Earnest money forfeiture requires proved repudiation or abandonment; mere failure to secure specific performance does not justify retention.

Earnest money may be forfeited only where repudiation, abandonment, or another proved contractual basis for forfeiture is established; mere failure to obtain specific performance or absence of readiness and willingness is insufficient. On the facts, the seller had not pleaded or proved a forfeiture term, no issue or evidence supported treating the payment as forfeitable earnest, and Section 55(6) of the Transfer of Property Act, 1882 did not by itself justify retention. The buyer's deposit therefore had to be refunded, and the decree directing refund with interest in default was affirmed.

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Issues: (i) whether the sum of Rs. 3,00,001 paid towards the purchase transaction could be treated as earnest money liable to forfeiture; (ii) whether, on the facts found, the respondent was entitled to forfeit or retain the amount, having regard to Section 55(6) of the Transfer of Property Act, 1882.

Issue (i): whether the sum of Rs. 3,00,001 paid towards the purchase transaction could be treated as earnest money liable to forfeiture.

Analysis: The payment comprised Rs. 25,001 and Rs. 2,75,000, but there was no issue framed and no evidence led that the amount had been paid in pursuance of the respondent's version of the agreement or that it was forfeitable under any proved contractual term. The finding that the appellant had failed to prove his pleaded agreement and was not ready and willing to perform did not, by itself, establish repudiation of the contract or a breach sufficient to support forfeiture. Mere delay or failure to obtain specific performance was not treated as equivalent to abandonment or repudiation.

Conclusion: The amount could not be sustained as forfeitable earnest on the record; the right to retain it was not established.

Issue (ii): whether, on the facts found, the respondent was entitled to forfeit or retain the amount, having regard to Section 55(6) of the Transfer of Property Act, 1882.

Analysis: The statutory charge for purchase money and earnest under Section 55(6) was treated as relevant, but it did not displace the requirement that the buyer must have repudiated the contract or improperly declined delivery before the seller could justify retention. No finding of repudiation or forfeiture was recorded, and the parties had not gone to trial on such an issue. The earlier decree directing refund therefore stood on the footing that the respondent could not lawfully keep the money.

Conclusion: The respondent had no right to forfeit or retain the sum, and refund was maintainable.

Final Conclusion: The cross-objection failed, and the decree directing refund of Rs. 3,00,000 was affirmed with interest in default of payment.

Ratio Decidendi: Earnest money can be forfeited only where the contract or proved facts show repudiation or conduct amounting to abandonment by the buyer; mere failure to obtain specific performance or absence of readiness and willingness, without a pleaded and proved forfeiture basis, does not justify retention of the deposit, even where Section 55(6) of the Transfer of Property Act, 1882 is invoked.

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