1994 (12) TMI 322 - SC - Indian Laws

Appellant loses appeal as earnest money forfeiture upheld for property sale default and damages

The SC dismissed the appellant's appeal regarding forfeiture of earnest money in a property sale agreement. The appellant defaulted on executing the sale ... Entitlement to forfeiture of earnest money - minor on the date of the agreement of sale - default committed by the appellant in the performance of their part of the agreement - come to the court with clean hands - HELD THAT:- It is true that in the written statement filed by the defendants, defendant Nos. 1,2, brothers and 4 being the mother representing defendant No.3 minor, as a natural guardian, had pleaded in paragraph 12 that the agreement to the extent of the share of the minor, is void. Under s.8(3) of the Hindu Minority and Guardianship Act, 1956, Act 32 of 1956 ('the Act'), it is only voidable at the instance of the minor or any person claiming under him. The guardian has to obtain permission from the court under s.8. In this case, admittedly, during the pendency of the suit, the third respondent-minor after becoming the major on July 31, 1975, was duly declared as major and the mother was discharged from guardianship. Thereafter he filed a memo adopting the written statement filed by the defendants 1 and 2, his brothers. When the minor had attained majority pending the suit and had elected to abide by the terms of the agreement of sale, the need to obtain sanction from the court became unnecessary. Under these circumstances, the necessity to obtain permission from the court under sub-s/(2) of s.8 of the Act became redundant. It is seen, from the conduct of the appellant, that he is not willing to perform his part of the contract and he wants to wriggle out of the contract. It is also seen that time is the essence of the contract. Sale deed was required to be executed on or before February 23, 1973, the appellant is the defaulting party and he has not come to the court with clean hands. It is seen that a specific covenant under the contract was that the respondents are entitled to forfeit the money paid under the contract. So when the contract fell through by the default committed by the appellant, as part of the contract, they are entitled to forfeit the entire amount. In this case even otherwise, we find that the respondents had suffered damages firstly for one year they were prevented from enjoying the property and the appellant had cut off 150 fruit bearing coconut trees and sugarcane crop was destroyed for levelling the land apart from cutting down other trees. Pending the appeal, the respondents sought for and were granted permission by the court for sale of the property, Pursuant thereto, they sold the land for which they could not secure even the amount under contract and the loss they suffered would be around ₹ 70,000/-. Under those circumstances, their forfeiting the sum of ₹ 50,000/cannot be said to be unjustified. The appeal is accordingly dismissed with costs. Issues involved:The issues involved in this case are the forfeiture of earnest money, the validity of the agreement due to the minor's involvement, and the entitlement of the respondents to forfeit the entire amount.Forfeiture of earnest money:The appellant entered into an agreement to purchase land but failed to register the sale deed within the specified time, leading to a dispute over the earnest money. The High Court held that the appellant's failure to obtain layout plan sanction was a breach of contract, justifying the forfeiture of the earnest money.Validity of agreement due to minor's involvement:The appellant argued that the minor's guardian did not obtain court permission for the sale deed, rendering the agreement defective. However, the minor later became a major and adopted the contract terms, indicating willingness to perform. The Court found that the appellant failed to prove that the respondents suffered damages justifying the refund of the earnest money.Entitlement to forfeit the entire amount:The Court determined that the respondents were entitled to forfeit the entire amount due to the appellant's default and the damages they suffered. The respondents were granted permission to sell the property during the appeal, but the sale did not cover their losses, justifying the forfeiture of the earnest money.In conclusion, the Supreme Court upheld the High Court's decision to dismiss the appellant's suit, ruling that the forfeiture of the earnest money was justified based on the appellant's breach of contract and the damages suffered by the respondents.