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Saidun Nessa Hoque and ors. Vs. Calcutta Vyapar Pratisthan Ltd. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtKolkata High Court
Decided On
Case NumberAppeal No. 170 of 1966
Judge
Reported inAIR1978Cal285
ActsContract Act, 1872 - Section 74; ;Transfer of Property Act, 1882 - Section 55 and 55(6)
AppellantSaidun Nessa Hoque and ors.
RespondentCalcutta Vyapar Pratisthan Ltd.
Appellant AdvocateDipankar Ghose, Adv.
Respondent AdvocateA.C. Bhabra, Adv.
Cases ReferredChiranjit Singh v. Bar Swarup
Excerpt:
- ramenbra mohan datta, j. 1. the appeal herein has since been dismissed with costs for default of appearance of the appellant on or about 8th sept. 1977 in the presence of the respondent. the respondent intending to proceed with the hearing of the cross objection was directed to serve on the appellant a notice of hearing and pursuant thereto the appellant appeared.2. arguments had been advanced on a short but an interesting point arising out of the cross-objection filed by the respondent calcutta vyaper pratisthan limited. the judgment of the trial court was delivered by a. n. ray, j. (as he then was) on march 22 and 23, 1966 whereby the suit filed by the appellant was dismissed. the claim for specific performance of the sale of a premises comprising 25 cottahs of land with a cottage.....
Judgment:

Ramenbra Mohan Datta, J.

1. The appeal herein has since been dismissed with costs for default of appearance of the appellant on or about 8th Sept. 1977 in the presence of the respondent. The respondent intending to proceed with the hearing of the cross objection was directed to serve on the appellant a notice of hearing and pursuant thereto the appellant appeared.

2. Arguments had been advanced on a short but an interesting point arising out of the cross-objection filed by the respondent Calcutta Vyaper Pratisthan Limited. The judgment of the trial Court was delivered by A. N. Ray, J. (as he then was) on March 22 and 23, 1966 whereby the suit filed by the appellant was dismissed. The claim for specific performance of the sale of a premises comprising 25 cottahs of land with a cottage standing on a portion thereon being parts of premises Nos. 3, Rusell Street and 36, Chowringhee Road in Calcutta (hereinafter referred to as the said premises), was refused but the learned Judge allowed the claim for refund of the sum of Rs. 3 lakhs to the appellant. The plaintiff appellant preferred this appeal. The respondent preferred a cross-objection in respect only of the said decree for the refund of the sum of Rs. 3 lakhs paid as earnest and towards the agreed purchase price. It is the respondent's cross-objection which has come up for our consideration. Accordingly, the respondent is virtually in the position of the appellant before us.

3. The facts shortly are that between 30th April, 1963 and 6th May, 1963 it was agreed by and between the above parties through one Ramkishanji Dha-nuka that the respondent would sell to the appellant and the appellant would purchase from the respondent the property being the said premises in suit free from all encumbrances at and for the price of Rs. 10,75,000. One of the terms of the contract was that the appellant would advance a sum of Rupees 25,001 to the respondent towards and on account of the earnest money and in part payment of the agreed price or consideration. According to the appellant the agreement was arrived at orally but some of the terms of the agreement would appear from the correspondence as set out in para 5 of the plaint. Pursuant to the said agreement the appellant paid Rs. 25,001 as earnest money and in part payment of the purchase price.

4. In para 13 of the plaint it has been stated, inter alia, that on or about Aug. 21, 1963 it was further agreed amongst other terms that the appellant would pay to the respondent on account of earnest money and towards or in part payment of the agreed purchase price and in addition to the aforesaid sum of Rs. 25,001 a further sum of Rs. 2,75,000. In para 15 thereof it has been stated that pursuant to the aforesaid the appellant paid the said further sum on Oct. 14, 1953 by cheque dated October 8, 1963. The respondent received and accepted the said cheque and duly encashed the same.

5. In paragraph 18 of the plaint it has been stated that if the Court would decide that specific performance ought not to be granted in this case or if it is found that the property could not be sold free from encumbrances or at all then the appellant, in lieu of a decree for a specific performance, would be entitled to a decree for the refund or return of the amount aggregating to a sum of Rupees 3,00,001 paid as earnest money and towards the agreed purchase price.

6. In the written statement the respondent, inter alia, set up an agreement for the sale of the said premises on terms and conditions which were different from the terms and conditions mentioned by the appellant and also referred to some other correspondence but admitted that the price was agreed at a sum of Rs. 10,75,000 and that the earnest money payable would be Rs. 25,001. According to the respondent the said sum of Rupees 2,75,000 was paid as further earnest money in respect of the agreement as set out in para 7 of the written state-ment. The respondent further stated in the written statement that the appellant was not ready and willing to perform the terms and conditions of the agreement and thereby failed and neglected to complete the agreement for sale and thereupon the respondent determined the agreement for sale and forfeited the earnest money.

7. The question which arose for the Court's determination was whether there was any agreement as alleged in paras 3, 4 and 13 of the plaint or whether the agreement entered into was as alleged in para 7 of the written statement. The further question was as to whether the appellant was or is ready and willing to perform his part of the contract and in respect of the payment by the appellant for a sum of Rs. 25,001 and of Rupees 2,75,000. The learned trial Judge held against the appellant in respect of his findings relating to the terms of the contract. In other words, it was held that the appellant had failed to prove the terms of the contract. The further finding was that the appellant was not ready or willing to perform his part of the agreement between the parties. The result, thereof, was that the suit was dismissed by the learned Judge. The learned Judge then held:--

'Now that the plaintiff has lost, the question is whether the plaintiff is entitled to any portion of this money. As far as the earnest money is concerned there is no case of forfeiture of the earnest money. There is no oral evidence to that effect nor has the defendant proceeded on the basis of forfeiture. The argument advanced on behalf of the defendant was that if there was no contract money was not recoverable. It was said that if the agreement was ineffective the entire money was irrecoverable. Reliance was placed by counsel on behalf of the defendant on the decision of Nilkantha Rai Chowdhury v. Lalit Mo-han Banerjee, reported in 19 Cal WN 933: (AIR 1916 Cal 774) and on the observations at p. 935 (of Cal WN) : (at p. 775 of AIR) of the report. I have already indicated that damages awarded in that case were wrong because there was no contract which was capable of specific performance. The money in the present case was paid by the plaintiff to the defendant in aid of an agreement. It is true that the plaintiff has failed to prove the case of agreement. It is also correct that as far as the plaintiff is con-cerned the plaintiff cannot invoke in aid the mode of agreement in support of a suit for specific performance. In the present case the money that was paid by the plaintiff to the defendant was pursuant to some agreement which the parties entered into. For some reason or other that agreement is not capable of specific performance. The money that was paid to the defendant, if it is allowed to remain with the defendant would in my opinion be allowing the defendant unjust enrichment. I am therefore unable to allow the defendant to remain in possession of the money. I make it quite clear that it is not that the money is being awarded to the plaintiff either in lieu of specific performance or as damages for the plaintiff is not entitled either to specific performance or to damages. The money is merely being refunded to the defendant as a measure of grace to prevent enrichment of the defendant. The suit is dismissed with costs. The plaintiff is however entitled to refund of Rs. 3,00,000. Certified for two counsel.'

That gives a complete picture of the claim relating to the refund. The learned Judge has directed refund because he has held that the appellant is entitled to the refund to the, extent of Rs. 3 lakhs but in making the order he has observed that the money was merely being refunded to the appellant (wrongly stated as defendant) as a measure of grace to prevent enrichment of the respondent. It is difficult to appreciate how the learned Judge directed refund as a measure of grace. If the principle of prevention of unjust enrichment was applied then there could be no question of directing refund as a measure of grace. The learned Judge, in my opinion, failed to appreciate that such an order could not have a legal basis and as such could not stand in the eye of law. Apart from that one of the main points, that has to be considered in this cross-objection is whether the respondent cross-objector was entitled to forfeit the said amount, in the facts and circumstances of the case involved herein,

8. We have to consider here as to what was the character of the said sum of Rs. 3,00,001. Was the entirety of the amount paid as earnest? If not, to what extent, it was, if at all? The learned Judge noted in his judgment that counsel for the respondent made an offer during the trial to refund the sum of Rs. 3 lakhs, to the appellant but theappellant did not accept the offer and the case proceeded. Obviously, the appellant was thinking that the appellant would win and would get the decree for specific performance of the agreement but that had not been the case at the end. It is also to be noted that the respondent chose not to raise any issue on the question of forfeiture nor did the parties advance any separate argument on the point before the learned trial Judge.

9. The question as to what amounts to earnest and what are the characteristics thereof and under what circumstances the same might be liable to be forfeited upon default of the purchaser in completing the sale came to be considered before the Supreme Court which summarised the principle of law regarding 'earnest' in the case of Shree Hanuman Cotton Mills v. Tata Air Craft Ltd. reported in : [1970]3SCR127 as follows:--

'(1) It must be given at the moment at which the contract is concluded.

(2) It represents a guarantee that the contract will be fulfilled or, in other words, 'earnest' is given to bind the contract.

(3) It is the part of the purchase price when the transaction is carried out.

(4) It is forfeited when the transaction fails through by reason of the default or failure of the purchaser.

(5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest.' In that case, it has been held, after reviewing several decisions on the point, that one of the main principles which emerge regarding earnest is that it must be given at the moment at which the contract is concluded. In enunciating the said principle the Supreme Court considered the characteristics of earnest as set out in Burrows in Words and Phrases, Vol. II. According to the author:

'An earnest must be a tangible thing ......... That thing must be given at themoment at which the contract is concluded, because it is something given to bind the contract, and therefore, it must come into existence at the making or conclusion of the contract.' The Supreme Court also considered the case of Howe v, Smith (1884) 27 Ch D 89. In discussing the history of earnest, Fry, L.J. in that case at page 101 observed:--

'The practice of giving something to signify the conclusion of the contract,sometimes a sum of money, sometimes a ring or other object, to be repaid or redelivered on the completion of the contract, appears to be one of great antiquity and very general prevalence.' The Supreme Court in the above Tata Air Craft case also considered the decision in Farr Smith & Co. v. Messrs. Ltd. (1928) 1 KB 397 where Wright J. at p. 408 while discussing the characteristics of earnest observed:

'That thing must be given at the moment at which the contract is concluded, because it is something given to bind the contract, and, therefore, it must come into existence at the making or conclusion of the contract.'

It would appear that the passage appearing in Burrows in Words and Phrases has been quoted from the observations made by Wright J. in the case of Farr Smith & Co. v. Messrs. Ltd, (supra).

10. Mr. Dipankar Ghose, learned counsel, appearing on behalf of the appellant contends, following the above principle as enunciated by the Supreme Court in the aforesaid case, that the sum of Rs. 2,75,000 was in any event, not paid on the conclusion of the contract, According to the appellant the contract was concluded by correspondence exchanged between 30th April, 1963 and 6th May, 1963. The appellant's further case was that the said agreement was modified or altered by subsequent agreement of 21st Aug. 1963 when the appellant agreed to pay the said further sum of Rs. 2,75,000 as earnest and in part payment of the purchase price. Mr. Ghose contends that this part of the appellant's case has been disbelieved and the trial Court has found that there was no such agreement. It follows, therefore, that such subsequent agreement went out of the way because that case was rejected by the trial Court. In any event, even according to the respondent, the agreement arrived at for the purchase of the premises was contained in letters written between 29th April, 1963 and 6th May, 1963 and the contract was concluded within the said period. Accordingly, the subsequent agreement of 21st Aug., 1963 was not made at the time of the conclusion of the agreement and, accordingly, the further amount paid and described as earnest and in part payment of the purchase price could not be said to satisfy the above principle No. 1 as enunciated by the Supreme Court.

11. It is next argued by Mr, Ghose that the same argument would apply also in respect of Rs. 25,001 paid as earnest and in part payment of the purchase price by the appellant at or before the completion of the agreement. It is contended that if the appellant's agreement on the basis whereof earnest was paid, had not been proved, as per finding of the Court, then it should be held that such earnest was not paid in pursuance of the said agreement. It was paid by the appellant to the respondent and the amount was held by the respondent as money had and received by the respondent. Since the Court came to the finding that there was no agreement, the amount though paid as earnest could not be held to have been paid as earnest because it could no longer be said that it was paid in pursuance of an agreement. The purpose of payment of the earnest is to bind the agreement and, accordingly, in the absence of any agreement there could be no such purpose.

12. Mr. Ghose next contends that, in any event, the sum of Rs. 25,001, covered by the cheque sent on 30th April, 1963, was not paid because the cheque was not encashed but was later on replaced by another cheque sent on *or about 10th June, 1963 as would appear from the correspondence. That being the position, the payment of this sum of Rs. 25,001 was also made not at the time of the conclusion of the agreement, which even according to the respondent, took place on 16th May, 1963. It was encashed or paid at a time which was subsequent to the time of the conclusion of the agreement. In my opinion, in making such submission Mr. Ghose was asking the Court to he hypertechnical in considering the question of payment. It is not in evidence as to why the appellant sent another cheque by its letter dated 10th June, 1963 requesting the respondent not to encash the previous cheque sent on 30th April, 1963 and to cancel the same. In any event, it was not the case that the respondent sent back the cheque to the appellant and asked for another cheque. It was the appellant who wanted to replace the previous cheque and to cancel the previous one and to replace the same by another cheque. The respondent after receiving the second cheque sent on 10th June, 1963 cancelled the previous one. That being the position, in my opinion, the position relating to the payment of the earnest money of Rs. 25,001 remained unalteredand must be held to have been made before the conclusion of the agreement, and Mr. Ghose's above contention must be rejected. Of course, what is the effect of the payment of Rs. 25,001 when the appellant's original agreement has been discarded by Court, is another question and that would be discussed on the basis of money had and received as urged by Mr. Ghose.

13. Mr. Ghose contends that the Court has found that the respondent's version relating to the contract as pleaded in para 7 of the written statement is correct. That has been accepted by the Court, but the question is, does that improve or alter the position? The appellant must establish its own contract or fail. The question of proving the contract as set up by the respondent does not become material because the appellant's case is that the earnest has been paid pursuant to the appellant's contract. If the respondent is entitled to forfeit the earnest that would be by way of forfeiture of the earnest paid in pursuance Of the appellant's contract.

14. In my opinion, there is no evidence before the Court that the earnest was paid in accordance with the agreement as pleaded in para 7 of the written statement. If the appellant has failed to prove the agreement as pleaded in the plaint then there could be no question of the appellant paying the earnest in pursuance of the agreement as pleaded in the written statement or in pursuance thereof, and on that ground alone the suit is liable to fail. The question of readiness and willingness would no longer be required to be enquired into. The specific issue as to whether the sums paid as earnest were so paid in pursuance of the agreement as pleaded in the plaint must, in such event, be answered in the negative. That being the position, the several decisions which deal with the question of forfeiture of the earnest money cannot be applicable to the facts and circumstances of this case because the facts which are involved herein are quite different from the facts on the basis whereof the question has been gone into in the said decided cases. The result, therefore, is that even though factually there is no dispute that the appellant had paid Rs. 25,001 as earnest and in part payment yet the same cannot be attributed to any agreement in pursuance whereof the sum was so paid and, that being the position, it must be held that the said sum was so paid asmoney had and received by the respondent on account of the appellant and no question of forfeiture would come in. Accordingly, the said sum must lose the character of being earnest. The position would have been different if the respondent could show by leading some evidence that the said sum of Rs. 25,001 was paid as earnest in pursuance of their agreement but that has not been done. There is neither any pleading to that effect nor any proof by leading either oral or documentary evidence. There is not even any suggestion made to the appellant's witnesses to that effect. In short, the appellant's case as made out in the plaint was rejected by the court. In any event, the learned Judge also has not come to such a finding that the deposit money was paid in pursuance of the respondent's agreement. Mr. Bhabra has pointed out that in the agreement as pleaded in para 7 of the written statement it has been pladed that the earnest was to be paid not on the basis of the said agreement between the parties but as indicated above. There was neither any issue nor any proof that such earnest was paid in pursuance of the said contract as pleaded by the respondent.

15. Mr. Ghose has argued that the case of forfeiture, if any, of the earnest money was pleaded by the respondent and, therefore, if the respondent insisted on that then an issue ought to have been raised; but neither any issue was raised nor any evidence was adduced. It has been recorded in the last portion of the judgment that no attempt was made to advance any argument on that point. From the last portion of the said judgment it would appear that the respondent sought to argue some other point on the question of forfeiture.

16. The learned Judge has noted therein that there was no case of forfeiture of the earnest money. No oral evidence was adduced to that effect nor did the respondent proceed on the basis of forfeiture. The only argument that was advanced on behalf of the respondent, as recorded by the learned Judge, was that 'if there was no contract, money was not recoverable.' The learned Judge had decreed the refund on the basis that money was paid by the appellant to the respondent pursuant to some agreement which the parties entered into: but that for some reason or other that agreement was not capable of specific performance. The learned Judgeultimately decided the point by taking into consideration the fact that if the money had been paid under such circumstances and if it remained in the hands of the respondent and was not ordered to be refunded then it would amount to unjust enrichment on the part of the respondent, which according to the learned Judge, could not be allowed.

17. In my opinion, it is difficult to appreciate the above reasoning given by the learned Judge, but in any event, it is made clear that the case of forfeiture was not sought to be argued nor, in the facts and circumstances of this case, such question of forfeiture could arise according to the learned Judge. If the point was not argued and no issue was raised then we see no reason why we should allow the point of forfeiture to be urged at this stage before us, If the issue had been raised by and on behalf of the respondent to that effect then the appellant might have led additional evidence on the point and could have cross-examined the respondent's witnesses on that point to establish that there was no case of forfeiture. Accordingly, the respondent cannot take advantage of the evidence on record and urge that the appellant has committed breach of the contract and that, accordingly, the earnest is liable to be forfeited.

18. Mr, Bhabra has argued that the Court has found that there was agreement as pleaded in para 7 of the written statement and, accordingly, the sum of Rs. 25,001 was paid as earnest in respect of the said agreement, which has been established. To my mind, the above argument cannot hold good for the following reasons. In the first place, the appellant has sent the earnest by its letter dated 30th April, 1963 in respect of the terms of the contract as provided therein. At that time the respondent's agreement was not in existence. That was concluded sometime on or about 15th/16th May, 1963. Then again, the terms of the appellant's contract were somewhat different from the terms as set out by the respondent in the written statement. For instance, in respect of the two important matters the said two agreements differ. One of the important terms of the appellant's agreement was that the vacant possession would be given but such a definite term is absent in the agreement as pleaded by the respondent. Similarly, the appellant asked for a good and marketable title but according to the respondent's version they werenot obliged to give anything beyond the marketable title only. In the next place, no issue to that effect was raised in the court below. Issue No. 2 as raised was whether the money was paid pursuant to the agreement as alleged in the plaint. There was no issue which was raised as to whether it was paid pursuant to the agreement as alleged in paragraph 7 of the written statement. Lastly, the trial Court did not come to any finding that the earnest was paid pursuant to the respondent's agreement. All that the Court has found was that there was the agreement as pleaded in para 7 of the written statement and one of the terms was that the sum of Rs. 25,001 should be the earnest; but there again, there is no finding of the Court that the said sum was paid in terms of the said contract as pleaded by the respondent.

19. On behalf of the respondent, learned counsel Mr. Bhabra has tried to impress upon the Court that there was default on the part of the appellant. It has been urged by Mr. Bhabra that in a suit for specific performance unless the appellant would show readiness and willingness to complete the transaction the appellant could not get any relief from the Court. Mr. Bhabra has shown from the judgment that the learned Judge's finding had been that the appellant was not ready and willing and, accordingly, it was submitted that the appellant had committed breach of contract. It was further submitted that because of such breach, the respondent was entitled to retain the earnest. In my opinion, the argument is fallacious. Readiness and willingness would show the state of the mind of the appellant. It could not be called a term of the contract. It was nothing but a condition precedent to obtain relief from the Court by way of specific performance. Mr. Ghose, on the other hand, contends that there is no rinding of the Court from which it can be said that the appellant was in breach of any clause. That being the position, the respondent would not be entitled to forfeit or to retain any part of the earnest money.

20. Mr. Ghose contends that want of readiness and willingness could not constitute any breach on the part of the appellant to disentitle him to recover the earnest money. Referring to Howe v. Smith (1884) 27 Ch D 89 (supra) Mr. Ghose contends that when it is said that the contract goes off by one party's default what is meant is that his actionamounts to the repudiation of the contract. Upon repudiation the breach takes place but the converse is not necessarily true. Every breach is not repudiation. The breach must be of such character that it would per se discharge the contract. The contract must be put an end to and then only the question of retaining the money paid by way of earnest might arise. It must first be shown that there has been a breach of a particular term of contract and then that the breach was such that it amounted to repudiation of the contract. The question of readiness and willingness is not a term of the contract and want of such readiness and willingness could not put an end to the contract. It would merely indicate the mental attitude on the part of the defaulting party. The want of it merely disentitles him to a decree for specific performance. The issue as to breach of contract was not raised before the trial Court. Now an attempt is being made to prove that there was a breach. Since the parties did not go to trial on this point, the respondent is not entitled to raise this point here in the appeal stage.

21. Mr. Ghose has relied on the case of Nagubai Ammal v. B. Shama Rao, reported in AIR 1956 SC 583 in support of the proposition that the evidence adduced in one case on a particular issue cannot be made the foundation for the decision of a separate point on which no issue was raised at the trial and on which the parties did not go to trial. There the Supreme Court relied on the observation of Lord Dunedin in Siddik Mahomed Shah v. Mt. Saran, AIR 1930 PC 57 (1), that 'no amount of evidence can be looked into upon a plea which was never put forward. Upon that the Supreme Court observed at page 598:--

'The true scope of this rule is that evidence let in on issues on which the parties actually went to trial should not be made the foundation for decision of another and different issue, which was not present to the minds of the parties and on which they had no opportunity of adducing evidence.'

22. Mr. Ghose has referred to the various findings of the learned Judge on the question of want of readiness and willingness and has argued on that basis that there was no breach of any term of the contract. Mr. Ghose contends that the learned Judge practically came to the finding that the time was of the essence of the contract and as such on the ex-piry of 30th June there was to be want of readiness and willingness; but admittedly, the respondent had purported to extend the period even after 30th June, 1963 and had actually obtained the sum of Rs, 2,75,000 in October, 1963. Accordingly, the time had been extended on the respondent's own showing. Hence there was no breach of contract on that ground. The correspondence also showed that a draft conveyance was sent and alterations were made therein. That being the case, there was no breach of contract on that ground. All that could be contended was that there was delay on the part of the appellant but that should not disentitle the appellant to recover the earnest. Then again, in the month of August there was some talk about the deferred payment which case was rejected by the learned trial Judge.

23. Mr. Ghose has drawn our attention to a passage in Mulla's T. P. Act, 6th edition at page 344 where the learned author stated:--

'If the buyer's conduct does not amount to a repudiation, mere delay or such circumstances as would suffice to deprive him of the equitable remedy of specific performance would not justify a forfeiture of the deposit.' In Howe v. Smith, (1884) 27 Ch D 89 Cotton L.J. at page 95 said:--

'I do not say that in all cases where this court would refuse specific performance, the vendor ought to be entitled to retain the deposit. It may well be that there may be circumstances which would justify this Court in declining, and which would require the Court according to its ordinary rules, to refuse to order specific performance, in which it could not be said that the purchaser had repudiated the contract, or that he had entirely put an end to it so as to enable the vendor to retain the deposit. In order to enable the vendor so to act, in my opinion, there must be acts on the part of the purchaser which not only amount to delay sufficient to deprive him of the equitable remedy of specific performance, but which would make his conduct amount to a repudiation on his part of the contract.' At page 98 Bowen L.J. observed:--

'It is quite certain that the purchaser cannot insist on abandoning his contract and yet recover the deposit.' Then again, at page 99 Bowen L. J. observed;--

'We have to look to the conduct of the parties and to the contract itself, andputting the two things together, to sea whether the purchaser has acted not merely so as to break his contract, but to entitle the other side to say he has repudiated and no longer stands by it,' Fry, L. J. at page 105 observed:--

'But in my opinion there has been such default as justifies the vendor in treating the contract as rescinded: it affords the vendor an alternative remedy, so that he may either affirm the contract and sell under this clause or rescind the contract and sell under his absolute title.'

The case of Howe v. Smith (1884) 27 Ch D 89 (supra) has been followed by Eve J. in the case of Hall v. Burnell, reported in (1911) 2 Ch 551, 554, 555.

24. The principle has been followed in India by our High Court even as far back as in 1897 in the case of Alokeshi Dassi v. Hara Chand Dass, reported in ILR (1897) 24 Cal 897. Maclean C. J. sitting with Banerjee, J. (later Sir Gurudas Banerjee) while referring to Howe v, Smith (supra) observed at pages 898, 899:--

'The case, however, is valuable as illustrating what the late Lord Justice Cotton regarded as the principle upon which questions of this class are to be decided a view which was not dissented from by the other Lord Justices who were members of the Court.'

The Division Bench of this Court in that case also considered the question from the point of view of the conduct of the parties and took into consideration the conduct of the plaintiff which could be said to have amounted to a repudiation of the contract. In that case also the plaintiff attempted to enforce the contract and, accordingly, Chief Justice Mac-lean observed that it would not be equitable that the defendant should be allowed to retain deposit under such circumstances. Banerjee, J. in a separate judgment also took the same view.

25. From the above authorities the law on the point appears to be well settled that in deciding the question of refund of the earnest what is necessary to be looked into is the conduct of the plaintiff. He may not be entitled to be granted the relief by way of specific performance because he might be found to be guilty of delay but that did not imply that the vender would be entitled to retain the earnest money paid by the purchaser. To retain the same it must be shown that the purchaser's conduct amounted to a repudiation on his part orit was such that it had finally put an end to the contract. In other words, he had surrendered or had abandoned the contract. Such had happened in the case before the Supreme Court in the case of Shree Hanuman Cotton Mills v. Tata Aircraft Ltd. : [1970]3SCR127 (supra). When the purchaser's conduct would amount to a repudiation of the contract the Court will not allow him to get back the earnest money on the principle that he could not be allowed to take advantage of his own wrong. As Bowen L. J. put it, he cannot insist on abandoning the contract and yet recover the deposit (supra).

26. In the present case the learned trial Judge has refused specific performance to the appellant because he failed to prove the agreement as pleaded by him in the plaint. There was neither any issue as to breach or repudiation of the contract nor was there any finding to that effect by the learned Judge. That being the position, there could be nothing which could stand in the way of the appellant recovering the earnest by way of refhnd, as has been decreed by the learned Judge,

27. Before I deal with the facts involved in the present case on the question of refund of earnest it is necessary to bear in mind, at this stage, that both the parties are faced with some limitations in attacking the findings of the learned Judge of the Court below. The appellant having failed to obtain relief by way of specific performance of the agreement, preferred the appeal but for some reason or other best known to him the appeal has not been pursued by him. It has come to an end except for the purpose of the cross-objection. It is practically now the respondent's appeal limited to the point of refund of the earnest. But to my mind, the appellant is slightly in an advantageous position in the sense that to support the learned Judge's decree for refund of the earnest money he would be in a position to dispute the correctness of the finding of the learned Judge in matter connected with the date of completion of the sale and in respect of the findings relating to the want of readiness and willingness on the part of the appellant amounting to breach, if any, or the repudiation of the contract. The respondent on the other hand, is in a slightly disadvantageous position in the sense, that he cannot attack any part of the finding of the learned Judge if he has not specifically takenthe point in its grounds of cross-objection and, accordingly, the scope of his argument would also be limited in that sense.

28. Keeping this in mind, let us now consider what the facts were and what were the findings of the learned Judge in relation to the date of the completion of the contract. What was the stipulated time for the purpose of the contract? In paragraph 7E of the written statement the date of completion has been pleaded as on 30th June, 1963. That would also be borne out by the letter dated 15th May, 1063. The learned Judge has also observed that the correspondence would show that the date of completion was 30th June, 1963. But was that the actual position? If that was so, how could the respondent receive a further sum of Rs, 2,75,000 by way of earnest and in part payment of the purchase price in October, 1963? Hence, that by itself could show that the time for completion was extended from time to time. Then, again in cross-examination suggestions were put to the appellant's witness, Safar AH, on the basis of the payment of Rs. 2,75,000 that the time for completion of the agreement was agreed to be extended up to 31st December, 1963. If that was the factual position, then the appellant could very well argue that the learned Judge's observation that the date of completion was 30th June, 1963 could not be correct and that being so, all his findings relating to lack of readiness and willingness which were considered on the basis of 30th June, 1963 could not be taken advantage of by respondent cross-objector in this cross-objection. The learned Judge has decided the issue relating to readiness and willingness on the basis of the said date viz. 30th June 1963 and as such the breach or repudiation, if any, as on 30th June, 1963 could not amount to a breach or repudiation for the purpose of considering the question relating to refund of the earnest money. There could not be any forfeiture as on 30th June, 1963.

29. But the most important point to be considered here, as has been found by the learned Judge, is that the case of forfeiture was not argued before him. The parties did not go to trial on that point and, accordingly, at this stage the respondent cross-objector could not be allowed to challenge that part of the decree which directed refund of the earnest money.

30. A point has been raised before us relating to the statutory charge as provided under Section 55 of the T. P. Act. It has been urged that in deciding Tata Aircraft's case : [1970]3SCR127 the Supreme Court did not take into consideration the same. My learned brother in his judgment, which is going to be delivered, has dealt with that point and as such I do not propose to deal with the same, but I agree with the findings arrived at by the learned Judge on that point. I had the opportunity to go through the draft of the judgment prepared by my learned brother.

31. I, accordingly, confirm the judgment and decree of the learned trial Judge that the sum of Rs. 3,00,000 should be refunded. As however more than 11 years have elapsed and the respondent had the use and benefit of the said sum of Rs. 3,00,000 so long without making any payment to the purchaser or to his heirs in terms of the decree, it seems to me that it would be fair and reasonable if we pass the following decree.

32. It is ordered and decreed that the respondents do pay to the appellant the sum of Rs. 3,00,000 within a month from this date and in default thereof the decretal amount do carry interest at the rate of 6% per annum from the date of the decree herein until realisation. Save as aforesaid, the cross-objection is dismissed with costs. The interim order, if any, do stand vacated. Certified for two counsel.

Hazra, J.

33. I agree with the judgment delivered by my learned brother Ramendra Mohan Datta, J. I have read the draft judgment prepared by my learned brother, but I wish to state my views with regard to Section 55(6) of the T. P. Act, 1882, referred to in course of argument.

34. The question in the cross-objection is whether the respondent could forfeit or retain the sum of Rs. 3,00,001.

35. Rupees three lakhs, in round figure, or rather Rs. 3,00,001 consists of two sums, viz., Rs. 25,001 and Rupees 2,75,000. Both the sums were paid by Mohammed Ziaul Haque to the company for purchasing the immovable property.

36. The facts and events relating to the payment of Rs. 3,00,001/- and this litigation between the parties will appear from the judgment delivered by my learned brother and I do not with to repeat the same.

37. It has been argued before us by Mr. A. C. Bhabra, the learned seniorcounsel for the respondent that the defendant is entitled to forfeit or retain the sum of Rs. 3,00,001/- paid 'by the plaintiff as aforesaid. In support of his submission. Mr. Bhabra strongly relied on the principle of law in Howe v. Smith, (1884) 27 Ch D 89 and the judgment of the Supreme Court in Sree Hanuman Cotton Mills v Tata Aircraft Ltd., : [1970]3SCR127 .

38. Mr. Bhabra has contended that the said sums were paid as earnest and there was breach by the plaintiff of terms of the contract and so the plaintiff cannot recover the sum of Rs. 3,00,001/-.

39. In view of the argument of Mr. Bhabra two questions arise. The first question is whether the sum of Rupees 3,00,000/- was paid as earnest; and secondly, whether the purchaser committed breach of the terms of the agreement.

40. With regard to Section 55(6) of the T. P. Act, Mr. Bhabra has contended that Section 55(6) does not rob 'earnest' of its character as 'earnest' and is forfeit-able in case of default or failure on the part of the purchaser if the transaction is not completed on account of the failure or default of the purchaser.

41. The principle of law regarding 'earnest' of a bargain has been summarised by the Supreme Court in Tata Aircraft case, : [1970]3SCR127 .

42. I will now consider the point concerning Section 55 of the T. P. Act. It arises in this way. The Court is dealing with the question whether under the facts and circumstances of the case, the respondent as seller is entitled to forfeit the earnest money paid by the plaintiff as buyer. Howe v. Smith, (1884) 27 Ch D 89 on which Mr. Bhabra relies is an English case dealing with the point in question on the basis of old equity cases and so forth. Tata Aircraft case : [1970]3SCR127 relates to movable property. So. there was no occasion for the Supreme Court to consider the meaning and effect of Section 55(6) of the T. P. Act in that case. Although there may not be ultimately much difference as indicated hereinafter, I think I should indicate what appears to me in course of argument as to the effect of Section 55 of the T. P. Act under the facts of this case.

43. I shall read relevant portions of Section 55 of the T. P. Act. It is stated below:

'Section 55 : In the absence of a contract to the contrary, the buyer and the seller of immovable property respectively aresubject to the liabilities, and have the rights, mentioned in the rules next following or such of them as are applicable to the property sold;

(6) The buyer is entitled-

(a) ... ... ... ...

(b) unless he has improperly declined to accept delivery of the property, to a charge on the property, as against the seller and all persons claiming under him, to the extent of the seller's interest in the property, for the amount of any purchase money properly paid by the buyer in anticipation of the delivery and for interest on such amount; and when he properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission.'

44. It seems to me that under Section 55 of the T. P. Act the moment earnest money is paid it forms a charge on the immoveable property. This is the position under the Indian Law. It follows that it is a charge for repayment of the earnest money. If that is so, how far this is consistent with the right of forfeiture of deposit as laid down in the judgment in the English cases? Under Section 55(6) the buyer has a charge on the immoveable property not only for the purchase money but also for the earnest. It is a statutory charge. The buyer will be entitled to the statutory charge in respect of the purchase money unless he has improperly declined to accept delivery of the property and for the earnest when he properly declines to accept delivery. It follows, therefore, that under the subsection unless the buyer properly declines to accept delivery the charge for the earnest money will remain from the time of payment. This section, however, begins with the words 'In the absence of the contract to the contrary'. So, if there is a contract contrary to Section 55(6), namely, if the parties expressly stipulate that the purchase money will not form the charge on the property or it will be released from the charge on certain circumstances or that earnest money would be forfeited under certain circumstances the provisions of Sub-section (6) will not be attracted. But mere fact that money is described as earnest does not make the contract to the contrary within the meaning of this sub-section. It seems to me that mere use of the word 'earnest' would not be sufficient to ex-clude the operation of Section 55(6). Admittedly, there is no express term to the contrary in the facts of the present case. There is also no evidence as to whether the parties by using the word 'earnest' excluded the operation of Sub-section (6). These are all questions of fact. Therefore, the rule in Sub-section (6) would be attracted, viz., that the 'buyer will be entitled to the benefit of charge unless the buyer properly (improperly?) declines to accept delivery. It follows, therefore, that if the buyer improperly 'declines to accept' delivery he is not entitled to a charge under Sub-section (6). So, although, this is a statutory charge under Section 55(6), but to answer whether the seller can forfeit the earnest, ultimately, the same question arises, viz., has the buyer repudiated the contract?

45. Mr. Bhabra has relied on the decision of the Privy Council in Chiranjit Singh v. Bar Swarup, AIR 1926 PC 1 and submitted that there was forfeiture of earnest money in case of immovable property in that ease. But it should be noted that in the facts of that case the buyer of the immovable property was unable to purchase the same due to certain unavoidable circumstances and informed the same to the seller by telegram. On the admitted facts of that case, the transaction failed due to default or failure of the purchaser. So, no question of charge under Section 55(6) of the T. P. Act arose or could arise under the facts of that case.

46. Now with regard to the question whether buyer has repudiated the contract on the facts of this case, it does not appear that the plaintiff-purchaser has committed any breach amounting to repudiation. There is no issue as to forfeiture of earnest money and also there is no oral evidence directed to that effect. My learned brother has discussed the point in detail and I do not wish to add.

47. It is not necessary to deal with other points as the same have been dealt with by my learned brother and I agree with the same.

48. In this view of the matter, I also agree with my learned brother that the cross-objection must fail. I also agree with the decree and order passed by my learned brother.


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