SAKHARAM TUKARAM KUNBI Vs. JAIRAM JANUJI

JUDGEMENT

(1.) NIYOGI , A.J.C. 1. This appeal arises out of a suit for recovering damages arising out of breach of a contract of sale entered into on 21st September 1928 by the defendant Sakharam in favour of the plaintiff Jairam. The suit was dismissed in the Court of first instance, but was decreed in appeal. The defendant has therefore preferred this appeal.

(2.) THE contract of sale was made with reference to fields Survey Nos. 65 and 32/2 of Dhotra for Rs. 1,875 out of which Rs. 125 were paid as earnest money. On the day of the contract the fields had already been finally foreclosed and the vendor had ceased to have any title to it. Both the Courts below have concurrently found that the vendee, namely, the plaintiff, was aware of the fact that the vendor's title was extinguished by the final decree for foreclosure. The lower appellate Court awarded damages to the plaintiff in accordance with Section 73, Contract Act. He ordered refund of the earnest money amounting to Rs. 125 and in addition granted damages to the extent of Rs. 400" and passed a decree for Rs. 525. On behalf of the appellant it is contended that the vendor was not liable to pay damages for the loss of the bargain, although it is conceded that he was bound to refund the amount of earnest money which he had received. Reliance is placed on the ruling reported in Dhanrajgirji Narsinggirji v. Tata Sons Ltd. AIR 1924 Bom 473. In that case it was held that although Section 73, Contract Act, was applicable to the contracts respecting immovable property as to those relating to goods, still the rule of English law laid down in Bain, v. Fothergill (1874) 7 HL 158 was not necessarily excluded by the terms of Section 73, Contract Act. On the question of the applicability of that rule the judicial opinion in India is not unanimous. The rule is this: if a person enters into a contract of sale of real estate knowing that he has no title to it, nor any means of acquiring it, the purchaser cannot recover damages beyond the expenses he has incurred by an action for the breach of the contract. He can only obtain other damages by an action for deceit. The same rule was stated in other word's by Kay, J., in Gaslight & Coke Co. v. Towse (1887) 35 Ch D 519 as follows: 'If he (meaning the person in whose favour a trustee who leaped the trust property for 30 years with a covenant for renewal for another like term) enters into it knowing exactly what the title of his vendor is, and that the carrying out of the contract eventually is subject to a possible difficulty, how can he turn round and say: 'although, I entered into that contract with you knowing of that difficulty, still I hold you liable for damages'."

(3.) THE next question is whether, applying Section 73, Contract Act, the vendee is entitled to claim damages for the loss of his bargain. In the present case it is found that the vendee was aware of the vendor's defective title on the day of the contract of sale. On the assurance of the vendor that he would convey a sound title within eight days, the vendee advanced him Rs. 125 as earnest money out of the purchase money settled. The fact that the vendee was aware of the vendor's defective title cannot affect the validity of the contract which was to be performed not on the day on which admittedly the vendor had no title, but on some other day on which he expected to acquire a marketable title. The contract of sale which involved representation by the vendor that he would perform his part of the contract on a particular day created expectations in the mind of the vendee that he would get marketable title. The vendor was therefore bound in law either to fulfil his promise or compensate the promisee for the loss of the right he expected to acquire. That loss would obviously be estimated on the basis of the difference between the contract price and the market price on the day of the breach, as has been done by the Court below. As the vendor himself had agreed to pay the damages to the extent of Rs. 400 which has been found not to exceed the difference between the contract price and the market price at the date of the breach he was bound to reimburse the vendee by payment of, that stipulated amount. I affirm the lower appellate Court's decree and dismiss this appeal with costs.