Buyer who never proved he had the Rs 25.85 lakh balance loses Shalimar plot but keeps his Rs 4.15 lakh
Justice Neena Bansal Krishna upheld the dismissal of a specific performance suit over a 300 square yard plot, but held the seller had no right to forfeit the payments because the agreement named no forfeiture sum and he proved no loss.
A 70-year-old man who agreed in 2007 to buy a 300 square yard plot in Village Shalimar, Delhi, from a fellow villager for Rs 30 lakh, paid Rs 4.15 lakh in five instalments over four years, and then sued for the plot in 2013, has lost his appeal for specific performance. The Delhi High Court on 16 October agreed with the trial court that he never proved he had the Rs 25.85 lakh balance when it mattered. But Justice Neena Bansal Krishna also rejected the seller's story that the buyer walked away in January 2012, and confirmed that the seller must return every rupee with interest, because the agreement contained no forfeiture clause and he showed no loss, only a plot that had risen manifold in value and was still his.
A plot, a probate, and five receipts
Ram Pal Saini and Anil Kumar both live in Village Shalimar. On 1 November 2007 they signed an agreement to sell property No. 258 for Rs 30 lakh. The agreement recorded that Anil Kumar's title rested on a will of 17 March 1999, that probate case PC No. 40 of 2006 had been decided in his favour on 16 April 2007 subject to valuation, court fees and an administration bond, and that part of the property was in the possession of one Beena Devi, against whom his suit for possession was pending. Clause 5 obliged him to get the property mutated in his name before executing the sale deed. Clause 2 provided that if he failed to honour the sale he would pay the buyer double the earnest money. There was no clause allowing him to forfeit anything if the buyer defaulted.
Saini paid Rs 1 lakh on 3 November 2007 and Rs 1 lakh on 9 January 2008 as earnest money, then Rs 50,000 on 15 April 2008, Rs 65,000 on 20 June 2011 and Rs 1 lakh on 25 August 2011 as part payments towards the balance: Rs 4,15,000 in all, admitted and evidenced by receipts. His case was that the balance was payable within six months of mutation, that Anil Kumar never told him whether mutation had happened, that Beena Devi's appeal against the probate came with an injunction, and that even after it was decided in Anil Kumar's favour the seller kept putting off the sale deed. He said he had the money arranged and was losing interest on it. He sent a legal notice on 24 May 2013, got what he called a false reply on 30 May, and sued on 9 July 2013 for specific performance against payment of the Rs 25.85 lakh balance, or alternatively Rs 8.30 lakh, double what he had paid, with 15 per cent interest.
Anil Kumar's written statement said the buyer himself had terminated the agreement in January 2012 and asked for his earnest money back when pressed to pay the balance. The injunction had ended on 14 December 2010 when the High Court dismissed Beena Devi's appeal, FAO 130 of 2008, and for more than two and a half years after that Saini did nothing despite repeated requests, developing a sudden interest only because land prices had multiplied. Saini had wanted to pay in parts, which he refused. Not being highly literate, he said, he had asked Saini to help get the property mutated, and Saini had refused. Saini and his son attended the appeal hearings and Saini had arranged his lawyer, so Saini knew the appeal had been dismissed.
In replication Saini denied terminating the agreement or arranging counsel, but admitted giving Anil Kumar money to defend the case because he wanted the plot. He pointed out that the letters of administration were issued on 14 February 2011 and that Anil Kumar obtained possession from Beena Devi through execution only on 30 May 2013; since possession was to be handed over at the time of the sale deed, he argued, the deed should have followed within six months of that date.
Five issues were framed on 11 October 2017. Saini testified as PW-1 and proved the agreement and the five receipts; his brother Dharmpal Saini, the attesting witness, was PW-2. Anil Kumar testified as DW-1.
What the trial court found
The Additional District Judge held on 30 October 2019 that Saini had not proved his readiness and willingness. He could not give the date or month of any request for the sale deed, and in cross-examination admitted he did not remember making any telephone call about it. He could not explain why, if he had the whole balance ready in June and August 2011, he paid only Rs 65,000 and Rs 1 lakh and did not ask for the deed. The only bank statement he produced, during cross-examination, covered May and June 2013, with nothing for 2011 or 2012. And he could not explain his silence from his last payment on 25 August 2011 to his legal notice on 24 May 2013. On that record the trial court found the seller's version of a January 2012 termination probable, refused specific performance, declined to award double the amount, and decreed a refund of Rs 4,15,000 with 6 per cent interest from 30 May 2013 until realisation.
Saini appealed under Section 96 of the Code of Civil Procedure only against the refusal of specific performance; he did not challenge the refund. Mr T.S. Ahuja, leading for Saini, argued that Anil Kumar had admitted in cross-examination that Saini never sent a termination notice and that he himself never wrote demanding completion or forfeiting the earnest money; that the parties were neighbours who had dealt with each other until August 2011, so an unwritten termination five months later was a cooked-up afterthought; that the balance was due only within six months of mutation, which has still not happened; and that Anil Kumar could not have handed over possession in 2011 or 2012 because he did not get it until May 2013. He cited Satya Jain v. Anis Ahmed Rushdie, K. Prakash v. B.R. Sampath and Zarine Siddiqui v. A. Ramalingam on the principle that the discretion under Section 20 of the Specific Relief Act must be exercised on sound judicial principles. Ms Tanvi Madan, for Anil Kumar, stood by the written statement.
Nothing stood in the way after December 2010
Justice Krishna took the obstacles first. The agreement itself recorded that the probate had already been granted. Beena Devi's appeal was dismissed on 14 December 2010 and the letters of administration issued on 14 February 2011; after that there was no impediment to performance, and Saini plainly knew it, because he made his last two payments in June and August 2011. Yet there was not one notice or document showing that the seller sought time or that the buyer asked for the deed. If he did not know whether mutation had happened, he could at least have called on Anil Kumar to get it done as the agreement required.
The possession argument fared no better. The agreement said Anil Kumar would deliver possession after recovering it from Beena Devi at his own risk and responsibility; on its plain terms that was an obligation of the seller, not a condition precedent to the sale deed, and Saini had known of the litigation from the day he signed. His own legal notice went out on 24 May 2013, six days before Anil Kumar obtained possession, which undercut the submission that possession was what had held things up.
That left readiness and willingness, which under Section 16(c) of the Specific Relief Act a plaintiff must both plead and prove, from the agreement through to decree, as the Supreme Court held in H.P. Pyarejan v. Dasappa. Willingness is a state of mind shown by conduct; readiness is financial capacity shown by evidence. On Syed Dastagir v. T.R. Gopalakrishna Setty the plea is judged in substance, not form; on Raghunath Rai v. Jageshwar Prashad Sharma the buyer need only establish the capacity to pay, not produce cash; but on Baldev v. Bhule that capacity must be proved strictly, and self-serving statements will not do.
Saini's plaint said he was waiting after arranging huge money and losing interest on it, and repeated the statutory formula that he was always ready and willing. The judge held that was not enough. “Mere mechanical reproduction of the statutory language in the plaint does not suffice”; some detail of how the money was available had to be pleaded, and none was. In evidence, the only document was the bank statement for May and June 2013, produced in cross-examination. It might show he had the money then; it showed nothing about November 2007, December 2010 when the appeal was dismissed, or February 2011 when the letters of administration issued. The seller's account that Saini wanted to pay in parts gained support from the payments themselves: Rs 65,000 and Rs 1 lakh in instalments in mid-2011, after every impediment had been removed. The trial court was right that readiness and willingness had not been proved.
Why the seller could not keep the money
The last question was the Rs 4.15 lakh. Section 22 of the Specific Relief Act lets a plaintiff whose claim for specific performance fails seek refund of earnest money or deposit in the same suit. The judge drew the distinction between earnest money, given to bind the contract and liable to forfeiture if the buyer defaults, and advance or part payment, which is simply part of the price paid early, tracing the law from Chiranjeet Singh v. Har Swarup and Shree Hanuman Cotton Mills v. Tata Air Craft Ltd through Videocon Properties Ltd v. Bhalchandra Laboratories, where the label in the agreement was held not decisive, to the three-judge bench in Central Bank of India v. Shanmugavelu, which restated that a defaulting buyer loses earnest money but may recover part payment, subject to the seller's right to damages. On the admitted facts, Rs 2 lakh had been paid as earnest and Rs 2.15 lakh as part payment towards the balance, which was in substance advance money.
Then she turned to the agreement. Clause 2 named a sum payable only on the seller's default: double the earnest money. It named no sum payable by the buyer and contained no forfeiture stipulation at all. So Anil Kumar's claim to retain anything could rest only on proof of loss under Section 73 of the Contract Act. Even where a contract does name a sum, Section 74 allows only reasonable compensation not exceeding it: the Constitution Bench in Fateh Chand v. Balkishan Das held that the words whether or not actual damage or loss is proved dispense with proof of the precise amount, not with the existence of legal injury, and Kailash Nath Associates v. Delhi Development Authority restated that loss is a sine qua non under Section 74, which applies to forfeiture of earnest money. Forfeiture, the judge held, is not an automatic consequence of breach; the amount named is only the outer limit, and the party seeking to keep the money must show legal injury.
Here, “there is not an iota of evidence led by the Defendant” of any loss. On the contrary, Anil Kumar himself said real estate prices had risen manifold, and the plot remained with him. With no loss shown he had no right to forfeit the Rs 4.15 lakh, whether as earnest or as part payment.
The judge went one step further than the trial court. Anil Kumar's claim that Saini orally terminated the contract in January 2012 had no corroboration whatever. Had the deal been called off, Saini would have been expected to seek his money back then, and he did not; and Anil Kumar never wrote to Saini about termination or forfeiture. There was, she held, no termination by the buyer, and the trial court's finding that the plea appeared probable could not be sustained. Since the agreement was never terminated and never ripened into a sale deed, and the seller had shown neither a contractual right of forfeiture nor any loss, Saini was entitled to the refund.
His alternative claim for Rs 8.30 lakh, double the amount, failed on the same reasoning: a sum named in the contract is only the ceiling of reasonable compensation, and Saini had neither pleaded nor proved any loss beyond being deprived of his money, which the refund with interest compensated.
Order
The appeal was dismissed. The decree of 30 October 2019 stands: Anil Kumar must refund Rs 4,15,000 to Ram Pal Saini with interest at 6 per cent a year from 30 May 2013 until realisation, and the claim for specific performance of the agreement of 1 November 2007 remains dismissed. The pending applications were disposed of. The appeal was reserved on 6 August 2026 and pronounced on 16 October 2026.