Holding

The forfeiture of the advance money was lawful and, in the absence of a specific prayer for refund under Section 22, the appellant is not entitled to any refund.

Summary

The appellant, K.R. Suresh, paid Rs.20,00,000 as advance under an agreement of sale that required the balance to be paid within four months, failing which the advance would be forfeited. He did not pay the balance on time, and the respondents forfeited the advance and later sold the property to third parties. The appellant sued for specific performance and a refund of the advance, but the trial court and the High Court dismissed the suit, holding the forfeiture valid and noting no specific prayer for refund was made. On appeal, the Supreme Court examined whether the advance constituted earnest money, the applicability of Section 74 of the Contract Act to the forfeiture clause, and the requirement under Section 22 of the Specific Relief Act to expressly claim a refund. The Court held that the advance was earnest money, the forfeiture was lawful, and because the appellant never pleaded for a refund, no such relief could be granted. Consequently, the appeal was dismissed.

Issues considered

The validity of the forfeiture of the advance (earnest) money under the agreement of sale.
Whether the appellant is entitled to a refund of the advance money under Section 22 of the Specific Relief Act, 1963.
Whether Section 22(2) of the Specific Relief Act requires a specific prayer and can be amended at any stage of the proceeding.
The applicability of Section 74 of the Contract Act, 1872 to the forfeiture clause.
Whether time was of the essence in the contract, justifying specific performance and forfeiture.

Legislation cited

Code of Civil Procedure, 1908
Contract Act, 1872s. 74
Specific Relief Act, 1963s. 22(1)(b), s. 22(2)

Headnote

Issue for Consideration Issue arose as regards the correctness of the order passed by the courts below dismissing the suit instituted by the appellant- purchaser for specific performance of contract; and whether the appellant entitled to the refund of the amount purportedly paid as advance money. 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

Subjects

Agreement of saleAdvance amountEarnest amountGuarantee for due performance of contractForfeiture clauseTime was of essenceCompensation for breach of contractRefund of earnest moneyAlternative reliefAmendment to pleadingsAmendment at any stage of the proceedingSpecific performance of contractRefund of the amount paid as advance moneyForfeiture of advance moneyAmendment of the plaintAlternative relief of refund of earnest moneyAppropriate case

Judgment

[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 appellant-
purchaser 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.
26 [2025] 6 S.C.R.

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 BEFORE THE BEFORE THE REMARKS
COURT HIGH COURT TRIAL COURT
Appellant Appellant Plaintiff Original
Purchaser/
Agreement of
Sale Holder
[2025] 6 S.C.R. 27

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

Respondent Respondent Defendant No. 1 Original Owner
No. 1 No. 1 (by way of an
unregistered
Will)
Respondent Respondent Defendant No. 4 Husband of
No. 4 No. 4 respondent
no. 1 and GPA
Holder
Respondent Respondent Defendant Nos. Minor children
Nos. 2-3 Nos. 2-3 2-3 of respondent
no. 1 and
respondent
no. 4
Respondent Respondent Defendant No. 5 Subsequent
No. 5 No. 5 Purchaser (wife
of defendant
no. 6)
Srinivas S. - Defendant No. 6 Subsequent
Purchaser
(Deceased
through his
LRs)
Respondent Respondent - Legal heirs of
Nos. 6 and 7 Nos. 6(a) and defendant no. 6
6(b)

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 City-

IN 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-Cum-
Sale 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 Thirty-
Five 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
34 [2025] 6 S.C.R.

Supreme Court Reports

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 four-
month 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. 35

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.”
36 [2025] 6 S.C.R.

Supreme Court Reports

(ii) Secondly, the High Court observed that the plaintiff, in his cross-
examination, 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
38 [2025] 6 S.C.R.

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 cross-
examination, 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 [2025] 6 S.C.R.

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. [See: P Ramanatha Aiyar in “Advanced
Law Lexicon”, 7th Edn.]
32. The principles governing the scope of “earnest money” were succinctly
explained in the case of Shree Hanuman Cotton Mills v. Tata Air
Craft Ltd., reported in (1969) 3 SCC 522, reproduced as under:
“21. From a review of the decisions cited above, the
following principles emerge regarding ‘earnest’:
‘(1) It must be given at the moment at which the
contract is concluded.
42 [2025] 6 S.C.R.

Supreme Court Reports

(2) It represents a guarantee that the contract will
be fulfilled or, in other words, “earnest” is given to
bind the contract.
(3) It is part of the purchase price when that
transaction is carried out.
(4) It is forfeited when the transaction falls through
by reason of the default or failure of the purchaser.
(5) Unless there is anything to the contrary in the
terms of the contract, on default committed by the
buyer, the seller is entitled to forfeit the earnest.’”
(Emphasis supplied)

33. In the case of Videocon Properties Ltd. v. Bhalchandra
Laboratories reported in (2004) 3 SCC 711, while assessing
the difference between “advance” and “earnest”, this Court took
the view that the words used in the agreement alone cannot be
determinative of the true nature of the amount advanced. Instead,
the intention of the parties and the surrounding circumstances serve
as more apt indicators. Further, the Court observed that earnest
money fulfils a dual purpose: first, it operates as part-payment of
the purchase price and; secondly, as security for the performance
of the contractual obligations. Thus, its true character and purpose
can only be canvassed on a close reading of the agreement, and the
relevant contextual factors. The relevant observations are reproduced
hereinbelow:
“14. […] Further, it is not the description by words used
in the agreement only that would be determinative of the
character of the sum but really the intention of parties
and surrounding circumstances as well, that have to be
looked into and what may be called an advance may
really be a deposit or earnest money and what is termed
as ‘a deposit or earnest money’ may ultimately turn out to
be really an advance or part of purchase price. Earnest
money or deposit also, thus, serves two purposes of being
part-payment of the purchase money and security for the
performances of the contract by the party concerned,
who paid it.”
(Emphasis supplied)
[2025] 6 S.C.R. 43

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

34. In Satish Batra v. Sudhir Rawal, reported in (2013) 1 SCC 345,
this Court emphatically held that it is only the “earnest money”, paid
as a pledge for the due performance of the contract, that can be
forfeited by the seller on account of the buyer’s default. In the same
vein, earnest money can also be doubled and paid back to the buyer
if the contract falls through due to the seller’s default. An amount
which is in nature of an “advance” or serves as part-payment of the
purchase price cannot be forfeited unless it is a guarantee for the
due performance of the contract. The Court further held that despite
the existence of an outright forfeiture clause, it shall not apply if the
amount stipulated in the contract is found to be only in the nature
of part-payment of the purchase price. Consequently, the forfeiture
of “advance money” as part of earnest money can only be justified
if the terms of the contract are clear and explicit to that effect. The
relevant observations are reproduced hereinbelow:
“6. […] In Chiranjit Singh v. Har Swarup [(1926) 23 LW
172 : AIR 1926 PC 1] it has been held that (LW p. 174)
the earnest money is part of the purchase price when
the transaction goes forward and it is forfeited when the
transaction falls through, by reason of the fault or failure
of the purchaser. […]
xx xx xx
10. In DDA v. Grihsthapana Coop. Group Housing Society
Ltd. [1995 Supp (1) SCC 751], this Court following the
judgment of the Privy Council in Har Swarup [(1926) 23
LW 172 : AIR 1926 PC 1] and Shree Hanuman Cotton Mills
[(1969) 3 SCC 522] , held that the forfeiture of the earnest
money was legal. In V. Lakshmanan v. B.R. Mangalagiri
[1995 Supp (2) SCC 33] this Court held as follows : (SCC
p. 36, para 5)
“5. The question then is whether the respondents
are entitled to forfeit the entire amount. It is seen
that a specific covenant under the contract was that
the respondents are entitled to forfeit the money
paid under the contract. So when the contract fell
through by the default committed by the appellant,
as part of the contract, they are entitled to forfeit the
entire amount.”
xx xx xx
44 [2025] 6 S.C.R.

Supreme Court Reports

15. The law is, therefore, clear that to justify the forfeiture
of advance money being part of “earnest money” the
terms of the contract should be clear and explicit. Earnest
money is paid or given at the time when the contract is
entered into and, as a pledge for its due performance by
the depositor to be forfeited in case of non-performance
by the depositor. There can be converse situation also
that if the seller fails to perform the contract the purchaser
can also get double the amount, if it is so stipulated.
It is also the law that part-payment of purchase price
cannot be forfeited unless it is a guarantee for the due
performance of the contract. In other words, if the payment
is made only towards part-payment of consideration and
not intended as earnest money then the forfeiture clause
will not apply.”
(Emphasis supplied)

35. A forfeiture clause identical to the one in the present ATS was found
in the case of Satish Batra (supra). It provided for the forfeiture of
earnest money in case of the purchaser’s default, as well as the
payment of double the amount of earnest money in case of the
vendor’s default. This Court allowed the forfeiture of the earnest
money, which was held to be security for the due performance
of the contract, by the seller when the transaction fell through on
account of the purchaser’s fault. The relevant forfeiture clause and
observations are reproduced hereinbelow:
“5. […] The question whether the seller can retain the
entire amount of earnest money depends upon the terms
of the agreement. The relevant clause of the agreement
for sale dated 29-11-2005 is extracted hereunder for easy
reference:
“(e) If the prospective purchaser fails to fulfil the
above condition, the transaction shall stand cancelled
and earnest money will be forfeited. In case I fail to
complete the transaction as stipulated above, the
purchaser will get double the amount of the earnest
money. In both conditions, the dealer will get 4%
commission from the faulting party.”
[2025] 6 S.C.R. 45

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

The clause, therefore, stipulates that if the purchaser
fails to fulfil the conditions mentioned in the agreement,
the transaction shall stand cancelled and earnest money
will be forfeited. On the other hand, if the seller fails to
complete the transaction, the purchaser would get double
the amount of earnest money. Undisputedly, the purchaser
failed to perform his part of the contract, then the question
is whether the seller can forfeit the entire earnest money.
xx xx xx
17. We are, therefore, of the view that the seller was justified
in forfeiting the amount of Rs.7,00,000 as per the relevant
clause, since the earnest money was primarily a security for
the due performance of the agreement and, consequently,
the seller is entitled to forfeit the entire deposit. […]”
(Emphasis supplied)

36. A three-Judge Bench of this Court, of which one of us (J.B. Pardiwala, J.)
was a part, reiterated the distinction between “earnest” and “advance”
in Central Bank of India v. Shanmugavelu, reported in (2024) 6 SCC
641, thus stating that “earnest” differs from “advance money”, though
the former can be treated as part-payment of the sale consideration
if the contractual terms are duly honoured. In other words, earnest
money is adjusted against the total sale consideration if the contract
goes through. The relevant observations are reproduced hereinbelow:
“84. The difference between an earnest or deposit and an
advance part-payment of price is now well established in
law. Earnest is something given by the promisee to the
promisor to mark the conclusiveness of the contract. This
is quite apart from the price. It may also avail as a part-
payment if the contract goes through. But even so it would
not lose its character as earnest, if in fact and in truth it
was intended as mere evidence of the bargain. An advance
is a part to be adjusted at the time of the final payment. If
the promisee defaults to carry out the contract, he loses
the earnest but may recover the part-payment leaving
untouched the promisor’s right to recover damages. […]”
(Emphasis supplied)
46 [2025] 6 S.C.R.

Supreme Court Reports

37. From the above exposition of law, it becomes amply clear that
the amount of Rs.20,00,000/- termed as “advance money” in the
ATS, was essentially “earnest money”. In other words, it was in the
nature of a guarantee for the due performance of the contract. In a
fashion akin to earnest money, the said amount was paid at the very
execution of the ATS. It was meant to be adjusted against the total
sale consideration of Rs.55,50,000/- if the transaction was carried
out, which is evident from the ATS clause that states the balance
sale consideration to be as Rs.35,50,000/-. Further, it was liable to
be forfeited in the event that the transaction fell through by reason
of the default on part of the purchaser. Consequently, when the
appellant-purchaser failed to comply with the contractual stipulation of
paying the balance sale consideration within a period of four months
from the date of the agreement, the respondent nos. 1-4 (vendors)
were justified in forfeiting the advance money.
38. We consider it apposite at this juncture to take note of the conditions
that make time the essence of a contract. Such conditions were
precisely outlined by this Court in Chand Rani v. Kamal Rani,
reported in (1993) 1 SCC 519, which are reproduced hereunder:
“25. From an analysis of the above case-law it is clear
that in the case of sale of immovable property there is no
presumption as to time being the essence of the contract.
Even if it is not of the essence of the contract the Court
may infer that it is to be performed in a reasonable time
if the conditions are:
1. From the express terms of the contract;
2. from the nature of the property; and
3. from the surrounding circumstances, for example:
the object of making the contract.”
(Emphasis supplied)

39. This Court recently reaffirmed the principles for deeming whether time
is of the essence in a contract in Welspun Specialty Solutions Ltd.
v. ONGC, reported in (2022) 2 SCC 382. It held that the determination
must be made by reading and analysing the contract in its entirety,
taking into account the surrounding circumstances. An explicit clause
stating that time is of the essence is not, by itself, sufficient. The
[2025] 6 S.C.R. 47

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

Court further observed that any provision allowing extensions under
a contract effectively negates such a clause, thereby indicating that
time is not of the essence. The relevant observations are reproduced
hereinbelow:
“34. In order to consider the relevancy of time conditioned
obligations, we may observe some basic principles:
(a) Subject to the nature of contract, general rule is
that promisor is bound to complete the obligation by
the date for completion stated in the contract. [Refer
to Percy Bilton Ltd. v. Greater London Council [Percy
Bilton Ltd. v. Greater London Council, (1982) 1 WLR
794 (HL)] ]
(b) That is subject to the exception that the promisee
is not entitled to liquidated damages, if by his act
or omissions he has prevented the promisor from
completing the work by the completion date. [Refer
Holme v. Guppy [Holme v. Guppy, (1838) 3 M & W
387 : 150 ER 1195] ]
(c) These general principles may be amended by
the express terms of the contract as stipulated in
this case.
35. It is now settled that “whether time is of the essence
in a contract”, has to be culled out from the reading of the
entire contract as well as the surrounding circumstances.
Merely having an explicit clause may not be sufficient to
make time the essence of the contract. As the contract was
spread over a long tenure, the intention of the parties to
provide for extensions surely reinforces the fact that timely
performance was necessary. The fact that such extensions
were granted indicates ONGC’s effort to uphold the integrity
of the contract instead of repudiating the same.”
(Emphasis supplied)

40. Having regard to the aforesaid authorities, the intention of the parties
and the surrounding circumstances in the present case, it can be
sufficiently inferred that the inclusion of the forfeiture clause in the
ATS was intended to bind the contracting parties and ensure the due
48 [2025] 6 S.C.R.

Supreme Court Reports

performance of the contract. This is particularly 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 nos. 1–4 regarding the OTS, which was known to the
appellant, as recorded by the Trial Court. The findings of the Trial
Court, along with the impugned judgment affirming that time was of
the essence, further substantiate the said intent.
41. Furthermore, the appellant neither sought any extension for
performing his part of the contract nor was any extension of time
granted by the respondent nos. 1-4. On the contrary, within two
months of the stipulated period’s expiry, the respondent nos. 1–4
proceeded with a distress sale of the suit property to the respondent
nos. 5–7 (subsequent purchasers), further underscoring the urgency
underlying the contract.

b. Permissible Extent of Forfeiture
42. The issue at hand may be looked at from another angle. Having
reached the aforesaid conclusion that the forfeiture of advance
money by the respondent nos. 1-4 herein was lawful, it appears
fitting to determine whether they were entitled to the entire amount
of Rs.20,00,000/-.
43. At this juncture, we deem it appropriate to take note of Section
74 of the Indian Contract Act, 1872 (for short, “the 1872 Act”).
Section 74 of the 1872 Act deals with the compensation for loss or
damage caused by a breach of the contract when a particular sum
of liquidated damages or penalty is already set forth under the terms
of the contract. It further provides that such compensation must be
reasonable and it cannot, in any circumstance, exceed the amount
stipulated in the contract. The same is extracted below:
“74. Compensation for breach of contract where penalty
stipulated for.—When a contract has been broken, if a
sum is named in the contract as the amount to be paid
in case of such breach, or if the contract contains any
other stipulation by way of penalty, the party complaining
of the breach is entitled, whether or not actual damage
or loss is proved to have been caused thereby, to receive
from the party who has broken the contract reasonable
[2025] 6 S.C.R. 49

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

compensation not exceeding the amount so named or, as
the case may be, the penalty stipulated for.
[…]”
44. A conjoint reading of Section 74 of the 1872 Act and the principles
underlying forfeiture clauses was undertaken in the case of Fateh
Chand v. Balkishan Dass, reported in 1963 SCC OnLine SC 49.
This Court held that Section 74 of the 1872 Act will apply to every
covenant involving a penalty, whether it is for a future payment on
breach of the contract or the forfeiture of a sum already paid. Ergo,
a forfeiture clause in a contract would ordinarily fall within the ambit
of the words “any other stipulation by way of penalty”. Further, it was
held that supplying evidence of a loss incurred by the vendor on
account of the breach of contract by the buyer would be mandatory
to justify forfeiture, and only a reasonable amount, commensurate
with such loss, can be forfeited. The relevant observations are
extracted hereinbelow:
“14. […] The words “to be paid” which appear in the first
condition do not qualify the second condition relating to
stipulation by way of penalty. The expression “if the contract
contains any other stipulation by way of penalty” widens
the operation of the section so as to make it applicable to
all stipulations by way of penalty, whether the stipulation is
to pay an amount of money, or is of another character, as,
for example, providing for forfeiture of money already paid.
There is nothing in the expression which implies that the
stipulation must be one for rendering something after the
contract is broken. There is no ground for holding that the
expression ‘contract contains any other stipulation by way
of penalty’ is limited to cases of stipulation in the nature of
an agreement to pay money or deliver property on breach
and does not comprehend covenants under which amounts
paid or property delivered under the contract, which by
the terms of the contract expressly or by clear implication
are liable to be forfeited.
xx xx xx
16. There is no evidence that any loss was suffered by the
plaintiff in consequence of the default by the defendant,
50 [2025] 6 S.C.R.

Supreme Court Reports

save as to the loss suffered by him by being kept out of
possession of the property. There is no evidence that the
property had depreciated in value since the date of the
contract provided; nor was there evidence that any other
special damage had resulted. The contact provided for
forfeiture of Rs 25,000 consisting of Rs. 1039 paid as
earnest money and Rs 24,000 paid as part of the purchase
price. The defendant has conceded that the plaintiff was
entitled to forfeit the amount of Rs 1000 which was paid
as earnest money. We cannot however agree with the
High Court that 13 percent of the price may be regarded
as reasonable compensation in relation to the value of the
contract as a whole, as that in our opinion is assessed
on an arbitrary assumption. The plaintiff failed to prove
the loss suffered by him in consequence of the breach
of the contract committed by the defendant and we are
unable to find any principle on which compensation equal
to ten percent of the agreed price could be awarded to
the plaintiff. […]
(Emphasis supplied)

45. It is imperative to mention herein that in Fateh Chand (supra), this
Court, while setting “earnest money” apart from a “penalty”, held
that insofar as forfeiture of earnest money is concerned, Section
74 of the 1872 Act will not apply. The relevant observations are
reproduced hereinbelow:
“7. The Attorney General appearing on behalf of the
defendant has not challenged the plaintiff’s right to
forfeit Rs 1000 which were expressly named and paid
as earnest money. He has, however, contended that the
covenant which gave to the plaintiff the right to forfeit Rs
24,000 out of the amount paid by the defendant was a
stipulation in the nature of penalty, and the plaintiff can
retain that amount or part thereof only if he establishes
that in consequence of the breach by the defendant, he
suffered loss, and in the view of the Court the amount
or part thereof is reasonable compensation for that loss.
We agree with the Attorney General that the amount of
Rs 24,000 was not of the nature of earnest money. The
[2025] 6 S.C.R. 51

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

agreement expressly provided for payment of Rs 1000 as
earnest money, and that amount was paid by the defendant.
The amount of Rs 24,000 was to be paid when vacant
possession of the land and building was delivered, and
it was expressly referred to as “out of the sale price.” If
this amount was also to be regarded as earnest money,
there was no reason why the parties would not have so
named it in the agreement of sale. […]”
(Emphasis supplied)

46. To the same effect is the decision of this Court in Maula Bux v.
Union of India, reported in (1969) 2 SCC 554, wherein it was held
that forfeiture of earnest money is not deemed as penal and that
Section 74 of the 1872 Act will only apply where the forfeiture is
in the nature of a penalty. The relevant observations are extracted
hereunder:
“5. Forfeiture of earnest money under a contract for sale
of property — movable or immovable — If the amount is
reasonable, it does not fall within Section 74. That has been
decided in several cases: Chiranjit Singh v. Har Swarup
[Chiranjit Singh v. Har Swarup, 1925 SCC OnLine PC 63 :
(1926) 23 LW 172] ; Roshan Lal v. Delhi Cloth & General
Mills Co. Ltd. [Roshan Lal v. Delhi Cloth & General Mills
Co. Ltd., 1910 SCC OnLine All 98 : ILR (1911) 33 All 166];
Mohd. Habib-Ullah v. Mohd. Shafi [Mohd. Habib-Ullah v.
Mohd. Shafi, 1919 SCC OnLine All 87: ILR (1919) 41
All 324] ; Bishan Chand v. Radha Kishan Das [Bishan
Chand v. Radha Kishan Das, 1897 SCC OnLine All 52 :
ILR (1897) 19 All 489 : 1897 AWN 123]. These cases are
easily explained, for forfeiture of reasonable amount paid
as earnest money does not amount to imposing a penalty.
But if forfeiture is of the nature of penalty, Section 74
applies. Where under the terms of the contract the party
in breach has undertaken to pay a sum of money or to
forfeit a sum of money which he has already paid to the
party complaining of a breach of contract, the undertaking
is of the nature of a penalty.”
(Emphasis supplied)
52 [2025] 6 S.C.R.

Supreme Court Reports

47. In Shanmugavelu (supra), this Court emphasized upon the
fundamental difference between the forfeiture of “earnest money”
and forfeiture of “any other amount”, wherein the former constitutes a
general forfeiture clause, while the latter qualifies as a penal clause.
A clause for forfeiture of earnest money thus, only intended as a
deterrent to ensure due performance of the contractual obligations, will
not be deemed penal in the ordinary sense. The relevant observations
are reproduced hereunder:
“81. Even otherwise, what is discernible from the
abovereferred decisions of Fateh Chand [Fateh Chand v.
Balkishan Dass, 1963 SCC OnLine SC 49 : AIR 1963 SC
1405] , Maula Bux [Maula Bux v. Union of India, (1969) 2
SCC 554] and Satish Batra [Satish Batra v. Sudhir Rawal,
(2013) 1 SCC 345 : (2013) 1 SCC (Civ) 483] is that there lies
a difference between forfeiture of any amount and forfeiture
of earnest money with the former being a penal clause and
the latter a general forfeiture clause. A clause providing for
forfeiture of an amount could fundamentally be in the nature
of a penalty clause or a forfeiture clause in the strict sense
or even both, and the same has to be determined in the
facts of every case keeping in mind the nature of contract
and the nature of consequence envisaged by it.
82. Ordinarily, a forfeiture clause in the strict sense will not
be a penal clause, if its consequence is intended not as a
sanction for breach of obligation but rather as security for
performance of the obligation. This is why Fateh Chand
[Fateh Chand v. Balkishan Dass, 1963 SCC OnLine SC
49 : AIR 1963 SC 1405] Maula Bux [Maula Bux v. Union
of India, (1969) 2 SCC 554] and Satish Batra [Satish
Batra v. Sudhir Rawal, (2013) 1 SCC 345 : (2013) 1 SCC
(Civ) 483] held that forfeiture of earnest money deposit
is not a penal clause, as the deposit of earnest money is
intended to signify assent of the purchaser to the contract,
and its forfeiture is envisaged as a deterrent to ensure
performance of the obligation.”
(Emphasis supplied)

48. A different view was taken by this Court in Kailash Nath Associates v.
DDA, reported in (2015) 4 SCC 136, wherein it held that Section 74
[2025] 6 S.C.R. 53

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

of the 1872 Act applies to the forfeiture of earnest money deposit.
It further held that proof of actual damage or loss is a sine qua non
for invoking the said section and thereby, only a reasonable amount
will be permissible for forfeiture upon the breach of contract. The
relevant observations are reproduced hereinbelow:
“43. […]
xx xx xx
43.2. Reasonable compensation will be fixed on well-known
principles that are applicable to the law of contract, which
are to be found inter alia in Section 73 of the Contract Act.
43.3. Since Section 74 awards reasonable compensation
for damage or loss caused by a breach of contract, damage
or loss caused is a sine qua non for the applicability of
the section.
43.5. The sum spoken of may already be paid or be
payable in future.
43.6. The expression “whether or not actual damage or loss
is proved to have been caused thereby” means that where
it is possible to prove actual damage or loss, such proof
is not dispensed with. It is only in cases where damage
or loss is difficult or impossible to prove that the liquidated
amount named in the contract, if a genuine pre-estimate
of damage or loss, can be awarded.
43.7. Section 74 will apply to cases of forfeiture of earnest
money under a contract. […]”
(Emphasis supplied)

49. This Court expounded on the question of loss in Lakshmanan v. B.R.
Mangalagiri, reported in 1995 Supp (2) SCC 33, holding that when
the contract falls through due to the default on part of the appellant-
purchaser, and the resulting loss suffered by the respondent-vendors
exceeds the amount forfeited under the contract, the forfeiture cannot,
by any measure, be seen as unjustified. The relevant observations
are extracted below:
“5. The question then is whether the respondents are
entitled to forfeit the entire amount. It is seen that a specific
54 [2025] 6 S.C.R.

Supreme Court Reports

covenant under the contract was that the respondents are
entitled to forfeit the money paid under the contract. So
when the contract fell through by the default committed by
the appellant, as part of the contract, they are entitled to
forfeit the entire amount. In this case even otherwise, we
find that the respondents had suffered damages, firstly for
one year they were prevented from enjoying the property
and the appellant had cut off 150 fruit-bearing coconut
trees and sugarcane crop was destroyed for levelling the
land apart from cutting down other trees. Pending the
appeal, the respondents sought for and were granted
permission by the court for sale of the property. Pursuant
thereto, they sold the land for which they could not secure
even the amount under contract and the loss they suffered
would be around Rs 70,000. Under those circumstances,
their forfeiting the sum of Rs 50,000 cannot be said to be
unjustified. The appeal is accordingly dismissed with costs.”
(Emphasis supplied)

50. We may as well refer to a recent judgment of this Court in Godrej
Projects Development Ltd. v. Anil Karlekar, reported in 2025
SCC OnLine SC 222, wherein this Court examined one-sided and
unconscionable forfeiture clauses. It was held that a forfeiture clause,
if found to be unfair and unreasonable, cannot be enforced by this
Court. Further, while citing the clause providing for “forfeiture of
earnest money deposit” in Satish Batra (supra), it held that the said
clause could not be said to be one-sided and accordingly, upheld the
same. The relevant observations are extracted as under:
“26. In the case of Central Inland Water Transport
Corporation Limited v. Brojo Nath Ganguly8, this Court,
by taking recourse to Article 14 of the Constitution of
India, has held that the courts will not enforce an unfair
and unreasonable contract or an unfair and unreasonable
clause in a contract, entered into between Parties who are
not equal in bargaining power. It will be relevant to refer to
the following observations of this Court in the said case:
“89. […] It will also apply where a man has no choice,
or rather no meaningful choice, but to give his assent to
[2025] 6 S.C.R. 55

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

a contract or to sign on the dotted line in a prescribed
or standard form or to accept a set of rules as part
of the contract, however unfair, unreasonable and
unconscionable a clause in that contract or form or rules
may be. This principle, however, will not apply where the
bargaining power of the contracting parties is equal or
almost equal. This principle may not apply where both
parties are businessmen and the contract is a commercial
transaction.”
xx xx xx
33. Insofar as the judgment in the case of Satish Batra
(supra) is concerned, the clause providing for “forfeiture of
earnest money deposit” cannot be said to be one-sided. […]
34. It can thus be seen that in the aforesaid case though
the term in the Agreement provided for forfeiture of the
earnest money in the event the prospective purchaser
fails to fulfill the conditions, it also provided for payment
of double the amount of earnest money by the vendor to
the purchaser in case the vendor fails to complete the
transaction. As such, the said term cannot be said to be
one-sided.”
(Emphasis supplied)

51. On a conspectus of the aforementioned authorities, it is evident
that a clause for the forfeiture of earnest money is not penal in the
ordinary sense, rendering Section 74 of the 1872 Act, inapplicable.
In the present case, the stipulated amount under the ATS was in
the nature of an earnest money deposit and thus, Section 74 of the
1872 Act cannot apply to the same. Further, the forfeiture clause was
fair and equitable rather than one-sided and unconscionable, as it
imposed liabilities on both the appellant-purchaser and respondent-
sellers, wherein the seller was obligated to pay twice the advance
amount paid by the buyer in case of his default.
52. Even, for argument’s sake, if we have to apply the principle under
Section 74 of the 1872 Act to the present case in line with Kailash
Nath (supra), the forfeiture of the entire amount of advance money
by the respondent nos. 1-4 would still be justified on the ground that
56 [2025] 6 S.C.R.

Supreme Court Reports

there was breach of contract by the appellant, which led to financial
losses for the respondent nos. 1-4. Such losses, as specifically
pleaded and proved by the evidence led before the Trial Court, far
exceeded the amount forfeited under the ATS, a position that was
duly noted and accepted by the Trial Court.

ii. Law on the Alternative Relief of Refund of Earnest Money
under Section 22 of the 1963 Act
53. The High Court denied the relief of refund of advance money to the
appellant herein, having regard of the fact that the appellant had
not sought for an alternative prayer for refund of the advance sale
consideration in the suit as mandated by Section 22(2) of the 1963 Act.
54. Before we proceed to answer the question formulated by us in para
27, we deem it necessary to examine Section 22 of the 1963 Act.
It reads thus:
“22. Power to grant relief for possession, partition,
refund of earnest money, etc.— (1) Notwithstanding
anything to the contrary contained in the Code of Civil
Procedure, 1908 (5 of 1908), any person suing for the
specific performance of a contract for the transfer of
immovable property may, in an appropriate case, ask for—
(a) possession, or partition and separate possession,
of the property, in addition to such performance; or
(b) any other relief to which he may be entitled,
including the refund of any earnest money or deposit
paid or [made by] him, in case his claim for specific
performance is refused.
(2) No relief under clause (a) or clause (b) of sub-section
(1) shall be granted by the court unless it has been
specifically claimed:
Provident that where the plaintiff has not claimed any
such relief in the plaint, the court shall, at any stage of
the proceeding, allow him to amend the plaint on such
terms as may be just for including a claim for such relief.
(3) The power of the court to grant relief under clause (b)
of sub-section (1) shall be without prejudice to its powers
to award compensation under section 21.”
[2025] 6 S.C.R. 57

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

55. Sir Frederick Pollock, 3rd Baronet, in Pollock & Mulla: The Indian
Contract and Specific Relief Acts, 16th Edn., has discussed the
object and scope of Section 22 of the 1963 Act and the alternative
relief of refund of earnest money deposit, as follows:
“[s 22.6.2] Refund of Earnest Money or Deposit
[…] The relief of refunding of earnest money or deposit
cannot be granted unless specifically claimed. Further
such a plea cannot be considered in a second appeal,
particularly when the issue of execution of the agreement
has been held as not having been proved.
Refund of amounts paid may also be ordered when
specific performance has been refused on the ground
of unexplained delay by the plaintiff in approaching the
Court. It is also open to a plaintiff to give up his prayer for
specific performance at the hearing, or before the hearing,
and ask for return of the earnest money or deposit.
Where a clause entitling forfeiture of earnest money is
contained in the agreement, it would not be refundable to
the plaintiff who has failed to perform his part of the contract.
Forfeiture of earnest money should not be allowed where
the vendor has not suffered any loss, but has actually
gained, viz., on account of frustration of contract. Where
the value of land had considerably increased after the sale
agreement, the Court, while refusing a decree for specific
performance, ordered a refund of the earnest amount on
the ground that the plaintiff did not suffer any loss, but
had gained due to the default of the plaintiff.
xx xx xx
[s 22.7] Pleadings and Amendment to Pleadings
Section 22 enacts a rule of pleading. It enables the plaintiff
to ask for possession in the suit for specific performance
and empowers the Court to provide, in the decree itself,
that upon payment by the plaintiff of the consideration
money within the given time, the defendant should execute
the deed and put the plaintiff in possession. If the said
relief is not claimed in the plaint, the Court shall permit
the plaintiff at any stage of the proceedings, including
58 [2025] 6 S.C.R.

Supreme Court Reports

execution proceedings, to amend the plaint on such terms
as it deems proper. The purpose is to avoid multiplicity of
suits. This provision overrides the provisions of Order VI,
rule 17 of CPC, 1908. Omission to seek alternative relief
is not a ground to reject the plaint.
A plaintiff may amend the plaint to include a claim for refund
to advance money paid to the defendant. The amendment
may be made at any stage of the proceeding, including
the appellate stage. The option vests with the plaintiff to
claim alternative relief, and unless he claims such a relief,
the Court is not empowered to grant it.”
(Emphasis supplied)

56. The expression “at any stage of the proceeding” has been judicially
interpreted to include the appellate stage as well, as affirmed by a
catena of High Court decisions. This interpretation entails that that an
amendment of the plaint to incorporate a prayer for the alternative relief
of refund of earnest money may be sought even during the first appeal
from the original decree passed in a suit for specific performance.
The non-obstante clause attached to Section 22(1) of the 1963 Act
grants it an overriding effect, thereby excluding the operation of the
Code of Civil Procedure, 1908. Further, the use of the word “shall”
in the proviso to Section 22(2) imposes a mandate upon the court to
allow the amendment of plaint, as sought by the party, at any stage.
[See: Sahida Bibi v. Sk. Golam Muhammad, 1982 SCC OnLine
Cal 59; Tarit Bhowmik v Mukul Day, 2014 SCC Cal 5361]
57. In Manickam v. Vasantha, reported in 2022 SCC OnLine SC 2096,
this Court was dealing with the question of whether the executing
court could deliver possession in execution of a decree where no
specific prayer for possession had been made in a suit for specific
performance. It held that the proviso appended to Sub-section (2)
of Section 22 of the 1963, which mandates the Court to allow an
amendment of the plaint at any stage of the proceeding to include a
claim for such relief under Clause (a) or (b) of Section 22(1), renders
the provision directory in nature. The Court opined that Section
22(2) is qualified by the phrase “in an appropriate case”, referring
to situations where such relief does not necessarily flow from a
decree for specific performance of a sale agreement. Accordingly,
if such relief under Clause (a) or (b) of Section 22(1) appears as
[2025] 6 S.C.R. 59

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

a necessary implication of the decree for specific performance, a
specific prayer for claiming such relief would not be required. In light
of these principles, this Court held that the relief of possession was
inherently included in a decree for specific performance and need not
be specifically pleaded. Furthermore, it reiterated that the words “at
any stage of the proceeding” have a wide amplitude, encompassing
both the appellate stage and execution proceedings. The relevant
observations are reproduced hereinbelow:
“22. The Bombay High Court in a judgment reported as
Lotu Bandu Sonavane v. Pundalik Nimba Koli held that relief
of possession is to be claimed “in an appropriate case”. It
means a case in which the relief does not necessarily flow
from the decree for specific performance of the agreement
of sale. If such a relief is ancillary to and necessarily
flows from a decree for specific performance, then it is
not necessary to specifically seek such a relief and the
bar of S. 22(2) would not be attracted. If the defendant is
in possession of the property agreed to be sold and the
decree directs a specific performance of the agreement
of sale, the defendant is bound to execute the sale deed
as per the decree and to put the plaintiff in possession of
the property as contemplated by S. 55(1)(f) of the Transfer
of Property Act. In such a case it is not necessary to
specifically claim the relief of possession in the suit.
xx xx xx
9. The term “proceeding” is a very wide and
comprehensive term and it includes execution
proceeding also. The expression “at any stage of
the proceeding” gives widest permission to the Court
to allow amendment at any stage of the proceeding
including execution of the decree. The amendment
can be allowed even in an appeal arising out of the
order passed by the executing Court rejecting the
prayer for permission. The proviso recognises the
well settled position that the Court passing a decree
for specific performance retains control over the
subject matter as long as anything remains to be
done in the case.”
xx xx xx
60 [2025] 6 S.C.R.

Supreme Court Reports

26. The matter can be examined from another angle
as well. Section 22(2) of the Act, though is worded in
negative language, “no relief under clause (a) or clause
(b) of sub-section (1) shall be granted by the court unless
it has been specifically claimed”, but the proviso takes
out the mandatory nature from the substantive provision
of sub-section (2) when the plaintiff is allowed to amend
the plaint on such terms as may be just for including the
plaint for such relief “at any stage of the proceeding”. “At
any stage of the proceeding” would include the proceeding
in suit or in appeal and also in execution. The proviso to
sub-section (2) of Section 22 of the Act contemplates that
the Court shall, at any stage of the proceedings, allow
the plaintiff to amend the plaint on such terms as may be
just for including a claim for such relief. The said proviso
makes the provision directory as no penal consequences
follow under sub-section (2) of Section 22. […]
xx xx xx
29. To examine whether a provision is directory or
mandatory, one of the tests is that the court is required to
ascertain the real intention of the legislature by carefully
attending to the whole scheme of the statute. Keeping in
view the scheme of the statute, we find that Section 22(2)
of the Act is only directory and thus, the decree-holder
cannot be non-suited for the reason that such relief was
not granted in the decree for specific relief.
30. The defendant in terms of the agreement is bound to
handover possession of the land agreed to be sold. The
expression “at any stage of proceeding” is wide enough
to allow the plaintiffs to seek relief of possession even at
the appellate stage or in execution even if such prayer
was required to be claimed. This Court in Babu Lal has
explained the circumstances where relief of possession
may be necessary such as in a suit for partition or in a
case of separate possession where the property conveyed
is a joint property. In the suit for specific performance,
the possession is inherent in such suit, therefore, we find
[2025] 6 S.C.R. 61

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

that the decree-holders are in fact entitled to possession
in pursuance of the sale deed executed in their favor.”
(Emphasis supplied)

58. It is thus a settled position of law that the 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, under Section 22 of the 1963 Act, the courts
cannot grant such relief suo moto, since the inclusion of the prayer
clause remains a sine qua non for the grant of such a relief. In other
words, 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. This has been emphatically held
by this Court in Desh Raj v. Rohtash Singh, reported in (2023) 3
SCC 714. The relevant observations are reproduced hereunder:
“35. On a plain reading of the above-reproduced provision,
we have no reason to doubt that the plaintiff in his suit for
specific performance of a contact is not only entitled to
seek specific performance of the contract for the transfer
of immovable property but he can also seek alternative
relief(s) including the refund of any earnest money, provided
that such a relief has been specifically incorporated in the
plaint. The court, however, has been vested with wide
judicial discretion to permit the plaintiff to amend the
plaint even at a later stage of the proceedings and seek
the alternative relief of refund of the earnest money. The
litmus test appears to be that unless a plaintiff specifically
seeks the refund of the earnest money at the time of filing
of the suit or by way of amendment, no such relief can be
granted to him. The prayer clause is a sine qua non for
grant of decree of refund of earnest money.
36. Applying these principles to the facts of the case in
hand, we find that the respondent has neither prayed for
the relief of refund of earnest money in the original plaint
nor he sought any amendment at a subsequent stage. In
the absence of such a prayer, it is difficult to accept that
the courts would suo motu grant the refund of earnest
62 [2025] 6 S.C.R.

Supreme Court Reports

money irrespective of the fact as to whether Section 22(2)
of the SRA Act is to be construed directory or mandatory
in nature.”
(Emphasis supplied)

59. The judgment in Desh Raj (supra) has been relied upon by the
learned counsel appearing for the appellant herein. However, it is
difficult to understand how this judgment furthers their case. On the
contrary, this judgment clearly contradicts their position, stating in
unequivocal terms that, in the absence of a prayer for the relief of
refund of earnest money, such relief cannot be granted by this Court.
60. Another judgment which has been relied upon by the learned counsel
for the appellant in reference to the issue of refund of earnest money,
is the case of Kamal Kumar v. Premlata Joshi, reported in (2019)
3 SCC 704. Notably, the ruling in this case also stands contrary to
the arguments advanced by the appellant on account of the fact
that the relief of refund of earnest money was denied therein. The
relevant observations are extracted hereunder:
“9. In the case at hand, we find that the two courts below
have gone into these questions in the light of pleadings
and evidence and recorded a categorical finding against
the plaintiff holding that the plaintiff was neither ready nor
willing to perform his part of the contract and, therefore, he
was not entitled to claim the relief of specific performance
of the contract against the defendants in relation to the
suit land. It was also held that the plaintiff was not entitled
to claim any relief of refund of earnest money because it
was liable to be adjusted as agreed between them.”
(Emphasis supplied)

61. Applying these principles to the facts of the case at hand, we find
ourselves unable to accept the submissions of the appellant that, in
the absence of a specific prayer for the refund of advance money
paid by them, Prayer (c) of the plaint which specifies the grant of
“such other relief(s) as the Hon’ble Court deems fit in the facts and
circumstances of the case in the interest of justice”, can be construed
to include a prayer for such an alternative relief.
[2025] 6 S.C.R. 63

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

62. The reasoning set forth in the case of Manickam (supra) as regards
the relief of possession under Section 22(1)(a) of the 1963 Act, can
be appropriately imported in the present case to say that the relief
of refund of earnest money under Section 2 2(1)(b) is not a relief
that automatically flows from a decree for specific performance of a
sale agreement and must, therefore, be explicitly sought.
63. In our considered opinion, the law contained under Section 22(2) of
the 1963 Act is adequately broad and flexible to allow the appellant
to seek an amendment of the plaint for the said relief, even at the
appellate stage. However, no such application for an amendment
of the plaint was moved either before the trial court or during the
course of the first appeal before the High Court. That is to say, the
appellant never prayed for the refund of the advance money. Here, it
would be redundant to state that the law aids the vigilant, not those
who sleep over their rights.

E. CONCLUSION
64. For all the foregoing reasons, we have reached the conclusion that
the forfeiture of advance money by the respondent nos. 1-4 was
justified. In such circumstances, we are not inclined to grant the
relief of refund of advance money to the appellant.
65. We are unable to find any kind of perversity or illegality in the impugned
judgment passed by the High Court. As a result, the present appeal
stands dismissed.
66. Parties shall bear their own costs. Pending application(s), if any,
stand disposed of.

Result of the case: Appeal dismissed.

†
Headnotes prepared by: Nidhi Jain