T RANGANAYAKAMMA Vs. S R SUBUDHI

JUDGEMENT

(1.) THESE five civil revision petitions arise out of an order passed by the Subordinate Judge of Berhampur as Small Cause Court Judge in five S. C. C. suits Nos. 80/51, 81/51, 82/51, 83/51 and 31/52. All the suits were tried analogously and disposed of in one judgment and similarly the five revision petitions were heard analogously and will be dealt with in one judgment.

(2.) THE petitioner in all these revisions is one Srimati T. Ranganayakamma who was the owner of about 8.6 acres of land situated within the limits of Berhampur Municipality. She got the plot divided into several small house sites and after obtaining the approval of the Municipality advertised early in October, 1948 for the sale of those house sites by public auction to the highest bidder. The auction was held on the 10th and 11 -10 -1948 at the spot and 20 to 22 house sites were sold to the highest bidders. The opposite parties in these revisions had bid for some of the house sites and the bid was accepted by the auctioneer. The following table will give a clear idea of the amount of the bid, the amount of the earnest money deposited by the highest bidder and other particulars connected with the litigation. No. of C. R.No. of S.C.C. SuitName of the plaintiffPlot for which the plaintiff bidThe bid amountDate of auctionAmount deposited 1.193/52.80/51S. Rajagopalan Subudhi15Rs. 2,700/ -10 -10 -48Rs. 400/ -2.196/5281/51N. Ramachandra Rao21Rs. 8,200/ -11 -10 -48Rs. 400/ -3.195/5282/51M. Jaganayakuly12Rs. 1,300/ -10 -10 -48Rs. 408/ - & 14Rs. 1,500/ - 4.197/52.83/51K. Chidambaram Subudhi16Rs. 2,260/ -10 -10 -48Rs. 300/ -5.194/52.31/52E. Krishnamurty11Rs. 1,050/ -10 -10 -48Rs. 130/ - Amount claimed by the plaintifi in the suit. 1. Rs. 500/ - 2. Rs. 500/ - 3. Rs. 408/ - 4. Rs. 408/ - 5. Rs. 176 12.9 Before the commencement of the bid the conditions of the sale were read out to all the persons at the spot and one of the conditions was that the highest bidder should deposit one -eighthof the purchase money immediately after the sale was knocked down in his favour and that he should pay the balance within one month thereof failing which the advance amount paid by him would be forfeited and the property would be resold and the loss, if any, would be recovered from him. This is the usual condition for deposit of earnest -money insisted upon generally before the holding of any sale by public auction. The opposite -parties deposited the various sums as earnest -monies in respect of their bids. Subsequently, however, differences arose between the parties in consequence of which the balance of the purchase money was not paid and then the opposite parties instituted the suits under revision claiming refund of the earnest monies deposited by them. The petitioner, however, contended that in accordance with the conditions of the sale the earnest monies were forfeited inasmuch as the opposite parties were mainly responsible for breach of the original contract of sale in not paying the balance of the purchase money within the stipulated time. Before the learned S. C. C. Judge there was some controversy between the parties as to who was responsible for breach of the contract of sale each party accusing the other. But the finding of the learned Judge, which was not rightly challenged before us, is to the effect that the purchasers (the plaintiffs) were to blame and that the seller (the defendant -petitioner) was, therefore, entitled to rescind the contract of sale.

(3.) THE English law regarding earnest money is well settled. As pointed out by Fry L. J. in - -'Howe v. Smith', (1884) 27 Ch D 89 at p. 101 (D) 'in the event of the contract being performed it (meaning earnest money) shall be brought into account, but if the contract is not performed by the payer it shall remain the property of the payee. It is not merely a part payment but is then also an earnest to bind the bargain so entered into, creates by the fear of its forfeiture a motive in the payer to perform the rest of the contract.' In a Full Bench decision of the Madras High Court in - - 'Natesa Aiyar v. Appavu Padayachi', AIR 1915 Mad 896 (E) this view of the English law of contract was applied in construing the relevant provisions of the Contract Act also and it was held that the buyer was not entitled to claim refund of the earnest money forfeited when a contract for sale of immovable property fell through due to his default. Doubtless, Sadasiva Ayyar J. delivered a dissentient judgment holding that the buyer was entitled to the refund of the earnest money and that the remedy of the seller was only by way of damages. The majority view, however, has been uniformly accepted in all succeeding decisions of the various High Courts in India and it is unnecessary to refer to them in detail. In the Privy Council decision reported in AIR 1926 PC 1 (A) which arose out of a case from Allahabad their Lordships explained the true meaning of earnest money in the following terms: 'Earnest money is part of the purchase price when the transaction goes forward; it is forfeited when the transaction falls through, by reason of the fault or failure of the vendee.' They were undoubtedly aware that in India, the law of contract had been codified in the Contract Act and yet they did not consider that any of its provisions would render the English law concept of earnest money inapplicable in India. Hence, this Privy Council decision is a direct authority in support of the majority view of the Full Bench of the Madras High Court cited above and it has been uniformly followed in several subsequent decisions - - 'Dinanath Damodar v. Malvi Mody Ranchhoddas and Co.', AIR 1930 Bom 213 (F); - - 'Bhalchandra v. Mahadeo', AIR 1947 Nag 193 (G); - - 'Parampal Singh v. Budh Singh', AIR 1938 Lah 62 (H); - - 'Krishna Chandra v. Mamud Bepari', AIR 1936 Cal 51 (I); - - 'Nadiar Chand v. Satish Chandra', AIR 1927 Cal 964 (J) and - - 'Abas Ali v. Kodhusao', AIR 1929 Nag 30 (2) (FB) (K).