P L D 1957 (W (PLP)

INAMULLAH, J.

This is a plaintiff's application in revision under section 32 of the Karachi Small Couses Court Act 1929 against an order passed by the Small Causes Court judge, dated 14th November 1949, and arises under the follow ing circumstances: On 2nd December 1948, the defendants-opposite party agreed to sell to the plaintiff-applicant 125 pieces of long cloth at Rs. 85 per piece. The plaintiff-applicant made a deposit of Rs. 1,100 towards the said contract. The plaintiff filed a suit before the Small Causes Court judge claiming Rs. 2,000 which included the amount of deposit and damages. The contention of the plaintiff-applicant was that the defendant-opposite party had failed to fulfil his contract and therefore, he was entitled to the return of the deposit money as well as to damages. The defendant-opposite party contested the suit and contended that the breach was on the part of the plaintiff-applicant and that he had forfeited the deposit as the default was committed by the plaintiff- applicant. The Small Causes Court judge dismissed the plaintiff's suit on the ground that the breach of the contract was com mitted by the plaintiff and not by the defendant. Mr. Aziz, the learned Advocate for the plaintiff-applicant, has urged only one point : That the deposit of Rs. 1,100 was an advance payment and therefore, it could not be forfeited by the defendant-opposite party. He contended in this connection that the deposit could not be forfeited as such, unless it could be shown that it was paid as a security for the due performance of the contract. Mr. Aziz relied on the terms of the contract which reads as tinder: "Long cloth Camaliya Brand Pieces 125 (one hundred twenty five) 34" x 44" yards at Rs. 85 (eighty five) per piece including sales-tax forward goods of November Shipment per SS. Tressilian. Rs. 1,100 cash (Eleven hundred) has been received as deposit towards this. The balance is to be paid at the time of delivery on the arrival of the goods sold on the terms of the contract of purchase of forward goods." It was contended by Mr. Aziz that from a perusal of the above contract, it would appear that the amount of Rs. 1,100 was only an advance payment inasmuch as it was a part payment of the total amount to be paid on receipt of the goods by the plaintiff-applicant. It was also contended on the basis of the contract that there was nothing to show that this amount of Rs. 1,100 was to stand as security for the due performance of the contract. Mr. Usman Bhai Memon, who has appeared for the defendant-opposite party, has raised two-fold contentions: In the first place, he contended that the plaintiff-applicant cannot be entitled to any refund of the deposit as the learned Judge has found that he was in breach of the contract. In the second place he contended that wherever deposit money is paid, it is to stand as security for the performance of the contract and it is not necessary for the defendant to show from the contract that it was so agreed between the parties, and that on failure of the contract, the same would be forfeited. The contentions raised by Mr. Usman Bhai Memon are well supported by various High Courts and must prevail. In the first place I may mention that; generally speaking, there is no difference in law between "deposit money" and earnest money". These terms had been subject of interpretation by various authorities and the conclusion that one comes to after perusing those authorities is, that there is no vital difference between these two terms. In this connection, before I deal with the meaning of these terms; I may at the outset make it clear that "deposit money" and earnest money" in view of the decisions that I would presently mention, serve two-fold object: (1) The primary object of the term "deposit money" and the "earnest money" is to serve as security for the performance of the contract; and (2) if the contract was being fulfilled, the same was to be treated as part of the sale consideration. I would now deal with meaning of "earnest money" and "deposit money" "Earnest money" has been discussed by their Lordships of the Privy Council in the well-known case of Chiranjit Sing v. Har Swarup (A I R 1926 P C 1). It was observed by Lord Shaw who delivered judgment in that case: "That earnest money is part of the purchase price when the transaction goes forward : it is forfeited when the transaction falls through, by reason of the fault or failure of the vendee." This is the principle that was enunciated in that case and has been followed by various Courts in this sub-continent. In that case also the terms of the contract were: "Willing on old terms, namely, earnest 20,000 balance in two moieties . . . . . ." It would appear that in that case also, the earnest money was to be debited on fulfilment of the contract towards the sale consideration. This Privy Council case was followed by the Calcutta High Court in the case of Krishna Chandra Rudhrapal (A I R 1936 Cal. 51). It was observed in that case that "Earnest money is a guarantee for the performance of the contract. If the transfer goes forward it is a part of the purchase price, but if it falls through on account of the default of or breach by the vendee, it is forfeited, in the absence of a contract either express in its terms or to be inferred from the whole contract. If the purchaser says that the earnest money has not been forfeited, though the breach is on his part, lie has to show that the agreement prevents forfeiture". It would appear from the above that if the plaintiff- applicant wanted to show that if he was in breach of the contract, he was not liable to forfeiture, he had to prove either an express or implied agreement to that effect. It had not been contended before me that there was any such agreement. In fact none can be inferred from the contract which I have reproduced above. The term "deposit money" has been defined by the Allahabad High Court in the case of Bishanchand v. Radhakishandas (A I R 1919 All. 489). In that case, their Lordships of the Allahabad High Court adopted the pronouncement by Lord Justices Cotton, Bowen and Fry in the case of Howe v. Smith (L R 27 Ch. D 89). It was observed in that case that "(a) Deposit, although to be taken as part payment if the contract was completed, was also a guarantee for the performance of the contract, and that the plaintiff, having failed to perform the contract within a reasonable time, had no right to a return of the deposit". In this Allahabad case, a certain amount was paid as deposit which was to be treated as part-payment on the fulfilment of the contract. In the case of P. Gopala Ratana lyengar (A I R 1938 Mad. 246) it was held that "It is a well-known principle of law that if a purchaser, on agreeing to purchase any property agrees also to pay, and does pay a deposit, that deposit is to be regarded as security for the fulfilment of the contract. Though there may be nothing specific about forfeiture, the mere fact that a deposit was demanded carries with it the impli cation that it should be forfeited if the contract was broken, unless purchaser proves an agreement to the contrary." Stroud's Judicial Dictionary Vol. I, page 785 gives the definition of "deposit" as under: "(1) A deposit is equivalent to an earnest, and is forfeited on breach by depositor of his agreement ; ev ew when the word is found in the following common collocation "as a deposit and in part payment of the purchase money" ; so that, on the contract going off, by reason of such breach, the deposit cannot be recovered back, unless there be circumstances which render it inequitable for the deposit to be retained by the depositee . . . . . . (2) A deposit, as distinguished from a part payment, serves two purposes, namely, in the event of the contract being performed to go in diminution of the purchase price, and in the interval between contract and completion to operate as an earnest or guarantee that the contract shall be performed Dies v. British and International Mining and Finance Corporation (1) . . . . . . It is clear from the above decisions and I need not multiply cases on that point, that the terms "deposit money" and "earnest money" have now come to mean the same thing in commercial litigation. A deposit or earnest money serves two purposes, namely : ((1939) 1 K B 724) in the event of the contract being performed, it goes to help in reducing the purchase price and (2) in the interval between the contract and completion of the same, to operate as earnest or guarantee that the contract shall be performed. The contention of Mr. Aziz has no force that the deposit money of Rs. 1,100 on the face of the construction of the c contract between the parties, was not to serve as a security for the contract between the parties and in the event of the fulfilment of the contract, it was to be set off as part payment towards the sale consideration. If the plaintiff applicant wanted that this general principle should not apply, it was for him to have urged and proved that. there was a contrary agreement between the parties that on failure or breach of the contract by the plaintiff-applicant, the deposit money was not to be forfeited. In this connection, I may also mention that, as held in the case of Abdul Ghani & Co. v. `trustees of the Port of Bombay (A I R 1952 Bom. 310) it is not necessary to mention in the contract that the deposit or earnest money would be forfeited in case of failure to perform the contract. Mr. Aziz. the learned advocate for the plaintiff-applicant, relied on certain case which, to my mind, are clearly dis tinguishable and have no application to the facts of the present case. He relied very earnestly on the case of Amarnath Nikkuram v. Mohansing (A I R 1954 M B 134). It was observed in that case that "An advance can be said to be earnest money only if it is given as security for the performance of the contract, but not otherwise." In that case, from the contract it did not appear that the money was paid as earnest or as deposit money. In that contract, certain amount was paid only as an advance. Under those circumstances the learned judges of Madhya Bharat held in that case that an advance can be said to be earnest money only if it is proved that it was to be a security for the performance of the contract In the present case, no such question would arise as the money was given as a deposit money and not merely as advance money as in that case. That case therefore, would have no reference to the present case. Mr. Aziz also relied on the case of Pasumati Seethanna v. Thommandra Yasikalappa (A I R 1926 Mad. 117) and that of Desu Ratamma v. Kakaraparthi Krishna Marthi (A I R 1928 Mad. 326). In these cases also, the question was one of an advance money. The other case relied upon is of Manetralli satyanarayana Murthi v. , Thommandra Erikalappa (A I R 1926 Mad. 410).- 111 that case, a very general proposition was enunciated by their Lordships: "That it is never the practice in mercantile contracts to hold that whatever be the damage suffered or not suffered, the seller is to be entitled to keep the deposit." This proposition of law was not accepted by the same Court in the case of Sanam Narayanamurthi and another v. Nanapalli Nageswara Rao (A I R 1941 Mad. 108). The relevant observation of their Lordships in that case reads: "Whatever may be the practice with reference to mercantile contracts in England, so far as I am aware even in respect of sale of goods it has been customary in this country to receive sums of money by way of deposit or earnest and such sums were forfeited when default is committed by vendee, and Courts have given effect to such forfeiture". The same view was taken by Agha, J. in Ghaffar Trading Co. v. Leroy & Co. Ltd. (Suit No. 78 of 1950 (unreported case)). It would appear from the above discussion that the plaintiff-applicant has failed to show any agreement either express or implied that he was not liable to forfeiture of the deposit money. Moreover, on the finding of the learned Small Causes judge that the plaintiff had committed breach of the contract, he is not entitled to the refund of the deposit money. This view was taken by Bachal. J. in Messrs. Hoosen Brothers v. Ismail Nur Muhammad (Suit No. 576 of 1949 (unreported case)). I would, for the reasons given above, dismiss the revision with costs. A. H. Revision dismissed.