Home Today's Paper Most Popular Video Gallery Photo Gallery
Subscription Blog Signin Register
Logo
Monday, February 24, 2020 05:41:53 AM
Follow Us On: Facebook Twitter Twitter Twitter Twitter

Security Money Vs Earnest Money

Forfeiture amount should be commensurate to losses if party not at fault

By
18th-Jan-2020       
Share
  • Twitter
  • Google+
  • Save
  • E-mail
  • Print
Comments
Share your thought
Post a comment »
Read all () »

Appellate Division  (Civil) :
Syed Mahmud  Hossain CJ
 Muhammad Imman Ali J
 Hasan Foez Siddique J
Mirza Hussain Haider J

Trading Corporation of Bangladesh……………………….Petitioner
Vs
Trio Hologram Industries Ltd….……………… Respondent.

Judgment
April, 12th, 2018

Security Money
Mere breach of contract would not entitle a party to forfeit the entire amount of security money. The amount of forfeiture should be commensurate to the losses suffered by the party not at fault. The petitioner by its conduct indicated that it would accept giving lower price to 10% of the masur dal as adequate damages, therefore, it cannot claim forfeiture of the deposit. .     (12)
Earnest Money
An amount deposited by the supplier as security for the performance of contract for supply of goods is not earnest money and hence the Court cannot give release to the supplier in case of default. . ..... (13)
Munshi Lai vs Ahmad Mirza Beg AIR 1933 Qudh 291; Province of West Pakistan vs Mis Mistri Patel Co. 21 DLR (SC) 132; Maula Bux vs Union of India, AIR 1970 (SC) 1955 and Kunwar Chiranjit Singh vs Har Swarup, AIR 1926 PC ref.
Kamal-ul-Alam, Smior Advocate instructed by Shahanara Begum, Advocate-on-Record-For the Petitioners.
Probir Neogi, Senior Advocate, instructed by Ibrahim Khali, Advocate-on-Record-For the Respondent.
Judgment
Syed Mahmud Hossain CJ: This civil petition for leave to appeal is directed against the judgment and order dated 7-12-2016 passed by the High Court Division in First Miscellaneous Appeal No 177 of 2015 allowing the appeal and setting aside the judgment and order dated 5-5-2015 passed by the learned District Judge, Dhaka in Arbitration Miscellaneous Case No. 227 of 2013 allowing the same and thereby setting aside Clause and part of clause III of the arbitration award dated 20-3-2013 passed by the learned Chairman of the Arbitral Tribunal in respect of Contract No, TCB/MP 2605/2010 dated 19-9-2010.
2. The case of the 1st party-respondent, in brief, is that the respondent on its own offered to make supply of 2,000 metric tons of masur dal and the petitioner TCB accepted the offer and both the parties entered into a contract for supply and sale of 2,000 metric tons of red lentils without husk of Nepal origin with certain terms and conditions specified in the Contract No.TCB/MP-2605/2010 dated 19-9-2010. The TCB opened L/C in favour of the respondent for importation of masur dal as specified in the contract entered into between the parties dated 19-9-2010. The duration of L/C was to expire on 5-12-2010 and subsequently at the request of the respondent this duration was extended up to 13-12-2010 and lastly this was again extended upto 20-1-2011. The respondent imported masur dal from Nepal under L/C and supplied 1,000 metric tons red whole lentils to the TCB in its first shipment. However, the respondent supplied masur dal, which was not in accordance with the specification of the contract. Failing to supply remaining 1,000 metric tons of red lentils, the respondent requested TCB by letter dated 18-1-2011 for permission to supply Dal with 2.50 to 3.60 mm diameter instead of 2 to 3 mm diameter instead of 2 to 3 mm diameter of grain as specified in the contract which was rejected.
Both the parties appointed their respective Arbitrators, who could not concur with each other in their opinion and gave different Awards. Thereafter, the Chairman of the Arbitral Tribunal finally arrived at his own decision with a completely separate award on 20-2-2013. In the above award, the learned Chairman of the Arbitral Tribunal accepted the price for 10% defective Dal at Taka 78 per kg as fixed by the Price Fixation Committee of TCB and also declared that the respondent is entitled to get refund of Taka 95,00,000 deposited by the respondent as performance security forfeited by the petitioner.
3. Against the decision Nos. II and part of iii of the Award passed by the learned Chairman of Arbitral Tribunal relating to refund of Taka 95,00,000 of performance guarantee, the petitioner TCB filed a case before the District Judge seeking to set aside the award and the learned District judge after hearing of both the parties allowed the Arbitration Miscellaneous Case No. 227 of 2013 and set aside Clause IT and part of Clause III of the Arbitration Award dated 20-3-2013 passed by the learned Chairman of the Arbitral Tribunal in respect of Contract No.TCB/MP-2605/2010 dated 19-9-2010.
4. Being aggrieved by and dissatisfied with the aforesaid judgment, the 1st party-appellant  (present respondent) preferred First Miscellaneous Appeal No.177 of 2015 before the High Court Division. The learned Judges of the High Court Division by the judgment and order dated  7-12-2016 allowed the appeal.
Feeling aggrieved  by and  dissatisfied with the judgment and order passed by the High Court Division the leave-petitioner filed this civil petition for leave to appeal before this Division.
5. Mr. Kamal-ul-Alam, learned Senior Advocate, appearing on behalf of the 2nd party-petitioner, submits as under:
'The High Court Division failed to appreciate that TCB very explicitly stated in its letter dated 27-2-2011 that amendment of the size of masur dal, extension of L/C would not be accepted. By this letter, TCB has rescinded the contract from legal point of view. After this letter, M/s TRIO Hologram Industries Ltd. (in short, TRIO) was not allowed any further shipment of masur dal. Since the TRIO breached the contract at the very beginning, there was, therefore, no question of novation of contract and, as such, the impugned judgment should be set aside.
The TCB after investigation by its letter dated 9-3-2011 made very clear to the 1st party that as it rescinded the contract, it was up to the 1st party to take back the whole consignment of the masur dal on its own risk: or to accept the price fixed by TCB as the First Party was to clear violation of the terms of the contract and, as such, the impugned judgment should be set aside."
6. Mr. Probir Neogi, learned senior Advocate appearing on behalf of the 1st party respondent (TRIO), on the Other hand, supports the impugned judgment delivered by the High Court Division.
7. We have considered the submissions of the learned Senior Advocates of both the sides, perused the impugned judgment and the materials on record.
8. Record reveals that the TCB opened L/C in favour of the respondent for importation of masur dal as specified in the contract entered between the parties on 19-9-2010. The duration of L/C was to expire on 5-12-2010 and subsequently, at the request of the respondent, the duration was extended up to 13-12-2010 and lastly time was extended up to 20-1-2011. Admittedly, the respondent imported masur dal from Nepal under L/C and supplied 1,000 metric Tons red lentils to the TCB in its first shipment. However, the respondent supplied masur dal which was not in accordance with the specification of the contract and could not supply half of the total quantity of the contracted goods within specified period.
9. In the case in hand, the leave-petitioner did not terminate the contract. The leave-petitioner was adequately compensated for loses it had suffered by paying Taka 78 per kg. Since the leave-petitioner has been compen-sated by paying a lesser price for 10% of masur dal, it is not entitled to forfeit the performance guarantee.
10. In the case of Munshi Lai vs Ahmad Mirza Beg AIR 1933 Oudh 291, it has been held that where a condition in a contract carries with it an element of punishment, it is in the nature of a penalty.
11. In the case of West Pakistan vs/Ms/ Miistri Patel & Co. 21 DLR (SC) 132, it has been held as under :
"………………..It will be wrong to argue that since the firm had agreed to deposit a sum as earnest money and in lieu thereof furnished bank guarantee for the said amount, the Government would be entitled to claim the whole of this amount simply because there was a breach of the contract by the firm."
12. What is important to mention here is that mere breach of contract would not entitle a party to forfeit the entire amount of security money. The amount of forfeiture should be commensurate to the losses suffered by the party not at fault. The leave-petitioner by its conduct indicated that it would accept giving lower price to 10% of the masur dal as adequate damages, therefore, it cannot claim forfeiture of the deposit.
13. An amount deposited by the supplier as security for the performance of contract for supply of goods is not earnest money and hence the Court cannot give release to the supplier in case of default.
14. In this connection, reliance may be placed on the case of Maula Bux vs Union of India, AIR 1970 SC 1955 wherein paragraph-4, it I has been stated as under:
"4. Under the terms of the agreements the amounts deposited by the plaintiff as security for due performance of the contracts were to stand forfeited in case the plaintiff neglected to perform his part of the contract. The High Court observed that the deposits so made may be regarded as earnest money. But that view cannot be accepted. According to Earl Jowitt in "The Dictionary of English Law" at P.689: "Giving an earnest or earnest-money is a mode of signifying assent to a contract of sale or the like, by giving to the vendor a nominal sum (e,g, a shilling)  as token that the parties are in earnest or have made up their minds" As observed by the Judicial Committee in Kunwar Chiranjit Singh as Har Swarup, AIR 1926 PCl;
"Eanest-money is part of the purchase price when the translation goes forward : it is forfeited when the translation falls through, by reason of the fault or failure of the vendee."
In the present case the deposit was made not of a sum of money by the purchaser to be applied towards part payment of the price when the contract was completed and till then as evidencing an intention on the part of the purchaser to buy property or goods. Here the plaintiff had deposited the amounts claimed as security for guaranteeing due performance of the contracts. Such deposits cannot be regarded as earnest-money".
15. In the light of the findings made before, we do not find any substance in the submissions made by the learned Counsel for the leave-petitioner.
The findings arrived at and the decision made by the High Court Division having been made on proper appreciation of law and fact do not call for interference. Accordingly, this civil petition is dismissed.

Tariff
Add Rate

News Archive

Inside The New Nation

Football »

Ronaldo marks 1,000th game with record-equalling goal


AFP, Rome :Cristiano Ronaldo scored for a record-equalling 11th consecutive Serie A game in his 1,000th professional match as Juventus extended their league lead on Saturday with a 2-1 win over basement club SPAL.The 35-year-old tapped in six minutes before the break to equal the mark held by Gabriel Batistuta ...

Editorial »

We don't need experts to tell us banking sector is ruined


 AS Bangladesh Bank has miserably failed to function properly, the country's banking sector is heading towards a total collapse and is being held hostage by a few individuals and entities. This remark comes from the local think-tank Centre for Policy Dialogue on Saturday marking the government's move for appointing a ...

Entertainment »

Kirti Kulhari skips cab and takes auto-rickshaw


Mission Mangal actor Kirti Kulhari was spotted taking a rickshaw ride in the city. The actor who prefers to take auto to travel for short distances was quite happy as she posted on Instagram “When all the ubers and the olas of the world leave u stranded, it's the Rickshaws ...

International »

UN chief urges new transit point for aid to Syria


AFP, United Nations :UN Secretary- General Antonio Guterres has urged the Security Council to authorize a new passage point on the Turkish border to allow humanitarian aid to reach the embattled population of northeast Syria, where medical supplies are running short.The recommendation came in a report issued Friday to Council ...

Editorial »

Govt incapable of deciding how to deal with Rohingya crises


NEWSPAPERS reported that the government is shifting its previous stance on sheltering one lakh Rohingyas to remote Bhashan Char due to constant objections from the international community, especially the aid agencies. Bhashan Char is only 25 kilometres from Sandwip Island and it has a fast siltation rate. There is also ...

Football »

Lewandowski double edge Bayern past bottom side Paderborn


Bundesliga leaders Bayern Munich squeezed past bottom side Paderborn 3-2 on Friday as Robert Lewandowski netted twice to spare goalkeeper Manuel Neuer's blushes in their final game before facing Chelsea in the Champions League.Lewandowski now has a league-leading tally of 26 goals in the top flight, illustrating his importance to ...

Entertainment »

Priyanka wishes Sophie a happy birthday


Priyanka Chopra has shared a sweet birthday wish for sister-in-law and Game of Thrones actor Sophie Turner on her 24th birthday. She shared a picture from the 2017 MET Gala where she not just made her first appearance with now husband Nick Jonas but also met Sophie. Sharing the picture ...

Sports »

Venezuela's Rojas sets new indoor women's triple jump world record


Venezuela's Yulimar Rojas on Friday set a new indoor women's triple jump world record of 15.43m at a meeting in Madrid.The 24-year-old world champion bettered the previous world record of 15.36m set by Russia's Tatyana Lebedeva in Budapest in March 2004.Rojas's new mark also left her just seven centimetres short ...

International »

Sanders condemns Russian interference in 2020 elections


Agencies :Bernie Sanders on Friday condemned Russian interference in the 2020 election, telling Russia President Vladimir Putin that "if elected president, trust me, you are not going to be interfering in American elections."Sanders issued a statement in response to The Washington Post's report that the Vermont senator was briefed by ...

International »

China's President expresses thanks to Bill Gates help for tackling virus epidemic


AFP, Beijing :Chinese President Xi Jinping has written a letter expressing thanks to the Bill & Melinda Gates Foundation for the organisation's "generosity" and support tackling a deadly virus epidemic, state media said Saturday.The outbreak of the new COVID-19 strain has claimed 2,345 lives in mainland China and infected more ...

Entertainment »

Angrezi Medium’s song Ek Zindagi is all about living dreams


Homi Adajania’s upcoming comedy-drama film Angrezi Medium is about the lovable relationship between a father and his daughter. The chemistry of the relation is portrayed beautifully by Irrfan Khan and Radhika Madaan in the trailer and now the makers have released the first song from the fil titled Ek Zindagi ...

Football »

Messi sees 'strange' things at Barcelona after social media row


Lionel Messi said Wednesday it was "strange" to see Barcelona locked in a row over a company accused of criticising current and former players, including himself, on social media.Barcelona president Josep Maria Bartomeu said on Tuesday the club had terminated its contract with PR company, I3 Ventures, who had been ...

Editorial »

21 February should be celebration of free speech


THE historic Amtala, where Language Movement activists gathered on February 21, 1952 to defy a curfew and protest the then Pakistan government's refusal to recognise Bangla as one of the State languages of Pakistan is covered by encroachers.Pakistan government was ultimately compelled to include an article in the country's Constitution ...

International »

How Trump visit could leverage CAA and Kashmir against PM Modi


Agencies, New Delhi :As India rolls out the red carpet to receive US President Donald Trump next week, rough spots that have arisen in the wake of the Modi government's decisions on Kashmir and the subsequent passing of the Citizenship Amendment Act will need diplomatic resolution. The Modi government's sudden ...

International »

India ‘bigger problem’ than China: Michael Bloomberg on carbon emissions


PTI, Washington :India poses a bigger problem than China when it comes to fighting climate change, particularly on reducing carbon emissions, Democratic presidential aspirant and former New York mayor Michael Bloomberg has said.During his maiden appearance on a Democratic presidential primary debate in Las Vegas on Wednesday, Bloomberg said it ...

 
Items that you save may be read at any time on your computer, iPad, iPhone or Android devices.
 
Are you new to our website? Do you have already an account at our website?
Create An Account Log in here
Email this news to a friend or like someone
Email:
Write a comment to this news