1. The appellants agreed to purchase certain quantities of steam coal and rubble from the respondent under three several contracts dated the 20th December 1916, 25th December 1916 and 2ad January 1917 respectively. At the time of entering into the two last named contracts the appellants paid to the respondent the respective sums of Rs. 152-8-0 and Rs. 520, the agreement being that those amounts were to remain in deposit with the respondent, they paying cash for the earlier orders to be given under the contracts, and the deposits being eventually credited as payments or part payments against the final order.
2. In regard to the last two contracts the respondent sued to recover damages but the suits were dismissed on the finding that in the state of the market he had suffered no damage. The appellants also sued for the recovery of the two sums mentioned above, namely, Rs. 152-8-0 and Rs. 520 and it is with these that we are concerned in the present appeal. The first Court decreed the amount, and the lower Appellate Court has reversed that decree and dismissed the suit.
3. Various contentions were put forward by the appellants. Firstly, that it was in consequence of the default of the responent in respect of the deliveries under the first contract that they failed to place orders under the other two contracts. Secondly, that the supply of waggons was stopped by Government, and, thirdly, that the performance of the last two contracts was conditional upon the due performance of the first on the part of the respondent. It is, however; found by the lower Appellate Court that there is not sufficient evidence of the interdependence of the contracts in the way alleged: it is also found that there is not sufficient evidence as regards the stoppage of waggons: that the appellants were dissatisfied with the respondent and did not act and were not willing to act according to the contracts: and, that, in there circumstances, it must be held that the contracts were broken by the appellants.
4. The question, therefore, is whether under these circumstances the plaintiffs are entitled to a refund of the deposit.
5. So far as the English Law is concerned, the law is well-settled. As pointed out by Lord Macnaghten in Soper v. Arnold (1880) 14 App. Cas. 429 at p. 435 : 59 L.J. Ch. 214 : 61 L.T. 702 : 38 W.R. 449: 'The deposit serves two purposes--if the purchase is carried out it goes against the purchase-money but its primary purpose is this, it is a guarantee that the purchaser means business.' In the case of Barrell, Ex parte, Parnell, In re (1885) 10 Ch. App. 512 : 44 L.J.K.B. 138 : 33 L.T. 115 : 23 W.R. 846 it was held that where a contrast for sale goes off for default of the purchaser the vendor is entitled to retain the deposit: James, L. J., remarked that the money was paid to the vendor as a guarantee that the contrast should be performed: the trustee refuses to perform the contract, and then says 'give me back the deposit,'--there is no ground for such a claim. Mellish, L. J., said: 'it appears to me clear that, even when there is no clause in the contract as to the forfeiture of the deposit, if the purchaser repudiates the contrast he cannot get back the money as the contract has gone off through his default,' In Collins v. Stimson (1883) 11 Q.B.D. 142 at p. 143 : 52 L.J.Q.B. 440 : 48 L.T. 828 : 31 W.R. 920 : 47 J.P. 439 Baron Pollock said: 'According to the law of vendor and purchaser the inference is that such a deposit is paid as a guarantee for the performance of the contract and where the contract goes off by default of the purchaser the vendor is entitled to retain the deposit,' and in Palmer v. Temple (1839) 9 A. & E. 508 : 1 P. & D. 379 : 8 L.J.Q.B. 179) 48 R.R. 668 : 112 E.R. 1304 it was held that 'in the absence of any specific provision the question whether the deposit is forfeited depends on the intent of the parties to be collected from the whole instrument,'
6. The question was discussed in Howe v. Smith (1884) 27 Ch. D. 89 at p. 95 : 53 L.J. Ch. 1055 : 80 L.T. 573 : 82 W.R. 802 : 48 J.P. 773 where Fry, L.J. traced the history of earnest and deposit and at page 101 observed:
Money paid as a deposit must, I conceive, be paid on some terms implied or expressed. In this case no terms are expressed, and we must, therefore, inquire what terms are to be implied. The terms must naturally to be implied appear to me in the case of money paid on the signing of a contract to be that in the event of the contract being performed it shall be brought into account, but if the contract ii not performed by the payer it shall remain the property of the payee. It is not merely a part payment but is then also an earnest to bind the bargain so entered into, and creates by the fear of its forfeiture a motive in the payer to perform the rest of the contract.
7. The rule was approved by the Judicial Committee in Sprague v. Booth (1909) A.C. 576 : 78 L.J.P.C. 164 : 101 L.T. 211.
8. The principle has been followed in this country, see Bishan Chand v. Radha Kishan Das 19 A. 489; A.W.N. (1897) 123 : 9 Ind. Dev. (N.S.) 316, Roshan Lal v. Delhi Cloth and General Mills Co Limited 7 Ind. Cas. 794 : 33 A. 166 at p. 169 : 7 A.L.J. 1019, Raghu Nath Sahay v. Chandra Protap Singh 15 Ind Cas. 268 : 17 C.W.N. 100, (express agreement for refund of the deposit) Habibullah v. Arman Dewan 53 Ind. Cas. 875 : 30 C.L.J. 113 at p. 115 : 24 C.W.N. 40, Natesa Aiyar v. Appavu Padayachi 19 Ind. Cas. 462 : 38 M. 178 : 24 M.L.J. 488 : 13 M.L.T. 392 : (1913) M.W.N. 341 (express agreement for forfeiture of the deposit).
9. It is contended, however, on behalf of the appellant that the rule is not an inflexible one, that in the absence of any statutory provisions on the point we should decide the case according to the principles of justice, equity and good conscience, and that as the defendant had not suffered any loss, he should not be allowed to make a gain by retaining the deposit. We were referred to the observations of Cotton, L.J. in Howe v. Smith (1884) 27 Ch. D. 89 at p. 95 : 53 L.J. Ch. 1055 : 80 L.T. 573 : 82 W.R. 802 : 48 J.P. 773 in support of the contention. In that case Cotton, L.J. observed as follows:
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.
10. There is no doubt that it is not in every case of default on the part of the purchaser, that the vendor is entitled to retain the deposit, but the observations of Cotton, L. J., apply to cases where there is suit for specific performance of a contract and there is no repudiation on the part of the purchaser. In the sage of Alokeshi Dassi v. Hara Chand Dass 24 C. 897 : 10 W.N. 705 : 12 Ind Dec. (N.S.) 1267, which was also relied upon by the appellants, the learned Judges observed: 'It is admitted that there is nothing either in the Specific Relief Act or in the Contrast Act which touches the question. We have, therefore, to consider what is just and equitable and may fairly consider the law in England upon the subject,' and referred to the observations of Cotton, L.J. in Howe v. Smith (1884) 27 Ch. D. 89 at p. 95 : 53 L.J. Ch. 1055 : 80 L.T. 573 : 82 W.R. 802 : 48 J.P. 773 quoted Above. In the case of Alokeshi Dasri v. Hara Chand Das 24 C. 897 : 10 W.N. 705 : 12 Ind Dec. (N.S.) 1267, however, the defendant denied the contract in toto, and it was found that there was no repudiation of the contract by the plaintiff who brought the suit for specific performance of the contract and it was held that he was entitled to a refund of the deposit. We have not been referred to any case in which the plaintiff has been held entitled to refund of the deposit money even where there was repudiation of the contrast on his part. In the present case the appellants were dissatisfied with the dealings of the respondent under the first contrast, and they accordingly did not place any orders under the second and third contracts. They admittedly were not willing to perform their part of the contrasts and their defence practically amounts to a justification for repudiation of the contracts. The findings of the Court of Appeal below, however, are against them.
11. It may be hard that the plaintiffs should forfeit the deposit although the defendant did not suffer any loss, but having regard to the findings arrived at by the Court of Appeal below, and to the authorities on the point, we feel constrained to dismiss the appeal. We direct, however, that each party do bear his own costs in all the Courts.