FACTS OF THE CASE :
The appellants agreed to sell the property that is the subject of this suit to the respondent. They signed two different sales agreements. Clause 8 of the Sale Agreements required the respondent to obtain the necessary No Objection Certificates and notify the appellants. Since one of the appellants was a minor. They received the necessary clearance under The Hindu Minority and Guardianship Act before the execution date. However, the appellants claimed that the respondent failed to appear before the registrar on the date set for the execution of the sale deed. A provision in the said agreement also stated that if the respondent failed to complete the sale deed, any sum advanced by them would be lost by the appellants. The appellants thereby forfeited the sum advanced. A few years later, the respondents (original plaintiffs) sued for a particular execution of the contract as well as another consequential remedy. As a result, the State obtained the mentioned land. The respondent claimed possession of the land in the alternative on a money judgment of Rs. 2,29,10,000 while stating that the appellants were accountable for the idea of the sale deed. Both the Trial Court and the High Court agreed that the respondent should be given alternative remedies in the form of earnest money.
ARGUMENTS RAISED BY THE APPELLANT
Time was of the essence in the contract, according to the knowledgeable lawyer for the appellant. that because the area was agricultural land on the date the agreement was executed, there was no need to obtain NOCs before that date. It wasn’t included inside the boundaries of the Municipal Corporation until years later, following the passing of a notification. that the respondents had to obtain the NOCs by clause 8 of the agreement.
ARGUMENTS RAISED BY THE RESPONDENT
The respondent’s attorney argued that clause 8 should be read to suggest that the respondent’s obligation under the contract only applied to NOCs that he could not obtain on his own. The sale was made impossible because the state bought the land, so the money forfeited should be restored. Further, it was argued that the forfeited sum was a penalty and should, if at all possible, be reduced to a reasonable degree.
LEGAL ISSUE
Whether the contract stated that time was of the essence?
Whether it established that the appellants were purposefully avoiding fulfilling their contractual obligations?
Whether the respondent is eligible for the return of earnest money?
OBSERVATION BY THE COURT
The Court stated that there is no room for debate regarding the parties’ desire to treat time as being of the essence under the aforementioned contract. As a result, the relief of specific performance should be declined because the respondent unreasonably delayed filing the case.
The Court noted that the respondent had not provided enough information to back up this claim regarding whether the appellants wilfully avoided carrying out their obligations under the contract. The relief of earnest money awarded to the respondent by the lower courts was the last point of contention.
The Apex Court made the following observation when ruling on the matter: Section 22 of the Specific Relief Act allows a plaintiff to demand both specific performance of the contract and alternative relief, such as a fund of money, so long as such a relief has been specifically incorporated in the plaintiff.
The Court noted that in the current instance, the respondent had neither attempted to amend the plaint to incorporate the aforementioned claim nor had he requested the relief of a refund of earnest money. Given these facts and section 22(2) of the act, the Court is unable to immediately grant the restoration of earnest money.
Regarding the respondent’s claim that the amount forfeited was penal and outside the parameters of reasonable compensation as defined by section 74 of the Contract Act, the Court noted that in situations where the contractual terms stipulate that the pre-estimate amount is like “earnest money,” the onus is on the party seeking a refund of the same to establish that it was penal. In this instance, the respondent hasn’t demanded the return of the earnest money or imposed any penalties on the appellants.
RATIO DECIDENDI :
In the current case, the Apex Court ruled that the court cannot suo moto provide a plaintiff’s alternative relief of a return of earnest money in a suit for specific performance without the plaintiff particularly requesting it in his complaint.
JUDGEMENT
In the aforesaid terms, the appeal is allowed, as are any pending applications.
CONCLUSION
In light of these observations, the learned Court concluded that the contract had been terminated by its terms and not as a result of the purchase process. The loss of the earnest money was warranted and reasonable, according to the court’s ruling. As a result of the reunion, it stipulated that the appeal should be authorized and the lower courts’ rulings should be overturned.
Original Judgment – C.A. No. 9217/2022 – D.No. 28709 / 2019 14-Dec-2022
Written by M.Sahithi, GITAM School of Law.