An advance payment towards sale consideration is distinct from earnest money and merits refund upon breach, subject to appropriate interest limits.

J U D G M E N T

A.Muhamed Mustaque, J.

This is an appeal filed by the defendant in a suit for return of advance sale consideration. The plaintiff and defendant entered into an agreement for sale on 26/2/2013. The plaintiff paid Rs.50 lakhs towards sale consideration to the defendant. The total consideration fixed for purchase of the immovable property was Rs.2.30 crores. The sale was not materialised. The parties alleged breach and default against each other. The Sub Judge, by a detailed order allowed the suit for recovery of Rs.50 lakhs together with 9% interest from the date of agreement for sale till realisation.

2. In this appeal, the learned counsel for the appellant Shri Roy Chacko, argued in detail. He also placed reliance on the following Judgments of the Hon'ble Supreme Court, this Court and the High Court of Madras:

. Shree Hanuman Cotton Mills and another, v.

Tata Air Craft Ltd. [ AIR 1970 SC 1986 ]

. Kannan Menon v. Kuttikrishna Menon &

Others [ 1962 KLJ 257 ]

. P.R. Gunasekaran v. K.Balasubramani and Ors. [MANU/TN/1538/2016]

According to the learned counsel, the plaintiff committed default and therefore, the defendant was entitled to forfeit the advance amount. Placing reliance on the above judgments, it was submitted that the appeal be allowed and the judgment of the Sub Judge be reversed.

3. Defending the judgment, the learned counsel for the plaintiff Shri S. Vinod Bhat and Smt Anagha Lakshmy Raman submitted that the agreement clearly states that Rs.50 lakhs was paid as an advance amount and not as an earnest money.

It was further argued that the defendant did not raise any counter claim seeking damages from the plaintiff.

4. We read Ext.A1 agreement of sale executed between the parties. The agreement of sale clearly shows that Rs.50 lakhs was paid as advance towards sale consideration. The further stipulation that consequent upon default the plaintiff would be liable for the loss, would only indicate that when there is actual loss to the defendant, he is entitled to recover such loss from the plaintiff. There is nothing to indicate in Ext.A1 that Rs.50 lakhs was paid as earnest money for performance. When any part amount is paid towards sale consideration, normally, it has to be presumed that it is an advance amount towards the sale consideration. In the absence of any material to show that it was earnest money, any default, on the part of the plaintiff is immaterial or irrelevant, for considering his right to seek refund of advance amount paid. The default would be relevant only while considering the question related to 'charge' as referable under Section 55 (6)(b) of the Transfer of Property Act, 1882 . In this case, the court had not granted a relief of 'charge' in favour of the plaintiff.

5. The defendant had not raised any counter claim, claiming damages. In such circumstances, the plaintiff is entitled for refund of advance amount paid. However, we find that 9% interest has been awarded from the date of agreement, as interest. There is no such stipulation regarding payment of interest in the agreement. The six months time was fixed therein for performance of agreement. The agreement was on 26.2.2013, wrongly mentioned as 26.2.2011 in the impugned judgment. Therefore, the plaintiff can demand interest only after the expiry of the period for performance. Thus, the plaintiff would be entitled for interest only from 20.8.2013 onwards.

We are also of the view that the interest awarded is on higher side as it is not a commercial transaction. We are of the view that the court could not have ordered interest beyond 6% overlooking the mandate under Section 34 of the Civil Procedure Code . Thus, we modify the impugned decree ordering recovery of Rs.50 lakhs along with 6% interest from 20/8/2013 till the date of realisation. The appeal is allowed partly. The parties are directed to suffer their respective costs.