⚖️ Legal Learning | Shri Ganpati Jurists
SUBHASH AGGARWAL vs. MAHENDER PAL CHHABRA & ANR. (Supreme Court of India)
🔑 Core Legal Principle
When both the buyer and the seller are at fault in the performance of a contract, forfeiture of earnest money is impermissible, as it would lead to unjust enrichment of one party.
📌 Why forfeiture was rejected
Buyer’s fault: Failed to prove readiness and willingness to perform the contract.
Seller’s fault: Failed to fulfil essential contractual obligations, including:
Mutation of the property
Conversion from leasehold to freehold
Since defaults existed on both sides, equity could not favour one party at the cost of the other.
🧭 Supreme Court’s Observation
“Equity must operate in a manner that prevents unjust enrichment and restores the parties to their original position, as far as possible, particularly where both the parties are at fault.”
The Court held that allowing forfeiture would give the seller an unfair and inequitable windfall.
⚖️ Legal Learning / Takeaway
Forfeiture of earnest money is not automatic
Courts will examine conduct of both parties
Equitable principles override rigid contractual clauses
Objective is restoration, not punishment
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