Decided on February 22,1954

Amarnath Nikkuram Appellant
Mohan Singh and Surjan Singh Respondents


Chaturvedi, J. - (1.)THIS second appeal of the Defendant arises from a suit filed by the Respondent against him for the refund of Rs. 2161/9/ - which he had paid to the Defendant as part of the purchase price of five wagons of coal to be delivered (SIC) him at the Railway Station Shivpuri from (SIC) 1947 to 15.5.1947. The coal was not delivered and therefore the Plaintiff filed this suit, (SIC) trial Court came to the conclusion that both the parties were responsible for the breach of the contract and therefore decreed the suit. The lower appellate Court took the view that the Defendant (SIC) was responsible for the breach of the contract and must return the money. There is, therefore, (SIC) finding of fact against the Defendant.
(2.)MR . Shiv Dayal, learned Counsel for the Appellant, draws my attention to a letter (Ex. D.1) written by the Plaintiff to the Defendant on 13.5.1947 (i.e., two days before the last date fixed for the fulfilment of the contract) by which the Plaintiff asked the Defendant not to give his coal (SIC) anybody till he received a message or a letter (SIC) him Mr. Shiv Dayal contends that this (SIC) shows that for the breach of (SIC) contract the Plaintiff alone was responsible. (SIC) have been true if time was of the essence of the contract. According to Section 55 contract Act (SIC) a party to a contract promises to do a (SIC) at of before that time the contract become voidable at the option of the promise "if (SIC) intention of the parties was that time should (SIC) of the essence of the contract." The question (SIC) time is or is not the essence of the contract has to be decided on the facts of each case.
Their Lordships of the Judicial Committee in 'jamshed v. Burjorji', AIR 1915 PC 83 (A), laid (SIC) the proposition that the mere fact that time (SIC) for the performance of a certain act not, by itself, sufficient to prove that time is of (SIC) essence of a contract. The Court has to look (SIC) the substance and not merely at the letter of (SIC) contract and ascertain whether the parties (SIC) and in substance intended more than that (SIC) act should be performed within a reasonable (SIC) Considering that the agreement itself fixed (SIC) period of 4 1/2 months (January to 15th May) (SIC) fulfilment of the contract and considering (SIC) evidence adduced in the case I am of opinion (SIC) the fixing of the last date in the agreement (SIC) not indicate that the intention of the parties (SIC) that time should be of the essence of the (SIC) act within the meaning of Section 55, Contract (SIC) The only conclusion that can be drawn from (SIC) agreement and from the evidence adduced is (SIC) the parties only intended that the goods (SIC) be supplied within a reasonable time.

(SIC) in my opinion, in this view of the case (SIC) emphasis cannot be laid on Ex. D. 1 in the (SIC) What actually happened after 13.5.1947 is (SIC) but is not clear from the record. There (SIC) documentary evidence adduced by the par -(SIC) and on the basis of the oral evidence the (SIC) arrived at by the learned trial Court was (SIC) parties were responsible for the breach(SIC) contract. I am disposed to agree with this (SIC) Inasmuch as the Defendant did not (SIC) wagon of coal from January to 13.5.47 (SIC) cannot be absolved from the fault. In this (SIC) the matter the advances made by the Plaintiff the Defendant were clearly recoverable.

(SIC) Mr. Shiv Dayal contended that though the (SIC) Rs. 2161/ - was part of he purchase price (SIC) it was earnest money it was liable to be (SIC) The learned Counsel relied upon (SIC) Singh v. Harswarup, AIR 1926 PC 1.

(B) for the proposition that earnest money is part of the purchase price when the transaction goes forward; and that it is forfeited when the transaction falls through by reason of the fault or failure of the vendee.

This ruling of the Privy Council applies to a case where earnest money has been paid to the seller; and an advance can be said to be earnest money only if it is given as security for the performance of the contract but not otherwise. Whether the deposit is described as earnest money or part payment is immaterial. It must be a guarantee for the purpose of the contract which alone can be forfeited if the transaction falls through; see Seethanna v. Yasikalappa : AIR 1926 Mad 117 (C); Desu Rattama v. Krishna Murthi, AIR 1928 Mad 326 (D); Madan Mohan v. Jwala Prasad, AIR 1950 EP 278 (E).

In 'Krishna Chandra v. Mahmud Bepari' : AIR 1936 Cal 51 (P) a Plaintiff had brought a suit for the recovery of his deposit which was paid only as part payment of the price and therefore it was hold by R.C. Mitter J., that the Plaintiff was entitled to recover it from the Defendant, and that in spite of the breach being on his part. This ruling has been followed in 'AIR 1950 EP 278 (E)'.

4. In the case before me the Defendant did not raise the plea in the written statement that the money paid to him by the Plaintiff was earnest money and was given as security for the performance of the contract or that there was an implied contract between the parties that the money paid in advance would be treated as security for the purchaser's fulfilment of the bargain and as such it would be liable to be forfeited on his default. The only plea raised by the defence was that the Plaintiff was responsible for the breach and the money should be forfeited as a penalty for breach of the contract. It has been pointed out in Bhal Chandra v. Mahadeo : AIR 1947 Nag 193 (G) that there is a distinction between a penalty for breach of contract and the forfeiture of deposit by way of earnest money. The latter is a payment actually made by the vendee whereas the penalty is the compensation sought for the breach and yet to be recovered. As the present case was fought by the Defendant in the Courts below on the basis that the deposit should be forfeited only as a penalty for breach of the contract and not on the basis of its forfeiture by way of earnest money, an entirely new case cannot now be allowed to be set up in second appeal.

In this view of the matter the appeal fails and is dismissed with costs.


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