Recovery of earnest money under CPC- Earnest money is a deposit paid to a seller, which reflects the good faith of a buyer in purchasing a property.

The money gives the buyer more time before closing to get funding and perform the hunt for names, property valuation and inspections. Earnest money may be called, in many respects, a deposit on a home, an escrow deposit, or money in good faith.

What is Earnest Money?
• It is a deposit made to a seller that represents a buyer’s good faith to buy a home. It is a sum of money that a buyer pays to the Seller at the time of entering a contract.
• It is an amount to show that his interest in the said property is genuine.
• The money is often paid once a verbal acceptance upon an offer has been made.
• It is also called as Binder, Token money or Good-faith deposit.

What is Escrow Account?
• It is an account where funds are held in trust whilst two or more parties complete a transaction.
• The funds will be disbursed after they have fulfilled the agreement they have entered with free consent.
• If the Seller fails to complete his obligation, then all funds are returned to the buyer.
• The money can be recovered by a recovery suit or summary suit under Order 37 of Code of Civil Procedure, 1908.

• This could be invoked by companies, partnership firm, proprietorship firm and traders, etc.
If a person desirous to get back his earnest money, and notice has not given a satisfying answer, then a recovery suit or a summary suit to get back the money invested to buy a property or home with genuine interest.

What is the Procedure of Summary Suit?
• The procedure of Summary suit provided under Order XXXVII of the CPC.
• The main object of Order 37 of CPC is to provide procedure for suit if the defendant does not have any defense.

Application of Order XXXVII
The Order is applicable to
1. All the suits upon bills of exchange, hundis and also promissory notes.
2. In suits where the plaintiff wants recovery of a money payable by the other party or defendant, govern through a contract.

Jurisdiction
These kinds of suits can be filed with the Supreme Court, City Civil Court, Small Court or any other court notified by the Supreme Court.
Suits for recovering a debt with or without interest arises-
1. Through contract in writing; or
2. On any enactment (the recoverable sum should be fixed in money or it should be a debt other than a penalty); or
3. On a guarantee (the claim should be in respect of a debt or liquidated demand only).

What do you mean by Pecuniary Jurisdiction?

As per to the jurisdiction of civil proceedings, the jurisdiction of the court are to be decided on case to case basis. Example- Suits amounting from Rs 1- 20 Lakhs lie before the District court and suits over and above Rs 20 Lakhs lie before the High court. Supreme Court determines these limits of the District Courts.
The pecuniary jurisdiction will come into picture when, in the written contract, it is not mentioned what amount shall be disbursed or returned to the buyer, if the contract is rescinded. Then the court will handle the matter by looking into the case that is the monetary value. This scenario will be seen only when the parties to the contract have not mentioned the amount to be given back to the buyer of the property.
Procedure

Apart from the fact(s) about the case, the plaint must contain a specific affirmation that the suit is filed under this Order.
• It should contain that no such relief has been claimed which does not fall under the ambit of rule XXXVII of the CPC.
• After filing of a summary suit (case), the defendant shall be served a copy of the plaint and summon and within 10 days, the defendant must appear. He will ask for leave and Leave to defend may or may not be granted to him unconditionally or upon Order 37(7) says that procedure of summary suits which shall be the same as the procedure of ordinary suits.

Leave to Defend is granted
• The defendant shall be provided an unconditional leave of appeal if the court is satisfied.
The limitation period for a recovery suit:
For filing a civil recovery claim is restricted to 3 years and after that one cannot get the money back. However, it shall be decided by the court which shall depend upon the facts and circumstances of each case. recovery of earnest money under CPC

Different means to recover money
Legal Notice
The first step is to send a legal notice to the defaulter. After receiving a legal notice, the defaulter has 15 days to repay all the dues and if the payment is not done, the complainant can file a complaint with court or file an FIR.

Summary Suits

To reduce time and energy, Order 37 of the Code of Civil Procedure can be followed to recover money. Here, both the parties can avoid trial hearing and proceedings are based on written statements.

Negotiable Instruments Act
There is a provision to recover debt or money for cheques, Bills of exchange, etc. If the cheque gets bounced, within 30 days of receipt of information from the bank a legal notice is sent to the drawer of the cheque. If the drawer fails to make payment within 145 days of the notice, a complaint can be filed with the court within 30 days.

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Criminal Case
A criminal case can be filed against defaulter for recovering debt under the Indian Penal Code, 1860. This can be based on a criminal breach of trust or cheating and dishonest misappropriation.

Insolvency and Bankruptcy Code
Insolvency for debt collection will be submitted to adjudicating authority. The plea can be accepted or rejected in 14 days.

Conclusion

Summary suits are considered very cheap and time-friendly for all those who demand money from the defaulters. But it is also to make sure that such kind of default should not take place again and so stringent actions should also be taken to avoid future defaults.

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