whether the seller is entitled to forfeit the earnest money deposit where the sale of an immovable property falls through by reason of the fault or failure of the purchaser ? .-2015 S.C. [2012] MSKLAWREPORTS



 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.

When we examine the clauses in the instant case, it is amply clear that the clause extracted hereinabove was included in the contract at the moment at which the contract was entered into. It represents the guarantee that the contract would be fulfilled. In other words, ‘earnest’ is given to bind the contract, which is a part of the purchase price when the transaction is carried out and it will be forfeited when the transaction falls through by reason of the default or failure of the purchaser. There is no other clause militates against the clauses extracted in the agreement dated 29.11.2011.

We are, therefore, of the view that the seller was justified in forfeiting the amount of Rs.7,00,000/- as per the relevant clause, since the earnest money was primarily a security for the due performance of the agreement and, consequently, the seller is entitled to forfeit the entire deposit. The High Court has, therefore, committed an error in reversing the judgment of the trial court.

Consequently, the appeal is allowed and the impugned judgment of the High Court is set aside. However, there will be no order as to costs.-2015 S.C. [2012] MSKLAWREPORTS

Popular posts from this blog

Writ - praying to declare that explanation to Section 6 of the amendment Act of 39 of 2005, Explanation: for the purpose of this Section partition means any partition made by execution of a deed of partition duly registered under the Registration Act, 1908 (16 of 1908) or partition effected by a decree of a court as unconstitutional and the same is liable to be struck down and etc; -2015 KAR(2015) msklawreports

Or.39, rule 7 of C.P.C - Petition for preservation of properties belongs to the petitioner - as the Govt. is going to demolish the building in road widening scheme - Or.39, rule 1 made absolute against the petitioner infavour of the respondent - Trial court allowed the Petition wrongly - their lordships held that In a suit for injunction, though the question of possession as on the date of filing of the suit is most relevant, there may be other ancillary and incidental questions as to the conduct of the parties before the Court. The concept of possession in law should take in its spectrum all rights, liabilities, immunities and claims vis-`-vis the property which is said to be in possession. When the Court recorded a prima facie finding that Gayatri bai is in possession, she was also in law entitled to take advantage of that presumption. Unless the defendant properly pleads and proves at the earliest stage regarding any such movables or immovables attached to the immovable property, no defendant can be heard of saying that his belongings were lying in the disputed property. - 2015 A.P.(2001) MSKLAWREPORTS

Cancellation of Bail with out completing the investigation by police about threat on defacto complainant , is a premature one - - 2015 TELANGANA & AP.MSKLAWREPORTS