VIRENDER ARAN Vs. DEVINDER SINGH

JUDGEMENT

(1.) The question which arises in the present appeal is whether for rescission of a contract the mere communication to rescind would be sufficient or would the said communication need to be accompanied with the liquidated amount/damages mentioned in the contract where no time has been specified for such payment. The facts of the case are that the appellant (seller) agreed to sell a flat bearing No. C-8/54A, Keshav Puram, Delhi-35 to the respondent (purchaser) for a sale consideration of Rs.29,50,000/-, through an agreement dated 4th March, 2011. The entire monies were to be paid on or before 5th June, 2011. Earnest money/bayana of Rs.3,00,000/- was received in cash by the appellant/seller at the time of the agreement. Both parties had the freedom to rescind the contract. However if the purchaser/respondent was to walk away from it, he would have to forfeit the earnest money paid, whereas if the seller was to rescind the contract he would be required to pay twice the amount of earnest money received by him. By a letter dated 24th May, 2011, the seller conveyed to the purchaser that he would not like to sell his property and offered to repay the earnest money. In reply, the purchaser through his lawyer's notice of 31st May, 2011 stated that he was ready and willing to honour his part of agreement, however should the seller persist with his stand to rescind or not honour the agreement, he would be liable to pay the seller double the amount of bayana, i.e. (Rs.3,00,000/- x 2) Rs.6,00,000/-. The said legal notice called upon the seller/appellant:

(2.) Counsel for the seller/appellant contends that for rescission of the agreement all that the seller was required to do was to intimate the purchaser/respondent that he was not willing to proceed with the agreement to sell and that the earnest money would be repaid. He relies on Clause 5 of the said agreement which reads as under:-

(3.) Learned counsel further contended that the way the agreement was structured casts an obligation only upon the purchaser to pay the entire consideration amount within the stipulated period i.e. on or before 5th June, 2011. However, no such time limit was fastened upon the seller in case he was to resile from the agreement. In any case, the seller had offered, within one week of the agreement i.e. on 10th March, 2011 and yet again on 24th May, 2011, to refund to the purchaser the earnest money, but allegedly the purchaser refused to accept the monies. His bona fides was further established by the fact that the demand draft of Rs.3,00,000/-, equivalent to the earnest money received had already been prepared in favour of the purchaser by HDFC bank on 3rd June, 2011, however it could not be delivered through his lawyer to the purchaser due to some confusion. Therefore, contended counsel the learned Single Judge had erred in holding that the defendant could not lawfully cancel the agreement to sell any further proceedings in decreeing the suit for specific performance of the agreement to sell.