Earnest money cannot be forfeited without contractual authority and proof of loss.

The parties executed an agreement to sell dated 1 November 2007 for a property in Shalimar, Delhi, for ₹30,00,000.

The plaintiff paid ₹4,15,000 in earnest money and part-payments.

He sought specific performance, or alternatively double the amount paid.

The defendant pleaded that the plaintiff had terminated the agreement in January 2012 and lacked funds to complete the purchase.

The trial court rejected specific performance for failure to prove readiness and willingness, but ordered refund of ₹4,15,000 with 6% interest.

The plaintiff appealed, seeking specific performance; he did not challenge the refund relief.

1. Whether the plaintiff proved that he was continuously ready and willing to perform his obligations under the agreement and was therefore entitled to specific performance

2. Whether the alleged litigation, lack of mutation, and the defendant’s delayed recovery of possession prevented or postponed performance of the agreement

3. Whether the defendant could retain the ₹4,15,000 paid, or whether the plaintiff was entitled to double that amount

Section 16(c) of the Specific Relief Act, 1963 requires a plaintiff seeking specific performance to plead and prove readiness and willingness throughout the relevant period.

Readiness concerns financial capacity; willingness is assessed from conduct.

The purchaser need not prove possession of ready cash, but must establish financial capacity through evidence; a self-serving assertion is insufficient [*Syed Dastagir v. T.R. Gopalakrishna Setty*, (1999) 6 SCC 337; *Raghunath Rai v. Jageshwar Prashad Sharma*, (1999) 50 DRJ 751; *Baldev v. Bhule*, (2012) 132 DRJ 247].

Section 22 permits a claim for refund of earnest money or deposit when specific performance is refused.

Under Sections 73 and 74 of the Contract Act, 1872, forfeiture or stipulated compensation is not automatic: compensation requires legal injury, and where loss is capable of proof it must be proved.

Section 74 applies to forfeiture of earnest money [*Fateh Chand v. Balkishan Das*, (1964) 1 SCR 515; *Kailash Nath Associates v. Delhi Development Authority*, (2015) 4 SCC 136].

The court found that the probate appeal had been dismissed on 14 December 2010 and the Letter of Administration issued in February 2011, removing the asserted legal impediment to completing the sale.

The agreement also did not make the defendant’s recovery of possession a precondition to execution of the sale deed.

Despite this, the plaintiff produced no evidence of requests for execution or of his financial capacity during the relevant period; his bank statement covered only May–June 2013, after the suit was instituted.

His payments in instalments and unexplained delay further failed to establish readiness and willingness.

The court therefore upheld refusal of specific performance.

However, the alleged termination by the plaintiff was unsupported by evidence, and the defendant proved neither a contractual right to forfeit the payments nor any loss from the plaintiff’s default.

The plaintiff was consequently entitled to a refund, but not double the amount, as no additional loss was proved.

It also held that the defendant could not retain the ₹4,15,000 received under the agreement, but that the claim for double that amount was unproved.

The appeal was dismissed, leaving in force the decree for refund of ₹4,15,000 with interest at 6% per annum from 30 May 2013 until realization.