H.U.D.A. AND ANR versus KEWAL KRISHAN GOEL AND OTHER ETC.

Citation: [1996] SUPP. 2 S.C.R. 587 · Decided: 09-05-1996 · Supreme Court of India · Bench: K. RAMASWAMY · Disposal: Appeal(s) allowed
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Judgment (excerpt)

H.U.D.A. AND ANR. 
v. 
KEWAL KRISHAN GOEL AND OTHER ETC. 
MAY 9,.1996 
[K. RAMASWAMY AND G.B. PATTANAIK, JJ.] 
Haryana Urban Development Authority Rules-Allotment of 
lan~Withdrawal by allottee due to incapacity to pa:r-Refund of 
mone:r-Held, competent authority can fo1feit eamest money. 
Words & Phrases-'Eamest'--Meaning of 
The Haryana Urban Development Authority offered certain residen· 
A 
B 
c 
tial plots of land for sale. As per the advertisement, 10% of the total price 
should be sent along with the application as earnest money. On receipt of 
letter allotment, each allottee was required to indicate whether he was D 
accepting the offer or refusing the same within 30 days from the date of 
receipt. In case of acceptance, the allottee was further required to make 
~n additional deposit which together with earnest money would constitute 
~5% of the total tentative price. It was further indicated that if the allottee 
falls to accept the allotment within 30 days from the date of receipt of the 
letter then the authority was entitled to forfeit the earnest money. It was 
also stipulated that the balance amount could be either paid in a lump 
sum or in six annual installments, with 15% interest. The respondents were 
\he allottees who made initial deposit and chose to accept the allotment 
and paid the balance in instalments. After a few instalments they intimated 
the Appellants that they will not be in a position to take the land and 
requested for refund. In some cases the Appellant replied that the applica-
tion cannot be accepted and in some other cases even before any reply, the 
allottees approached the High Court. The High Court directed the Appel-
~.nt to refund the balance after deducting 10% of the amount deposited by 
each of the allottee. 
On Appeal before the Court it was contended by the Appellant that, 
E 
F 
G 
in view of the fact that the allottee was required to deposit 10% of the 
purchase price as earnest money while the application for allotment was 
made and having accepted the allotment in question with the terms and 
conditions stipulated in the letter of allotment, when the transaction fails H 
587 
588 
SUPREME COURT RF.PORTS 11996] SUPP. 2 S.C.R. 
A as a result of default or failure on the part of the allottec, the authority 
would be entitled to forfeit the entire earnest money and not the 10% of 
the amount deposited till then as directed by the High Court that "earnest" 
represents a guarantee that the contract will be fulfilled and is given to 
bind the contract and it is forfeited when the transaction falls through on 
B 
account of failure on the part of the purchaser and that in view of the 
specific clauses of the letter of allotment the High Court committed gross 
error in directing to forfeit only 10% of the amount deposited. 
The respondents contended that the forfeiture of earnest money in 
terms of the allotment letter can be made ifthe allo!tee does not communi-
C cate his refusal by registered letter \\i!hin 30 days from the date of 
allotment but once the allotment is accepted and there after the allottee 
opts out due to inability there is no provision for forfeiture, and that in 
the absence of provisions in the allotment letter or in the Rules the High 
Court was entitled to decided the question on equitable consideration and 
there is no error of law then. 
D 
Allowing the appeal, this Court 
HELD : 1. The Appellant would be entitled to forfeit the earnest 
money which had been deposited along with the application form and on 
deducting the said "Earnest" the balance amount may be refunded to 
E allottees who had made application for refund. [594-E-F] 
F 
G 
2. The allottees having accepted the allotment and having made some 
payment on instalment basis then made the request to surrender the land, 
has committed default on their part and therefore the competent authority 
would be fully justified in forfeiting the earnest money which had been 
deposited and not the 10% of the amount deposited. [594-B-C] 
Sh1i Hanuman Cotton Mills & Ors. v. Tata Air Craft Limited, [1969] 
3 SCC 522 and Delhi Development Authority v. Grishthapana Cooperative 
Group !lousing Society Ltd., [1995] Supp. 1 SCC 751, referred to. 
Fair Smith & Co. v. Messers Ltd., LR (1928) 1 KBD 397 and Summer 
and Leivesley v. John Brown & Co., 25, Times LR 745, referred to. 
3. The High Court was in error in issuing the direction in question 
on the ground that the respondents were not in a position to de
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