MEENAKSHINADA DEIKSHTAR Vs. MURUGESA NADAR

JUDGEMENT

(1.) THE plaintiff is the revision petitioner. Under Exhibit A-2 dated 27th April. 1963, the plaintiff agreed to purchase the land belonging to the 1st defendant through the 2nd defendant who was the accredited power-of-attorney holder of the 1st defendant. The plaintiff paid a sum of Rs. 225 as advance towards the total price of Rs. 1,537, which advance, in terms of the agreement, was liable to be forfeited in case the sale was not completed within the prescribed time and due to the plaintiff's default. The term of the contract ran as under;

(2.) MR. M. Srinivasan, learned counsel for the petitioner, contended that the defendants did not primarily discharge their burden by alleging in the pleadings that the money though named as 'advance' was in the nature of deposit for the due performance of the contract and that in any event there is no proof that the defendants suffered actual damages by reason of the alleged breach of contract by the plaintiff. The sheet-anchor of his case is the ratio in Fateh Chand v. Balkishan dass. He contended that in the absence of such proof of actual damages, the normal presumption is that the defendants are not entitled to any reasonable compensation and the plaintiff is therefore entitled to the decree as prayed for, Mr. Ratnam, learned counsel for the respondents, however, based his case on Howe v. Smith, (1884) 27 Ch D 89 referred to in Venkoba Char v. Sanjivappa, AIR 1937 Mad 681, and argued that the real intention of the parties has to be gathered from the terms of the contract and the surrounding circumstances. According to him, though the money paid under Exhibit A-2 is termed as 'advance', it is really earnest money guaranteeing the performance of the contract and as the lower Court found as a fact that the plaintiff is in default he should fail. He urged that, has not made any departure from the ratio in Natesa Aiyar v. Appavu Padayachi, (1915) ILR 38 Mad 178 = 24 Mad lj 488 = (AIR 1915 Mad 896) (FB ). He would say that any payment made contemporaneously with an agreement from which springs a contract, should be deemed to be a deposit or earnest money. He placed reliance on Puran Chand v. Official Liquidator, and vehemently argued that the plaintiff has to be non-suited because of his own default. He would also maintain that different considerations ought to weigh with Courts while considering the import of mercantile contracts as opposed to other contracts involving sale of land, etc. He relied on Satyanarayanamurthi v. Erikalappa, (1926) 50 Mad LJ 150 = (AIR 1926 mad 410), for the purpose. According to him, the principle laid down in ILR 38 Mad 178 = 24 Mad LJ 488 = (AIR 1915 Mad 896) (FB), is still good law and the plaintiff is not entitled to the return of the deposit notwithstanding absence of pleading by the defendants as to the loss sustained by them or proof of the same.

(3.) BEFORE the contentions of the parties are adverted to, it is convenient to note, and analyse its import. According to the Supreme Court, section 74 of the Indian Contract Act made an inroad into refinements of English common Law, which always maintain a marked distinction between liquidated damages and penalty. In the case of breach of contracts, even where a certain sum is named as the predetermined damages and in case of breach of the same by either of the contracting parties, the Court has jurisdiction to find in a lis involving adjudication of the rights and obligations of parties to such a contract, as to who is in default and what is the reasonable compensation payable by the party in default to the other. It does not matter which party to the contract, initiates the proceedings and the Court is not bound by the quantified estimate of damages provided for in the contract itself. It is salutary however for the Courts not to exceed the quantified damages so named in a contract. To quote the Supreme court in.