1 2025:CGHC:36632 NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR FA No. 159 of 2022 Rajan @ Rajendra Prasad S/o Late Ramlal Koshta Aged About 72 Years R/o Ramleela Chowk, Kharora, Tahsil Tilda, District Raipur Chhattisgarh ... Appellant/Defendant versus Surendra Kumar Jain S/o Late Narsingh Das Jain Aged About 73 Years R/o Village Kesla, P.S. Kharora, Tahsil Tilda, District Raipur Chhattisgarh ... Respondent/Plaintiff For Appellant : Mr. Sourabh Sharma and Ms. Harneet Kaur, Advocates For Respondent : Ms. Aneesha Naik, Adv. on behalf of Mr. Apoorv Goel, Advocate (Hon’ble Shri Justice Naresh Kumar Chandravanshi) Judgment on Board 28.7.2025 1. This first appeal has been preferred by the appellant/defendant under Section 96 of the Code of Civil Procedure, 1908, challenging the judgment and decree dated 09.9.2022 passed by First Upper District Judge, Raipur (CG) in Civil Suit No.67-B/2016, whereby recovery suit has been allowed in favour of the plaintiff/respondent herein and decree has been granted in his favour. (For sake of convenience, the parties would be referred hereinafter as per their status before the trial Court) BINI PRADEEP Digitally signed by BINI PRADEEP Date: 2025.07.30 14:15:11 +0530 2 2. Facts of the case in nut shell are that, agreement was executed by defendant in favour of the plaintiff to sell his land bearing Khasra No.1092/12 area 1495 sq.ft., situated at Ward No.14, PH No.31, Village Kharora, Tahsil Tilda Distt. Raipur (short short ‘the suit land’) for sale consideration of Rs.801/- per sq.ft. In furtherance of the same, Rs. 3 lakh was paid by the vendor/purchaser/plaintiff Surendra Kumar Jain to the defendant, out of which, Rs.1 lakh was paid on cash and Rs. 2 lakh was paid through cheque. Subsequently, sale deed was not got executed by the plaintiff on the ground that the suit land was found to be involved in dispute. Thereafter the plaintiff filed civil suit for recovery of earnest money of Rs.3 lakh along with interest. 3. The defendant filed his written statement, in which he denied the pleadings of the plaintiff that the suit land was a disputed land. It was further pleaded that the defendant is still ready to execute the sale deed in favour of the plaintiff, but the plaintiff himself does not want to get it registered, hence, he is not entitled to get any earnest money. 4. On the basis of the pleadings of both parties, the learned trial Court framed as many as two issues, recorded evidence of both parties and after considering the same, allowed the suit filed by the plaintiff, granting decree in his favour and by directing the defendants to return earnest money of Rs. 3 lakh along with interest @ 3.5% per annum from the date of filing of the suit along with cost. Being aggrieved by this, the defendant has filed instant appeal. 5. Learned counsel for the defendant/appellant submits that there was never any dispute over the suit land, rather the prospective purchaser/ plaintiff himself was not interested to purchase the suit land. Therefore, false and baseless allegations have been levelled. She further submits that the defendant is still ready to execute sale deed in furtherance of Agreement to 3 sell (Ex.-P/1) executed between the parties. She would next submit that there was no clause in the agreement that in the event of non-execution of sale deed, the advance amount shall be payable to the plaintiff/purchaser. But the learned trial Court without considering the aforesaid facts, has granted decree in favour of the plaintiff by applying wrong provisions of Indian Contract Act, 1872. Hence, judgment and decree passed by the learned trial Court may be set aside by allowing this appeal. 6. Per contra, learned counsel for the plaintiff/respondent supports the impugned judgment and decree passed by the learned trial Court. 7. I have heard learned counsel for the appellant/plaintiff and perused the record. 8. Undisputedly, for sale of the suit land, Agreement to sell (Ex-P/1) was executed between both the parties and the same was signed by them. In furtherance of said agreement, Rs. 3 lakh was also paid by the plaintiff as advance amount (बयाना), which shall be adjusted against total sale consideration. Therefore, it is not simply an earnest money, rather it is a part of sale consideration. Though Agreement to sell (Ex-P/1) does not contain any forfeiture clause, but merely because of the such infirmity, the defendant cannot be held to be entitled to get the benefit of contract, which ultimately got redundant. The learned trial Court has rightly relied upon the provisions of Sections 56, 65 & 72 of the Indian Contract Act, 1872. 9. Even otherwise, in a suit for return of advance amount or the earnest money, it is not to be adjudicated as to which party committed default in part performance unless the agreement contains a forfeiture clause. The Supreme Court in the matter of Satish Batra vs. Sudhir Rawal (2013) 1 SCC 345 has held that precision and clarity in clauses of contract to justify forfeiture is necessary and that in agreement for purchase of immovable property the 4 forfeiture clause will not apply when the payment is made only towards part payment of consideration and not intended as earnest money. 10. Difference between 'advance amount' and the 'earnest money' has been considered by the Supreme Court in number of cases. In Shree Hanuman Cotton Mills vs Tata Air-Craft Ltd (1969) 3 SCC 522, the Supreme Court laid down certain principles to determine as to when the amount paid as 'advance' be treated as 'earnest money' and the seller is entitled to forfeit the same. Para 21 of the judgment is reproduced hereunder. “ 21. From a review of the decisions cited above, the following principles emerge regarding 'earnest': (1) It must be given at the moment at which the contract is concluded. (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 purchase price when the transetion is carried out. (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 to forfeit the earnest. ” 11. In the matter of DDA v. Grihsthapana Coop. Group Housing Society Ltd 1995 Supplementary (1) SCC 751, the Supreme Court, following privy council's decision in the matter of Chiranjit Singh v. Har Swarup AIR 1926 PC 1, held that for the question whether the respondents are entitled to forfeit the entire amount, it is to be 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. 12. In Videocon Properties Ltd. v. Bhalchandra Laboratories (2004) 3 5 SCC 711, the Supreme Court examined the nature and character of the earnest money and took a view that the words used in the agreement alone would not be determinative of the character of the “earnest money” but really the intention of the parties and surrounding circumstances. It held that the earnest money serves two purposes of being part-payment of the purchase money and security for the performance of the contract by the party concerned. 13. It is not the description by word used in the agreement only that would be determinative of the character of the sum but really the intention of the party have to be looked into and what may be called as an 'advance money' may really be a deposit or 'earnest money' and what is termed as a deposit or earnest money “may ultimately turn out to be really an advance or part of purchase price”. 14. In Satish Batra (Supra), the Supreme Court considered the issue and held thus in paragraph 15 and 16. 15. The law is, therefore, clear that to justify the forfeiture of advance money being part of “earnest money” the terms of the contract should be clear and explicit. Earnest money is paid or given at the time when the contract is entered into and, as a pledge for its due performance by the depositor to be forfeited in case of non-performance, by the depositor. There can be converse situation also that if the seller fails to perform the contract the purchaser can also get the double the amount, if it is so stipulated. It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money then the forfeiture clause will not apply. 16. When we examine the clauses in the instant case, it is 6 amply clear that the clause extracted hereinabove was included in the contract at the moment at which the contract was entered into. It represents the guarantee that the contract would be fulfilled. In other words, “earnest” is given to bind the contract, which is a part of the purchase price when the transaction is carried out and it will be forfeited when the transaction falls through by reason of the default or failure of the purchaser. There is no other clause militates against the clauses extracted in the agreement dated 29.11.2011. 14. 15. Applying the ratio of law laid down by the Hon’ble Apex Court in afore cited cases, if facts and circumstances of the instant case are seen, then it is found that though there is no specific term with regard to forfeiture of advance amount (बयाना) in the event of non-execution of sale deed, but as per Clause- 2 of the Agreement to sell (Ex-P/1), Rs. 3 lakh was paid by the plaintiff as part of the sale consideration, which would have to be adjusted against remaining sale consideration while execution of the registered sale deed. Further, perusal of the evidence available, this Court does not find any perversity or illegality in the finding recorded by the trial Court that because of dispute involved in the suit land, the plaintiff is not interested to get registered the sale deed. 16. Since there is no stipulation in the Agreement to sell (Ex-P/1) that the amount paid is the security amount for performance of contract and that in the event of default by the purchaser in observing the terms of the agreement of contract, amount so paid as advance would be forfeited. Rather, same was paid as part of sale consideration to be adjusted at the time of execution of the sale deed. Therefore, the defendant/seller/vendor was not entitled to forfeit the amount of Rs.3 lakh. 17. In view of the law laid down by the Apex Court in the case of Satish 7 Batra (Supra), the trial Court has not committed any error of law in allowing the suit filed by the plaintiff in his favour. In that view of the matter, I do not find any merit in the appeal and the same is dismissed accordingly. 18. A decree be drawn accordingly. 19. In view of above, pending IA(s), if any, stands disposed of. Sd/- (Naresh Kumar Chandravanshi) Judge Bini