2019 Supreme(Del) 290
IN THE HIGH COURT OF DELHI AT NEW DELHI
RAJIV SAHAI ENDLAW, J.
Mohan Buildmart Pvt. Ltd. - Petitioners
Versus
Hitesh Kumar - Respondents
CS(OS) No.457 of 2016
Decided On : 01-02-2019
For the Petitioners: Mr. Asit Tewari & Mr. Virender Rana, Advs.
For the Respondents: Mr. S.N. Gupta, Adv.
Forfeiture of earnest money requires proof of loss, and pre-suit interest may be denied in case of breach of contract.
Headnote:
Forfeiture - Agreement to Sell - Kailash Nath Associates Vs. DDA (2015) 4 SCC 136, Klintoz Pharmaceuticals Pvt. Ltd. Vs. Ravinder Shankar Mathur (2015) 4 SCC 136, Satish Verma Vs. Garment Gaft (India) Pvt. Ltd. 2018 SCC OnLine Del 6829, Mera Baba Pvt. Ltd. Vs. Ram Lubhaya Puri 2018 SCC OnLine Del 9502, Kamla Rameshchandra Sharma Vs. Maharashtra Rajya Wakhar Mahamandal, Pune 2008 SCC OnLine Bom 1433, Palm Art Apparels Pvt. Ltd. Vs. Enkay Builder Pvt. Ltd. MANU/DE/3533/2017 - The court discussed the legal position with respect to forfeiture of amounts, even if paid as earnest money, and cited various cases to establish that there can be no forfeiture without proving the loss. The court found that the defendant's written statement was bereft of any particulars of the loss suffered and held that the plaintiff was not entitled to pre-suit interest due to breach of the Agreement to Sell.
Fact of the Case:
The plaintiff sued for recovery of advance sale consideration with interest, claiming that the defendant failed to fulfill the Agreement to Sell and forfeited the earnest money. The defendant argued that the suit was time-barred and that the plaintiff was in breach of the agreement.
Finding of the Court:
The court found the suit to be within time and held that the plaintiff was not entitled to pre-suit interest. The court also found that there was no plea of loss suffered by the defendant due to the plaintiff's breach of the agreement.
Issues: The issues included the timeliness of the suit, the forfeiture of earnest money, and the defendant's claim of loss due to the plaintiff's breach.
Ratio Decidendi: The court held that there can be no forfeiture without proving the loss and found the plaintiff not entitled to pre-suit interest due to breach of the Agreement to Sell.
Final Decision: A decree was passed in favor of the plaintiff for recovery of the advance sale consideration with interest, but no costs were awarded.
1. None appeared for the defendant despite pass over.
2. The plaintiff has instituted this suit for recovery of Rs.5,41,27,154/- with pendente lite and future interest, claiming that (i) the defendant vide Agreement to Sell dated 17th April, 2013, as amended on 19th April, 2013, had agreed to sell his 1/3rd share admeasuring 27 Bighas 19 Biswas in Khatta No.44/46, Killa No.4/22(4-8), 23(4-16), 24(4-16), 25/1(2-8), 20/20/2(2-13), 21/1(2-3), 21/21/24(4-1), 25/2(4-2), 28(0-4), 24/3(4-12), 4(4-16), 7(4-16), 8(4-16), 13(4-16), 18/1(1-10), 24/18/2/1(2-16), 27(0-4), 102(11-1), 172(1-15) total ad-measuring 83 Bighas 18 Biswas in village Khera Dabar, Najafgarh, Delhi; (ii) the plaintiff in pursuance to the aforesaid Agreement to Sell paid advance consideration of Rs.4,15,56,354/- to the defendant out of the total agreed sale consideration informed to be of Rs.21,55,63,540/-; (iii) the defendant however avoided to take steps for getting No Objection Certificate (NOC) from the Competent Authority and/or for complying with the other formalities necessary for execution of the Sale Deed; (iv) the plaintiff had got issued a letter dated 11th January, 2014 to the defendant calling upon the defendant to perform his part of the Agreement to Sell; (v) the defendant in his reply dated 14th February, 2014 claimed forfeiture of Rs.4,15,56,354/-; (vi) the plaintiff got issued another notice dated 18th February, 2014 to the defendant controverting the claim of the defendant and claiming refund of the advance paid with interest; (vii) a suit was filed in the District Court, Dwarka by a third party against the defendant for specific performance of the agreement to sell, of the same land, claimed to have been executed by the defendant with that third party and the plaintiff was also impleaded in the said suit; vide interim order in the said suit filed by the third party, the defendant no.1 was restrained from alienating the land; (viii) it was also learnt that the wife and child of the defendant were also claiming rights against the defendant in the subject land; and, (ix) the plaintiff is thus entitled to refund of advance sale consideration of Rs.4,15,56,354/- together with interest at 9% per annum thereon amounting to Rs.1,25,70,800/- till the institution of the suit. Hence, the suit claim for Rs.5,41,27,154/-.
3. The suit was entertained and summons thereof ordered to be issued.
4. The defendant has filed a written statement pleading that, (a) this suit instituted on 8th September, 2016 with respect to monies admittedly paid under the Agreements to Sell dated 17th April, 2013 and 19th April, 2013 is barred by time; (b) the plaintiff paid a sum of Rs.2,15,56,354/- to the defendant as earnest money on 17th April, 2013 at the time of executing the Agreement to Sell dated 17th April, 2013; (c) in terms of the said Agreement to Sell, the plaintiff was to pay the balance amount of Rs.19,40,07,186/- on or before 17th July, 2013 and on receipt of which the defendant was to execute the Sale Deed; (d) just two days after the Agreement to Sell dated 17th April, 2013, the plaintiff approached the defendant expressing inability to pay the balance sale consideration of Rs.19,40,07,186/- by 17th July, 2013 and requested for extension of time for payment and the said request of the plaintiff was accepted by the defendant and time for payment extended till 30th August, 2013 and addendum dated 19th April, 2013 executed; (e) the plaintiff, in order to show his bona fides and willingness to conclude the contract, paid a further sum of Rs.2,00,00,000/- and it was mutually agreed that the said money would also constitute earnest money; (f) the plaintiff failed to pay the balance sale consideration of Rs.17,40,07,186/- on or before 30th August, 2013 and consequently, the amount of Rs.4,15,56,354/- paid by the plaintiff as earnest money stood forfeited and the Agreement to Sell stood cancelled; (g) the defendant, in fulfilment of his part of the Agreement to Sell ha