KANHAIYALAL NANDRAM Vs. C.P. SHAH

JUDGEMENT

(1.) THE only question material for consideration in this petition is as regards the competency of claim of the piaintiff for the return of money paid by him in anticipation of the performance of a contract which he later himself broke.

(2.) THE facts were that the Plaintiff had agreed to purchase and the Defendant had agreed to supply to him a three horse power oil engine for Rs.1,460 and had paid Rs.100 to the Defendant in pursuance of it. An order form signed by the Plaintiff is produced on record. This mentions payment of Rs.100 as 'deposit'. The learned Small Cause Judge on examination of evidence found that the Plaintiff was in breach. He construed the deposit as earnest money and held that the Defendant was entitled to forfeit the same. He consequently dismissed the Plaintiff's suit. In this petition it is contended that the amount of Rs.100 paid by the Plaintiff to the Defendant was a mere advance payment which on the falling through of the contract became recoverable.

(3.) LOOKING at the matter as a whole, I think that we should come to the conclusion that the money paid by the Plaintiff to the Defendant, was on the footing of, as he described it, 'earnest money' under the contract which had been arrived at between them. There was a long discussion between us as to the precise meaning of the expressian 'earnest money, and as to whether or not there is any difference in law between payment of earnest money and payment of deposit or part of the purchase price. It is not necessary that I should attempt to go into that question at any length, because once one comes to the conclusion that there was a contract, it seems to me that it does not matter very much whether one calls the payment earnest money or describes it as 'part payment'. It seems clear that in this particular case the payment was really a sum remitted by the Plaintiff to the Defendant in part discharge of that percentage of the whole purchase money which was described as Down Cash or 'Cash Down', that is to say, 25 per cent of the total purchase money of one lac. On the assumption that there was a contract and that the money was paid in pursuance of it, it is clear to my mind on the authorities that if the contract went off or rather if it was not followed by 'completion' owing to the default of the Plaintiff, then the Plaintiff cannot recover. In Howe v. Smith (1884) 27 Ch. D. 89, 500 were paid as deposit and part payment of purchase money. The purchaser failed to complete the contract by the contract date and the vendors sold the property to somebody else. In a suit by the purchaser for specific performance the same was refused. His claim for refund of deposit was also negatived as the same was held to be in the nature of guarantee and as such liable to forfeiture. Fry L. J. held: It (the deposit) is not merely a part payment but is then also an earnest to bind the bargain. This decision was approved by the Privy Council in Mayson v. Clouet 1924 A.C. 980.