Statutory charge on earnest money treated as part payment extends to interest when sale is not completed.

Where earnest money is, in substance, part of the prepaid purchase consideration, Section 55(6)(b) of the Transfer of Property Act creates a statutory charge on the amount payable on failure of the sale and on the interest due on it. The Court treated the payment structure and the parties' intention as decisive, holding that the amount was not a mere deposit but part payment of the purchase price. As the vendors did not complete the sale, the buyer was entitled to refund with interest, and interim protection against alienation of the property was justified.

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Issues: Whether the buyer's statutory charge under Section 55(6)(b) of the Transfer of Property Act extends to earnest money treated as part payment of the purchase price and to interest on that amount, so as to justify interim protection against alienation of the property.

Analysis: The statutory charge under Section 55(6)(b) attaches to purchase money properly paid in anticipation of delivery and to interest on such amount. Earnest money, depending on the intention of the parties and the surrounding circumstances, may function both as security for performance and as part payment of the purchase price. On the agreement and its payment structure, the amount of Rs. 38 lakhs was not a mere deposit simpliciter but was part of the prepaid purchase consideration. Since the vendors failed to complete the sale, the amount became refundable with interest under the contract, and the statutory charge extended to the principal sum as well as the interest due thereon.

Conclusion: The statutory charge covered the earnest money amount and the interest claimed on it, and the order granting interim injunction was justified.

Ratio Decidendi: Where earnest money is, in substance, part of the prepaid purchase consideration, Section 55(6)(b) of the Transfer of Property Act creates a statutory charge on the amount refunded and on the interest payable thereon.

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