SUPREME COURT HOLDS THE BUYER ENTITLED TO REFUND OF DOUBLE THE ADVANCE AMOUNT, AS THE SELLER FAILED TO EXECUTE SALE DEED WITHIN THE STIPULATED TIME

Recently, a two Judge Bench of the Supreme Court comprising of Justice M.R. Shah and Justice C.T. Ravikumar passed a judgment dated 28.04.2023 in T.D. Vivek Kumar & Anr.  v. Ranbir Chaudhary in Civil Appeal Nos. 2514-2516 of 2023, and observed that in terms of the sale agreement executed between the buyer and the sellers, the buyer would be entitled to get twice the amount given as an advance, as the seller failed to execute the sale deed within the prescribed time mentioned under the sale agreement.

FACTS

1) A “Sale Agreement” dated 18.07.2004 was entered into between the Appellant No. 2 – Seller through his Attorney, the Appellant No. 1 and the Respondent – Buyer for sale of a property (Property) for a consideration of Rs. 17,61,700/-. The date for execution and registration of Sale Deed was tentatively fixed as 18.09.2004. A total amount of Rs. 2,00,000/- was paid as an advance money by the Respondent-Buyer (Advance). However, the Appellants – Original Defendants / Sellers failed to execute the Sale Deed in the prescribed time.

2) Thus, the Respondent – Original Plaintiff / Buyer instituted a Civil Suit in the Court of Additional Civil Judge (Senior Division), Faridabad (Trial Court), seeking specific performance of the Sale Agreement and relief of injunction.

3) The Ld. Trial Court, vide Order dated 16.01.2010, (i) refused to pass a Decree for specific performance of the Sale Agreement, (ii) however, the Appellant-Seller(s) was directed to refund Rs. 4,00,000/- to the Respondent-Buyer i.e., double the Advance amount paid by the Plaintiff under the Sale Agreement.

4) Aggrieved, the Respondent – Buyer filed an Appeal before the First Appellate Court, which dismissed the said Appeal, seeking specific performance of the Sale Agreement.

5) Aggrieved, the Respondent – Buyer preferred a Regular Second Appeal No. 596 / 2012 and a Cross Objection bearing XOBJ / 10 / 2010, before the Punjab and Haryana High Court, seeking specific performance of the Sale Agreement.

6) The High Court vide, Order dated 27.07.2016, allowed the Second Appeal and Cross Objection and thereby, overturned the judgments of the Ld. Trial Court and the First Appellate Court and consequently, granted the relief of specific performance of the Sale Agreement in favor of the Respondent – Buyer on the ground that he was ready and willing to perform his part of the Sale Agreement.

7) Aggrieved by the High Court Order dated 27.07.2016, the Appellant-Seller(s) filed a Review Application No. 149- C/2016 before the High Court against the grant of relief of specific performance of the Sale Agreement, which was dismissed, vide Order dated 26.10.2018.

REASONING AND ANALYSIS

Aggrieved by the High Court Orders dated 27.07.2016 and 26.10.2018, the Appellant – Seller moved the Supreme Court under Article 133 of the Constitution of India (Appeals to the Supreme Court in Civil Matters) and thereby challenged the grant of relief of specific performance of the Sale Agreement in favor of the Respondent-Buyer.

The Apex Court passed a Judgment dated 28.04.2023 in Civil Appeal No. 2514-2516 of 2023 and observed as follows:

(i) “As per clause 2 of the sale agreement, if the second party fails to pay the balance amount within stipulated time, the advance will be forfeited and if the seller fail or refuse to execute the sale deed and other necessary document in favour of the purchaser/buyer or in the name of his nominees within the stipulated time, the seller will be responsible to pay double the amount given as an advance. It cannot be disputed that the plaintiff being a party to the agreement to sell is bound by the terms and conditions stipulated in the sale agreement.”

(ii) Accordingly, the Bench held that as the Appellant – Seller failed to execute the Sale Deed within the stipulated time, thus, the Respondent – Buyer would be entitled to refund of double the Advance amount paid to the Appellant-Seller in accordance with Clause 2 of the Sale Agreement and not grant of relief of specific performance.

(iii) Further, the Bench observed that the High Court passed the Impugned Orders dated 27.07.2016 and 26.10.2018 without even framing the substantial question(s) of law, which is required to be framed under Section 100 of the Civil Procedure Code, 1908. Hence, the said High Court Orders were held unsustainable.

Conclusion

Thus, based on the aforesaid observations, the Supreme Court upheld the Ld. Trial Court and First Appellate Court’s Judgments that refused to grant the relief of specific performance of the Sale Agreement and only allowed refund of double the Advance amount payable to the Respondent-Buyer. As a result, the Appeals filed by the Appellant-Seller(s) were allowed and the High Court Impugned Orders dated 27.07.2016 and 26.10.2018 were set aside.

Devashish Kakkar

Legal Associate

The Indian Lawyer