K.R. Suresh vs R. Poornima & Ors.

Held: No perversity or illegality in the impugned judgment – Amount termed as “advance money” in the agreement for sale-ATS, was essentially “earnest money” – It was in the nature of a guarantee for the due performance of the contract – It was liable to be forfeited in the event that the transaction fell through by reason of the default on part of the purchaser – Inclusion of the forfeiture clause in the ATS was intended to bind the contracting parties and ensure the due performance of the contract – This is particularly significant given the stipulated four-month period for completing the sale transaction and the primary object of executing the ATS, being the urgency of the respondent-owners which was known to the appellant – Findings of the courts below affirming that time was of the essence, further substantiates the said intent – Stipulated amount under the ATS was in the nature of an earnest money deposit and thus, s.74 of the 1872 Act cannot apply to the same – Forfeiture clause was fair and equitable rather than one-sided and unconscionable, as it imposed liabilities on both the parties – Forfeiture of advance money by the respondent was lawful and justified as there was breach of contract by the appellant, which led to financial losses to the respondents – Furthermore, as regards the refund of earnest money, u/s.22(1)(b) it is not a relief that automatically flows from a decree for specific performance of a sale agreement and must, thus, be explicitly sought – No such application for an amendment of the plaint moved before the courts below, appellant never prayed for the refund of the advance money – Law aids the vigilant, not those who sleep over their rights – Contract Act, 1872 – s.74. [Paras 31, 37, 40-42, 61-65] Specific Relief Act, 1963 – s.22 – Alternative relief of refund of earnest money u/s.22 – When:

Held: Plaint may be amended at any stage of the proceedings to enable the plaintiff to seek an alternative relief, including that of refund of earnest money, and the courts have been vested with wide judicial discretion to permit such amendments – However, u/s.22 courts cannot grant such relief suo moto, since the inclusion of the prayer clause remains sine qua non for the grant of such relief – When an “appropriate case” exists for seeking the said relief under this provision, it must be specifically sought either in the original plaint or by way of an amendment. [Para 58] Contract – Agreement of sale – Forfeiture of advance money – Difference between “advance money” and “earnest money”: Held: Terms “advance money” and “earnest money” are often used interchangeably – Word “advance” means money in whole or in part, forming the consideration of an agreement paid before the same is completely payable – Word “earnest” stands for a sum of money given for the purpose of binding a contract, which is forfeited if the contract does not go off and adjusted in price if the contract goes through. [Paras 30-31]