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

Citation: [1995] 2 S.C.R. 115 · Decided: 20-02-1995 · Supreme Court of India · Bench: S.C. AGRAWAL, B.L. HANSARIA, SUJATA V. MANOHAR
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Judgment (excerpt)

I 
DELHI DEVELOPMENT AUTHORITY 
v 
GRIHASTHAPANA CO-OPERATIVE GROUP HOUSING 
SOCIETY LTD. 
FEBRUARY 20, 1995 
[S.C.AGRA WAL, B.L. HANSARIA AND 
SUJATA V. MANOHAR, JJ.] 
A 
B 
Delhi Development Authority (Disposal of Developed Nazul land) 
Amendment Rules. 1981-Rule 24(2)-Forfeiture of earnest money paid by C 
the allottee who refused to accept the allotment of land at enhanced 
price-Validity of. 
Words and phrases--!'Eamest money''-Meaning of. 
The appellant authority proposed to allot land to co- operative group 
housing societies at Dwarka, Phase-I and Narela @ Rs. 975 and Rs. 950 
per sq. meter respectively. The interested societies were required to deposit 
D 
Rs. 5 Iakh as earnest money. However, before possession was delivered the 
appellant authority enhanced the premium to Rs. 1650.65 per sq. meter, E 
the value determined by the Government of India. Some societies ap-
proached the High Court Court but the enhancement of premium was 
upheld. 
On appeal, the Supreme Court, while upholding the enhancement, 
extended the time for making payment. Upon the respondent not making F 
payment as directed by the Supreme Court the appellant forfeited a sum 
of money equivalent to 10% of what bad become payable @ Rs. 1650.65 as 
·~rnest money" due number a clause of the allotment order. 
This was challenged in the High Court which directed the appellant 
not to make any deductions and to refund the entire amount deposited by G 
the respondents. The appellants brought the present appeal contending 
that the forfeiture ot'earnest money" in case of non-deposit of premium 
was in accordance with law and that the High Court having found the 
enhancement to be reasonable erred in its direction to refund the earnest 
money. 
115 
.H 
A 
B 
c 
D 
E 
F 
G 
116 
SUPREME COURT REPORTS 
(1995) 2 S:C.R. 
Allowing the appeals, thi~ Court 
HELD : 1. Earnest money is given at the moment of contract con-
clusion, to bind the contract, as part of the purchase price and is forfeited 
on purchase's default or failure if nothing to the contrary is stated in the 
contract. (118-F-G] 
Shri Hanuman Cotton Mills v. Tata Aircraft Ltd., (1970) 3 SCR 127, 
relied on. 
Chiranjit Singh v. Harswarup AIR (1926) PC I, referred to. 
2.1. The respondents having accepted the offer contained in the 
communication of 3.11.92 were bound to pay premium at the enhanced rate 
of Rs. 1650.65 held to be reasonable by the High Court. As there was no 
compliance with the condition mentioned in the Supreme Court's order 
dated 10.05.93, the respondents had make themselves liable to forfeiture 
of the earnest .money. (119-F] 
2.2. The earnest inoney which was deposited was not 10% of the 
premium as required by the amended Nazul Rules.but a fixed sum of Rs. 
5 lakh mentioned in the offer of 1.10.90. The earnest money which had 
become liable to be forfeited was a sum of Rs. 5 lakh and not 10% of the 
total premium calculated the rate of Rs. 1650.65. (119-G-H] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 931 of 
· 1995 Etc. Etc. 
/ · 
From the Judgment and Order dated 3.8.94 of the Delhi High Court 
in C.W.P. No. 4607 of 1993. 
Arun Jaitley, V.B. Saharaya and Ms. Suparea for the Appellant. 
Bishwajit Bhattarya, Sanjay Ghosh and A Bhattacharjee for the 
Respondents. 
Y.P. Mahajan and Ms. Sushma Suri for the Union of India. 
The Judgment of the Court was delivered by 
HANSARIA, J. 
1The short point which needs to be decided in these 
H appeals is whether the High Court of Delhi was justified in directing the 
,..... 
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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. 
2. 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.
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