IMPORTANT POINT
Where a land is allotted and the allottee deposits some instalments but thereafter intimates the authority about his incapacity to pay up the balance instalments and requests for refund of the money paid, the allotting authority is entitled to forfeit the earnest money which had been deposited with the application form and not the 10% of the amount deposited.

JUDGMENT

Pattanaik, J.- Leave granted.

2. In these three appeals directed against the judgment of the Punjab and Haryana High Court the common question of law is involved and as such are heard together and are being disposed of by this common judgment.

3. The short question that arises for consideration is, where a land is allotted and the allotee deposits some instalments but thereafter intimates the authority about his incapacity to pay up the balance instalments and requests for refund of the money paid, is the allotting authority entitled to forfeit the earnest money deposited by the allottee or could be only entitled to forfeit 10% of the total amount deposited by the allotee till the request is made as directed by the High Court?

4. Haryana Urban Development Authority issued an advertisement inviting applications for allotment of residential plots at Karnal. The price of plots was different for different size. In accordance with the advertisement 10% of the total price was required to be deposited along with the application form as earnest money and where the plot was a preferential one an extra price of 10% of the total price was required to be deposited. In the letter of allotment that had been issued by the Estate Officer of the Haryana Urban Development Authority to the allotee, it was indicated that if the allotee refuses to accept the allotment then the same may be communicated within 30 days from the date of allotment letter failing which the allotment would stand cancelled and the earnest money deposited shall be forfeited to the authority and the allotee can have no claim for damages. It was also stipulated in the letter of allotment that the balance amount of the tentative price indicated in the letter of allotment could be deposited either in lump sum without any interest within 60 days from the date of issue of the allotment letter or on 6 annual instalments and each instalment would be recoverable together with interest at 15%. On receipt of the letter of allotments the allotees who are the respondents in these appeals accepted the allotment and made the initial deposits as required and thereafter chose to deposit the balance amount in instalment. Each of the allotee-respondent did deposit some instalment and thereafter intimated the authority that they will not be in a position to take the land allotted and requested for refund of the amount. In some cases the authority replied that their prayer for cancellation of allotment cannot be acceded to and in some other cases even before any consideration made by the authority to the request of the allotees, the allottees approached the High Court. The High Court having directed the authority to refund the balance after deducting 10% of the amount deposited by each of the allotee, the Haryana Urban Development Authority as well as the State of Haryana have preferred these appeals.

5. Mr. Arun Jaitley, the learned senior counsel appearing for the appellants contended that in view of the fact that the allotee was required to deposit 10% of the purchase price as earnest money while the application for allotment was made and having accepted the allotment in question with the terms and conditions stipulated in the letter of allotment, when the transaction falls through by reasons of default or failure on the part of the allottee, the authority would be entitled to forfeit the entire earnest money deposited and not the 10% of the amount deposited till then as directed by the High Court. Mr. Jaitley contends earnest represents a guarantee that the contract will be fulfilled and is given to bind the contract and therefore the same is forfeited when the transaction falls through on account of failure on the part of the purchaser. According to the learned counsel in view of the specific clauses of the letter of allotment the High Court committed gross error in directing forfeit of only 10% of the amount deposited. Mr. Mahabir Singh, learned counsel ap