SHREE HANUMAN COTTON MILLS & ORS. vs TATA AIR-CRAFT LTD.

The Supreme Court held that under Section 64 and Section 74 of the Indian Contract Act, 1872, a deposit made as earnest money can be forfeited if the buyer commits a breach of contract. The Court established that for a deposit to qualify as earnest money, it must be given at the time of contract, guarantee contract fulfillment, be part of the purchase price, and be forfeited upon buyer's default. The Court upheld the respondent's right to forfeit the Rs. 2,50,000 deposit due to the appellant's breach, dismissing the appellant's suit for recovery.