P. Gopalaratna Iyengar vs A. Rajaratna Mudaliar

King, J.—This petition is concerned with an agreement between plaintiff and defendant that defendant should sell certain property to plaintiff

for Rs. 2500. The undisputed facts of the case are that defendant executed a sale deed on 22nd May 1932, received Rs. 100 as an advance

towards the purchase price, and handed over the sale deed to plaintiff. Subsequently the sale deed was returned by plaintiff to defendant and the

four months'' time for registration passed without any further payment on plaintiff''s part. In 1935, plaintiff filed the present suit to recover the Rs.

100 from defendant with interest and also the charges he had incurred in purchasing the stamp. He based his claim upon a repudiation of the

contract by defendant, who, he said, asked for the return of the sale deed in order to sell the property to some one else. The learned District

Munsif refused to believe this allegation on plaintiff''s part, and held that defendant''s evidence that plaintiff returned the sale deed because he was

unable to find the purchase money was true. He nevertheless gave plaintiff a decree for the refund of Rs. 100 on the grounds: (i) that there was no

agreement that it should be forfeited if plaintiff broke the contract; (ii) that no time was stipulated within which the transaction was to be completed,

and (iii) that defendants ""treated the contract as at an end"".

I am unable to accept any of these reasons as justifying the1 lower Court''s decree. The first appears to be a finding of fact but is not really so. It

is a well-known principle of law that if a purchaser on agreeing to purchase any property agrees also to pay, and does pay a deposit, that deposit

is to be regarded as security for the fulfillment of the contract. Here there is no doubt that the deposit of Rs. 100 was insisted upon by the

defendant as a term of the contract. The lower Court holds the view that because no terms were reduced to writing, defendant should not be

believed when he says that the deposit was to be forfeited, but even if defendant has in this instance gone too far, and in fact nothing specific was

said about forfeiture, the mere fact that a deposit was demanded carries with it the implication that it should be forfeited if the contract were

broken, unless plaintiff proves an agreement to the contrary. This he has made no attempt to do. The second reason I am unable to understand.

Plaintiff admits in cross-examination that it was recited in the document itself that the consideration was to be paid before the Sub-Registrar, which

implies, of course, that it was to be paid within four months. Plaintiff does not assert that this clause in the sale deed was not meant to be operative.

For its third reason, the lower Court relies upon a ruling reported in A.K. Oostman v. Gurtajee Coovarjee (1935) 22 AIR Mad 903. That is a

ruling which, with respect, I find it difficult to appreciate. It proceeds upon no basis of facts proved, lays down the law theoretically as to the

conditions upon which a purchaser who has broken his contract may recover an advance which he has made, and then gives a decree not for the

refund of any such advance, but allowing the purchaser four months'' time to complete his payment of the purchase price. I am unable to see how

this case can govern the case with which I am now dealing, where plaintiff does not ask to be permitted to make further payment. If it does govern

the present case, it still remains to analyze what is meant by the expression, ""regard the contract as at an end"". To me, it seems to mean some

mutual agreement between plaintiff and defendant that both of them no longer consider it necessary to go through with their transaction. It cannot

be applied to the mere mental realization by the defendant of the fact that plaintiff has broken the contract or, in my opinion, to defendant''s failure,

to sue for damages or specific performance. Is defendant who holds in his hands a deposit liable to forfeiture, to be compelled to institute legal

proceedings against a purchaser who has no money with which to pay him and as the evidence in this case shows, no property on which to raise

any money? I am accordingly of opinion, and as I said before, that none of the lower Court''s reasons can be supported as justifying its decree,

and must allow this petition and dismiss plaintiff''s suit with costs throughout.