Case Analysis: Shree Hanuman Cotton Mills Vs Tata Aircraft Ltd (1970 (3) SCR 127)

Rahul Jain, Symbiosis Law School, Noida

INTRODUCTION:

Shree Hanuman Cotton Mills v. TATA Aircraft Ltd1 is a case, which was filed before the Court after the breach of a contract of sale of goods took place. The Indian Contract Act, 1872 provides for the concept of ‘earnest money’ in Section 74 of the act. It can in layman terms, be defined as a token amount, paid by the buyer to convey that its inclination towards certain property/goods is actual. This judgement marked the classification of conditions required to term a sum paid by the buyer as earnest money.

BENCH:

• Hon’ble Justice Vaidyialingam • Hon’ble Justice Shelat • Hon’ble Justice Dua

FACTS:

In the case being analyzed, the Respondent, TATA Aircraft Ltd and the Appellant, Shree Hanuman Cotton Mills entered into an agreement, whereby the appellant was to buy and the respondent was to sell some aero-scrap at a price of Rs. 10,00,000. A payment of Rs. 2,50,000 was made in favour of the respondent on the day of the contract, the balance decided to be paid in two instalments.

Further, the parties agreed to make the respondent’s terms of business, elements to the terms and conditions pertaining to the contract. As per Clause 9 of the respondent’s terms of business, the purchasing party is bound to deposit 25% of the sum in entirety with the respondent, which the respondent is to retain as earnest money. Such an amount is adjustable in the concluding bills and no interest is allowed to the buyer on this.