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IN THE HIGH COURT OF KERALA AT ERNAKULAM
A. BADHARUDEEN, J
Mathukutty S/o. Kunjukutty - Appellant
Versus
Mukesh Kumar S/o. Muthuswamy Achary - Respondent
RFA NO. 494 OF 2015
Decided On : 11-03-2025
(A) Code of Civil Procedure, 1908 - Section 96 and Order XLI Rule 1 - Transfer of Property Act, 1882 - Section 55(6)(b) - Breach of contract - Plaintiff sought return of advance money of Rs.3 lakh due to defendant's refusal to execute sale deed despite readiness - Trial court decreed in favor of plaintiff, directing repayment with interest - Court emphasized that plaintiff did not improperly decline delivery of property and was entitled to return of advance. (Paras 7 , 11 , 27 )
(B) Contract Law - Earnest Money - The court reiterated that earnest money serves as a guarantee for contract performance and cannot be forfeited unless stipulated in the contract - The plaintiff's readiness to execute the agreement was established, countering the defendant's claims of forfeiture. (Paras 18 , 19 )
Facts of the case:
The plaintiff entered into an agreement with the defendant to purchase property for Rs.11,20,000/-, paying Rs.3 lakh as advance. The defendant failed to execute the sale deed, leading to the suit for recovery of advance. (Paras 4 , 5 )
Findings of Court:
The court affirmed that the plaintiff was ready and willing to perform the contract, and the defendant's reluctance justified the return of the advance amount. (Paras 27 , 30 )
Issues: 1. Was the plaintiff ready and willing to execute the agreement? 2. Was the trial court justified in granting return of advance money? 3. Is the advance money liable to be forfeited? (Paras 14 )
Ratio Decidendi: The court held that the plaintiff's willingness to execute the sale deed was evidenced, and the defendant's failure to comply negated any forfeiture claims. (Paras 27 , 30 )
Result: Appeal dismissed; trial court's decree confirmed.
Based on the provided legal document, the key facts are as follows:
The plaintiff entered into an agreement with the defendant to purchase a property for Rs.11,20,000, paying Rs.3 lakh as an advance or earnest money (!) .
The agreement stipulated that the sale deed was to be executed within five months, with the deadline being 02.02.2012. The plaintiff claims to have requested the defendant to execute the sale deed on 31.01.2012, personally informing the defendant and even reaching the sub-registrar’s office with the remaining consideration (!) (!) .
The defendant admits to the execution of the agreement but contends that the plaintiff was not ready and willing to perform his part of the contract, citing alleged delays and financial issues faced by the plaintiff, including payments made to third parties for property purchases (!) (!) .
The plaintiff asserts that he was prepared and willing to complete the transaction and that the defendant’s reluctance to proceed justified the claim for the return of the advance amount (!) (!) .
The trial court found that the plaintiff demonstrated readiness and willingness to perform the contract, and that the defendant’s failure to execute the sale deed was unjustified, leading to a decree for the return of Rs.3 lakh with interest (!) .
The defendant’s defense included the argument that the agreement contained a clause permitting forfeiture of the advance if the plaintiff failed to perform, and that the plaintiff’s failure to execute the sale deed justified the forfeiture of the advance money (!) (!) .
The court clarified that for the forfeiture of earnest money or advance payment, the terms must be explicit, and the party seeking forfeiture must have improperly declined to accept delivery of the property. It was established that the plaintiff did not improperly decline delivery, as he was ready and willing, and the defendant was at fault (!) (!) .
The court also examined the nature of the payment, concluding that the advance amount was not merely part of the purchase price but was paid as earnest money, which, under the applicable law, could be forfeited only if the party failed to perform their contractual obligations properly (!) (!) .
The court noted that the defendant’s claim of loss due to payments made to third parties for property purchases was not sufficient to justify forfeiture, especially since the defendant could pursue those third parties directly (!) .
Ultimately, the court upheld the findings that the plaintiff was ready and willing to perform and that the defendant’s failure to do so justified the return of the advance amount. The appeal was dismissed, and the trial court’s decree was confirmed (!) .
The defendant was also ordered to pay court fees within a specified period, and the appeal process included directions for recovery of the court fee if not paid (!) (!) .
In summary, the case revolves around whether the plaintiff properly declined to accept delivery of the property, justifying the return of the advance, and whether the defendant’s claim for forfeiture of the advance due to breach was valid. The court found that the plaintiff’s readiness and willingness negated the forfeiture claim, leading to the judgment in favor of the plaintiff.
JUDGMENT
This regular first appeal has been filed under Section 96 read with Order XLI Rule 1 of the Code of Civil Procedure, 1908 , challenging the decree and judgment dated 30.07.2013 in O.S. No.80/2012 on the files of the Sub Court, Pathanamthitta. The appellant herein is the defendant and the respondent herein is the plaintiff.
2. Heard the learned counsel for appellant and the learned counsel appearing for the respondent, in detail. Perused the verdict under challenge, the records of the trial court and the decisions placed by both sides.
3. Parties in this appeal shall be referred with reference to their status before the trial court.
4. The plaintiff filed suit seeking return of advance money to the tune of Rs.3 Lakh with 12% interest, contending that the defendant has improperly declined to perform his part of contract inspite of willingness of the plaintiff to execute the sale deed in terms of an agreement executed between them on 02.09.2011, whereby it was agreed between the parties to sell the plaint schedule property for a total sale consideration of Rs.11,20,000/-.
5. The defendant resisted the suit by admitting the execution of the agreement. The contention raised by the defendant is that, the agreement could not be executed because of the laches of the plaintiff, though the defendant was ready to execute the sale deed on or before 02.02.2012 as agreed upon by the plaintiff and the defendant.
6. The trial court, on appreciation of rival pleadings, raised necessary issues and tried the matter. PWs 1 and 2 were examined and Exts.A1 to A6 were marked on the side of the plaintiff. DWs 1 to 5 were examined and Exts.B1 to B9 were marked on the side of the defendant.
7. Finally, the trial court found that, even though the plaintiff had been ready and willing to execute the sale deed as agreed upon, the reluctance on the part of the defendant resulted in non-execution of the sale deed and accordingly the suit was decreed as under: 1. The defendant is directed to repay the advance amount of Rs.3 lakh to the plaintiff with interest at the rate of 6% from the date of suit till its realisation from defendant and his asset.
2. By this decree a charge is created on the property attached before judgment.
3. The plaintiff is also entitled for the cost of the suit.
8. The sum and substance of the argument tendered by the learned counsel for the defendant is that, in this matter, though the suit to get back the advance sale consideration has been filed within three years from the date of agreement, the plaintiff did not file suit to get performance of the contract and the same would show that the plaintiff was not ready and willing to execute the sale deed. It is pointed out by the learned counsel for the defendant that, in the agreement for sale marked as Ext.A1, it has been provided specifically that if there was failure on the part of the plaintiff to execute the sale deed, then the advance amount is to be forfeited. The learned counsel for the defendant placed decision of the Apex Court reported in [2012 KHC 4620 : 2012 (4) KHC SN 20] Satish Batra v. Sudhir Rawal , when the Apex Court dealt with a case, where the facts of the case reads as under:
The clause, therefore, stipulates that if the purchaser fails to fulfil the conditions mentioned in the agreement, the transaction shall stand cancelled and earnest money will be forfeited. On the other hand, if the seller fails to complete the transaction, the purchaser would get double the amount of earnest money. Indisputedly the purchaser failed to perform his part of the contract, then the question is whether the seller can forfeit the entire earnest money. When we examine the clauses in the instant case, it is amply clear that the clause extracted hereinabove was included in the contract at the moment at which the contract was entered into. It represents the guarantee that the contract would be fulfilled. In other words, 'earnest' is given to bind the contract, which is a part of
A party seeking the return of advance money must establish that they did not improperly decline to accept delivery, and the terms of the contract regarding earnest money must be clear to justify forf....
The plaintiff must convincingly demonstrate readiness and willingness to fulfill contractual obligations for specific performance.
A plaintiff seeking specific performance must prove both readiness and willingness to perform the contract, failing which the court may order a refund of earnest money instead.
A buyer's advance can only be forfeited if explicitly labeled as earnest money within a contract, and this must be linked directly to the buyer's default.
(1) Agreement to Sell – Suit for Specific Performance – Plaint may be amended at any stage of proceedings to enable plaintiff to seek alternative relief, including that of refund of earnest money and....
A party can claim a refund of earnest money if the other party fails to provide a valid title, and time is not necessarily the essence of the contract.
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