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2025 Supreme(Telangana) 1232
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
K. LAKSHMAN, J.
Dharavath Ravi - Appellant
Vs.
The State of Telangana and Others - Respondent
Writ Petition No.42451 of 2022
Decided On : 18-08-2025
Advocate Appeared:
For the Appellant : S Ganesh
For the Respondent: GP For Housing
Forfeiture of token advance payments is prohibited if there is no clear mutual agreement labeling them as earnest money or if the parties have not suffered loss, as established in contract law.
Headnote:(A) Government Order for disposal of assets - High Power Committee formation - Auction process for property sale - Regulations regarding token advance payment stated - Nature of advance payments discussed, particularly the distinction between earnest money and part payment - Clear guidelines for forfeiture of token advances in case of non-performance were outlined. (Paras 4, 10, 11, 16, 18)
(B) Contract Law - Forfeiture of deposits - Conditions under which advance payments can be forfeited were explored, with emphasis on circumstances and parties’ intentions behind payments. The court reiterated that the forfeiture must not be arbitrary. (Paras 11, 16)
Facts of the case:
The petitioner participated in an auction for a flat and paid a token advance of Rs. 2,00,000/-. He encountered issues securing a bank loan and subsequently requested extensions for payment, which were not granted, leading to a notice of forfeiture from the authorities.
Findings of Court:
The court ruled the forfeiture was unreasonable as the respondent had not suffered any loss, stating the advance paid could not be forfeited given the circumstances.
Issues: The primary issue was whether the forfeiture of the token advance was justified despite the petitioner’s efforts to procure financing.
Ratio Decidendi: The court highlighted the importance of intentions behind payments and the need for clear contractual terms to justify forfeiture, emphasizing that an advance should not be treated as earnest money without mutual agreement.
Result: The forfeiture of Rs. 2.00 lakhs was declared illegal, ordering the amount to be refunded to the petitioner. Respondent No.2 directed to pay the amount within thirty days.
| Table of Content |
|---|
| 1. factual background of the auction process. (Para 2) |
| 2. respondents' arguments regarding the forfeiture of the advance. (Para 3) |
| 3. court's analysis of the petitioner's payment issues. (Para 4 , 5 , 6 , 7 , 15 , 16) |
| 4. legal principles regarding advance and forfeiture. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14) |
| 5. court's final order regarding the refund. (Para 18 , 19) |
ORDER :
K. LAKSHMAN, J.
Heard learned counsel for the petitioner and Mr. K. Madhusudhan Reddy, learned Standing Counsel for respondent No.4.
FACTS
2. The Government has issued G.O.Rt.No.20, dated 10.03.2020 for disposal of all assets of respondent No.2 by conducting an open auction on an “as is where is” basis, and constitution of a High Power Committee of Secretaries to work out the modalities for disposal.
2.1. Pursuant to the said G.O., respondent No.4 vide letter dated 12.01.2022 sought permission from the Government of (28) Projects of respondent No.4 by the Agencies viz., HMDA, TSIIC and the District Collectors concerned shown against the projects in Annexure enclosed and also authorized the concerned agencies to prepare and finalize the modalities for auction. Vide letter dated 27.01.2022, the Special Chief Secretary to Government has accorded permission to respondent No.4 to conduct said 28 Projects. The details of the same are specifically mentioned in Annexure to the said proceedings dated 27.01.2022. It includes Sahabhavana Township, Bandlaguda in respect of 2246 Flats. The Agency responsible to conduct auction is respondent No.3 - HMDA. Accordingly, HMDA prepared a brochure regarding conduct of auction at Bandlaguda Township. In the said brochure, it is specifically stated that finished flat is @ Rs.3,000/- per square feet and semi-finished flat @ Rs.2,750/-.
2.2. Clause - 12 of the said brochure deals with payment schedule and the same is mentioned as under:
“Payment Schedule
a) Soon after completion of allotment, a “Letter of intimation” will be sent to the allottee, for payment of 10% token advance within 07 days.
b) After payment of 10% Token Advance within 07 Days, a “Letter of allotment cum confirmation” will be issued to the successful allotee for payment of balance amount.
| Sl.No. | Installment | Amount Payable | Payable by | If not paid within stipulated time |
| 1 . | First Installment | 80% of Sale Value | Within 60 days from the date of issue of allotment letter | 10% token advance will be forfeited. |
| 2 . | Final Installment | Balance sale price, including 10% token advance paid | On or before 90 days from the date of allotment letter. | 10% token advance will be forfeited. |
c) Cash Discounts
2% Discount is allowed, if the cost of the flat total value is paid within 30 days from date of Allotment.
d) “No-Objection Certificate” (NOC) will be issued after payment of 10% token advance for obtaining Loans from Banks subject to sanction by the respective Banks and forwarding the registered sale deed directly to the Bank.”
2.3. In terms of the said brochure, Notification was issued on 11.05.2022 and online applications were received and flats were allotted on 22.06.2022 as per schedule. Pursuant to the said brochure, the petitioner participated in the said auction in respect of flat in Bandlaguda. He has paid an amount of Rs.1,000/- towards fee to participate in the said auction process. Respondent No.3 has conducted auction and drawl of lots. Flat No.705 in C05 Tower with 798 square feet was allotted to the petitioner under the said auction and drawl of lots conducted by respondent No.3. Accordingly, respondent No.2 has issued Letter of Intimation dated 03.07.2022 informing the petitioner with regard to allotment of the said 2 BHK Flat i.e., Flat No.705 in C05 tower at Rs.3,000/- per square feet. As per the said allotment letter, the petitioner herein has to pay 10% of the total cost of the flat within seven (07) days, 80% as first installment within 60 days and the balance 10% as final payment within 90 days along with applicable development charges and corpus fund.
2.4. According to the peti
