A contractual clause stipulating refund of earnest money upon non-execution of a sale deed does not, by itself, bar a decree for specific performance under Section 23 of the Specific Relief Act, 1963, unless the agreement clearly confers upon the defaulting party an option to substitute payment in lieu of performance. Further, in a second appeal under Section 100 CPC, the High Court cannot reappreciate evidence or disturb concurrent findings of fact in the absence of perversity or a substantial question of law. 2026 INSC 700

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Specific Relief Act, 1963 – Section 23 – Agreement to Sell – Earnest Money Clause – Code of Civil Procedure, 1908 – Section 100 – Second Appeal – Whether a clause providing for refund of earnest money in the event of non-execution of the sale deed bars a decree for specific performance? – Held, No.

The appellant entered into an Agreement to Sell immovable property, paid substantial earnest money, and the parties twice extended the date for execution of the sale deed. The Trial Court found that the agreement was genuine and that the purchaser was always ready and willing to perform his part of the contract, but refused specific performance on the ground that the agreement merely provided for refund of the earnest money if the sale deed was not executed. The First Appellate Court reversed the decree and granted specific performance. In second appeal, the High Court, while affirming the concurrent findings regarding execution of the agreement and the purchaser's readiness and willingness, restored the Trial Court's decree by holding that the agreement did not contemplate specific performance and by drawing adverse inferences from collateral circumstances. Whether an earnest money clause providing for refund of the advance excludes the remedy of specific performance, and whether the High Court could reappreciate concurrent findings of fact in second appeal? – Held, No.

The Supreme Court held that Section 23 of the Specific Relief Act expressly permits specific performance notwithstanding a contractual stipulation for payment or refund of money upon breach, unless the contract clearly confers an option on the defaulting party to substitute payment in place of performance. A clause requiring refund of earnest money merely secures performance and does not confer an option to avoid the contract. The agreement contained no language enabling the vendor to discharge his obligation by refunding the advance. The High Court further exceeded the limited jurisdiction under Section 100 CPC by reappreciating evidence and disturbing concurrent findings of fact without recording any finding of perversity. Once execution of the agreement, payment of consideration, and the purchaser's readiness and willingness stood concurrently established, the High Court could not revisit those findings by relying upon collateral circumstances or fresh factual inferences. The decree for specific performance granted by the First Appellate Court was accordingly restored.

Ratio Decidendi

A contractual clause stipulating refund of earnest money upon non-execution of a sale deed does not, by itself, bar a decree for specific performance under Section 23 of the Specific Relief Act, 1963, unless the agreement clearly confers upon the defaulting party an option to substitute payment in lieu of performance. Further, in a second appeal under Section 100 CPC, the High Court cannot reappreciate evidence or disturb concurrent findings of fact in the absence of perversity or a substantial question of law.