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Bali Ram Dhote Vs. Bhupendra Nath Banerjee and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtKolkata High Court
Decided On
Case NumberSuit No. 1524 of 1967
Judge
Reported inAIR1978Cal559
ActsSuccession Act, 1925 - Sections 211 and 307; ;Contract Act, 1872 - Sections 55 and 74; ;Transfer of Property Act, 1882 - Section 55; ;Code of Civil Procedure (CPC) , 1908 - Order 6, Rule 4
AppellantBali Ram Dhote
RespondentBhupendra Nath Banerjee and ors.
Appellant AdvocateAjoy Ray, Adv.
Respondent AdvocateN.C. Chowdhury, Adv.
DispositionSuit dismissed
Cases Referred(Maula Bux v. Union of India
Excerpt:
- orderpadma khastgir, j. 1. by an agreement dated 29th of june 1966 the plaintiff herein baliram dhote agreed to purchase and bhupendra nath banerjee, jitendra nath banerjee, abanindra nath banerjee and nihar bala devi agreed to sell the premises no. 8/1, hazra road. the salient. terms and conditions of the said agreement are set out as hereunder : --1. the vendors agree to sell and the purchaser agrees to purchase all that the said premises no. 8/1, hazra road, calcutta, fully and particularly mentioned and described in the schedule hereunder written (hereinafter referred to as the said premises) for an absolute and indefeasible estate of inheritance in fee simple in possession or an estate equivalent thereto free from all encumbrances whatsoever at or for the sum of rupees 2,80,000/-.....
Judgment:
ORDER

Padma Khastgir, J.

1. By an agreement dated 29th of June 1966 the plaintiff herein Baliram Dhote agreed to purchase and Bhupendra Nath Banerjee, Jitendra Nath Banerjee, Abanindra Nath Banerjee and Nihar Bala Devi agreed to sell the premises No. 8/1, Hazra Road. The salient. terms and conditions of the said agreement are set out as hereunder : --

1. The Vendors agree to sell and the purchaser agrees to purchase all that the said premises No. 8/1, Hazra Road, Calcutta, fully and particularly mentioned and described in the Schedule hereunder written (hereinafter referred to as the said premises) for an absolute and indefeasible estate of inheritance in fee simple in possession or an estate equivalent thereto free from all encumbrances whatsoever at or for the sum of Rupees 2,80,000/- (Rupees Two lacs Eighty Thousand) only subject to the vendor's making out a good and marketable title thereto.

2. The purchaser has this day paid to the vendors a sum of Rs. 10,001/- (Rupees Ten thousand and one) only as and by way of earnest money and in part payment of the consideration money and the balance sum will be paid by the purchaser to the vendors on or before the execution of the conveyance.

3. Subject to the provisions herein contained the vendors shall make out a good and marketable title to the said premises and the purchase shall be completed within six months from the date hereof. The time in this respect shall be deemed to be the essence of contract.

4. The vendors shall within a week from the date of these presents deliver or cause to be delivered to Mr. T. K. Gupta, solicitor for the purchaser on his accountable receipt all the title deeds and documents exclusively relating to the said premises as may be in their possession and custody.

5. Within two months from the data of execution of these presents and subject to the making out such good and marketable title to the said premises the purchaser shall submit to the vendors a draft conveyance to enable the vendors to obtain the Income-tax Clearance Certificate under Section 230-A of the Income-tax Act.

10. If the vendors fail to make out a good and marketable title to the said premises in terms of these presents or otherwise to perform their part of the contract the purchaser shall be at liberty to rescind this agreement and in that eventthe vendors shall on demand refund the said sum of Rs. 10,001/- (Rupees Ten thousand and one) only paid as earnest money to the purchaser and shall also pay to the purchaser his costs of investigation of title and of this agreement assessed at Rs. 85/- (Rupees eighty-five) only.

11. If upon the vendors' making out a good and marketable title to the said premises in terms of these presents the vendors fail to complete the sale in terms of this agreement, the purchaser shall at his option be entitled to have this agreement specifically enforced or to hold the vendors liable for all losses and damages thereof and in such event the vendors shall forthwith refund the said earnest money of Rs. 10,001/- (Rupees ten thousand and one) only to the purchaser and if after the vendors' making out a good and marketable title to the said pre-mises the purchaser fails to complete the purchase of the said premises within the time and in the manner aforesaid the vendors shall be entitled at their option either to cancel this agreement and forfeit the sum of Rs. 10,001/- (Rupees ten thousand and one) only as and by way of liquidated damages or to specifically enforce this agreement and hold the purchaser liable for all costs, expenses and damages.

12. The vendors shall produce or cause to be produced a copy of the Income-tax Clearance Certificate and/or the Certificate under Section 230-A of the I.T. Act within sufficient time before the execution of the conveyance to the solicitor for thepurchaser and produce the original for his inspection and in the event of failure of production of such certificate, the vendors shall forthwith refund the earnest money and shall also pay the cost of investigation of title assessed at Rs. 85/~ to the purchaser.

2. The plaintiff's case is that the agreement was entered into at 98/4, S. N. Banerjee Road. On that day when the vendors went to the plaintiff's residence and entered into the agreement, the plaintiff's wanted to pay a sum of Rs. 10,001/- as an earnest money by cheque but as the defendants refusedto accept the same, the plaintiff promised to send the earnest money to the vendors at their place of residence at 8/1, Hazra Road wihereupon the vendors left the said place and the plaintiff, after encashing the said cheque, went to 8/1, Hazra Road along with Mr. T. K. Gupta, the solicitor, to the vendor's residence at 8/1, HazraRoad, and handed over the money to the vendors including Nihar Bala Dassi. On 19th of Sept. 1966, one of the vendors Jitendra Nath Banerjee died leaving a Will whereby he appointed the defendant No. 4 Satish Chandra Mukherjee as the executor under the said Will. It is the positive case of the plaintiff that in spite of repeated requests the defendants failed to answer the requisition on title and also to furnish relevant papers in respect of the said premises and thereby they have failed and neglected to complete the said purchase or to perform their part of the agreement within a reasonable time. As such, the plaintiff was absolved from his obligation to perform his part of the agreement and he has lawfully put an end to the said agreement by a notice dated 6th of May, 1967. As a result whereof the plaintiff is entitled to refund of the said sum of Rs. 10,001/- with interest at the rate of 6% and Rs. 85/- by way of assessed costs for making investigation on title.

3. The defendant's definite case is that the agreement was entered into at 8/1, Hazra Road outside the jurisdiction of this Hon'ble Court and not at 98/4, S. N. Banerjee Road, as made out by the plaintiff. It is their further case that the earnest money was paid at 8/1, Hazra Road simultaneously with the signing of the said agreement and Nihar Bala Dassi one of the vendors signed the said agreement at her residence at Russa Road, South which is also outside the jurisdiction of this Court. It is the case of the defendants that the plaintiff himself has failed and neglected to complete his part of the agreement by not submitting the requisition on title within two months from the date of the agreement but also the plaintiff has failed to submit the draft conveyance to the vendors to enable them to obtain the necessary Income-tax Clearance Certificate under Section 230-A of the Income-tax Act. On the death of Jitendra Nath Banerjee the defendants immediately applied for probate of the will of Jitendra Nath Banerjee in Oct., 1966 and had the provisional assessment of the Estate Duty completed and in fact the probate in respect of the said Will was granted to the defendant on 22nd of June, 1967. The defendants' case is that immediately after execution of the said agreement, they submitted the title deeds Sri respect of the said premises to the plaintiff's solicitor in the first week of July, 1966 under an accountable receipt.Although the title deeds were submitted in due time neither the plaintiff nor his solicitor chose to give requisition on title earlier than 3rd week of December, 1966, Although in the agreement itself it has been stated that time in this case would be an essence of contract but such condition was given a go-by by the plaintiff himself because on 16th of Dec., 1966 the plaintiff's solicitor wrote to the defendants that there was no other alternative but to extend the time for completion of the transaction and also expressed his desire that the time factor in the contract would be presumed to be waived by the defendants if no reply was received to that letter. The defendants' definite case is that they agreed to the proposal as envisaged in the said letter of 16th Dec. 1966. On the 4th of Jan., 1967, the defendants duly answered the requisition on title and sent the same to the plaintiff's solicitor which was duly received by the plaintiff's solicitor which would appear from an endorsement appearing on the original requisition on title. The defendants in the meantime in order to give the vacant possession to the plaintiff, took rent of two flats and some of them shifted themselves in those rented flats with the anticipation that as and when the transaction is completed they would hand over the vacant possession of 8/1, Hazra Road to the plaintiff. In the meantime all on a sudden on 23rd of May, 1967, the defendants received a letter from the plaintiff dated 6th of May, 1967, wrongfully purporting to cancel the said agreement on untrue allegations and also demanded back the refund of the earnest money with interest and the assessed costs. In reply the defendants through their solicitors Ganguli Sinha & Co. called upon the plaintiff to complete the purchase and thereby to fulfil the plaintiff's part of the agreement. The defendants' definite case is that the plaintiff was not ready and willing to purchase the said premises, as such on some pretext or other the plaintiff tried to avoid the said contract. It is the defendants' case that as price of land and building in Calcutta was falling during those days, the plaintiff wanted to go back from the agreement and to complete the sale. As it was according to them, the plaintiff's fault they were under no obligation to refund the sum of Rs. 10,001/- with interest or at all.

4. After hearing Mr. Ajoy Ray appearing on behalf of the plaintiff and Mr. N. C. Chowdhury, appearing for the defendants, the following issues were raised:--

1. Did the defendants fail to carry out their obligation under the agreement dated the 29th of June, 1966 on the grounds as alleged in paras 5, 6 and 8 of the plaint by not producing the original probate within time as pleaded in para. 8 of the plaint ?

2. Was the said agreement dated 29th of June, 1966, to be completed within six months from the date thereof or within May 6, 1967 as alleged in the para. 8 of the plaint ?

3. Was time factor remained the essence of the contract ?

4. Was the plaintiff ready and willing to perform his part of the said agreement ?

5. Is the plaintiff entitled to the refund of the said sum of Rs. 10,001/- from the defendant ?

6. Has the defendant suffered any damages ?

7. Has this Hon'ble Court jurisdiction to try and entertain this suit ?

8. To what relief, if any, is the plaintiff entitled

5. The plaintiff examined himself and the defendants examined Kali Prasad Banerjee and Rama Prasad Banerjee on their behalf. The plaintiff's evidence regarding the entering of the agreement at 98/4, S. N. Banerjee Road is unacceptable by me. One of the vendors Jitendra Nath Banerjee was lying seriously ill and he was a cardiac asthma patient and it was impossible for him to move out of his bed as per doctor's advice. Moreover, all the vendors were of old age including Nihar Bala Dassi who was of 90 years of age and they were not keeping good health. It is hardly expected that the vendors who were trying to sell the property would go all the way to the vendee's residence to sign the agreement, more so, in view of the evidence of Kali Prasad and Rama Prasad Banerjee that they were not keeping good health due to old age. The plaintiff's version is that the vendors although went to 98/4, S. N. Banerjee Road to sign the agreement and in fact signed the agreement where there is a recital that a sum of Rs. 10,001/- by way of earnest money has been paid and the vendors have accepted the same would come away without taking the money on the plaintiffs assurance that the plaintiff will send the said sum later at their residence 8/1, Hazra Road, Calcutta. The vendors would not put their signatures in acknowledgment of the receipt of the said sum of Rs. 10,001/- as earnest money untiland unless actually they received the said sum in hand. The plaintiffs version of the case that he after encashment of the cheque for Rs. 10,001/- went to 8/1, Hazra Road in the company of T. K. Gupta, his solicitor, is denied by both the witnesses for and on behalf of the defendants. Moreover, Mr. T. K. Gupta, the solicitor, has not given evidence to corroborate the statement made by the plaintiff. In view of that, I am of the opinion and I hold that the agreement was signed as also the earnest money was paid at 8/1, Hazra Road and at Russa Road, South, at the residence of Nihar Bala Dassi. As such this court has no jurisdiction to entertain this suit as the plaintiff's cause of action has arisen outside the jurisdiction of this Hon'ble Court. The plaintiff has come for reliefs in this court on the ground as stated in paras. 5 and 6 of the plaint, wherein the plaintiff made a specific case that as the defendants have failed and neglected to answer the requisition on title and also failed to send the title deeds, the plaintiff has terminated the said agreement and demanded back the earnest money. The plaintiff's that part of the case is falsified by his own evidence as he has admitted before me that the title deeds were deposited by the defendants to the plaintiff's solicitor which fact is also corroborated by the evidences of the two Banerjees examined on behalf of the defendants. It would also appear from oral and documentary evidence that after submission of their title deeds Mr. T. K. Gupta, the plaintiff's solicitor, gave requisition on title and the defendants have answered the requisition on title which was received by Mr. T. K. Gupta on 4th of Jan., 1967. From the original requisition on title not only the signature of Mr, T. K. Gupta but also the date on which he received the same would appear. So the entire plaintiff's case as made out in the plaint is negatived both bv oral and documentary evidence adduced not only by the defendants but by the evidence of the plaintiff himself. The plaintiff has also admitted that the defendants have sent to his solicitor a copy of the will when Jitendra Nath Banerjee died. From the copy of the said Will all the particulars including the name of the executor would appear. What prevented the plaintiff's solicitor from preparing the draft conveyance in the name of the said executor along with other vendors and sending the same to the defendant's solicitor for a consent signature and also for final engrossment. That would havehelped the vendors to procure the certificate from the income-tax authorities under Section 230-A of the Income-tax Act, Moreover, the plaintiff did not tender the balance purchase money to the vendors. On the question of plaintiff's readiness and willingness to perform his part of the agreement, his explanation is that he could have arranged for the balance purchase money from his own business or he could have borrowed from his friends and relatives. In answer to question 12, the plaintiff has stated that his solicitor Mr, T. K. Gupta was in a better position to explain why the sale could not be completed. He has also admitted in his evidence that in case the plaintiff failed to comply with his part of the agreement, the defendants were entitled to forfeit the earnest money in terms of the agreement. Although he insisted in evidence that the vendors have failed to make out a marketable title but he could not give the reasons why he said so or in which manner the vendors have failed to make out a marketable title. Although by a letter dated 27th of June, 1967, the Solicitor on behalf of the defendants informed the plaintiff that they have obtained the probate and requested the plaintiff to send a draft conveyance, the plaintiff neither did send a draft conveyance nor tender the balance purchase-price. In his evidence, the plaintiff has very candidly admitted that in view of the death of one of the vendors time had to be extended as it was normal and natural that some time would be taken to get the Will of the deceased vendor probated. He also admitted that grant of probate by court of law is a long drawn affair as such time had to be extended. The defendants lost no time in taking whatever steps they could within their power to obtain the probate of the will of Jitendra Nath Banerjee. They applied in the month of Oct. 1966 as one of the sons of the deceased vendor was of unsound mind, a guardian had to be appointed on his behalf. As such it took a little time to have the will probated which was completed on 22nd of June, 1967, From the Will it would appear that the deceased vendor had given the permission to the executor to sell the said property, under the Will. In my opinion, as time although originally was an essence of the contract but in view of the subsequent agreement by and between the parties that clause was given a go-by by extending the time of performance of the agreement till probate was granted. Theplaintiff was wrong in cancelling the said agreement in May, 1967 without calling upon the defendant earlier to perform their part of the agreement and without giving them a reasonable-notice, as such the plaintiff is not entitled to get the refund of the said sura of Rs. 10,001/- with interest and assessed the costs. The plaintiff, in my opinion, has himself failed to carry out his part of the agreement by not preparing the draft conveyance and forwarding the same to the defendants for the purpose of obtaining the certificate under Section 230-A of the Income-tax Act. The plaintiff has also failed to tender the balance purchase money to the defendants. On the contrary, the plaintiff has come to this Court for reliefs on allegations in the plaint which could not be substantiated by him, On the contrary, those have been negatived by the plaintiff's own evidence and evidence as tendered on behalf of the defendants.

6. In an agreement for sale of immovable property time is not an essence of the contract. In this case although as I have stated earlier that time was made an essence of the contract at the beginning but that was definitely given a go-by by the parties. It could not be expected that the vendee will have to wait for an indefinite period for the vendors to carry out their part of the agreement but in view of the death of one of the vendors the vendee agreed to wait for six months not only from the date of the agreement from June to December, 1966 but in Dec. 1966, the vendee agreed to give a go-by to the said time clause and agreed to extend the time for due performance of the said agreement. From Dec. 1966, up to June 1967 time was considered by the vendee to be a reasonable time. Moreover, the vendee himself waited till 23rd of May, 1967 when the letter of termination of agreement by the plaintiff was received by vendors. In this case the will was probated with utmost expedition. As such, the plaintiff should have waited for a reasonable time from the first of Dec. 1966. Moreover, the plaintiff should have given a reasonable notice to the vendors before cancelling the said agreement. The plaintiff has failed to substantiate both the grounds as made out in the paragraphs 5 and 6 of the plaint. The plaintiff was given the opportunity of raisins the issue regarding the non-production of the original probate. Even then the plaintiff has not been able to prove that the defendants have failed or neglected to produce the original probate of the will within a reasonable time. The plaintiff has failed to prove that there has been delay or laches on the part of the defendants in obtaining the probate of the will or that such probate was obtained not within a reasonable time. The plaintiff's version that the original draft conveyance could not be prepared in the absence of the original probated will is unacceptable by me. From the copy of the will submitted by the defendants' solicitors the name of the executor that is the defendant No. 4, transpired, as such it was possible for the plaintiff's solicitor to have a draft conveyance prepared in the name of the executor. The grant of the probate could not be a very important factor for the preparation of the draft conveyance deed, otherwise the plaintiff himself would have made out a point in the plaint itself. There is no whisper in the plaint that because of non-production of the original probated will the plaintiff could not complete the sale. The absence of the probate of the will could not prevent the vendee from preparing the draft conveyance having it approved, executed and even registered because under the law there is no bar in doing the same.

7. Under Sections 211 and 307 of the Indian Succession Act an executor obtains a title by virtue of the will and not from the date when the will is probated. Under Section 211 of the Indian Succession Act 'the executor or administrator, as the case may be, of a deceased person is his legal representative for all purposes and all the properties of the deceased person vest in him as such.' The executor derives his title from the will and immediately after the testator's death, his property vests in the executor as the law knows no interval between the testator's death and the vesting of the property. An executor by virtue of his office, that is in the character of executor takes an estate in the property of the deceased and a legal character is vested in him. In the present case, the will also empowers the executor, the defendant No. 4 herein to sell the property. The executor represents the estate even before he has taken the probate. As such the probate is not necessary to make an executor entitled to the properties as his title is derived under the will. There is nothing in the law to prevent the executor from acting as an executorand exercise a power given to him without obtaining probate.

8. In a case reported in AIR 1932PC 92 (Kadiyala Venkata Subarnma v. Ramayya) it has been held 'probate and administration refers to proof and not vesting of title on executor. The provisions of Section 12 of the Probate and Administration Act do not suggest that before probate the executor has no title but are only intended to simplify the proof of his title as dating from the testator's death. The object is to set rid of the multiplicity of proof in every case Where either the will itself, or anything done under it by the executor is challenged. Probate once granted authenticates the will against all the world; it affords the ready means of proof of the contents of the will; and it is a complete answer by the executor to any challenge of his authority as such. Probate is no part of the executor's title. Executor is only the person to whom the testator has confided the carrying out of his disposition and it is not necessary that before the executor can dispose of the property he must be clothed with probate, and the power of disposal is not dependent upon the the grant of the probate.'

So in this case when the advocate for the plaintiff received a letter from the defendants stating the name of the executor and giving a copy of the will what prevented the vendee from having the draft conveyance prepared and having it approved by the defendants. Probate mainly gives an adequate protection and nothing further.

9. The only condition under which the purchaser could cancel the contract and demand refund of the earnest money has been provided under Clauses 10 and 11 of the agreement which provides that.

'Where the vendors fail to do and make out a good and marketable title or otherwise perform their part of the agreement, the purchaser shall be at liberty to rescind this contract and in that event the vendors shall on demand refund the said sum of Rs. 10001/- paid as earnest money to the purchaser.'

Under clause 11 'if upon the vendors' making out a good and marketable title the vendors fail to complete the sale, the purchaser shall at his option be entitled to have this agreement specifically enforced or ask the vendors to refund the said earnest money. If after the vendors making out a good and marketable title the purchaser fails to complete the purchase then the vendors shall be entitled at their option to cancel the agreement and forfeit the sum of Rs. 10001/- and only as and by way of liquidated damages.'

So under both the Clauses 10 and 11 the plaintiff is not entitled to claim the refund of the said earnest money because the vendors have neither failed to make out a good and marketable title nor have they failed to perform their other part of the contract. From the letter dated 6th of May, 1967, it would appear that the plaintiff did not give any time to the defendants calling upon the defendants to complete the sale within such time. Moreover, in the letter no reason has been given for cancellation of the said agreement.

10. The pre-condition for making such claim is that the plaintiff will have to prove with cogent evidence that the defendants have committed the breach of the said agreement. It must be noted that under the agreement only under Clauses 10 and 11 provisions have been made for refund of the said earnest money and no other right has been given to the plaintiff under the agreement to get the refund of the same unless the case falls under Clauses 10 and 11 of the agreement.

11. In this case the plaintiff has not pleaded that the forfeiture of Rs. 10001/-is either unreasonable or unconscionable. Without pleading, and without raising any issue to that effect and without giving any evidence to that effect, it is not open for the plaintiff to argue that the forfeiture by the defendants of the said sum of Rs. 10001/- would be either unreasonable or unconscionable.

12. So Mr. Ajoy Roy's argument that the forfeiture of Rs. 10001/- by the defendants was in the nature of penalty cannot be accepted not only because that is not borne out by the facts of the case but also because there is no pleading to that effect in the plaint, as such no issue has been raised so to allow the plaintiff to urge the said point could not be proper as the defendants have not come to meet that part of the plaintiff's case which has been tried to be made for the first time at the time of the argument. So the question of deciding and applying the decisions as cited by Mr. Ray does not arise here.

13. In the case reported in (1977) 81Cal W. N. 199 (Subir Ghosh v. Indian Iron & Steel Co.), it was held that

'the amount payable on a bond was not by way of penalty but as liquidated damages on a genuine pre-estimate of the damages, the company would be liable to sustain in the event of the breach on the part of the defendants.'

It was further held in the case that

'Whether the amount payable by way of penalty or liquidated damages is to be decided on a proper construction of the terms of the agreement. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party. While the essence of the liquidated damages is a genuine covenanted pre-estimate of the damages to be sustained on the breach of the covenant. The true implication of Section 74, therefore, is that it is true that notwithstanding the amount agreed what would be payable is reasonable compensation but if there is no evidence showing that the amount so assessed and specified Es unreasonable and unconscionable or excessive the agreement between the parties estimating their damages is in itself evidence and even in the absence of any other evidence of such damage, such evidence alone may be considered sufficient.'

14. The court is to decide this on consideration of all the facts and circumstances proved including the agreement itself so that if on the agreement proved it is found that the money made payable is liquidated damages based on a genuine pre-estimate of the damages to be suffered and is not excessive or unconscionable with reference to the damage likely to have been suffered by the party claiming the amount, the court can certainly decree the amount so estimated by the party and mere absence of an independent proof of damage or the quantum thereof would not necessarily induce the court to overrule the claim and dismiss the suit.

15. One party cannot subsequently unilaterally make time an essence of the contract. In a case reported in : AIR1960Mad452 (V. R. Mohanakrishnan v. Chimanlal Desai) it was held that

'If due to causes beyond the control the purchaser agreed to accept the late shipment or late supply of goods without objection the purchaser cannot subsequently by unilateral action i.e. by writing to the supplier that if the goods were not delivered within a certain time, he would take legal action, make the time an essence of the contract. Delay in delivery due to the errors of Customs Authority could not be held delay on the part of the seller.'

Similarly, in this case delay in the grant of the probate proceedings could not, by any stretch of imagination, be held to be delay or default on the part of the de-lend ants.

16. In a case reported in : [1970]3SCR127 (Shree Hanuman Cotton Mills v. Tata Air Craft Ltd.) it has been held that

'earnest money represents a guarantee that the contract will be fulfilled or, in other words, 'earnest' is given to bind the contract. It is part of the purchase price when transaction is carried out, it is forfeited when the transaction falls through by reason of the default or failure of the purchaser. 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 money.

Where a clause in the terms of the business which was accepted by the parties requires the buyer to deposit 25 per cent of the total value of the goods at the time of placing the order and also further provides that the deposit shall remain with the company (seller) 'as earnest money,' to be adjusted in the bills and further provides that no interest is payable to the buyer by the company 'on such amounts held as earnest money' which shall be forfeited unconditionally by the company on default by the purchaser in payment of the price, without prejudice to the rights of the company under law and the contract, and the purchaser deposits the 25 P. C. of the price, the amount deposited is a deposit 'as earnest money,' which the company has right to forfeit upon default of the purchaser in payment.'

17. That case also considered the point on unreasonableness where it can be considered in a case of forfeiture of an amount deposited by way of earnest money and if so what are the necessary factors to be taken into account in considering the reasonableness or otherwise of the amount deposited by way of earnest money. In that case that the question of quantum of earnest money deposited forfeited whether unreasonable or the forfeiture was by way of penalty, was never raised by the appellant and the appellants also led no evidence at all that is why it was held in that case unless the appellants had pleaded and established that there was unreasonableness attached to the amountrequired to be deposited under the contract or that the clause regarding forfeiture amounted to a stipulation by way of a penalty the respondents had no opportunity to satisfy the court that no question of unreasonableness or the stipulation being by way of penalty arises. The Supreme Court of India did not go into the matter as the appellants did not raise such contentions. As such no opinion was expressed. Forfeiture of a reasonable amount paid as an earnest money does not amount to imposing a penalty. In that particular case the court allowed the party to forfeit the sum of Rs. 2,50,000/- by way of earnest money which was 25 per cent of the contracted price. In the present case the entire sum of Rs. 10001/- was paid by way of earnest money, as such I am of the opinion that the defendants are entitled to forfeit the said sum in view of the facts as stated above.

18. In the case reported in : [1970]1SCR928 (Maula Bux v. Union of India), it has been held that 'earnest money is a part of the purchase price when the transaction goes forward; It is forfeited when the transaction falls through, by reason of the fault or failure of the vendee.' In that case it was held 'an amount deposited by the contractor as security for guaranteeing due performance of contract for supply of goods cannot be regarded as earnest money.' It further held that

'Section 74 of the Contract Act applies where compensation for breach of contract, a penalty is stipulated for due performance of the contract,'

'Forfeiture of earnest money under a contract for sale of property, movable or immovable, if the amount is reasonable, (the case) does not fall under Section 74 of the Contract Act.'

19. In view of the facts and the law as stated above I answer the issues in the manner following:--

I answer the issues Nos. 1, 2, 3, 4, 5 and 6 in the negative as such I dismiss this suit with costs.


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