Madras High Court
Chinnasamy Pillai And Five Ors. vs K. Marappan And Anr. on 1 November, 1995
Equivalent citations: 1996(1)CTC318
ORDER Abdul Hadi, J.
1. These two connected second appeals arise out of O.S. No. 602 and O.S. No. 603 of 1980 respectively. In both the suits, respective plaintiffs are different and one is mother of the other. Defendants are same in both the suit and it is those defendants who have preferred these two second appeals. Each of the said suits is for recovery of an identical sum of Rs. 3,108-50. In each of the two cases, it is claimed that the appellants have received the abovesaid sums as advance amount under the relevant suit sale agreement under which the said defendants are vendors, and the respective plaintiffs are purchasers.
2. Though both the suits were dismissed by the trial Court, in the first appeals filed by the respective plaintiffs/respondents herein namely, A.S. No. 13 and 14 of 1982 respectively, respective suits have been decreed as prayed for. Aggrieved by the said decrees, the abovesaid defendants have preferred these two second appeals. The only submission of the learned counsel for the defendants/appellants is mat the said amount in each of the two cases was given as earnest money and so it gets forfeited cannot be recovered back by the plaintiff in each case. On the other hand, the argument of the learned counsel for the respondent in each case is that it is only advance money and not earnest money, and that hence the decree granted by the lower appellate court is correct.
3. I have considered the rival submissions. As held in H.C. Mills v. Tata Air Craft, AIR. 1970 S.C. 1986, earnest money is money given as guarantee for the fulfilment of the contract. But I must point out that there is no such plea at all in the written statement of the defendants in either of the suits. Neither the term Earnest Money is used there, nor there is a plea, that the money in question was given as guarantee for the fulfilment of the contract. On the other hand, in paragraph 14 of the written statement what is mentioned is as follows:-
So in the written statement itself, the money in question is described as an advance. It is settled law if the money given is only an advance, it has to be given back to the vendor and cannot be forfeited. (Vide Sardarilal v. Shakuntla Devi, AIR. 1961 Punjab 378 (D.B.).
4. Even assuming it is earnest money, the law is that unless there is proof that the defendants have suffered by the breach of contract committed by the plaintiff, it cannot be forefeited, but has to be given back to the vendor. It has also been so held in Marimuthu Gounder v. Ramaswamy Gounder 1971 (I) M.L.J. 343 and Natesa v. Sulochana 1981 (2) M.L.J. 215 Division Bench. In the later decision, the relevant observation is as follows:-
"Whether the amount paid at the time of the contract for sale is treated as advance or deposit or earnest money, Section 74 of the Contract Act, will be attracted notwithstanding the clause for forfeiture of the said amount, the party in breach will be entitled only to a reasonable compensation subject to the maximum amount mentioned in the agreement for sale."
In the former decision, the relevant observation is "Proof of actual damage was a sine quo non to seek damages" In the present case, there is a clear finding by the lower appellate Court regarding this aspect as follows :-
As against this factual finding learned counsel for the appellants could not point out a single ground in the second appeal memorandum of grounds. Therefore, when it is established that the defendants have not suffered any damage because of any breach of contract committed by the plaintiff, they have necessarily to rcfund the abovesaid amount, and that is what the lower appellate court has done. I am unable to see any error at all in the judgment and decree of the lower appellate Court. Accordingly, the second appeal is dismissed with costs.