IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE PIUS C.KURIAKOSE MONDAY, THE 1ST DECEMBER 2008 / 10TH AGRAHAYANA 1930 AS.No. 705 of 1999(A) --------------------- OS.155/1995 of SUB COURT, MUVATTUPUZHA .................... APPELLANT(S)/PLAINTIFF: -------------- M.S.SREEKUMAR, SON OF SREEDHARAN NAIR, MANGALATH HOUSE, PAZHOOR P.O. PIRAVOM. BY ADV. SRI.T.V.ANANTHAN SRI.C.D.JOSE RESPONDENT(S)/DEFENDANT: --------------- M.L.THAMBI, SON OF LAKSHMANAN, KAVALAMPARAMBIL, KAROOR KARA, MANEED VILLAGE. ADV. SRI.DINESH R.SHENOY SRI.T.N.MANOJ THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 1 /12 /2008 , THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: PIUS.C.KURIAKOSE,J. ------------------------ A.S.No. 705 OF 1999 ------------------------ Dated this the 1st day of December, 2008 JUDGMENT The plaintiff in a suit for money which was dismissed by the trial court is the appellant. The parties will be referred to as they were before the trial court. The case of the plaintiff has averred in the plaint is that defendant executed an agreement in favour of the plaintiff on 16/1/1995 to sell the plaint schedule property extending 10 cents of land with a building for a total consideration of Rs.2,67,500/-. On the terms of the agreement, the document was to be executed on or before 15/6/1995. It was specifically recited in the agreement that an advance amount of Rs.54,000/- is paid towards sale consideration. The defendant sent a letter to the plaintiff on 17/5/1995 that he should be ready to purchase the property. When the parties met on 28/5/1995, the defendant told the plaintiff that the title deed of the property is in a bank and it had to be taken back. On 3/6/1995, the plaintiff sent a letter to the defendant intimating that he will be present in the Piravam Sub Registry office at 9 a.m. on 13/6/1995, with the balance sale consideration to get the A.S..No.705/1999 2 sale deed executed and required the defendant to be present there on time with necessary documents to execute the sale deed in favour of the plaintiff. Even though the defendant came to the S.R.O on time, he said to plaintiff that he wanted three more months time to clear the mortgage and to get the documents back and thereby indicating that he was not ready and willing to perform his part of the contract. Hence the plaintiff filed the suit for return of Rs.54,000/- with interest at the rate of 14% from 16/1/1995 till realisation. The defendant contended that he was ready and willing to perform his part of the contract and that the plaintiff was at fault and that he has suffered loss on several accounts and that the amount paid was earnest money and therefore the same is liable to be forfeited. It was further contended that the defendant acquired housing loan at 5% interest from the Bank and he was present in Piravom Sub Registry on 13/6/1995. For clearing the loan, the defendant borrowed money from the different people at the rate of 18% and as such he is incurring a loss of Rs.5000/- per year and also that the defendant lost his low interest housing loan facility. Further it was contended that the defendant waited on A.S..No.705/1999 3 14/6/1995 and 15/6/1995 at the Sub Registry Piravom, but the plaintiff was not seen. On the 16th morning, the plaintiff came to the house of the defendant and requested for 6 months time and the defendant granted 3 months time. The defendant had entered into an agreement with one Thankachan for the purchase of his property and an advance of Rs.10,000/- was paid to him and in part performance of that agreement the defendant filled up that property and towards that the defendant spent Rs.4800/-. Since the plaintiff did not purchase the defendant's property he could not purchase the property from Sri.Thankachan and as such he lost the advance amount of Rs.10,000/- paid to the said Thankachan. The plaintiff violated all the norms and clauses in the agreement. It is also contended that the defendant had to pay Rs.2500/- to one broker for the transaction with the plaintiff. Further it is contended that since the defendant performed his part of contract, plaintiff is liable to compensate the defendant. On the terms of the agreement, the defendant received Rs..54,000/- as earnest money and since the plaintiff has committed default the earnest money will stand forfeited. In the first instance the learned Subordinate Judge A.S..No.705/1999 4 raised the following issues for trial; 1. Is the plaintiff entitled to get specific performance of contract ? 2. Is the alternate relief allowable ? 3. Has the defendant violated the contract ? 4. Reliefs and costs. The learned Subordinate Judge would recast the issues since he felt that the issues were initially framed without appreciating the pleadings correctly. 1. Who violated the contract ? Whether the plaintiff or the defendant ? 2. Whether the plaintiff is entitled to get back the advance amount with interest ? 3. Relief and costs ? 2. At trial the evidence consisted of the oral testimony of PW-1 and DW-1 and Exts.A1, B1 to B9. Considering issue No.1 the learned subordinate Judge found that the plaintiff is the defaulter and accordingly answered the issue No. 1 against the plaintiff. Considering the issue No. 2 the learned Sub Judge A.S..No.705/1999 5 would refer to the decision in Kannan Menon v. Kuttikrishna Menon & others (1962 KLJ 257) and also the judgment of the Supreme court in The Commissioner of Income Tax Bombay v. Bombay Dyeing & Manufacturing Company Limited (JT 1996 (6) S.C.68). According to the learned Subordinate Judge it could be seen from the facts and circumstances in the case that the amount of Rs.54,000/- was given at the time of Ext.A1 agreement and it was given as part of the purchase price. However, it was clear that it was given as a guarantee when he would perform his part of the contract. The learned Sub Judge would conclude on making analysis of the terms of the contract that money given as advance price was really earnest money and it was liable to be forfeited and would answer the issue No.2 against the plaintiff and ultimately dismiss the suit without costs. 3. I have heard the submissions of Sri.C.D.Jose, learned counsel for the appellant and those of Sri.Dinesh R.Shenoy learned counsel for the respondent. Sri.Jose would argue that the court below should have taken into account the fact that the agreement in question is a unilateral one executed by the vendor A.S..No.705/1999 6 in favour of the vendee and not a bilateral one . He would read over to me the full text of the agreement Ext.A1 and submit that the finding of the court below that the sum of Rs.54,000/- was paid towards earnest money runs contrary to the terms in the agreement that the payment is made towards sale consideration. The learned counsel submitted that on the terms of Ext.A1, sale deed is to be executed on or before 15/6/1995. The date 15/6/1995 was not convenient to the plaintiff as he had to take his mother to the hospital. The date of execution of the document was fixed as 13/6/1995 and he has taken all necessary initiative to have the sale deed executed in his favour. There is also finding that the defendant was not ready to execute sale deed on 13/6/2005. The court below found that the defendant is not a defaulter, since two more days are left for the performance of agreement as per Ext.A1. The learned counsel submitted that dismissing the suit, as has been done by the court below, enables the defendant to have unjust enrichment since there is no satisfactory evidence to prove that he has suffered any loss in the transaction. The defendant had no case that the plaintiff agreed on 13/6/1995 to execute the document A.S..No.705/1999 7 on 14/6/1995. This aspect of the matter was not noticed by the court below. Sri.Jose would refer to Exts.A1 A2, A3 and Sections 73 and 74 of the Indian Contract Act during the course of his submissions. The learned counsel would rely on the judgment of this court in Abdulla v. State of Kerala (2001 (3) KLT 903) in support of his submissions. 5. Sri.Dinesh R.Shenoy, learned counsel for the respondent would oppose all the submissions of Sri.C.D.Jose. Sri.Shenoy took me to the pleadings. Strong reliance was placed by him on the judgment of the Supreme Court H.U.D.A. & Anr. v. Kewal Krishnan Goel & Ors ( JT 1996 (6) S.C. 62). 6. I have very anxiously considered the rival submissions addressed at the Bar. As rightly noticed by the courts , the essential question in this case is whether the amount of Rs.54,000/- which was entrusted by the plaintiff with the defendant in the context of Ext.A1 partakes the character of earnest money or sale consideration. If one goes by the definition given by the Supreme Court in JT 1996 (6) SC, 62 (supra), it would appear as though the amount has got characteristics of earnest money. But, I am of the view that on A.S..No.705/1999 8 the terms of the recitals in Ext.A1, the respondent is not entitled to contend that the amount received by him was earnest money. It is seen from the evidence that the defendant respondent was in two minds regarding the character of money which had been entrusted with him by the appellant plaintiff. This is why he adduced evidence regarding the loss sustained by him due to the breach of contract by the plaintiff. The evidence on record will show that the loss actually sustained by the defendant respondent was only Rs. 40,000/- . This means that in terms of Sections 73 and 74 of the Indian Contract Act the respondent cannot aspire to retain more than Rs.14,000/- from out of the amount which was received by him from the appellant as advance sale consideration. Permitting the respondent to retain the entire amount of Rs.54,000/- advanced to him by the appellant will amount to allowing the respondent to have unjust enrichment. Result of the above discussion is that the appeal will stand allowed in part. The judgment and decree under appeal are set aside and a decree is passed directing the respondent to pay back a sum of Rs.64,000/- to the appellant within three months A.S..No.705/1999 9 from today. If the amount is not paid within the stipulated time, the amount will carry interest at the rate of Rs.6% p.a. from the date of the suit till date of realisation. In the circumstances of this case, the parties are directed to suffer their costs through out. (PIUS.C.KURIAKOSE,JUDGE) dpk In page 8 of the judgment dated 1/12/2008 in A.S. No.705/1999 the figure “Rs.14,000/-” occurring in line 11 is substituted by the figure “Rs.40,000/-” and the figure “Rs.64,000/-” occurring in the last line is substituted by the figure “Rs.14,000/-” and the words “ within three months from today” occurring after the words “ to the appellant” in the second sentence in the last para are substituted by the words “ within three months from the date of receipt of a copy of this judgment” as per order dated 22/7/2009 on I.A. No.1628/2009 in A.S. No.705/1999. Registrar (Judicial) A.S..No.705/1999 10 PIUS.C.KURIAKOSE,J. ------------------------ A.S.No. 705 OF 1999 ------------------------ A.S..No.705/1999 11 JUDGMENT 1ST DECEMBER 2008