Limitation for the buyer to seek recovery of earnest money would begin from the date when forfeiture has been pleaded by the seller

The Delhi High Court has held that limitation of the appellant/ buyer to claim the amounts under the Agreements to Sell, and which are paid to the respondent/ seller, would only commence if the respondent/seller has pleaded a case of forfeiture.

The same was held in Bharat Bhushan Kapur vs M/s Neha Deep Construction RFA 113/2006 decided on 31.07.2018

Challenge:

Appeal is filed by the plaintiff in the suit impugning the judgment of the trial court whereby the trial court has dismissed the suit for specific performance and injunction filed by the appellant/plaintiff being time barred. Appellant/buyer had pleaded that in spite of his being ready and willing to perform his part of the contract the respondent/defendant did not transfer the suit properties to the appellant/buyer and hence the subject for specific performance and injunction.

The respondent/seller contested the suit and prayed for dismissal of the suit on the ground of being time barred because Agreements were of the year 1983 and the suit was filed on 27.8.2004, i.e. after around 21 years of the Agreements to Sell.

In Appeal the appellant gave up the relief of specific performance, and prayed only for the refund of the sum of Rs.2,25,000/- paid by the appellant/buyer to the respondent/seller under the Agreements to Sell dated 16.3.1983

Held:

Limitation of the appellant/buyer to claim the amounts under the Agreements to Sell, and which are paid to the respondent/seller, would only commence if the respondent/seller has pleaded a case of forfeiture. Not only there is no pleading by the respondent/seller of forfeiting of the amounts paid by the appellant/plaintiff, there is no pleading in the written statement of the respondent/seller that prior to filing of the subject suit the respondent/seller had ever sent a communication to the appellant/buyer that the amounts paid by the him would stand forfeited on account of the alleged breach by the appellant/plaintiff of the two Agreements to Sell dated 16.3.1983.

In such a scenario the amount which remains with the respondent/seller is in the nature of a deposit by the appellant/buyer, and the right to claim back the deposit arises only once a notice is issued seeking refund of the amount deposited. A period of three years of limitation will thereafter start for the deposit in view of Article 113 of the Limitation Act.

The law with respect to entitlement of a buyer of a suit
property for refund of the price paid is well settled, and this law is that in spite of a buyer being guilty of breach of contract, a seller cannot forfeit the amounts paid under the agreement to sell unless the seller pleads and proves the loss, especially a specific monetary amount, which is caused to him on account of the stated breach of a plaintiff/buyer. This aspect has been considered by me in detail in the recent judgment in the case of M.C. Luthra Vs. Ashok Kumar Khanna 2018 (248) DLT 161, and against which judgment an SLP was filed in the Supreme Court, and which SLP was dismissed by the Supreme Court vide Order dated 15.5.2018 in SLP (C) No. 11702/2018. In the facts of the present case it is seen that respondent/defendant has not pleaded or proved that any loss was caused to him, much less a specific loss figure equivalent to the amount paid by the appellant/plaintiff to the respondent/defendant under the subject agreements to sell, and therefore, the respondent/defendant, subject to the decision of issue on limitation ,is not entitled to forfeit the amounts paid totalling to Rs.2,25,000/- under the two Agreements to Sell dated 16.3.1983.