Stanley, C.J and Banerji, J.:— The question in this appeal is whether a purchaser who has repudiated a purchase is entitled to recover earnest money paid by him on entering into the contract. The contract in this case was for the purchase of 500 bales of cotton yarn, and the agreement was that the purchaser would deposit Rs. 5 per bale as earnest money with the defendant company and that if that was not done within two days of the contract the defendant company would be at liberty either to adhere to or cancel the contract. The purchaser paid a sum of Rs. 1,300 as earnest money, which left a balance of earnest money still unpaid. It has been found by the lower appellate court that the purchaser repudiated the contract. He was guilty of two breaches: first of all, he failed to pay the entire earnest money agreed to be paid by him, and he also failed to take delivery of the goods and pay for them. Upon these findings the lower appellate court dismissed the plaintiff's claim. His suit was for recovery of the sum of Rs. 1,300, which was paid by him as earnest money.
We think that the court below was right in the view which it took. The question whether earnest money is recoverable has been considered in a number of cases, and it would appear that no invariable rule can be laid down on the subject. In the case of Collins v. Stimson Baron Pollock stated the law upon the subject in the following terms—“According to the law of vendor and purchaser the inference is that such a deposit is paid as a guarantee for the performance of the contract, and where the contract goes off by default of the purchaser the vendor is entitled to retain the deposit.”
In the case of Howe v. Smith the question was considered whether a sum which was paid on the purchase of real estate as a deposit and in part payment of the purchase money was recoverable. The plaintiff who sued for the recovery of the earnest money failed to perform his contract within a reasonable time, and it was held by the court of appeal, affirming the decision of Kay, J., that the deposit, although to be taken as part payment, if the contract was completed, was also a guarantee for the performance of the contract, and that the plaintiff, having failed to perform his contract within a reasonable time, had no right to a return of the deposit.
Again, in the case of Ex parte Barrett, in re Parnell, in which by a contract for sale of real estate it was stipulated that a portion of the purchase money should be paid immediately and the residue on completion of the contract, it was held on non-fulfillment of the contract by the purchaser that the vendor was entitled to retain the deposit. Sir W.M James, L.J, in his judgement says:—“The money was paid to the vendor as a guarantee that the contract should be performed. The trustee refuses to perform the contract and then says give me back the deposit. There is no ground for such a claim.” Sir G. Mellish, L.J, in his judgement observes:—“It appears to me clear that even where there is no clause in the contract as to the forfeiture of the deposit, if the purchaser repudiates the contract he cannot have back the money, as the contract has gone off through his default.”
To the same effect is the ruling of Knox and Burkitt, JJ., in the case of Bishan Chanel v. Radha Kishan Das. The contract in that case was for the purchase of a decree for money. Through default of the purchaser the purchase was not carried out, and it was held that the purchaser could not recover the deposit which had been paid by him in pursuance of the contract.
We have said that no hard and fast rule can be laid clown on this subject. As was said by Cotton, L.J, in the case of Howe v. Smith, “I do not say that in all cases where this court would refuse specific performance, the vendor ought to be entitled to retain the deposit. It may well be that there may be circumstances which would justify this court in declining, and which would require the court, according to its ordinary rules, to refuse to order specific performance in which it could not be paid that the purchase had repudiated the contract, or that he had entirely put an end to it so as to enable the vendor to retain the deposit. In order to enable the fender so to act, in my opinion, there must be acts on the part of the purchaser which not only amount to delay sufficient to deprive him of the equitable remedy of specific performance, but which would make his conduct amount to a repudiation on his part of the contract.” Such a case as would entitle a purchaser to a return of the earnest money is that of Alokeshi Dassi v. Hara Chand Dass. In that case the defendant vendor unsuccessfully denied the contract in toto and there was no repudiation of the contract by the plaintiff, and it was held that plaintiff purchaser was entitled to a refund of the deposit made by him. The present case is unlike that case according to the finding of the lower appellate court. The plaintiff in this case was in default, in that he repudiated the contract, although full opportunity was given to him of completing it. We think that the lower appellate court rightly dismissed his suit. We accordingly dismiss this appeal with costs.
Appeal dismissed.