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Bhagavathi Mudaliar Vs. N. Subramaniam - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Case NumberCivil Revn. Petn. No. 2058 of 1965
Judge
Reported inAIR1969Mad317
ActsContract Act, 1872 - Sections 74; Code of Civil Procedure (CPC) , 1908 - Sections 115
AppellantBhagavathi Mudaliar
RespondentN. Subramaniam
Appellant AdvocateK.N. Balasubramanian and ;M. Srinivasan, Advs.
Respondent AdvocateS. Padmanabhan and ;D. Muthuvamalingam Pillai, Advs.
DispositionRevision allowed
Cases ReferredSundararaja Iyer and Co. v. Murugesa Mudaliar.
Excerpt:
.....sum paid at initial stage of agreement to convey properties represents advance simpliciter or earnest money - court below found that it was earnest money - revision - absence of legal evidence which would justify any inference that amount of certain sum more than advance - in view of language of documents not slightest hint that it was anything more than advance towards sale amount - plea not explicitly put forward - order passed by court below liable to be set aside - revision allowed. - - 500 could be regarded, notwithstanding the mere nomenclature in the document the absence of a forfeiture clause, or the absence of any other indication in the evidence, as a deposit for the due performance, or earnest money, then the plaintiff will have to fail. 1, the judicial committee..........or has any tinge of the character of a deposit for due performance of the contract, or earnest money. if the amount of rs. 500 is only an advance, the plaintiff (revision petitioner) was bound to succeed in his suit. if it could be conceivably held that the amount of rs. 500 could be regarded, notwithstanding the mere nomenclature in the document the absence of a forfeiture clause, or the absence of any other indication in the evidence, as a deposit for the due performance, or earnest money, then the plaintiff will have to fail. '' the courts below have non-suited the plaintiff, and he is the revision petitioner here.2. for an important reason i am not now proceeding into the one question of fact decided by the courts below, that time had to be construed as the essence of.....
Judgment:
ORDER

M. Anantanarayanan, C.J.

1. The only question which is involved in this revision proceeding is whether an amount of Rs. 500 which was paid at the initial stage of an agreement to convey properties between the parties, represents an advance simpliciter, or has any tinge of the character of a deposit for due performance of the contract, or earnest money. If the amount of Rs. 500 is only an advance, the plaintiff (revision petitioner) was bound to succeed in his suit. If it could be conceivably held that the amount of Rs. 500 could be regarded, notwithstanding the mere nomenclature in the document the absence of a forfeiture clause, or the absence of any other indication in the evidence, as a deposit for the due performance, or earnest money, then the plaintiff will have to fail. '' The Courts below have non-suited the plaintiff, and he is the revision petitioner here.

2. For an important reason I am not now proceeding into the one question of fact decided by the courts below, that time had to be construed as the essence of this contract on the facts, and further that it was the plaintiff, the intending Vendee, who committed breach of the contract. Had the matter been open for my, determination, some probabilities could no doubt be stressed by learned counsel for the petitioner, for an opposite view. It is a fact that the vendor later sold the properties shortly after the expiry of the period fixed, for a sum of Rs. 20,000 to a third party. But for an important reason, I am not now proceeding into this aspect at all. Actually, learned counsel for the respondent argues, on the strength of the dicta of the Supreme Court in Pandurang v. Maruti, : [1966]1SCR102 , that it is not even open to me to interfere in revision with the dismissal of the suit of the plaintiff for recovery of the alleged advance of Rs. 500. The argument is that errors of fact cannot be canvassed in revision under Section 115 C. P. C. and even errors of law cannot be so canvassed, unless such errors have affected the jurisdiction of the trial court. In any event, these dicta will certainly inhibit me from any reassessment of the evidence, on the question of who committed the breach and arrival of any different conclusion after such reassessment. We must therefore take it as established, that time was the essence of the contract in this case, and that the plaintiff did commit breach of the contract.

3. Even so, on the facts, it is very difficult to see how there is any legal evidence on which the conclusion could be based that the amount of Rs. 500 was a kind of deposit, or earnest money, or security for performance, and hence liable to be taken in forfeiture by the vendor. As far as the written statement is concerned, it is significantly silent on this aspect. Most of the written statement is concerned with the facts which would show that it was the plaintiff the intending purchaser, who committed the breach of the contract. As far as the document itself is concerned, though a particular nomenclature or the lack of certain words may not be decisive, the document is very unhelpful as regards the hypothesis that the amount of Rupees 500 could represent any earnest money, or security. Ex facie this amount merely appears to be an advance, in respect of the consideration. But I am willing to assume, on the authorities placed before me, that mere nomenclature in the document, or the absence of any forfeiture clause, may not be decisive and that the character of a deposit or earnest money could be spelt out from the circumstances and the evidence.

4. Even so, the very great difficulty in this case is the total absence of any circumstances or legal evidence, which would tend to show that the amount of Rs. 500 was not a mere advance, but was some kind of security for due performance or earnest money. I shall now refer briefly to the authorities cited by learned counsel on both sides, in order to demonstrate that where there is a total lack of legal evidence the finding cannot be supported that the amount is really earnest money or deposit for fulfilment and not an advance. Admittedly, there is no legal presumption one way or other. The issue is purely one of fact.

5. In Chiranjit Singh v. Har Swarup AIR 1926 P. C. 1, the Judicial Committee pointed out that earnest money becomes part of the purchase price or consideration when the transaction goes forward, but is liable to forfeiture when the transaction falls, through or by reason of the fault or failure of the vendee. The decision is not helpful in the present context for the simple reason that it relates to an amount paid which is earnest money, or which is a deposit for due performance. If that is assumed here it would really be begging the question. The real problem is how is this to be determined, when the document itself merely treats the amount as an advance, and has no forfeiture clause and there are no other circumstances from which the inference that the amount is earnest money, could be presumed.

6. There is a decision of a single Judge of the Calcutta High Court in Nareshchandra v. Ramchandra, : AIR1952Cal93 relied on by the learned counsel for the respondent. This follows, the idea expressed in the decision of the Judicial Committee, the earnest money has the two characteristics which I have already referred to, Such earnest money, in the absence of an express or implied contract to the contrary is liable to be forfeited by the vendor, when the contract goes oft for default of the purchaser. Here again, the nature of the money initially paid is assumed and is the foundation for the argument. Needless to say, it is of very little help in the present context.

7. A very helpful precedent for our discussion is Chunnilal v. Mohanlal, : AIR1964MP126 . Here the learned Judge (Krishnan J.) was concerned with the test to be applied with reference to the terms of Section 74 of the Contract Act, and he pointed out that the nomenclature in the document may not be decisive. But what should be ascertainable with reasonable precision, on the evidence, is the understanding at the time of the agreement, between the parties, that the specific amount paid was a guarantee for the performance of the contract, and therefore liable to be retained by the person to whom it is paid, on breach of contract by the other party. The learned Judge further observed that when the amount was paid at the time of the agreement itself this fact may be of some help to assume that the amount could possess the character of earnest money.

8. The decision of a single Judge of the Andhra Pradesh High Court in Rabina Bibi v. Satyavathi, : AIR1963AP304 does not take the matter any further, and the decision is really based on the dicta in AIR 1926 PC 1.

9. On the contrary, there are two decisions relied on by learned counsel for the revision petitioner, which have some relevance to his claim that, on the fact of this case, the suit should have been decreed. The first is Rattamma v. Krishnamurthi, AIR 1928 Mad 326, where the Division Bench of Devadoss and Jackson JJ. observed that advances made by a purchaser to a vendor in respect of a sale are recoverable, even if the transaction falls through owing to the fault of the purchaser. To resist such a claim, the vendor must prove a contract, express or, implied, between the parties, that the money paid in advance was agreed to be treated as security for the fulfilment by the purchaser of the bargain. In this case it is liable to be forfeited, for the fault of the purchaser. Where the vendor does not allege or prove this, the amount is merely an advance, and it is recoverable as such.

10. The decision of Govinda Menon and Ramaswami JJ. in Sundararaja Iyer and Co. v. Murugesa Mudaliar. : AIR1957Mad228 approbates these dicta, stressing that the law in this respect in India was somewhat different from the law with regard to contracts before the English courts.

11. With these authorities in mind, when we look at the facts of the present case, we find that there is total absence of legal evidence which would justify any inference that the amount of Rupees 500 was anything more than an advance. As far as the document goes, there is not the slightest him that it was anything more than an advance towards the sale amount, or that it was a deposit for fulfilment of the contract or earnest money, in any sense. Even in the written statement, such a plea is not explicitly put forward. There is nothing in the evidence to support it. I can understand an inference of such an agreement, even as implied and not as an expressed contract, but there must be at least some legal evidence as a foundation for such a conclusion. There is none.

12. The only question is whether, nevertheless, this court ought not to interfere in revision, because of the dicta of the Supreme Court earlier referred to But, when there is total absence of legal evidence, I think it is indisputable that this comes within the scope of Section 115 C. P. C. for it would amount to an exercise of jurisdiction, illegally or with material irregularity.

13. Accordingly, I allow the revision and direct that the suit of the plaintiff be decreed with costs in the trial court. Parties will otherwise bear their own costs.


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