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Legal Case Shots

Court judgements broken down into the case type, how the decision played out, and the lesson worth remembering, with the full judgement available as a PDF.

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What is Legal Case Shots?+

Legal Case Shots is a searchable database of Supreme Court of India judgments, each broken down into the case type, the court's key holding, and a practical lesson learnt, with the full judgment available as a PDF for citation or deeper reading.

Arbitration & Commercial LawSupreme Court of India

Desh Raj & Ors. vs. Rohtash Singh

Civil Appeal · 2022 INSC 1279Decided 14 Dec 2022
Civil Appeal No. 921 of 2022
Surya Kant · Bela M. Trivedi

Background

The appellants (sellers) had agreed in 2004 to sell land to the respondent (buyer) for about Rs. 79 lakh per acre, with Rs. 22.9 lakh paid as earnest money. The sale agreement said time was of the essence, and if the sale deed was not executed by a fixed date the earnest money would be forfeited. The buyer failed to show up before the Sub-Registrar to execute the sale deed despite the sellers appearing and giving him a further chance; the sellers then forfeited the earnest money and treated the agreement as cancelled. Years later, after the State acquired the land, the buyer sued for specific performance and, when that became impossible, for return of the earnest money; the trial court, first appellate court and High Court all ordered the earnest money refunded on the theory that the agreement had become "impossible to perform" due to the acquisition.

Decision Breakdown

The Supreme Court held that this reasoning was flawed: the sale agreement was terminated in 2004 by the sellers' lawful forfeiture (because the buyer failed to complete the sale despite notice and extra opportunity), long before the land was ever acquired by the State years later; it did not "become impossible to perform" because of the later acquisition. Since the buyer never argued during the case that the forfeited amount was an excessive "penalty" under Section 74 of the Contract Act, and never actually sought a refund of earnest money as his primary relief, the forfeiture stood as valid, reasonable compensation for his own breach. The lower courts' decrees ordering refund were set aside and the buyer's suit was dismissed.

Lesson Learnt

If a sale agreement states time is of the essence and provides for forfeiture of earnest money on the buyer's failure to complete the deal, courts will enforce that forfeiture as agreed compensation for breach: a buyer cannot escape a valid forfeiture just because the property was later acquired by the government for an unrelated reason.

Official source (sci.gov.in)View Judgment (PDF)
Desh Raj & Ors. vs. Rohtash Singh – Legal Case Shots | LegalAware