| CITATION | AIR 1952 Cal 93, 55 CWN 765 |
| DATE OF JUDGEMENT | 10 JULY 1951 |
| COURT | CALCUTTA HIGH COURT |
| APPELLANT | NARESH CHANDRA GUHA |
| RESPONDENT | RAM CHANDRA SAMANTA AND ORS |
| BENCH | P MOOKERJEE |
INTRODUCTION
The plaintiff was against the dismissal of his lawsuit, which he filed in part to collect an amount of money that he had paid as earnest money for the sale of land. A demand for interest as compensation for damages was included in the lawsuit. The plaintiff has appealed the learned “Subordinate Judge’s” dismissal of the case, which was made in accordance with the Provincial Small Cause Courts Act.
FACTS
On March 24, 1948, the defendant-opposite parties signed a “baina,” or agreement for sale, in the plaintiff’s favor regarding several lands, and they paid him (the plaintiff) Rs. 501/- in earnest money. Later, the parties had different views on the nature and breadth of the subject matter of the stated “banana,” which led to the final collapse of the transaction. Following this, the plaintiff sought the earnest money to be returned. When the defendants refused, the plaintiff filed the current lawsuit.
ISSUES
What happens when the intended buyer, also known as the purchaser hereafter, breaches the terms of the purchase agreement?
What are the rights of the various parties with regard to the earnest money are discussed?
APPELLANT’S ARGUMENT
The plaintiff’s main claims were that the transaction had failed due to the defendants’ default, or, in other words, that the defendants had broken their contract, and that, as a result, the plaintiff was entitled to a refund of the earnest money as well as interest as compensation for the loss of the transaction.
The plaintiff argued that according to the ‘baina’ Ex. 1, he was granted khas, or actual possession of the disputed lands, as well as the superior or mokarari interest and any subordinate interest that may have existed in the disputed lands.
RESPONDENT’S ARGUMENT
The defence included, among other things, the claim that the defendants had lost the earnest money while acting within the bounds of their legal authority and that, as a result, the plaintiff was not entitled to its recovery or to any relief from the lawsuit. Both sides agreed that the contract had expired. However, both parties charged the other with breach of contract.
The plaintiff was only entitled to the superior or mokarari interest in the disputed lands, as opposed to the subordinate interest, if any, and was only entitled to possession of the superior interest, not actual or khas possession of the said lands, according to the defendant’s interpretation of the “baina,”.
ANALYSIS
Courts have occasionally strayed into fanciful territory in search of this goal, but the rule itself has yet to be substantially contested. Additionally, it is evident from the authorities that, in applying this rule, Judges have consistently accepted the position that, absent a contrary intention, express or implied, in the agreement for sale, money paid by the buyer to the seller at the time of such agreement, whether it is referred to as earnest money or deposit money or by any other designation, is presumed to be earnest or security for the performance of the contract of sale, liable to be forfeited if the contract, giving him a right to forfeit the money; nonetheless, the assumption is rebuttable and the right may be challenged by evidence of an express or inferred opposing purpose in the relevant contract.
There is no forfeiture of earnest money provision in the “baina,”it must be said. Furthermore, there is no stated or inferred purpose to the contrary, whether it takes the form of a clause requiring the refund or return of the earnest money or another form. The earnest money totals Rs. 501/-, or just around 8% of the stated price, but the agreed-upon price is Rs. 6,000/-. Therefore, it cannot be deemed unreasonable in any word, and even when using the “unreasonability of the amount in question” test, no inference of any opposite purpose, as mentioned above, can be drawn.
The English cases “Depree v. Bedborough,” 4 Giff 479 (1863), “Ex parte Barrel,” “In re Parnell,” 10 Ch. A. 5.12 (1875), “Collins V. Stimson,” 11 QBD 142 (1883), “Howe v. Smith,” 27 Ch. D. 89 (1884), “Soper v. Arnold,” 14 AC 429 (1889), and “Levy v. Stogdon,” 1 Ch. 5, Mayson v. Clouet (1924) A C 980, ‘Sprague v. Booth’ (1909) A C 576, ‘Hall v. Burnell’ (1911) 2 Ch 551, and by the Indian judgements recounted in the instances of ‘Bishan Chand V Radha Kishan’. The cases are considered precedents for the given case and taken as guidelines for deriving judgment.
JUDGMENT
The court has determined that the earnest money, as described above, is liable to be forfeited by the vendor when the contract fails due to the buyer’s default, in the absence of an express or implied agreement to the contrary. This liability exists despite Sections 64, 65, and 74 of the Indian Contract Act and is unaffected by any of the aforementioned provisions. However, in the event that the vendor sues the buyer for damages for contract violation, the lost earnest money must be taken into consideration, and the buyer will be given credit for it in such a case.
According to the aforementioned interpretation of the situation, the second argument put up by the petitioner similarly falls short and is thus rejected. As a consequence, this Rule is discharged, but in light of the facts, the court orders that each party incur their own costs throughout the entire process.
CONCLUSION
The money is liable to be forfeited by the vendor as the contract has failed to stipulate due to the mistake of the buyer and these conditions were not either expressed or implied in the contract. The petitioner falls short of justifying his arguments thus the lawsuit has been rejected.
