1985 Supreme(Raj) 413
RAJASTHAN HIGH COURT
G.M.Lodha, J.
Food Corporation of India - Appellant
Versus
Manipal and Sons - Respondent
S.B. Civil Regular first Appeal No. 27 of 1975.
Decided On : 6-04-1985
Oral evidence is not admissible to contradict, vary, add to, or subtract from the terms of a written contract, unless there is ambiguity or doubt which requires to be explained.
Headnote:
CONTRACT - SALE OF GOODS - EARNEST MONEY - INTERPRETATION OF CONTRACT - ADMISSIBILITY OF ORAL EVIDENCE - SECTION 92 OF THE EVIDENCE ACT, 1872.
Fact of the Case:
The plaintiff, a registered partnership firm, entered into four contracts with the defendant, a statutory corporation, for the purchase of 4000 quintals of gram. The plaintiff deposited security deposits of Rs. 4000/- with the defendant for the due performance of the contracts. The contracts were duly performed, but the defendant refunded only a sum of Rs. 3000/-, leaving a balance of Rs. 1000/-. The plaintiff also made a written offer for the purchase of 1000 quintals of gram @ Rs. 85.11 per quintal. The defendant accepted the offer, and the plaintiff took delivery of 300 quintals of gram. The defendant remained in possession of the remaining 700 quintals of gram on behalf of the plaintiff as an unpaid seller. The plaintiff failed to take delivery of the remaining 700 quintals of gram, and the defendant forfeited the earnest money of Rs. 8500/- and claimed damages of Rs. 3577/-. The plaintiff filed a suit for the refund of Rs. 1000/- deposited in respect of the previous contracts, Rs. 8500/- deposited in respect of the contract dated 24-2-1969, and Rs. 2500/- as past interest on those two amounts.
Finding of the Court:
The court held that the sum of Rs. 8500/- was not deposited as earnest money but as a precondition for making an offer. The court further held that the defendant was not entitled to forfeit the sum of Rs. 8500/- as earnest money or to recover damages of Rs. 3577/-. The court also held that the oral evidence considered by the trial court was not permissible as against the express provision of Section 92 of the Evidence Act, 1872.
Issues: 1. Whether the sum of Rs. 8500/- was deposited as earnest money or as a precondition for making an offer? 2. Whether the defendant was entitled to forfeit the sum of Rs. 8500/- as earnest money? 3. Whether the defendant was entitled to recover damages of Rs. 3577/-? 4. Whether the oral evidence considered by the trial court was permissible?
Ratio Decidendi: 1. The court interpreted the contract between the parties and held that the sum of Rs. 8500/- was deposited as a precondition for making an offer and not as earnest money. 2. The court held that the defendant was not entitled to forfeit the sum of Rs. 8500/- as earnest money because the plaintiff had not breached the contract. 3. The court held that the defendant was not entitled to recover damages of Rs. 3577/- because the plaintiff had not suffered any loss. 4. The court held that the oral evidence considered by the trial court was not permissible as against the express provision of Section 92 of the Evidence Act, 1872.
Final Decision: The appeal was partly allowed. The decree was reduced by Rs. 8500/-. The parties were directed to bear their own costs throughout.
JUDGMENT
1. :- This first appeal is directed against the judgment dated 28-9-74 of the Additional District Judge, Sri Ganganagar in civil suit No. 8/72. The plaintiff's suit has been decreed in his favour for an amount of Rs. j9,500/-.
2. The plaintiff is a registered partnership firm carrying on grain merchant's and commission agents' business at Ganganagar. The defendant is a statutory Corporation established under Section 3 of the Food Corporation Act, 1964. The defendant has a District Office at Ganganagar which is managed by an officer called the District Manager. The plaintiff had entered into four contracts for the purchase of 4000 quintals of gram and had deposited security deposits of Rs. j4000/- with the defendant for the due performance of the contracts. These contracts were duly performed but the defendant has refunded only a sum of Rs. j3000/- leaving a balance of Rs. j1000/-. The plaintiff is entitled to recover this balance of Rs. j1000/- from the defendant. On 22-2-69 the plaintiff made a written offer for the purchase of 1000 quintals of gram @ Rs. j85.11 per quintal. As per condition for making the offer the plaintiff deposited Rs. j8500/- by means of a cheque being 10% of the price of gram offered to be purchased. This offer was accepted by the defendant vide its letter dated 24-2-69. In pursuance of this contract the plaintiff took delivery of 300 quintals of gram on 25-2-69. Thus part delivery of the goods was in progress and therefore the property in all the 1000 quintals of gram passed on to the plaintiff. The defendant remained in possession of the remaining 700 quintals of gram on behalf of the plaintiff as an unpaid seller. The time fixed for the performance of the contract was 10 days from the date of the letter of acceptance but as the price of gram began to shoot up the defendant did not make the delivery of the balance quantity of 700 quintals despite oral and written requests. The defendant vide his letters dated 16-7-69, 16-1-70 and 26-2-70 communicated to the plaintiff that the sum of Rs. j8500/- deposited by him had been forfeited and that he was further liable to pay a sum of Rs. j3577/-as damages suffered by the defendant. According to the plaintiff, the defendant is not entitled to forfeit the said sum of Rs. j8500/- or to recover notional loss of Rs. j3577/-. The amount of Rs. j8500/- was deposited as a precondition for making offer and it was not an earnest money and, therefore, not liable to be forfeited. There was no breach on the part of plaintiff and therefore, the defendant was not entitled to make any forfeiture or recover any Sections Even on the breach of the contract by the plaintiff, the defendant was only entitled to resell the goods and recover the loss if any. In the present case the defendant did not suffer any loss and was, therefore, not entitled to recover any damages. The breach of contract, if any, by the plaintiff took place on 6-3-69 and the rate of gram prevailed in the market on this date was the same as contracted by the plaintiff. The defendant did not suffer any damages. The stipulation regarding the forfeiture of earnest money was penal in nature. The plaintiff has, therefore, brought the suit for the refund of Rs. j1000/- deposited in respect of the previous contracts, Rs. j8500/- deposited in respect of the contract dated 24-2-69 and Rs. j2500/- as past interest on those two amounts.
3. The defendant in its written statement has admitted to have entered into the five contracts with the plaintiff. The fact that the security deposit of Rs. j1000/- is due and recoverable from the defendant has also been admitted. Regarding the balance sum of Rs. j8,500/-, it has been pleaded that the plaintiff, by not depositing the balance price of the balance quantity of 700 quintals of gram had committed the breach of contract and the defendant under the terms and conditions of the contract was entitled to forfeit the earnest money and also to recover loss suffered. The amount o
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