Telangana High Court
Dharavath Ravi vs The State Of Telangana And 3 Others on 18 August, 2025
Author: K. Lakshman
Bench: K. Lakshman
HON'BLE SRI JUSTICE K. LAKSHMAN
WRIT PETITION No.42451 OF 2022
ORDER:
Heard learned counsel for the petitioner and Mr. K.
Madhusudhan Reddy, learned Standing Counsel for respondent No.4.
FACTS:
2. The Government has issued G.O.Rt.No.20, dated 10.03.2020
for disposal of all assets of respondent No.2 by conducting an open
auction on an “as is where is” basis, and constitution of a High Power
Committee of Secretaries to work out the modalities for disposal.
2.1. Pursuant to the said G.O., respondent No.4 vide letter
dated 12.01.2022 sought permission from the Government of (28)
Projects of respondent No.4 by the Agencies viz., HMDA, TSIIC and
the District Collectors concerned shown against the projects in
Annexure enclosed and also authorized the concerned agencies to
prepare and finalize the modalities for auction. Vide letter dated
27.01.2022, the Special Chief Secretary to Government has accorded
permission to respondent No.4 to conduct said 28 Projects. The
details of the same are specifically mentioned in Annexure to the said
proceedings dated 27.01.2022. It includes Sahabhavana Township,
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Bandlaguda in respect of 2246 Flats. The Agency responsible to
conduct auction is respondent No.3 – HMDA. Accordingly, HMDA
prepared a brochure regarding conduct of auction at Bandlaguda
Township. In the said brochure, it is specifically stated that finished
flat is @ Rs.3,000/- per square feet and semi-finished flat @
Rs.2,750/-.
2.2. Clause – 12 of the said brochure deals with payment
schedule and the same is mentioned as under:
“Payment Schedule:
a) Soon after completion of allotment, a “Letter of intimation” will be sent to the allottee, for
payment of 10% token advance within 07 days.
\
b) After payment of 10% Token Advance within 07 Days, a “Letter of allotment cum
confirmation” will be issued to the successful allotee for payment of balance amount.
If not paid within
Sl.No. Installment Amount Payable Payable by stipulated time
80% of Sale Value Within 60 days from 10% token
1. First Installment the date of issue of advance will be
allotment letter forfeited.
Balance sale price, On or before 90 10% token
2. Final Installment including 10% token days from the date advance will be
advance paid of allotment letter. forfeited.
c) Cash Discounts
2% Discount is allowed, if the cost of the flat total value is paid within 30 days from date of
Allotment.
d) “No-Objection Certificate” (NOC) will be issued after payment of 10% token advance for
obtaining Loans from Banks subject to sanction by the respective Banks and forwarding the
registered sale deed directly to the Bank.”
2.3. In terms of the said brochure, Notification was issued on
11.05.2022 and online applications were received and flats were
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allotted on 22.06.2022 as per schedule. Pursuant to the said brochure,
the petitioner participated in the said auction in respect of flat in
Bandlaguda. He has paid an amount of Rs.1,000/- towards fee to
participate in the said auction process. Respondent No.3 has
conducted auction and drawl of lots. Flat No.705 in C05 Tower with
798 square feet was allotted to the petitioner under the said auction
and drawl of lots conducted by respondent No.3. Accordingly,
respondent No.2 has issued Letter of Intimation dated 03.07.2022
informing the petitioner with regard to allotment of the said 2 BHK
Flat i.e., Flat No.705 in C05 tower at Rs.3,000/- per square feet. As
per the said allotment letter, the petitioner herein has to pay 10% of
the total cost of the flat within seven (07) days, 80% as first
installment within 60 days and the balance 10% as final payment
within 90 days along with applicable development charges and corpus
fund.
2.4. According to the petitioner, he has paid Rs.2,00,000/-
(Rupees Two Lakhs) as token advance on 11.07.2024 by way of
RTGS into the account of respondent No.3. Total cost of the flat is
Rs.23,94,000/-.
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2.5. It is the specific case of the petitioner that thereafter he
approached various Banks for availing loans. The banks did not
process his application. The said fact was brought to the notice of
respondent No.2 by way of submitting representation dated
23.09.2022 and requested to extend time up to 30.09.2022. He has
also submitted similar representation dated 29.09.2022. Without
considering the said representations, respondent No.2 has informed
the petitioner that he has to pay balance sale consideration by
22.11.2022. He has also submitted another representation dated
19.11.2022 requesting respondent No.2 to extend time for payment by
one more month. The same was not extended. Further, respondent
No.2 informed the petitioner that they will forfeit the said amount of
Rs.2.00 lakhs paid by the petitioner towards token advance.
Therefore, the petitioner filed the present writ petition to declare the
action of respondent No.2 in issuing the final notice dated 03.11.2022
in directing the petitioner to pay balance amount by 22.11.2022,
failing which, the token advance paid by the petitioner will be
forfeited as illegal.
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CONTENTIONS OF THE RESPONDENTS:
3. Respondent Nos.2 and 4 filed counter contending that the
petitioner failed to pay the amount within agreed timelines. In the
brochure itself, there is clause that if the petitioner fails to pay balance
sale consideration, token advance paid by him will be forfeited. Even
then, respondent No.2 granted extension of time to the petitioner. He
failed to pay the same. Therefore, the token advance paid by the
petitioner is liable to be forfeited as per the prevailing terms and
conditions.
ANALYSIS AND FINDINGDS OF THE COURT;
4. The aforesaid facts would reveal that the petitioner herein is
a practicing Advocate. He has participated in the said auction. The
aforesaid flat was allotted to him. As per the said brochure, soon after
completion of allotment, letter of intimation dated 03.07.2022 was
given to the petitioner. He has paid an amount of Rs.2.00 lakhs as
token advance on 11.07.2022. The total cost of the flat is
Rs.23,94,000/-. The petitioner paid an amount of Rs.2.00 lakhs
towards token advance. Therefore, vide letter of allotment-cum-
confirmation, dated 11.07.2022, respondent No.2 informed the
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petitioner to pay an amount of Rs.19,15,200/- i.e., 80% of flat cost by
12.09.2022 and Rs.2,78,800/- as final installment, after adjusting the
token advance and above installments by 12.10.2022. He has applied
for loans by approaching the Banks. The Banks have not processed
the loan application stating that the petitioner is not having permanent
source of income as he is a practicing advocate. Therefore, the banks
did not sanction loans to the petitioner. He has informed the said fact
to respondent No.2 vide letter dated 23.09.2022 and sought for
extension of one month time. He has submitted similar letters dated
29.09.2022 and 19.11.2022 and requested respondent No.2 to extend
time. Thus, the petitioner made every effort to pay the said amount
within the timelines, but he could not.
5. There is no dispute with regard to the schedule of payment.
The petitioner has to pay 80% of the cost by 12.09.2022 and balance
by 12.10.2022. The petitioner failed to pay the said amount.
6. During the course of hearing, it is brought to the notice of
this Court by respondent No.2 that, respondent No.2 has already sold
the said flat to third parties and received the consideration.
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7. In the light of the said submission, the only issue to be
decided by this Court is as to whether the petitioner herein is entitled
for refund of said amount of Rs.2.00 lakhs paid by him towards token
advance?
8. In K.R. Suresh v. R. Poornima 1, the Hon’ble Supreme
Court once again reiterated the concept of “Advance money” or
“earnest money”. In paragraph No.31, it was held as under:
“31. Here, we consider it apposite to refer to the
meanings of the said terms. The word “advance”
means money in whole or in part, forming the
consideration of an agreement paid before the
same is completely payable. On the other hand, the
word “earnest” stands for a sum of money given
for the purpose of binding a contract, which is
forfeited if the contract does not go off and
adjusted in price if the contract goes through.”
9. In the aforesaid decision, the Apex Court has also referred to
the case in Videocon Properties Ltd. v. Bhalchandra
Laboratories2, wherein it was held as under:
1
. 2025 INSC 617
2
. (2004) 3 SCC 711
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WP No.42451 of 2022“14. ….. Further, it is not the description by words
used in the agreement only that would be
determinative of the character of the sum but really
the intention of parties and surrounding
circumstances as well, that have to be looked into
and what may be called an advance may really be
a deposit or earnest money and what is termed as
‘a deposit or earnest money’ may ultimately turn
out to be really an advance or part of purchase
price. Earnest money or deposit also, thus, serves
two purposes of being part-payment of the
purchase money and security for the performances
of the contract by the party concerned, who paid
it.”
10. In Meenakshinada Deikshtar v. Murugesa Nadar3,
learned Single Judge of Madras High Court interpreting Section – 74
of the Indian Contract Act held as follows:
“3…… In the case of breach of contracts, even
where a certain sum is named as the predetermined
damages and in case of breach of the same by
either of the contracting parties, the Court has
jurisdiction to find in a lis involving adjudication
of the rights and obligations of parties to such a
contract, as to who is in default and what is the3
. AIR 1970 Mad. 391
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WP No.42451 of 2022reasonable compensation payable by the party in
default to the other. It does not matter which party
to the contract initiates the proceedings and the
Court is not bound by the quantified estimate of
damages provided for in the contract itself. It is
salutary however for the Courts not to exceed the
quantified damages so named in a contract. To
quote the Supreme Court in Fateh Chand v.
Balkishan Dass.”
11. In Satish Batra v. Sudhir Rawal 4, the Apex Court dealing
with regard to forfeiture in case of breach of contract, held as follows:
15. “Law is, therefore, clear that to justify the
forfeiture of advance money being part of earnest
money the terms of the contract should be clear
and explicit. 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 to
be forfeited in case of non-performance, by the
depositor. 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.
4
. (2013) 1 SCC 345
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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”
12. In the present case, the amount paid by the petitioner was
described only as a token advance, made at a preliminary stage of the
transaction, and there is nothing on record to indicate that the parties
agreed to treat the same as earnest money. In such circumstances, the
amount in question, being part-payment of the consideration and not a
contractual guarantee, cannot be forfeited as held in the above case.
13. In Kailash Nath Associates v. Delhi Development
Authority 5 the Apex Court held as under:
“29. Based on the facts of this case, it would be
arbitrary for the DDA to forfeit the earnest money
on two fundamental grounds. First, there is no
breach of contract on the part of the appellant as
has been held above. And second, DDA not having
been put to any loss, even if DDA could insist on a
contractual stipulation in its favour, it would be
arbitrary to allow DDA as a public authority to
appropriate Rs.78,00,000/- (Rupees Seventy Eight
Lakhs) without any loss being caused. It is clear,
5
. (2015) 4 SCC 136
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WP No.42451 of 2022therefore, that Article 14 would apply in the field
of contract in this case and the finding of the
Division Bench on this aspect is hereby reversed.”
14. In Maula Bux v. Union of India 6, the Apex Court held as
under:
“Forfeiture of earnest money under a contract for
sale of property movable or immovable if the
amount is reasonable does not fall within Section
74… But if forfeiture is of the nature of penalty,
Section 74 applies. Where under the terms of the
contract the party in breach has undertaken to pay
a sum of money or to forfeit a sum of money
which he has already paid… the undertaking is of
the nature of a penalty.”
15. In the light of the aforesaid principle laid down by the
Apex Court, coming to the case on hands, as discussed above, the
petitioner failed to pay balance amount within the timelines. But,
before expiry of the said timelines, he has informed respondent No.2
that he has approached the banks for loan and he sought for extension
of time. He submitted the aforesaid representations dated 23.09.2022,
6
. (1969) 2 SCC 554
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29.09.2022 and 19.11.2022. The said request was not considered by
respondent No.2.
16. As discussed supra, respondent No.2 has already sold the
said subject flat by cancellation of allotment of flat in favour of the
petitioner and received sale consideration amount. Hence, respondent
No.2 has not suffered any loss. As stated above, the petitioner herein
is a practising advocate. He could not get loan despite of his best
efforts. Therefore, forfeiting the aforesaid amount of Rs.2.00 lakhs
paid by the petitioner towards token advance by respondent No.2 is
unjustified and also contrary to the principle laid down by the Apex
Court and the provisions of the Contract Act.
17. Vide order dated 22.11.2022, this Court granted status quo
obtaining as on the said date shall be maintained till the next date of
hearing. Vide order dated 13.12.2022 considering the submissions
made by learned Standing Counsel for respondent No.2 that the
petitioner failed to pay the amount within timelines, the petitioner has
already deposited Rs.2.00 lakhs towards token advance, this Court
vacated the said interim order dated 22.11.2022 holding that the claim
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of the petitioner will be examined in the main writ petition and
forfeiture of payment of Rs.2.00 lakhs shall be subject to the outcome
of the main writ petition.
CONCLUSION:
18. In the light of the aforesaid discussion, more particularly,
considering the fact that respondent No.2 has already sold the subject
flat to third parties and received sale consideration, the petitioner is
practising as junior advocate, to declare the forfeiture of the amount of
Rs.2.00 lakhs paid by the petitioner towards token advance is
unreasonable and unjustified. Respondent No.2 is directed to pay the
said amount of Rs.2,00,000/- (Rupees Two Lakhs Only) to the
petitioner herein within thirty (30) days from the date of copy of this
order. However, the petitioner is not entitled for any interest on the
said amount.
19. This writ petition is disposed of accordingly. In the
circumstances of the cases, there shall be no order as to costs.
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As a sequel thereto, miscellaneous petitions, if any, pending in
the writ petition shall stand closed.
_________________
K. LAKSHMAN, J
18th August, 2025
Mgr