unless, loss is proved to have been caused to the prospective sellers/defendants/respondents. The Supreme Court in the judgment of Fateh Chand (supra) allowed forfeiture of amount of Rs.1,000/- out of the amount paid of Rs.25,000/-. I may also note that nomenclature of a payment is not important and what is important is really the quantum of price which is paid. In the present case, the total price payable for the suit property is Rs.20,00,000/- and therefore 25% of the payment made s tricto sensu cannot be an earnest money, though it has been called so. Only a nominal amount can be an earnest money, inasmuch as, the object of such a clause is to allow forfeiture of that amount to a nominal extent as held in the case of Fateh Chand (supra). For example can it be said that 100% of the price or 75%/80% of the price or 50% of the price is earnest money so that it can be forfeited. The answer surely is in the negative. Such high amounts called earnest money will be in the nature of penalty and thus hit by Section 74 of the Indian Contract Act, 1872 in view of Fateh Chand’s case. The principles laid down in Fateh Chand’s case; that forfeiture of a reasonable amount is not penalty but if forfeiture is of a large amount the same is in the nature of penalty attracting the applicability of Section 74; have been recently reiterated by the Supreme Court in the case of V.K.Ashokan vs. CCE, 2009 (14) SCC 85 ." (underlining added) I therefore hold that the appellant/defendant can at best seek to forfeit, in accordance with the ratio in Satish Batra's case (supra), a sum of Rs. 3 lacs, and not a sum of Rs. 9 lacs as is claimed by the appellant/defendant, but even this amount of Rs. 3 lacs cannot be allowed to be forfeited and the reasons are given hereinafter.
