The main legal point established in the judgment is that earnest money is forfeited when the transaction falls through due to the fault of the purchaser.

Findlay, J C—The question referred for the consideration of this Full Beach is as follows:

If A agrees to sell a property to B and earnest money or an advance payment of part of the purchase-money is paid to A, and if B subsequently commits a breach of the contract is B entitled to recover from A, the advance payment or earnest money in question?

2. It will be convenient to consider first the question of earnest money simpliciter, leaving out of account the item of an advance payment of part of the purchase money, regarding which it is possible that different legal incidents might arise.

3. This particular matter was considered at great length by Batten and Stanyon, A.J. Cs., in Ballabhdas v-Paikaji (3). It is unnecessary to repeat at length the reasoning of the learned Additional Judicial Commissioners in that judgment. It will suffice to say that the Additional Judicial Commissioners were of opinion that such earnest money or a part payment in advance of the purchase-money made under a stipulation that it shall be forfeited if the purchaser makes default is governed by Section 74, Contract Act, and gives the Courts discretion to deal withthe forfeiture on equitable principles. In coming to this decision they did, the learned Additional Judicial Commissioners accepted the opinion of Sankarah Nair, J., in Natesa Iyer v. Appavu Pada yachi,1909 33 ILR(Mad) 375, as opposed to that of Wallis, J. The matter next came before a Judge of this Court in Mangal Lal v. Mt. Nanni, 1922 AIR(Nag) 104. In that case, Drake-Brockman, J.C. dealt with the matter somewhat cursorily and came to the conclusion that a deposit or earnest money of the kind under consideration can be retained by the vendor where a contract goes off owing to a default of the purchaser. Hallifax, A.J.C. in Lachhmi Narayan v. Damodardas, 1925 AIR(Nag) 109, again considered the question and accepted the view of the Bench decision in Ballabhdas v. Paikaji,1916 12 NLR 177. Meanwhile, however, their Lordships of the Privy Council have had the same question before them, in Ohiranjit Singh v. Har Swarap, 1926 AIR(PC) 1. from a decision of the Allahabad High Court. Their Lordships, it is true, have not dealt with the matter at any great length, but this appears to be, in my opinion, because they considered the point at issue a perfectly clear one which required no detailed discussion. The appeal was decided practically on the following statement of the law applicable in the opinion of their Lordships:

Earnest money is part of the purchase price when the transaction goes forward: it is forfeited when the transaction falls through, by reason of the fault or failure of the vendee.

4. The application of this principle to the question before us settles the case in my opinion. It need hardly be said incidentally that, in the question we have before us, we assume that it is immovable property which has been agreed to be sold. It has been urged by the pleader for the applicants that their Lordships' decision on this question must be regarded as a mere obiter dictum. I am wholly unable to see any ground whatever for this suggestion. Very obviously, the matter in question formed the crux of the appeal and the mere brevity of their Lordship's judgment on the question at issue cannot, in any way, justify the assumption that their Lordships had not given-full consideration to the questipn involved. It would be utterly unreasonable to assume that, when their Lordships issued the dictum in question, they had not in mind the fact of the existence of the Indian Contract Act and the fact that provisions like Sections 63, 64, 73 and 74 there of are on the Statute Book. I find it impossible to assume that their Lordships were not laying down a general proposition of law on the point involved. It has even been suggested that their Lordships, in deciding the question, were, at the time, dealing with a decision of the Allahabad High Court, which has been in the habit of taking the view followed by D