Supreme Court: Alternative Relief U/s. 22 Specific Relief Act, Including Refund Of Earnest Money, Cannot Be Granted Suo Moto By Courts

The Court, while also delving into the validity of the forfeiture of advance money, dismissed an Appeal challenging the decision of the Karnataka High Court, which affirmed that the advance money paid, being primarily a security for the due performance of a contract, was rightfully forfeited. The Court further emphasised on the law regarding the alternative relief of refund under Section 22 of the Specific Relief Act, 1963 (the Act).

A Bench of Justice JB Pardiwala and Justice R Mahadevan held, “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.”

Senior Advocate Anand Sanjay M Nuli represented the Appellant, while AOR Supreeta Sharanagouda appeared for the Respondents.

Brief Facts

The Appellant had filed a suit seeking the specific performance of an Agreement of Sale (ATS). The Respondents were the original owners of the property, who had acquired title through an unregistered Will. The Appellant paid part payment, referred to as ‘advance money’ in the ATS.

Upon Appellant’s failure to pay the remaining amount within the stipulated period, the Respondents terminated the agreement and forfeited the advance paid.

The Trial Court dismissed the Appellant’s suit, holding that the advance money, being security for performance, was rightfully forfeited by the Respondents due to the Appellant’s failure and the resulting losses to the defendants. The High Court dismissed the Appellant’s Appeal, affirming the Trial Court's findings, while holding that the Appellant, having failed to prove his readiness and willingness to perform his part of the contract under Section 16(c) of the Act, was not entitled to the relief of specific performance.

Court’s Reasoning

The Supreme Court noted that the High Court denied the relief of refund of advance money to the Appellant 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 Act.

The Court referred to its decision in Desh Raj v. Rohtash Singh, wherein it was held that “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.”

The Bench emphasised that while Section 22 of the Act allowed a party to seek the refund as an alternative relief if specific performance was refused, this relief cannot be granted unless it has been specifically claimed.

“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,” the Court held.

Consequently, the Court ordered that “the forfeiture of advance money…was justified. In such circumstances, we are not inclined to grant the relief of refund of advance money to the appellant…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.”

Accordingly, the Supreme Court dismissed the Appeal.

Cause Title: K.R. Suresh v. R. Poornima & Ors. (Neutral Citation: 2025 INSC 617)

Appearance:

Appellant: Senior Advocate Anand Sanjay M Nuli; Advocates Suraj Kaushik, Firoz Gandhi and Nahar Singh Yadav

Respondents: AOR Supreeta Sharanagouda, Supreeta Sharanagouda and Dhawesh Pahuja; Advocates Sharanagouda Patil, Jyotish Pandey, Vinod Kumar Srivastava, Saket Gogia, Gauri Pande, Sheetal Maggon and Mansingh

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