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.

JUDGMENT :

K. GOVINDARAJAN THILAKAVADI, J.

1. In this Second Appeal, challenge is made to the judgment and decree dated 20.03.2019 passed in A.S. No.111 of 2013, on the file of the IV Additional District Judge, Coimbatore, reversing the Judgment and decree dated 02.09.2013 passed in O.S.No.367 of 2011, on the file of the I Additional Sub-Court, Coimbatore.

2. The case of the plaintiff is that the defendants are the absolute owners of the suit property. The first defendant on behalf of the defendants 2 and 3 agreed to sell the suit property to the plaintiff and received a sum of Rs.5,00,000/- as advance on 20.01.2011 and executed a receipt on the same day in favour of the plaintiff. Since there was some discrepancies in the title documents with regard to the extent of the properties agreed to sell, the plaintiff requested the 1^st defendant to bring out rectification deeds. But for the reasons best known to the 1^st defendant, he brought out the rectification deed only in respect of one sale deed dated 01.12.2006 and failed to bring out rectification deeds with regard to other title deeds. The plaintiff was always ready and willing to purchase the suit property provided all the relevant documents were made available by the defendants with clear title and extent. Since, the 1^st defendant gave evasive reply in bringing out the rectification deeds as requested by the plaintiff, the plaintiff issued a legal notice on 10.03.2011 for refund of entire advance money of Rs.5,00,000/- received by the 1^st defendant from the plaintiff with 24% interest from the date of receipt of the said notice till the date of payment. On 17.03.2011, the 1^st defendant issued a reply notice admitting the receipt of the advance amount of Rs.5,00,000/- paid by the plaintiff but refused to refund the said amount by stating that the plaintiff was in default. Hence, the suit.

3. The claim of the plaintiff was resisted by the 1^st defendant by stating that he was always ready and willing to perform his part of the contract. The plaintiff is only a name lender and son in law of one Gerard S. Nayagam, who is the intending purchaser. In spite of several demands made by the 1^st defendant, the intending purchaser, without any reasonable cause, postponed the execution of the sale deed and left the Country. The 1^st defendant has not committed any breach of contract. The intending purchaser did not have sufficient funds to purchase the suit property and instigated the plaintiff to file the present suit. Since the intending purchaser failed to perform his part of the contract, the 1^st defendant has suffered mental agony and unable to sell the property. He would further submit that the plaintiff has purposely included the properties of the 2^nd and 3^rd defendant with ulterior motive and so he is not entitled to get any relief as against the defendants 2 and 3. Since the 1^st defendant has suffered a huge loss, the amount paid by the plaintiff is liable to be forfeited. The 2^nd and 3^rd defendant submitted that there is no privity of contract between themselves and the plaintiff and there is no cause of action for the suit as against them and therefore, prayed for dismissal of the suit.

4. The trial court decreed the suit in favour of the plaintiff. Aggrieved by this, the 1^st defendant preferred the appeal suit in A.S. No.111/2013 before the IV Additional District Court, Coimbatore. The first appellate court set aside the judgment and decree passed by the trial court and dismissed the suit filed by the plaintiff. Challenging the same, the present second appeal is preferred by the plaintiff.

5. The second appeal was admitted on the following substantial questions of law:

"1. Whether the dismi