S V HARIHARA IYER Vs. MATHEW GEORGE
LAWS(KER)-1963-3-2
HIGH COURT OF KERALA
Decided on March 04,1963

S.V.HARIHARA IYER Appellant
VERSUS
MATHEW GEORGE Respondents


Referred Judgements :-

STEEDMAN V. DRINKLE [REFERRED TO]
CHIRANJIT SINGH V. HAR SWARUP [REFERRED TO]
MADAN MOHAN V. JAWALA PARSHAD [REFERRED TO]
P PARANCHUKUTTY VS. DHARMASHI MADHAVJI VISRAM [REFERRED TO]
MURALIDHAR CHATTERJEE VS. INTERNATIONAL FILM CO LTD [REFERRED TO]
KHUDA-I-TALA THROUGH K B QAZI MOHAMMAD ZAFAR AHMAD KHAN VS. MTHAMIDA KHATOON [REFERRED TO]



Cited Judgements :-

PARAMMA L DIED VS. K SHANKER [LAWS(APH)-1998-9-83] [REFERRED TO]
L PRAMMA DIED VS. KALAKONDA SHANKER [LAWS(APH)-1998-9-48] [REFERRED TO]
GRANDHI SUBRAMANAYAM VS. VISSAMSETTI VISWESWARA RAO [LAWS(APH)-2001-8-124] [REFERRED TO]
STATE OF BIHAR VS. P K JAIN [LAWS(PAT)-1981-1-12] [REFERRED TO]
REGISTRAR, INDIAN COUNCIL OF ARBITRATION VS. K.S.SIDHU [LAWS(DLH)-2014-1-45] [REFERRED TO]


JUDGEMENT

- (1.)The appellant contracted to give and the respondent to accept, for a consideration of Rs. 10,090/-, the assignment of a decree which the former had obtained. On the date of the contract, the appellant was paid a sum of Rs. 1,000/- as part of the consideration, and more than three months later, another sum of Rs. 1,000/- was also similarly paid. Alleging default on the part of the appellant, the respondent has sued the appellant to enforce, repayment of the sum of Rs. 2,000/- which he paid. The appellant pleaded, that the respondent had committed breach of contract in not taking the assignment which the appellant was still prepared to give. The two courts have found that the respondent had committed breach and yet have decreed the suit holding that the appellant's remedy lay in damages against the respondent.
(2.)In this appeal the learned counsel first attempted to establish, that the payment made by the respondent was in the nature of a deposit by way of earnest or of guarantee for the due performance of the contract. The appellant had no such case in the written statement and the second of the payments was made not on the date of the contract, but only about three months later. There is nothing to distinguish between the nature of the two payments and this contention has only to be repelled. The distinction between a deposit with the seller by way of earnest and a part payment of the consideration to him, lies in the intention with which the deposit or the payment is made. In the former, the intention is to assure the seller that the buyer is in earnest or is sincere and guarantees or secures the due performance of the contract on his part and when the transaction goes through the amount deposited is adjusted towards the sale consideration; in the latter, this intention is not present, but there is simply a part payment. In the former the deposit is forfeited on default, though decided cases have evolved certain principles of equity which it is unnecessary to consider.
(3.)The question in the present case is whether the respondent who had committed breach of contract is entitled to recover from the appellant, who not only is ready and willing to perform his part of the contract but also insists upon the respondent doing likewise. In the case of breach of contract, the injured party, according to Cheshire, the learned author, may take one of two courses. "He may, despite so violent a breach, hold the defaulting party to his promise. If he adopts this course, he himself remains liable on the contract, but he may recover damages for any loss sustained. His alternative course is to accept the breach as discharging the contract" - Cheshire and Fifoot on Law of Contract, 5th Edition, page 495. In the latter event, he would be relieved from further performance of the contract and may sue for damages. 'One who simply breaches his contract does not thereby rescind it, though his act may give the other party a right to claim rescission and restoration." - Black on Rescission and Cancellation, 1916 edition. Volume I, page 5. The respondent though guilty of breach of contract, cannot be supposed to have by such breach rescinded or put an end to the contract by himself; that is a right which the other party to the contract may avail himself of. "Upon the rescission of a contract, either of the parties will be entitled to demand and recover from the other whatever was paid to him as the consideration of the contract or in execution of its terms, making allowance, of course, for the set off of corresponding demands on the other side." - See Black on Rescission and Cancellation, Volume II, page 703. Mayne and Mcgregor observe in their work on Damages, 12th edn., page 238, that
"If there is no agreement, whether express or implied, that money paid shall not be returnable on default, then nothing in the nature of agreed liquidated damages exists in the contract and the defaulter is entitled, if the other party rescinds on the basis of the default and does not keep the contract open and available for performance, to recover the money he has paid over in part performance in an action for money had and received."

The statement is categorical according to which, the respondent's right to repayment of money paid, is conditional upon rescission by the appellant, whose right it is, instead of rescinding, to keep the contract open and to hold the respondent liable for whatever legal consequences may flow from his breach. Certain passages occurring in Para.256 and 257 of the above text book, and particularly Steedman v. Drinkle (1961 (1) AC 275) and Stockloser v. Johnson (1954 (1) QB 476) were relied on for the respondent, but they concern the application of equitable principles to the refund of money deposited by way of earnest or to guarantee performance of the contract, and have no relevance, so far as part payments simpliciter are concerned. The statement of the law as based on text books dealing with the subject will not be complete, without a reference to Salmond and Williams on Contracts, 2nd edition, where the learned authors at page 566 say, that

"money which has been paid or property which has been transferred by either party to the other prior to such rescission must in general stay where it is and cannot be recovered."

and at page 567 as follows:

"What, however, is the position of the other party to the determined contract - the party through whose breach the rescission has come about Has he any right or remedy at all in respect of his partial execution of the contract before its rescission Take the case where he has rendered services in part performance of the contract. If A, for example contracts to build a house on B's land for the lump sum of 5000 payable on completion, and after doing work worth 2000 on B's land abandons the contract or commits some other essential breach of it. B may rescind and determine the contract. In such a case can A recover from B any compensation for the work so done by him, or is B, on the contrary, entitled to retain the benefit of the work so done upon his land and pay nothing for it .... It seems to be established as a general principle that the party in default has no such right or remedy. He cannot so; on the express contract for it contained no term providing for payment otherwise than on completion of the work, and the law refuses to recognise in his favour any substituted implied contract under which he may recover compensation for his expenditure and services before rescission."

On this statement of the law, I am of the opinion that the respondent as a defaulter is not entitled to recover what he Had paid under the contract to the appellant who still holds on to the contract and is ready and willing to perform his part. On the exposition of the law by text writers of eminent authority, I am led to think, that the respondents's claim for refund of the consideration can arise only on rescission of the contract by the appellant.

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