Case Note & Summary
The appellant, Jyoti Adsod, filed a suit for recovery of Rs.70,000 paid as earnest money to respondent no.1, Sindhubai Shende, under an agreement of sale dated 10-12-2000 for a constructed portion on plot No.8A and 8B. The total consideration was Rs.2,80,000, and the sale deed was to be executed by 30-11-2003. The plaintiff alleged that the defendant failed to execute the sale deed despite requests, and later learned that part of the property was sold to defendant no.2. The plaintiff issued a notice on 18-5-2006 and filed suit on 23-11-2006 for refund of earnest money. The trial court decreed the suit, but the lower appellate court reversed it, holding that the plaintiff was not entitled to refund as she had not sought specific performance. The High Court framed a substantial question of law regarding the absence of a forfeiture clause. It held that the agreement did not contain any clause for forfeiture of earnest money, and the defendant could not retain the amount without such a clause. The court distinguished between earnest money and part payment, noting that in the absence of a forfeiture clause, the buyer is entitled to refund. The High Court allowed the appeal, set aside the appellate decree, and restored the trial court's decree for refund of Rs.70,000 with interest at 6% per annum from the date of suit till realization.
Headnote
A) Contract Law - Earnest Money - Forfeiture - Specific Relief Act, 1963, Section 22 - Refund of earnest money - The plaintiff paid Rs.70,000 as earnest money under an agreement of sale dated 10-12-2000. The defendant failed to execute the sale deed by the stipulated date. The trial court decreed refund, but the lower appellate court reversed it. The High Court held that in the absence of a clause providing for forfeiture of earnest money, the defendant could not retain the amount. The plaintiff was entitled to refund as the defendant failed to perform her part of the contract. (Paras 1-9)
Issue of Consideration
Whether the lower appellate court erred in denying refund of earnest money in the absence of a forfeiture clause or legal reasons for forfeiture
Final Decision
Appeal allowed. Judgment of lower appellate court set aside. Decree of trial court restored. Defendant no.1 to pay Rs.70,000 with interest at 6% per annum from date of suit till realization.
Law Points
- Forfeiture of earnest money requires express clause in agreement
- absence of clause entitles buyer to refund
- specific performance not necessary for refund claim
