Madras High Court
Rama Rao And Another vs Bashu Khan Saheb And Two Others on 24 November, 1997
Equivalent citations: 1998(2)CTC363, (1998)IIIMLJ605
ORDER
1. The plaintiffs who lost in both the courts below are the appellants herein. The suit O.S. No.1175 of 1978 was filed in the District Munsifs' Court, Villupuram, for passing a preliminary decree and final decree directing the defendants to pay the plaintiffs, personally and also out of the charged properties set out in the plaint, a sum of Rs.4,142.50, stating as under:-
The respondents herein executed a sate deed in favour of the second plaintiff/second appellant under Exhibit A-1 dated 21.6.1978 for a consideration of Rs.21,000 out of which Rs.3,000 was paid by the second appellant on the date of the sale deed. The respondents requested the appellants to postpone the registration of the sale deed till after the marriage of their daughter was finalised. The second appellant therefore did not get the sale deed registered immediately. The registration was being postponed on the pretext that the marriage of the respondents daughter had not been finalised. The appellants took the respondents' word and abstained from presenting the document for registration expecting the respondents to give their final consent for registration of sale deed. In fact, on 17.7.1978 the first appellant advanced a loan of Rs.1,000 to the first respondent on a promissory note Ex.A-2 and it was agreed that the said amount would be adjusted out of the sale consideration treating the same as part of sale price. Thus the appellants were always ready and willing to perform their part of the contract. On 21.10.1978, the appellants met the respondents and requested them to attend the sub-registrar's office for registration of the sale deed. The respondents pretended to be pre-occupied and promised to attend the sub-registrar's office on the afternoon on that day. However when the appellants went to the respondents' house again on the afternoon, they had left their house and could not be found. There was also not enough time for presenting the document for compulsory registration. Thus, by their own default and fraudulent conduct, the respondents had prevented the appellants from getting the sale deed registered within the prescribed time. It was entirely due to the negligence and laches on the part of the respondents and their fraudulent conduct that the document could not be registered in time. The respondents were, therefore, liable to pay Rs.1,000 to the first appellant and also to pay the first payment of Rs.3,000 with interest thereon at the rate of 12% p.a. from 21.6.1978 by way of damages for breach of contract. The appellants sent a reply under Exhibit A4 on 12.11.1978, containing false and fabricated allegations. It was not true to say that inrespect of the promissory note, only a sum of Rs.500 was paid by the appellants and that they promised to pay the balance of Rs.500 later. It was further false to say that the first respondent met the plaintiffs a number of times and requested them to come and attend the registration. It was equally false to state that the first appellant had incurred a loss in the business and therefore the appellants could not have the sale deed registered. The suit was therefore filed for recovery of the moneys due to the plaintiffs.
2. The third respondent being a subsequent purchaser had been made a party to the proceedings.
3. The first respondent contested the suit inter alia contending as follows:- The marriage of the daughter of the respondents 1 and 2 was fixed to 20.8.1978 and they required money for the marriage expenses from the appellants. It was not true to say that respondents 1 and 2 requested the appellants to postpone the registration on account of the marriage, till the marriage of their daughter was finalised. The appellants had no where-withal to pay the balance in time and as such the registration was postponed. For meeting the marriage expenses of their daughter, respondents 1 and 2 pressed the appellants for payment of the balance and they represented that they had no cash at that time and respondents 1 and 2 wanted the appellants to pay atleast Rs.500 and this amount the first appellant paid and took a promissory note for Rs.1,000. The said amount could not be treated as part of the consideration for the sale deed. The plaintiffs/appellants were never ready to proceed with the transaction and they had committed default and had filed the suit. They never asked the respondents 1 and 2 to attend the Registrar's office. It was only because of the appellants' laches and negligence the sale deed could not be registered. The respondents were not bound to pay either Rs.3,000 or Rs.1,000 or any other amount. The appellants caused incalculable damage to the respondents 1 and 2 when they approached the appellants to execute the sale deed to meet the marriage expenses, the appellants used to postpone and ultimately, respondents 1 and 2 were forced to sell their property for a reduced price on 9.1.1979. For a property agreed to be sold for Rs.21,000 to the second appellant, the respondents 1 and 2 had to sell for Rs.19,000 and in the process they incurred a loss of Rs.2,000. The amount of Rs.3,000 specified in Ex.A-1 sale deed was only paid for due performance of the further obligation on the part of the appellants and in as much as the plaintiffs/appellants did not perform their obligation they were not entitled to the return of any amount. The appellants were also not entitled to have a charge over the suit property. The suit was bad for misjoinder of parties and causes of action. In any event, respondents 1 and 2 were entitled to the benefits of Act 13 of 1980 and now they were not liable to pay the amount.
4. The second respondent adopted the written statement of the first respondent. The subsequent purchaser, viz., the third respondent, contested the suit on the following grounds: After negotiations, he purchased the suit property for Rs.19,000 on 9.1.1979 from respondents 1 and 2. On the date of the sale deed, he paid a sum of Rs.4,000 to respondents 1 and 2 and out of the balance, he discharged the Co-operative Urban Bank loan of Rs.5,000 due from respondents 1 and 2 and the balance of Rs.10,000 was agreed to be paid at the time of registration. He had no knowledge of the alleged transaction between the appellants and respondents 1 and 2. After receiving the balance of Rs.10,000, respondents 1 and 2 duly registered the sale deed in his favour. He also discharged the loan due to the Bank. After sale, he took possession and he was in enjoyment of the suit property. He wa a bona fide purchaser for value without notice. The appellants had no right to a charge over the property. The claim under the promissory note Exhibit A-2 would not be clubbed with the other claim. The prayer for personal decree against him was also untenable. There was no privity of contract or privity of interest between him and the appellants and the suit therefore had to be dismissed.
5. The trial Court held that the appellants had committed default and that they were not entitled to any damages. It also held that the suit was bad for misjoinder of parties causes of action and hence the suit as framed was not maintainable. It further held that the suit against the third respondent was also not maintainable as there was no privity of contract or interest between the appellants and the third respondent and that in any event the third respondent was not personally liable and that the appellants were not also entitled to a charge over the property. So holding, the learned District Munsif, Villupuram, by this judgment and decree dated 28.3.1991, dismissed the suit with costs.
6. On appeal in A.S. No.15 of 1983 by the appellants herein, the learned Subordinate Judge, Villupuram, by his judgment and decree dated 24.1.1984, dismissed the appeal with costs. Aggrieved, the present Second Appeal has been filed.
7. At the time of admission, the following substantial question of law was framed for consideration in this Second Appea1.
"Whether the courts below have not erred in law in not applying the principles of law, laid down in Muralidhar Chatterjee v. International Film Co., Let., A.I.R. 1943 P.C. 34 and Natesa Iyer v. Appavu Padayachi, A.I.R. 1915 Mad. 896, wherein the right of vendee to get refund of sale consideration has been upheld on facts and circumstances similar to the present case?"
It should be immediately mentioned that in the decision reported in Moula Bux v. Union of India, it has been held that the view expressed in Natesa Iyer v. Appavu Padayachi, A.I.R. 1915 Mad. 896 : I.L.R. 38 Mad. 178 (FB), was no longer good law in view of the judgment of the Supreme Court in Fatech Chand v. Balkishan Dass, .
8. Mr.V. Raghavachari, learned counsel for the appellants submitted that this is a case where because of the default committed by respondents 1 and 2 the appellants could not get the document registered in time and in the process, lost the property and therefore, the appellants would be entitled to be repaid the amount of Rs.3,000 as also Rs.1,000 covered by the promissory note -subsequently executed by the first respondent. Even otherwise, the learned counsel contended that if at all the respondents 1 and 2 would be entitled to only a reasonable amount as and:by way of damages. He also relied on several decisions in Ponnammal v. Pichai Thevan and others, 52 M.L.J. 33, Makkala Narsimlu v. Gunnala Radhunandan, ; Ram Bahadur Thakur and Co. v. Shreeram Durgaprasad, ; Maula Bux v. Union of India, ; Shree Hanuman Cotton Mills and another v. Tata Air Craft Ltd., ; Pulavarti Sitaramamurty and another v. Bangaru Sobhanadri and another, 1950 (2) M.L.J. 505; G. Gopal Chettiar v. N. Giriappa Gowder, ; Gurdial Singh v. Pearey Lal Malhan, ; Surendranath Talukdar v. Lohit Chandra Talukdar, A.I.R. 1975 Gau. 58; Sudhakar and Co. by Propr. M. Sivagnanambal v. The City Municipal Corporation, 89 L.W 559; Muralidhar Chatterjee v. International Film Co., Ltd., A.I.R. 1943 P.C 34.
9. Before looking into those decisions, it would be necessary to find out whether the appellants were guilty of breach and default or the respondents 1 and 2. The Courts below concurrently found that only the appellants were at fault that they did not have adequate funds to complete the transaction and that they could not put the blame on respondents 1 and 2 for not getting the sale deed registered. Admittedly, the liability of Urban Bank loan had to be discharged by the appellants as part of the sale consideration. According to the first appellant, who was examined as P.W.1, he had.at the time the sale deed was executed about Rs.25,000 ready cash, but still he did not choose to discharge the bank loan, and no explanation had been offered by the appellants for not discharging the said loan. Exhibit A-1 sale deed is dated 21.6.1978. The appellants had not chosen to issue any notice to respondents 1 and 2 calling upon them to complete the registration after receiving the balance from the appellants. Only after the time ran out, under the original of Exhibit A-3 dated 31.10.1978, they caused a notice to be issued finding fault with respondents 1 and 2 that they had failed to register the document. Even in Exhibit A-3, the appellants did not call upon the respondents 1 and 2 to complete the registration. They had only asked for payment of Rs.3,000 being the advance paid under Exhibit A-l and Rs.1,000 by way of damages with interest on both the amounts. Under Exhibit A3 they had asked for payment of the money due under the promissory note Ex.A2 also. The total demand made under Exhibit A3 was Rs.5,000. The respondents 1 and 2 replied under Exhibit A4 on 2.11.1978 clearly stating that only the appellants had committed default and that there was no default and negligence on their part. They had also expressed their willingness in Exhibit A-4 to complete the sale after receiving the balance of consideration. Even after that, the appellants did not choose to get the document registered after paying the balance. This would go a long way in discrediting the bona fides of the appellants. If really they had the money ready either at the time of Exhibit A-1 or at the time of Exhibit A3 they could have called upon the respondents 1 and 2 to complete the transaction by offering to pay the balance amount. In the course of the arguments before the lower appellate court and also in the grounds of appeal, it was mentioned that the appellants did not take steps for compulsory registration as they were not aware of the law. It is elementary that ignorance of law is no excuse. To quote John Selden "Ignorance of the law excuses no man; not that all men know the law. It is an excuse every man will plead and no man could tell how to confute him." It was therefore not open to the appellants to put forward any such plea and rightly did the lower appellate court discountenance such a plea. The appellants produced a series of receipts in Exhibit A-5 before the trial court and on the basis of those receipts it was contended that the appellants had Rs.30,000 available after selling away the produce in their native place in Maharashtra. The appellants did not choose to satisfy the courts below as to what Exhibit A-5 series said, as the language in which they were written was Marathi. It was admitted by P.W.1 that the receipts related to the period 1965-77 and rightly did the lower appellate court and the trial court find that those receipts did not in any way prove that the appellants had enough money at the time the sale deed was executed. The courts below, therefore found that at the relevant period the appellants did not have the money for completing the transaction and therefore, they were at fault.
10. Based on the promise made by the appellants to complete the transaction, the respondents 1 and 2 fixed their daughter's marriage and since the appellants did not pay the money, the marriage had to be postponed indefinitely and ultimately when respondents 1 and 2 found that the appellants did not have adequate funds to complete the transaction, they were forced to sell the property to a third party for a reduced price and in the process lost Rs.2,000. This aspect of the matter has been thoroughly gone into by the courts below and they have accepted the case of the respondents 1 and 2 that they had to sell the property for a reduced price of Rs.19,000. Thus, on the question of breach, the Courts below concurrently found, on an appreciation of the materials on record and the facts and circumstances of the case, that only the appellants had committed default. In my view, no exception can be taken to this factual findings by the courts below.
11. So far as the amount due under the promissory note Exhibit A-2 is concerned, the courts below found on the basis of the averments in the plaint as well as in the notice that the claim based on the breach of Exhibit A-1 sale deed and the money due under Exhibit A-2 promissory note were entirely independent of each other and that one had nothing to do with the other. The courts below also found that the appellants had not established that the parties had agreed that the amount alleged to be due under Exhibit A-2 promissory note was to be adjusted towards the sale price. It is also, in my view, a question of fact and the two courts having concurrently found in favour of respondents 1 and 2, no interference is called for. The courts below also found that there had been a misjoinder of causes of action as well as parties to the suit. Indeed so far as the sale deed is concerned, the first plaintiff had nothing to do with that. So far as the promissory note Exhibits A2 is concerned, the second plaintiff and the second defendant had nothing to do with and insofar as the third respondent is concerned, the courts below found that he was a bona fide purchaser for value without notice and he had nothing to do with any of the transactions and that it was a clear case of misjoinder of parties and causes of action.
12. The courts below also found that respondents 1 and 2 were entitled to adjust the balance amount of Rs.1,000 towards damages due to them and that the appellants were not entitled to claim the refund of Rs.3,000 with interest as claimed in the suit. In these circumstances, it has necessarily to be held that the appellants have not made out any case for interfering with the decision of the courts below. In the view I have taken, it may not be necessary to refer to the various decisions cited by the learned counsel for the appellants. I have already referred to the fact that the view expressed in Natesa Iyer v. Appavu Padayachi, A.I.R. 1915 Mad. 896 : I.L.R. 38 Mad. 178 (FB) is no longer good law in view of the decision of the Supreme Court in Fateh Chand v. Balkishan Dass, .
13. It has been held in Fateh Chand's case, referred to above as follows:-
"Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty. The measure of damages in the case of breach of stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for."
In Maula Bux's case, already referred to, the Supreme Court held as follows:-
"Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon Courts by Section 74. In all cases, therefore, where there is a stipulation in the nature of penalty for forefeiture of an amount deposited pursuant to the terms of contract which expressly provides for forefeiture, the Court has jurisdiction to award such sum only as it considers reasonable, but not exceeding the amount specified in the contract as liable to forfeiture."
In the decision in Shree Hanuman Cotton Mill's case, the Supreme Court observed as follows:-
"Benjamin, in his book on 'sale' 8th edition, after referring to clause 17 of the statute of frauds and section 4(1) of the Sale of Goods Act, 1893 providing for giving "Something in earnest to hind the contract, or in part payment", says, at P.219:
"give something in earnest" or "in part payment," are often treated as meaning the same thing, although the language clearly intimates that the earnest is "something to bind the bargain," or "the contract," whereas it is manifest that there can be no part payment till after the bargain has been bound, or closed."
The author further states that there are two distinct alternatives, viz., a buyer may give the seller money or a present as a token or evidence of the bargain quite apart from the price, i.e., earnest, or he may give him part of the agreed price to be set off against the money to be finally paid, i.e., part payment and that if the buyer fails to carry out the contract and it is rescinded, cannot recover the part payment. But this does not affect th seller's right to recover damages for breach of contract unless it was by way of deposit or guarantee in which case it is forfeited. It is further stated that an earnest does not loss its character because the same thing might also avail as a part payment."
The Supreme Court in the above decision, also observed as follows:
"From a review of the decision cited above, the following principles emerge regarding "earnest":
(1) It must be given at the moment at which the contract is concluded. (2) It represents a guarantee that the contract will be fulfilled or, in other words, "earnest" is given to bind the contract. (3) It is part of the purchase price when the transaction is carried out. (4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser. (5) Unless there is anything to the Contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest."
The Supreme Court applying the principal enunciated to the facts of the case dealt with by it held that the plaintiff in that case was entitled to forfeit a sum of Rs.1,000 which was paid as "earnest money".
14. While dealing with that case, the Supreme Court referred to the distinguished Muralidhar Chatterjee v. International Film Co., Ltd., A.I.R. 1943 P.C. 34 and held that restoration of benefit under Section 64 of the Contract Act would arise only when there was no breach on the part of the person seeking such restoration. The situation here is also similar. In my view, the decision of the Supreme Court relied upon by the learned counsel for the appellants does not help the appellants at all.
15. The decisions in Ponnammal's case, 52 M.L.J. 33 cited, held that the plaintiffs in that case were entitled to a refund of the amount paid by them in discharge of the mortgage under Section 64 of the Contract Act, but that Section did not confer a right of equitable charge on the plaintiffs. In Pulavarti Sitaramamurty's case, 1950 (2) M.L.J. 505 relied upon by the learned counsel for the appellants dealing with the question of breach as to when it should be stated to arise and as to when the question for damage would arise, the Court held that breach of contract had of course to be proved before any enquiry could be conducted into the quantum of damages, so that, where it is impossible to say who had committed the breach no question of damages can arise. In my view, this decision has no application to the facts of the case and I would go one step further and say that this case really supported the case of the respondents 1 and 2. It has been found by the courts below that the appellants alone had committed the breach of the agreement and it resulted in loss to respondents 1 and 2. Respondents 1 and 2 had clearly established that the appellants alone had committed breach of contract.
16. The decision in Ram Bahadur Thakur and Co., and another v. R.B. Shreeram Durgaprasad Private Ltd., has no application to the facts of the present case. It was held in that case that the amount paid was by way of deposit and not as earnest money and hence the refund could be granted. The decision in G. Gopala Chettiar v. N. Giriappa Gowder, deals with a case where the vendor and vendee were both at fault and each committed breach of contract in which case the Court held that the vendee was entitled to return of his money. This decision also will not apply to the facts of the present case.
17. It should be mentioned here that the learned counsel for the appellant fairly contended that only if it was found that the breach was on the part of the respondents 1 and 2 the decisions cited by him would have relevance. In Surendranath Talukdar and others v. Lohit Chandra Talukdar, A.I.R. 1975 Gau. 58 the question arose where in a suit for refund of earnest money the defence was the non performance of the terms of the agreement by the plaintiff, but the defendant failed to prove any stipulation by way of penalty and his plea that the time was the essence of the contract was also not proved and further there was no proof of any loss or damage incurred by the defendant. It was therefore, held that section 74 of the Indian Contract Act would not apply and the defendant could not claim any compensation or any forfeiture of earnest money. The facts in the instant case are entirely different and this decision does not apply. The case in Gurdial Singh v. Pearey Lal Malhan, was for cancellation of contract by the vendor himself before the agreed date for performance and the Court rightly held that the vendor would be liable to refund the amount and no question of readiness and willingness to perform the contract on the part of the vendee would arise. Equally, the decision in Makkala Narsimlu v. Gunala Ragunadan Rao, was a case of failure by the vendor and he was directed to repay the advance money as also certain amount by way of damages. That case also has no application to the facts of the present case.
18. The Courts below have concurrently found that respondents 1 and 2 had incurred a loss of Rs.2,000 by selling the property to the third respondent. The courts below also found that regarding the balance of Rs.1,000 the respondents 1 and 2 were entitled to keep it and the appellants could not recover the same. This amount of Rs.1,000 is a fair and reasonable compensation for the damage caused to the respondents 1 and 2 in the transaction.
19. In view of the discussion above, I hold that the appellants have not made out a case for interference in this Second Appeal. The question of law framed is therefore found against the appellants.
20. The second appeal is dismissed. However, there will be no order as to costs.