The Supreme Court of India has ruled that the presence of a clause providing for the refund of earnest money or the absence of an express clause for court enforcement does not bar a decree for specific performance under the Specific Relief Act, 1963. A division bench of Justice K.V. Viswanathan and Justice Alok Aradhe set aside a decision of the High Court of Punjab & Haryana, emphasizing that a High Court in a second appeal under Section 100 of the Code of Civil Procedure (CPC) cannot interfere with concurrent findings of fact unless they are perverse or completely lacking in evidentiary support.
Background of the Case
The dispute arose from an Agreement to Sell executed on June 22, 2003, between the appellant (plaintiff), Jaspal Singh, and the respondent (defendant), Ashwani Kumar. The respondent, a co-owner of a 12-marlas plot of land with a factory in village Gowar/Gohwar, Tehsil Phillaur, District Jalandhar, Punjab, agreed to sell his half share to the appellant for Rs. 12,50,000. At the execution of the agreement, the appellant paid Rs. 9,00,000 as earnest money. The agreement set June 22, 2004, as the date for executing the Sale Deed, adding that if execution failed for any reason, the respondent would refund the earnest money.
By mutual consent, the timeline was extended twice through subsequent agreements dated June 21, 2004, and July 21, 2004. The third agreement recorded an additional payment of Rs. 60,000 and extended the execution deadline to January 22, 2005. While the appellant appeared before the Sub-Registrar on January 20 and 24, 2005 (the intermediate dates being a holiday and a weekend), the respondent failed to appear. In 2006, the appellant filed a suit for specific performance, with an alternative prayer for the recovery of Rs. 19.20 lakh.
The respondent resisted the suit, claiming he never executed the agreements. He asserted that his signatures were obtained on blank papers as collateral security for a travel arrangement to go abroad through an agent associated with the appellant.
The Trial Court found the execution of the agreement and its extensions proved, and accepted that the appellant was ready and willing to perform his obligations. However, it declined specific performance on the ground that the agreement did not provide for enforcement through court but only for the refund of earnest money. It ordered the recovery of Rs. 9 lakh with interest.
The First Appellate Court reversed this finding, decreeing specific performance. It held that the absence of an express clause enabling court enforcement did not bar relief, and that the agreements showed a continuing intention of the parties to complete the sale. Following this decree, the Sale Deed was executed on April 29, 2013, and possession of the property was delivered to the appellant.
However, in a Second Appeal, the High Court of Punjab & Haryana set aside the First Appellate Court’s decree and restored the Trial Court’s refund order. The High Court reasoned that the appellant had suppressed receiving a separate payment of Rs. 2,00,000 (which was encashed via a cheque from the respondent on March 11, 2004). It concluded that the repeated extensions and the absence of a specific performance clause showed that the transaction was not genuine. The High Court subsequently dismissed a review petition filed by the appellant.
Arguments of the Parties
Counsel for the appellant, Shri R.K. Kapoor, argued that the Second Appeal had become infructuous since the Sale Deed had already been executed and possession delivered under the First Appellate Court’s decree. He submitted that the High Court erred in finding that the lack of an express enforcement clause barred specific performance, and described the High Court’s findings on the travel arrangement transaction as perverse.
Counsel for the respondent, Ms. Nina R. Nariman, contended that execution proceedings remain subject to the outcome of the appeal. She argued that specific performance is an equitable and discretionary relief, meaning the courts must weigh the conduct of the parties. She highlighted the joint ownership of the property, the long extensions, and the appellant’s suppression of the Rs. 2,00,000 cheque as factors making the grant of specific performance inequitable.
The Court’s Analysis
The Supreme Court examined two primary issues: the scope of interference with findings of fact in a second appeal, and whether a refund clause bars specific performance.
On the scope of Section 100 CPC, the Court reiterated that the First Appellate Court is the final court of fact. Referencing long-standing legal principles dating back to the 1962 ruling in Sir Chunilal v. Mehta & Sons, Ltd. v. Century Spinning & Manufacturing Co. Ltd., and subsequent rulings like Kondiba Dagadu Kadam v. Savitribai Sopan Gujar and Jaichand v. Sahnulal, the Court noted that a finding of fact will not be disturbed in a second appeal unless it is vitiated by perversity. The High Court, despite not upsetting the concurrent findings on the execution of the agreement and the appellant’s readiness, impermissibly reassessed the circumstances to reach a contrary conclusion.
On the question of specific performance, the Supreme Court analyzed Section 23 of the Specific Relief Act, 1963. The Court observed that:
“a contract otherwise proper to be specifically enforced may be so enforced notwithstanding that a sum is named in it as payable in the event of breach, unless the court is satisfied, having regard to the terms of the contract and the attending circumstances, that the sum was named only to give the defaulting party an option of paying money in lieu of performance and not merely to secure performance.”
Referring to its prior decisions in M.L. Devender Singh v. Syed Khaja and Kamal Kant Jain v. Surinder Singh, the Court reiterated that “a party in breach cannot resist specific performance merely on the ground that the agreement contains no express stipulation for that relief”.
Applying this to the agreement in question, the Supreme Court observed:
“The clause records no more than bare consequence flowing from non-execution of the Sale Deed; the stipulation for refund operates as a deterrent reinforcing the obligation to perform, and not as a substitute for it.”
The Court held that the High Court erred in treating the omission of the Rs. 2,00,000 cheque transaction as proof of fraud. While the omission may bear on credibility, the respondent failed to produce positive proof linking the cheque to the alleged travel visa fraud. The respondent also failed to examine any handwriting experts to prove that the agreement was superimposed on blank sheets of paper, and under Sitaram Motilal Kalal v. Santanuprasad Jaishankar Bhatt, the admission of signatures amounts to an admission of the facts in the document.
The Supreme Court also rejected the High Court’s view that the joint ownership of the property cast suspicion on the transaction, stating:
“A co-owner’s undivided share in immovable property is a valid and marketable subject matter of transfer, and an Agreement to Sell such a share cannot be viewed with suspicion merely because the vendor’s co-sharer brother was not made a signatory.”
Citing Sidheshwar Mukherjee v. Bhubneshwar Prasad Narain Singh, M.V.S. Manikayala Rao v. M. Narasimhaswami, and Ramdas v. Sitabai, the Court noted that the transfer of an undivided share is fully enforceable, with the buyer’s remedy lying in a suit for partition. Lastly, the Court found that the seven-month extension timeline was entirely reasonable and did not indicate a sham transaction.
Decision of the Court
The Supreme Court held that the High Court had transgressed its jurisdiction under Section 100 CPC by reversing findings of fact without recording any finding of perversity. It ruled that the refund clause did not operate as a bar to a decree for specific performance.
Consequently, the Supreme Court allowed the appeals, quashed and set aside the High Court’s judgment dated February 8, 2019, and its review order dated July 10, 2019, and restored the First Appellate Court’s decree of specific performance in favor of the appellant. There was no order as to costs.
Case Details:
Case Title: Jaspal Singh Versus Ashwani Kumar
Case No.: Civil Appeal Nos. 2448-2449 of 2023
Bench: Justice K.V. Viswanathan, Justice Alok Aradhe
Date: July 14, 2026
