#Contract Law

The Delhi High Court held that forfeiture of earnest money under an Agreement to Sell is not automatic; the party retaining the deposit must prove actual legal injury and quantifiable loss under Section 74 of the Indian Contract Act. The court distinguished the K.R. Suresh precedent, ruling it inapplicable to simple recovery suits, thereby strengthening a vendee's right to recover earnest money absent proven damages.

The Supreme Court ruled that a homebuyer can recover only the amount paid from personal savings in a tripartite loan arrangement when the builder defaults, not the bank-disbursed loan. It awarded Rs 1.27 crore (personal funds) with 12% interest plus Rs 15 lakh compensation, while confirming the bank’s Rs 2 lakh service deficiency. This clarifies refund limits for buyers financed via builder-bank-buyer tripartite agreements.

The Supreme Court set aside the PMGSY recovery order, holding that cross contract recovery can be effected only with express authority and must observe natural justice. It ordered the release of Rs.84,17,003 plus 6% interest from 27 September 2025 to the contractor.

The Delhi High Court ruled that a landlord claiming damages for lost rent must first mitigate the loss and establish the prevailing market rent at the time of breach, failing which the claim under Section 73 of the Indian Contract Act fails. The decision affects landlords seeking compensation for tenant-induced utility theft, emphasizing the evidentiary burden on them.

The Delhi High Court reinstated the arbitral award, ruling that a claim of patent illegality fails when the award correctly interprets the contract and statutory provisions. This limits parties from overturning awards on that ground, reinforcing the narrow scope of judicial interference in arbitration.

Delhi HC quashed a Single Judge’s order that nullified an arbitral award, reiterating that courts may intervene only under Sections 34/37 of the Arbitration and Conciliation Act and cannot re-appraise evidence or reinterpret the contract. The ruling preserves award finality and curtails judicial overreach for parties challenging awards.

Delhi High Court confirmed that a seller may retain only the expressly stipulated earnest-money amount, rejecting forfeiture of the full ₹17.5 million paid. The ruling limits Section 74 ICA to penal clauses and excludes later part-payments, urging parties to define earnest money separately.

Omaxe Ltd’s petition under Section 37(1)(c) was dismissed, leaving the arbitral award that orders the builder to pay compensation for delayed possession, with 15% interest, untouched. The ruling clarifies that courts may intervene only for evident misconduct or jurisdictional error, not merely to alter award amounts. Homebuyers and developers in builder-buyer agreements are directly impacted.

Delhi High Court partially set aside the arbitral award, ruling that damages awarded without establishing actual loss and interest counted as damages breach Section 34 of the Arbitration Act. The decision restricts arbitral tribunals to grant only loss-based compensation, with interest payable separately, affecting future construction and contract disputes.

The Kerala High Court ruled that the state cannot withhold or claim damages upon contract termination unless it proves actual financial loss, mandating the return of the security deposit with 9% interest. This reinforces the principle that liquidated damages must reflect real harm, not serve as punitive leverage in public procurement - a critical safeguard for contractors.

Bombay High Court upholds strict compliance with tender conditions, ruling that prohibition on fractional quotations is mandatory and non-negotiable. The judgment reinforces that administrative discretion in public procurement cannot override explicit tender stipulations, impacting bidders and contracting authorities alike.

The Supreme Court ruled that security deposits under commercial contracts do not accrue interest unless refunded beyond the agreed period, reinforcing contractual sanctity while ensuring equitable relief for delayed refunds. This judgment clarifies the enforceability of explicit no-interest clauses in contracts, impacting contractors and government entities alike.

Madhya Pradesh High Court upholds recovery decree under a risk purchase clause, ruling that payment delays do not invalidate contractual liability. The court modified the interest rate to 12% under Section 34 CPC, setting a precedent for commercial contract disputes involving market procurement costs.

Allahabad High Court sets aside NHAI’s termination of an EPC contract, ruling that failure to provide possession of land as per contractual obligations violates Article 14. The Court mandates project timeline rescheduling, emphasizing state authorities cannot evade contractual duties under the guise of arbitrary termination.

Bombay High Court reinforces interim protection under Section 9 of the Arbitration Act by restraining further transfers of 152 disputed plots and appointing a symbolic Receiver. The ruling clarifies that registered conveyance deeds override unregistered agreements, ensuring preservation of arbitration subject-matter for developers and investors in real estate disputes.