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PETITIONER:

DELHI DEVELOPMENT AUTHORITY

Vs.

RESPONDENT:

GRIHSTHAPANA CO-OPERATIVE GROUP HOUSING SOCIETY LTD.

DATE OF JUDGMENT20/02/1995

BENCH:

HANSARIA B.L. (J)

BENCH:

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

ACT:

HEADNOTE:

JUDGMENT:

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

sq.mtr. 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 sq.mtr. 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

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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

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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

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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

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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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