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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5598  OF 2017 (Arising out of Special Leave Petition (C) No.15383 of 2015)

RAMESH CHAND AND ORS.   …APPELLANTS

VERSUS

M/S. TANMAY DEVELOPERS  PVT. LTD. & ORS.   …RESPONDENTS

WITH

CIVIL APPEAL NO. 5600 OF 2017 (Arising out of Special Leave Petition (C) No.17007 of 2015)

RAJINDER SINGH AND ORS.   …APPELLANTS

VERSUS

M/S. TANMAY DEVELOPERS  PVT. LTD. & ORS.   …RESPONDENTS

WITH

CIVIL APPEAL NO. 5601  OF 2017 (Arising out of Special Leave Petition (C) No.17168 of 2015)

MUKHTIAR SINGH AND ORS.   …APPELLANTS

VERSUS

M/S. CAPEX PROJECTS  PVT. LTD. & ORS.   …RESPONDENTS

AND  

CIVIL APPEAL NO. 5606  OF 2017 (Arising out of Special Leave Petition (C) No. 13622  of 2017 (CC.

No.12759 of 2015)

MEHAR CHAND (SINCE DECEASED) THR. LRS. AND ORS.      …APPELLANTS

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VERSUS  

M/S. TANMAY DEVELOPERS  PVT. LTD. & ORS.   …RESPONDENTS

J U D G M E N T

ARUN MISHRA, J.

1. Leave granted.

2. The  appellants-herein  are  aggrieved  by  the  common judgment  and

order passed by the High Court of Punjab and Haryana at Chandigarh in

F.A. No.1941 of 2013, dated 4th February, 2015.  The High Court by the

impugned judgment and order has directed refund of the earnest money by

M/s. Tanmay Developers Private Ltd. Five agreements to sell were entered

into between the M/s. Tanmay Developers Pvt. Ltd. and the land owners on

22.07.2006, 22.07.2006, 22.07.2006, 24.07.2006 and 21.06.2006.  Out of

the five agreements, earnest money of Rs.54,25,000/- was paid out of the

total  sale  consideration  of  Rs,4,52,81,250/-  as  per  agreement  on

22.07.2006.   As per  agreement  dated  22.07.2006,  Rs.1,56,000,00/-  was

paid as earnest money out of total sale consideration of Rs.12,54,37,500/-.

As  per  yet  another  agreement  on  22.07.2006,  earnest  money  of

Rs.21,00,000/-  was  paid  out  of  a  sum  of  Rs.1,50,93,750/-.  As  per

agreement dated 24.07.2006,  earnest  money of  Rs.90,00,000/- was paid

out of total sale consideration of Rs.7,71,31,250/-.  As per agreement dated

21.06.2006, earnest money of Rs.2,60,000/- was paid out of a total sale

consideration or Rs.14,29,687/-.  Period for performance of agreement had

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expired  in  the  month  of  September/October,  2006.  The  land-owners  on

failure of purchaser to get the sale deed executed forfeited earnest money.  

3. A notification under Section 4 of the Land Acquisition Act, 1894 (for

short, “the Act”) was issued on 18.3.2008 for acquiring the land which was

the subject matter of the agreements.  Three suits were filed for recovery of

earnest  money  in  September,  2009  and  one  suit  was  filed  for  specific

performance  of  agreement  to  sell  by  the  respondent-  M/s.  Tanmay

Developer in the month of March, 2008 which was decreed on 18.04.2014

and the appeal filed by the land owners was pending at the time when the

impugned judgment and order was passed by the High Court.  Similarly,

three other suits which were filed for recovery of the earnest money were

pending.   The  Land  Acquisition  Officer  has  passed  the  award  on

19.09.2008.  No reference under Section 18 of the Act was sought by M/s.

Tanmay Developers; however, during the pendency of the suits/appeal the

respondent had filed application under Section 30 of the Act for referring

the  dispute  to  the  Civil  Court  for  refund  of  earnest  money  alongwith

interest.  The Land Acquisition Officer accordingly referred the matter.

4. The Reference Court on 7.12.2012 has passed an award rejecting the

prayer  made  by  respondent  No.1  on  the  ground  that  the  dispute  with

respect  to  the  forfeiture  of  earnest  money  and  whether  M/s.  Tanmay

Developers  Pvt.  Ltd.  was  entitled  for  specific  performance  could  not  be

adjudicated under Section 30 of the Act and it would not be appropriate for

the Reference Court to decide these disputed issues between the parties in

view of civil suits/appeal.  The Reference Court held that the dispute under

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Section 30 of the Act arising out of the apportionment of the compensation

or any part thereof involved the vexed question of title or the civil rights of

the  parties  arising  out  of  such transaction could  not  be  adjudicated  by

substituting the judicial forum into the civil court.  The Reference Court

could  not  decide  question  of  refund  of  earnest  money  by  applying  the

provisions of Chapter 2 of Part II of the Specific Relief Act, 1963.  Such

powers  can  be  exercised  by  the  Civil  Courts.   Aggrieved  thereby  the

respondent  No.1  filed  appeals  before  the  High  Court  which  have  been

allowed by the impugned judgment and order.  

5. The respondent No.1 had sought apportionment of the compensation

only on the ground that agreement for sale had been entered into by the

land owners and prayed for refund of the earnest money along with the

interest at the rate of  12 per cent per annum, since the agreement had

become incapable of being specifically performed due to the acquisition of

land.  It was contended on behalf of the land owners that Respondent No.1

was not ready and willing to perform its part of the contract.  Time was

essence of the contract.  There had been forfeiture of the earnest money on

failure of respondent No.1 to get the sale deed executed within stipulated

period.  Respondent No.1  was not having requisite amount of money hence

could not be said to be ready and willing to purchase the property. In the

facts and circumstances, the right of forfeiture of earnest money had been

rightly exercised.  Thus, respondent No.1 was not entitled for refund of the

earnest  money  or  apportionment  of  compensation  particularly  due  to

pendency of the civil suits/appeal.

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6. The learned counsel appearing on behalf of the appellants urged that

High  Court  erred  in  directing  refund  of  the  earnest  money  along  with

interest at 6% per annum out of the compensation amount determined by

the Land Acquisition Officer.  The High Court has not decided various vital

questions.  The  Reference  Court  had  rightly  declined  to  entertain  the

reference application under Section 30 of the Act seeking refund of earnest

money  under  guise  of  apportionment  of  compensation.  As  per  the

agreement, earnest money had been forfeited much before the acquisition of

the land which was initiated by virtue of notification issued under Section 4

in the year 2008.  Civil  Suits had been filed and one of the matter first

appeal had been filed against one of the judgment and decree of the Civil

Court, thus, those questions could not have been taken over for decision by

the Reference Court. Subsequent to filing of civil suits remedy of reference

had been sought under Section 30.

7. On the other hand, it was contended by the learned counsel appearing

on  behalf  of  the  respondent-developer  that  buyer  would  be  a  “person

interested” within the purview of Section 3 (b) and 9 of the Act. Any person

interested could have sought the reference which had rightly made as the

payment of earnest money under agreements was not in dispute.  The High

Court  has  rightly  exercised  the  power  to  apportion  compensation  by

directing refund of the earnest money along with interest.  

8. It  was  not  rightly  disputed  that  several  civil  suits  with  respect  to

refund of the earnest money and for specific performance of the agreement

to sale were filed by the respondent No.1 before reference was sought under

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Section 30 of  the Act.  Once remedy in the form of  civil  suits  had been

resorted to, in our considered opinion, it was not at all  proper exercise of

power  to  invoke  provisions  under  Section  30  of  the  Act  with  regard  to

apportionment of the compensation by directing refund of earnest money.

It is not mandatory to make a reference to the civil court under Section 30

and adjudication of dispute in an appropriate case can be ordered by way of

the civil suit.  In the instant case civil suits had already been preferred by

respondent  No.1.   It  was  not  appropriate  to  decide same dispute  under

Section 30.

9. In  the  instant  case,  there  were  serious  disputed  questions  as  to

whether earnest money had been rightly forfeited by the land owners due to

the failure of the respondent No. 1 to obtain the sale deeds executed within

stipulated  time  fixed  under  the  agreements,  whether  respondents  were

ready and willing to purchase the property and had arrangement of balance

consideration for payment to land owner.  Whether the power of forfeiture

was rightly exercised by the land owners as claimed by them.  The Civil

Court was already in seisin of the matter as such reference court had rightly

rejected the reference made under Section 30 of the Act and rightly asked

parties to await outcome of the regular civil suits.  

10. The High Court in the impugned judgment has not decided  aforesaid

objections raised by the appellants/land owners without examining facts

and circumstances of the case and due to pendency of civil suits, it was not

open to the High Court to order refund of the earnest money.

11. A perusal of Section 18 of the Act makes it clear that reference can be

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sought to a civil  court with respect (i)  the measurement of  the land,  (ii)

adequacy and quantum of compensation, (iii) persons to whom it is payable

and  (iv)  the  apportionment  thereof  amongst  the  persons  interested.  The

application under Section 18 is required to be filed within stipulated time

whereas  no  limitation  is  prescribed  under  Section  30  of  the  Act.   It  is

discretionary upon the court to refer a dispute under Section 30 of the Act.

The same is confined to the apportionment of the compensation or as to a

person to whom the same is payable.  The scope of Section 30 of the Act is

narrow as compared to Section 18 as laid down in G.H. Grant v. State of

Bihar AIR 1966 SC 237 and in  Sharda Devi v. State of Bihar (2003) 3

SCC 128.  

12. We need not go into the question whether  holder of  agreement is

“person interested” as defined in Section 3(b) of the Act. As we are satisfied

that respondent No. 1 could not have resorted to the remedy of reference for

refund of the earnest money as for this very purpose he had filed civil suit

earlier in point of time. In the reference petition refund of earnest money

had been prayed with interest at the rate of 12 per cent per annum.  In civil

suit refund had been sought with 18 per cent interest per annum and in

one suit specific performance was prayed.  

13. The  High  Court  has  relied  upon  the  decision  of  this  Court  in

Thiriveedhi Channiah v. Gudipudi Venkata Subba Rao (Dead) by Lrs.

& Ors. (2009) 17 SCC 341, in which the appellant demanded refund of the

advance amount on the premise that due to notification under Section 4(1),

property could not be sold whereas the plea of forfeiture was advanced by

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the respondents.  This High Court had ignored and overlooked that case

arose out of the civil suit in which specific performance of agreement to sale

was  sought.   This  Court  has  found  that  parties  were  aware  of  the

notification under Section 4(1) as such right of forfeiture could have been

exercised. The facts in the said case were different and the said decision

could not have been utilized by the High Court for setting aside the well

reasoned award passed by the reference court declining to entertain the

prayer made by the respondents, in view of the availing remedy of the civil

suits.   The  High  Court  should  have  in  fairness  reflected  that  the  said

decision was rendered by this Court in the context of civil suit. The High

Court has referred it  in the manner as if  it  was a case which has been

decided under Section 30 of the Act with respect to the apportionment of

the compensation.   

14. The learned counsel on behalf of the respondent has relied upon the

decision  of  Bombay  High  Court  in  Mohammad Akil  Khan v.  Premraj

Jawanmal  Surana  and  Anr. AIR  1972  Bom.  217.   The  decision  is

distinguishable as the civil suit had not been filed in the said case.  Thus,

we need not go into the correctness of the aforesaid decision.  Reliance has

also been placed on Delhi Development Authority v. Bhola Nath Sharma

(Dead) by Lrs. & Ors. (2011) 2 SCC 54; and Sunderlal v. Paramsukhdas

& Ors. AIR 1968 SC 366 to contend that definition under Section 3(b) of the

“person interested” is “inclusive” definition. Reliance for this purpose has

also been placed on U.P. Jal Nigam, Lucknow Through Its Chairman &

Anr. v. Kalra Properties (P) Ltd., Lucknow & Ors. (1996) 3 SCC 124,

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laying down that a purchaser is entitled to step into the shoes of the owner

to  claim  compensation  though  could  not  question  the  notification  for

acquisition. In our opinion even if it is held that respondent No.1 was the

“person interested” within the meaning of Section 3(b) of the Act its case is

not advanced so as to seek adjudication of the questions in the facts of this

case  in  the  reference  under  Section  30  of  the  Act  which  remedy  was

discretionary.   The  land  owners  also  relied  upon Coromandel  Indag

Products  Private  Limited  v.  Garuda  Chit  and  Trading  Company

Private Limited and Another (2011) 8 SCC 601 wherein this Court dealt

with  question  when  time  is  essence  of  the  contract  and  in  what

circumstances earnest money could be forfeited.  This question has to be

gone into in civil suits.  

15. Resultantly,  the  appeals  are  allowed.  The  impugned  judgment  and

order passed by the High Court is hereby set aside.  The land owners are

entitled for disbursement of the compensation.  Obviously, it will be subject

to the outcome of the civil suits in which refund of the earnest money along

with  interest  had  been  sought  by  the  respondent  No.1.   In  case  the

appellants fail  and refund is directed in civil  suits, the landowners shall

have to pay it as per the judgment and decree which may be passed.  No

costs.

…………………………..J. (ARUN MISHRA)

..................................J.      (MOHAN M. SHANTANAGOUDAR)     

NEW DELHI APRIL 26, 2017