Earnest money is a sum of money paid by a buyer to a seller as a token of good faith and to bind the contract. It is forfeited if the buyer fails to complete the purchase.

( 1 ) THIS regular second appeal is by the defendant against the judgment and decree dated 26. 4. 73 of the Addl. District Judge Delhi, whereby he allowed the appeal of the plaintiff and decreed the suit for Rs. 2,000. 00 with costs and future interest at the rate of 6/o per annum from the date of institution of the suit till realisation of the amount.

( 2 ) THE facts are not many. The parties entered into an agreement for sale of a bus chassis by the defendant to the plaintiff. An amount of Rs. 2,000. 00 was given by the plaintiff to the defendant when the agreement was entered into. The plaintiff contends that this amount was given by way of advance or part-payment but the defendant contends that it was by way of earnest money. The contract of sale having fallen through the defendant claimed to have forfeited this amount. The plaintiff, however filed a suit for recovery of Rs. 6. 000. 00. Rs. 2. 000. 00 being the refund of part-payment/advance and Rs 4,000. 00 as damages suffered by it. The trial court dismissed the suit. In first appeal, the plaintiff confined its claim to refund of Rs. 2,000. 00 only and, as noted above, its suit for this amount was decreed. Mr. Sharma. learned counsel for the appellant-defendant, has contended that circumstances showed, that the amount of Rs. 2,000. 00 was given by way of earnest money and further that the breach was committed by the plaintiff. He said of finding the lower appellate court that both the parties were guilty. of breach of the contract was not correct. In the circumstances therefore, he said that the defendant was well within his right to forfeit the earnest money.

( 3 ) AT this stage, it will be appropriate to refer to some of the relevant facts. Ex. P-l is a letter dated 17. 12. 1959 written by the defendant to the plaintiff for sale of a bus chassis for a consideration of Rs. 30, 935. 00. In this letter, the defendant said that the amount be paid to United Motors Jaipur, on his behalf where he had booked the bus chassis. He said after the whole of the amount had been paid, the plaintiff would be owner of the bus chassis. It appears that ultimately a vehicle was to be built on the bus chassis and that was to be financed by the plaintiff. Terms to that effect are mentioned in Ex. P-l. Ex. P-6 is a letter dated 2. 1. i960 written by the plaintiff to United Motors, Jaipur. In this it was mentioned that a bus chassis was booked by the defendant, who was the hirer of the plaintiff, and that the plaintiff was sending a suroofrs. 29,000. 00 bymeans of a bank draft. It was pointed out that a sum of Rs. 2,000. 00 had already been deposited with the United Motors by the defendant. The price of the bus chassis was mentioned at Rs. 30. 935. 00. With this letter dated 7. 1,1960 (Ex. P-7) of the defendant to the United Motors, Jaipur, was also sent wherein United Motors were requested to deliver the bus chassis to the plaintiff. There is another letter (Ex. P-2) dated 6. 2. 1960 written by the defendant to the plaintiff wherein the defendant confirmed that he had sold all his rights in the bus chassis for Rs. 30,9 3 5. 00 to the plaintiff and that a sum of Rs. 2,000. 00 was paid by him as advance to United Motors, Jaipur, at the time of registering the bus chassis in his name and that amount had since been received by the defendant from the plaintiff in cash on 6. 2. 1960 itself. The defendant in this letter also requested the plaintiff to pay the balance of Rs. 28,935. 00 in his account to United Motors, Jaipur, who had been instructed by him to deliver the bus chassis to the plaintiff. It appears for some reason or the other, the bus chassis could not be delivered by the United Motors, Jaipur, to the plaintiff. By letter dated 5. 4. 1960 (Ex. PW I/i), United Motors, Jaipur, informed the plaintiff that the bus chassis would be offered some time by 15th April 1960 but that the exact date of delivery would be intimated after some time. Then by letter dated 3. 4. 1960 (Ex