MARIMUTHU GOUNDER Vs. RAMASWAMY GOUNDER

JUDGEMENT

(1.) THE unsuccessful second defendant in O.S. No. 112 of 1972 on the file of the Subordinate Judge. Udumalpat. who could not get relief in this Court in Appeal No. 526 of 1973, is the appellant. THE plaintiff entered into a agreement of sale with the defendants under Ex. B-2. A sum of Rs. 10,000/- was paid as advance to the defendants by the plaintiff. Inter alia there were other terms under which the plaintiff should purchase the property from the defendants. On the foot that the defendants committed breach of contract, the plaintiff filed the suit for the recovery of the sum of Rs. 10,000 together with interest from the date of payment. This was resisted by the defendants on the ground that they did not commit breach and that under the terms of the agreement the sum of Rs. 10,000/- was forfeitable. THE defence was:

(2.) MR. Palaniswami strenuously contended that as the amount is in the nature of earnest money, it could be forfeited notwithstanding the absence of proof of damage. Reliance was placed upon a decision of our High Court in Natesa Aiyar v. Appavu Padayachi (ILR 38 Mad 78): (AIR1915 Mad 896) (FB). Apart from the fact that we have our own doubts whether, in the light of the later pronouncements of the Supreme Court, the ratio of the above decision would still be applicable to the facts of this stage that the parties expressly stipulated that what was paid under Ex.B-2 was not earnest money but advance. It is reasonable also to characterise this amount as advance since it bears a very great proportion to the totality of the consideration as well. Generally earnest money forms a small proportion or ratio to the consideration which is agreed to be the consideration to be passed by one to the other under a contract of sale. Having regard to the fact that the amount of Rs. 10,000/- was paid, treated and nomenclatures as advance under Ex.B-2, we are unable to agree with MR. Palaniswami that the amount paid should be treated automatically as earnest money. Again in the absence of pleading that the defendants have suffered damage to the tune of Rs. 10,000/- the plea that the entire amount paid by the plaintiff cannot be demanded and the defendants are not under an obligation to refund it is an extreme contention. We searched in vain for proof of any such sufferance of damage and in fact MR. Palaniswami was called upon to refer to such a plea or a statement in the witness box by the witnesses examined on the side of the defendants. He was unable to refer to any specific statement by the defendants or by the witness examined on their side. It was in those circumstances that Sethuraman. J., said that without reference to any actual damage, the amount referred to in the agreement cannot be forfeited, because it would be in the nature of penalty. Proof of actual damage is a sine qua non to seek damage. The Supreme Court noticed the inequity in a case where an automatic forfeiture is sought for by a defendant and their conclusion is based upon the principle that nobody can unjustly enrich himself. It was open to the defendants to have pleaded that way and not only pleaded in that way which they have to in law, but also substantiated the same by acceptable evidence. We have referred to the written Statement in which the defendant's case was that the only remedy of the plaintiff was to file a suit for specific performance and they are not entitled to refund the sum of Rs. 10,000/-. It is in the same perspective that the oral evidence also was let in and there was no express or implied reference to any sufferance of damage by the defendants. It was in these circumstances that Sethuraman, J., rightly held that it was necessary for the party not in breach to prove the actual amount of damages suffered so that to that extent the amount already paid may be allowed to be retained. In the absence of any proof or, as we said, even on allegation in the pleading of such damage, it appears that the learned Judge is right in his conclusion. The appeal is dismissed. Appeal dismissed.