Contract Assignment 1

HONOURABLE HIGH COURT OF DELHI

I. Brief Overview:
1) The present case was brought upon The Hon’ble Court (High Court of
Delhi) before Hon’ble Mr. Justice Valmiki J. Mehta by Appellant, Anoop Singh
through Regular First Appeal under Section 96 of CPC, through Advocate, Mr.
Surendra Mishra, against the judgement of the trial court dated 05.07.2017.
Respondents, Gopal Krishan Bhuradia & Anr. were represented by Advocate,
Mr. D.K. Mishra. The questions were raised against forfeiture of earnest
money and the interpretation of Section 73 & 74 of the Indian Contract Act,
1872 were emphasized upon, along with relevant case laws. The appeal was
accordingly allowed, a money decree was passed in favour of the appellant
and against the respondents and the case was disposed of on 05.07.2018.
{2018 SCC OnLine Del 9712: 2018 AIR CC 3393: (2018) 3 RCR (Civil)
884}

II. Issues:
2) The issue to be decided by The Hon’ble Court is that even if the appellant
is guilty of breach of contract and did not have readiness and willingness to
go ahead with the specific performance of the Agreement to Sell dated
24.01.2013, whether in such circumstances the respondents can forfeit the
amount of Rs. 10.25 lacs paid by the appellant to the respondents under the
subject Agreement to Sell. {Pg no. 2, para 3; 2018 SCC OnLine Del 9712:
2018 AIR CC 3393: (2018) 3 RCR (Civil) 884}
3) Whether it is the ratio of the judgement of the Supreme Court in the case of
Satish Batra vs. Sudhir Rawal, 2013 1 SCC 345 which has to be applied or it is
the ratio of the judgements of the Supreme Court in the cases of Fateh Chand
vs. Balkishan Dass, AIR 1963 SC 1405 and Kilash Nath Associates vs. Delhi
Development Authority, (2015) 4 SCC 136.
{Pg no. 2, para 4; Pg no. 32, para 4}

1
Contract Assignment 1

4) How much money can the respondents forfeit. {Pg no. 32, para 4; Pg no. 33,
para 6; Pg no. 35, para 8; Pg no. 36, para 10}
5) Is the appeal filed by the appellant for the impugned judgement of the trial
court entertainable in The Hon’ble Court. {Pg no. 33, para 5 & 6; Pg no.
35, para 8}
6) Whether the appellant is entitled to any interest and if it is then how much
should be the rate of interest. {Pg no. 36, para 11}

III. Facts:
7) The above parties entered into an Agreement to Sell dated 24.01.2013 for
the respondents to sell the subject suit property with respect to third and
fourth floor with roof rights of the property bearing no. 14-B/40, measuring
88.9 sq. yds, Dev Nagar, Karol Bagh, New Delhi-110005, to the appellant. {Pg
no. 3, para 4; Pg no. 14, para 11}
8) The total sale consideration was Rs. 90.25 lacs and at the time of entering
into the Agreement to Sell the respondent received an amount of Rs. 10.25
lacs as advance through the appellant. {Pg no. 1, para 2; Pg no. 34, para 7}
9) Disputes and differences arose between the parties as to who was guilty of
breach of contract in not performing the Agreement to Sell dated
24.01.2013, should the respondent allowed to forfeit the entire amount
given by the appellant or the appellant be allowed to recover double the
amount of money paid to the respondent under the Agreement to Sell. {Pg
no. 32, para 4; Pg no. 33, para 6; Pg no. 34, para 7}

IV. Brief Submissions:

10) The appellant first petitioned in The Hon’ble Court: CS(OS) No. 552/2014,
against the respondents pleading that the respondent is guilty of breach of
contract and that therefore, in terms of Clause 3 of the subject Agreement to
Sell dated 24.01.2013, the appellant was entitled from the respondent for
seeking double the amount of money paid of Rs. 10.25 lacs i.e., an amount of
Rs. 20.61 lacs, which latter got dismissed by The Hon’ble Court as the
appellant had withdrawn the suit. {Pg no. 34, para 7}

2
Contract Assignment 1

11) The appellant then petitioned in the trial court with the suit for seeking
specific performance from the respondent under the Agreement to Sell dated
24.01.2013, with respect to third and fourth floor with roof rights of the
subject property, which further got rejected by the trial court on 05.07.2017,
as stated in Para 38 of its judgement. {Pg no. 33, para 5; Pg no. 35, para 8}
12)The appellant then filed an appeal in The Hon’ble Court through the
Regular First Appeal under Section 96 of the Code of Civil Procedure, 1908
(CPC), for requestioning of the judgement dated 05.07.2017 of the trial
court, which dismissed the suit for specific performance of the Agreement
to Sell dated 24.01.2013. {Pg no. 1, para (Oral)}
13) When the appeal came up for admission in The Hon’ble Court on
20.12.2017 the appellant condoned the appeal and sought only a limited
relief in this appeal of refund of the amount paid by the appellant to the
respondent under the subject Agreement to Sell dated 24.01.2013. The
appeal was allowed and the case was disposed of on 05.07.2018. {Pg no. 1,
para 2; Pg no. 37, para 12}

V. Brief of the Appeals:

14) Suit no.: CS(OS) No. 552/2014, in The Hon’ble Court (High Court of
Delhi)
i. The appellant/plaintiff has sued the respondent/defendants for
recovery of Rs. 20.61 lacs relying upon Clause 3 in the Agreement to
Sell dated 24.01.2013, which made the respondents/defendants liable
to pay, double the amount of earnest money received to the
appellant/plaintiff in the even of being in breach of Agreement.
ii. Appellant/plaintiff pleading that he entered into an agreement with
the two respondents/defendants for purchase of the third and fourth
floor of a property in Karol Bagh and had paid an advance of Rs. 10.25
lacs to the respondents/defendants; that the appellant/plaintiff has
however now discovered that the construction of the subject
property was not permissible by MCD, as having illegal projections

3
Contract Assignment 1

on municipal land and the appellant/plaintiff is thus now not

interested in purchasing the said floors.
{Pg no. 34, para 7}
15) Suit no.: RFA No. 1061/2017, in The Hon’ble Court (High Court of
Delhi)
iii. The appellant filed a suit through the Regular First Appeal under
Section 96 of the Code of Civil Procedure, 1908 (CPC) for the
requestioning of the judgement delivered by the trial court dated
05.07.2017, which has dismissed the suit for specific performance
filed by the appellant/plaintiff seeking specific performance from the
respondents/defendants under the Agreement to Sell dated
24.01.2013, with respect to third and fourth floor with roof rights of
the property bearing no. 14-B/40, measuring 88.9 sq. yds, Dev Nagar,
Karol Bagh, New Delhi-110005.
{Pg no. 1, para (Oral)}

16) Suit no.: RFA No. 1061/2017 & CM No. 46485/2017(stay), in The
Hon’ble Court (High Court of Delhi)
iv. The appeal was condoned by the appellant and when this appeal
came up for admission on 20.12.2017, the appellant sought only a
limited relief in this appeal of the refund of the amount paid by the
appellant to the respondents under the subject Agreement to Sell
being amount of Rs. 10.25 lacs out of the total sale consideration of
Rs. 90.25 lacs.
v. Counsel for the appellant argued that appeal is only pressed not for
seeking specific performance and which relief has been rejected by
the trial court, but for refund of admitted earnest money amount
which has been paid by the appellant to the respondents. It was
argued that the trial court has committed an error in holding that
relief sought of refund of earnest money is barred on account of
earlier suit filed by the appellant for the recovery of double the
earnest money, inasmuch as, the cause of action in the earlier suit
was different and was based upon breach of contract by the

4
Contract Assignment 1

respondents whereas the recovery of money aspect will not be based

on any breach being caused of the respondents but on account of
appellant being entitled to refund of the earnest money as no loss has
been pleaded and proved to have been caused to the respondents for
them to forfeit the earnest money amount.
{Pg no. 1, para 2}

VI. Consideration:
17) So, the main issue which comes up is whether the appeal entertainable in
The Hon’ble Court and if it is then should the respondents be allowed to
forfeit the whole amount paid by the appellant to the respondents under the
subject Agreement to Sell and if not, then how much money should the
respondents be allowed to forfeit under the Agreement. Also, if the amount
of money in question is refundable then how much money should be
refunded to the appellant, which has been taken under the Agreement by the
respondents.

VII. Observations:
18) In the present case the main question is whether the amount paid by the
appellant to the respondents as earnest money, under the agreement to sell
dated 24.01.2013 refundable to the appellant. As, in the present case it was
noted that the ratio of Satish Batra case(supra) will not apply because in the
subject Agreement to Sell dated 24.01.2013, admittedly there is no clause
which entitles the respondents to forfeit the amount of earnest money.
Therefore, in any case the respondents would have to plead and prove the
loss being caused to them on account of the breach by the appellant of failing
to perform the subject Agreement to Sell. Also, the affidavit by way of
evidence filed by the respondents except making self-serving statement of
the property prices having fallen does not state as to what is the specific
monetary loss on account of falling in the prices of the property, and this
self-serving averment is also not cross-referenced with respect to any

5
 Contract Assignment 1

documentary evidence that the property prices have fallen by more than Rs.
10.25 lacs so as to entitle the respondents to forfeit the amount of Rs. 10.25
lacs.

VIII. Further Observation:

19)The fact that the appellant had withdrawn his earlier suit for recovery of
double the amount of earnest money cannot prevent the appellant from
filing the subject suit for specific performance, but this issue was considered
by the trial court and rejected in terms of para 38 of the impugned
judgement, but this finding of the trial court in para 38 is completely illegal
because in the earlier suit the appellant had sought recovery of double the
amount of the earnest money on the pleading that the respondents were
guilty of breach of contract, however for determining the issue of refund of
earnest money amount the cause of action is totally a different cause of
action that taking that it is the appellant who is guilty of breach of contract,
and not the respondents.
20) Also, The Hon’ble Court is justified by providing an interest @ 12% per
annum as in case the appellant would have sought a loan, then, the appellant
would have to pay ordinarily an interest of around 12% per annum simple
for the loan taken of Rs. 10.25 lacs from any bank or financial institution as
justified and observed in the case of M.C. Luthra vs. Ashok Kumar Khanna,
2018 (248) DLT 161 in The Hon’ble Court.

IX. Conclusion:
21) From the above observation we can conclude that alone mentioning
something as earnest money does not constitute as only earnest money, it
will depend upon the intention of the parties while they were forming the
contract ,also, if it falls in the aspect of earnest money it should be seen that
only a negligible amount is been taken as earnest money and it should not
be in the nature of penalty, interpretation of Section 73 & 74 should be taken
in consideration, also, if the aggrieved party is forfeiting whole of the

6
Contract Assignment 1

amount as earnest money it is the duty of the aggrieved party to show proof
of damages caused due to the breach of contract by the defendant.
Relevant case laws cited under the judgement were:
Fateh Chand vs. Balkishan Dass, AIR 1963 SC 1405;
Kilash Nath Associates vs. Delhi Development Authority, (2015) 4 SCC 136;
Satish Batra vs. Sudhir Rawal, 2013 1 SCC 345;
Shree Hanuman Cotton Mills vs. Tata Aircraft Limited, (1969) 3 SCC 522: 1970
(3) SCR 127;
Maula Bux vs. Union of India, (1969) 5 SCC 554: 1970 (1) SCR 928;
ONGC Ltd. vs. Saw Pipes Ltd., (2003) 5 SCC 705