Brief Overview:

A clause requiring refund of earnest money if sale deed is not executed does NOT give the seller an option to walk away, buyer’s right to seek specific performance survives.

Technical Details:

Does a refund clause give the seller a way out?

The Supreme Court answered in negative, holding that:

1)       Refund is not an exit route: earnest-money refund clause does not bar specific performance unless it clearly gives the seller a contractual option to pay and walk away.

2)       Second Appeal is not a retrial: Under Section 100 CPC, concurrent factual findings cannot be reopened unless perversity, misreading of evidence, or a substantial question of law is shown.

3)       Fraud must be proved: Extensions of time or collateral money dealings cannot defeat a proved sale agreement without positive evidence of fraud.

4)       Undivided shares can be sold: A co-owner’s undivided share is transferable; partition, not invalidation, is the usual remedy for enjoyment.

Takeaways:

1)       A refund clause is not a seller’s escape clause. Unless the agreement clearly makes refund the sole remedy, specific performance can still be ordered.

2)       Second Appeal is not a second chance. Concurrent findings cannot be disturbed merely because another view is possible.

3)       For drafting, say it expressly. If parties want damages/refund to replace performance, the contract must leave no ambiguity.

For further details, please see:

32126_2019_5_1501_71999_Judgement_14-Jul-2026.pdf

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