DELHI DEVELOPMENT AUTHORITY v. GRIHASTHAPANA CO-OPERATIVE GROUP HOUSING SOCIETY LTD.

The Judgment of the Court was delivered by 1 HANSARIA, J. The short point which needs to be decided in these H appeals is whether the High Court of Delhi was justified in directing the

D.D.A v. CO-OP. GROUP HSG. SOCY. LTD. (HANSARIA, J.) 117

appellant to refund the earnest money deposited by the respondents fol- A lowing allotments of land to them at the cost of Rs. 975 per sq. mtr., which cost subsequently came to be enhanced to Rs. 1650.65, because of which the respondents· refllsed to finally accept the allotment.

2Copy pinpoint2. The aforesaid question arises on these facts. The appellant proposed to allot land to about 260 Co-operative Group Housing Societies B in Dwarka Phase-I, so also to about 60 such Societies in Narela. When the proposal was first made on 1.10.90, the cost was fixed at Rs. 975 per sq. mtr. for Dwarka land and Rs. 950 for Narela land. The Societies interested in the allotment land ~e required to deposit Rs. 5 lakhs as earnest money and to formally apply for allotment. On the interested Societies accepting C the offer, formal allotment was made by communication of the appellant dated 25.1.91. Before possession of the land came to be delivered, the / appellant by its communication dated 3.11.92 stated that the premium of the land shall be payable at Rs. 1650.65 per sq. mtr. which was the value determined by the Government of India, vide its notification dated D 21123.10.92. Some of the Societies approached the Delhi H~ Court being aggrieved at the enhancement of the premium. The High Court ultimately upheld the enhancement, which decision has since been reported in 26 Delhi Reported Judgment 156. On ·this Court being approached against the Judgment of the High' Court by way of special leave petitions, the same E came to be disposed of by extending the time of paying the first instalment up to 31st May, 1993 which date had been fixed by the High Court as 30th April, 1993. '.fllis Court made _it clear in its order that the facility to pay first instalment with interest will be available only upto 31st July, 1993; and no. extension of time beyond this date would be granted.

3Copy pinpoint3. On the respondents herein not paying the amount as ordered by this Court, the appellant forfeited sum of money equivalent to 10% of what had become payable @ 1650.65, taking the same as earnest money due as per clause 4 II of the allotment order dated 3.11.1992. This action of the appellant \Va& challenged before the Delhi High Court, who by impugned G . order has directed the appellant not to make any deduction and to refund the entire amount deposited by the respondents. The validity of this direction has been challenged in these appeals.

4Copy pinpoint4. Shri Jaitley, appearing for the appellant, has co~ed his submis- H

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"· High Court which is relatabre to the A sion to the part of the direction of the refund of earnest money. Learned counsel contends that the respondents having had accepted the allotment on the conditions mentioned in the communication dated 25.1.91 w&ich had visualised enhancement of the rate, and the enhancement having been regarded as reasonable by the High B Court, the direction to refund the earnest money is not in accordance with I

the law for two reasons. First, the very conception of earnest money is that in case the contract goes off, the same can be forfeited. Secondly, the Delhi Development Authority (Disposal of Developed Nazul Land) Amendment Rules, 1981, which were notified on 11.11.91, having provided for forfeiture of earnest money in case of non-deposit of promium as mentioned in C amendment Rule 24(2), action of the appellant in forfeiting the earnest money was in accordance with the law.

5Copy pinpoint5. In support of the first legal propositio~ Shri Jaitley referred us. principally to a three-judgment Bench decision of this Court in Shree D Hanuman Cotton Mills v. Tata Aircraft Ltd., [1970] 3 SCR 127, in which there is a detail discussion of what is meant by earnest money and what is tlie ·consequences of deposit of such ·money and when can the same be forfeited. The Bench after reviewing various decisions noted in the judg- ment which includes that of the Privy Council rendered in Chiranjit Singh E v. Har Swamp, AIR (1926) PC ·1, culled out the following principles regarding the "earnest" at page 139 : ·

"( 1) It must · be given at the moment at which the contract is concluded.

F ·-· (2) It represents. a guarantee that the contract will be fulfilled or, in other words, 'earnest' is given to bind the contract.

(3) It is part of the putchase price when the transaction is carried out. G (4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser.

(5) Unless there is anything to the contrary in the terms of the . contract, on default committed by the buyer, the seller is entitled H to forfeit the earnest." ·

D,.D.A v. CO-OP. GROUP HSG. SOCY. LID. [HANSARIA, J.] 119

6Copy pinpoint6. In view of the aforesaid legal position, the contention advanced by A Shri Bishwajit Bhattarcharya for the respondents is tlJtt there was no acceptance of the offer given on 3.11.92 in which mentioned was made about the rate of premium being Rs. 1650.65. The appellant is, therefore, not entitled according to the learned counsel, to forfeit the earnest money, as no such money had been deposited after this date in token of acceptance of the proposal.

7Copy pinpoint7. Shri Jaitley counters this statement by urging that the proposal to allot land as contained in the communication of 3.11.92 cannot -be read dehors what had been mentioned in the allotment offer dated 25.1.91 or for that matter the offer contained in the communication dated 1.10.90. This brought home by drawing our attention to what has been stated in para 3 of the offer dated 3.11.92 in which, while calculatmS the entire amount payable by the allottee, the deposit made earlier pursuant to the offer of 1.10.90 was adjusted. Further, in sub-para II of para 4 of the lateJ D communication, the fact of deposit ~arnest money earlier has been taken note of. We also find from Application Form dated 24.12.1992 submitted

- by the respondent in CA No. 93lJ85 that the earnest money deposited on 22.10.90 as well as part of the premium deposited on 25.1.91, have been mentioned under item 8 dealing with the "Challan Number and date whereby 25% of the total premium and 10% of earnest money has been deposited."

8Copy pinpoint8. The aforesaid facts leave no manner of doubt in our mind that what stated in the communication of 3.11.92 was in continuation of the earlier offer dated 1.10.90/25.1.91. We therefore, hold that the respondents had accepted the offer contained in the communication of 3.11.92 and, as such, they were bound to pay premium at the enhanced rate of Rs. 1650.65, held as reasonable by the High 'court. As they did not comply with the condition mentioned in the Court's aforesaid order dated 10.5.93, the respondents had made themselves liable to forfeiture of the earnest money. G As, however, the earnest money which has deposited. was not 10% of the premium as required by the amended Nazul Rules, but was a fixed sum of Rs. 5 lakhs in C.A. No. 93lJ85 mentioned in the offer of 1.10.90, the earnest money which had become liable to be forfeited was a sum of Rs. S lakhs, and not 10% of the total premium calcultted at the rate of Rs. 1650.65. · · H

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9Copy pinpoint9. The appeals, therefore, stand allowed by modifying the High Court's order by stating that the amount to be refunded to the respondents woulc,i not include earnest money which had been deposited by them. The -j-- remaining amount would be refunded by the appellant within a period of 4 weeks from today, falling which the respondents would be entitled for B interest @ 18% per annum from today till payment. In the facts and circumstances of the case, we make no order to costs.

A.G. Appeals allowed.