Forfeiture of 'Earnest Money' Not Penal Und Not Penal Under Section 74 of Contract Act: Supreme Court

The Supreme Court upheld the forfeiture of ₹20 lakhs paid as earnest money under an Advance Sale Agreement after the purchaser failed to pay the balance amount. 

Referring to Sections 74, 23, and 56 of the Indian Contract Act, the Court clarified that forfeiture of earnest money, unlike advance payment, is valid if it secures contract performance and is not penal. 

The Court cited key rulings, including Fateh Chand v. Balkishan Dass, Satish Batra v. Sudhir Rawal, Kailash Nath Associates v. DDA, Godrej Projects v. Anil Karlekar, and Central Bank of India v. Shanmugavelu, to reaffirm its reasoning.

The Court found no reason to interfere with the lower court's findings.