DELHI DEVELOPMENT AUTHORITY

GRIHASTHAPANA CO-OPERATIVE GROUP HOUSING

SOCIETY LTD.

FEBRUARY 20, 1995

[S.C.AGRA WAL, B.L. HANSARIA AND

SUJATA V. MANOHAR, JJ.]

Delhi Development Authority (Disposal of Developed Nazul land) Amendment Rules. 1981-Rule 24(2)-Forfeiture of earnest money paid by C the allottee who refused to accept the allotment of land at enhanced price-Validity of.

Words and phrases--!'Eamest money''-Meaning of.

The appellant authority proposed to allot land to cooperative group housing societies at Dwarka, Phase-I and Narela @ Rs. 975 and Rs. 950 per sq. meter respectively. The interested societies were required to deposit

Rs. 5 Iakh as earnest money. However, before possession was delivered the appellant authority enhanced the premium to Rs. 1650.65 per sq. meter, E the value determined by the Government of India. Some societies approached the High Court Court but the enhancement of premium was upheld.

On appeal, the Supreme Court, while upholding the enhancement, extended the time for making payment. Upon the respondent not making F payment as directed by the Supreme Court the appellant forfeited a sum of money equivalent to 10% of what bad become payable @ Rs. 1650.65 as

rnest money" due number a clause of the allotment order.

This was challenged in the High Court which directed the appellant not to make any deductions and to refund the entire amount deposited by G the respondents. The appellants brought the present appeal contending that the forfeiture ot'earnest money" in case of non-deposit of premium was in accordance with law and that the High Court having found the enhancement to be reasonable erred in its direction to refund the earnest money.

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Allowing the appeals, thi~ Court

HELD : 1. Earnest money is given at the moment of contract conclusion, to bind the contract, as part of the purchase price and is forfeited on purchase's default or failure if nothing to the contrary is stated in the contract. (118-F-G]

Shri Hanuman Cotton Mills v. Tata Aircraft Ltd., (1970) 3 SCR 127, relied on.

Chiranjit Singh v. Harswarup AIR (1926) PC I, referred to.

2.1. The respondents having accepted the offer contained in the communication of 3.11.92 were bound to pay premium at the enhanced rate of Rs. 1650.65 held to be reasonable by the High Court. As there was no compliance with the condition mentioned in the Supreme Court's order dated 10.05.93, the respondents had make themselves liable to forfeiture of the earnest .money. (119-F]

2.2. The earnest inoney which was deposited was not 10% of the premium as required by the amended Nazul Rules.but a fixed sum of Rs. 5 lakh mentioned in the offer of 1.10.90. The earnest money which had become liable to be forfeited was a sum of Rs. 5 lakh and not 10% of the total premium calculated the rate of Rs. 1650.65. (119-G-H]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 931 of 1995 Etc. Etc. / ·

From the Judgment and Order dated 3.8.94 of the Delhi High Court in C.W.P. No. 4607 of 1993.

Arun Jaitley, V.B. Saharaya and Ms. Suparea for the Appellant.

Bishwajit Bhattarya, Sanjay Ghosh and A Bhattacharjee for the Respondents.

Y.P. Mahajan and Ms. Sushma Suri for the Union of India.

The Judgment of the Court was delivered by

HANSARIA, J.

1The short point which needs to be decided in these H appeals is whether the High Court of Delhi was justified in directing the

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appellant to refund the earnest money deposited by the respondents fol- A lowing allotments of land to them at the cost of Rs. 975 per sq. mtr., which cost subsequently came to be enhanced to Rs. 1650.65, because of which the respondents refllsed to finally accept the allotment.

2. The aforesaid question arises on these facts. The appellant proposed to allot land to about 260 Co-operative Group Housing Societies B in Dwarka Phase-I, so also to about 60 such Societies in Narela. When the proposal was first made on 1.10.90, the cost was fixed at Rs. 975 per sq. mtr. for Dwarka land and Rs. 950 for Narela land. The Societies interested in the allotment land e required to deposit Rs. 5 lakhs as earnest money and to formally apply for allotment. On the interested Societies accepting C the offer, formal allotment was made by communication of the appellant dated 25.1.91. Before possession of the land came to be delivered, the appellant by its communication dated 3.11.92 stated that the premium of the land shall be payable at Rs. 1650.65 per sq. mtr. which was the value determined by the Government of India, vide its notification dated D 21123.10.92. Some of the Societies approached the Delhi H~ Court being aggrieved at the enhancement of the premium. The High Court ultimately upheld the enhancement, which decision has since been reported in 26 Delhi Reported Judgment 156. On this Court being approached against the Judgment of the High' Court by way of special leave petitions, the same E came to be disposed of by extending the time of paying the first instalment up to 31st May, 1993 which date had been fixed by the High Court as 30th April, 1993. '.fllis Court made _it clear in its order that the facility to pay first instalment with interest will be available only upto 31st July, 1993; and no. extension of time beyond this date would be granted.

3. On the respondents herein not paying the amount as ordered by this Court, the appellant forfeited sum of money equivalent to 10% of what had become payable @ 1650.65, taking the same as earnest money due as per clause 4 II of the allotment order dated 3.11.1992. This action of the appellant \Va& challenged before the Delhi High Court, who by impugned G . order has directed the appellant not to make any deduction and to refund the entire amount deposited by the respondents. The validity of this direction has been challenged in these appeals.

4. Shri Jaitley, appearing for the appellant, has coed his submis- H

"· A sion to the part of the direction of the High Court which is relatabre to the refund of earnest money. Learned counsel contends that the respondents having had accepted the allotment on the conditions mentioned in the communication dated 25.1.91 w&ich had visualised enhancement of the rate, and the enhancement having been regarded as reasonable by the High B Court, the direction to refund the earnest money is not in accordance with the law for two reasons. First, the very conception of earnest money is that in case the contract goes off, the same can be forfeited. Secondly, the Delhi Development Authority (Disposal of Developed Nazul Land) Amendment Rules, 1981, which were notified on 11.11.91, having provided for forfeiture of earnest money in case of non-deposit of promium as mentioned in C amendment Rule 24(2), action of the appellant in forfeiting the earnest money was in accordance with the law.

5. In support of the first legal propositio~ Shri Jaitley referred us. principally to a three-judgment Bench decision of this Court in Shree D Hanuman Cotton Mills v. Tata Aircraft Ltd., [1970] 3 SCR 127, in which there is a detail discussion of what is meant by earnest money and what is tlie consequences of deposit of such money and when can the same be forfeited. The Bench after reviewing various decisions noted in the judgment which includes that of the Privy Council rendered in Chiranjit Singh E v. Har Swamp, AIR (1926) PC 1, culled out the following principles

regarding the "earnest" at page 139 : ·

" ( 1) It must be given at the moment at which the contract is concluded.

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(2) It represents. a guarantee that the contract will be fulfilled or, in other words, 'earnest' is given to bind the contract.

(3) It is part of the putchase price when the transaction is carried out.

( 4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser.

(5) Unless there is anything to the contrary in the terms of the . contract, on default committed by the buyer, the seller is entitled H to forfeit the earnest." ·

6. In view of the aforesaid legal position, the contention advanced by A Shri Bishwajit Bhattarcharya for the respondents is tlJtt there was no

acceptance of the offer given on 3.11.92 in which mentioned was made about the rate of premium being Rs. 1650.65. The appellant is, therefore, not entitled according to the learned counsel, to forfeit the earnest money, as no such money had been deposited after this date in token of acceptance B of the proposal.

7. Shri Jaitley counters this statement by urging that the proposal to allot land as contained in the communication of 3.11.92 cannot -be read dehors what had been mentioned in the allotment offer dated 25.1.91 or C for that matter the offer contained in the communication dated 1.10.90.

This brought home by drawing our attention to what has been stated in para 3 of the offer dated 3.11.92 in which, while calculatmS the entire amount payable by the allottee, the deposit made earlier pursuant to the offer of 1.10.90 was adjusted. Further, in sub-para II of para 4 of the lateJ D communication, the fact of deposit arnest money earlier has been taken note of. We also find from Application Form dated 24.12.1992 submitted by the respondent in CA No. 93lJ85 that the earnest money deposited on 22.10.90 as well as part of the premium deposited on 25.1.91, have been mentioned under item 8 dealing with the "Challan Number and date whereby 25% of the total premium and 10% of earnest money has been E deposited."

8. The aforesaid facts leave no manner of doubt in our mind that what stated in the communication of 3.11.92 was in continuation of the

earlier offer dated 1.10.90/25.1.91. We therefore, hold that the respondents F had accepted the offer contained in the communication of 3.11.92 and, as such, they were bound to pay premium at the enhanced rate of Rs. 1650.65, held as reasonable by the High 'court. As they did not comply with the condition mentioned in the Court's aforesaid order dated 10.5.93, the respondents had made themselves liable to forfeiture of the earnest money. G As, however, the earnest money which has deposited. was not 10% of the premium as required by the amended Nazul Rules, but was a fixed sum of Rs. 5 lakhs in C.A. No. 93lJ85 mentioned in the offer of 1.10.90, the earnest money which had become liable to be forfeited was a sum of Rs. S lakhs, and not 10% of the total premium calcultted at the rate of Rs. 1650.65. · H

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9. The appeals, therefore, stand allowed by modifying the High Court's order by stating that the amount to be refunded to the respondents woulc, i not include earnest money which had been deposited by them. The -j-- remaining amount would be refunded by the appellant within a period of 4 weeks from today, falling which the respondents would be entitled for B interest @ 18% per annum from today till payment. In the facts and circumstances of the case, we make no order to costs.

A.G.

Appeals allowed.