1995 (1) TMI 386 - SC - Indian Laws

Summary

Issues involved:
The issue involves the entitlement of the appellant to obtain a refund of earnest money due to the acquisition of land by the government for a public purpose, and the interpretation of the terms of the contract in light of the Land Acquisition Act.

Judgment Details:

Entitlement to Refund of Earnest Money:
The appellant entered into an agreement with the respondent for the purchase of land, with a clause stating that in case of land acquisition by the government, the earnest money shall be returned without interest. The notification u/s 4(1) of the Land Acquisition Act was published before the sale deed could be executed, rendering the contract impossible to perform. The courts found that the agreement of sale was frustrated due to the land acquisition, making the question of readiness and willingness irrelevant. The appellant was entitled to seek a refund of the earnest money as per the terms of the contract and u/s 33 of the Contract Act. The trial court rightly decreed the suit for the return of earnest money, while the higher courts erred in their judgments by not considering the impact of the land acquisition on the contract.

Application of Section 33 of the Contract Act:
Section 33 of the Contract Act allows for the enforcement of contingent contracts when the happening of the uncertain future event becomes impossible. In this case, the notification issued under s.6 of the Land Acquisition Act made the contract impossible to perform, leading to its frustration. The appellant was within his rights to seek the refund of earnest money based on this legal provision. The trial court's decision to decree the suit for the return of earnest money was legally sound, while the higher courts erred in their judgments by overlooking the applicability of Section 33 and the impact of the land acquisition on the contract.

Conclusion:
The Supreme Court allowed the appeal, directing the parties to bear their own costs. The judgments of the High Court and the District Judge were set aside, and the decree of the trial court, which granted the appellant the refund of earnest money, was restored. The courts recognized the legal implications of the land acquisition on the contract terms and upheld the appellant's right to seek a refund under the relevant legal provisions.