JUDGMENT

HANSARIA, J. :—The short point which needs to be decided in these appeals is whether the High Court of Delhi was justified in directing the appellant to refund the earnest money deposited by the respondents following allotment of land to them at the cost of Rs. 975/- per sq. mtr., which cost subsequently came to be enhanced to Rs. 1650.65, because of which the respondents refused to finally accept the allotment.

2. The aforesaid question arises on these facts. The appellant proposed to allot land to about 260 Co-operative Group Housing Societies in Dwaraka Phase-1, so also to about 60 such societies in Narela. When the proposal was first made on 1-10-90, the cost was fixed at Rs. 875/- per sq. Mtr. For Dwaraka land and Rs. 950/- for Narela land. The societies interested in the allotment of land were required to deposit Rs. 5 lakhs as earnest money and to formally apply for allotment. On the interested Societies accepting the offer, formal allotment was made by communication of the appellant dated 25-1-91. Before possession of the land came to be delivered, the appellant by its communication dated 3-11-92 stated that the premium of the land shall be payable at Rs. 1650.65/- per sq. mtr. which was the value determined by the Government of India, vide its notification dated 21/23-10-92. Some of the Societies approached the Delhi High Court being aggrieved at the enhancement of the premium. the High Court ultimately upheld the enhancement, which decision has since been reported in (1993) 26 Delhi Reported Judgments 156. On this Court being approached against the judgment of the High Court by way of special leave petitions, the same came to be disposed of by extending the time of paying the first instalment up to 31st May, 1993 which date had been fixed by the High Court as 30th April, 1993. This Court made it clear in its order that the facility to pay first instalment with interest will be available only up to 31st July, 1993; and no extension of time beyond this date would be granted.

3. On the respondents herein not paying the amount as ordered by this Court, the appellant forfeited a sum of money equivalent to 10% of what had become payable @1650.65, taking the same as earnest money due as per clause 411(sic) of the allotment order dated 3-11-1992. This action of the appellant was challenged before the Delhi High Court, who by impugned order has directed the appellant not to make any deduction and to refund the entire amount deposited by the respondents. The validity of this direction has been challenged in these appeals.

4. Shri Jaitley, appearing for the appellant, has confined his submission to that part of the direction of the High Court which is relatable to the refund of earnest money. Learned counsel contends that the respondents having had accepted the allotment on the conditions mentioned in the communication dated 25-1-91 which had visualised enhancement of the rate, and the enhancement having been regarded as reasonable by the High Court, the direction to refund the earnest money is not in accordance with the law for two reasons. First, the very conception of earnest money is that in case the contract goes off, the same can be forfeited. Secondly, the Delhi Development Authority (Disposal of Developed Nazul Land) Amendment Rules, 1981, which were notified on 11-11-91, having provided for forfeiture of earnest money in case of non-deposit of premium as mentioned in amended Rule 24(2), action of the appellant in forfeiting the earnest money was in accordance with the law.

5. In support of the first legal proposition, Shri Jaitley referred us principally to a three-judges Bench decision of this Court in shree Hanuman Cotton Mills v. Tata Aircrafts Ltd.,(1970) 3 SCR 127, in which there is a detail discussion of what is meant by earnest money and what is the consequences of deposit of such money and when can the same be forfeited. The Bench after reviewing various decisions noted in the judgment which includes that