1 IN THE HIGH COURT OF BOMBAY AT GOA FIRST APPEAL NO. 3 OF 2004 1. M/s. Stirling Shipping, a partnership firm having its Office at 5th floor, Commerce Centre, Vasco da Gama, Goa 403 802. 2. Shri Jagdish Y. Chowgule, Partner, M/s. Stirling Shipping, 5th Floor, Commerce Centre, Vasco da Gama Goa 403 802 . ..... Petitioners (Orig. Defendant) V e r s u s M/s. Sancoale Shipping Ltd., a company incorporated under the companies Act, 1956, having its office at Ground Floor, Below La Paz Hotel, Opp.Municipal Garden-East, Vasco da Gama, Goa 403 802. ......Respondent (Orig. Plaintiff) Mr. R. V. Kamat, Advocate for the Appellants. Mr. M. S. Sonak, Advocate for the Respondent. CORAM: P. B. MAJMUDAR & N. A. BRITTO, JJ. DATE : 15 th January, 2009. ORAL JUDGMENT (Per P. B. MAJMUDAR, J.) This appeal is directed against judgment and decree passed by learned Civil Judge Senior Division, Vasco-da-Gama in Special Civil Suit No. 2 38/2001/A. The appellant herein is the original defendant no.1 in the said suit. Respondent herein instituted the said suit for recovery of an amount of Rs. 15,00,000.00 which was paid by the plaintiff to the defendant by way of earnest money towards a sale consideration as the plaintiff and defendant agreed for transaction of sale of a barge and the plaintiff had agreed to purchase the same for Rs. 1,60,00,000.00. The defendant was the owner of a barge being M.V. Divya-1, bearing no. MH-H-657. The defendant agreed to sell the said barge to the plaintiff for the aforesaid amount of Rs. 1,60,00,000.00. It was agreed that the plaintiff shall pay Rs. 15,00,000.00 towards earnest money to the defendant and balance of Rs. 1,45,00,000.00 was to be paid within a period of 70 days from the date of the agreement. It was agreed that plaintiff should pay 18% interest to the defendant, upon his failure, to pay the balance amount within the stipulated period of 70 days. The agreement in question was to remain in force up to 21/03/1998. The plaintiff failed to pay the said amount by 21/03/1998. 2. According to the plaintiff, the defendant executed in writing a letter in favour of plaintiff on 3/09/1998, requesting the plaintiff to give NOC as the defendant wanted to sell the said barge to someone else and agreed to pay the earnest money back, the moment he sells the barge. The plaintiff accordingly gave NOC to the defendant. According to the plaintiff, the defendant sold the said barge on 21/09/1998 ,but failed to pay back the amount of earnest money 3 to the plaintiff. The plaintiff accordingly was obliged to file the aforesaid suit for getting the aforesaid amount back i.e. Rs. 15,00,000.00 which he had paid at the time of entering into an agreement for the purpose of purchasing the barge. 3. The suit was resisted by the defendant. It is the case of defendant that since the plaintiff had not paid the remaining amount of Rs. 1,45,00,000.00 which was required to be paid on or before 21/03/1998, that the agreement stood terminated on the said day and the defendant was discharged from all the liability upon termination of the said agreement. 4. It is the case of the defendant that plaintiff had breached the agreement and because of the same defendant suffered loss of interest and damages at the rate of Rs. 1,100/- per day and, therefore, the defendant has forfeited the said amount of Rs. 15,00,000.00 which was paid by the plaintiff to the defendant as earnest money. On this, and such other grounds, the suit was resisted by the defendant. 5. The learned trial Judge framed two issues arising out of the pleadings. The learned trial Judge after considering the evidence on record came to the conclusion that the plaintiff has proved his claim to get Rs. 15,00,000.00 back from the defendant at the rate of 18% and held that the plaintiff has 4 proved that the suit is within limitation. The trial Court accordingly decreed the suit by awarding Rs. 15,00,000.00 with 10% interest from 3/09/2001 till the actual payment is made. The decree of the trial Court impugned in this appeal. 6. The learned Counsel for the appellant Mr. Kamat submitted that the suit is not filed within a period of 3 years from the original agreement which was entered into between the parties on 28/12/1997. He submitted that the defendant has also sustained damages at least of about 5 lacs as the plaintiff had not carried out his obligation under the contract at all. Therefore, while decreeing the suit the said amount is required to be adjusted. It is submitted that defendant was entitled to forfeit the security deposit in view of the loss suffered by the defendant as the plaintiff had failed to carry out his obligation under the contract. It is submitted by learned Counsel for the appellant that in any case this Court may modify the decree by awarding Rs. 5 lacs to the defendant towards the damages and loss which he has sustained. 7. Learned Counsel Mr. Sonak, on the other hand, pointed out that in view of the agreement executed by the defendant in favour of the plaintiff dated 3/09/1998, the trial Court has rightly decreed the suit for refunding the earnest money in favour of the plaintiff. 5 8. We have heard both the learned Counsel and have also gone through the records and proceedings and order of the learned trial Judge. It is required to be noted that the plaintiff and the defendant entered into an agreement dated 28/12/1997, by which the plaintiff had agreed to purchase barge M.V. Divya-1 from the defendant for Rs. 1,60,00,000.00. On the basis of the said agreement, the plaintiff had paid Rs. 15,00,000.00 to the defendant and had agreed to pay remaining amount within 70 days. The life of the said agreement was till 21/03/1998. It is not in dispute that the plaintiff had not paid remaining amount of Rs. 1,45,00,000.00 within the stipulated time. In between, some negotiations took place between the parties. In the meanwhile, since the defendant wanted to sell the said barge he requested the plaintiff to give NOC for permitting such sale. It is an admitted fact that the defendant executed a writing on 3/09/998 which is at page 8 in the paper book. The defendant, as per the said writing agreed to pay Rs. 15,00,000.00 to the plaintiff, which he had received as earnest money, the moment sale of the barge is completed in all respect. The contents of the said writing are as under: “Date : 3rd September, 1978 To, M/s. Samcoale Shipping Ltd. Vasco da Gama, G O A. KIND ATTN. : MR. PRAKASH SARASWAT SUB : OUR AGREEMENT DATED 28TH DECEMBER, 1997 REGARDS SALE OF BARGE 6 M.V. DIVYA I – MRH 657 TO YOUR COMPANY M/S. SANCOALE SHIPPING LTD. Dear Sir, As you know that the above referred agreement expired on 21/03/1998 and became null and void. However, in order for us to maintain cordial business relationship we agree to refund the advance payment of Rs. 15,00,000/- (Rupees Fifteen Lacs only) in due course after the sale of the barge is completed in all respects. In the meanwhile we would request you to oblige by issuing us the enclosed NOC on your company's letterhead as the same is required by our prospective buyers M/s. Valient Shipping & Co. Pvt. Ltd. Kindly do the needful at the earliest and oblige. Thanking you, Yours faithfully, for STIRLING SHIPPING sd/- JAGDISH Y. CHOWGULE MANAGING PARTNER” 9. It is the case of the plaintiff that even though the sale was completed on 21/09/1998, the defendant had not repaid the said amount and that is why the plaintiff was required to file the aforesaid suit for getting refund of the earnest money. Plaintiff has tendered affidavit in lieu of his examination in chief pointing out the aforesaid aspect in his affidavit. The plaintiff was subject to cross-examination by the defendant, but nothing substantively has been brought out from his cross-examination. The defendant has also tendered his affidavit which is at page 33 in the compilation, wherein he has 7 stated that the plaintiff has failed to pay the remaining amount as agreed between the parties as per original agreement and defendant therefore was entitled to forfeit the earnest money of Rs. 15,00,000.00. In the cross- examination he has admitted that in the said letter Exhibit 14 defendant had agreed to refund the amount of Rs. 15,00,000.00. 10. Considering the evidence on record, it cannot be disputed that subsequent to the original agreement dated 28/12/1997, the defendant executed the agreement on 3/09/1998 which is referred to herein above, unconditionally accepting their liability to pay earnest money to the plaintiff to the tune of Rs. 15,00,000.00. The said document is executed within a period of 3 years from the original document. The same can therefore even be considered as acknowledgment of the debt so far as payment of Rs. 15,00,000.00 towards earnest money is concerned. Even otherwise, in our view, by subsequent agreement between the parties at Exhibit 14 dated 3/09/1998, the defendant agreed to pay back earnest money on plaintiff's giving NOC to the defendant. It is not in dispute that on basis of such document the plaintiff gave NOC to the defendant. By virtue of the same defendant sold away the said barge to other trader. On the basis of aforesaid agreement at Exhibit 14, the plaintiff was even otherwise entitled to get the aforesaid amount, in view of the document executed by the defendant. Even otherwise, the said document can be construed as a promise to pay time 8 barred debt. The debtor can always agree to pay a time barred debt for which no consideration is required and promise to pay time barred debt can always be considered as a valid contract. 11. Learned Counsel for the defendant however submitted that since the defendant has suffered a loss and damages, the defendant was entitled to forfeit the said amount towards such damages which he has sustained. Learned Counsel for the defendant agreed that it is no doubt true that under Section 73 of the Contract Act, the defendant cannot retain the said amount by way of penalty but he can certainly ask to deduct the amount for the loss he has sustained. It is required to be noted that reading of Exhibit 14 makes it clear that the defendant had unconditionally agreed to refund the amount back to the plaintiff. Apart from that the defendant has not placed any counter claim or set off before the trial Court nor has held any evidence for pointing out what actual loss he has suffered on account of plaintiff's not fulfilling his contractual obligation. No such point also was raised in arguments before the trial Court. Under these circumstances, even though the party to a contract may be entitled to retain an amount of earnest money for the loss suffered by him as per the provisions contained in the Contract Act. In view of the documents executed by the defendants by which the defendants have agreed to pay back the earnest money to the plaintiff as well as on the ground that no evidence is led by the defendants before the trial 9 Court as to the actual amount of loss they have sustained, as well as no argument, however, was raised before the trial Court, nor counter claim or the set off was placed before the trial Court, the said submission of the learned Counsel is required to be rejected. It is not in dispute that the suit is filed within a period of 3 years from the execution of the document at Exhibit 14 by the defendants. In that view of the matter, the suit is filed within the period of limitation. The learned Counsel for the appellant is not in a position to point as to how the suit can be said to be beyond limitation, if it is filed on the basis of the document at Exhibit 14. 12. Considering the said aspect of the matter, we do not find any substance in this appeal. The learned trial Court has rightly considered the evidence and decreed the suit in connection with the payment of earnest money. The appeal is, accordingly, dismissed with no order as to costs. P. B. MAJMUDAR, J. N. A. BRITTO, J. NH/-