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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 532 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 533 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. 534