Case Note & Summary
The appellant (plaintiff) entered into a sale agreement dated 19.03.2010 with the respondents (defendants) for purchase of property bearing Survey No.75/1 for a total consideration of Rs.9,30,000. The plaintiff paid Rs.9,00,000 as earnest money, with the balance of Rs.30,000 to be paid at the time of execution of the sale deed within four months. The plaintiff alleged that he was always ready and willing to perform his part, but the defendants became evasive and demanded more money, threatening to sell to a third party. The plaintiff issued a legal notice on 01.02.2011 and filed a suit for specific performance on 10.03.2011. The trial court dismissed the suit, holding that the plaintiff failed to prove readiness and willingness. The first appellate court reversed, decreeing specific performance. The High Court, in second appeal, partly allowed the appeal, dismissing the suit for specific performance but directing refund of Rs.9,30,000 with 12% interest per annum from the date of suit. The Supreme Court granted leave and heard the appeal. The Supreme Court examined the evidence and found that the plaintiff did not prove readiness and willingness, as he did not show that he had the balance consideration ready within the stipulated time. The court noted that the plaintiff only issued a legal notice after the period expired and did not deposit the balance amount in court. The court upheld the High Court's finding that specific performance was not warranted. However, the court affirmed the direction for refund of earnest money with interest, holding that the defendant cannot retain the earnest money when the contract is not performed due to the plaintiff's failure, and the defendant did not prove any loss. The Supreme Court dismissed the appeal, confirming the High Court's order.
Headnote
A) Specific Relief Act - Specific Performance - Readiness and Willingness - Section 16(c) Specific Relief Act, 1963 - The plaintiff must prove continuous readiness and willingness to perform his part of the contract. In this case, the plaintiff failed to adduce sufficient evidence to show that he was ready and willing to pay the balance consideration within the stipulated time. The courts below concurrently found that the plaintiff did not prove his readiness and willingness, and the Supreme Court upheld this finding. (Paras 5-10) B) Specific Relief Act - Refund of Earnest Money - Interest - Section 22 Specific Relief Act, 1963 - When a suit for specific performance is dismissed, the court may order refund of earnest money with interest if the plaintiff is not at fault. The High Court directed refund of Rs.9,30,000 with 12% interest per annum from the date of suit. The Supreme Court affirmed this direction, holding that the defendant cannot retain the earnest money when the contract is not performed due to the plaintiff's failure. (Paras 11-15) C) Contract Act - Earnest Money - Forfeiture - Section 74 Contract Act, 1872 - Earnest money is a guarantee for performance. If the contract falls through due to the plaintiff's default, the defendant may forfeit the earnest money. However, in this case, the defendant did not prove any loss, and the court found that the plaintiff was not entirely at fault. Therefore, the defendant was directed to refund the earnest money with interest. (Paras 12-14)
Issue of Consideration
Whether the High Court was justified in dismissing the suit for specific performance while directing refund of earnest money with interest, and whether the plaintiff is entitled to specific performance of the sale agreement.
Final Decision
The Supreme Court dismissed the appeal, upholding the High Court's judgment and decree dated 25.06.2025. The suit for specific performance stands dismissed, and the defendants are directed to refund Rs.9,30,000 with 12% interest per annum from 10.03.2011 till realization.
Law Points
- Specific performance
- Readiness and willingness
- Earnest money refund
- Interest on earnest money
- Section 22 Specific Relief Act
- 1963
