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Gappulal v. Kanderwal Brothers
Factual and Procedural Background
The plaintiff, a hardware dealer in Gwalior, entered into a contract with the defendant, a firm based in Bombay, for the purchase of 5000 feet of G.I. pipe at a specified rate, paying Rs. 500 as advance. The defendant failed to deliver the pipes as per the contract. The plaintiff filed a suit in the Small Causes Court at Lashkar, seeking recovery of the advance amount. The defendant did not appear, and the suit proceeded ex parte. However, the Small Causes Court returned the plaint, holding that no part of the cause of action arose in Gwalior and directed the plaintiff to present the suit in the proper court. The plaintiff filed a revision petition challenging this order.
Legal Issues Presented
- Whether the contract between the plaintiff and defendant was made in Gwalior or Bombay.
- Whether the Small Causes Court at Gwalior had jurisdiction to entertain the suit for recovery of the advance amount.
- Whether, on breach of contract, the advance amount paid by the plaintiff became a debt payable by the defendant to the plaintiff at the plaintiff’s place of residence.
Arguments of the Parties
Applicant's Arguments
- The contract was concluded in Gwalior.
- The contract was to be performed at Gwalior, where the pipes were to be delivered.
- On breach of contract, the advance amount became a debt owed by the defendant to the plaintiff and thus payable at Gwalior under the general rule that a debtor must find his creditor.
- Relied on the precedent in Mohammad Usuff Rowther v. M. Hateem and Co. to support the claim that the advance money becomes recoverable as a debt upon breach.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Amarnath Shadi Lal v. S. Dhondusa Dhaktappa and Brothers, AIR 1941 Lah 223 | Delivery of goods F.O.R. Bombay presumed at place of consignment (Bombay). | Used to reject the argument that contract was to be performed at Gwalior, confirming contract formation and delivery place as Bombay. |
| Mohammad Usuff Rowther v. M. Hateem and Co., AIR 1934 Mad 581 | Advance money paid under a contract that fails becomes a debt recoverable by the party who paid it. | Accepted to establish that the advance amount became a debt owed by defendant to plaintiff, supporting jurisdiction of Gwalior court. |
| Champaklal Mohanlal v. Necter Tea Co., AIR 1933 Bom 179 | Principle that money paid for consideration which fails is recoverable as debt. | Followed to reinforce the legal principle regarding recovery of advance money on breach of contract. |
Court's Reasoning and Analysis
The court examined the place of contract formation and performance, concluding that the contract was made in Bombay by correspondence, with acceptance posted from Bombay. The contract was for delivery F.O.R. Bombay, thus delivery was presumed to be at Bombay, not Gwalior. The court rejected the applicant’s contention that the contract was concluded or to be performed in Gwalior. However, on breach of contract, the advance amount paid by the plaintiff became a debt owed by the defendant to the plaintiff. Applying the general legal principle that the debtor must find his creditor, the court held that the defendant was liable to pay the amount at the plaintiff’s place of residence, Gwalior. Therefore, the Small Causes Court at Gwalior had jurisdiction to entertain the suit for recovery of the advance amount. Consequently, the court set aside the order of the Small Causes Court, Lashkar, and remanded the case for trial on merits.
Holding and Implications
The order of the Small Causes Court, Lashkar, returning the plaint for presentation in the proper court is set aside.
The suit is remanded to the Small Causes Court at Gwalior for trial on merits. The decision confirms that while the contract was made and to be performed at Bombay, the recovery of an advance amount on breach of contract constitutes a debt payable at the creditor’s residence, thus establishing jurisdiction of the Gwalior court. No new precedent was created; the ruling applies established legal principles to the facts of this case.
Citing Reference: Affirmed 2Mentioned 1
Case Note:Contract - Recovery of amount - Impugned order passed holding no part of cause of action arose and returned plaint for presentation in proper Court under challenge in present revision - Held, in instant case, on breach of contract amount of advance paid by Plaintiff to Defendant became a debt received by Defendant to use of Plaintiff and that thereafter relationship between parties, in respect of this amount, was that of a creditor and a debtor and that under general rule that debtor must find his creditor, Defendant was bound to pay this amount to Plaintiff.
ORDER
Dixit, J.
1. This is a petition for revision of the order of the Small Causes Court, Lashkar returning the plaint for presentation to the proper Court.
The plaintiff-applicant is a dealer in hardware at Gwalior. The defendant non-applicant is a firm carrying on business at Bombay. The plaintiff alleged that he had agreed to purchase from the defendant 5000 ft. G. I. Pipe 1/2" at the rate of Re. 0-8-0 per foot F. O. R. Bombay, and that he paid Rs. 500/- to the defendant as advance; that subsequently the defendant failed to give delivery of the pipes according to the contract. The plaintiff, therefore, brought a suit against the defendant in the Court of Small Causes at Lashkar for the recovery of Rs. 500/- paid as advance by him to the defendant.
The defendant did not appear in the lower court and the suit proceeded ex parte against him. The learned Judge of the Small Causes Court, however, held that no part of the cause of action arose in Gwalior and returned the plaint for presentation in the proper Court. The plaintiff has now come up in revision to this Court.
2. Mr. Kak learned counsel for the applicant first contended that the contract was concluded in Gwalior. I am unable to accept this contention.
The contract was entered into by correspondence. The letter dated 15-6-1953 which the defendant addressed to the plaintiff clearly shows that by a letter dated 11th instant the plaintiff placed an order with the defendant for the supply of 5000 ft. G. I. Pipe at the rate of Re. 0-8-0 per foot F. O. R. Bombay and that the said order was accepted by the defendant by his letter dated 15-6-1953. The plaintiff's offer for the purchase of 5000 ft. G. I. Pipe was thus accepted by the defendant at Bombay where the letter of acceptance was posted. The contract was thus clearly made in Bombay.
Learned counsel for the applicant referred me to a letter addressed by the defendant on 29-5-1953 to the plaintiff wherein the defendant stated that he would be in a position to book the plaintiff's order for 10000 ft. of pipe at the rate of annas eight per foot, which was expected in Bombay from abroad sometime in June 1953. It was said that by this letter the defendant made an offer for the sale of 10000 feet of pipe and that this offer was accepted by the plaintiff by his letter dated 11-6-1953 which was posted at Gwalior. I am unable to read the defendant's letter of 29-5-1953 as containing any specific offer. By that letter the defendant expressed his willingness to supply 10000 ft. of pipe to the plaintiff in June 1953 and invited an offer from the plaintiff for such quantity of pipe as he may require. In fact by his letter dated 11-6-1953 the plaintiff placed an order for only 5000 ft. of pipe and not for 10000 ft. of pipe which the defendant was ready to supply.
Mr. Kak then urged that the contract was to be performed at Gwalior where the pipe was to be delivered. This contention must also, in my opinion, be rejected. The contract between the parties was for the supply of pipe F. O. R. Bombay. That being so, the delivery of the goods to the buyer would, in law, be presumed at the place of consignment i.e., at Bombay, (see -- 'Messrs. Amarnath Shadi Lal v. Messrs. S. Dhondusa Dhaktappa and Brothers', AIR 1941 Lah 223 (A)).
3. Mr. Kak then submitted that on the breach of the contract the amount of advance paid by the plaintiff to the defendant became a debt received by the defendant to the use of the plaintiff and that thereafter the relationship between the parties, in respect of this amount, was that of a creditor and a debtor and that under the general rule that the debtor must find his creditor, the defendant was bound to pay this amount to the plaintiff at Gwalior.
In support of this contention Mr. Kak relied on--'Mohammad Usuff Rowther v. M. Hateem and Co.', AIR 1934 Mad 581 (B). This contention is, in my opinion, well founded and must be accepted. The plaintiff's suit is for the recovery of the advance money, because of the breach of the contract to supply pipe. Now with regard to the recovery of the amount of deposit or advance under breach of contract, the principle of law is that unless the right is excluded by the terms of the contract, money paid for consideration which fails becomes moneys received by one party to the use of the other party and is recoverable as a debt. The moment the agreement is broken there is either failure of the consideration or there is an equity in favour of the plaintiff which impliedly makes the retention of the amount of the deposit or advance a debt due by the defendant to the plaintiff. This view is amply supported by the decision of the Bombay High Court in -- 'Champaklal Mohanlal v. Necter Tea Co.', AIR 1933 Bom 179 (C), which was followed in AIR 1934 Mad 581 (B), cited by the learned counsel for the applicant.
If then, as I think, on breach of the contract the amount of advance became a debt received by the defendant to the use of the plaintiff, the rule that the debtor must find his creditor would apply and the amount of the deposit would be payable at the place where the plaintiff resides. In this view of the matter the Court of Small Causes at Gwalior would have the jurisdiction to entertain the plaintiff's suit for the recovery of the sum of Rs. 500/- from the defendant.
4. The result is that the order of the Court of Small Causes, Lashkar is set aside and the case is sent back to lower Court for trial on merits. Costs in this Court will be costs in the cause.
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