Property seller can forfeit entire earnest money paid by buyer: Supreme Court

Setting aside a Delhi High Court order, the apex court ruled that earnest money is paid or given at the time when the contract is entered into and as a pledge for its due performance by the depositor and it is to be forfeited in case of non-performance by the depositor

 
New Delhi: Earnest money paid by a purchaser of an immovable property can be forfeited by the seller if the former fails to pay the remaining sum, the Supreme Court has held, reports PTI.
 
A bench of justices KS Radhakrishnan and Dipak Misra said the earnest money is given to bind the contract and the seller is entitled to forfeit it if the sale of an immovable property falls through, due to the fault of the purchaser.
 
"Earnest money is paid or given at the time when the contract is entered into and as a pledge for its due performance by the depositor and it is to be forfeited in case of non-performance by the depositor," the bench said.
 
The bench gave the ruling setting aside a Delhi High Court order which had held that the seller is entitled to forfeit only a nominal amount and not the entire sum.
 
The bench said irrespective of the amount, the purchaser is entitled to forfeit the entire money.
 
"There can be converse situation also that if the seller fails to perform the contract, the purchaser can also get the double the amount, if it is so stipulated.
 
"It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money, then the forfeiture clause will not apply," the bench said. 
 
The court passed the order on a man's plea against the High Court's order directing him to forfeit only a nominal amount of Rs50,000 out of Rs7 lakh earnest money paid by a purchaser after he failed to pay the rest of Rs63 lakh to get the property.
 
"We are of the view that the High Court has completely misunderstood the dictum laid down in earlier apex court judgements and came to a wrong conclusion of law for more than one reason, which will be more evident when we scan through the subsequent judgements of this court," the bench said.
 
"We are, therefore, of the view that the seller was justified in forfeiting the amount of Rs7 lakh as per the relevant clause, since the earnest money was primarily a security for due performance of the agreement and, consequently, the seller is entitled to forfeit the entire deposit," the bench said.
 

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Sun TV Network buys new IPL franchise of Hyderabad

The Maran-owned Sun TV's bid of Rs85.05 crore per annum for the Hyderabad franchisee represent a premium of over 100% than the money paid by Deccan Chargers

 

Mumbai: Sun TV Network on Thursday won the Hyderabad franchise of the Indian Premier League (IPL) for Rs85.05 crore per year, marking an end to Board of Control for Cricket in India (BCCI)'s hunt for a new team in the wake of the controversial termination of cash-strapped Deccan Chargers, reports PTI.

 

The IPL Governing Council met today to open the bids for the new IPL franchise and Sun TV was found to have the highest bid amount.

 

"SUN TV Network have won the Hyderabad Franchise for Rs85.05 crores per year. This Franchise fee represents a premium of over a 100% above the amount paid by Deccan Chronicle Holdings Ltd (DCHL) for the Hyderabad Franchise in 2008," BCCI Secretary Sanjay Jagdale said in a release.

 

"The SUN TV Network bid was substantially higher than the second bid of PVP Ventures, which was Rs69.03 crores," Jagdale said.

 

In an effort to attract more bidders, the BCCI had kept the base price at a reasonable Rs60 crores per year. DCHL had bought the Hyderabad franchise for Rs428 crores for a period of 10 years.

 

Chennai-based Sun TV Networks is one of India's biggest television networks with 32 TV channels and 45 FM radio stations primarily catering to an audience in the four southern languages of India. Their network includes channels covering news, entertainment, film, documentary and music.

 

The BCCI had floated the tenders for a new IPL franchise after terminating Deccan Chargers' contract on 15th September but the team owners DCHL had challenged it at the Bombay High Court.

 

The High Court had ruled in favour of the BCCI after Deccan Chargers Holdings failed to furnish bank guarantee of Rs100 crore before 12th October 5pm deadline.

 

Later, an arbitrator had ordered for status quo but the High Court again ruled in favour of the Board.

 

DCHL then approached the Supreme Court which, however, declined on 19th October to interfere with the High Court decision which had set aside the status quo order passed by the arbitrator.

 

According to an IPL source, Sun TV has paid Rs20 crore as signing amount and also the bank guarantee of Rs85 crores for the first year.

 

The source said that the Deccan Chargers players, who are now left without a team following the termination of the franchise, will get the first option in the new team owned by Sun TV.

 

"Sun TV will have to inform the IPL by tomorrow as to which Deccan Charger players they want in the team," the source said.

 

Those players not selected will go to the common auction pool.

 

All the IPL franchises will have to indicate by 31st October which players they wish to retain for the sixth edition of the league.

 

The source said that Sun TV and PVP Ventures were the only two companies which bid for the new IPL team. Four other companies had collected the forms but did not bid.

 

The BCCI had begun the process of finding a new IPL team inviting bids in respect of 12 cities -- Ahmedabad, Cuttack, Noida Dharamsala, Indore, Hyderabad, Kanpur, Kochi, Nagpur, Rajkot, Ranchi and Vizag -- just a day after terminating the Deccan Chargers' contract on 15th September.

 

The DCHL had challenged the termination of its contract, but the Bombay High Court had on 1st October ordered the company to furnish a bank guarantee of Rs100 crore, bear all expenses for IPL 6, including making payments to BCCI towards franchise, players and support staff. Besides, it was asked to bear the costs of conducting matches and other expenses.

 

But DCHL's failure to submit bank guarantee of Rs100 crore of a nationalised bank by 12th October deadline then allowed BCCI to initiate action in furtherance to the termination.

 

The IPL season 6 will commence from April next year.

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