Neelam Khanna vs Kanchan Arora

Valmiki J Mehta, J.—The challenge by means of this Regular First Appeal u/s 96 Code of Civil Procedure, 1908 is to the impugned judgment and decree-dated 30.04.2001 whereby the suit for recovery filed by Respondent/Plaintiff was decreed for the amount of earnest money paid under an Agreement to Sell.

The Appellant as seller had agreed to sell to the Respondent/Plaintiff as buyer a plot of land bearing No. 189, Block B, Sector VIII at Dwarka, New Delhi for total consideration of Rs. 9,50,000/- and pursuant to which agreement, the Appellant received a sum of Rs. 1,00,000/-. The Appellant sought to forfeit the earnest money of Rs. 1,00,000/- on the ground that it was the Respondent who committed a breach of contract. The trial court has however rejected the contention of the Appellant and decreed the suit for recovery.

Learned Counsel for the Appellant argued that it was the Respondent who has breached the contract and therefore, the Appellant, was justified in forfeiting the earnest amount. I am unable to agree. The position of law is well settled right from the decision of the constitution Bench of Supreme Court in case of Fatehchand v. Balkishan Das AIR 1963 SC 1485 that even in case of breach of Agreement to Sell of immovable property by a buyer, a seller cannot forfeit the entire earnest amount unless it is pleaded and proved by the seller that in fact loss has been caused to him on account of fall in the value of the property. I put to the learned Counsel for the Appellant as to whether such a case was ever laid out before the trial Court by the Appellant that the Appellant/Defendant suffered a loss on account of breach of contract by the Respondent/Plaintiff, assuming that the Respondent/Plaintiff was indeed guilty of breach of contract, to which the counsel for Appellant fairly conceded that there are no such pleadings or evidence before the trial court to show a fall in the value of the property. At best the Appellant would therefore have been entitled to a forfeiture only of a nominal amount, in terms of the judgment in the case of Fateh Chand (Supra), however, the counsel states that he does not seek such relief.

In view of the above, there is no scope for interference with the impugned judgment and decree. The appeal is therefore dismissed, leaving the parties to bear their own costs. Interim orders are vacated. Trial court record be sent back.