Buyer Who Didn’t Pay ₹36 Lakh Balance Wins ₹4 Lakh Bayana Refund As Delhi HC Finds Sellers Failed To Prove Loss

The parties executed an Agreement to Sell dated 21 June 2008 for a consideration of ₹40,00,000; the purchaser paid ₹4,00,000 as earnest money, and the balance was payable by 5 September 2008.

The purchaser alleged that the sellers failed to provide title documents and sued for ₹8,00,000—double the earnest money—on the basis of the agreement’s default clause.

The sellers claimed the purchaser defaulted and that they lost ₹4,60,000 paid as earnest money in a separate proposed purchase; however, the documents supporting that claim were de-exhibited for want of originals.

The Trial Court rejected the claim for double earnest money but decreed a refund of ₹4,00,000 with pendente lite and future interest at 6% per annum. The sellers’ legal representatives appealed.

Section 74 of the Indian Contract Act, 1872, allows only reasonable compensation for breach, subject to the stipulated amount; a contractual sum does not become automatically recoverable as a penalty or forfeiture.

Under Fateh Chand v. Balkishan Das, proof of the precise amount of loss may be dispensed with, but not the existence of legal injury.

Kailash Nath Associates v. Delhi Development Authority confirms that loss or damage is a sine qua non for Section 74; where the loss is capable of proof, it must be proved, and Section 74 applies to forfeiture of earnest money under a contract.

The Court also referred to Section 73 of the Contract Act in assessing the sellers’ alleged loss.

The specific-prayer requirement under Section 22(2) of the Specific Relief Act, discussed in K.R. Suresh v. R. Poornima, applies to a suit for specific performance and did not govern this simpliciter recovery suit.

Although the purchaser had not paid the balance consideration by the stipulated date, the sellers’ right to retain the earnest money depended on establishing compensable loss, not merely on the contractual forfeiture clause.

The sellers’ asserted loss from the proposed purchase from Paramjeet Singh was capable of proof through documents or witness testimony, but they produced no cogent evidence establishing the transaction or why it failed.

The Trial Court therefore properly ordered return of the earnest money.

The title-related observations were incidental to assessing the purchaser’s explanation for not proceeding with the transaction and did not determine the sellers’ title.

Nor was the refund an unclaimed alternative remedy in a specific-performance suit: the purchaser had brought a recovery suit for ₹8,00,000, and the Court awarded only ₹4,00,000 of that monetary claim.

The appeal was dismissed, leaving intact the decree for ₹4,00,000 with pendente lite and future interest at 6% per annum; pending applications were also disposed of.