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Delhi Development Authority Vs. Grihsthapana Co-Operative Group Housing Society Ltd. [1995] INSC 137 (20 February 1995)

Hansaria B.L. (J) Hansaria B.L. (J) Agrawal, S.C. (J) Manohar Sujata V. (J)

CITATION: 1995 AIR 1176 1995 SCC Supl. (1) 751 JT 1995 (2) 530 1995 SCALE (1)807



1. The short point which needs to be decidedin these appeals is whether the High Court of Delhi was justified indirecting the appellant to refund the. earnest money deposited by the respondents following 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 refused 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 in Dwaraka Phase -1, 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 for Dwaraka land and Rs.950/- for Narela land. The Societies interested in the allotment land were require& to deposit Rs.5 lakhs as earnest money and to formarally apply for allotment On the interested Societies accepting the offer, formal allotment was made by communication of the appellant dated25.1.1991. 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 as Rs.1650.65/- per which was the value determined by the Government of India, vide its notification dated 21/ 23.10.92. Some of the Societies approached the Delhi High Court being aggrieved at the enhancement of the premium. The High Court ultimately upheld the enhancement, which decision has since been reported in 26the Delhi Reported Judgments 156. On thus Court being approached against the judgment of the High Court by way of special leave petition, the same came to be disposed pf by extending the time of paying the first instalments up to 31st May 1993 which date had been fixed by the High Court as 30th April, 1993. This 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 a sum of money equivalent to 10% of what had become payable @1650.65, taking the same as earnest money due as per clause 411 of the allotment order 3.11. 1992. This action of the appellant was challenged before the Delhi High Court, who by impugned order has directed the appellant not to make any deduction and 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 532 appellant, has confined has submission to that part of the direction of the High Court which is relatable to the refund of earnest money. Learned counsel contends that the respondents having had accepted the allotment on the conditions mentioned in the communications dated 25.1.91 which had visualised enhancement of the rate, and the enhancement having been regarded as reasonable by the High 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 premium as mentioned in amended 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 proposition, Shri Jaitley referred us principaly to a three-judges Bench decision of this Court in Shree Hanuman Colton 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 the 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 v Har Swarup, AIR 1926 PCI, 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.

(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 purchase price when the transaction is carried out.

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

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

6. In view of the aforesaid legal position, the contention advanced by Shri Bishwajit Bhattacharya for the respondents is that there was no acceptance of the offer given on 3.11.92 in which mention was made about the rate of premium being Rs. 1650.65. The appellant is, therefore, not entitled, according to to the learned counsel, to forfeit the earnest money, as, no such money had been deposited after this date in token of acceptance 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 after dated 25.1.91 or for that matter the offer contained in the communication dated 1. 10. 90. This is brought home by drawing our attention to what has been stated in para 3 of the offer dated 3.11.92 in which, while calculating the entire amount payable to the offer of 1.

10.90 was adjusted. Further, in sub-para II of para 4 of the later communication, the fact of deposit earnest money earlier has been taken note of We also find from the Application Form dated 24.12.'1992 submitted by the respondent in C.A.No.931/85 that the earnest money deposited on 22.10.90 as well as part of the 533 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 deposited.

8.The aforesaid facts leave no manner of doubt in our mind that what was 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 had accepted the offer contained in die 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 this Court's aforesaid order dated 10.5.93, the respondents had made themselves liable to forfeiture of the earnest money. As, however, the earnest money which was 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.931/35 mentioned in the offer of 1. 10. 90, the earnest money which had become liable to be forfeited was a sum of Rs. 5 lakhs, and not 10% of the total premium calculated at the rate of Rs.1650.65.

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


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