964, the defendant sent a telegram stating that he had sold Uchna gram 100 bags to which the plaintiff sent a reply telegram on 23-10-1964 that the defendant sent a cheque for Rs. 6753-31 being the difference between the price for which the contract was agreed to and the price for which the goods were sold after deducting the difference from the advance of Rs. 10,000 that the plaintiff received the said cheque on 27-11-1964 and that immediately the plaintiff sent a telegram calling upon the defendant to remit the balance of Rs. 3246-69 which the defendant refused to comply with, with the result the present suit was filed.
3. The defendant's contention is that the contract was concluded on 24-9-1964 for the sale of one bilty of gram consignment consigned from Uchana to Bangalore at Rs. 104 per bag of 98 kg. gross F. O. R. bilticut dispatching station that the plaintiff accepted the offer of the defendant that after giving credit to the advance of Rs. 10,000 the defendant telephoned to the plaintiff stating that he would not draw the hundi but insisted on payment of cash against delivery that after the goods arrived the defendant called upon the plaintiff to send his man with the balance of the sale price that in the first week of October 1964 the prices of gram fell and that the plaintiff in seeking to withdraw from the contract, sent a letter canceling the contract that the defendant was ready and willing to fulfil his part of the contract that the silence of the defendant till 15-10-1964 was due to the non-arrival of the goods and not due to any implied acceptance of any cancellation of the contract that the defendant took delivery of the goods debiting the amount against the plaintiff and sole the goods in open market for a total sum of Rupees 22420-85, that there was a balance of Rs. 6754-11 due to the plaintiff for which the defendant has sent a cheque on the Central Bank of India Ltd., in favor of the plaintiff for Rs. 6753-31, that the plaintiff is not entitled to recover the balance of the amount claimed and that the defendants are residents of Bangalore and the Court at Salem has no jurisdiction to entertain the suit.
4. The trial Court held that it had jurisdiction to entertain the suit as part of the cause of action had arisen within its jurisdiction that the contract between the parties was as alleged by the plaintiff, that the defendant committed the breach of the contract as he had failed to draw the hundi and that the plaintiff was entitled to get the refund of the advance paid. In the result the suit was decreed.
5. The defendant filed A. S. 88 of 1968 to the Subordinate Judge. Salem, Before the Subordinate Judge the question2 of jurisdiction of the trial Court to entertain the suit was not challenged. The only questions which were raised were (1) whether it was the defendant or the plaintiff who committed breach of the contract and (2) whether the plaintiff was entitled to the refund of the amount claimed. The learned Judge held that it was the plaintiff who committed the breach of the contract. However, in considering the question whether the plaintiff is entitled to the refund to the advance the learned Judge went into the question of the validity of the re-sale. The learned Judge held that the resale by the defendant of the goods is not valid and the property in the goods did not pass to the plaintiff. Even assuming that the property in the goods had passed to the plaintiff and that the defendant was entitled to resell the goods the learned Judge held that the payment of Rs. 10,000/- was only by way of advance and not as a deposit or a security and that the advance so paid could be recovered back by the purchaser even though the transaction of sale fell through owning to the purchaser's default unless the defendant established that the money so paid was treated as security for the due fulfillment of the contract which the defendant was entitled. In the view the learned Subordinate Judge took, the plaintiff was entitled to get the refund of the advance paid even though he had committed breach of the contract. In the result the appeal was dismissed. The defendant has filed the above second appeal.
6. The learned counsel for the appellant relying upon the judgment of the Supreme Court in Shree Hanuman Cotton Mills v. Tata Aircraft Ltd. : 3SCR127 contended that the amount of Rs. 10,000/- paid by the plaintiff must be treated as earnest money and that the defendant is entitled to forfeit the advance as the plaintiff committed default. In the plaint the sum of Rs. 10,000 paid by the plaintiff was stated to be by way of advance and this was not controverted in the written statement and the defendant did not say that the sum paid was the earnest money or deposit guaranteeing that the contract would be fulfilled. The question for consideration, therefore, is whether by reason of the resale held by the defendant-appellant the defendant was entitled to claim the difference between the contract price and the price fetched at the resale. In the present case the property in the goods did not pass to the buyer. The railway receipt in respect of the goods was not transferred to the buyer. The property in the goods thus remained only with the seller. The question therefore, arises is whether the seller is entitled to resell the goods under Section 54(2) of the Indian Sale of Goods Act at the risk of the purchaser. In Ambalavana Chettiar and Co. v. Express Newspapers Ltd., : 2SCR293 it was held that a seller can exercise the right provided under Section 54(2) of the Sale of Goods Act only if the property in the goods has passed to the buyer. In the present case the property in the goods did not pass to the buyer and therefore the sale by the seller cannot be at the risk of the purchase. It therefore follows that it is not open to the seller to claim the difference between the contract price and the price which the goods fetched at the resale.
7. The next question that arises is whether the plaintiff is entitled to the refund claimed. Out of Rs. 10,000 the defendant has admittedly refunded the sum of Rs. 6753-31. The further question is whether the plaintiff is entitled to the refund of the balance of Rs. 3246-69, which is the subject-matter of the present suit. I have already indicated that the sum of Rs. 10,000 paid by the plaintiff was not as earnest money or security deposit but that it was paid only by way of advance. The view of the Courts below that the above sum is refundable to the plaintiff appears to be correct and this is in accordance with the view expressed in : 3SCR127 .
8. In the result the second appeal fails and is dismissed. There will be no order as to costs. No leave.