The main legal point established in the judgment is the interpretation of earnest money and its forfeiture in case of default by the purchaser.

JUDGMENT

Anil Kshetarpal, J. - Defendants-appellants are in the Regular Second Appeal against the judgments passed by the Courts below decreeing suit for refund of earnest money/part payment paid pursuant to the agreement to sell of immovable property.

2. In the considered view of this Court, following substantial questions of law arise in the present case:-

1) What is the meaning of earnest money?

2) Whether the judgments passed by the Courts below are result of mis-application of judgments passed by Hon'ble the Supreme Court in the case of Satish Batra vs. Sudhir Rawal, (2013) 1 SCC 345 and Videocon Properties Limited vs. Dr. Bhalchandra Laboratories, (2004) 3 SCC 711 ?

3. Some facts are required to be noticed.

4. Undisputed facts are that the defendants-appellants entered into an agreement to sell for sale of land measuring 36 kanals 15 marlas at the rate of Rs. 1,50,50,000/- per acre (8 kanals) and received Rs. 60,00,000/- as earnest money/part payment on 24.07.2006 itself. Sale deed was to be got executed and registered on 09.09.2006.

5. Now the disputed facts are plaintiff-respondent company claims that it was always ready and willing to perform its part of the contract and since 09.09.2006 and 10.09.2006 were holidays, therefore, their representatives went to the office of Sub Registrar on 11.09.2006 and defendants did not come forward. Hence, plaintiff in order to prove its attendance got attested an affidavit. It was further pleaded by the plaintiff that the defendants did not seek clearance.

6. On the other hand, defendants pleaded that they were present in the office of SubRegistrar on 11.09.2006 and representative of the plaintiff company was not present. It was pleaded that plaintiff was never ready and willing to perform its part of the contract. Defendants further pleaded that on 11.09.2006, they got their affidavits attested. They further pleaded that a notice calling upon the plaintiff to come on 14.12.2006 in office of registering authority and get the sale deed executed in terms of the agreement to sell was issued on 06.12.2006. On 14.12.2006, defendants again visited the office of the Sub-Registrar but the representative of the plaintiff company did not come forward. Thereafter, the defendants once again got served a notice dated 19.12.2006 informing the plaintiff that the amount has been forfeited.

7. Total sale consideration in the present case is Rs. 6,16,10,937.5. Earnest money/part payment is Rs. 60,00,000/- which is little bit less than 10%. The suit was filed by the plaintiff on 07.09.2009 i.e. just before the time when period of 3 years from the target date for execution and registration of the sale deed was about to expire.

8. As per the agreement to sell which is in Hindi, it has been written that the amount of Rs. 60,00,000/- has been paid as earnest money and part payment. It is further provided in Clause 4 of the agreement to sell, execution whereof is not disputed between the parties, that if the purchaser does not get the sale deed registered within the time prescribed then total earnest money shall stands forfeited and the agreement shall stands cancelled.

9. In the present case apart from Rs. 60,00,000/- which was the amount paid on the date the agreement to sell was executed, no further payment has been made.

10. The word 'earnest money' has been considered by Hon'ble the Supreme Court in the judgment Shree Hanuman Cotton Mills and others vs. Tata Air Craft Limited, (1969) 3 SCC 522 . In para 21, the earnest has been defined as under:-

"21. From a review of the decisions cited above, the following principles emerge regarding "earnest":

(1) It must be given at the moment at which the contract is concluded.

(2) It represents a guarantee that the contract will be fulfilled or, in other words, 'earnest' is given to bind the contract.

(3) It is part of the purchase price when the transaction is carried out.

(4) It is forfeited when the transaction falls through by reason of the default or failur