Surendranath Talukdar and others vs Lohit Chandra Talukdar

Baharul Islam, J.—This appeal is by the defendants and from the Judgment and decree passed by the Assistant District Judge, Barpeta in Money Appeal No. 1 of 1970.

The plaintiff''s suit is for refund of an amount alleged to have been advanced on an agreement for sale of immovable property. The plaintiff''s case is that the defendants agreed to sell 8 bighas of land which the plaintiff agreed to purchase. The price was settled at the rate of Rs. 520/- per bigha. On 28th of Aghon 1366 B. S. the defendants executed an agreement (Ext. 1) for the sale of the suit land in favour of the plaintiff. The plaintiff raid an amount of Rs. 1,401/- as baina. The plaintiff further alleges that after the said agreement he advanced Rs. 300/- on 4th of March and Rs. 270/- on the 15th of March following. In total he Paid Rs. 1.971 to the defendants, but the defendants did not execute the sale deed: on the contrary they sold the land to a third party On the plaintiff''s insistence for the sale of the land in his favour the defendants excused themselves and promised to refund the money paid to them by the plaintiff. But they did not refund the money and hence the plaintiff filed the instant suit.

The defendants have filed a written statement and contested the suit, They have admitted the execution of Ext. 1 and receipt of Rs. 1,401/- from the plaintiff, but they allege that the lower portion of the paper containing Ext. 1 has been torn off; that portion contained a stipulation to the effect that if the plaintiff could not nay the entire amount within 3rd of March, 1366 B. S. corresponding to 17th January, 1960 A. D. then he will not be entitled to get the land and his earnest money would be forfeited, and if he (the plaintiff) be ready with money and the defendants did not sell the land then the plaintiff would be entitled to deposit the money in Court and get a sale deed executed through Court. They further allege that relying on the above agreement they entered into an agreement for purchase of land from one Lankeswar Das, who received an advance amount of Rs. 500/- from them. But due to the plain tiff''s failure they could not purchase the land from Lankeswar and had to forfeit the advance amount of Rs. 500/-; further they had to take a loan of Rs. 1,500/- from D. W. 5. Gopal Goswami to purchase some land at Dakshin Baska and that loan had to be repaid by selling the land, which was proposed to be sold to the plaintiff to another person at a low price of Rs. 400/- per bigha. The defendants therefore, claim that the plaintiff is not only not entitled to get the refund of the money but they are entitled to compensatory cost of at least Rs. 1.000/-.

The learned Munsiff after trial decreed the suit for Rs. 1.401/- stipulated in Ext. 1 but dismissed the plaintiff''s claim of Rs. 570/- which he alleged to have paid subsequent to the execution of Ext. 1. On appeal the judgment and decree of the Munsiff were upheld by the learned Assistant District Judge. Both the Courts below have concurrently held that the plaintiff has failed to prove the payments of Rs. 300/- and Rs. 270/- alleged to have been made after the execution of Ext. 1. The defendants now have come on appeal against the judgment and decree of the learned lower appellate Court as stated earlier.

Shri A. M. Mazumdar, learned counsel appearing for the defendant-appellants submits that it was the plaintiff who broke the contract and that in terms of the stipulation contained in Ext. 1 the plaintiff is liable to forfeit his amount of Rs. 1,401/- or at least a part of it. u/s 74 of the Indian Contract Act. G. Section 74 of the Contract Act provides that when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach or if the contract contains any other stipulation by way of penalty the party complaining of the breach is entitled whether or not actual damage or loss is proved to have been caused thereby to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or as the case may be the penalty stipulated for We are therefore to see whether the agreement (Ext. 1) contained any stipulation and the plaintiff violated it. The learned lower appellate Court has found that the portion of the paper containing Ext. 1. contained a stipulation as alleged by the defendants and that stipulation was the forfeiture clause alleged by them. Mr. Mazumdar relying on this finding of the learned lower appellate Court submits that this is a finding of fact and however erroneous it may be it cannot be upset in a second appeal. On the contrary Shri B. K. Goswami learned counsel appearing for the respondents submits that the finding of the learned lower appellate Court in the regard is perverse.

The learned appellate Court below has found that the bainapatra (Ext. 1), in the torn portion of it, contained a stipulation and in his judgment he has quoted the alleged stipulation as follows: "The plaintiff must clear payment of the entire amount of consideration by the 3rd March of 1366 B. S. and in default of that the baina amount of Rs. 1,401/- would stand forfeited to the defendants. And if upon tender of the entire consideration amount within the stipulated time the defendants did not execute the promised sale deed, the plaintiff would be entitled to get the deed from the Court on his deposit of the amount there". Learned counsel for the appellants could not satisfy me where from the learned lower appellate Court made the above quotation. I have perused the evidence of D. W. 6. Surendra Nath Talukdar who is defendant No. 1 and who himself wrote Ext. 1. and of Dinaram Talukdar and Pabitra Pathak, D. Ws. 3 and 4 respectively, who are attesting witnesses of Ext. 1. The relevant evidence of D. W. 6 is "One portion of the paper on which the agreement was written is found to be torn off". He has not given the terms or nature of the alleged stipulation although he himself executed Ext. 1 in his own hand. The material evidence of D. W. 3 is. ''''There was another signature below another portion of the writing". But he does not depose to any stipulation or forfeiture clause. The material evidence of D. W. 4 in this regard is: "The bottom of the paper contained the stipulated date". But it does not appear from his evidence what stipulated date he means. He does not depose to any stipulation or forfeiture clause. It is, therefore, clear that the finding of the lower appellate Court that there was a forfeiture clause on the lower part of the oarer Ext. 1 is not warranted by any evidence on record. The finding is Diverse. It must. therefore, be held that the defendants have failed to prove that Ext. 1 contained any forfeiture clause.

Now let us see whether the plaintiff broke the agreement, D. W. 6 in his evidence has stated that he received Rs. 1.401/- at the time of the execution of Ext. 1 and "The balance was to be paid on the 3rd March 1366 B. S. The money was not paid according to stipulation and I rescinded the contract''''. Section 55 of the Contract Act provides that when a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not performed becomes voidable at the option of the promisee if the intention of the parties was that time should be of the essence or the contract. If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. If in case of a contract voidable on account on the promisor''s failure to perform his promise at the time agreed the promisee accepts performance of such promise at any time other than that agreed the promisee cannot claim compensation for any loss occasioned by the non-performance at the promise at the time agreed, unless at the time of such acceptance, he gives notice to the promisor of his intention to do so.

The defendants in the instant easel have not proved that time was of the essence of the agreement as per Ext. 1. The learned lower appellate Court has come to the categorical finding that the plea of having incurred losses for the alleged nonperformance of the agreement, Ext. 1. by the plaintiff. is false. In other words it has held that the defendants have sustained no loss or damage due to the alleged non-performance of the agreement the plaintiff. In the result. therefore,! it must be held that the defendants hive, failed to prove that Ext. 1 contained any stipulation by way of penalty or that it was broken by the plaintiff. In my opinion therefore. Section 74 of the Constance of Act does not apply to the facts and circumstances of the present case. Shri Mazumdar has cited AIR 1926 PC 1; Fateh Chand Vs. Balkishan Das, and Maula Bux Vs. Union of India (UOI), . The decisions deal with Section 74 and are therefore of no assistance to the appellants.

We are now to find whether the plaintiff is entitled to the amounts on Rs. 1,401/- paid to the defendants on the date of execution of Ext. 1. Relent on two decisions reported in AIR 1953 Mvs 10 and Sardarilal and Others Vs. Shrimati Shakuntla Devi, learned counsel for the respondents, submits the amount of Rs. 1,401/- is an earnest money it could be forfeited, but if it was a part of the consideration, it could not be forfeited. Their Lordships of the Mysore High Court, agreeing with the decision of the Calcutta High Court reported in Naresh Chandra Guha Vs. Ram Chandra Samanta and Others, have held:

that between ''earnest money'' and ''part payment of price'' there is a fundamental distinction or difference in this respect and the rule of forfeiture has no application to money received as such part payment.

Their Lordships of the Punjab High Court in Sardarilal and Others Vs. Shrimati Shakuntla Devi, have held:

Law does not permit the defendants to forfeit payments made by way of an advance. Part payment of the purchase price cannot be forfeited for the reason that it is not a guarantee for the performance of the contract and therefore what is forfeitable is what has been given by way of earnest.

I am in respectful agreement with the above view. In the case of Cough v. L. & N. W. R. (quoted at page 458 in the 9th Edition of the Indian Contract and Specific Relief Acts, of Pollock and Mulla) it has been held:

No man can at once treat the contract as avoided by him so as to resume the property which he parted with under it, and at the same time keep the money or other advantages which he has obtained under it.

The law, therefore, is that an amount paid under an agreement to sell immovable property is forfeitable if it is an earnest money, and refundable if it is a part of the price of the property. Even when the amount is forfeitable the entire amount paid as earnest may not be forfeited; what amount is liable to be forfeited is to be adjudged by the Court in the facts and circumstances of a particular case.

But it is often difficult to ascertain from the terms of an agreement whether a sum paid under it is an earnest money or a part of the purchase price nevertheless it can be determined from the intention of the parties inferred from, or proved by, evidence.

In the instant case the evidence on record clearly shows that the amount of Rs. 1,401.00 is a part of the purchase money; for D. W. 6. (defendant No. 1 Surendra) in his deposition, says.

I received Rs. 1,401.00 and executed Ext. 1 agreement That balance was to be paid on 3rd March. 1366 B. S.

D. W. 3. Dinaram. in his deposition says. Rs. 1.401.00 was paid in advance for 8 big has of land. The balance was to be paid later on 3rd March.

D. W. 4, Pabitra Pathak, deposes that Rs. 1.401.00 were paid on the date of the agreement. Ext. 1.and that the balance was to be paid on 3rd March following.

It must therefore be held that the amount of Rs. 1.401.00 was a part of the purchase money and as such liable to be refunded to the purchaser, namely the plaintiff.

In the instant ease it was the defendants who rescinded the contract for D. W. 6 has said in his evidence. "The balance was to be paid on the 3rd Mags. 1336 B. S. The money was not paid according to stipulation and I rescinded the contract". So equity demands that if a rescission is to be granted, both parties must be restored to status quo ante. In other words as the seller has retained his land (or sold it to a third party at no loss) the purchaser must get back the money paid by him.

Section 64 of the Contract Act, which, in my opinion, has been based on the above principle, provides that when a person at whose option a contract is voidable rescinds it the other Party there to need not perform any promise therein contained in which he is a promisor. The party rescinding a voidable contract shall if. he has received any benefit there under from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received. In my opinion the amount of Rs. 1,401/- paid by him to the defendants was a benefit within the meaning of Section 64 and as in this case, as held earlier, as the defendants have failed to prove any loss or damage sustained by them, they are not entitled to any compensation and on the contrary the plaintiff will be entitled to the refund of the entire amount of Rs. 1,401,00 paid by him. Although the judgment of the learned Court below was erroneous in part, the decree is a valid one.

In the result this appeal fails and is dismissed. In the circumstances I leave the parties to bear their own costs.