Forfeiture of advance consideration requires proof of loss; absence of loss negates entitlement to retain funds.

JUDGMENT

This appeal is preferred by the defendant in a suit for return of money received in pursuance to the agreement for sale.

2. The plaintiff entered into an agreement of sale with the defendant on 10.08.2015. In pursuance to the said agreement, the plaintiff paid an amount of Rs. 5,00,000/- as advance consideration to the defendant. Since the defendant was not prepared to return the money nor execute the sale deed, the plaintiff withdrew from the contract and instituted a suit for recovery of money. The defendant contended that he is entitled to forfeit the entire advance sale consideration as penalty for breach of contract. However, he did not plead or prove any loss due to the breach of contract.

2.1. The Trial Court concluded that since there is no pleading of loss and damage, no question of awarding compensation in terms of Section 74 of the Indian Contract Act arises and accordingly, the suit was decreed. Aggrieved, the appellant preferred A.S. No. 191 of 2018 before the Addl. District Court – IV, Kottayam, and by judgment dated

26.08.2025, the appeal was partly allowed and hence, the present appeal.

3. Heard Sri. Santhosh Peter, the learned Counsel appearing for the appellant.

4. On consideration of the submissions raised on behalf of the appellant, this Court is of the view that no substantial question of law arises for consideration in the present appeal. It is trite law that in a case of forfeiture of earnest money, it is incumbent upon the defendant to prove the sustenance of a loss due to the breach of contract. In the present case, there is neither a pleading nor any proof to establish the quantum of loss caused due to the non-compliance of the agreement. That apart, since it has come out in evidence that, the contract was not performed due to the fault of the plaintiff, the claim for damages and also the forfeiture of the entire advance amount cannot be sustained. Therefore, the Courts below have correctly appreciated the law on the point and have decreed the suit for return of advance money. In such circumstances, this Court finds that no substantial question of law arises for consideration in the appeal. Accordingly, the appeal is dismissed.

Sd/-