Sau. Jyoti W/O Sanjay Adsod vs Sau. Sindhubai Ramraoji Shende ...
2017 Latest Caselaw 3747 Bom

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                           IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                     NAGPUR BENCH : NAGPUR.


                                              SECOND APPEAL NO.282 OF 2015


               APPELLANT:                                              Sau.   Jyoti   w/o   Sanjay   Adsod,   Aged
                                                                       about   41   years,   Occ.   Household   r/o
               (Ori. Plaintiff)
                                                                       Saraswati   Nagar,   Amravati   District
                                                                       Amravati.
                             
                                                                                                
                                                           -VERSUS-


               RESPONDENTS: 1.                                         Sau. Sindhubai Ramraoji Shende, Aged
                                                                       about   49   years,   Occ.   Household   r/o
               (Ori. Defendant 
                                                                       Saraswati   Nagar,   Amravati   District
               No.1.)
                                                                       Amravati.
               (Ori. Defendant                         2.
                                                      Sau.   Rampyari   Chandanlal   Jaiswal,
               No.2.)                                 Aged   about   39   years,   Occ.   Household,
                                                      r/o   Saraswati   Nagar   Amravati   District
                                                      Amravati.
                                                                                                                       
              Shri A. M. Sudame Advocate for the appellant.
              Shri P. R. Agrawal, Advocate for respondent no.1.
                                                  CORAM: A.S. CHANDURKAR, J.

DATED: 29 th JUNE, 2017.

ORAL JUDGMENT :

1. This appeal filed under Section 100 of the Code of

Civil Procedure, 1908 has been heard on the following substantial

question of law framed earlier:

Whether the lower appellate Court committed

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error in the absence of clause or evidence for providing forfeiture of the earnest amount or any legal and valid reasons therefor could overturn the decree of the trial Judge?

2. The appellant is the original plaintiff who had filed suit

for recovery of an amount of Rs.70,000/- which was paid to the

defendant no.1 pursuant to an agreement of sale entered into with

her. This agreement of sale is dated 10-12-2000 by which

defendant no.1 agreed to sell constructed portion standing on plot

No.8-A and 8-B. As per this agreement, the total consideration

fixed was Rs.2,80,000/- and Rs.70,000/- was paid as earnest

money. The sale deed was to be executed by 30-11-2003.

According to the plaintiff, the defendant no.1 did not execute the

sale deed by said date. Various requests were made to the

defendant no.1 to complete the transaction. Thereafter on

18-5-2006 a notice was issued to the defendant no.1 calling upon

her to execute the sale deed. The plaintiff further learnt that

portion of the suit house was sold to defendant no.2. Hence, on

23-11-2006, the plaintiff filed suit for refund of earnest amount of

Rs.70,000/-.

3. The defendant no.1 filed her written statement. The

agreement in question was denied. It was pleaded that the

plaintiff had come up with a false case. She pleaded that on

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8-4-2005 half portion of the suit property was sold to the

defendant no.2 and therefore, no relief could be granted to the

plaintiff.

4. The parties led evidence and the trial Court held that

the agreement dated 10-12-2000 had been duly proved. The

payment of Rs.70,000/- was also held to be proved. The trial

Court further held that breach was committed by the defendant

no.1 and, therefore, it passed a decree for refund of earnest

amount with 6% interest.

5. Being aggrieved the defendant no.1 filed an appeal.

The appellate Court held that though the agreement was proved,

the breach was committed by the plaintiff. After holding that the

plaintiff was not ready and willing to perform her part of the

agreement, it held that the defendant no.1 was entitled to forfeit

the amount of Rs.70,000/-. On that basis the appeal was allowed

and the suit came to be dismissed.

6. Shri A. M. Sudame, learned Counsel for the appellant

submitted that in the agreement dated 10-12-2000 (Exhibit-39)

there was no clause permitting forfeiture of the earnest amount.

He submitted that in the absence of any such agreement between

the parties by which defendant no.1 could forfeit the earnest

amount, the appellate Court was not justified in permitting such

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forfeiture. He further submitted that no evidence was led by

defendant no.1 to justify forfeiture of the earnest amount.

According to him, the aspect of readiness and willingness of the

plaintiff was wrongly considered by the appellate Court while

setting aside the decree passed by the trial Court. As the time was

not the essence of the contract and defendant no.1 had sold out

the suit property to defendant no.2 in breach of the agreement, the

plaintiff was entitled for refund of earnest amount. He placed

reliance upon the decisions of the Hon'ble Supreme Court in

Balasaheb Dayandeo Naik Vs. Appasaheb Dattatraya Pawar (2008)

4 SCC 464 and Gian Chand Vs. Gopala and others (1995) 2 SCC

528.

7. Shri P. R. Agrawal, learned Counsel for respondent

no.1 supported the impugned judgment. According to him, the

sale deed was to be executed by 30-11-2003 and though defendant

no.1 was ready and willing to perform her part of the agreement,

the breach was committed by the plaintiff. He submitted that the

appellate Court rightly found that the plaintiff was not ready and

willing to perform her part of the contract and therefore, forfeiture

of the said amount was justified. He placed reliance upon the

decisions of the Hon'ble Supreme Court in Satish Batra Vs. Sudhir

Rawal (2013) 1 Supreme Court Cases 345, judgment in Civil Appeal

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No.5636 of 2017 (Jaswinder Kaur (now deceased) through her L.Rs.

and Ors vs. Gurmeet Singh and Ors.) dated 18-4-2017, decision of

the Calcutta High Court in Naresh Chandra Guha vs. Ram Chandra

Samanta AIR 1952 Calcutta 93 and the decision of the Delhi High

Court in Dr. Habibur Rehman Khan v. Naresh Kumar 2014 (207)

DLT 15.

8. I have heard the learned Counsel for the parties at

length and perused the records of the case. While answering the

substantial question of law, it would be necessary to consider the

law with regard to forfeiture of advance money that is paid while

entering into an agreement. In Satish Batra (supra), the facts

therein indicate that in the agreement of sale, there was a specific

stipulation that on the failure of the purchaser to fulfil certain

conditions, the earnest amount was liable to be forfeited. In para

15 of the said decision, it has been observed thus:

"15. The 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 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

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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."

From the aforesaid, it is clear that the terms of the

contract must be clear and explicit to justify forfeiture of the

advance amount. Further, if the amount paid is towards part

payment of consideration and not intended to be earnest money,

then the forfeiture clause would not apply.

9. As per the agreement dated 10-12-2000, the suit

house belonging to defendant no.1 was agreed to be sold for

consideration of Rs.2,80,000/- out of which Rs.70,000/- was paid

as earnest amount. The balance consideration of Rs.2,10,000/-

was to be paid by 30-11-2003. The agreement clearly recites that

this amount of Rs.70,000/- was received as an advance and

towards the part payment of the total consideration. The

agreement does not contain any clause by which forfeiture of the

amount paid could be made. Similarly, the consequence of not

complying with the time schedule mentioned in the agreement is

also not provided. The agreement dated 10-12-2000 (Exhibit-39)

has been held to be duly proved by both the Courts. It is in the

light of this agreement at Exhibit-39 that the entitlement of the

plaintiff for refund of the earnest amount is required to be

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adjudicated.

10. The defence as raised to the claim for refund of earnest

amount of Rs.70,000/- was the denial of the agreement dated 10-

12-2000. It was pleaded that the plaintiff's husband had misused

the stamp-paper for preparing said agreement. The agreement

itself having been denied, there were no pleadings by the

defendant no.1 as regards absence of readiness and willingness on

the part of the plaintiff to perform her part of the agreement. In

absence of any pleadings by the defendant that the plaintiff was

not ready and willing to perform her part of the agreement, there

was no occasion for the appellate Court to have gone into that

aspect of the matter for denying refund of earnest amount. In the

light of limited defence raised by the defendant, the ratio of the

decisions in Naresh Chandra Guha, Dr. Habibur Rehman Khan and

Jaswinder Kaur (supra) cannot apply to the case in hand.

Moreover, the agreement being for sale of immovable property,

there is no presumption that the time was the essence of the

contract. This position is clear from the decision in Chand Rani V.

Kamal Rani (1993) 1 SCC 519. This decision has been followed in

Balasaheb Dayandeo Naik (supra). There was no term in the

agreement permitting forfeiture of the part consideration paid by

the plaintiff on account of any breach by the plaintiff. There was

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also no evidence led by the defendant to justify the forfeiture of

said amount. The defendant having failed to prove her defence vis

a vis the agreement dated 10-12-2000, the plaintiff was entitled

for a decree of refund of earnest amount.

11. It cannot be lost sight of that the suit as filed was

simplicitor for refund of the earnest amount and in absence of any

agreement between the parties by which defendant no.1 was

entitled to forfeit the amount of part payment, the aspect

regarding readiness and willingness of the plaintiff to perform her

part of the agreement could not have been the basis for the

appellate Court to refuse refund of the part consideration.

In that view of the matter, I find that the trial court

was justified in holding in favour of the plaintiff. The appellate

Court by misdirecting itself proceeded to consider the question of

readiness and willingness and treated it as a condition precedent

for getting refund of the part consideration was paid by the

plaintiff. The substantial question of law is accordingly answered

in favour of the appellant. The appellate Court was not justified in

setting aside the decree passed by the trial Court.

12. In view of aforesaid, the judgment in Regular Civil

Appeal No.94/2009 dated 24-2-2015 is quashed and set aside. The

judgment in Regular Civil Suit No.441/2006 dated 26-3-2009

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stands restored.

13. The second appeal is allowed with no order as to costs.

JUDGE

/MULEY/