Courts Can't Grant Refund Of Earnest Money If Not Specifically Prayed For In Specific Performance Suit: Jharkhand High Court

The Jharkhand High Court has observed that, in a specific performance suit, the Courts cannot grant relief of refund of earnest money if it is not specifically prayed for.

“Since the plaintiffs in the plaint in itself has not sought the alternate relief for refund of the earnest money or the further amount so paid, the Court cannot give direction for refund of the said amount to the plaintiffs/appellants in view of Section 22(2) of the Specific Relief Act, 1963,” the single bench of Justice Subhash Chand observed.

The plaintiffs filed a suit against the defendant for specific performance of an agreement to sell 4 acres of land. They claimed that on February 14, 2005, they entered into an agreement with the defendant, agreeing to purchase the land for Rs. 37,45,833. They paid Rs. 5,00,000 as earnest money, and the defendant accepted it. The agreement stipulated that upon payment of the remaining Rs. 32,45,833, the defendant would execute a sale deed.

Additional payments of Rs. 1,00,000 each were made on April 10, 2005, and April 8, 2006, reducing the balance to Rs. 30,45,833. The agreement was valid for six months, extendable by paying 2% interest on the principal amount. The defendant was to get the land measured and provide rent receipts and related documents upon sale deed execution.

Despite timely payments and requests, the defendant refused to execute the sale deed. Legal notices were sent in August and September 2005, but the defendant responded with incorrect claims. Consequently, the plaintiffs filed a suit seeking specific performance.

The trial court dismissed the suit, leading the plaintiffs to move the high Court, arguing that the judgement was legally flawed.

In light of the facts and circumstances of the case, the court emphasised, “it is well evident that the agreement to sale in question was executed by the defendant/respondent.”

The court pointed out that, as per the admission of the defendant, he had received Rs. 5 lac prior to the agreement to sale and a further Rs. 1 lac after the execution of the agreement to sale.

The court noted that the defendant opposed the specific performance of this agreement on the grounds that it was void, thus preventing the enforcement of specific performance. However, the court emphasised that the defendant/respondent benefitted under this agreement, having received a total of Rs. 6 lacs, and is liable to repay this amount in accordance with the provisions of Section 33 of the Specific Relief Act.

The court acknowledged that, according to the plaint case, Rs. 7 lacs was claimed to have been paid, supported only by oral evidence from the plaintiffs. The court noted the lack of documentary evidence for this amount, highlighting the defendant/respondent's admission of having received only Rs. 6 lacs, thereby rebutting the plaintiffs' oral evidence.

The court further observed that in the agreement to sale of two plots, which the defendant was not authorised to transfer and had no title to, rendered the specific performance of the agreement unenforceable in view of Section 17 of the Specific Relief Act read with Section 7 of the Transfer of Property Act.

The court reiterated, “no person can transfer a better title than he himself has. In view of two plots and their area being comprised in the agreement in question, the agreement was void in itself in view of Section 17 of the Specific Relief Act read with Section 7 of the Transfer of Property Act and Section 10 of the Indian Contract Act.”

Accordingly, the court dismissed the first appeal and affirmed the impugned judgement and decree.

Case Title: Shyam Kumar Gupta and Anr vs. Om Prakash Bhagat

LL Citation: 2024 LiveLaw (Jha) 82

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