The main legal point established in the judgment is that the nature and character of the payment, the intention of the parties, and the designation used by the parties to indicate the nature of the sum paid are crucial in determining whether the money paid was intended as earnest money, security for performance, or part payment, and whether it is liable to be forfeited upon breach of the contract.

Rajiv Sahai Endlaw, J.

1. This appeal impugns the judgment and decree dated 25th February, 2009 (of the Court of Addl. District Judge, Delhi in CS No.75/2008) in favour of the respondent, of recovery of principal sum of Rs.5 lacs together with Rs.55,000/- towards interest till the date of institution of the suit and interest pendente lite and future @ 6% per annum, from the appellant/defendant.

2. Notice of the appeal was issued and subject to the deposit by the appellant/defendant of the entire decretal amount in this Court, the execution stayed. The appellant/defendant preferred SLP (Civil) No.14282/2009 to the Supreme Court against the said order but which was dismissed vide order dated 22nd June, 2009. The appeal was admitted for hearing on 14th September, 2009 and the Trial Court record was requisitioned. Vide order dated 4th December, 2009, subject to the respondent/plaintiff furnishing adequate security and subject to restitution in the event of appellant/defendant succeeding, the respondent / plaintiff was permitted to withdraw the decretal amount deposited by the appellant/defendant. The record shows the decretal amount to have been so released to the respondent/plaintiff against Bank Guarantee. Hearing of the appeal was expedited on the application of the appellant/defendant that he is a senior citizen.

3. The counsels have been heard.

4. The respondent/plaintiff had instituted the suit from which this appeal arises for recovery of Rs.6,72,500/- from the appellant/defendant pleading:-

(a). that the respondent/plaintiff had agreed to purchase a Mercedes Benz Car Model 300-D having registration No.DL-9C-1687 represented to be a 1995 Model from the appellant/defendant for a sum of Rs.36 lacs and a sum of Rs.5 lacs was paid to the appellant/defendant vide cheque dated 16th August, 1995 against receipt of the same date issued by the appellant/defendant;

(b). that the appellant/defendant after receiving the said sum of Rs.5 lacs assured the respondent/plaintiff that he will produce/show the relevant documents pertaining to the said car but did not fulfill the said assurance;

(c). it also transpired that the appellant/defendant misrepresented that the car was a 1995 model, in fact, it was actually a 1992 model;

(d). that the appellant/defendant vide letter dated 1st September, 1995 threatened to forfeit the part payment of Rs.5 lacs;

(e). the respondent/plaintiff vide its reply dated 4th September, 1995 informed the appellant/defendant of cancellation of the deal and called upon the appellant/defendant to refund the sum of Rs.5 lacs together with interest @ 18% per annum;

(f). that the appellant/defendant instead of refunding the amount received sent a legal notice dated 12th September,1995 claiming to have forfeited the sum of Rs.5 lacs; and,

(g). that the aforesaid amount was not refunded despite legal notice dated 11th April, 1996 intimating the appellant/defendant that interest @ 18% per annum thereon will be charged. Accordingly, the suit was filed in or about July, 1997.

5. The appellant/defendant contested the suit, by filing a written statement, on the grounds:-

(i). denying to have represented that the car was a 1995 model;

(ii). that the respondent/plaintiff was fully aware that only those cars (above 1600 cc) could be imported into India which were at least one year used and registered abroad in the name of an NRI returning on transfer/residence after staying abroad for more than two years and that the whole process of import takes at least 12 to 15 months and thus the question of a year 1995 model car being made available for sale in the Indian market in the same year did not arise;

(iii). that the appellant/defendant had already shown the original documents of the car to the respondent/plaintiff at the time of accepting the cheque for Rs.5 lacs as advance and only after seeing such original documents and seeing the car model and the year of manufacture was 1992 did the respondent/plaintiff agr