1966 (12) TMI 71 - HC - Indian Laws

Appeal Partially Succeeds: Earnest Money Claim Allowed, Advance Payment Dismissed.

Ram Lal Puri Versus Gokalnagar Sugar Mills Co., Ltd.

Ram Lal Puri Versus Gokalnagar Sugar Mills Co., Ltd. - AIR 1967 Delhi 91 Issues Involved:1. Applicability of Limitation Act Articles (Article 97, Article 120, Article 62)2. Nature and Recovery of Earnest Money3. Nature and Recovery of Additional Advance Payment4. Extension of Limitation Period under Section 36(a) of the Displaced Persons (Debts Adjustment) ActDetailed Analysis:1. Applicability of Limitation Act Articles:The primary issue was whether the claim is governed by Article 97, Article 120, or Article 62 of the Limitation Act. The court concluded that Article 97, which prescribes a three-year period for money paid upon an existing consideration which afterwards fails, was not applicable to the earnest money of Rs. 20,000, as it was not paid upon an existing consideration. Article 62, which deals with money received by the defendant for the plaintiff's use, was also found inapplicable. The court determined that the general residuary Article 120, which provides a six-year limitation period, was applicable for the earnest money. For the additional advance payment of Rs. 30,000, Article 97 was applicable, making the claim time-barred.2. Nature and Recovery of Earnest Money:The court recognized the earnest money of Rs. 20,000 paid by the vendee as a collateral security for performing his part of the contract. It was established that earnest money serves as proof of the vendee's bona fides and is liable to forfeiture if the transaction fails due to the vendee's fault. However, since the contract became void due to evacuee legislation in Pakistan, the earnest money could not be considered as paid upon an existing consideration which later failed. Consequently, the court held that the claim for the earnest money was governed by Article 120 and was within the limitation period.3. Nature and Recovery of Additional Advance Payment:The additional advance payment of Rs. 30,000 was intended as part of the purchase price rather than as earnest money. The court determined that this payment was made on the existing consideration of the transfer of the property. Therefore, the claim for this amount was governed by Article 97, which prescribes a three-year limitation period starting from the date of failure of consideration. Since the claim was filed beyond this period, it was deemed time-barred.4. Extension of Limitation Period under Section 36(a) of the Displaced Persons (Debts Adjustment) Act:The court examined whether the limitation period could be extended under Section 36(a) of the Displaced Persons (Debts Adjustment) Act. The appellant argued that the earlier Pakistan legislation was not properly proved and should be ignored. However, the court noted that the West Punjab Ordinance 7 of 1947 and the subsequent West Punjab Act 7 of 1948 rendered the performance of the contract unlawful long before the application was filed on 8-12-1952. Thus, the appellant's application could not be saved by the extension of the limitation period under Section 36(a) of the Act.Conclusion:The appeal succeeded in part. The vendee's claim for the earnest money of Rs. 20,000 was allowed, as it was governed by the residuary Article 120 and was within time. However, the claim for the additional advance payment of Rs. 30,000 was dismissed as time-barred under Article 97. The impugned order was modified accordingly, and each party was left to bear their own costs.