GIAN CHANDversusGOPALA AND ORS.

A                                GIAN CHAND
                                        v.                                       +·
                             GOPALA AND ORS.

                              JANUARY 18, 1995

B            [K. RAMASWAMY AND N. VENKATACHALA, JJ.)

          Contract Act, 1872--Section 33-Contingent contract-Agreement to
    purchase lan~amest money paid-Notification u/s 4(1) Land Acquisition
    Act already published-Whether vendee entitled to obtain refund of earnest
c   money-Held, yes.

        The appellant entered into an agreement with the respondent to
  purchase land belonging to the respondent for a consideration and paid
  a sum of Rs. 20,000 as earnest money. The sale deed was to be executed
  on or before 30-4-1978. The appellant came to know that notification u/s
D 4(1) of the Land Acquisition Act, 1894 was published on 3.8.1977 which
  fact was concealed from the appellant. He filed a suit for refund of the
  earnest money. The Trial Court decreed the suit. The decree was reversed
  on appeal. The appellate court set aside the suit on the ground that he
  was not ready and willing to perform his part of the contract. In
E second appeal, the High Court dismissed the same in limine. Hence this
  appeal.

           The question raised for consideration was whether the appellant was
    entitled to obtain refund of earnest money.
                                                                                 ,,.
F                                                                                      •
          Allowing the appeal, this Court

         HELD : 1. The contract in question being a contingent contract
  based on uncertain future events, (here is a case of suppression of fact
  even otherwise) that event having occurred by notification issued under s.6
G of the Land Acquisition Act, 1894, the contract became impossible of
  performance. Therefore, it got frustrated and the contracting party was        }..
                                                                                       -
  entitled to enforce the terms of the contract for refund of earnest money.
  His readiness and willingness was not relevant in such circumstances after
  the notification under s.4 (1) and declaration under s.6 were published.
H                                                           [414-G-H, 415-A]
                                       412
                            GIANCHANDv. GOPALA·                           413

            CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4710 of A
    1992.

         From the Judgment and Order dated 11.8.86 of the Punjab &
    Haryana High Court in R.S.A. No. 931 of 1986.

            G.K. Bansal and Sanjay Bansal for the Appellant                     B

I
            Prem Malhotra for the Respondents.
J
            The following Order of the Court was delivered :

           This appeal, by special leave, arises from the judgment of the learned C
    Single Judge of the High Court of Punjab & Haryana in R.S.A. No.
    931/1986, dated 11.8.1986. The appellant had entered into an agreement
    with the respondent on 13.1.78 to purchase 1/3rd share of the land belong-
    ing to the respondent for a total consideration of Rs. 78.000 and paid a
    sum of Rs. 20,000 as earnest money. The sale deed was to be executed on D
    or before 30.4.78. Later the appellate came to know that notification u/s
    4(1) of the Land Acquisition Act, 1894 was published on 3.8.77 which fact
    was concealed to the appellant, so he had filed the suit for refund of the
    earnest money. The Trial Court in Suit No. 620/82 decreed the suit for
    refund of the earnest money with interest at 6% per annum from 25.1.1980
    till the date of realisation of the decree amount. Feeling aggrieved, the E
    respondent filed Civil Appeal No.110/83. The District Judge by his Judg-
    ment and decree dated 28.9.1985 reversed the decree and dismissed the
    suit. In Second Appeal, the High Court dismissed the same in limine. Thus
    this appeal, by special leave.
                                                                                 F
           The only question for consideration is whether the appellant is
    entitled to obtained refund of earnest money. One of the terms of the
    contract, admittedly entered into between the parties, is that in the event
    of acquisition of land by the Government for a public purpose, the respon-
    dent "shall return the earnest money without interest. " Admittedly, since
    the notification u/s 4(1) of the Land Acquisition Act was already published, G
    the question arises whether the appellant could get a sale deed executed
    and in its absence whether he is entitled to obtain refund of earnest money
    paid under the agreement. On publication of notification under s.4(1) of
    the Act, though it is not conclusive till declaration u/s 6 was published, the
    owner of the land is interdicted to deal with the land as a free agent and H
    414                   SUPREME COURT REPORTS                   [1995) 1 S.C.R.

A to create encumbrances thereon or to. deal with the land in any manner
  detrimental for public purpose. Therefore, though notification u/s 4(1) is
  not conclusive, the owner of the land is prevented from encumbering the
  land in that such encumbrance does not bind the Government. If ultimate-
  ly, declaration under s-:6 is published and acquisition is proceeded with, it
B would be conclusive evidence of public purpose and the Government is
  entitled to have the land acquired and take possession free from all
  encumbrances. Any sale transaction or encumbrances created by the owner
  after the publication of notification under s.4(1) would therefore be void
  and does not bind the State. In this perspective, when the necessary
  conclusion is that the agreement of sale stands frustrated, the question of
C readiness and. willingness on the part of the vendor or vendee does not
  arise. The appellate court wrongly held that the appellant was not ready
  and willing to perform his part of the contract. In the face of the notifica-
  tion how the appellant could get a valid title? Any attempt on his part
  would be futile exercise and avoidable expenditure. Both the Courts have
D concurrently found that time is not essence of the contract. Under those
  circumstances, the plaintiff is entitled to lay the suit for refund of earnest
  money within three years from the date of refusal of the performance of
  the contract. In this case, declaration under s.6 was published and so it was
  conclusive of public purpose and the land was acquired. The contract was,
  therefore, frustrated. Since one of the terms of the Contract is to return
E the P,arnest money, in the event of acquisition being made by the State, the
  vendee appellant is entitled under s.33 of the Contract Act, as rightly and
  legally held by the trial court, to seek refund of the earliest money.

          Section 33 of the Contract Act reads thus : -
F
             "33. Contingent contracts to do or not to do anything if an uncertain
             future even does not happen can be enforced when the happening
             of the event becomes impossible, and not before.

    The contract in question being a contingent contract based on uncertain
G future events, (here is a case of suppression of fact even otherwise) that
  event having occurred by notification issued under s.6 the contract became         ~·
  impossible of performance. Therefore, it got frustrated and the contracting
  party is entitled to enforce the terms of the contract for refund of earnest
  money. The Trial Court had rightly decree the suit for return of the earnest
H money. The district Judge refused the relief on the ground that he was not
                                GIAN CHAND v. GOPALA                             415

        ready and willing to perform his part of the contract. As stated earlier, his   A
        readiness and willingness is not relevant after the notification under s.4(1)
        and declaration under s.6 were published. Under those circumstances, the
        District Judge had taken an erroneous view in reversing the decree of the
        trial court. The High Court did not apply its mind nor did it advert to any
        these relevant circumstances, It simply dismissed the second appeal in
        limine, as if it was a routine. Therefore, we hold that the decree of the       B
        High Court and that of the District Judge are vitiated by manifest gross
        errors of law. They are set aside accordingly. The decree of the trial court
    l   is restored.

              The appeal is allowed. In the circumstances, parties are directed to
        bear their own costs.
                                                                                        c
        A.G.                                                        Appeal allowed.



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