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PETITIONER: GIAN CHAND

       Vs.

RESPONDENT: GOPALA & ORS.

DATE OF JUDGMENT18/01/1995

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. VENKATACHALA N. (J)

CITATION:  1995 SCC  (2) 528        JT 1995 (2)   513  1995 SCALE  (1)824

ACT:

HEADNOTE:

JUDGMENT: ORDER This  appeal, by special leave, arises from the judgment  of the  learned  Single  Judge of the High Court  of  Punjab  & Haryana in R.S.A.No.931/1986, dated 11.8.1986. The appellant had entered into an agreement with the respondent on 13.1.78 to  purchase  1/3rd  share  of the  land  belonging  to  the respondent for a total consideration of Rs.78,000/- and paid a sum of Rs.20,000/- as earnest money.  The sale deed was to be  executed on or before 30.4.78. Later the appellant  came to  know that notification u/s 4(1) of the Land  Acquisition Act,  1894 was published on 3.8.77 which fact was  concealed to the appellant, so he had filed the suit for refund of the earnest  money.  The Trial Court in Suit  No.620/82  decreed the suit for refund of the earnest money with interest at 6% per annum from 25.1.1980 till the date of realisation of the decree  amount.   Feeling aggrieved,  the  respondent  filed Civil  Appeal  No.  1  10/83.  The  District  Judge  by  his Judgment and decree dated 28.9.1985 reversed the decree  and dismissed  the suit.  In Second Appeal, the High Court  dis- missed  the  same in limine.  Thus this appeal,  by  special leave. 2.  The  only  question for  consideration  is  whether  the appellant  is  entitled to obtain refund of  earnest  money. One  of the terms of the contract, admittedly  entered  into between the parties, is that in the event of acquisition  of land by the Government for a public purpose, the  respondent "shall   return   the  earnest  money   without   interest." Admittedly,  since  the notification u/s 4(1)  of  the  Land Acquisition  Act was already published, the question  arises whether the appellant could get a sale deed executed and  in its  absence  whether  he is entitled to  obtain  refund  of earnest  money paid under the agreement.  On publication  of notification  under  s.4(1)  of the Act, though  it  is  not conclusive till declaration u/s 6 was published, the  owner- of  the land is interdicted to deal with the land as a  free

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agent and to create encumbrances thereon or to deal with the land   in  any  manner  detrimental  for   public   purpose. Therefore,  though notification u/s 4(1) is not  conclusive, the owner of the land is prevented from encumbering the land in that such 515 encumbrance  does not bind the Government.   If  ultimately, declaration  under  s.6  is  published  and  acquisition  is proceeded  with, it would be conclusive evidence  of  public purpose  and  the Government is entitled to  have  the  land acquired and take possession free from all encumbrances  Any sale transaction or encumbrances created by the owner  after the publication of notification under s.4(1) would therefore be  void and does not bind the State.  In this  perspective, when ’the necessary conclusion is that the agreement of sale stands frustrated, the question of readiness and willingness on  the  part of the vendor or vendee does not  arise.   The appellate  court  wrongly held that the  appellant  was  not ready  and willing to perform his part of the contract.   In the  face of the notification how the appellant could get  a valid  title?   Any  attempt on his  part  would  be  futile exercise  and avoidable expenditure.  Both the  courts  have concurrently found that time is not the essence of the  con- tract.  Under those circumstances, the plaintiff is entitled to  lay  the suit for refund of earnest money  within  three years  from  the date of refusal of the performance  of  the contract.  In this case, declaration under s.6 was published and so it was conclusive of public purpose and the land  was acquired.   The contract was, therefore, frustrated.   Since one  of the terms of the contract is to return  the  earnest money, in the event of acquisition being made by the  State, the vendee-appellant is entitled under s.33 of the  Contract Act, as rightly and legally held by the trial court, to seek refund of the earnest money. 3.   Section 33 of the Contract Act reads thus:-               "33.  Contingent contracts to do or not to  do               anything if an uncertain future event does not               happen  can be enforced when the happening  of               that event becomes impossible, and not before.  The contract in question being a contingent contract  based on  uncertain future events, (here is a case of  suppression of  tact  even  otherwise) that  event  having  occurred  by notification   issued   under  s.6,  the   contract   became impossible of performance.  Therefore, it got frustrated and the  contracting party is entitled to enforce the  terms  of the contract for- refund of earnest money.  The Trial  Court had  rightly  decreed the’ suit for return  of  the  earnest money.  The district Judge refused the relief on the  ground that he was not ready and willing to perform his part of the contract.  As stated earlier, his readiness and  willingness is  not  relevant after the notification  under  s.4(1)  and declaration  under s.6 were published.  Under those  circum- stances,  the District Judge had taken an erroneous view  in reversing the decree of the trial court.  The High Court did not  apply  its  mind  nor did it advert  to  any  of  these relevant  circumstances.   It simply  dismissed  the  second appeal  in  limine, as if it was a routine.   Therefore,  we hold  that  the  decree of the High Court and  that  of  the District Judge are vitiated by manifest gross errors of law. They  are  set aside accordingly.  The decree of  the  trial court is restored. 4. The appeal is allowed.  In the circumstances, parties are directed to bear their own costs. 516

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