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1972 Supreme(Mad) 203

Madras High Court
RAGHAVAN
Mohammad Sultan Rowther - Appellant
Versus
Naina Mohammad - Respondent
Decided On : 03/28/1972

Advocates:
T. R. Srinivasan and K. Ramamurthi, for Appellant; N. Sivarrani, N. Krishna Mitra and V. Narayanaswami, for Respondents.

In the absence of a specific contractual provision for forfeiture, an advance payment cannot be forfeited.

Headnote:

CONTRACT - SALE OF LAND - ADVANCE PAYMENT - FORFEITURE - ABSENCE OF SPECIFIC PROVISION IN AGREEMENT - RIGHT TO COMPENSATION FOR DEFAULT.

Fact of the Case:

Plaintiff paid Rs. 1,000 as an advance for the purchase of land from the defendants. The sale deed was not executed due to a dispute over the release deed from the plaintiff's brothers-in-law. The plaintiff sued for the refund of the advance, while the defendants claimed forfeiture.

Finding of the Court:

The court held that in the absence of a specific provision in the agreement for forfeiture of the advance in case of default, the defendants were not entitled to forfeit the sum of Rs. 1,000 paid by the plaintiff. However, the court awarded reasonable compensation of Rs. 500 to the defendants for the plaintiff's default.

Issues: Whether the defendants were entitled to forfeit the advance payment of Rs. 1,000 in the absence of a specific provision in the agreement.

Ratio Decidendi: The court relied on the principle that in the absence of a specific contractual provision for forfeiture, an advance payment cannot be forfeited. The court also considered the Supreme Court judgments in Maula Bux v. Union of India, Sree Hanuman Cotton Mills v. Tata Air Craft Ltd., and Fatehchand v. Balkishandas, which dealt with cases involving specific forfeiture clauses in contracts.

Final Decision: The court allowed the plaintiff's appeal in part and directed the defendants to refund Rs. 500 out of the advance of Rs. 1,000 paid. The parties were directed to bear their own costs.

JUDGMENT :- The plaintiff is the appellant. The suit is to recover Rupees 1,120. The plaintiff's case is that the defendants, who are the owners of S. No. 14/2 measuring 6.70 acres in Valandarayai village, offered to sell to the plaintiff for a sum of Rs. 5,000 and received an advance of Rs. 1,000. Out of the balance it was agreed that Rupees 2,000 could be adjusted towards the othi subsisting on the property and the balance of Rs. 2,000 was payable before the Sub Registrar at the time of the registration of the sale deed. The case of the plaintiff is that in pursuance of the agreement the plaintiff got the stamp papers and wrote out the document and took it to the defendants for their signature and registration. But the defendants refused to complete the transaction and register the document. Thereupon on 28-4-1964 in pursuance of the mediation it was agreed that a release deed from the brothers-in-law of the plaintiff in respect 9f the suit property should be obtained in the name of the defendants' father and on the same day defendants should execute a sale deed in the name of the plaintiff, that the plaintiff requested his brothers-in-law to execute a release deed, but they claimed that they were entitled to a half share in the suit property and that they would not execute the release deed. Thus, the sale deed could not be completed and the agreement had become impossible of performance. On 29-6-1964 the plaintiff caused a registered notice to be issued to the defendants calling upon them to refund the advance of Rs. 1,000 received by them. The defendants refused to return the advance and the present suit is filed for recovery of the sum paid.

2. The defence to the suit is that the plaintiff agreed to purchase the property for Rs. 8,950, that in order to evade the payment of the excess stamp duty the consideration was proposed to be mentioned in the sale deed as Rupees 5,000, that they did not agree for the consideration being mentioned as Rupees 5,000 in the sale deed, that the plaintiff did not offer to pay the entire consideration for the sale deed and consequently the sale transaction could not be completed. The further defence is that they were not aware of the fact that the plaintiff got the sale deed written on 27-4-1964 and they came to know about it only after receiving a notice from the Taluk Office in connection with the refund of the stamp papers. The further contention was that the defendants represented to the plaintiff that the property proposed to be sold belonged to them absolutely, that the plaintiff insisted that he should obtain a release deed before taking the sale deed, that it was agreed that the plaintiff should obtain a release deed from his brothers-in-law and then take the sale deed, that the plaintiff's brothers-in-law refused to execute the release deed, that as the plaintiff did not act in terms of the agreement dated 28-4-1964, he should forfeit the advance paid by him, the defendant therefore contended that plaintiff having committed default, the advance paid had been forfeited and that the plaintiff is not entitled to claim the amount and the defendants are not liable to Pay interest on the said sum in any event and the defendants prayed for the dismissal of the suit.

3. The trial Court held that the plaintiff committed default inasmuch as he failed to act in terms of the contract, that the plaintiff is not entitled to the refund of Rs. 1,000 and that though it was not agreed between both parties that if the plaintiff defaulted, he should lose the advance. In the result, the suit was dismissed.

4. The plaintiff filed A. S. 120 of 1968 to the District Judge, Ramanathapuram at Madurai. The learned Judge while holding that time is not the essence of the contract to sell the immovable property held that the plaintiff committed default and that he is not entitled to the refund of the advance paid by him . The plaintiff has filed the above second appeal.

5. The question that arises for consideration i



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