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2018 Supreme(Del) 1457
IN THE HIGH COURT OF DELHI AT NEW DELHI
VALMIKI J.MEHTA, J.
ANOOP SINGH - Appellant
Versus
GOPAL KRISHAN BHURADIA & ANR - Respondents
RFA No.1061 of 2017 and C.M. No.46485 of 2017
Decided on : 05-07-2018
Advocate Appeared:
For the Appellant :Mr. Surendra Mishra, Advocate.
For the Respondent:Mr. D.K. Mishra, Advocate.
A seller under an agreement to sell cannot forfeit the amount paid by the buyer unless the seller pleads and proves that loss has been caused to him on account of the buyer's breach of contract.
Headnote:
The subject matter of the appeal is a suit for specific performance of an agreement to sell, or in the alternative, refund of the earnest money paid by the appellant to the respondents under the agreement to sell. The appellant had earlier filed a suit for recovery of double the amount of earnest money, which was dismissed as withdrawn. The trial court dismissed the suit for specific performance, holding that none of the parties were guilty of breach of contract, and that the appellant was not entitled to refund of the earnest money as no loss had been pleaded and proved to have been caused to the respondents for them to forfeit the earnest money amount. The appellant challenged the trial court's decision on appeal.
Fact of the Case:
The appellant and the respondents entered into an agreement to sell, under which the appellant paid an earnest money of Rs.10.25 lacs to the respondents. The appellant later filed a suit for specific performance of the agreement to sell, or in the alternative, refund of the earnest money. The trial court dismissed the suit, holding that none of the parties were guilty of breach of contract, and that the appellant was not entitled to refund of the earnest money as no loss had been pleaded and proved to have been caused to the respondents for them to forfeit the earnest money amount.
Finding of the Court:
The court held that the appellant was entitled to refund of the earnest money paid to the respondents under the agreement to sell, as the respondents had failed to plead and prove any loss caused to them due to the appellant's breach of contract. The court also held that the appellant was entitled to interest on the earnest money amount at the rate of 12% per annum from the date of payment till the date of recovery.
Issues: 1. Whether the appellant was entitled to refund of the earnest money paid to the respondents under the agreement to sell. 2. Whether the appellant was entitled to interest on the earnest money amount.
Ratio Decidendi: 1. The court held that the appellant was entitled to refund of the earnest money paid to the respondents under the agreement to sell, as the respondents had failed to plead and prove any loss caused to them due to the appellant's breach of contract. The court relied on the judgment of the Supreme Court in Kailash Nath Associates Vs. Delhi Development Authority and Another, (2015) 4 SCC 136, which held that before any seller under the Agreement to Sell seeks to forfeit the amount paid under the Agreement to Sell, the factum of causing of loss and its being proving is a sine qua non and failing which the seller cannot forfeit the amount paid to him by the buyer under the Agreement to Sell. 2. The court held that the appellant was entitled to interest on the earnest money amount at the rate of 12% per annum from the date of payment till the date of recovery. The court relied on the judgment of the Supreme Court in South Eastern Coalfileds Ltd. Vs. State of M.P. and Others (2003) 8 SCC 648, which held that the rate of interest should be 12% per annum from the date of the agreement to sell till the filing of the suit, and thereafter pendente lite and future till payment.
Final Decision: The appeal was allowed. A money decree was passed in favour of the appellant and against the respondents for a sum of Rs.9.25 lacs alongwith interest @ 12% per annum simple from 24.1.2013 till payment. Appellant/plaintiff is also entitled to costs of this appeal.
Based on the provided legal document, the maintainability of the recovery suit depends on the specific circumstances and the legal principles applied.
The court observed that the earlier suit filed by the appellant for recovery of double the earnest money was withdrawn and was based on a different cause of action—namely, breach of contract by the respondents. The current suit, however, pertains to the refund of the earnest money paid under the agreement to sell, which is a separate cause of action. The court indicated that the withdrawal of the earlier suit does not bar the current claim for refund, especially since the cause of action for recovery of earnest money is different from that of specific performance or breach of contract.
Furthermore, the court clarified that the issue of entitlement to refund of earnest money can be decided independently of the earlier suit, and that the respondents’ failure to prove loss or damage to justify forfeiture of the earnest money further supports the claim for refund.
Therefore, the court held that the suit for recovery of the earnest money was maintainable, provided the claimant could establish that the amount paid was refundable and that the respondents had not proven any loss or breach that would justify forfeiture. The court ultimately decreed that the respondents were liable to refund the earnest money along with interest, which indicates the suit was indeed maintainable under the given circumstances.
In summary, the recovery suit for the earnest money was maintainable as a separate cause of action, notwithstanding the withdrawal of the earlier suit, since it involved a different claim and the respondents failed to demonstrate a legal basis for forfeiture.
VALMIKI J. MEHTA, J.
1. This Regular First Appeal under Section 96 of Code of Civil Procedure, 1908(CPC) is filed by the plaintiff in the suit. By the impugned judgment dated 5.7.2017 trial court has dismissed the suit for specific performance filed by the appellant/plaintiff seeking specific performance of the Agreement to Sell dated 24.1.2013 with respect to third and fourth floor with roof rights of the property bearing no.14-B/40, measuring 88.9 sq yds, Dev Nagar, Karol Bagh, New Delhi-110005.
2. When this appeal came up for admission on 20.12.2017, the appellant/plaintiff sought only a limited relief in this appeal of refund of the amount paid by the appellant/plaintiff to the respondents/defendants under the subject Agreement to Sell being the amount of Rs.10.25 lacs out of the total sale consideration of Rs.90.25 lacs. The following order was passed on 20.12.2017:-
“CMs No.46486-87/2017 (both for condonation of delay in re-filing)
1.
Delay in re-filing is condoned, subject to just exception.
2.
Applications stand disposed of.
RFA 1061/2017 & CM No.46485/2017 (stay)
3.
Learned counsel for the appellant argues that appeal is only pressed not for seeking specific performance and which relief has been rejected by the trial court, but for refund of admitted earnest money amount which has been paid by the appellant to the respondents. It is argued that the trial court has committed an error in holding that relief sought of refund of earnest money is barred on account of earlier suit filed by the appellant for recovery of double the earnest money, inasmuch as, the cause of action in the earlier suit was different and was based upon breach of contract by the respondents/plaintiffs whereas the recovery of money aspect will not be based on any breach being caused of the respondents / plaintiffs but on account of appellant being entitled to refund of the earnest money as no loss has been pleaded and proved to have been caused to the respondents/ plaintiffs for them to forfeit the earnest money amount.
4. Notice be issued to the respondents, both in the ordinary method as well as by registered post AD, returnable before the Joint Registrar on 9th March, 2018.
5.
Trial court record be requisitioned.”
3. The issue therefore to be decided by this Court is that even if the appellant/plaintiff/buyer is guilty of breach of contract and did not have readiness and willingness to go ahead with the specific performance of the Agreement to Sell dated 24.1.2013, whether in such circumstances the respondents/defendants/sellers can forfeit the amount of Rs.10.25 lacs paid by the appellant/plaintiff to the respondents/defendants under the subject Agreement to Sell.
4. I have recently had an occasion to consider this aspect in the judgment delivered in the case of M.C. Luthra Vs. Ashok Kumar Khanna 2018 (248) DLT 161. In the judgment in the case of M.C. Luthra (supra) I have referred to the Constitution Bench judgment of the Supreme Court in the case of Fateh Chand Vs. Balkishan Dass AIR 1963 SC 1405 and which judgment holds that in case of a breach of an agreement to sell there cannot be forfeiture of an amount paid under the Agreement to Sell unless the seller pleads and proves that loss has been caused to him on account of breach by the buyer of not going through with the sale transaction. Constitution Bench of the Supreme Court in the case of Fateh Chand (supra) has held that except a very nominal amount no further amount can be forfeited by a seller. The Constitution Bench judgment of the Supreme Court in the case of Fateh Chand (supra) has been followed by the Supreme Court in its recent judgment in the case of Kailash Nath Associates Vs. Delhi Development Authority and Another (2015) 4 SCC 136 and which holds that before any seller under the Agreement to Sell seeks to forfeit the amount paid under the Agreement to Sell, the factum of causing of loss and its being proving is a sine qua non and failing which the seller cannot forfeit the amount pa
