1977 (12) TMI 140 - SC - Indian Laws

Summary

Issues Involved:
1. Default of appearance and dismissal of appeal.
2. Cross-objection regarding the refund of earnest money.
3. Existence and terms of the contract.
4. Readiness and willingness to perform the contract.
5. Forfeiture of earnest money.
6. Application of the principle of unjust enrichment.
7. Section 55(6) of the Transfer of Property Act, 1882.

Detailed Analysis:

1. Default of Appearance and Dismissal of Appeal:
The appeal was dismissed for default of appearance by the appellant on 8th September 1977. The respondent proceeded with the cross-objection, and the appellant subsequently appeared.

2. Cross-Objection Regarding the Refund of Earnest Money:
The respondent filed a cross-objection against the trial court's decree for the refund of Rs. 3 lakhs, which was paid as earnest money and part of the purchase price. The trial court had dismissed the suit for specific performance but allowed the refund of the earnest money, which the respondent contested.

3. Existence and Terms of the Contract:
The primary issue was whether there was an agreement as alleged by the appellant or as claimed by the respondent. The trial court found against the appellant, holding that the appellant failed to prove the terms of the contract. The court noted that the earnest money was paid pursuant to some agreement, but the specific performance of that agreement was not possible.

4. Readiness and Willingness to Perform the Contract:
The trial court found that the appellant was not ready and willing to perform his part of the contract, leading to the dismissal of the suit for specific performance. The court emphasized that readiness and willingness are conditions precedent for obtaining specific performance but do not constitute terms of the contract.

5. Forfeiture of Earnest Money:
The court discussed the principles of earnest money as summarized in the Supreme Court case of Shree Hanuman Cotton Mills v. Tata Aircraft Ltd., which states that earnest money is given to bind the contract and is forfeited if the purchaser defaults. However, the trial court found no evidence or argument regarding the forfeiture of earnest money by the respondent. The court held that the money was not awarded as damages or in lieu of specific performance but to prevent unjust enrichment of the respondent.

6. Application of the Principle of Unjust Enrichment:
The trial court directed the refund of Rs. 3 lakhs to the appellant to prevent unjust enrichment of the respondent. The court noted that the money was paid pursuant to an agreement that was not capable of specific performance, and retaining the money would unjustly enrich the respondent.

7. Section 55(6) of the Transfer of Property Act, 1882:
The court considered the statutory charge under Section 55(6) of the Transfer of Property Act, which entitles the buyer to a charge on the property for the amount of purchase money paid, including earnest money, unless the buyer improperly declines to accept delivery. The court found no evidence of a contract to the contrary that would exclude the operation of this section. The court noted that the statutory charge remains unless the buyer repudiates the contract.

Conclusion:
The court confirmed the trial court's judgment and decree for the refund of Rs. 3 lakhs, with interest at 6% per annum from the date of the decree until realization. The cross-objection was dismissed with costs. The court emphasized that the refund was to prevent unjust enrichment and not as a measure of grace. The principle of forfeiture of earnest money was not applicable due to the lack of evidence and argument on that point. The statutory charge under Section 55(6) of the Transfer of Property Act was upheld, entitling the appellant to the refund of the earnest money.