JUDGMENT - KHARCHE S.T., J.: - By invoking the jurisdiction of this Court under section 100 of the Code of Civil Procedure, this second appeal takes an exception to the judgment dated 21st September, 1989 passed by the learned Additional District Judge, Nagpur in Civil Appeal No. 422 of 1982 whereby the appeal filed by the original plaintiff was allowed and the defendants were directed to refund earnest money of Rs. 4,625/- together with interest @ 6% per annum on Rs. 3,700/- from the date of institution of the suit till recovery by setting aside the judgment and decree dated 30th June, 1982 passed by the learned Joint Civil Judge, Junior Division, Nagpur dismissing the suit of the plaintiff for recovery of the earnest money. Relevant facts giving rise to this appeal are as under : 2. The respondent-plaintiff is Gram Panchayat established under the Bombay Village Panchayats Act, 1958 had filed the suit for recovery of earnest money with interest thereon, on the contentions that the defendant Nos. 1 to 5 are the members of the joint Hindu family and the defendant No. 2 is Karta of the family. They were Malgujars of the same village and they owned and possessed water tank. The defendants agreed to sell the said water tank to the plaintiff for the consideration of Rs. 25,000/- and executed the agreement of sale dated 13-10-1975 on receiving the earnest money of Rs. 5,000/-. It was agreed between the parties that the defendants would execute the registered sale-deed within 15 days, after getting permission as is required under sections 89 and 91 of the Bombay Tenancy and Agricultural Lands (Vidarbha Region) Act, 1958 (for short, the Tenancy Act) from the competent authority for sale of the said water tank and on payment of the balance consideration of Rs. 20,000/-. The defendant No. 2 is a practising Advocate and he agreed to help the Gram Panchayat for getting permission from the Competent Authority in accordance with the provisions of law. Accordingly the proceedings were instituted before the Sub-Divisional Officer for obtaining permission, but ultimately it was found that no permission was required for the said transaction and consequently the proceedings were dropped on 17-11-1975. Thereafter the plaintiffs were served notice dated 19-3-1976 calling upon them to pay balance consideration and to get the sale-deed executed to which no reply was given by them. Thereafter the plaintiffs were served notice dated 19-3-1976 calling upon them to pay balance consideration and to get the sale-deed executed to which no reply was given by them. The land was sold to other persons on 31-5-1976 and the plaintiff Gram Panchayat demanded refund of earnest amount of Rs. 5,000/- together with interest but it remained unpaid and therefore, the plaintiff Gram Panchayat was compelled to file the suit for recovery of the said amount. The defendants strongly resisted the claim of the plaintiff by filing their written statement and contended that the agreement of sale was executed by them for sale of water tank for consideration of Rs. 25,000/- accepting the earnest amount of Rs. 5,000/- and the sale-deed was to be executed within 15 days after getting the permission. The defendants contended that accordingly they had instituted the proceedings before the Sub-Divisional Officer but ultimately the proceedings were dropped and the defendants in spite of the notice served on plaintiff calling upon them to get the execution of the sale-deed, have committed breach of the contract and they were not ready to purchase the tank and ultimately the water tank was sold to one Mahadeo for the consideration of Rs. 24,000/- on 31-5-1976 and as such defendants suffered loss to the tune of Rs. 1,000/-. The defendants were ready and willing to perform their part of contract and there was express term in the agreement about the forfeiture of the earnest money in the event of non-performance of contract on the part of plaintiff and therefore, the earnest money stands forfeited. 3. On the aforesaid pleadings, the learned trial Judge framed the issues. The parties adduced the oral as well as documentary evidence in support of their contentions. The leaned trial Judge on consideration of the evidence adduced before him had come to the conclusion that the defendants did not commit breach of the contract and that the plaintiff was not willing to perform its part of the contract and therefore, the plaintiff would not be entitled to recover the earnest money and the damages as it is the plaintiff who has committed breach of contract. Consistent with these findings, the learned trial Judge dismissed the suit. Being aggrieved by the judgment and decree passed by the trial Court, the plaintiff Gram Panchayat preferred appeal in the District Court. Consistent with these findings, the learned trial Judge dismissed the suit. Being aggrieved by the judgment and decree passed by the trial Court, the plaintiff Gram Panchayat preferred appeal in the District Court. The learned Additional District Judge on hearing the parties recorded finding that the plaintiff has committed breach of the contract but the defendants are not entitled to forfeiture of the earnest money and damages, and therefore, he set aside the judgment and decree passed by the trial Court and directed the defendants to return the amount of Rs. 4,625/- with interest @ 6% per annum, as mentioned above. This judgement of the Appellate Court is under challenge in this second appeal. 4. Shri Vyawahare, the learned Counsel for the defendants contended that there is specific stipulation in the agreement of sale dated 30-10-1975 that if the sale-deed is not executed as stipulated in the agreement of sale within 15 days after obtaining permission of the Competent Authority, the earnest money of Rs. 5,000/- would stand forfeited. He contended that the defendants had moved the Sub-Divisional Officer for obtaining permission in accordance with the provisions of section 18 of the Tenancy Act, but ultimately it was found that no permission of the Competent Authority would be required for the sale of water tank and consequently the proceedings were dropped and therefore, the plaintiff Gram Panchayat was called upon to get the sale-deed executed from them after payment of balance consideration of Rs. 20,000/- by notice dated 19-3-1976 to which no reply was given. Mr. Vyawahare further contended that the plaintiff Gram Panchayat has committed breach of the contract and plaintiff was not ready and willing to perform its part of the contract. He contended that there is no question of treating the earnest money as a security deposit as is observed by the learned Appellate Court. He contended that the forfeiture clause mentioned in the agreement of sale is indicative of the intention of the parties that the said earnest amount was to be forfeited in case the sale-deed is not executed as per the terms and conditions mentioned in the agreement of sale. He contended that the Appellate Court has committed error of law relying on Section 74 of the Contract Act, 1872 which provides for stipulation. He contended that the Appellate Court has committed error of law relying on Section 74 of the Contract Act, 1872 which provides for stipulation. He contended that the decision of the Supreme Court in (Fateh Chand v. Balkishan Dass)1, A.I.R. 1963 S.C. 1405 relied on by the Appellate Court is not applicable to the facts and circumstances of the present case. He contended that in the present case the defendants are entitled to forfeit the earnest amount because the transaction between the parties could not be completed on account of failure of the plaintiff. He therefore contended that the impugned judgment passed by the Appellate Court is not sustainable in law. In support of these submissions he relied on the decision of the Supreme Court in the case of (Hanuman Cotton Mills v. Tata Air Craft)2, A.I.R. 1970 S.C. 1986. 5. Mr. P.A. Deshmukh, the learned Counsel for the plaintiff Gram Panchayat contended that the covenant of the agreement of sale would clearly show that the sale-deed was to be executed within 15 days after obtaining the permission from the Sub-Divisional Officer, but since the water tank which was immovable property was agreed to be sold, time was not the essence of the contract and therefore, the forfeiture clause in relation to the earnest money would not survive. He contended that when the time was not essence of the contract, the plaintiff-Gram Panchayat could have filed the suit for specific performance of the contract, but instead the suit has been filed for refund of earnest because subsequently the defendants sold the said water tank to other person on 31-5-1976. He contended that the Appellate Court was perfectly justified in granting decree for refund of earnest amount after deducting the loss of Rs. 1,000/- which is said to have been suffered by the defendants. 6. This Court has given thoughtful consideration to the contentions canvassed by the learned Counsel for the parties. It is not in dispute that the defendants are owners of the water tank situated in Survey No. 228/1 and they had agreed to sell this water tank to the plaintiff-Gram Panchayat for the consideration of Rs. 25,000/- on receiving cash amount of earnest Rs. 5,000/ before the Sub-Registrar and in presence of the witnesses. It is not in dispute that the defendants are owners of the water tank situated in Survey No. 228/1 and they had agreed to sell this water tank to the plaintiff-Gram Panchayat for the consideration of Rs. 25,000/- on receiving cash amount of earnest Rs. 5,000/ before the Sub-Registrar and in presence of the witnesses. The covenant of agreement of sale would reveal that the sale-deed was to be executed after obtaining permission from the Sub-Divisional Officer within 15 days and the possession would be delivered at the time of registration of the sale-deed and also after receiving balance consideration. Forfeiture clause is also incorporated in the agreement of sale which could be translated as under : "If the permission is accorded and thereafter if the purchaser Gram Panchayat did not get the sale-deed executed within 15 days, the earnest amount of Rs. 5,000/- would be forfeited and the plaintiff will not have any right to claim the refund of the same." 7. It is also not in dispute that as per the stipulation in the agreement of sale, proceedings were initiated before the Sub-Divisional Officer for obtaining permission which was subsequently dropped on 17-11-1975 as there was no necessity to obtain such permission for sale of the water tank. The plaintiff was called upon by notice dated 19-3-1976 to get the sale-deed executed on payment of balance consideration to which no reply was given and thereafter the defendants sold the said water tank to third party on 31-5-1976 and the suit was filed by the plaintiff for refund of earnest money on 14-8-1978. In the case of Shree IIanuman Cotton Mills another v. Tata Air Craft Ltd., A.I.R. 1970 S.C. 1986 the Honble Supreme Court laid down certain principles in para 24 of the judgment which are reproduced as under : From a review of the decisions cited above, the following principles emerges regarding "earnest": (1) It must be given at the moment at which the contract is concluded. (2) It represents a guarantee that the contract will be fulfilled or, in other words, "earnest" is given to bind the contract. (3) It is part of the purchase price when the transaction is carried out. (4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser. (2) It represents a guarantee that the contract will be fulfilled or, in other words, "earnest" is given to bind the contract. (3) It is part of the purchase price when the transaction is carried out. (4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser. (5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest." 8. Eventually, it would be necessary to reproduce the provisions of section 55 of the Transfer of Property Act to the extent necessary for appreciating the contentions of the parties on either side. Section 55 of the Transfer of Property Act reads thus ; 55. "Rights and liabilities of buyer and seller. - In the absence of a contract to the contrary, the buyer and the seller of immovable property respectively are subject to the liabilities, and have the rights, mentioned in the rules next following or such of them as are applicable to the property sold : (6) The buyer is entitled- (a) where the ownership of the property has passed to him, to the benefit of any improvement in, or increase in value of, the property, and to the rents and profits thereof, (b) unless he has improperly declined to accept delivery of the property, to a charge on the property, as against the seller and all persons claiming under him, to the extent of the sellers interest in the property, for the amount of any purchase-money properly paid by the buyer in anticipation of the delivery and for interest on such amount; and, when he properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission." 9. This Court may usefully refer to the recent decision of the Supreme Court in the case of (Videocon Properties Ltd. v. Dr. Bhalchandra Laboratories others)3, 2003(10) SCALE 1085 . This Court may usefully refer to the recent decision of the Supreme Court in the case of (Videocon Properties Ltd. v. Dr. Bhalchandra Laboratories others)3, 2003(10) SCALE 1085 . The Honble Supreme Court dealt with this provision of law under section 55(6)(b) of the Transfer of Property Act and observed in para 16 that; "The further aspect that requires to be noticed is as to the nature and character of earnest money deposit and in that context the distinguishing features, which help to delineate the differences, if any. The matter is not, at any rate, res integra, In ((Kunwar) Chiranjit Singh v. Har Swarup)4, A.I.R. 1926 P.C. 1, it was held that the earnest money is part of the purchase price when the transaction goes forward and it is forfeited when the transaction falls through, by reasons of the fault or failure of the purchaser. This statement of law had the approval of this Court in (Maula Bux v. Union of India)5, A.I.R. 1970 S.C. 1955. 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 purpose 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 the aforesaid case, considering the scope of section 55(6)(b) of the Transfer of Property Act, it was held that the vendors were liable to refund the amount which was not merely the earnest money but it was treated as a part payment of purchase price especially when the sale transaction could not be completed due to the lapses and inabilities on the part of the vendee irrespective of bona fides or otherwise. 11. In the present case it would clearly reveal that the water tank was agreed to be sold on 13-10-1975, on receiving the cash amount of Rs. 5,000/- in presence of the sub-registrar and two witnesses, for consideration of Rs. 25,000/-. 11. In the present case it would clearly reveal that the water tank was agreed to be sold on 13-10-1975, on receiving the cash amount of Rs. 5,000/- in presence of the sub-registrar and two witnesses, for consideration of Rs. 25,000/-. The sale-deed was to be executed after obtaining permission of the Competent Authority within 15 days. But, the proceedings regarding obtaining of the permission were dropped on 17-11-1975 and therefore, if the parties wanted to make the time essence of the contract, the sale-deed would have been got executed within 15 days from the date of dropping of the proceedings. It is settled law that in case of immovable property, generally time is not the essence of the contract and in the present case it appears that the time of 15 days was allowed that too only after obtaining the permission. The intention of the parties as per the covenant mentioned in the agreement of sale would show that time was not the essence of the contract so far as the execution of the sale-deed is concerned, because that was dependent on certain contingencies, i.e. The permission from the Sub-Divisional Officer for the sale of the water tank. In such circumstances, though the plaintiffs were called upon to get the sale-deed executed and though they did not execute the sale-deed, the defendants sold the water tank to third party on 31-5-1976 and therefore, the plaintiff Gram Panchayat thought it fit not to institute the suit for specific performance of the contract. When the time was not essence of the contract, then the forfeiture clause in the agreement of sale cannot be enforced and in such a situation it is not possible to accept the contention of Mr. Vyawahare, the learned Counsel for the defendants that by virtue of the forfeiture clause, the earnest amount has been forfeited. 12. It is not in dispute that the defendants sold the said water tank to one Mahadeo Hatwar and his brothers on 31-5-1976 for Rs. 24,000/- and as such they have suffered the loss of Rs. 1,000/-. The Appellate Court has considered this aspect and deducted the amount of Rs. 1,000/- from the earnest amount and granted decree for Rs. 4,625/- with interest @ 6% per annum on Rs. 3,700/- from the date of the institution of the suit till recovery. 24,000/- and as such they have suffered the loss of Rs. 1,000/-. The Appellate Court has considered this aspect and deducted the amount of Rs. 1,000/- from the earnest amount and granted decree for Rs. 4,625/- with interest @ 6% per annum on Rs. 3,700/- from the date of the institution of the suit till recovery. In such circumstances, this Court is of the considered opinion that there is no error or illegality in the judgment of the Appellate Court and the plaintiff Gram Panchayat is entitled to receive the refund of earnest money in the interest in accordance with the provisions of section 55(6)(b) of the Transfer of Property Act. Consequently the appeal is dismissed. In the circumstances, no costs. Appeal dismissed. -----