Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5598 OF 2017

(Arising out of Special Leave Petition (C) No.15383 of 2015)

RAMESH CHAND AND ORS. …APPELLANTS

VERSUS

M/S. TANMAY DEVELOPERS

PVT. LTD. & ORS. …RESPONDENTS

WITH

CIVIL APPEAL NO. 5600 OF 2017

(Arising out of Special Leave Petition (C) No.17007 of 2015)

RAJINDER SINGH AND ORS. …APPELLANTS

VERSUS

M/S. TANMAY DEVELOPERS

PVT. LTD. & ORS. …RESPONDENTS

WITH

CIVIL APPEAL NO. 5601 OF 2017

(Arising out of Special Leave Petition (C) No.17168 of 2015)

MUKHTIAR SINGH AND ORS. …APPELLANTS

VERSUS

M/S. CAPEX PROJECTS

PVT. LTD. & ORS. …RESPONDENTS

AND

CIVIL APPEAL NO. 5606 OF 2017

(Arising out of Special Leave Petition (C) No. 13622 of 2017 (CC.

No.12759 of 2015)

MEHAR CHAND (SINCE DECEASED)

THR. LRS. AND ORS. …APPELLANTS

Page 2 VERSUS

M/S. TANMAY DEVELOPERS

PVT. LTD. & ORS. …RESPONDENTS

J U D G M E N T

ARUN MISHRA, J.

1.Leave granted.

2.The appellants-herein are aggrieved by the common judgment and

order passed by the High Court of Punjab and Haryana at Chandigarh in

F.A. No.1941 of 2013, dated 4

th

February, 2015. The High Court by the

impugned judgment and order has directed refund of the earnest money by

M/s. Tanmay Developers Private Ltd. Five agreements to sell were entered

into between the M/s. Tanmay Developers Pvt. Ltd. and the land owners on

22.07.2006, 22.07.2006, 22.07.2006, 24.07.2006 and 21.06.2006. Out of

the five agreements, earnest money of Rs.54,25,000/- was paid out of the

total sale consideration of Rs,4,52,81,250/- as per agreement on

22.07.2006. As per agreement dated 22.07.2006, Rs.1,56,000,00/- was

paid as earnest money out of total sale consideration of Rs.12,54,37,500/-.

As per yet another agreement on 22.07.2006, earnest money of

Rs.21,00,000/- was paid out of a sum of Rs.1,50,93,750/-. As per

agreement dated 24.07.2006, earnest money of Rs.90,00,000/- was paid

out of total sale consideration of Rs.7,71,31,250/-. As per agreement dated

21.06.2006, earnest money of Rs.2,60,000/- was paid out of a total sale

consideration or Rs.14,29,687/-. Period for performance of agreement had

Page 3 expired in the month of September/October, 2006. The land-owners on

failure of purchaser to get the sale deed executed forfeited earnest money.

3.A notification under Section 4 of the Land Acquisition Act, 1894 (for

short, “the Act”) was issued on 18.3.2008 for acquiring the land which was

the subject matter of the agreements. Three suits were filed for recovery of

earnest money in September, 2009 and one suit was filed for specific

performance of agreement to sell by the respondent- M/s. Tanmay

Developer in the month of March, 2008 which was decreed on 18.04.2014

and the appeal filed by the land owners was pending at the time when the

impugned judgment and order was passed by the High Court. Similarly,

three other suits which were filed for recovery of the earnest money were

pending. The Land Acquisition Officer has passed the award on

19.09.2008. No reference under Section 18 of the Act was sought by M/s.

Tanmay Developers; however, during the pendency of the suits/appeal the

respondent had filed application under Section 30 of the Act for referring

the dispute to the Civil Court for refund of earnest money alongwith

interest. The Land Acquisition Officer accordingly referred the matter.

4.The Reference Court on 7.12.2012 has passed an award rejecting the

prayer made by respondent No.1 on the ground that the dispute with

respect to the forfeiture of earnest money and whether M/s. Tanmay

Developers Pvt. Ltd. was entitled for specific performance could not be

adjudicated under Section 30 of the Act and it would not be appropriate for

the Reference Court to decide these disputed issues between the parties in

view of civil suits/appeal. The Reference Court held that the dispute under

Page 4 Section 30 of the Act arising out of the apportionment of the compensation

or any part thereof involved the vexed question of title or the civil rights of

the parties arising out of such transaction could not be adjudicated by

substituting the judicial forum into the civil court. The Reference Court

could not decide question of refund of earnest money by applying the

provisions of Chapter 2 of Part II of the Specific Relief Act, 1963. Such

powers can be exercised by the Civil Courts. Aggrieved thereby the

respondent No.1 filed appeals before the High Court which have been

allowed by the impugned judgment and order.

5.The respondent No.1 had sought apportionment of the compensation

only on the ground that agreement for sale had been entered into by the

land owners and prayed for refund of the earnest money along with the

interest at the rate of 12 per cent per annum, since the agreement had

become incapable of being specifically performed due to the acquisition of

land. It was contended on behalf of the land owners that Respondent No.1

was not ready and willing to perform its part of the contract. Time was

essence of the contract. There had been forfeiture of the earnest money on

failure of respondent No.1 to get the sale deed executed within stipulated

period. Respondent No.1 was not having requisite amount of money hence

could not be said to be ready and willing to purchase the property. In the

facts and circumstances, the right of forfeiture of earnest money had been

rightly exercised. Thus, respondent No.1 was not entitled for refund of the

earnest money or apportionment of compensation particularly due to

pendency of the civil suits/appeal.

Page 5 6.The learned counsel appearing on behalf of the appellants urged that

High Court erred in directing refund of the earnest money along with

interest at 6% per annum out of the compensation amount determined by

the Land Acquisition Officer. The High Court has not decided various vital

questions. The Reference Court had rightly declined to entertain the

reference application under Section 30 of the Act seeking refund of earnest

money under guise of apportionment of compensation. As per the

agreement, earnest money had been forfeited much before the acquisition of

the land which was initiated by virtue of notification issued under Section 4

in the year 2008. Civil Suits had been filed and one of the matter first

appeal had been filed against one of the judgment and decree of the Civil

Court, thus, those questions could not have been taken over for decision by

the Reference Court. Subsequent to filing of civil suits remedy of reference

had been sought under Section 30.

7.On the other hand, it was contended by the learned counsel appearing

on behalf of the respondent-developer that buyer would be a “person

interested” within the purview of Section 3 (b) and 9 of the Act. Any person

interested could have sought the reference which had rightly made as the

payment of earnest money under agreements was not in dispute. The High

Court has rightly exercised the power to apportion compensation by

directing refund of the earnest money along with interest.

8.It was not rightly disputed that several civil suits with respect to

refund of the earnest money and for specific performance of the agreement

to sale were filed by the respondent No.1 before reference was sought under

Page 6 Section 30 of the Act. Once remedy in the form of civil suits had been

resorted to, in our considered opinion, it was not at all proper exercise of

power to invoke provisions under Section 30 of the Act with regard to

apportionment of the compensation by directing refund of earnest money.

It is not mandatory to make a reference to the civil court under Section 30

and adjudication of dispute in an appropriate case can be ordered by way of

the civil suit. In the instant case civil suits had already been preferred by

respondent No.1. It was not appropriate to decide same dispute under

Section 30.

9.In the instant case, there were serious disputed questions as to

whether earnest money had been rightly forfeited by the land owners due to

the failure of the respondent No. 1 to obtain the sale deeds executed within

stipulated time fixed under the agreements, whether respondents were

ready and willing to purchase the property and had arrangement of balance

consideration for payment to land owner. Whether the power of forfeiture

was rightly exercised by the land owners as claimed by them. The Civil

Court was already in seisin of the matter as such reference court had rightly

rejected the reference made under Section 30 of the Act and rightly asked

parties to await outcome of the regular civil suits.

10.The High Court in the impugned judgment has not decided aforesaid

objections raised by the appellants/land owners without examining facts

and circumstances of the case and due to pendency of civil suits, it was not

open to the High Court to order refund of the earnest money.

11.A perusal of Section 18 of the Act makes it clear that reference can be

Page 7 sought to a civil court with respect (i) the measurement of the land, (ii)

adequacy and quantum of compensation, (iii) persons to whom it is payable

and (iv) the apportionment thereof amongst the persons interested. The

application under Section 18 is required to be filed within stipulated time

whereas no limitation is prescribed under Section 30 of the Act. It is

discretionary upon the court to refer a dispute under Section 30 of the Act.

The same is confined to the apportionment of the compensation or as to a

person to whom the same is payable. The scope of Section 30 of the Act is

narrow as compared to Section 18 as laid down in G.H. Grant v. State of

Bihar AIR 1966 SC 237 and in Sharda Devi v. State of Bihar (2003) 3

SCC 128.

12.We need not go into the question whether holder of agreement is

“person interested” as defined in Section 3(b) of the Act. As we are satisfied

that respondent No. 1 could not have resorted to the remedy of reference for

refund of the earnest money as for this very purpose he had filed civil suit

earlier in point of time. In the reference petition refund of earnest money

had been prayed with interest at the rate of 12 per cent per annum. In civil

suit refund had been sought with 18 per cent interest per annum and in

one suit specific performance was prayed.

13.The High Court has relied upon the decision of this Court in

Thiriveedhi Channiah v. Gudipudi Venkata Subba Rao (Dead) by Lrs.

& Ors. (2009) 17 SCC 341, in which the appellant demanded refund of the

advance amount on the premise that due to notification under Section 4(1),

property could not be sold whereas the plea of forfeiture was advanced by

Page 8 the respondents. This High Court had ignored and overlooked that case

arose out of the civil suit in which specific performance of agreement to sale

was sought. This Court has found that parties were aware of the

notification under Section 4(1) as such right of forfeiture could have been

exercised. The facts in the said case were different and the said decision

could not have been utilized by the High Court for setting aside the well

reasoned award passed by the reference court declining to entertain the

prayer made by the respondents, in view of the availing remedy of the civil

suits. The High Court should have in fairness reflected that the said

decision was rendered by this Court in the context of civil suit. The High

Court has referred it in the manner as if it was a case which has been

decided under Section 30 of the Act with respect to the apportionment of

the compensation.

14.The learned counsel on behalf of the respondent has relied upon the

decision of Bombay High Court in Mohammad Akil Khan v. Premraj

Jawanmal Surana and Anr. AIR 1972 Bom. 217. The decision is

distinguishable as the civil suit had not been filed in the said case. Thus,

we need not go into the correctness of the aforesaid decision. Reliance has

also been placed on Delhi Development Authority v. Bhola Nath Sharma

(Dead) by Lrs. & Ors. (2011) 2 SCC 54; and Sunderlal v. Paramsukhdas

& Ors. AIR 1968 SC 366 to contend that definition under Section 3(b) of the

“person interested” is “inclusive” definition. Reliance for this purpose has

also been placed on U.P. Jal Nigam, Lucknow Through Its Chairman &

Anr. v. Kalra Properties (P) Ltd., Lucknow & Ors. (1996) 3 SCC 124,

Page 9 laying down that a purchaser is entitled to step into the shoes of the owner

to claim compensation though could not question the notification for

acquisition. In our opinion even if it is held that respondent No.1 was the

“person interested” within the meaning of Section 3(b) of the Act its case is

not advanced so as to seek adjudication of the questions in the facts of this

case in the reference under Section 30 of the Act which remedy was

discretionary. The land owners also relied upon Coromandel Indag

Products Private Limited v. Garuda Chit and Trading Company

Private Limited and Another (2011) 8 SCC 601 wherein this Court dealt

with question when time is essence of the contract and in what

circumstances earnest money could be forfeited. This question has to be

gone into in civil suits.

15.Resultantly, the appeals are allowed. The impugned judgment and

order passed by the High Court is hereby set aside. The land owners are

entitled for disbursement of the compensation. Obviously, it will be subject

to the outcome of the civil suits in which refund of the earnest money along

with interest had been sought by the respondent No.1. In case the

appellants fail and refund is directed in civil suits, the landowners shall

have to pay it as per the judgment and decree which may be passed. No

costs.

…………………………..J.

(ARUN MISHRA)

..................................J.

(MOHAN M. SHANTANAGOUDAR)

NEW DELHI

APRIL 26, 2017