Security deposit under a construction contract is recoverable from stakeholder and owner; limitation runs from the date of deposit.

Money deposited as security for due performance of a construction contract was treated as a contractual deposit held by the architect as stakeholder for both sides. On completion of the work, the sum became refundable, and both the owner and the architect were liable to return it; the owner could not deny liability after ratifying the deposit, and the architect could not apply the fund to his own claims. Limitation was governed by the specific deposit article, running from the date of deposit, and not by the general contract or demand-based provisions. The claim was therefore not time-barred, with the residuary limitation provision also supporting maintainability.

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Issues: (i) whether the owner and the architect were liable to refund the sum deposited as earnest money for performance of the construction contract; (ii) whether the suit for recovery of the deposit was barred by limitation.

Issue (i): whether the owner and the architect were liable to refund the sum deposited as earnest money for performance of the construction contract.

Analysis: The deposit was made pursuant to the construction arrangement and was treated by the correspondence and surrounding conduct as part of the contract security. The architect received and retained the money as security for due performance, and the owner subsequently confirmed that the amount had been deposited with its architects. The transaction created a depositary relationship and, on the facts, the architect held the money as stakeholder for both sides. After satisfactory completion of the work, the deposit became refundable. The owner could not disclaim liability after ratification, and the architect could not appropriate the fund against his own claims against the owner.

Conclusion: Both the owner and the architect were liable to refund the deposit, and the claim was maintainable against each of them.

Issue (ii): whether the suit for recovery of the deposit was barred by limitation.

Analysis: A deposit made as security for due performance was held to fall within Article 145 of the Limitation Act, the time beginning from the date of deposit. The decision rejected a narrow reading that would confine Article 145 to deposits returnable forthwith or on demand. The Court further held that, even if Article 145 did not apply, the claim would still be saved by Article 120 as a residuary provision. Article 115 was held inapplicable because a suit for return of a deposit is not a claim for compensation for breach of contract. Article 60 was also rejected on the facts.

Conclusion: The suit was not barred by limitation; Article 145 applied, and alternatively Article 120 protected the claim.

Final Conclusion: The deposit was recoverable from both defendants, and the limitation defence failed.

Ratio Decidendi: Money deposited as security for due performance of a contract is recoverable as a deposit from the depositary or stakeholder, and limitation runs under the specific deposit article from the date of deposit rather than being governed by the general contract or demand-based limitation provisions.

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