V. LAKSHMANAN versus B. R. MANGALAGIRI AND ORS.

Citation: [1994] SUPP. 6 S.C.R. 561 · Decided: 13-12-1994 · Supreme Court of India · Bench: K. RAMASWAMY, N. VENKATACHALA · Disposal: Dismissed

Judgment (excerpt)

V. LAKSHMANAN 
v. 
B. R. MANGALAGIRI AND ORS. 
DECEMBER 13, 1994 
[K.RAMASWAMY ANON. VENKATACHALA,JJ.] 
Contract Act, 1872: Agreement to sell land-Time essence· of 
contract-Contract fell through for default of purchaser-Forfeiture of 
entire earnest money by seller held justified 
A 
B 
Earnest money-What is-Nomenclature given of advance in the C 
agreement is not conclusive. 
Hindu Minority and Guardianship Act, 1956: Section 8. 
Agreement to sell land-One of the sellers minor on the date of sale-
Minor attaining majority pending suit and electing to abide by the terms of D 
sale-Necessity 'to obtain Court permission becomes redundant. 
The appellant entered into an agreement with respondents for 
purchase of land, paid Rs. 50,000 as earnest money which was stated as 
advance in the agreement and undertook to execute the sale-deed 
registered within six months. Subsequent to the agreement he took E 
possession of the land and levelled it for the purpose of making it into 
plots for sale to third parties. On failure to get sanction of the lay-out 
plan, the appellant issued notice to respondents for return of earnest 
money and also Rs. 15,000 for expenditure said to have been incurred 
for development of the land. The respondents not only denied their 
liability but also forfeited the entire earnest money. The appellant filed F 
a suit which was decreed by the Trial Court. During the pendency of 
the suit one of the respondents, a minor, attained majority and elected 
to abide by the terms of the agreement. On appeal, the High Court 
reversed the decree and. dismissed the appellant's suit. During the 
pendency of the appeal, the respondents sold the land in terms of the G 
permission granted by the court. 
In appeal to this Court it was contended on behalf of the appellant 
that the High Court erred in dismissing the suit because (i) the title of 
the suit land was defective since the guardian of one of the minor 
respondents failed to obtain permission of the court under section 8 of H 
561 
562 
SUPREME COURT REPORTS 
[1994) SUPP. 6 S.C.R 
A 
the Hindu Minority and Guardianship Act, 1956 for effectuating the 
sale deed; (ii) the amount of Rs. 50,000 being an advance and not 
earnest money, could not be forfeited unless respondents prove that 
they have suffered damages which was necessary condition to forfeit 
the advance amount. 
B 
Dismissing the appeal, this court 
I 
HELD: 1. The Agreement of sale fell through due to the default 
committed by the appellant. He having failed to obtain the sanction of 
the lay out plan as the Gram Panchayat refused to sanction and having 
found it difficult to effectuate the sale to third parties invented an 
C I excuse to get over the agreement and pitched upon the plea of oral 
request said to have been made to the respondents to obtain sanction of 
the court to alienate the share of the minor and of their refusal. 
Therefore, he is not willing to perform his part of the contract and he 
wants to wriggle out of the contract. It is also seen that time is the 
essence of the contract. The appellant is, therefore, the defaulting party 
D 
and has not come to the court with clean hands. [564 C to D, 565 DJ 
2. A specific covenant under the contract is 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. In this 
E 
case even otherwise, the respondents had suffered damages. Therefore, 
their forfeiting the entire sum of earnest money cannot be said to be 
unjustified. [565 E to F] 
3. Earnest money is a part of the purchase price. The nomenclature 
or label given in the agreement as advance is not either decisive or 
F 
immutable. No doubt in the agreement it was stated that the amount 
was advance and not earnest money. But the amount paid is only by 
way of earnest money as part of the sale transaction. [564 C to F] 
4. When the minor respondent had attained majority pending the 
suit and had elected to abide by the terms of the agreement of sale, the 
G 
need to obtain sanction from the court became unnecessary. Under 
these circumstances, the necessity to obtain permission from the court 
under sub-section (2) of section 8 of the Hindu Minority and 
Guardianship Act, 1956 became redundant. [565 CJ 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4542 of 
H 
1984. 
... 
V. LAKSHMANAN v. B. R. MANGALAGI

Excerpt shown. Read the full judgment & AI analysis in Lexace.