Sri Justice A.V Krishna Rao, J.:— The plaintiff-appellant is a retired Army Captain residing at Chandole in Guntur District. He conceived the idea of constructing a Cinema Hall in Nidubrole in the same District, Nidubrole had already two Cinema Houses. The defendant is a Medical Practitioner residing in Chandole. Under Ex. A-8 dated 19-3-1961, the defendant had purchased a site of an extent of 25-3/4 cents in Nidubrole from one Kothamasu Padmavathy. The plaintiff himself had owned about 10 cents immediately opposite to this site. The plaintiff and the defendant entered into an agreement, Ext. A-1 dated 31-10-1962 for the sale of the site purchased by the defendant under Ex. A-8. As per this agreement, the extent of the site is mentioned as about 29 cents. The price agreed upon was Rs. 1175/- percent. A sum of Rs. 4,000/- was paid on the date of the agreement as ‘Bayana’. It was agreed that the consideration should be paid at the rate for the extent of the site found on actual measurement. The balance of the consideration was to be paid within 1½ months i.e, by 15-12-1962. In case the purchaser committed default in payment of the balance of consideration, interest was to be paid by him at one percent per mensem as and from the due date. Possession of the site was to be given to the purchaser on the date of the registration of the sale deed.
2. However, the sale deed was not executed before 15-12-1962. The plaintiff had paid the defendant towards the balance of consideration payable, Rs. 4,000/- on 16-11-1962. Rs. 11,500/- on 3-2-1962, Rs. 3,000/- on 12-3-1963 and Rs. 4,000/- on 11-6-1963. Thus, inclusive of the ‘Bayana’ paid on the date of the agreement, the plaintiff paid to the defendant in all a sum of Rs. 26,500/-. On 15-10-1965, the plaintiff through his Advocate Issued a notice in English to the defendant. In this notice, the plaintiff had referred to the execution of Ex. A.I and that he had paid in all a sum of Rs. 26,500/- including what he called the earnest money of Rs. 4000/- paid on 31-10-1962. It was averred in this notice that the plaintiff got the suit site measured on 9-9-1965 in the presence of the defendant and to his utter chagrin and disappointment, the area was only 25 cents and that the defendant had really purchased 25-3/4 cents from the previous owner Padmavathy. He accused the defendant of deceiving him and committing fraud by false representation that he had purchased 29 cents from his vendor. It was only on the strength of such a representation that the plaintiff had agreed to purchase the site at huge cost. He also accused the defendant of cheating. He expressed that 25 cents of land was insufficient for constructing a Cinema Hall and stated that he was rescinding and repudiating the contract dated 31-10-1962 and called upon the defendant to return the sum of Rs. 26,5000/- paid with interest thereon within a week, failing which a suit would be filed for recovery of the amount. On 25-10-1965, the defendant sent a reply stating that he had sent an Express Telegram on 18-10-1965 requesting the plaintiff to send him a copy of the contract of sale and that no reply was sent. The present suit was filed by the plaintiff on 30-10-1965. In the plaint, the plaintiff claimed in all a sum of Rs. 31,504/- inclusive of Interest on Rs. 26,500/- paid from the date of payment at 5½ per cent and also a sum of Rs. 1,000/- towards the amount spent by the plaintiff as preliminary to the construction of the Cinema Hall. He claimed to have spent on 14-12-1965 this sum of Rs. 1,000/- for the services of an Engineer from Guntur and also the blue prints of the theater prepared.
3. The defendant resisted the suit denying the various allegations in the plaint. He stated in his written statement that the plaintiff was not entitled to any damages whatsoever and that the plaintiff himself was guilty of laches. The repudiation or rescission of the contract by the plaintiff was also illegal. The defendant was not guilty of any laches. The defendant was put to immense loss on account of the conduct of the plaintiff.
4. On the pleadings of parties appropriate issues were framed as follows:—
1. Whether the suit contract is vitiated by fraud and misrepresentation as alleged in the plaint.
2. Whether the plaintiff is entitled to rescind or repudiate the suit contract?
3. Whether the suit as framed is not maintainable?
4. Whether the plaintiff is estopped from filing the suit?
5. Whether the suit is barred by time?
6. Whether the plaintiff is entitled to any of the reliefs prayed for?
5. Subsequent to the filing of the suit, the plaintiff had sought amendment of the plaint seeking in the alternative a relief of specific performance of the contract. The amendment was allowed in spite of opposition of the defendant. The matter was carried in revision. The High Court held on the strength of a decision of the Supreme Court in Prem Raj v. D.L.F.H & Co. Ltd. (1) AIR 1968 S.C 1355, that the alternative relief could not be claimed by the plaintiff for the reason that a plaintiff suing for specific performance of a contract could alternatively sue for rescission of a contract, but the converse is not provided for.
6. The plaintiff's suit was dismissed in to by the trial Court. The trial Court found that the plaintiff had committed the breach of contract. It also found that there were no laches or lack of bona fides on the part of the defendant in performing his part of the contract, and that the contract was not vitiated by fraud and misrepresentation and that the plaintiff was not entitled to rescind, or repudiate the contract. It further found that the plaintiff was not estopped, from filing the suit, and that the suit was not barred by limitation. The sole reason for the dismissal of the plaintiff's suit by the lower Court was that a party who commited breach of contract could not in justice or, in law claim to be repaid part part the sale consideration which he had paid to the other party unless and until the other party rescinded the contract. The plaintiff, therefore, it was held was not entitled to claim the purchase money paid.
7. The learned Advocate-General appearing for the plaintiff-appellant had accepted the finding of the trial Court that the repudiation of the contract by the plaintiff was on untenable grounds and that it was the plaintiff who had committed the breach of the contract, Ex. A.I Even so, submitted the learned counsel, that the plaintiff was entitled to the amounts which he had paid towards the purchase money. He urged that neither in justice nor in law the defendant could retain the money paid towards, the fulfilment of the contract. He also urged that after Ex. A. 9 notice was issued by the plaintiff rescinding the contract, it was for the defendant to have accepted the repudiation and then and there sue for specific, performance or for recovery of damages. The defendant having had nearly 3/4ths of the consideration paid to him should not be permitted to remain quiet and claim to retain the money, as well as the property. The defendant himself had also rescinded the contract, as admittedly during the pendency of the suit, he had leased out the property to a Club on an annual rental of Rs. 2000/- for a period of two years. Arguments were advanced before us by either counsel only on the above question and no other question was argued before us.
8. The amounts paid to the defendant in all come to Rs. 26,500/- The amount of Rs. 4000/- paid on 31-10-1962 and recited in Ex-A-I was as ‘Bayana’. The rest of the payments amounting to Rs. 22,500/- do not admittedly partake of the character of ‘Bayana’. In Rabina Bibi v. Satyavathi (2) A.I.R 1963 A.P 304) N.D Krishna Rao, J. had to consider the meaning of the word ‘Bayana’ or the word ‘Bajana’ used in the agreement before him. The learned Judge after referring to Brown's Telugu-English Dictionary and Sankaranarayana's Telugu-English Dictionary opined this:—
“All earnest moneys are also advances. It is clear that the use of the word ‘Bayana’ carries with it the meaning that it is a particular type of advance, viz., an earnest money”.
9. The learned Judge then stated that cases of earnest money were directly covered by the decision of the Privy Council in Chiranjit Singh v. Har Swarup (3) AIR 1923 P.C 1. wherein it was held that it was liable to be forfeited for non-performance of the contract. In Chiranjit Singh v. Har Swarup (3), it was stated thus (at page 2):—
“Earnest money is part of the purchase price when the transaction goes forward: it is forested when the transaction falls through, by reason of the fault or failure of the vendee”.
10. A reference was also made to Sambayya v. D. Ramananda (4) (AIR 1960 A.P 515) in the above decision to the effect that earnest money carries with it the incident that it is intended to be security for the performance of the contract, Considering the word ‘Bayana’ in the document before him, the learned judge held that the amount of Rs. 150/- paid as ‘Bayana’ was paid at the time as earnest money and that there could be no doubt that it was liable to the forfeited, as the plaintiff himself had committed breach of the contract. The observations of Lord Shaw in Chiranjit Singh v. Har Swarup (3) were relied on to the effect “that there is nothing to suggest that the owner of the estate agreed to sacrifice the stipulated earnest”.
11. We may, however, point out that in the Guntur District the word ‘Bayana’ in sale agreements is used not only in cases where a payment is really earnest money but also to an advance made. We are inclined to think that the word ‘Bayana’ used in an agreement of sate is not per se determinative of the question whether it is an earnest money or merely an advance. The meaning ascribable to the word ‘Bayana’ depends upon the intention of the parties at the time of the agreement. That intention can be gathered either by the express terms of the contract or by the conduct of the parties and this surrounding circumstances incidental to such a contract. We need not elaborate further on the question whether the payment of Rs. 4000/- paid on 31-10-1962 contemporaneously with the execution of Ex. A-1 is earnest money for the reason that the plaintiff and his lawyers had understood this payment to be earnest money. In Ex. A-9 notice got issued by the plaintiff through his advocate before the institution of the suit. It was stated that the plaintiff had paid a sum of Rs. 4000/- as earnest money on the date of the contract of sale and later on defendant had received Rs. 22,500/- in four installments. In the plaint also it was, stated in paragraph 3(a) that the plaintiff had paid an earnest money of Rs. 4000/- to the defendant and got the contract of sale executed by him. In paragraph 3(b) of the plaint, it is stated “that the following payments were made on the respective dates and endorsed on the contract of sale and its counter part in addition to the earnest money paid at the time of the contract of sale”. Admittedly the amount of Rs. 4000/- paid on 31-10-1962, is earnest money. If it is earnest money the defendant is entitled to forfeit the said amount, as the transaction had fallen through by reason of the fault or failure of the vendee, who is the plaintiff in this case. The plaintiff, in our opinion, therefore is clearly not entitled to a refund of this amount of Rs. 4,000/-.
12. The next question arises as to what the position is with regard to the amount of Rs. 22,500/- paid in four installments to the defendant. Is the plaintiff entitled to a return of this amount? The learned advocate-General contends that he is so entitled. We will now refer to the various authorities relied upon by him.
13. In Rattamma v. Krishna Murthi (5) (AIR 1928 Mad 326) Devadoss and Jackson, JJ. were dealing with a case where the plaintiff had sued for recovery of advances made by him as a purchaser to the defendants who were vendors in respect of the sale of gunnies. The Courts below found that the transaction fell through owing to the plaintiff's default and decreed the return of the plaintiff's advance of Rs. 750/- without interest except from the date of the suit. This decree was questioned before the learned Judges. In the suit agreement, the relevant portion was: “You have paid advance of Rs. 750/-. at Rs. 15 per bale. Hence the same has been received”. The learned Judges, after referring to the English cases, had observed:—
“…It would be indeed hazardous to infer that in the Krishna district when a vendor accepts what he calls “advance” he is taking a deposit clothed with all the implications which that term has acquired in the West through the Course of European civilization. Far safer is the finding of the learned Subordinate Judge that as the defendants neither alleged nor proved that the advance was earnest money and as it was treated merely as part payment of purchase money in the account books of the defendants it is not a deposit in the strict sense of the word”.
14. The decree was confirmed. The above decision appears to be an authority for the position that advances made by a purchaser to his vendors in respect of a sale would be recoverable even in cases where the transaction falls through owing to the purchaser's default, unless the vendor proves that there was an implied contract between the parties that the money paid in advance should be treated as security for purchaser's fulfilment of the bargain and that therefore, could be forfeited for default.
15. In Sundararama Iyar & Co. v. M. Mudaliar (6) referring to the above decision, Govinda Menon and Ramaswami, JJ. (at page 229 of the report) had observed thus;
“It has been held in Rattamma v. Krishna Murthi, 54 Mad LJ 40 : (AIR 1928 Mad 326) which decision has not so far been over ruled or dissented from—at least no case to that effect has been brought to our notice—that a sum of money paid as advance by the purchaser to the vendor in respect of the sale of goods can be recovered by the purchaser even though the transaction of sale fell through owing to the purchasers default, unless the vendor proves a contract express or implied that the money paid as advance should be treated as security for the purchaser's fulfilment of the bargain and as such liable to be forfeited on his default….
16. Even if therefore the plaintiffs broke the contract they are entitled to get back their advance…..”.
17. In Mudaliar v. Subramaniam (7) A.I.R 1969 Madras 317, Anantanarayanan, C.J referred to the above Madras Cases and also certain other decisions and followed them.
18. In Meenakshinadar v. Murugesa Nadar (8) A.I.R 1970 Madras 391, Rama prasada Rao, J. had followed the decisions in Rattamma v. Krishnamurthi (5) Supra and Sundarama lyar & Co. v. Murugesa Mudaliar (6) Supra and held:
“The defendant (vendors) who interdict a claim for refund of deposit, have to plead and prove the damage suffered by them upon which the Court will adjudicate as to what may be the reasonable compensation to which the defendants are entitled to and deduct the same and award a decree in favour of the plaintiff only for the balance. Such is the onus cast on the vendors is an accepted proposition and is well established-Vide Rattamma v. Krishnamurthi (44 Mad LJ 40-AIR 1928 Mad 326, and Sundararama Iyer and Co. v. Murugesa Mudaliar (1957) I Mad LJ 321-(AIR 1957 Mad 228).”
19. The learned Judge then went on to point out the procedure that is to be followed in such circumstances. He stated that the vendors have to allege and prove damages to themselves by either putting forward a plea of set-off or of counter-claim against the plaintiff for damages for breach of contract. (Vide Sri Lakshmi Talkies v. M.M.S lampee, (1961) 2 Mad LJ 349 at p. 355. It was also observed that an independent suit for the same purpose, no doubt, would be maintainable.
20. We will now see what the position is according to the English authorities in a situation such as the present. In the Law of Contract by Cheshire and Fifoot, 6th Edition (1964) at page 512, it was observed:—
“it has been established before Thorbe v. Fasey that rescission for breach is conditional upon the return to the party in default of any money that he has already paid in the fulfilment of his contractual obligations (Dies v. British and International Mining and Finance Cor. Ltd. (1939) 1 K.B 724). It cannot even be retained by the injured party as security for payment of the damages that may ultimately be awarded to him. (Harrislon v. Holland) (1921) 3 K.B 297. Thus in the case of a contract for the sale of goods, a seller who rescinds because of the buyer's default is entitled to recover damages, but he must return any part of the price that may have been paid, (Benjamin, Sale of Personal Property, 7th Edn. p. 989 approved, (1939) 1 K.B at p. 743).”
21. We will now refer to the decision in Harrison v. Holland (9) (1921) 3 K.B 297. There was a contract for the sale of real property. The purchasers paid 50,0001, as a deposit and a further sum of 100,0001, on account of the purchase price. There was a term in the contract that in case the purchasers fail to comply with the stipulations of the contract, the deposit of 50,0001, but not the sum of 100,0001, should be forfeited and the vendors could resell the property and any deficiency arising on such re-sale and expenses of resale should be paid by the purchasers to the vendors as liquidated damages. The purchasers having paid the amounts as mentioned above committed default in the completion of the contract. The vendors had then forfeited the deposit of 50,0001, but it had not yet resold the property by the time the plaintiff, who is an assignee from the purchasers of their right to the 100,0001, has filed the suit to recover the sum of 100,0001. The defendants-vendors resisted the suit and urged that they had a right to retain the amount for a reasonable time as security for any loss that they might sustain on a resale of the property. It was held that the parties had treated the sum of 100,0001, simply as a payment as advance and that therefore the vendors were not entitled on the cancellation of the contract to retain that sum as security for any loss they might sustain on a resale.
22. In Dies v. British and International Mining and Finance Corporation (10) (1939) 1 K.B 724, in respect of a contract for rifles and ammunition the purchaser had paid 100,0001. But thereafter in breach of the contract, as he himself admitted, he had neither completed the further payments of the price nor took delivery of the rifles and ammunition. The vendors elected to treat the contract as at an end. The purchaser sued to recover 100,0001, less 13,5001, which the purchasers-vendors were admittedly to retain as per the terms of the contract by way of liquidated damages. It was held by Stable J. who tried the suit that the payment of 100,0001, was not in the nature of a deposit or earnest, but was part payment of the price and that the distinction between a deposit which was forfeitable on the purchaser's default and a part payment which was returnable is not confined to contracts for sale of land, but is of general application and that the purchaser was accordingly entitled to recover the sum of 100,0001, subject to the defendants' claim to damages for the purchaser's breach of contract. At page 743 of the report, the learned Judge has stated thus:—
“It was said further that the rule which under certain circumstances enables a purchaser in default to recover a payment or part payment of the purchase price is a rule applicable to the sale of land only and must not be extended to the sale of goods, but no authority for this latter proposition was cited to me, and I was referred to certain passages in the Seventh Edition of Benjamin on Sale, at pp. 989, 994 and 995, which state the rule as being of general application.
23. At p. 989 the principle is summarized in these words:—
“In ordinary circumstances, unless the contract otherwise” provides, the seller, on rescission following the buyer's “default, becomes liable to repay the part of the price paid.”
24. If this passage accurately states the law, as, in my judgment, it does, where the language used in a contract is neutral, the general rule is that the law confers on the purchaser the right to recover his money, and that to enable the seller to keep it he must be able to point to some language in the contract from which the inference to be drawn is that the parties intended and agreed that he should.”
25. At page 744, the learned Judge observed:—
“In my judgment, the real foundation of the right which I hold exitss in the present case is not a total failure of consideration but the right of the purchaser, derived from the terms of the contract and the principle of law applicable, to recover back his money.
I am fortified in the view I have formed by the consideration that, in cases where the parties have agreed that a certain sum shall in the event of a breach represent the liquidated damages to be paid, the Court can, if satisfied that the agreed amount is not damages but a penalty, relieve one or other of the parties against his inequitable and improvident bargain. In my Judgment there would be a manifest defect in the law if, where a buyer had paid for his goods but was unable to accept delivery, the vendor could retain the goods and the money quite irrespective of whether the money so retained bore any relation to the amount of the damage, if any, sustained as a result of the breach. The seller is already amply protected, since he can recover such damage as he has sustained and can. It seems, set off his claim for damages against the claim for the return of the purchase price”
26. In our opinion, the above observations of Stable, J. neatly state the position governing the instant case.
27. The aforementioned discussion leads to the conclusion that in cases where amounts have been paid towards purchase price, even in cases where the purchaser himself is in default, he would be entitled to recover the purchase price.
28. But the learned counsel for the respondent, Sri M. Chandrasekhara Rao contended that all the cases concerned situations where the vendors also treated the contract as at an end. In the instant case, he urged that the defendant had not put an end to the contract, though the plaintiff himself under Ex. A-9 had repudiated the same.
29. This submission as we shall presently show has no factual basis.
30. No doubt the repudiation or renunciation of the contract by one of the parties before the time for performance has come does not, itself, put an end to the contract, but the ‘anticipatory breach’ discharges the other, if he so chooses, and entitles him at once to sue for damages. This principle is convenient, as it would enable the wronged or innocent party to assert his rights speedily and so to minimise his damage, which he might suffer from the breach. If the promisee refuses to accept the renunciation, and continues to insist (as he has a right to do) on the performance of the promise, the contract remains in existence for the benefit and at the risk of both parties, and if any thing occurs subsequently to discharge it from other causes, the promiser, whose renunciation has been refused, may nevertheless take advantage of such discharge.
31. The plaintiff had repudiated the contract by notice dated 15-10-1965. If the defendant had chosen to accept the repudiation, he could have straight away sued for damages, thereby putting an end to the contract. If he did not choose to accept the repudiation, he should have filed a suit for specific performance or in the alternative for damages. He had not chosen to do so. He had with him not only the possession of the site, but also a considerable portion of the consideration viz., Rs. 26,500/-. In the written statement, he had not made any claim for damages consequent upon the breach of the plaintiff which he had alleged in it. Nor had he chosen to set off his claim if any against the claim of the plaintiff for return of the purchase price. He had also not chosen to file an independent suit. He had clearly the option of taking pleas in the written statement to the above effect or to file a separate suit. His inaction or non-election to do what in law he had to do, leads to the inference that he had accepted the repudiation. As the Court in this suit was not called upon to decide his rights vis-a-vis the breach committed by the plaintiff, there is no point in urging that he had kept the contract alive and that the plaintiff would not be entitled to a refund of the purchase price. Further, if he had kept the contract alive, as he urged, it is imperative that he must show his readiness and willingness to perform his contractual obligations throughout. The defendant, as admitted by him, had leased out the suit site to a Club for a period of two years. This unequivocal conduct on his part gives the lie to his case that he was ever ready and willing to perform his part of the contract as deposed to by him. What was contemplated by the parties under Ex. A-1 was delivery of vacant possession and the defendant deliberately pendent lite had rented out the property for a period of two years. He himself clearly put an end to the contract by his conduct.
32. The learned counsel for the respondent placed strong reliance upon the decision in Harihara Iyer v. Mathew George (11) AIR 1965 Kerala 187. In that case, the question that arose before the learned single judge was whether the respondent in the appeal who had committed breach of the contract was entitled to recover from the appellant who not only was ready and willing to perform his part of the contract, but also insisted upon the respondent doing likewise. The learned judge opined that the respondent before him was a defaulter and was not entitled to recover what he had paid under the contract to the appellant, who still held on to the contract and was ready and willing to perform his part. The decision was based upon the fact that the appellant was throughout ready and willing to perform his part of the contract. The decision, therefore, turned upon the particular facts of that case. It cannot be of any assistance to the defendant-respondent in this case for the reason that it cannot be said on the facts that he was ready and willing to perform his part of the contract as he has put himself in a position not to be able to perform it. He put a third party in possession of the property. That apart, in the instant case, as pointed out earlier by us the defendant after the suit was filed had neither alleged nor proved any damage to himself either putting forward a plea of set off against the plaintiff for damages which he should have done. He did not also institute a separate suit in this behalf. We had expressed earlier our conclusion that he had accepted the repudiation by the plaintiff. In such circumstances, we fail to see how the decision of the Kerala High Court, helps the defendant as it has no analogy to the facts of the present case.
33. The plaintiff had claimed a sum of Rs. 1,000/- being the expenses Incured by him as a preliminary to the construction the Cinema Hall on the suit site. We may straight away say that there is no acceptable evidence that he had incurred this amount of expenses. Even other wise, we fail to see how the plaintiff, who had committed a breach of the contract and had rescinded it, is entitled to recover this amount. There is no authority which is cited in support of this claim. The claim is, therefore, rejected.
34. The plaintiff in law is not entitled to interest on the amounts paid by him except from the date of suit. The result is, that the plaintiff appellant is not entitled to recover the sum of Rs. 4,000/- paid on 31-10-1962. He is also not entitled to the sum of Rs. 1,000/-. He is also disentitled to the interest claimed in the plaint up to the date of suit.
35. There will, therefore, be a decree in favour of the plaintiff-appellant for a sum of Rs. 22,500/- representing the advance made by him towards purchase money at 6 percent interest from the date of suit till recovery thereof. The appeal is allowed to the extent indicated above. In the circumstances of the case, we think it just and proper to direct the parties to bear their respective costs here and in the court below.