Court Cannot Suo Motu Grant Refund of Earnest Money in Specific Performance Suits Absent Specific Pleading

In brief

The question

1. Whether the suit was barred by the law of limitation under Article 54 of the Limitation Act, 1963

The court held

The Court allowed the appeal and set aside the refund order

It also directed

The suit was within limitation due to the novation of the contract

A decree for refund of earnest money cannot be granted unless specifically pleaded in the plaint as per Section 22(2) of the SRA

General prayers for "any other relief" or equitable considerations of "unjust enrichment" cannot bypass the mandatory requirement of a specific prayer for refund. The suit was dismissed in its entirety.

01Facts

The Plaintiff/Respondent entered into an Agreement to Sell (ATS) with the Defendant/Appellant (owner) on 23.09.2011 for a property in Laxmi Nagar for ₹61,00,000

p. 2

Disputes arose regarding title documents, leading to a fresh ATS on 07.08.2013 with a revised consideration of ₹79,00,000, acknowledging a previous payment of ₹17,00,000

p. 3, 22

The Plaintiff failed to prove his readiness and willingness to pay the balance by 05.09.2013

pp. 3-4, 10

The Trial Court dismissed the Plaintiff’s suit for Specific Performance but suo motu ordered the Defendant to refund the ₹17,00,000 earnest money with 8% interest

pp. 1-2, 11

The Defendant appealed this refund order and the finding on limitation

pp. 11-12

02Issues

i.1. Whether the suit was barred by the law of limitation under Article 54 of the Limitation Act, 1963

Issue 3 · p. 9 · ¶ 72

ii.2. Whether the Court can grant a refund of earnest money under Section 22 of the Specific Relief Act, 1963, in the absence of a specific prayer in the plaint

¶ 52-53

iii.3. Whether the principle of equity and "broad justice" can override express statutory provisions regarding refund of earnest money

¶ 92, 104

03Law Applied

Section 62 of the Indian Contract Act, 1872 regarding Novation, where a new contract substituted for an old one discharges the original

¶ 84-85

Article 54 of the Limitation Act, 1963, setting a three-year window from the date fixed for performance

¶ 88

Section 22 of the Specific Relief Act, 1963, which mandates that no relief for refund of earnest money shall be granted unless "specifically claimed," though it allows for amendment at any stage

¶ 55-57

Precedents included Desh Raj v. Rohtash Singh (2023) and K.R. Suresh v. R. Poornima (2025), establishing that a prayer for refund is a sine qua non for such a decree.

¶ 58, 61

Provisions in the judgment · 11 · Linked ones open on LawLens

Code of Civil Procedure, 1908 Section 96 Section 7 Section 41

Specific Relief Act, 1963 Section 16 Section 20 Section 21 Section 22 Section 23

Code of Criminal Procedure, 1973 Section 156

Limitation Act, 1963 Section 1

Indian Contract Act, 1872 Section 62

04Reasoning

The High Court first determined that the 2013 Agreement was a novation because it fundamentally altered the price and terms without referencing the 2011 Agreement; thus, the suit filed in 2016 was within the three-year limit from the 2013 performance date

¶ 82, 87, 89

Regarding the refund, the Court noted that the Plaintiff’s prayer only sought Specific Performance and Permanent Injunction, with no alternative prayer for refund

¶ 54, 67

Applying Desh Raj and K.R. Suresh, the Court held that Section 22(2) of the SRA is an absolute statutory bar that prevents courts from granting refund suo motu

¶ 59, 65

The Court rejected the Trial Court's use of "equity" to order a refund, reasoning that equity follows the law and cannot override the express statutory requirement of Section 22(2)

¶ 98, 108

Since the Plaintiff never amended his plaint to include a refund claim, even at the appellate stage, the relief was legally impermissible

¶ 67-68