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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Anil Kshetarpal, J.
Col. Iqbal Singh & Ors. – Appellants
Versus
Madan Pal (deceased) Through Lrs & Anr. – Respondents
RSA-5437-2015 (O&M) and RSA-6241-2015 (O&M)
Decided On : 24-11-2022
earnest money - specific performance of agreement to sell - Section 41 of the Punjab Courts Act, 1918 - Maula Bux Vs Union of Jndia(1969)2 SCC 54, Satish Batra Vs. Sudhir Rawal, (2013) 1 SCC 345 - Om Prakash and others Vs. M/s Ganga Developers Pvt. Ltd.'
Fact of the Case:
The case involved a dispute over the refund of earnest money in an agreement to sell for immovable property. The plaintiffs claimed specific performance of the agreement, while the defendants claimed that the plaintiffs had failed to fulfill the terms of the contract.
Finding of the Court:
The trial Court found that the plaintiffs were not always ready and willing to perform their part of the contract and thus were not entitled to the decree of specific performance. The Court ordered the refund of the earnest money along with interest to avoid undue enrichment.
Issues: The main issue was whether the plaintiffs were ready and willing to perform their part of the contract, and whether the refund of earnest money was justified.
Ratio Decidendi: The Court found that time was the essence of the contract and that the plaintiffs had failed to honor the terms of the agreement. The Court also highlighted the legal principles related to forfeiture of earnest money as per the terms of the contract.
Final Decision: The Court allowed one appeal and dismissed another, thereby dismissing the plaintiffs' suit for specific performance and setting aside the judgment and decrees directing the defendants to return the earnest money along with interest.
JUDGMENT
Anil Kshetarpal, J. - The Regular Second Appeal in the States of Punjab, Haryana and Union Territory, Chandigarh, is governed by Section 41 of the Punjab Courts Act, 1918 and not by Section 100 of the Code of Civil Procedure, 1908, as held by a five Judge Bench of the Supreme Court in Pankajakshi (Dead)JhroughLRsV.ChandrikaandOhers3J2016)6SCC15Z..
2. The following substantial question of law arises for adjudication in the present case. If the Court comes to a conclusion that the proposed purchaser/vendee, in the agreement to sell for immovable property, has committed a default in performing his part of the terms of the contract, then, whether a decree for refund of the earnest money is required to be passsed?.
3. These two cross-appeals have been filed by the plaintiffs as well as the defendants. The parties shall be referred to by their status in the suit. Both the Courts, while refusing to grant the relief of specific performance of the agreement to sell, have ordered the refund of the earnest money along with interest. The plaintiffs claim relief of specific performance of the agreement to sell, whereas, the defendants (owners) claim that the judgments passed by the Courts directing them to refund the amount of earnest money along with interest are not in accordance with the settled law.
4. The relevant facts, in brief, are being noticed. The execution of the agreement to sell is admitted between the parties. The relevant terms of the agreement are as under:-
'1- That the total sale price of the said property has been fixed at Rs.Seven crores only (Rs.7,00,00,000/-) That the said purchaser have paid to the seller a sum of Rs.1,05,00,000/- only (Rupees One Core and Five lakhs) as earnest money for the sale of the said property
3- That the last date for the executionand registration of the final documents sale deed has been fixed on or before 20th Jan 2006.
4- That all expenses on the Sale Deed i.e. stamp papers and registration charges including any other expenses shall be borne by the purchaser.
5- That the seller shall register the deed in the name of the said purchasers only.
6- That the seller shall hand over the vacant possession of the said property only after the registration and full payment.
7-That if the purchaser backs out from this deed, then his earnest money shall stand forfeited in favour of the said seller and the deal shall stand cancelled.
8- That the sale of the said property includes nothing else except land. The standing plantation of the poplar trees is that of the seller and shall be disposed off before handing over possession of the said property.
9- That the payment schedule will be as under and NO deviation from the same shall be acceptable to the seller. Time is the essence of contract:-
(a) Other than earnest money of Rs.One Crore five lakhs only (Rs.1,05,00,000/- only) Rs.Three crores only (Rs.3,00,00,000/- only) shall be payable on or before 12th April 2005.
(b) Final payment of balance amount of Rs.Two crores and ninety five lakhs only (Rs.2,95,00,000/-only) shall be made by 20 Jan 2006.
10- That it is made clear that time is the essence of the contract. The last date for final payment & registration has been agreed between the parties to the agreement as 20/01/06. In case the final payment & registration is not performed by 20/01/06, the said date shall not be extended and the agreement shall deemed to be cancelled and the earnest money shall stand forfeited. In case seller causes delay, he shall return earnest money in double amount.'
Note:- There was no clause No.2 in the agreement.
5. Approximately 99 bighas of land located in the outskirts of Chandigarh was agreed to be purchased for a total sale consideration of Rs.7,00,00,000/-. The defendants have admitted the receipt of Rs.1,05,00,000/- as earnest money. The plaintiffs claim that they went to the residence of the defendants on 12.04.2005 with the next installment of Rs.3,00,00,000/- but the defendants refused to receive the same. Thereafter, t
The main legal point established in the judgment is that the forfeiture of earnest money as per the terms of the contract is justified, especially when time is the essence of the contract.
(1) Agreement to Sell – Unless plaintiff specifically seeks refund of earnest money at the time of filing of suit or by way of amendment, no such relief can be granted to him – Prayer clause is a sin....
The main legal point established in the judgment is that the failure of one party to perform its obligations under a reciprocal contract precludes that party from claiming performance of the reciproc....
(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....
Forfeiture of advance payment justified when buyer fails to perform contractual obligations, as per Specific Relief Act.
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