V. LAKSHMANANversusB. R. MANGALAGIRI AND ORS.

                          V. LAKSHMANAN                                    A
                                 v.
                   B. R. MANGALAGIRI AND ORS.

                         DECEMBER 13, 1994

          [K.RAMASWAMY ANON. VENKATACHALA,JJ.]                             B

     Contract Act, 1872: Agreement to sell land-Time essence· of
contract-Contract fell through for default of purchaser-Forfeiture of
entire earnest money by seller heldjustified

    Earnest money-What is-Nomenclature given of advance in the C
agreement is not conclusive.

    Hindu Minority and Guardianship Act, 1956: Section 8.

    Agreement to sell land-One of the sellers minor on the date of sale-
Minor attaining majority pending suit and electing to abide by the terms of D
sale-Necessity 'to obtain Court permission becomes redundant.

     The appellant entered into an agreement with respondents for
purchase of land, paid Rs. 50,000 as earnest money which was stated as
advance in the agreement and undertook to execute the sale-deed
registered within six months. Subsequent to the agreement he took E
possession of the land and levelled it for the purpose of making it into
plots for sale to third parties. On failure to get sanction of the lay-out
plan, the appellant issued notice to respondents for return of earnest
money and also Rs. 15,000 for expenditure said to have been incurred
for development of the land. The respondents not only denied their
liability but also forfeited the entire earnest money. The appellant filed F
a suit which was decreed by the Trial Court. During the pendency of
the suit one of the respondents, a minor, attained majority and elected
to abide by the terms of the agreement. On appeal, the High Court
reversed the decree and. dismissed the appellant's suit. During the
pendency of the appeal, the respondents sold the land in terms of the G
permission granted by the court.

    In appeal to this Court it was contended on behalf of the appellant
that the High Court erred in dismissing the suit because (i) the title of
the suit land was defective since the guardian of one of the minor
respondents failed to obtain permission of the court under section 8 of H

                                561
    562                   SUPREME COURT REPORTS           [1994) SUPP. 6 S.C.R

A    the Hindu Minority and Guardianship Act, 1956 for effectuating the
     sale deed; (ii) the amount of Rs. 50,000 being an advance and not
     earnest money, could not be forfeited unless respondents prove that
     they have suffered damages which was necessary condition to forfeit
     the advance amount.

B         Dismissing the appeal, this court                I
         HELD: 1. The Agreement of sale fell through due to the default
    committed by the appellant. He having failed to obtain the sanction of
    the lay out plan as the Gram Panchayat refused to sanction and having
    found it difficult to effectuate the sale to third parties invented an
C I excuse to get over the agreement and pitched upon the plea of oral
    request said to have been made to the respondents to obtain sanction of
    the court to alienate the share of the minor and of their refusal.
    Therefore, he is not willing to perform his part of the contract and he
    wants to wriggle out of the contract. It is also seen that time is the
    essence of the contract. The appellant is, therefore, the defaulting party
D and has not come to the court with clean hands. [564 C to D, 565 DJ
         2. A specific covenant under the contract is that the respondents
     are entitled to forfeit the money paid under the contract. So when the
     contract fell through by the default committed by the appellant, as part
     of the contract, they are entitled to forfeit the entire amount. In this
E    case even otherwise, the respondents had suffered damages. Therefore,
     their forfeiting the entire sum of earnest money cannot be said to be
     unjustified. [565 E to F]

        3. Earnest money is a part of the purchase price. The nomenclature
    or label given in the agreement as advance is not either decisive or
F   immutable. No doubt in the agreement it was stated that the amount
                                                                                 ...
    was advance and not earnest money. But the amount paid is only by
    way of earnest money as part of the sale transaction. [564 C to F]

         4. When the minor respondent had attained majority pending the
    suit and had elected to abide by the terms of the agreement of sale, the
G   need to obtain sanction from the court became unnecessary. Under
    these circumstances, the necessity to obtain permission from the court
    under sub-section (2) of section 8 of the Hindu Minority and
    Guardianship Act, 1956 became redundant. [565 CJ

        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4542 of
H   1984.
                     V. LAKSHMANAN v. B. R. MANGALAGIRI                      563

        From the Judgment and Order dated 3.11.83 of the Madras High Court A
    in A. No. 911 of 1977.


-       S. Balakrishnan for the Appellant

        S. Shivasubr~aniam and S. Srinivasan for the Respondents.

        The following Order of the Court was delivered:
                                                                                    B

         This appeal by special leave arises from the judgment of the Division
    Bench of the High Court of Madras dated November 3, 1983 made in
    Appeal No. 911/77. The appellant-plaintiff had entered into an agreement
    with respondents on August 23, 1972 to purchase their 6 acres 76 cents of
    the land situated in Bhavani Village for a consideration of Rs. 2,75,000 and
                                                                                    c
    paid Rs. 50,000 as earnest money (stated as advance in the agreement). He
    undertook to have the sale deed registered within six months i.e. on/or
    before February 23, 1973. Time is, thereby, the essence of the agreement.
    The Appellant had taken possession of the land and levelled the land and
    applied for permission for sanction of layout. The Gram Panchayat,
    Bhavani, refused to grant sanction. Thereafter, the appellant got issued a
                                                                                  D
    notice on February 20, 1973, calling upon the respondents to return the
    earnest money of Rs. 50.000 and also Rs. 15000 said to be the expenditure
    incurred by them towards development which liability was denied by the
    respondents in their reply notice wherein they also claimed to have forfeited
    the earnest money for default committed by the appellant in the E
    performance of their part of the agreement. The appellant laid O.S. No.
     108/73 on the file of the Addl. Subordinate Judge, Erode, on March 13,
     1973 Which the trial court decreed on April 30, 1977. On appeal, as stated
    earlier, the High Court reversed the decree and dismissed the suit.

         It is contended by Shri Balakrishnan, learned counsel for the appellant,   F
    that admittedly, respondent No. 3-B.R. Srinivasan was a minor on the date
    of the agreement of sale. When the appellant orally had asked the 4th
    respondent guardian to obtain permission from the Court for effectuating
    the sale deed, the mother as natural guardian of the 3rd respondent had
~
    refused to obtain permission on the ground that it was not necessary to
    obtain the permission of the Court. When the title was defective, no one        G
    would be prepared to purchase the land covered by the agreement of sale
    and, therefore, the High Court was not right in dismissing the suit of the
    appellant. It is also contended that the amount of Rs. 50,000 being an
    advance and not an earnest money, the whole amount cannot be forfeited
    unless the respondents proved that they had suffered damages which is a
    necessary condition to forfeit the advance amount. That amount only could       H
    564                   SUPREME COURT REPORTS               [1994] SUPP. 6 S.C.R

A   be forfeited. No evidence was adduced to prove that the respondents had
    suffered damages. Subsequent sale made by the respondents pending the
    appeal was only a device adopted to deny the refund of the advance money
    paid by the appellant. The High Court had committed grievous error of law          •
    in allowing the appeal. We find no force in both contentions.

B        The facts of the case and the conduct of the appellant lead us to
    conclude that the appellant is not justified in seeking to nor is he entitled to
    recover from the appellants Rs. 50,000 paid by him. No doubt in the
    agreement it was stated that the amount was advance and not earnest
    money. Earnest money is a part of the purchase price. The nomenclature or
    label given in the agreement as advance is not either decisive or immutable.
c   The appellant, after he had entered into the agreement, admittedly, had
    taken possession of the land and levelled the land for the purpose of making
    it into plots for sale to the third parties, in terms of the agreement.
    Admittedly, the appellant failed to _obtain the sanction of the lay out plan as
    the Gram Panchayat refused to sanction it. Thereafter, the appellant having
    found it difficult to effectuate the sales to third parties, he invented an
D   excuse to get over the agreement and pitched upon the plea of oral request
    said to have been made to the respondent to obtain sanction of the court to
    alienate the share of the minor and of their refusal. Thereby, they were not
    willing to perform their part of the agreement and had refused to execute
    the sale deed. There is no truth in it. The agreement of sale fell through due
    to the default committed by the appellant. It is not the case that the
E   appellant had issued notice to the guardian to obtain sanction of the court
    and that the mother had refused to get it nor is she willing to execute the
    sale deed. The amount paid is only by way of earnest money as part of the
    sale transaction and that the appellant failed to perform his part of the
    contract.
F        It is true that in the written statement filed by the defendant Nos. 1, 2
    brothers and 4 being the mother representing defendant No.3- minor , as a
    natural guardian, had pleaded in paragraph 12 that the agreement to the
    extent of the share of the minor, is void. Under s.8(3) of the Hindu Minority
    and Guardianship Act, 1956, Act 32of1956 (for short, "the Act"), it is only
    voidable at the instance of the minor or any person claiming under him. The
G
    guardian has to obtain permission from the court under s.8. In this case ,
    admittedly, during the pendency of the suit, the third respondent-minor
    after becoming the major on July 31, 1975, was duly declared as major and
    the mother was discharged from guardianship. Thereafter he filed a memo
    adopting the written statement filed by the defendants l and 2, his brothers.
H   In their written statement and also in the reply notice got issued by them,
                  V. LAKSHMANAN v. B. R. MANGALAGIRI                     565

respondents No. I, 2 and 4 expressly averred and was testified in the A
evidence of the first defendant that they are "ready and willing to perform
there part of the contract". When the minor became major, he had adopted
their written statement, it would certainly mean, as rightly pointed out by
the High Court, that the minor was also willing to perform his part of the
contract along with his brothers. He thereby elected to abide by the terms of
the contract. It is not the case that the appellant had called upbn the B
respondents in writing to obtain permission from the court as required
under sub-section(2) of s.8 of the Act and that they refused to obtain such a
sanction. In the suit notice also he did not call upon them to get the sanction
of the court. On the other hand, he asked them to return the advance
amount. When the minor had attained majority pending the suit and had
elected to abide by the terms of the agreement of sale, the need to obtain C
sanction from the court became unnecessary. Under these circumstances,
the necessity to obtain permission from the court under sub-s/(2} of s.8 of
the Act became redundant. It is seen, from the conduct of the appellant, that
he is not willing to perform his part of the contract and he wants to wriggle
out of the contract. It is also seen that time is the essence of the contract.
Sale deed was required to be executed on or before February 23, 1973, the D
appellant is the defaulting party and he lias not come to the court with clean
hands.

      The question then is whether the respondents are entitled to forfeit the
entire amount. It is seen that a specific covenant under the contract was that
the respondents are entitled to forfeit the money paid under the contract. So · E
when the contract fell through by the default committed by the appellant, as
part of the contract, they are entitled to forfeit the entire amount. In this
case even otherwise, we find that the respondents had suffered damages,
firstly for one year they were prevented from enjoying the property and the
appellant had cut off 150 fruit bearing coconut trees and sugar cane crop F
was destroyed for levelling the land apart from cutting down other trees.
Pending the appeal, the respondents sought for and were granted permission
by the court for sale of the property. Pursuant thereto, they sold the land for
which they could not secure even the amount under contract and the loss
they suffered would be around Rs. 70,000. Under those circumstances, their
forfeiting the sum of Rs. 50,000 cannot be said to be unjustified. The appeal G
is accordingly dismissed with costs.

T.N.A.                                                    Appeal dismissed.