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TMI Blog2003 (12) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... in which event the vendors shall return to the purchasers the earnest with interest at 21% per annum" Clauses 17 and 18 also read as under: "17. If the vendors fail to make out a marketable title to this said land agreed to be sold, as herein agreed, the purchasers shall be entitled to cancel this agreement. In the event of cancellation of this agreement under this clause, the said earnest money or deposit shall be forthwith returned to the purchasers by the vendors without any interest, cost or compensation. 18. If the sale be not completed due to any willful default on the part of the vendors, the purchasers shall be entitled (a) to require specific performance by the vendors of this agreement or (b) to payment by the vendors of the interest at the rate of 21% per annum on the said earnest money or deposit and all costs, charges and expenses incurred and all loss and damages sustained by the purchasers in addition to the return by the vendors of the said earnest money or deposit." It is the stand of the appellants that for nearly five years the respondents did not perform their part of the contract or fulfill their obligations under Clause 2 of the agreement, in spite of repe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge on the said land described in Exhibit B to the plaint. The appellants have also chosen to appropriate the sum repaid in a different manner as per their choice and at their discretion as explained in the plaint. The appellants seem to have also filed an application for interim reliefs by way of Notice of Motion No.1952 of 2000 praying among other things for "(d) that pending the hearing and final disposal of the suit, the defendants by themselves, their servants and agents be restrained by an order and injunction of this Hon'ble Court, from selling, disposing of, alienating, encumbering or creating any third party rights of any nature whatsoever or from carrying out any construction or any other work in any manner whatsoever, in respect of the suit properties more particularly described in Exhibit 'B' to the plaint." After hearing both parties, the learned Single Judge passed the following order: "2. Admitted position is that there was an agreement to sell between the parties, and that an amount of Rs.38 lakh has been paid as an earnest money. It is also admitted position that the agreement was terminated by the plaintiff. It is also admitted position that in the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a charge is created for the purchase money as well as the interest amount thereon, whereas when it comes to earnest money, in the latter part of Section 55 (6)(b), there is no such specific mention of interest on the earnest money. We are concerned with the question as to whether this section creates a statutory charge on the property to protect the claim of interest on the earnest money and a plain reading of the section shows that it does not make any such provision. This being the position, in our view, the learned Single Judge was in error in holding that a charge was available to the respondents under Section 55 (6)(b) for claiming interest on the earnest money and, therefore, was in error in granting the injunction. The authorities and propositions cited by Mr. Doctor do not help us in interpreting section 55 (6)(b). Once the basis of this claim of charge is disclosed, one cannot claim injunction to secure the alleged claim for interest on the earnest money. We have, therefore, to interfere with the order passed by the learned Single Judge and accordingly we set a side the same. Therefore, there will not be any injunction as prayed by the respondents. The claim of the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or interest due thereon besides for the costs awarded to the purchaser to compel specific performance of the contract or to obtain a decree for its rescission and the contra view taken by the Division Bench differing from the view taken by the learned Single Judge is contrary to law and cannot be sustained. It was also contended that the omission to specifically specify in the said provision of the Act interest on earnest money may, at the most, be indicative of the discretion left with the Court in the matter of the rate of interest permissible on the earnest money deposit and not to deny the same once and for all. It was also urged on behalf of the appellants that on the peculiar terms and conditions of the agreement between parties, which in Clause 2.3 specifically provided for the rate of interest with which the earnest money deposit has to be refunded in case the respondents vendors fail to fulfill their obligations, the entire sum of earnest money deposit inclusive of the interest so provided for being repaid would form the subject matter of the statutory charge envisaged under Section 55(6)(b) of the Transfer of Property Act. It was also contended for the appellants that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a contract to the contrary, the buyer and seller of immovable property respectively are subject to the liabilities, and have the rights, mentioned in the rules next following, or such of them as are applicable to the property sold: (6) The buyer is entitled-- (a) where the ownership of the property has passed to him, to the benefit of any improvement in, or increase in value of, the property, and to the rents and profits thereof; (b) unless he has improperly declined to accept delivery of the property, to a charge on the property, as against the seller and all persons claiming under him,* * * to the extent of the seller's interest in the property, for the amount of any purchase-money properly paid by the buyer in anticipation of the delivery and for interest on such amount; and, when the properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission." The buyer's charge engrafted in clause (b) of paragraph 6 of Section 55 of the Transfer of Property Act would extend and enure to the purchase-money or earnest money paid before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t money deposit and in that context the distinguishing features, which help to delineate the differences, if any. The matter is not, at any rate, res integra. In (Kunwar) Chiranjit Singh vs. Har Swarup [AIR 1926 P.C. 1], it was held that the earnest money is part of the purchase price when the transaction goes forward and it is forfeited when the transaction falls through, by reasons of the fault or failure of the purchaser. This statement of law had the approval of this Court in Maula Bux vs. Union of India [AIR 1970 SC 1955]. Further, it is not the description by words used in the agreement only that would be determinative of the character of the sum but really the intention of parties and surrounding circumstances as well, that have to be looked into and what may be called an advance may really be a deposit or earnest money and what is termed as 'a deposit or earnest money' may ultimately turn out to be really an advance or part of purchase price. Earnest money or deposit also, thus, serves two purposes of being part payment of the purchase money and security for the performances of the contract by the party concerned, who paid it. Coming to the facts of the case, it is seen fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs and the interest due thereon. In the light of the above, in our view, the learned Single Judge on the original side was right in passing the order dated 23.10.2001 and the order of the Division Bench, taking a contrary view in the order under challenge, is contrary to law and the reasons assigned therefor cannot be countenanced. Hence, the same is hereby set aside and the order of the learned Single Judge shall stand restored and to be in force pending disposal of the suit. The question relating to manner of appropriation, attempted to be argued before us, is really a matter, which has to be, properly speaking canvassed and got adjudicated in the suit only and we express no opinion on the same. So far as the submission made that the injunction granted should not completely foreclose the liberties of the respondents, if an appropriate offer comes to sell the property after seeking directions of the judge on the original side, we leave liberties with the parties as and when necessary to approach the court before which the suit is pending for any such permission and the court after hearing the plaintiffs as well on any such request may consider the request in this regard on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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