8 IMPORTANT JUDGMENTS REGARDING EARNEST MONEY

1. In “Sarla Devi vs Budhan” on 28 April, 2011 R.S.A.No. 130/2007 & CM No. 9195/2006, the Hon’ble High Court of Delhi observed, “the Plaintiff had entered into an agreement to sell with the defendant; this was qua 45 sq. yards of property comprising of one room with latrine, bathroom measuring 16 ft. X 25 ft situate in Khasra No. 15 of Village Mandoli; total consideration agreed was Rs. 1,60,000/-; plaintiff had paid the sum of Rs. 50,000/- as an advance/earnest money. In terms of the aforestated agreement, the balance amount of Rs. 1, 10,000/- had to be paid by 25.08.2000, on which date the defendant was required to execute the documents of transfer in favour of the plaintiff before the Sub- Registrar. The plaintiff reached the office of the Sub-Registrar on 25.08.2000 for getting the documents of transfer executed but the defendant did not came there till 1 pm.”

Then the Honorable Court held, “It is also relevant to state that the statement of the defendant had been recorded on 24.10.2002 under Order X of the Code of Civil Procedure. In this statement, she had denied the execution of the agreement to sell Ex. PW-1/1; however in her deposition on oath in Court she had admitted this document. On the preponderance of probabilities and after a detailed examination of evidence both oral and documentary the court had held that Ex.PW-1/1 had been executed by the defendant; the plaintiff was entitled to refund of the earnest money i.e. double the amount of `50,000/- which amount of 1 lac was rightly granted in his favour.”

2. In “Shri Virender Aran vs Shri Devinder Singh” on 10 December, 2013 RFA(OS) 113/2013, CM APPL.13749/2013, the Hon’ble High Court of Delhi observed,  “if the first party refuses to sell the said property within stipulated period as mentioned above then the first party shall be liable to pay the earnest money as double to the second party, in case if the second party refuses to purchase the said property within same time then her/his earnest money shall be forfeited by the first party and after it the first party shall have full right to resell the said property to any person at any rate.”

Then the Honorable Court held “This Court is of the opinion that for rescinding the contract, only invocation of Clause 5 and due communication of the same was required; which was duly done, hence the agreement stood rescinded on 24.05.2011. Consequently, twice the amount of the earnest money i.e. Rs.6,00,000/- was payable to the purchaser. The seller had got the demand draft of Rs.3,00,000/- prepared on 3rd June, 2011. Although the time frame for refund was not mentioned in the agreement, he has nevertheless shown his readiness and willingness to repay the money. The offer to repay Rs.6,00,000/- along with 18% interest thereon is, in the opinion of this Court, fair and adequate. In view of the preceding discussion, the impugned order is set aside, the appellant is directed to pay Rs.6,00,000/- with interest thereon at the rate of 18% per annum from 24.5.2011 and costs of Rs.1,00,000/- to the respondent within 4 weeks from today.”

3. In “Birbal vs Dharam Pal And Others” on 6 May, 2014, RSA No.4056 of 2009 (O&M) the Hon’ble Punjab-Haryana High Court observed, "The plaintiff filed a suit for possession to effect that on 24.1.1991, defendant No.1 entered into an agreement to sell suit land measuring 8 bigha 4 biswas bearing khasra No.159/1(1-14),159/3(6-10) khatoni No.476 khewat No.166/136 min vide sjamabandi 1991-92 situated at village Tiwala, for a consideration of Rs.1,95,000/- and for delivering the possession of land and getting the registry in favour of the plaintiff and setting aside the judgment  and decree of exchange dated 16.1.1993 vide which exchanged property by defendant No.1 with defendants No.2 and 3 is illegal and against the facts and not binding upon the rights of plaintiff because it is mere paper proceedings just to defeat the right of the plaintiff and defendant No.2 and 3 have no concerned with the suit land."

Then the Honorable Court held, “The suit was dismissed with costs by the trial Court vide impugned judgment and decree dated 11.06.2003. However, appeal was accepted by the First Appellate Court vide impugned judgment and decree dated 31.3.2009 to the extent that respondent No.1 was directed to return the double amount of earnest money i.e. ` 50,000/- within a period of two months from the date of order.”

“Moreover, keeping in view the facts and circumstances of the case, appellant has been granted the relief of recovery of double the amount of earnest money and in view thereof, this Court is not inclined to interfere in the impugned judgment and decree of the First Appellate Court. Thus, this appeal is Dismissed.”

4. In “Jai Pal Singh vs Gurinder Pal Singh” on 23 January, 2015, RSA No.1233 of 2014(O&M) the Hon’ble Punjab-Haryana High Court observed, “the Defendant is in second appeal aggrieved against the concurrent findings returned by the Courts below whereby the suit filed by the respondent/plaintiff for recovery of double the amount of earnest money in light of agreement to sell dated 24.09.2005 was decreed by the learned Civil Judge (Sr. Divn.), Ambala vide judgment and decree dated 23.07.2012 and the findings thereof were affirmed by the learned District Judge, Ambala vide judgment and decree dated 18.09.2013.”

Then the Honorable Court held, “The sole point that arises for determination before this Court is that whether the respondent/plaintiff was entitled to recover Rs.2 lacs i.e. double the amount of earnest money from the appellant as per the stipulation contained in agreement to sell (Ex.P-1). 3. In view of the settled principles of law that the Civil Court is required to adjudicate the matter on the basis of preponderance of evidence led by the parties, this Court is of the opinion that both the Courts below have rightly decreed the suit of the plaintiff/respondent and no interference is warranted in the well reasoned judgment and decrees passed by the Courts below. In view of the above, finding no question of law much less substantial question of law arising for determination in the present second appeal, the same is hereby dismissed.”              

5. In “Dadarao And Anr vs Ramrao And Ors” on 2 November, 1999, CASE NO.: Appeal (civil) 176 of 1982, the Hon’ble Supreme Court of India observed, "Tukaram Devsarkar aged about 65, Agriculturist R/o Devsar, purchaser (GHENAR)- Balwantrao Ganpatrao Pande aged 76 years r/ o Dijadi Post Devsar, Vendor (DENAR), who hereby give in writing that a paddy field situated at Dighadi Mouja, Survey No. 7/2 admeasuring 3 acres belonging to me hereby agree to sell to you for Rs.2,000 and agree to receive Rs. 1,000 from you in presence of V.D.N. Sane. A sale deed shall be made by me at my cost by 15-4-1972. In case the sale deed is not made to you or if you refuse to accept, in addition of earnest money an amount of Rs. 500 shall be given or taken and no sale deed will be executed. The possession of the property has been agreed to be delivered at the time of purchase. This agreement is binding on the legal heirs and successors and assigns.”

Then the Honorable Court held, "While disposing of the suit, the trial court had directed the defendants to pay back Rs. 1,000 plus interest at the rate of 6 per cent per annum from the date of the suit till realisation. In addition thereto, the Civil Judge had required the defendants to pay Rs. 500 as damages to the plaintiff. Keeping this in view, while allowing this appeal, we affirm the decree of the trial court with this modification that the sum of Rs. 500 will also carry an interest of 6 per cent per annum with effect from 8th July, 1977, being the date of the decree by the trial court. This will be in addition to a decree for Rs. 1,000 plus interest at the rate of 6 per cent thereon from the date of the filing of the suit till the date of realisation.”

6. In “Satish Batra vs Sudhir Rawal” on 18 October, 2012, CIVIL APPEAL NO. 7588 OF 2012, the Hon’ble Supreme Court India held, "Law is, therefore, clear that to justify the forfeiture of advance money being part of ‘earnest money’ the terms of the contract should be clear and explicit. Earnest money is paid or given at the time when the contract is entered into and, as a pledge for its due performance by the depositor to be forfeited in case of non-performance, by the depositor. There can be converse situation also that if the seller fails to perform the contract the purchaser can also get the double the amount, if it is so stipulated. It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money then the forfeiture clause will not apply."

7. In “Sh. Dharam Singh vs Smt. Manju Bansal” on 29 May, 2015, Suit No.214/2015, the Honorable ADDL. DISTRICT JUDGE (CENTRAL¬07), TIS HAZARI COURTS : DELHI held, “A decree of specific performance of agreement to sell dated 12.04.2013 in respect of the suit property is passed in favour of the plaintiff and against the defendant and defendant is directed to execute the sale deed in respect of the suit property in favour of the plaintiff after getting balance sale consideration of Rs.9.5 lacs and get the sale deed registered before the concerned Sub-Registrar, Delhi. If defendant failed to execute the sale deed in respect of the suit property in favour of the plaintiff, the plaintiff is entitled to get it executed and registered through the court.”

8. In “Zarina Siddiqui versus A. Ramalingam alias R. Amarnathan”, CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 9947 OF 2014 (Arising out of Special Leave Petition (C) No. 19555 of 2012), THE HONORABLE SUPREME COURT OF INDIA ordered the owner of the suit property to execute the sale deed in favour of the person who gave the earnest money to the same.