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High Court Of Calcutta
Padma Khastgir
BALI RAM DHOTE - Appellant
Versus
BHUPENDRA NATH BANERJEE - Respondent
Suit 1524 Of 1967
Decided On : 06/01/1978
CONTRACT - SALE OF PROPERTY - EARNEST MONEY - FORFEITURE - REASONABLENESS - PENALTY - SECTION 74 OF THE CONTRACT ACT, 1872.
Fact of the Case:
The plaintiff agreed to purchase and the defendants agreed to sell a property. A sum of Rs. 10,001/- was paid as earnest money. The agreement provided that if the vendors failed to make out a good and marketable title or otherwise perform their part of the agreement, the purchaser shall be at liberty to rescind the contract and demand refund of the earnest money. The vendors failed to complete the sale within the stipulated time. The plaintiff terminated the agreement and demanded refund of the earnest money. The defendants forfeited the earnest money.
Finding of the Court:
The court held that the vendors did not fail to make out a good and marketable title or otherwise perform their part of the agreement. The delay in completing the sale was due to the death of one of the vendors and the time taken to obtain probate of the will. The plaintiff did not give a reasonable notice to the vendors before terminating the agreement. The forfeiture of the earnest money was reasonable and not a penalty.
Issues: 1. Did the defendants fail to carry out their obligation under the agreement dated the 29th of June, 1966 on the grounds as alleged in paras 5, 6 and 8 of the plaint by not producing the original probate within time as pleaded in para. 8 of the plaint. 2. Was the said agreement dated 29th of June, 1966, to be completed within six months from the date thereof or within May 6, 1967 as alleged in the para. 8 of the plaint. 3. Was time factor remained the essence of the contract. 4. Was the plaintiff ready and willing to perform his part of the said agreement. 5. Is the plaintiff entitled to the refund of the said sum of Rs. 10,001/- from the defendant. 6. Has the defendant suffered any damages. 7. Has this Hon'ble Court jurisdiction to try and entertain this suit. 8. To what relief, if any, is the plaintiff entitled.
Ratio Decidendi: 1. The forfeiture of earnest money is a reasonable and not a penalty if the amount is reasonable and the forfeiture is not unconscionable. 2. The amount of earnest money forfeited must be a genuine pre-estimate of the damages to be suffered by the party claiming the amount. 3. The court will consider all the facts and circumstances of the case, including the agreement itself, to determine if the amount forfeited is reasonable.
Final Decision: The court dismissed the suit with costs.
( 1 ) BY an agreement dated 29th of June 1966 the plaintiff herein Baliram Dhote agreed to purchase and Bhupendra Nath Banerjee, Jitendra Nath Banerjee, Abanindra Nath Banerjee and Nihar Bala Devi agreed to sell the premises No. 8/1, Hazra Road. The salient. terms and conditions of the said agreement are set out as hereunder : --1. The Vendors agree to sell and the purchaser agrees to purchase all that the said premises No. 8/1, Hazra Road, Calcutta, fully and particularly mentioned and described in the Schedule hereunder written (hereinafter referred to as the said premises) for an absolute and indefeasible estate of inheritance in fee simple in possession or an estate equivalent thereto free from all encumbrances whatsoever at or for the sum of Rupees 2,80,000/- (Rupees Two lacs Eighty Thousand) only subject to the vendor's making out a good and marketable title thereto.
( 2 ) THE purchaser has this day paid to the vendors a sum of Rs. 10,001/- (Rupees Ten thousand and one) only as and by way of earnest money and in part payment of the consideration money and the balance sum will be paid by the purchaser to the vendors on or before the execution of the conveyance.
( 3 ) SUBJECT to the provisions herein contained the vendors shall make out a good and marketable title to the said premises and the purchase shall be completed within six months from the date hereof. The time in this respect shall be deemed to be the essence of contract.
( 4 ) THE vendors shall within a week from the date of these presents deliver or cause to be delivered to Mr. T. K. Gupta, solicitor for the purchaser on his accountable receipt all the title deeds and documents exclusively relating to the said premises as may be in their possession and custody.
( 5 ) WITHIN two months from the data of execution of these presents and subject to the making out such good and marketable title to the said premises the purchaser shall submit to the vendors a draft conveyance to enable the vendors to obtain the Income-tax Clearance Certificate under Section 230-A of the Income-tax Act. 10. If the vendors fail to make out a good and marketable title to the said premises in terms of these presents or otherwise to perform their part of the contract the purchaser shall be at liberty to rescind this agreement and in that event the vendors shall on demand refund the said sum of Rs. 10,001/- (Rupees Ten thousand and one) only paid as earnest money to the purchaser and shall also pay to the purchaser his costs of investigation of title and of this agreement assessed at Rs. 85/- (Rupees eighty-five) only. 11. If upon the vendors' making out a good and marketable title to the said premises in terms of these presents the vendors fail to complete the sale in terms of this agreement, the purchaser shall at his option be entitled to have this agreement specifically enforced or to hold the vendors liable for all losses and damages thereof and in such event the vendors shall forthwith refund the said earnest money of Rs. 10,001/- (Rupees ten thousand and one) only to the purchaser and if after the vendors' making out a good and marketable title to the said pre-mises the purchaser fails to complete the purchase of the said premises within the time and in the manner aforesaid the vendors shall be entitled at their option either to cancel this agreement and forfeit the sum of Rs. 10,001/- (Rupees ten thousand and one) only as and by way of liquidated damages or to specifically enforce this agreement and hold the purchaser liable for all costs, expenses and damages. 12. The vendors shall produce or cause to be produced a copy of the Income-tax Clearance Certificate and/or the Certificate under Section 230-A of the I. T. Act within sufficient time before the execution of the conveyance to the solicitor for the purchaser and produce the original for his inspection and in the event of failure of production of such certificate, the vendors shall forthwith refund the ear
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