Case Law Analysis
|Delhi High Court
Section 74 Contract Act | Earnest Money Forfeiture Not Automatic; Retaining Party Must Prove Legal Injury & Actual Loss : Delhi HC
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.