## **IN THE HIGH COURT OF KERALA AT ERNAKULAM**
## **PRESENT:**
## **THE HONOURABLE MR.JUSTICE K.HARILAL**
**WEDNESDAY, THE 18TH DAY OF JANUARY 2017/28TH POUSHA 1938**
**RSA.No. 1316 of 2004 (F) -------------------------**
**AGAINST THE JUDGMENT & DECREE DATED 21-08-2004 IN AS.5/2001 of ADDL.DISTRICT AND SESSIONS COURT (SPL. COURT), KOTTAYAM**
**AGAINST THE JUDGMENT & DECREE IN OS.380/1997 of MUNSIFF COURT, ETTUMANOOR DATED 21-08-2000**
**APPELLANT/APPELLANT/DEFENDANT::**
**-------------------------------**
**JOMON PUTHENPURAKAL, S/O. KURIAKOSE, AGED 36 YEARS, RESIDING AT PUTHENPURAKAL HOUSE NEENDOOR KARA, ONAMTHURUTH VILLAGE, KOTTAYAM DISTRICT.**
**BY ADV. SRI.GEORGE CHERIAN (THIRUVALLA)**
**RESPONDENT/RESPONDENT/PLAINTIFF::**
**---------------------------------**
**P.M.LUKOSE @ LUKOSE MATHEW, S/O. MATHAI, PRALAYIL HOUSE, KURUKULLOOR KARA KOLLAMPARABHAGOM, KANAKKARI VILLAGE, MEENACHIL TALUK KOTTAYAM DISTRICT.**
**BY ADVS. SRI.MATHEW JOHN SRI.SUJESH MENON V.B.**
**THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON 18-01-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:**
_**OKB**_
## **K.HARILAL, J.**
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## **R.S.A. No.1316 of 2004**
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_Dated this the 18[th] day of January, 2017_
## **JUDGMENT**
## **~ ~ ~ ~ ~ ~ ~**
The appellant is the defendant in O.S.No.380/1997 of the Munsiff's Court, Ettumanoor. This Regular Second Appeal is filed against the judgment of the Additional District Court, Kottayam passed in A.S.No.5/2001 affirming the judgment and decree passed in O.S.No.380/1997 of the Munsiff's Court, Ettumanoor. The aforesaid Suit was filed for realisation of a sum of `25,000/-, the amount paid as advance for purchase of land belonging to the appellant and `15,000/- as compensation for damages. According to the plaintiff, he entered into an agreement for sale on 25.7.1997 with the defendant to purchase plaint schedule property for a consideration of `30,835/- per cent. As per the agreement, an amount of `25,000/- was paid as advance and that if within the stipulated time, on account of the
_RSA.1316/04-F_ **:2:**
default of the vendee, the amount would be forfeited and the agreement would be automatically cancelled. The plaintiff further contended that he was ready and willing to get the sale deed executed after paying the balance amount within the stipulated time; i.e., before 25.9.1997. But, the defendant failed to perform his part of the contract and thereby committed breach of contract. Hence the suit was filed for realising an amount of `40,000/- from the defendant as advance and damages.
2. The defendant contended that he was ready and willing to perform his part of the agreement and, in fact, the plaintiff failed to perform his part in paying the balance amount. He did not offer the amount payable as balance consideration and did not cooperate for measuring the property. Thus, the agreement was failed due to the fault of the plaintiff.
3. On the aforesaid rival pleadings, both parties adduced evidence consisting of the oral testimony of P.W.1 and D.W.1 and produced Exts.A1 to A6 and B1 to B5. After considering the evidence on record the trial court decreed
_RSA.1316/04-F_ **:3:**
the suit partly, allowing the plaintiff to realise an amount of `15,000/- with interest @ 6% per annum from the date of decree till realisation from the defendant and his assets.
4. Feeling aggrieved, though the defendant had preferred the aforesaid Appeal, after reappreciating the evidence on record, the appellate court confirmed the findings of the trial court and dismissed the appeal. Thus, the concurrent findings whereby the courts below allowed the plaintiff to realise an amount of `15,000/- with interest are assailed in this Regular Second Appeal.
5. The learned counsel for the appellant/defendant advanced arguments assailing the findings of the courts below that the plaintiff is entitled to get `15,000/- from the defendant. According to him, `25,000/- was paid as earnest money and not as advance in consideration. The learned counsel further drew my attention to the deposition of P.W.1 wherein P.W.1 himself admitted that he paid `25,000/- to the defendant as security. If it is a security for performance, it will come under earnest money. In case of default from the part of the plaintiff, he
_RSA.1316/04-F_ **:4:**
is not entitled to get back that amount. The courts below concurrently found that the plaintiff has committed breach of contract and the defendant was not at fault in not executing the sale deed. In such circumstance, the defendant is not liable to return the amount received as earnest money.
6. Secondly, it is contended that the payment of `25,000/- would not fall either under compensation or under penalty, as contemplated under Sections 73 and 74 of the Indian Contract Act, 1872. If that be so, the defendant is not liable to return the said amount to the plaintiff, particularly when the agreement specifically stipulates that in case of default from the part of the plaintiff, the defendant is not liable to return the amount paid to him and the same will stand forfeited. In support of the above argument, the learned counsel for the appellant cited **Dinanath Damodar Kale v. Malvi, Mody, Ranchhoddas and Co. [(1930) 32 BOMLR 272]** .
7. Heard the learned counsel for the appellant and
the learned counsel appearing for the respondent.
_RSA.1316/04-F_ **:5:**
8. In view of the arguments at the Bar, the substantial questions of law to be considered are,
(1). Whether the clause in Ext.A1 dealing with the money paid by the plaintiff to the defendant is one for security or advance?
(2). In the absence of proof of actual damage, is the plaintiff entitled to recover any amount by way of compensation?
9. Going by Ext.A1 agreement, it is seen that the payment of `25,000/- is referred as part of consideration at the beginning of the agreement. But, coming to the default clause, it is specifically stated that in case, the performance of the agreement fails due to the fault of the plaintiff, the sum of Rs.25,000/- paid will not be repaid to the plaintiff and he has no right to claim the said amount. But, in the deposition of P.W.1, he has specifically admitted that the sum of `25,000/- was paid as security for the performance of contract. If it is a security, certainly, it will fall under earnest money and cannot be treated as advance amount.
_RSA.1316/04-F_ **:6:**
10. The next question to be considered is, whether it would fall under compensation or security as contemplated under Sections 73 and 74 of the Indian Contract Act. Going by the terms of contract in Ext.A1, nowhere it is stated that the right to forfeiture of `25,000/- by the defendant is a compensation or a penalty. Needless to say, the rights and liabilities under a written contract shall be governed by the terms of contract and the same cannot be interpreted on extraneous consideration or views. In the absence of specific stipulation describing the forfeiture of `25,000/- either as compensation or as penalty, the same will not fall under Sections 73 and 74 of the Indian Contract Act. If the said payment of `25,000/- is not a compensation or penalty, certainly the rights and liabilities of the parties, in case of default, would be governed by the terms of contract only.
11. As per the terms of contract, in case of default from the part of the plaintiff in not executing the sale deed, a sum of `25,000/- paid to the defendant will not be refunded and the plaintiff has no right to claim the said
_RSA.1316/04-F_ **:7:**
amount. In the instant case, the courts below concurrently arrived at a finding that the agreement was broken due to the fault of the plaintiff. In other words, the plaintiff has committed breach of contract and the defendant is not responsible for non performance of the contract. If that be so, the default clause as such will come into operation, as it is not a compensation or penalty and it is an earnest money only. Therefore, in view of the specific stipulation in Ext.A1 agreement, that the defendant is not liable to refund `25,000/- in case of default from the part of the plaintiff, and the plaintiff has no right to claim the said amount, the defendant is not liable to pay back the said amount to the plaintiff. It is needless to say, where the contract has become broken due to default from the part of the plaintiff, he is not entitled to get any amount from the defendant who was willing to perform contract, as damages. But, the courts below miserably failed to appreciate the terms of contract and the law applicable to it in its correct perspective. Consequently, the findings are vitiated by illegality and perversity. The judgments and decrees
_RSA.1316/04-F_ **:8:**
passed by the courts below are set aside and the suit will stand dismissed.
This Regular Second Appeal will stand allowed.
All pending interlocutory applications will stand
closed.
Sd/- **K.HARILAL, Judge.**
okb
// True copy // P.A. to Judge
