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TMI Blog1996 (5) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... talments and requests for refund of the money paid, is the allotting authority entitled to forfeit the earnest money deposited by the allotee or could be only entitled to forfeit 10% of the total amount deposited by the allotee till the request is made as directed by the High Court? Haryana Urban Development Authority issued an advertisement inviting applications for allotment of residential plots at Karnal. The price of plots was different for different size. In accordance with the advertisement 10% of the total price was required to be deposited along with the application form as earnest money and where the plot was a preferential one an extra price of 10% of the total price was required to be deposited. In the letter of allotmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund the balance after deducting 10% of the amount deposited by each of the allotee, the Haryana Urban Development Authority as well as the State of Haryana have preferred these appeals. Mr. Arun Jaitley, the learned senior counsel appearing for the appellants contended that in view of the fact that the allotee was required to deposit 10% of the purchase price as earnest money while tile 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 falls through by reasons of default or failure on the part of the allotee, the authority would be entitled to forfeit the entire earnest money deposited and not the 10% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of the amount deposited and there is no error of law therein requiring interference by this Court. In view of the rival stand of the parties, the first question that arises for consideration is whether under the terms of allotment the allotees were required to deposit any amount as earnest money and if so when that earnest money could be forfeited by the authority? From the material on record there is no dispute that an application for allotment, pursuant to the advertisement made by the authority, has to be made with a deposit of 10%, of the tentative price as the earnest money. After consideration of the application when letter of allotment is issued clause (4) thereof stipulates that an allotee if refuses to accept the allotme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) In case you accept this allotment, please send your acceptance by registered post alongwith an amount of ₹ 34,505/- within 30 days from the date of issue of this allotment letter. which together with an amount of ₹ 23020/- paid by you alongwith your application form as earnest money, will constitute 25 percent of the total tentative price. (6) The balance amount i.e. ₹ 1,72,575/- of the above tentative price of the plot can be paid in lump-sum without interest within 60 days from the date of issue of the allotment letter or in six annual instalment. The first instalment will fall due after the expiry of one year of the date of issue of this letter. Each instalments should be recoverable together with interest on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pts the allotment and indicates the same within the stipulated period and makes additional deposits on instalment basis and thereafter intimates the authority that he will not be in a position to pay up the balance amount and makes a request for refund of the money deposited, would the authority be justified in forfeiting the earnest money which had been deposited along with the application form?. The answer to this question depends upon the basic concept of 'earnest'. In the case of Shri Hanuman Cotton Mills and Others vs. Tata Air Craft Limited, 1969 (3) SCC 522, this Court laid down the following regarding 'earnest': (1) It must be given at the moment at which the contract is concluded. (2) It represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Society Ltd., 1995 Supp(1) SCC 751. This being the legal position and the allotee hating accepted the allotment and having made some payment on instalment basis then made the request to surrender the land, has committed default on his 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 as held by the High Court. The High Court was totally in error in issuing the direction in question on the ground that the respondents were not in a position to deliver the possession of the land to the allotee. lt may be stated that in the letter of allotment no period was stipulated within which the possession of the land was to be delivered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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