# K.R. Suresh v. R. Poornima & Ors

- **Citation:** 2025 INSC 617
- **Court:** Supreme Court of India
- **Decided:** 2025-05-02
- **Case number:** Civil Appeal No. 5822 of 2025
- **Bench:** J.B. Pardiwala, R. Mahadevan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/k-r-suresh-v-r-poornima-ors-38914
- **Pages:** 42

## Headnote

Issue arose as regards the correctness of the order passed by
the courts below dismissing the suit instituted by the appellantpurchaser for specific performance of contract; and whether the
appellant entitled to the refund of the amount purportedly paid as
advance money.
Headnotes†
Specific Relief Act, 1963 - s.22 - Specific performance
of contract - Refund of advance money - Agreement for
sale-ATS between the parties pertaining to suit property for
a sale consideration - Appellant-purchaser issued cheques
towards the advance amount - Agreement stipulated
that balance amount to be paid within four months, and
in the event of failure, the advance amount would be
forfeited, and upon failure on part of respondents-owners,
double the advance amount to be paid to appellant as
compensation - Appellant did not pay the balance within
the agreed time period - Respondent-owners forfeited
the advance amount and cancelled the agreement, and
also sold the property to subsequent purchasers - Suit
for specific performance of the agreement of sale by
appellants - Dismissed by trial court as also by the High
Court - Correctness:
Held: No perversity or illegality in the impugned judgment - Amount
termed as "advance money" in the agreement for sale-ATS, was
essentially "earnest money" - It was in the nature of a guarantee
for the due performance of the contract - It was liable to be
forfeited in the event that the transaction fell through by reason
of the default on part of the purchaser - Inclusion of the forfeiture
clause in the ATS was intended to bind the contracting parties and
ensure the due performance of the contract - This is particularly
* Author
[2025] 6 S.C.R.
23
K.R. Suresh v. R. Poornima & Ors.
significant given the stipulated four-month period for completing
the sale transaction and the primary object of executing the ATS,
being the urgency of the respondent-owners which was known
to the appellant - Findings of the courts below affirming that
time was of the essence, further substantiates the said intent -
Stipulated amount under the ATS was in the nature of an earnest
money deposit and thus, s.74 of the 1872 Act cannot apply to
the same - Forfeiture clause was fair and equitable rather than
one-sided and unconscionable, as it imposed liabilities on both
the parties - Forfeiture of advance money by the respondent was
lawful and justified as there was breach of contract by the appellant,
which led to financial losses to the respondents - Furthermore, as
regards the refund of earnest money, u/s.22(1)(b) it is not a relief
that automatically flows from a decree for specific performance
of a sale agreement and must, thus, be explicitly sought - No
such application for an amendment of the plaint moved before the
courts below, appellant never prayed for the refund of the advance
money - Law aids the vigilant, not those who sleep over their
rights - Contract Act, 1872 - s.74. [Paras 31, 37, 40-42, 61-65]
Specific Relief Act, 1963 - s.22 - Alternative relief of refund
of earnest money u/s.22 - When:
Held: Plaint may be amended at any stage of the proceedings to
enable the plaintiff to seek an alternative relief, including that of
refund of earnest money, and the courts have been vested with
wide judicial discretion to permit such amendments - However,
u/s.22 courts cannot grant such relief suo moto, since the inclusion
of the prayer clause remains sine qua non for the grant of such
relief - When an "appropriate case" exists for seeking the said
relief under this provision, it must be specifically sought either in
the original plaint or by way of an amendment. [Para 58]
Contract - Agreement of sale - Forfeiture of advance money -
Difference between "advance money" and "earnest money":
Held: Terms "advance money" and "earnest money" are often
used interchangeably - Word "advance" means money in whole
or in part, forming the consideration of an agreement paid before
the same is completely payable - Word "earnest" stands for a
sum of money

## Text

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[2025] 6 S.C.R. 22 : 2025 INSC 617
K.R. Suresh
v.
R. Poornima & Ors.
(Civil Appeal No. 5822 of 2025)
02 May 2025
[J.B. Pardiwala* and R. Mahadevan, JJ.]
Issue for Consideration
Issue arose as regards the correctness of the order passed by
the courts below dismissing the suit instituted by the appellantpurchaser for specific performance of contract; and whether the
appellant entitled to the refund of the amount purportedly paid as
advance money.
Headnotes†
Specific Relief Act, 1963 - s.22 - Specific performance
of contract - Refund of advance money - Agreement for
sale-ATS between the parties pertaining to suit property for
a sale consideration - Appellant-purchaser issued cheques
towards the advance amount - Agreement stipulated
that balance amount to be paid within four months, and
in the event of failure, the advance amount would be
forfeited, and upon failure on part of respondents-owners,
double the advance amount to be paid to appellant as
compensation - Appellant did not pay the balance within
the agreed time period - Respondent-owners forfeited
the advance amount and cancelled the agreement, and
also sold the property to subsequent purchasers - Suit
for specific performance of the agreement of sale by
appellants - Dismissed by trial court as also by the High
Court - Correctness:
Held: No perversity or illegality in the impugned judgment - Amount
termed as "advance money" in the agreement for sale-ATS, was
essentially "earnest money" - It was in the nature of a guarantee
for the due performance of the contract - It was liable to be
forfeited in the event that the transaction fell through by reason
of the default on part of the purchaser - Inclusion of the forfeiture
clause in the ATS was intended to bind the contracting parties and
ensure the due performance of the contract - This is particularly
* Author
[2025] 6 S.C.R.
23
K.R. Suresh v. R. Poornima & Ors.
significant given the stipulated four-month period for completing
the sale transaction and the primary object of executing the ATS,
being the urgency of the respondent-owners which was known
to the appellant - Findings of the courts below affirming that
time was of the essence, further substantiates the said intent -
Stipulated amount under the ATS was in the nature of an earnest
money deposit and thus, s.74 of the 1872 Act cannot apply to
the same - Forfeiture clause was fair and equitable rather than
one-sided and unconscionable, as it imposed liabilities on both
the parties - Forfeiture of advance money by the respondent was
lawful and justified as there was breach of contract by the appellant,
which led to financial losses to the respondents - Furthermore, as
regards the refund of earnest money, u/s.22(1)(b) it is not a relief
that automatically flows from a decree for specific performance
of a sale agreement and must, thus, be explicitly sought - No
such application for an amendment of the plaint moved before the
courts below, appellant never prayed for the refund of the advance
money - Law aids the vigilant, not those who sleep over their
rights - Contract Act, 1872 - s.74. [Paras 31, 37, 40-42, 61-65]
Specific Relief Act, 1963 - s.22 - Alternative relief of refund
of earnest money u/s.22 - When:
Held: Plaint may be amended at any stage of the proceedings to
enable the plaintiff to seek an alternative relief, including that of
refund of earnest money, and the courts have been vested with
wide judicial discretion to permit such amendments - However,
u/s.22 courts cannot grant such relief suo moto, since the inclusion
of the prayer clause remains sine qua non for the grant of such
relief - When an "appropriate case" exists for seeking the said
relief under this provision, it must be specifically sought either in
the original plaint or by way of an amendment. [Para 58]
Contract - Agreement of sale - Forfeiture of advance money -
Difference between "advance money" and "earnest money":
Held: Terms "advance money" and "earnest money" are often
used interchangeably - Word "advance" means money in whole
or in part, forming the consideration of an agreement paid before
the same is completely payable - Word "earnest" stands for a
sum of money given for the purpose of binding a contract, which
is forfeited if the contract does not go off and adjusted in price if
the contract goes through. [Paras 30-31]
24
[2025] 6 S.C.R.
Supreme Court Reports
Case Law Cited
Desh Raj v. Rohtash Singh [2022] 18 SCR 65 : (2023) 3 SCC
714; Kamal Kumar v. Premlata Joshi [2019] 1 SCR 54 : (2019)
3 SCC 704; Pydi Ramana v. Davarasety Manmadha Rao (2024)
7 SCC 515; Shree Hanuman Cotton Mills v. Tata Air Craft Ltd.
[1970] 3 SCR 127 : (1969) 3 SCC 522; Videocon Properties
Ltd. v. Bhalchandra Laboratories [2003] Supp. 6 SCR 1197 :
(2004) 3 SCC 711; Satish Batra v. Sudhir Rawal [2012] 9 SCR
662 : (2013) 1 SCC 345; Central Bank of India v. Shanmugavelu
(2024) 6 SCC 641; Chand Rani v. Kamal Rani [1992] Supp.
3 SCR 798 : (1993) 1 SCC 519; Welspun Specialty Solutions
Ltd. v. ONGC [2021] 11 SCR 120 : (2022) 2 SCC 382; Fateh
Chand v. Balkishan Dass [1964] 1 SCR 515 : 1963 SCC OnLine
SC 49; Maula Bux v. Union of India [1970] 1 SCR 928 : (1969)
2 SCC 554; Kailash Nath Associates v. DDA [2015] 1 SCR 627 :
(2015) 4 SCC 136; Lakshmanan v. B.R. Mangalagiri [1994]
Supp. 6 SCR 561 : (1995) Supp. 2 SCC 33; Godrej Projects
Development Ltd. v. Anil Karlekar [2025] 2 SCR 343 : 2025
SCC OnLine SC 222; Sahida Bibi v. Sk. Golam Muhammad,
1982 SCC OnLine Cal 59; Tarit Bhowmik v Mukul Day, 2014
SCC Cal 5361; Manickam v. Vasantha, 2022 SCC OnLine SC
2096 - referred to.
Books and Periodicals Cited
P Ramanatha Aiyar, "Advanced Law Lexicon", 7th Edn; Sir Frederick
Pollock, 3rd Baronet, Pollock & Mulla: The Indian Contract and
Specific Relief Acts, 16th Edn - referred to.
List of Acts
Specific Relief Act, 1963; Contract Act, 1872; Code of Civil
Procedure, 1908.
List of Keywords
Agreement of sale; Advance amount; Earnest amount; Probate
certificate; Guarantee for due performance of contract; Forfeiture
clause; Time was of essence; Compensation for breach of contract;
Refund of earnest money; Alternative relief; Amendment to pleadings;
Amendment at any stage of the proceeding; Specific performance of
[2025] 6 S.C.R.
25
K.R. Suresh v. R. Poornima & Ors.
contract; Refund of the amount paid as advance money; Forfeiture
of advance money; Amendment of the plaint; Alternative relief of
refund of earnest money; Appropriate case.
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5822 of 2025
From the Judgment and Order dated 05.08.2021 of the High Court
of Karnataka at Bengaluru in RFA No. 386 of 2013
Appearances for Parties
Advs. for the Appellant:
Anand Sanjay M Nuli, Sr. Adv., M/s. Nuli & Nuli, Suraj Kaushik,
Firoz Gandhi, Nahar Singh Yadav.
Advs. for the Respondents:
Ms. Supreeta Sharanagouda, Sharanagouda Patil, Mrs. Supreeta
Sharanagouda , Jyotish Pandey, Vinod Kumar Srivastava, Saket
Gogia, Ms. Gauri Pande, Ms. Sheetal Maggon, Mansingh, Dhawesh
Pahuja.
Judgment / Order of the Supreme Court
Judgment
J.B. Pardiwala, J.
For the convenience of exposition, this judgment is divided into the
following parts: -
INDEX*
A. FACTUAL MATRIX .............................................................
2
i.
Judgment of the Trial Court .......................................
8
B. IMPUGNED JUDGMENT ....................................................
11
C. SUBMISSIONS ON BEHALF OF THE APPELLANT ............... 15
D. SUBMISSION ON BEHALF OF THE RESPONDENT
NOS. 1-4 ................................................................................ 16
* Ed. Note: Pagination as per the original Judgment.
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Supreme Court Reports
E.
SUBMISSION ON BEHALF OF THE RESPONDENT
NOS. 5-7 ................................................................................ 17
F.
ANALYSIS ............................................................................. 18
i.
Validity of the Forfeiture of Advance Money .................. 19
a. Difference between Earnest Money and Advance
Money ....................................................................... 19
b. Permissible Extent of Forfeiture ........................... 27
ii. Law on the Alternative Relief of Refund of Earnest
Money under Section 22 of the 1963 Act ................... 35
G. CONCLUSION ...................................................................... 42
1.
Leave granted.
2.
This appeal arises from the judgment and order passed by the High
Court of Karnataka at Bengaluru dated 05.08.2021 in R.F.A. No.
386/2013 (SP) ("impugned judgment") by which the High Court
dismissed the appeal preferred by the appellant (original plaintiff)
and thereby affirmed the judgment and order dated 24.11.2012
passed by the Court of V Additional City Civil and Sessions Judge
at Bengaluru City, dismissing O.S. No. 3559/2008 instituted by the
appellant herein for the specific performance of contract.
A.
FACTUAL MATRIX
3.
The position of the parties before this Court, the High Court and
before the Trial Court is tabulated as follows: -
BEFORE THIS
COURT
BEFORE THE
HIGH COURT
BEFORE THE
TRIAL COURT
REMARKS
Appellant
Appellant
Plaintiff
Original
Purchaser/
Agreement of
Sale Holder
[2025] 6 S.C.R.
27
K.R. Suresh v. R. Poornima & Ors.
Respondent
No. 1
Respondent
No. 1
Defendant No. 1
Original Owner
(by way of an
unregistered
Will)
Respondent
No. 4
Respondent
No. 4
Defendant No. 4
Husband of
respondent
no. 1 and GPA
Holder
Respondent
Nos. 2-3
Respondent
Nos. 2-3
Defendant Nos.
2-3
Minor children
of respondent
no. 1 and
respondent
no. 4
Respondent
No. 5
Respondent
No. 5
Defendant No. 5
Subsequent
Purchaser (wife
of defendant
no. 6)
Srinivas S.
-
Defendant No. 6
Subsequent
Purchaser
(Deceased
through his
LRs)
Respondent
Nos. 6 and 7
Respondent
Nos. 6(a) and
6(b)
-
Legal heirs of
defendant no. 6
For the sake of convenience, the parties shall be referred to in terms
of their status before the Trial Court.
4.
The dispute arises from a claim for specific performance of
the agreement of sale (hereinafter referred to as "ATS") dated
25.07.2007 in respect of the property bearing Site No.307, situated
at Kengeri Satellite Town Layout, Kengeri Hobli, Bangalore South
Taluk (hereinafter referred to as "suit property"). The defendant
no. 1 acquired absolute title over the suit property by way of an
unregistered Will dated 12.11.2002 executed by her late mother.
5.
The defendant nos. 1-4 executed an ATS dated 25.07.2007 in favor
of the plaintiff for the purchase of the Suit Property for total sale
consideration of Rs.55,50,000/-. The plaintiff issued two cheques
28
[2025] 6 S.C.R.
Supreme Court Reports
dated 16.07.2007 of the amount of Rs.10,00,000/- each towards
part payment of the sale consideration, the receipt of which was duly
acknowledged by the defendant no. 1. The said ATS stipulated that
the sale transaction shall be completed by payment of the balance
sale consideration of Rs. 35,50,000/- within four months from the
date of the ATS, pursuant to which the sale deed was to be executed.
The contents of the said ATS are extracted hereinbelow: -
"ADVANCE SALE AGREEMENT
This Advance Sale Agreement is executed on this Twenty
fifth day of July, Two Thousand Seven (25-07-2007) -BY-
 Smt. R. Poornima, daughter of Late Rathnamma also
wife of Sri M.L. Harsha, aged about 32 years, and Sri
Lakshmisha, husband of Smt. R. Poornima, aged about
39 years, and the children of Smt. Poornima and Sri M.L.
Harsha, 1) Kum. H.R. Anusha, aged about 7 years, 2)
Chi. H. Amogham aged about 3 years, both are minors
represented by their mother and natural guardian Smt. R.
Poornima, all are residing at House No.588, Postal Colony,
Visveshwaranagara Layout, Mysore CityIN FAVOUR OF:
Sri K.R. Suresh, aged about 42 years, son of Sri Rudrappa,
residing at K. Gollahalli Village, K. Gollahalli Post, Kengeri
Hobli, Bangalore South Taluk.
Whereas, the property mentioned in the schedule
hereunder i.e Site bearing No.307, situated at Kengeri
Ssatellite Town Layout, Kengeri Hobli, Bangalore South
Taluk, the said property originally belonged to Smt.
Rathnamma, the mother of Smt. R. Poornima, which is
her self-acquired property. The said site was allotted to her
on dated ___ by the Bangalore City Improvement Trust
Board, represented by its Chairman, vide allotment letter
No. __ KST/ __ which was allotted, Thereafter Lease-CumSale Deed registered in the office of the Sub-Registrar,
Bangalore South Taluk, registered in Book-1 volume 2414
pages 16 to 19 as Document No.5734/85-86, thereafter
the possession certificate No.33.73-74 dated 16-11-1973
[2025] 6 S.C.R.
29
K.R. Suresh v. R. Poornima & Ors.
was issued, during her life time she was in possession
and enjoyment of the said property as its absolute owner
and the absolute sale deed executed in her favour on
05-03-1986, in the office of the Sub-Registrar, Bangalore
South Taluk, vide Book-1 volume 2414 pages 95-96 as
Document No.5734/85-86, during her life time she was
enjoying the same peacefully as its absolute owner and on
12-12-2022 she has executed a WILL/TESTAMENT to her
only daughter Smt. R. Poormima and on 26-12-2002 she
passed away. After her death, her only daughter Smt. R.
Poormima and we became the sole and absolute owners,
successors, title holders in possession and enjoying the
said property. Khatha also got changed to the name of
Smt. R. Poormima in the Town Municipal Office, Kengeri
and enjoying the same happily.
In such a way we are in possession and enjoyment of the
schedule property and we are in need of funds to meet
our urgent necessities, hence we have sold the schedule
property to you for total sum of Rs.55,50,000/ (Rupees
Fifty-five lakhs Fifty Thousand only), out of the sale
consideration Rs.20,00,000/- (Rupees Twenty Thousand
only) I have received advance as hereunder:-
1. Rs. 10,00,000/- (Rupees Ten Lakhs only) through
cheque bearing No.110581 dated 16-07-2007 drawn
on Canara Bank, Yediyur Branch, Bangalore-560082.
2. Rs. 10,00,000/- (Rupees Ten Lakhs only) through
cheque bearing No.110582 dated 16-07-2007 drawn
on Canara Bank, Yediyur Branch, Bangalore-560082.
The remaining amount of Rs.35,50,000/- (Rupees ThirtyFive Lakhs Fifty Thousand only) we have agreed to receive
the same at the time of registration. Within 4(four) months
by paying the balance amount to us you can get registered
sale deed either to your name or to the name of person
as suggested by you.
The aforesaid property except you we have not encumbered
the same in any manner to whomsoever, also in respect of
said property except ourselves there are no any other title
30
[2025] 6 S.C.R.
Supreme Court Reports
holders or successors, if any such dispute arisen in future
the same will be solved by us out of our own expenses
and for which we have agreed.
In the event failure on your part to pay the remaining
amount within stipulated period, the advance amount paid
by you will be forfeited. In the event failure on our part
to execute the sale deed, even though you are ready to
pay the balance sale consideration and get registration
of sale deed, in such an event we agreed to pay the
double amount of the advance which you have paid as
compensation. Hence, we have executed this Advance
Sale Agreement by affixing our signature.
SCHEDULE:-
All that part and parcel of the site bearing No.307, 5th
Main Road, Kengeri Satellite Town Layout, Kengeri Hobli,
Bangalore South Taluk, now comes under Kengeri Town
Municipal limits, old Khatha No.129, present khatha
No.130, present property No.307, which comes within the
limits of Bruhat Bangalore Mahanagara Paluk, bounded
on the;
East by: Road
West by: Site No.317 & 318
North by: Site No.308
South by: Site No.306
As bounded above measuring East-West 60-0 (sixty) feet,
North South 40-0 (Forty) feet, together with house standing
thereon is covered under this Advance Sale Agreement.
WITNESSES:-
1.
2.
3.
VENDOR

PURCHASER"
6.
It is the case of the plaintiff that upon approaching the bank on
20.09.2007 for a loan to purchase the suit property, he was instructed
[2025] 6 S.C.R.
31
K.R. Suresh v. R. Poornima & Ors.
by the bank advocate to secure the original title documents and
a probate certificate from the defendant no. 1, as the defendant
no. 1 had acquired title over the suit property by virtue of an
unregistered Will. Accordingly, the plaintiff requested the defendant
nos. 1 and 4 respectively to obtain the probate certificate from the
competent court to establish absolute and marketable title over the
suit property. However, despite allegedly promising to furnish the
required documents, the defendant no. 1 failed to do so. Further,
the plaintiff purports to have repeatedly approached the defendant
nos. 1 and 4 respectively between 20.09.2007 and 18.02.2008,
orally expressing his readiness and willingness to complete the sale
transaction, yet the defendants did not come forward to perform
their part of the contract.
7.
It is the case of the plaintiff that having no other alternative left,
he ultimately issued a legal notice dated 18.02.2008 through his
advocate, expressing his readiness and willingness and calling
upon defendant nos. 1-4 to execute the sale deed by receiving the
balance sale consideration. Thereafter, the plaintiff claims to have
discovered that the defendant no. 1 was attempting to alienate the
suit property in favour of the defendant nos. 5 and 6 respectively
while the ATS dated 25.07.2007 was subsisting.
8.
The defendant no. 1 issued a reply dated 15.03.2008 denying the
allegations levelled in the legal notice dated 18.02.2008, stating that
the advance amount of Rs.20,00,000/- paid by the plaintiff stood
forfeited and consequently, the ATS stood cancelled on account of
the default by the plaintiff in making the payment for the balance
sale consideration within the specified four-months.
9.
Aggrieved by the foregoing, the plaintiff instituted original suit being
O.S. No. 3559 of 2008 before the Trial Court, praying for the following:
(i) an order directing defendant no. 1 to execute the sale deed in
favour of the plaintiff; (ii) deliver the possession of the suit property
in favour of the plaintiff and; (iii) a declaration to the effect that the
subsequent sale deed dated 15.02.2008 in favour of the defendant
nos. 5 and 6 respectively is not binding on the plaintiff.
10. It is the case of the defendant nos. 1-4 that they were in urgent
need of the sale consideration money to avail of the One-Time
Settlement (for short, "OTS") benefit from the Indian Overseas Bank
32
[2025] 6 S.C.R.
Supreme Court Reports
K.R. Mohalla, Mysore Branch which was time-bound for 3 months,
thereby making time the essence of the contract. The defendant
nos. 1-4 denied having ever agreed to produce the probate or the
original title deeds as contended by the plaintiff. Furthermore, they
have contended that owing to the plaintiff's non-performance of the
contract, they suffered substantial losses.
11. Pursuant to this, the defendant nos. 1-4 terminated the ATS and
forfeited the advance paid by the plaintiff, going by the express
covenant of the ATS. According to the defendants, at no point of
time during the validity of the ATS did the plaintiff convey or express
his readiness and willingness to complete the transaction. The
defendants have also asserted that the plaintiff instituted the suit
long after termination of the ATS.
12. The defendant nos. 5 and 6 respectively in their written statement took
the stance that they are bona fide purchasers of the suit property for a
valuable consideration of Rs.38,40,000/- through registered sale deed
dated 15.02.2008. They averred that they had no knowledge of the
prior ATS between the plaintiff and the defendant nos. 1-4. Further,
they argued that the suit filed by the plaintiff was not maintainable
against them as the sale deed in their favor was not challenged by
the plaintiff.
i.
JUDGMENT OF THE TRIAL COURT
13. Upon appreciation of the oral as well as documentary evidence on
record, the Trial Court vide its judgment and order dated 24.11.2012
dismissed the O.S. No. 3559/2008 filed by the plaintiff on the ground
that the plaintiff had not approached the Court with clean hands. The
Trial Court framed the following issues for its consideration:
"1. Whether the plaintiff proves the due execution of
agreement of sale dated 25.7.2007 for sale of suit property
for total consideration amount of Rs.55,50,000/- and paid
the earnest money of Rs.20,00,000/-?
2. Whether the plaintiff is always ready and willing to
perform his part of the contract?
3. Whether the first defendant proves the termination of
agreement of sale dated 25.7.2007?
[2025] 6 S.C.R.
33
K.R. Suresh v. R. Poornima & Ors.
4. Whether defendant No. 5 and 6 prove that they are
bonafide purchasers of the suit property for valuable
consideration?
5. Whether plaintiff is entitled for relief claimed in the suit?
6. What order or decree?"
14. The findings recorded by the Trial Court in its judgment and order
can be better understood in five parts:
(i)
First, on the issue of time being the essence of the contract,
the Trial Court recorded that the defendant nos. 1-4 were acting
under a necessity wherein they required the sale consideration
money urgently to discharge the loan availed for the purpose
of their business expansion which was in the nature of an OTS
facility, a fact which the plaintiff was cognizant of as per his
testimony. The Trial Court held that the defendants proved that
time was the essence of the contract and hence, it was the
bounden duty of the plaintiff to complete the transaction within
the specified period.
(ii)
Secondly, the Trial Court, while examining the issue of the
unregistered Will and probate, noted that the defendant no. 1,
as the sole legal heir of her mother, became the absolute owner
of the suit property upon her mother's demise. The Court also
underscored the settled law that a Will need not be registered
and lack of such registration does not impute its authenticity, thus
making the procurement of probate unnecessary. Additionally,
there was nothing on record to indicate that the advocate for
the bank insisted for a probate certificate. The plaintiff claimed
to have forgotten the name of the said advocate and had no
opinion in writing to rely upon. Further, neither the legal advisor
nor DW2 (defendant no. 4) was examined on the issue of
probate, leading to an adverse inference against the plaintiff.
The Court held that in the absence of any recitals in the ATS
requiring the defendants to furnish original title deeds to the
bank within four months, the plea taken by the plaintiff was
false, frivolous, and concocted.
(iii) Thirdly, on the issue of readiness and willingness to perform,
the Trial Court recorded that the plaintiff did not produce any
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bank passbook, account extracts, ITR or other documents, to
establish that he had sufficient finances to pay the balance
sale consideration within the stipulated four-month period. The
plaintiff, in his oral evidence, admitted that he had no funds
in his bank account and lacked documentary evidence to
substantiate possession of the required amount. Further, in his
oral evidence, the plaintiff categorically conceded that his legal
notice dated 18.02.2008 was issued only after the four-month
period had lapsed. In view of these facts, the Court concluded
that the plaintiff failed to prove his readiness and willingness
to perform the ATS.
(iv) Fourthly, the Trial Court held that the defendant nos. 1-4 were
not required to notify the plaintiff about the lapse of the fourmonth period or the subsequent sale of the suit property to
the defendant nos. 5 and 6 respectively, as no such obligation
was stipulated in the ATS. It further ruled that the defendant
no. 1 had the absolute legal right to alienate the suit property.
The Court, relying on the testimony of DW1 (defendant no.
6), found the defendant nos. 5 and 6 respectively to be bona
fide purchasers of the suit property, who were unaware of the
prior ATS and its cancellation. Consequently, the allegation of
collusion between the defendant nos. 1 and 4 & the defendant
nos. 5 and 6, as regards the subsequent sale of the suit property,
was found baseless.
(v)
Lastly, on the issue of forfeiture of advance money, the Trial
Court held that the advance money, being primarily a security
for the due performance of the ATS, was rightfully forfeited by
the defendant nos. 1-4 in view of the plaintiff's failure to perform
and the resultant huge loss sustained by the defendant nos.
1-4. The Court also took note of the fact that the ATS contained
explicit recitals regarding forfeiture. In light of the aforesaid, it
was held that the plaintiff was not entitled to a refund of the
advance money.
B.
IMPUGNED JUDGMENT
15. Aggrieved by the judgment and order of the Trial Court, the appellant/
plaintiff, preferred First Appeal before the High Court in R.F.A. No.
386/2013 (SP).
[2025] 6 S.C.R.
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K.R. Suresh v. R. Poornima & Ors.
16. A Division Bench of the High Court dismissed the appeal and thereby
affirmed the judgment and decree passed by the Trial Court on the
following four grounds:
(i)
First, the High Court held that, in the absence of any
obligation under the ATS for the defendant no. 1 to furnish
probate certificate before executing the sale deed, time was
the essence of the contract. Thus, the plaintiff, having failed
to pay the balance sale consideration within the stipulated
four-month period, committed breach of the conditions
specified in the ATS. Further, the Court took note of the fact
that it was only after a lapse of three months from the expiry
of the stipulated four-month period that the plaintiff issued
legal notice dated 18.02.2008 to the defendant no.1 calling
upon her to execute the ATS. The relevant observations
read as under:
"14. [...] There is no recital in the agreement of sale
that the defendant No.1 was required to furnish the
probate certificate from the competent Court before
executing the sale deed in favour of the plaintiff
upon receipt of the balance sale consideration. [...]
In the absence of requirement for furnishing probate
certificate, the contention of the plaintiff that the
defendant No.1 failed to perform her part of the
contract is not acceptable having regard to the fact
that it was well within his knowledge that the defendant
No.1 acquired the suit property by virtue of the will
executed in her favour by her mother, and the same
was acted upon and her name was entered in the
concerned revenue records.
15. The sale transaction was required to be completed
within four months from the date of execution of sale
agreement. The plaintiff failed to perform his part of
the contract by coming forward to pay the balance
sale consideration within four months as specified
in the sale agreement. It is only after expiry of three
months from the said date, the plaintiff issued the
legal notice to the defendant No.1 calling upon her
to execute the sale agreement."
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(ii)
Secondly, the High Court observed that the plaintiff, in his crossexamination, admitted that he did not possess any documents
to establish his ability to pay the balance sale consideration.
Further, the application moved by the plaintiff for production
of additional documents, to show his 'readiness', was rejected
by the Court, on the ground that any prior lacuna could not be
allowed to be filled up at the appellate stage. Pursuant to the
aforesaid, the High Court held that the plaintiff, having failed to
prove his readiness and willingness to perform his part of the
contract under Section 16(c) of the Specific Relief Act, 1963 (for
short, "the 1963 Act"), was not entitled to the relief of specific
performance. The relevant observations read as under:
"17. PW1 in his cross-examination has clearly
admitted that he has no documents to show that
he possessed the requisite amount to pay the
balance sale consideration. The documents sought
to be produced by the plaintiff by way of additional
evidence also discloses that the plaintiff did not
possess the requisite amount from the date of
execution of sale agreement till filing of the suit or
had the capacity to raise the requisite amount to
pay the balance sale consideration. Further, the
said additional documents cannot be permitted
to be produced to fill up the lacuna before the
Appellate Court and the same cannot be considered
and accordingly, the application for production of
additional documents is rejected.
18. [...] In view of the aforesaid proposition of law
enunciated by the Hon'ble Supreme Court and
Division Bench of this Court, it is held that plaintiff
having failed to prove that he had the requisite funds
to pay the balance consideration is not entitled for
relief for granting the decree for specific performance
under Section 16(c) of the Specific Relief Act, 1963."
(iii) Thirdly, the High Court held that the defendant no. 1 failed to
prove the termination of the ATS in favour of the plaintiff, as
no documentary evidence to substantiate the same was placed
on record. However, the defendant nos. 5 and 6 respectively
[2025] 6 S.C.R.
37
K.R. Suresh v. R. Poornima & Ors.
were deemed bona fide purchasers for value, in view of the
fact that the sale deed dated 15.02.2008 was executed in their
favour only after the expiry of the four-month period in the ATS.
Additionally, it is an admitted position of the plaintiff that he had
obtained the certified copy of the sale deed executed in favor of
the defendants nos. 5 and 6 respectively at the time of filing of
the suit. On account of the plaintiff's omission to challenge the
said sale deed, the Court held that the suit was not maintainable
against the defendant nos. 5 and 6 respectively. The relevant
observations read as under:
"19. The defendant No.1 in her reply notice dated
15.3.2008 -Ex.P.13 has stated that the sale agreement
was terminated on the ground that the plaintiff has
failed to perform his part of the contract by paying
the balance sale consideration within the specified
time vide letter. However, the defendant No.1 has not
placed any documentary evidence to substantiate
the said claim. Hence, it is held that the defendant
No.1 has failed to prove that the sale agreement
was terminated.
20. [...] The sale deed executed in favour of
defendants No.5 and 6 after expiry of four months
specified for completion of sale transaction cannot be
held to be executed during subsistence of the sale
agreement. Hence, the defendants No.5 and 6 are
held to be bonafide purchasers for value.
21. The plaintiff in the cross-examination has admitted
that he obtained the certified copy of the sale deed
executed in favour of defendants No.5 and 6 at the
time of filing of the suit. However, the plaintiff for the
reasons best known to him has not challenged the
sale deed. In the absence of challenge to the same,
the suit filed by the plaintiff against defendants No.5
and 6 is not maintainable."
(i)
Lastly, the High Court recorded that the plaintiff had not
sought for an alternative prayer for refund of the advance sale
consideration in the suit as mandated by Section 22 of the 1963
Act. In view of the requirements under Sub-section 2 of the said
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Supreme Court Reports
Section, it was held that, in the absence of a specific claim for
refund of advance money, the plaintiff was not entitled to such
refund. The relevant observations read as under:
"22. The plaintiff has not sought for an alternative
prayer for refund of the advance sale consideration in
the suit as required under Section 22 of the Specific
Relief Act, 1963. In the case of Sukhwinder Singh
(supra), the Hon'ble Supreme Court has held that
the plaintiff therein is entitled for refund of advance
sale consideration from the defendant No.2 - the
purchaser of suit property from the defendant No.1
who had remained absent since the defendant No.2
benefited from the property. However, the defendants
No.5 and 6 cannot be directed to repay the advance
sale consideration and compensate the plaintiff since
the plaintiff had not sought for alternative prayer for
refund of earnest money in the suit as was done in
the case before the Hon'ble Supreme Court. In the
absence of alternative prayer for refund of earnest
money, the prayer for refund of earnest money cannot
be granted in view of Section 22 of the Specific
Relief Act. Sub-Section 2 of Section 22 of the said
Act specifies that no relief under clause (a) or clause
(b) of sub-section (1) shall be granted by the court
unless it has been specifically claimed. In the absence
of such a claim, the plaintiff is held not entitled for
refund of earnest money."
C.
SUBMISSIONS ON BEHALF OF THE APPELLANT
17. Mr. Anand Sanjay M. Nuli, the learned Senior Counsel appearing for
the appellant/plaintiff, submitted that the defendant no. 1 failed to
obtain the promised probate certificate with respect to the suit property
despite multiple requests from the plaintiff. It was further submitted
that the defendant no. 4 has specifically admitted that between
18.02.2008 and 20.02.2008, the plaintiff voluntarily offered to pay
an additional Rs.10,00,000/- beyond the agreed sale consideration
of Rs.55,50,000/-. The learned Senior Counsel contended that the
aforesaid admission proved the readiness and willingness of the
plaintiff to fulfill his part of the contract.
[2025] 6 S.C.R.
39
K.R. Suresh v. R. Poornima & Ors.
18. Mr. Nuli submitted that the defendant nos. 1-4, exhibiting mala
fide intent, sold the suit property to the defendant nos. 5 and 6
respectively for Rs.38,40,000/- within just two months after the expiry
of the stipulated four-month period. It was argued that the purported
cancellation of the ATS was allegedly effected via a letter from the
defendant nos. 1-4, though the said letter was never produced before
the Trial Court. Further, he asserted that no prior notice had been
served on the plaintiff before forfeiting the advance sale consideration
or executing the sale deed in favour of the defendant nos. 5 and 6
respectively.
19. The learned Senior Counsel for the appellant/plaintiff submitted that
the plaintiff, as an alternative to the relief of specific performance, is
entitled to a refund of the advance money paid by him. Mr. Nuli relied
upon the judgments of this Court in Desh Raj v. Rohtash Singh,
reported in (2023) 3 SCC 714 and Kamal Kumar v. Premlata Joshi,
reported in (2019) 3 SCC 704, to argue that the relief of refund of
advance money can be granted under Prayer (C) of the plaint which
beseeches the Court to pass any order as it deems fit, despite there
being no specific prayer to that effect.
D.
SUBMISSIONS ON BEHALF OF THE RESPONDENT NOS. 1-4
20. Ms. Supreeta Sharanagouda, the learned Counsel for respondent/
defendant Nos. 1-4, submitted that the plaintiff, in his crossexamination, admitted that he had no documents to show that
he possessed the requisite amount to pay the balance sale
consideration. Further, it was argued that the additional documents
sought to be produced by the plaintiff also disclosed his financial
incapacity from the date of execution of the ATS until the filing of the
suit. The learned Counsel, relying upon Pydi Ramana v. Davarasety
Manmadha Rao, reported in (2024) 7 SCC 515, asserted that the
plaintiff failed to show his "readiness" and "willingness" to perform
the contract.
21. Ms. Sharanagouda argued, that having regard to the fact that the
balance sale consideration of Rs.35,50,000/- was to be paid within
four months from the date of the execution of the ATS, time was
evidently the essence of the contract. This was further established
by the very purpose of the sale, which was the urgent business
requirement of the defendant nos. 1 and 4, that got frustrated owing
to the failure of the plaintiff to pay the balance consideration on time.
40
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Supreme Court Reports
22. The learned Counsel further contended that pursuant to the recitals
in the ATS, there was consensus between the parties with respect
to the forfeiture of advance money in the event of the purchaser's
default in fulfilling the terms of the agreement.
E.
SUBMISSIONS ON BEHALF OF THE RESPONDENT NOS. 5-7
23. Mr. Dhawesh Pahuja, the learned Counsel appearing for the
respondent nos. 5-7 herein, submitted that the original defendant
nos. 5 and 6 fall under the exception carved out by Section 19(b)
of the1963 Act, having purchased the suit property in good faith
and without notice of the prior ATS in favour of the plaintiff. It was
argued that the factum of the prior ATS was suppressed and could
not be discovered even on thorough due diligence, considering that
the ATS was unregistered. An encumbrance certificate was placed
on record to substantiate the same, which did not reveal any prior
agreement in relation to the Suit Property.
24. The learned Counsel argued that the defendant nos. 5 and 6
respectively issued a legal notice dated 05.05.2008 against defendant
nos. 1-4 soon after receiving objections regarding transfer of Khata
from Bruhat Bengaluru Mahanagara Palike (for short, "BBMP"). It
was asserted that only in the reply dated 23.05.2008 to the said legal
notice that the defendant nos. 5 and 6 respectively were informed
about the prior ATS dated 25.07.2007 and the eventual lapse of the
said ATS on 25.11.2007 due to the default on part of the plaintiff.
25. In the last, it was argued that it would be too much to ask the bona
fide purchasers to refund Rs.20,00,000/- to the appellant/plaintiff. Such
a liability ought to be fastened upon the party guilty of suppression,
i.e. the respondent/defendant nos. 1-4.
F.
ANALYSIS
26. In view of the order dated 20.03.2023 passed by this Court, we are
limiting our consideration in this matter solely to the issue of refund
of earnest money.
27. Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the only question that
falls for our consideration is whether the appellant (original plaintiff)
is entitled to the refund of the amount of Rs.20,00,000/- purportedly
paid as "advance money"?
[2025] 6 S.C.R.
41
K.R. Suresh v. R. Poornima & Ors.
28. We intend to answer the aforesaid question in two parts, carefully
delineating the following:
i.
Validity of the Forfeiture of Advance Money; and
ii.
Law on the Alternative Relief of Refund of Earnest Money under
Section 22 of the 1963 Act.
29. At the cost of repetition, we deem it necessary to state that there
existed an explicit forfeiture clause in the ATS, which stipulated that
the advance money paid would stand forfeited in the event of default
by the buyer in fulfilling the terms of the contract. Similarly, in case of
default on part of the seller, the advance money was to be doubled
and paid back to the buyer. Pursuant to the aforesaid forfeiture
clause, the respondent nos. 1-4 herein forfeited the advance money
on account of the default by the appellant in paying the balance sale
consideration of Rs.35,50,000/- within the stipulated four-month period.
i.
Validity of the Forfeiture of Advance Money
a.
Difference between Earnest Money and Advance Money
30. At the outset, it is pertinent to distinguish between "advance money"
and "earnest money". The said terms are often used interchangeably.
The distinction becomes all the more essential, given that the ATS
explicitly refers to the forfeited sum as "advance money".
31. Here, we consider it apposite to refer to the meanings of the said
terms. The word "advance" means money in whole or in part,
forming the consideration of an agreement paid before the same is
completely payable. On the other hand, the word "earnest" stands for
a sum of money given for the purpose of binding a contract, which
is forfeited if the contract does not go off and adjusted in price if
the contract goes through.