Frustration of contract due to land acquisition, entitlement to refund of earnest money, and application of equity and good conscience.

L.N.Mittal, J.

1. The instant second appeal has been preferred by plaintiff Baldev Singh, who was fairly successful in the trial court, but has been nonsuited by the lower appellate court.

2. It is undisputed that defendants, vide agreement to sell dated 17.05.1996, agreed to sell 08 kanals 19 marlas land to the plaintiff @ Rs.4,000/- per marla and received Rs.40,000/- as earnest money. Defendants also received further amount of Rs.2,00,000/- on 20.08.1996 and Rs.1,00,000/- on 26.11.1996. Lastly, date for execution of sale deed was extended to 20.04.1997.

3. Plaintiffs case is that before 20.04.1997 - the date stipulated for execution of sale deed, Punjab Government made announcement for development of Anandpur Sahib in view of forthcoming 300th birth anniversary of Khalsa at Anandpur Sahib and consequently, Development Authority was formed to prepare plan for acquisition of land of Anandpur Sahib town and surrounding villages. In view thereof, the plaintiff sought refund of his earnest money of Rs.3,40,000/- from the defendants, who agreed to pay the same to the plaintiff at his house on 20.04.1997, but the defendants did not turn up. Accordingly, the plaintiff sought refund of earnest money of Rs.3,40,000/- with interest at the rate of 11/2% per month w.e.f. 20.04.1997 till recovery. The plaintiff included Rs.1,78,500/- as interest for pre-suit period and therefore, filed suit for recovery of Rs.5,18,500/-.

4. The defendants, while admitting the agreement and receipt of earnest money of Rs.3,40,000/- from the plaintiff, controverted the other plaint allegations and inter alia pleaded that the plaintiff did not have requisite money for getting the sale deed executed and committed breach of agreement, although defendants were always ready and willing to perform their part of the agreement and therefore, earnest money paid by the plaintiff stands forfeited. Various other pleas were also raised.

5. Learned Additional Civil Judge (Senior Division), Anandpur Sahib, vide judgment and decree dated 27.05.2004, decreed the plaintiffs suit for recovery of Rs.3,40,000/- with interest @ 6% per annum from the date of filing of suit till recovery. However, first appeal preferred by defendant no.l has been allowed by learned District Judge, Rup Nagar vide judgment and decree dated 16.10.2006 and thereby, suit filed by the plaintiff stands dismissed. Feeling aggrieved, plaintiff has preferred the instant second appeal.

6. I have heard learned counsel for the parties and perused the case file.

7. At the outset, it may be noticed that learned counsel for the respondents has today filed in Court affidavit of respondent no.l, pursuant to order dated 21.04.2010. The same is taken on record, subject to all just exceptions.

8. Learned counsel for the appellant contended that the agreement was frustrated because of acquisition of the suit land and therefore, the plaintiff-appellant is entitled to return of earnest money paid by him to the defendants along with interest thereon.

9. On the other hand, learned counsel for the respondents vehemently contended that process for acquisition of land started on 15.08.1997 with publication of notification under Section 4 of the Land Acquisition Act, 1894 (in short - the Act), whereas date of execution of sale deed was 20.04.1997 i.e. before issuance of notification under Section 4 of the Act and therefore, plaintiff had already committed breach of the agreement by not getting the sale deed executed on the stipulated date i.e. 20.04.1997, when the process of acquisition had not commenced. It was also contended that plaintiff did not have requisite money with him to get the sale deed executed and the plaintiff himself committed breach of the agreement. It was also pointed out that defendants had even sent notice dated 10.07.1997 for getting the sale deed executed in terms of the agreement, but the plaintiff neither sent any reply to the notice nor got the sale deed executed.

10. I have carefully conside