The main legal point established in the judgment is that earnest money can be forfeited in favor of the defendant if the plaintiffs fail to comply with the terms of the agreement.

JUDGMENT

Rajbir Sehrawat, J. (Oral) - This is the second appeal by the plaintiffs in the original suit, which was filed for the specific performance of agreement to sell, and in which while reversing the judgment and decree passed by the Trial Court granting refund of earnest money to them, the lower Appellate Court has ordered dismissal of the said suit.

2. For the convenience, the parties herein are referred to as the plaintiffs and the defendant, as they were described in the original suit.

3. The facts in brief, necessary for disposal of the present appeal are that, the plaintiffs/appellants filed a suit asserting therein that the defendant/respondent was owner in possession of the suit property. She had entered into an agreement to sell dated 20.10.2009 with the plaintiffs; for sale of the suit property in their favour. As per the recitals in the agreement, two dates were fixed for execution of the sale deeds; first 20.6.2010; and for the remaining portion the sale deed was to be executed on or before 20.1.2011. It was further asserted in the plaint that the plaintiffs had also paid Rs.40 lakhs as earnest money out of the total sale consideration of Rs.2,19,00,000/-. Besides this, the plaintiffs spent a huge amount on the suit land for getting the same approved for developing residential complex. Although in the first instance, the possession was delivered to the plaintiffs, however, later on, the possession was forcibly taken away by the defendant. Still further, it was asserted in the plaint that earlier also, there was an agreement dated 19.8.2006 between the parties qua the same property. However, the said agreement was cancelled on 10.12.2007 due to some defect in the title of the defendant. Subsequently, the present agreement was entered into, in which the earnest money already paid pursuant to the previous agreement, was adjusted as the earnest money in the present agreement. With these pleadings, the plaintiffs filed suit for specific performance of the agreement; praying for execution of the sale deed or for alternate relief for recovery of Rs.1.50 crores, which included Rs.40 lakhs of earnest money and damages and Rs.70 lakhs as costs of improvements made over the property and the expenses incurred for getting the licence to set up a colony.

4. Upon notice, the defendant contested the claim made by the plaintiffs. It was asserted in the written statement that the plaintiffs did not have the balance amount of the sale consideration on the stipulated date of the execution of the sale deed. Earlier agreement dated 19.8.2006 qua the same land was also cancelled because of the said reason only. Despite that the defendant had agreed to adjust the earlier earnest money as the earnest money for the present agreement. On merits, it was claimed by the defendant that she remained present before the Sub-Registrar throughout the day on the stipulated date of execution of the sale deed, however, the plaintiffs did not come present to get the sale deed executed in their favour. It was further asserted that since the plaintiffs have not come forward to get the sale deed executed, therefore, the earnest money stood forfeited as per the terms of the agreement.

5. To prove their respective assertions, the parties led their respective evidence. After considering the evidence on file, the trial Court recorded a finding that the plaintiffs were not ready and willing to get the sale deed executed in their favour. However, the trial Court ordered the return of the earnest money along with interest @ 6% per annum, from the date of passing of the decree till realisation of the decretal amount. The reasoning given by the trial Court for ordering refund of the money was that, the law does not permit unjust enrichment of any party under a contract. Hence, the defendant was bound to return the amount of earnest money.

6. Feeling aggrieved against the said judgment and decree passed by the trial Court, the defendant preferred the appeal before