Default in performance of a contract does not entitle the defaulting party to a return of earnest money. Failure to deliver goods on the date of performance precludes the party from claiming damages or setting off damages against the other party.

Venkataramana Rao, J.

1. This appeal arises out of a suit for the return of the purchase money-paid by the plaintiff in respect of a contract for sale and delivery of 600 bags of paddy by the defendants to the plaintiff. The contract was entered into on 28th October 1929 and is evidenced by Ex. D. The price per bag was fixed at Rs. 8-1-6. An advance of Rs. 200 was paid on the said day and later a sum of Rs. 1110 was advanced. In all, the plaintiff paid Rs. 1310 towards the purchase money. The date of performance was 8th November 1929. No delivery took place on that day. The case for the plaintiff is that the defendants committed default in the delivery of the bags and therefore he was entitled to sue for the return of the purchase money. The case for the defendants is that though the contract Ex. D does not mention what bags they were to deliver it was stipulated between them that those bags were the bags which the defendants had pledged with the Imperial Bank of India, that the plaintiff was to pay in advance the amount which he had to pay towards the purchase money in order to enable them to redeem the pledge and deliver the bags to the plaintiff but the plaintiff committed default in paying the said money to them. They further stated that this attitude on the part of the plaintiff was due to the fact that there was a falling market. In answer to this the plaintiff stated that he did go with the money to Avatapalli where the bags were under pledge and offered the money but the defendants would not take it. Both the lower Courts have found that the plaintiff did not go to Avatapalli and offer the money as alleged by him and taking advantage of the falling market he was not prepared to abide by the contract. Therefore there is no doubt that the plaintiff committed default in performing his part of the contract, but the question is, is the plaintiff entitled to get a return of the purchase money. Out of this sum of Rs. 1310, Rs. 200 was the sum paid on the date of the contract as and by way of earnest money.

2. Mr. Somasundaram on behalf of the plaintiff attempted to argue that that sum was not paid as earnest but as purchase money. I do not think it is open to him to so contend in the face of the distinct admission made by his client in his deposition wherein he states thus, "Defendant asked for Rs. 200 towards earnest money. I paid the amount." As the plaintiff has committed default, the defendants are entitled to forfeit the said sum of Rs. 200 and it is not open to the plaintiff to seek to recover it. Mr. Somasundaram argued that in mercantile contracts it is not usual to forfeit the said sum and the amount paid as advance or by way of earnest was never treated as security and in support thereof he relied on certain observations of Coutts-Trotter J. Whatever may be the practice with regard to mercantile contracts in England, so far as I am aware even in respect of sale of goods it has been customary in this country to receive sums of money by way of deposit or earnest and such sums were forfeited when default is committed by the vendee, and Courts have given effect to such forfeiture. As an instance in point I may mention the case reported in Roshan Lal v. Delhi Cloth and General Mills Co. Ltd. Delhi (11) 33 All 166. It was a case relating to a contract for the purchase of 500 bales of cotton. Sir John Stanley C.J., and Banerji J., non-suited the plaintiff who sued to recover the earnest money paid by him on the ground that he committed default in the performance of his part of the contract. Mr. Somasundaram argued that even assuming that the plaintiff was not entitled to recover the earnest money paid by him when he committed, default, at any rate the Court could not non-suit him in a case where the defendants were equally at fault in performing their part of the contract, but he was not able to cite any authority in support of this contention except relying, for the purpose of argument, on the case reported in 9 Mys