Patna High Court
Jagdishpur Metal Industries And Ors. vs Vijoy Oil Industries Ltd. on 1 July, 1958
Equivalent citations: AIR1959PAT176, 1958(6)BLJR626, AIR 1959 PATNA 176
JUDGMENT K. Ahmad, J.
1. The only important consideration that is raised in this case is: How far an earnest money or money paid in advance in part satisfaction or the total consideration of a contract of sale of immoveable property is liable in law to be refunded by the vendor to the vendee in case that contract falls through due to default on the part of the vendee?
2. The subject matter of sale in the present case was the sixteen anna interest of the defendants in their business carried at Ghaghidih in the name and style of 'Jagdishpur Metal Industries' including all its immoveable assets and moveables standing thereon. It is not denied that on the 17th July, 1949, the plaintiff, a limited company, Vijoy Oil Industries Limited, which is respondent in this Court, entered into an agreement (Exhibit I) with the defendants whereunder it agreed to purchase the entire aforesaid concern or the defendants for a sum of Rs. 1,00,000/- in cash and Rs. 25,000/- worth of shares in any company.
Further, it is also agreed between the parties that on the same day when the aforesaid agreement was executed, the plaintiff paid a sum of Rs. 5,000/-to the defendants and on the day following, that is, on the 18th of July, 1949, the plaintiff got exclusive possession over the entire concern. Then it is also not denied that thereafter on the 27th of July, 1949, the plaintiff made another part payment of Rs. 3,000/- towards the total consideration. So far therefore there is no controversy on facts, but the claim of the plaintiff is, which is strongly disputed, that apart from these admitted payments it had to incur some other liabilities ad well while it was in possession of the concern. That, according to it, covered a total sum of Rs. 2,000/- which was spread over the four following items:
(i) Rs. 535/5/- as payment made to the workmen;
(ii) Rs. 425/'- as cost of materials supplied to the concern;
(iii) Rs. 500/- as payment made towards pay and costs of the Darwans; and
(iv) Rs. 539/11/- as damages.
Thus, according to the plaintiff, it had been in all put to a total loss of Rs. 10,000/-.
Unfortunately, however, for reasons which I shall state presently, the contract fell through and On the 24th of August, 1949, the plaintiff gave a notice to the defendants, the relevant portion of which is as follows:--
"My clients have been informed that you are removing materials from the factory without the knowledge and consent of my clients; although you sold the factory and the materials to my clients and took advance for the same. On account of your not registering the sale deed and delivering possession of the property my clients are being put to serious loss and inconvenience. My clients have further been informed that you are negotiating with other parties for the sale of the property that you contracted to sell to my clients.
I, therefore, on behalf of my said clients give you notice that if you fail to register the sale deed immediately on receipt of this notice, you are to return the money advanced to you by my clients with all loss and damages caused to my clients for your non-performance of the contract, within three days from the date, as otherwise my instructions are to take legal steps both civil and criminal in the matter and that without any further reference."
Thereafter on the 1st of September, 1949, the present suit was instituted and on the day following i.e. on 2nd September, 1949 it gave up its possession over the concern.
3. Its allegation is that the contract was broken by the defendants and it was they who in spite of repeated demands made by it failed to execute the sale deed as agreed upon between the parties. Therefore, It is claimed that the plaintiff is entitled to the refund of the entire aforesaid amount of Rs. 10,000/- along with interests and costs.
4. In answer thereto the plea of the defendants is that they had done all that they could. For example, they had already applied for and obtained permission from their landlord Dhalbhum Estate for the sale of the factory to the plaintiff and their petition before the Sub-Divisional Officer, Jamshedpur, for the same was also pending. According to them, therefore, the allegations made in the plaint are all untrue.
In fact according to them, the plaintiff itself is responsible for this breach of contract and the reason for it was that the plaintiffs men had already, while the transaction of sale was still incomplete, begun removing iron and steel materials from the premises of the factory which was strongly objected to by the defendants. But in spite of it, it persisted in its design and so a criminal action had to be taken against it for that illegal removal.
The plaintiff, thereupon, in order to give a cover to its guilt instituted the present suit, and went to the length of even obtaining an attachment before judgment, evidently with a view to put pressure on the defendants and to injure their credit and reputation. In other words, according to the defendants, there was no breach of contract on their part and so the plaintiff is not entitled to any refund of the money that it paid in cash to them. And as for the controversial claims that have been advanced by the plaintiff, their defence is that it is all false.
5. The trial court on a consideration of the entire evidence on the record has rejected the claim of the plaintiff so far as it relates to the controversial items amounting to Rs. 2,000/- but has decreed the claim as to the balance of Rs. 8,000 though on the question as to who broke the contract it has given the finding in favour of the defendants That part of the finding is as follows:--
"The whole game seems to be that the plaintiff after execution of the agreement, Ext. I, himself did not want For some reason or other to purchase the property and he has come before this court with false and concocted allegations. Therefore, from the evidence on record I feel satisfied that there were laches on the part of the plaintiff in getting the sale deed executed. I do not find that there was any breach of contract on the part of the defendants for getting the sale, deed executed.' Therefore, the defendants have now come up in appeal.
6. Mr. Mojibur Rahman appearing for the appellants has strenuously argued that on the facts found by the trial court the liability of the defendants as to the refund of the aforesaid sum of Rs. 8,000/- is not sustainable in law. His submission is that the entire amount was paid as earnest money and as the contract went off due to the default on the part of the plaintiff, it is not entitled in law to get back the same. In reply Mr. Hari Lal Agarwala appearing for the plaintiff respondent has not only supported the claim decreed in favour of his client but has also challenged the finding given by it against the plaintiff to the effect that the contract fell through due to default on its part.
7. It is, therefore, necessary that before I go into the question of refund of the money paid as earnest or in advance, I should first dispose of the contention, which is one purely of fact, as to how far Mr. Agarwala is right in contending that the breach of the contract was due to default on the part of the defendants and not on the part of the plaintiff. The finding of the trial court, as already quoted above, is against the plaintiff on this point. Mr. Agarwala has challenged it on a number of grounds. The first is that the non-bona fide of me defendants is evidence from the misstatement of facts made by them in paragraph 9 of their written statement, where they say:
"In reply to the plaintiffs notice dated 24-8-1949, the defendants issued a registered notice through his lawyer on 26-8-1949 asking the plaintiff to supply a copy of the agreement and demanding Rs. 350/- as the value of the materials removed by the plaintiff."
Therefore, according to the defendants, a reply to the notice dated 24-8-1949 had been given by them. But on the record there is no iota of evidence to support this contention. Accordingly, it is urged that this plea, false as it is, was set up in order to justify the breach of contract which had already been committed by the defendants. Secondly, my attention has been drawn to the following facts elicited or stated in the evidence on the side of the defendants themselves. The first is the admission made by D.W. 9 that it took about a month to obtain the necessary permission from the Sub-divisional Officer and the Raja of Dhalbhum for the sale of the property and that it was after a month that the defendants went to Mr. P. C. Ghose for the draft of the documents; that means, the defendants on their own words, failed to complete their transactions within a month as agreed upon between the parties.
The other evidence brought to my notice is as to the story set up by the defendants regarding the removal of articles by the plaintiff from the factory. That consists of Exhibits E and D which are the reports given to the Police. The plaintiffs case about the statements set out in these documents is that they are all concocted and that there is no truth in any of them. There is, however, one fact which is very striking about them and that is that they were all got recorded on the 24th of August, 1949, that means, the day when the notice was sent by the plaintiff to the defendants.
That being so, it cannot be said with certainty that these three documents were completely independent of each other and not inter-connected; rather the probability is more in favour of the conclusion that the notice was just a camouflage to cover their own guilt as alleged against them in the reports (Exhibits E and D). The third evidence is about the property having been declared evacuee property. The relevant document in this connection is Exhibit B. That is an order sheet of the Assistant Custodian of evacuee property from 13-12-1949 to 15-12-1949. According to that the property was released from the list of evacuee properties on 13-12-1949.
This, however, cannot be a proof of the fact that the attachment, referred to in this order, was made at any time before the plaintiff had sent the aforesaid notice to the defendants. Therefore, it cannot be a ground for holding that it was for that reason that the defendants had failed to fulfil their part o£ the agreement about the sale. Fourthly, relying on the evidence of D.W. 4 it has been contended that though he did depose that permission had been sought from the landlord, Raja of Dhalbhum, for the sale of the company, but this fact being a matter in writing, the defendants should have placed the writing itself on the record and in the absence thereof, the oral testimony of D.W. 4 cannot establish that they had applied for the permission from the landlord to sell the factory as undertaken by them. Here again, I think, the argument is fallacious. If the application is missing, it is open to the party concerned to adduce secondary evidence of me same including oral evidence.
8. Then there is the statement made by D. W. 7 which is also relied upon by the plaintiff in support of its case. That reads:
" He replied that he had agreed to the posting of 5 men and not 10 or 12 men more who were loitering there. Noor Mohammad further said that Shankar Lall, Mahabir Prasad was trying to take possession of the factory by force. He also said that he did, not want to sell the factory now as India Government had not given permission to sell the same."
Accordingly it is urged that here there is their own admission to show that the contract fell through because the defendants failed to obtain necessary permission from the Government of India and not due to any fault on the part of the plaintiff.
It is true that this sentence as deposed to by the Assistant Sub-Inspector of Police about the statement made by Noor Mohammad before him is in favour of the plaintiff because at some stage the Government of India had refused to give the necessary permission to the defendants to sell the factory. But it has to be remembered that this statement of Noor Mohammad to the Assistant Sub-Inspector of Police had been made after the plaintiff had already decided not to complete the contract. Therefore, it cannot be any ground for holding that the default, if any, for the breach of contract was not on the part of the plaintiff but or the part of the defendants.
Then, apart from these facts, there are materials which have been elaborately discussed by the trial court and they, I think, as found by the trial court, firmly corroborate that the breach of contract was due to default on the part of the plaintiff. Accordingly, the argument advanced by Mr. Agarwala contrary to it cannot be accepted.
9. Then remains the question as to the refund of money that had been paid in advance by the plaintiff to the defendants in two instalments a part payment of the total consideration--the first a sum of Rs. 5,000/-, which was paid on the 17th July, 1949, when the agreement of sale was executed and the other a sum of Rs. 3,000/-, which was paid on the 27th of July, 1949, thus, in all, a sum of Rs. 8000/-. The case of the plaintiff is that even if it be held that the contract had been broken by reason of any default on its part, it is still entitled to get back this total advance of Rs. 8,000/-which it had paid to the defendants in part satisfaction of the entire consideration.
10. The trial court has accepted its case and has found:
"Therefore in conclusion I hold that there was no breach of contract on the part of the defendants but in spite of that the plaintiff is entitled to a refund of the advance and his advance is not liable to be forfeited."
This finding has been given by the trial court mostly on the authority laid down in Lachmi Narayan v. Damodar Das, 81 Ind Cas 282 which is equivalent to AIR 1925 Nag. 109. Therein it has been held:
"Where there is breach of contract on the part of a purchaser and there is no stipulation as to the forfeiture of the earnest money, the seller must prove special damage under Section 73 of the Contract Act."
Following this decision the trial court has observed:
"The defendants in the concluding sentence of para 10 of the written statement have alleged that they are entitled to the value of the materials removed by the plaintiff amounting to Rs. 3,500/-besides damages in consequence of the breach of the contract on the part of the plaintiff for which they reserve their, right to take appropriate legal action against the plaintiff. Now when the defendants have themselves reserved their right to recover the amount of the materials alleged to have been removed by the plaintiff and also the damages in consequence of the breach of the contract they cannot forfeit the amount of advance of Rs. 8,000/-received by them in this suit."
11. In my opinion, this finding is based on a fallacy. It presupposes that money paid in advance, may it be by way of earnest money or may it be in the nature of part satisfaction of the total consideration, is, as a rule, refundable by the vendor as contemplated under Sections 64 and 65 of the Indian Contract Act unless it is proved and established that he is entitled to certain damages as contemplated under Section 73 of the Contract Act or to liquidated damages as contemplated under Section 74 of the Indian Contract Act or unless there is any specific stipulation between the parties as to the forfeiture of such money paid in advance.
In other words, it assumes that as a rule any sum named in a contract as money paid in advance is penal and, therefore, hit by Section 74 of the Contract Act. I think either on principle or on law such an assumption is not justified. Section 64 deals with the consequences of rescission of voidable contract and lays down that "the party rescinding a voidable contract shall, if he has received any benefit thereunder from another party to such contract, restore such benefit, so far as may be to the person from whom it was received."
This section, therefore, on the very face of it, is not applicable to the present case as the breach of contract here, as found above, was committed not by the defendants but by the plaintiff itself.
Therefore, at least under this section the plaintiff cannot claim any refund of the money which it may have paid in advance by way of part satisfaction of the total consideration. Section 65 deals with the obligation of a person who has received advantage under void agreement or contract that becomes, void. It is true that their Lordships of the Privy Council in Satgur Prasad v. Harnarain Das, AIR 1932 P. C. 89 & Mohan Manucha v. Manzoor Ahmad, AIR 1943 P.C. 29 have held that the words "when a contract becomes void" are wide enough to cover the case of a voidable contract which has been avoided.
But in the case of an agreement, such as the one before us, it cannot be said either that it was ab initio void or that though it was possible of performance at the time it was entered into, it became impossible of performance subsequently or that at its inception it was a voidable contract which was subsequently avoided by any party thereto. On the contrary, the case admitted here is that the agreement was a valid agreement and that it continued to remain valid till the last until the plaintiff had broken it and at no stage it was a voidable agreement which had been subsequently avoided by the defendants.
That being so, Section 65 of the Indian Contract Act also does not come into play here. Further it has to be remembered that in the case of an earnest money the doctrine of forfeiture is not based either on the principle of penalty or on the principle of recompense for the loss incurred by one party to a contract as a result of any breach of it by the other. In my opinion, the doctrine of forfeiture in the case of an earnest money is based on a principle completely independent of the considerations that are laid down in Sections 64, 65, 73 or 74 of the Indian Contract Act.
In fact, an earnest money, belonging as it does to a class of its own, namely, that of deposit, is regulated and controlled by considerations which are peculiar to that class alone. Therefore where the agreement is unequivocal and it is specifically agreed upon thereunder that what has been paid in advance towards a contract is nothing but an earnest money, as understood in law, then it has to be dealt with in the light of the principles which apply to such deposits and not in the light of those that generally apply to restitution, penalty or liquidated damages.
But in most cases difficulty arises due to the fact that though payments are made in advance as a part of the total consideration of the contract of sale, there is no specification made thereunder as to whether the payment so made is an earnest money or is penalty named therein for any breach of contract or is an advance simpliciter paid to suit the convenience of the vendor. In such cases, apart from surrounding circumstances, reliance has to be placed on the main characteristic that as a rule constitutes an earnest money or a deposit. Now in order that a sum paid under a contract may be deposit, it has to fulfil two requirements.
First it must be a part payment and next it must be on the nature of money staked; that means, a deposit then serves not merely as a part payment but there is a further characteristic which it possesses, namely, it is paid as a guarantee that the contract shall be performed (Varadaraja Perumal v. Mundappa Pillai, AIR 1929 Mad. 817, Kumaraswami Aiyar v. Arunachalam, AIR 1927 Mad. 328, Natesa Aiyar v. Appavu Padayachi, ILR 38 Mad. 178; (AIR 1915 Mad. 896) Prague v. Booth, (1909) A.C. 576 and Howe v. Smith, (1884) 27 Ch. D. 89). As to such a deposit, Fry, L.J in (1884) 27 Ch. D. 89 observed:
"It (the deposit) is not merely a part payment but is then also an earnest to bind the bargain."
Thereafter the same view was laid down by Lord Macnaghten in Soper v. Arnold, (1889) 61 LT 702, wherein the learned Judge observed:
"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 and if there is a case in which a deposit is rightly and properly forfeited, it is, I think, when a man enters into a contract to buy real property without taking the trouble to consider whether he can ray for it or not."
And, in 1924 the Judicial Committee referred to the former case with approval in Mayson v. Clouet, 1924 A.C. 980 and then again in Chiranjit Singh v. Har Swamp AIR 1926 P.C. 1 the same view was reiterated in the following words:
"Earnest money is part of the purchase pries when the transaction goes forward; it is forfeited when the transaction falls through, by reason of the fault or failure of the vendee."
Further Fry in his Specific Performance (5th Edition, Para 1478) while dealing with this topic summarises it in the following words:
"The deposit unless paid on special terms is not merely part payment but is an earnest so that if the contract is performed it is brought into account as part payment; on the other hand, if the purchaser makes default, it may be retained by the vendor. The deposit is, therefore, a security for the performance of the purchaser's part of the contract. The authorities have not been uniform on this question, but the weight of authority is in favour of the statement above made."
And, therefore, it has been rightly observed in Abas AH v. Kodhusao, AIR 1929 Nag 30(2) that ex natura rei earnest money, which is not, in essentials, a penalty but is a mere security for the due fulfilment of an agreement, is excluded from the operation of provisions like Sections 63 and 64 of the Indian Contract Act and further that as regards Section 74, earnest money as such cannot be, by any stretch of reasoning, regarded as a sum named in the contract to be paid in case of breach, nor can it equally be properly described as a stipulation by way of penalty.
In other words, Section 74 contemplates a case of recovery of compensation for breach of contract not vet paid and not a case in which the money has been paid by way of earnest: Bhalchandra v Mahadeo, ILR 1947 Nag 60: AIR 1947 Nag 193. So there is a clear distinction between the penalty for breach of contract and forfeiture of a deposit of earnest money. While the latter is a payment actually made, the former is compensation sought for breach of contract Dinanth Damodar v. Mody Ranchhoddas and Co., AIR 1930 Bom 213.
Therefore, there is no justification for the contention that an earnest money paid in advance as a part satisfaction of the entire consideration of a contract of sale is in the nature of a penalty as contemplated under Section 74 of the Indian Contract Act and as such is not open to be forfeited by the vendor even if the contract of sale falls through due to any default on the part of the purchaser or to be retained by the seller unless the seller proves special damage under section 73 of the Contract Act, as laid down in AIR 1925 Nag 109.
In that decision the judgment was essentially influenced by the consideration that "that question must be decided with reference to the provisions of the Indian Contract Act and not the principles of the English Law."
But, in my opinion, if I may say so with all respect to the learned Judge, who decided that case, this premise of the Indian Contract Act being exhaustive on the subject of contract seems to be far from being correct as held in the Full Bench decision of that very Court in AIR 1929 Nag 30(2).
And even if it be accepted as correct, that is possible, of at all, only in a very limited sense, namely, in the sense in which it is so understood in Ballabhdas v. Paikaji, 38 Ind Cas 915: (AIR 1916 Nag 104). There the learned Judges have observed that:
"Although the Indian Contract Act purports to deal only with certain parts of the law relating to contracts, yet where it does treat with a subject in a way at variance with the law of England, it should be regarded as exhaustive and binding on the Courts in India."
Further in support of my this view I may fruitfully quote here the very passage of Findlay L. C. who gave the leading judgment in the case reported in AIR 1929 Nag 30(2). Therein the learned Judicial Commissioner observed:
"I am unable to accept the position that the Contract Act is exhaustive as regards the law of contract. As the very preamble to the said Act, the said piece of legislation only proposes to codify a certain part of the law referring to contracts, and the second part of Section 1 of the Act expressly exempts usages or customs of trade from being affected by the provisions of the Act. That payment of earnest money is a custom or usage of trade in India as well as in England cannot be denied and it normally is paid under the implied agreement with the vendee that if the contract is broken, the vendor is entitled to retain the said amount, whereas, if the contract is fulfilled, the earnest money is credited as part payment of the price."
That being so, the decision reported in AIR 1925 Nag 109 cannot be accepted as a good law. Further the view expressed therein has been uniformly negatived, if not directly at least by implication, by practically all Courts in India; for example, in AIR 1929 Nag 30(2); AIR 1930 Bom 213; Atul Chandra v. Sarat Chandra. AIR 1920 Cal 931, W. J. Younie v. Tulsiram Jankiram, AIR 1942 Cal 382; Katherine Stiffles v. Carr Mackertich Martin, 39 Cal WN 174; AIR 1947 Nag 193 and Abdul Gani and Co. v. Trustees of Port of Bombay, AIR 1952 Bom 310.
12. Judged, therefore, from this point of view, as stated above, it has to be seen how far the two payments in the present case, either the one or the other or both can be said to constitute an earnest money as contemplated in law. I have already said above that so far as the first payment is concerned, namely Rs. 5,000/-, that was paid on the very day when the agreement was arrived at, namely, on 17th July, 1949, and (here is a specific reference made of that payment in paragraph 4 of that agreement, which reads:
"4. The defects pointed out by you relating to (a) option to renew after 99 years and possession against value assessed at the time will be cured by us. (b) Advance against Tatas perfect goods paid by our financier will be paid by you on return. Against the above promised we have received as advanced Rs. 5000/- (Rupees five thousand only) the receipt of which we hereby acknowledge. We also agree that you will put your staff to look after the property which is yours and which we are selling."
Therefore, so far as this amount is concerned, there is, apart from any other consideration, a specific stipulation also made in the agreement that it was paid in advance as the guarantee for the fulfilment of the promise made thereunder. Then it is a well-established rule of law that when money is paid at the time of the agreement, whether it is called earnest money, or deposit or deposit money or by any other name, it is presumed to be earnest or security and liable to forfeiture on breach, Naresh Chandra Guha v. Ramchandra Samanta, 55 Cal WN 765: (AIR 1952 Cal 93), and on the facts of this case, there is no material which may suggest that in regard to the aforesaid item such a presumption has been rebutted.
On the contrary, Mr. Hari Lal Agarwala appearing for the plaintiff-respondent has in a way, though I must say not without hesitation, conceded that the claim of the defendants as to this amount is justified. For these reasons I have no doubt in my mind that the payment of the first instalment was in the present case not made with any other object in view but as earnest money. And if tills is correct then this fact taken along with the finding already given above that the contract was broken by reason of default on the part of the plaintiff logically leads to the conclusion that in law it is liable to be forfeited, and that is so is regardless of the consideration as to whether the aforesaid amount has or has not been specifically specified in the document as earnest money as also regardless of the consideration as to whether there is or is not any specific stipulation made therein that in case of default on the part of the plaintiff it would stand forfeited, unless there is any agreement to the contrary between the parties or if the agreement itself prevents such a forfeiture. Therefore, I think, the learned Subordinate Judge is not right in laying too much stress on the consideration that the aforesaid amount is not described in the document as earnest money or that there is no specific provision made as to the forfeiture of the same in the agreement.
The rule seems to be that forfeiture in such a case follows as a matter of course unless it is negatived by the agreement and does not depend in the least on the consideration whether the agreement does or does not provide for it. In other words, once it is found that what was paid in the form of Rs. 5,000/- was nothing but an earnest money or a deposit made as a guarantee for the fulfilment of the contract and that without any reservation and also that ultimately the contract fell through due to default on the part of the purchaser then there is no escape from the conclusion, as laid down in AIR 1926 PC 1, that the advance so made was forfeited in law and it was no more thereafter left liable to be refunded. Similarly not less untenable is the other view taken by the trial Court in support of its judgment that as the amount is not specifically stated as earnest money in the agreement it cannot be treated as such.
In my opinion, the mere absence of such a description in the agreement is neither decisive nor crucial. On the contrary, it is immaterial whether the deposit so made is or is not described in the agreement which it bears to the sum contracted for is rather large. In other words, what in fact constitutes an earnest money is the inherent character of the deposit made and not the name given to it though it is true that while the matter is still under I investigation these factors may be usefully relied upon as proper guide. In the present case, however, as already found above, there is no doubt that Rs. 5,000/- was paid as earnest money.
Then comes the second item namely, that of Rs. 3,000/-, which was paid on 27-7-1949. As to this amount. I think, it has to be conceded that it does not stand on the same footing as the one which was paid on the first occasion. On the contrary I find that in the case of this item there are certain considerations which not only distinguish it from the former but also takes it out completely from that class of payments which are known in law as earnest money.
The one broad feature is that it was paid long after the agreement had been finalised and executed & the second is that there is no material or circumstances on the record to suggest that this amount also was paid as a part of the earnest money or as a guarantee for the fulfilment of the agreement, rather it- appears to me, which is more likely on the facts of the case, that it was paid in response to the needs of the vendor who was then hard-pressed for money or it may be which is also not quite improbable, that the vendee thought it advisable that he should go on advancing as much money towards the total price as he may find it convenient to do, so that at the final stage the contract might not fail for the paucity of fund.
That being so, the probabilities are more in favour of the conclusion that this latter amount of Rs. 3,000/- was not paid as a guarantee for the fulfilment of the contract but merely as a part payment of the price which had been agreed upon to be paid for the property. That being so, the position of that amount is that of a sum received by the defendants for the use of the plaintiff and had the contract been completed it would have been rightly appropriated by them towards the purchase price.
But the contract having failed there is no justification left either in law or in fact for the defendants to retain that money even thereafter.
Therefore, I think, the plaintiff's claim for the refund of Rs. 3,000/- is fully justified in law and to that extent the decisions in 38 Ind Cas 915: (AIR 1916 Nag 104); AIR 1929 Nag 30 (2); Krishna Chandra v. Mamud Bepari, AIR 1936 Cal 51; Madan Mohan v. Jawala Prasad, AIR 1950 EP 278 and Mohd. Zafar v. Hamida Khatoon, AIR 1945 All 70, give full support to the claim of the plaintiff.
13. For the reasons given above, the judgment and decree of the trial court are modified and the defendants' appeal is allowed in part to the extent of Rs. 5,000/-. In other words, the plaintiff's suit is decreed to the extent of Rs. 3,000/- only with proportionate costs throughout while the rest of the claim advanced by the plaintiff with regard to Rs. 5,000/- is dismissed and that too with proportionate costs throughout.
14. If the sum of Rs. 3,000/- is not paid within a period of four months from today, the plaintiff will be entitled to interest at the rate of 4 per cent., per annum from the date of the suit to the date of payment.