Guriqbal Singh And Others v. Ravinder

[1]

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

i) RSA-1281-2026 Guriqbal Singh and others ...Appellants

Versus

Ravinder

...Respondent

ii) RSA-1349-2026 Guriqbal Singh and others ...Appellants

Versus

Ravinder

...Respondent

******

Reserved on: 30.04.2026

Pronounced on: 04.05.2026 Pronounced fully/opera6ve part: Fully ******

CORAM:

HON'BLE MR. JUSTICE DEEPAK GUPTA Argued by: Mr. Vikas Singh, Sr. Advocate with Mr. Harmeet Singh, Advocate and Ms. Anamika Sheoran, Advocate for the appellant.

Mr. Ashish Aggarwal, Sr. Advocate with Mr. Vishal Pundir, Advocate and Mr. Anmol Ra&an, Advocate for the respondent.

**** DEEPAK GUPTA, J.

The present two Regular Second Appeals arise out of a common judgment dated 20.01.2026 rendered by the learned first Appellate Court, whereby the judgment & decree dated 21.01.2020 passed by the learned Civil Judge (Senior Division), Karnal were set aside. 2.

By the judgment of the Trial Court, the suit filed by Ravinder (hereina5er referred to as "the vendee") seeking declara8on and recovery

[2] of earnest money was dismissed, whereas the suit filed by Guriqbal Singh and others (hereina5er referred to as "the vendors") for specific performance and consequen8al relief was decreed. The Appellate Court reversed the said findings, giving rise to the present appeals at the instance of the vendors.

3.

As it emerges on perusal of the record, the genesis of the dispute lies in an oral agreement to sell dated 06.06.2013, the terms whereof were reduced into wri8ng on 17.08.2013, whereby the vendors agreed to sell land measuring approximately 20.5 acres situated in village Munak, Sub Tehsil Ballah, District Karnal, to the vendee at the rate of ₹97,00,000/- per acre. An amount of ₹2 crores was admi&edly paid as earnest money. The date fixed for execu8on and registra8on of the sale deed was 06.12.2013.

4.

According to the vendee, the vendors represented themselves to be exclusive owners of the en8re land comprised in four Khewats as men8oned in the agreement and further assured that the land was free from all encumbrances. Ac8ng upon such representa8on, the vendee paid a substan8al amount of ₹2 crores. However, when he sought to verify the 8tle and revenue record, he was supplied only incomplete documents. Upon independently obtaining the Jamabandi shortly before the target date, he discovered that (i) the land was not confined to four Khewats but spread across several Khewats, (ii) there were mul8ple co-sharers, and (iii) parts of the land were mortgaged by some of the vendees and other cosharers with financial ins8tu8ons. On account of these facts, which according to him were concealed, he issued a legal no8ce dated 02.12.2013, prior to the target date, seeking refund of earnest money with interest and damages. When no payment was made, he ins8tuted a suit for declara8on that the agreement was void on account of fraud, and for recovery of ₹2,78,00,000/-.

5.

The vendors, on the other hand, took a categorical stand that

[3] the agreement was validly executed with full knowledge of the vendee. They asserted that they were co-sharers and competent to sell the agreed extent of land. It was further pleaded that a minor por8on of the land was under mortgage, but the same stood redeemed prior to the due date. The vendors alleged that they remained present before the Sub Registrar on 06.12.2013, 10.12.2013 and 23.01.2014, but the vendee failed to appear and perform his part of the contract. According to them, the vendee commi&ed breach and, therefore, the earnest money stood forfeited. On this premise, they filed a suit for specific performance and consequen8al injunc8on.

6.

Both suits were consolidated by the Trial Court. Necessary issues were framed and par8es led evidence in support of their respec8ve stands.

7.

The vendee Ravinder examined himself as PW1 and reiterated the allega8ons of fraud and concealment. He produced the agreement to sell (Ex.P1), legal no8ces and replies (Ex.P10 & P17), FIR and proceedings arising therefrom (Ex.P18 onwards), revenue records including Jamabandis (Ex.P57 to Ex. P68), and various bank documents (Ex.P41, Ex.P52, etc.) to establish that the land was encumbered and not exclusively owned by the vendors, as had been claimed by the vendors in the agreement. The tes8mony of PW2, an Agricultural Field Officer, and PW3, a Patwari, was relied upon to substan8ate the existence of mortgage and the nature of 8tle.

8.

On the other hand, one of the vendors Guriqbal Singh examined himself as DW1 and supported the case set up in the wri&en statement. Vendors also produced Jamabandis (Ex.D1, D2) to show ownership, bank cer8ficates (Ex.D3 to D10) to establish redemp8on of mortgage, and affidavits Ex.D11, D13, D15 evidencing their presence before the Sub Registrar on the relevant dates.

9.

The Trial Court, upon apprecia8on of the evidence, returned a

[4] finding that the vendee had failed to prove fraud or concealment. It held that the vendors were ready and willing to perform their part of the contract and that the vendee was in breach. Consequently, the suit filed by the vendee was dismissed and the suit filed by the vendors was decreed. 10.

However, the first Appellate Court, on re-appraisal of the en8re evidence, recorded contrary findings. It no8ced discrepancies in the descrip8on of property, existence of encumbrances, and absence of cogent proof of readiness and willingness on the part of the vendors. It further held that forfeiture of ₹2 crores was legally unsustainable. Accordingly, it set aside the decree for specific performance, and granted relief of recovery to the vendee.

11.

Assailing the aforesaid reversal, Learned senior counsel for the appellants-vendors contended that the Appellate Court misread the evidence and ignored material documents showing that the mortgage had been cleared before the due date. It was argued that the vendee had full knowledge of the nature of 8tle and that he failed to appear before the Sub Registrar despite repeated opportuni8es. It is contended that earnest money is liable to be forfeited, when the purchaser commits breach. 12.

Per contra, learned senior counsel for the respondent-vendee supported the judgment of the Appellate Court and argued that the vendors had suppressed material facts regarding 8tle and encumbrances. It was contended that the very founda8on of the contract was vi8ated by misrepresenta8on, and therefore, the vendee was jus8fied in seeking refund. It was further submi&ed that forfeiture of such a huge amount without proof of loss is impermissible in law. Reliance is placed on Moideenku y vs. Abraham George, 2026 AIR Supreme Court 162; and Kailash Nath Associates vs Delhi Development Authority, (2015) 4 SCC 136. 13.

Having heard learned counsel for the par8es and perused the record, this Court finds that the controversy mainly revolves around three issues: (i) whether there was concealment of material facts rela8ng to 8tle

[5] and encumbrances, (ii) whether the vendors proved their readiness and willingness, and (iii) whether forfeiture of earnest money was legally jus8fied.

14.

Concealment and nature of 8tle : A careful examina8on of the agreement to sell (Ex.P1) reveals that the property was described as falling within four specified Khewats, thereby conveying an impression that the vendors had a definite and iden8fiable 8tle over a consolidated parcel of land. However, the revenue record brought on record by the vendee, par8cularly the Jamabandis (Ex.P57 to Ex.P68), paints a materially different picture. The land in ques8on was, in fact, spread across mul8ple Khewats and was jointly held along with several co-sharers, who were not par8es to the agreement. This discrepancy is not merely a technical varia8on in descrip8on but goes to the root of the 8tle and the capacity of the vendors to convey the en8re agreed property.

15.

Further, the documentary evidence led by the vendee, including bank records and mortgage deeds (Ex.P41, Ex.P52 and connected documents), establishes that por8ons of the property were subject to subsis8ng encumbrances in the form of mortgages with financial ins8tu8ons. Although the vendors a&empted to explain that such mortgages were of a minor nature and were redeemed prior to the s8pulated date for execu8on of the sale deed, such an explana8on does not sa8sfactorily address the core issue, namely, the non-disclosure of these encumbrances at the 8me of entering into the agreement. The obliga8on of the vendor is not merely to clear encumbrances at a later stage but to make full and frank disclosure of all material facts affec8ng 8tle at the incep8on of the contract.

16.

The cumula8ve effect of these circumstances indicates that the vendee was not disclosed the complete and accurate informa8on regarding the 8tle of the property at the 8me, when he parted with a substan8al amount of ₹2 crores. The misdescrip8on of the extent and nature of

[6] ownership, coupled with the non-disclosure of encumbrances, materially affects the very founda8on of the agreement.

17.

It is a se&led proposi8on of law that suppression or concealment of material facts which have a direct bearing on the subject ma&er of the contract, vi8ates the transac8on and disen8tles the defaul8ng party from seeking equitable relief.

18.

In S.P. Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1, the Hon'ble Supreme Court held that a li8gant who approaches the Court with unclean hands and suppresses material facts is not en8tled to any relief, much less an equitable relief like specific performance. Similarly, in R.C. Chandiok v. Chuni Lal Sabharwal, (1970) 3 SCC 140, it was emphasized that a vendor seeking enforcement of an agreement must be in a posi8on to convey a clear, marketable and unencumbered 8tle. 19.

More recently, in Moideenku y vs. Abraham George (supra), the Hon'ble Supreme Court reiterated that concealment of a subsis8ng mortgage or defect in 8tle is a material circumstance which jus8fies refusal of specific performance and en8tles the vendee to seek refund of the advance amount.

20.

Applying the aforesaid principles to the facts of the present case, this Court finds that the vendors failed to establish that they had made a full and candid disclosure of all material aspects rela8ng to 8tle and encumbrances at the 8me of execu8on of the agreement. The discrepancies in the descrip8on of the property, the existence of co-sharers, and the presence of encumbrances, collec8vely establish that the vendee was induced to enter into the agreement without complete knowledge of essen8al facts.

21.

The finding recorded by the first Appellate Court that there was material non-disclosure on the part of the vendors is thus based on a correct apprecia8on of evidence and se&led legal principles. Consequently,

[7] the vendors, having failed to approach the Court with clean hands and being unable to show a clear and marketable 8tle at the relevant 8me, are not en8tled to the discre8onary relief of specific performance. 22.

Readiness and willingness: The obliga8on to establish con8nuous readiness and willingness to perform the contract squarely rests upon the party seeking specific performance. In the present case, the vendors have mainly relied upon affidavits purpor8ng to show their presence before the office of the Sub Registrar on the relevant dates. However, such affidavits, being self-serving in nature, cannot by themselves be treated as conclusive proof of readiness and willingness, par8cularly when the surrounding circumstances cast serious doubt on their capacity to perform their part of the contract, namely, to convey a clear and marketable 8tle.

23.

In N.P. Thirugnanam v. Dr. R. Jagan Mohan Rao, (1995) 5 SCC 115, the Hon'ble Supreme Court has authorita8vely held that readiness and willingness must be con8nuous, genuine and established by conduct of the party throughout. The requirement is not a mere formality, but a substan8ve condi8on precedent for grant of equitable relief of specific performance.

24.

Tested on the touchstone of the aforesaid principle, the conduct of the vendors in the present case does not inspire any confidence. The material on record reveals that prior to the s8pulated date for execu8on of the sale deed, the vendee, upon discovering discrepancies in the 8tle and existence of encumbrances, issued a legal no8ce dated 02.12.2013 (Ex.P2), clearly expressing his inability to proceed with the transac8on and calling upon the vendors to refund the earnest money. Significantly, despite receipt of the said no8ce, the vendors did not furnish any reply controver8ng the allega8ons regarding defec8ve 8tle or subsis8ng encumbrances. Instead, a5er the lapse of 8me, the vendors issued a subsequent no8ce dated 13.01.2014 (Ex.P10), calling upon the vendee to

[8] perform the agreement. This sequence of events assumes importance, as it reflects that the vendors failed to promptly address the objec8ons raised by the vendee with regard to 8tle and encumbrances, the issues which go to the root of the contract.

25.

The silence of the vendors in response to the no8ce dated 02.12.2013, followed by a delayed asser8on of readiness, undermines their plea of con8nuous readiness and willingness. Mere presence before the Sub Registrar, unsupported by proof of clear and marketable 8tle and unaccompanied by bona fide efforts to resolve the objec8ons raised, cannot sa8sfy the mandate of Sec8on 16(c) of the Specific Relief Act. 26.

In view of the above, this Court is of the considered opinion that the vendors have failed to establish their con8nuous readiness and willingness to perform their part of the contract. The findings recorded by the first Appellate Court on this issue are well-reasoned and in consonance with se&led principles of law, and therefore warrant no interference. 27.

Forfeiture of earnest money : The ques8on of forfeiture of earnest money in the present case assumes considerable significance, as the amount paid by the vendee is ₹2 crores, which cons8tutes a substan8al por8on of the total sale considera8on. Such a large sum cannot be treated as a nominal token or security deposit in the ordinary sense, and its forfeiture must, therefore, withstand strict scru8ny on the touchstone of se&led legal principles.

28.

It is by now well se&led that forfeiture of earnest money is not automa8c upon breach of contract and is subject to the overarching requirement of reasonableness and proof of loss. In Fateh Chand v. Balkishan Dass, AIR 1963 SC 1405, the Hon'ble Supreme Court held that a s8pula8on for forfeiture is in the nature of a penalty and that the party seeking to forfeit such amount must establish that reasonable compensa8on is jus8fied, which in turn must bear nexus with the loss suffered. The Court categorically observed that forfeiture cannot be

[9] enforced in terrorem.

29.

This principle has been reiterated and further clarified in Kailash Nath Associates v. DDA (supra), wherein it was held that in the absence of proof of actual loss or damage, forfeiture of earnest money is impermissible. The Supreme Court emphasized that even where a contract provides for forfeiture, such a clause cannot override the mandate of Sec8on 74 of the Indian Contract Act, 1872, which limits recovery to reasonable compensa8on.

30.

Similarly, in Sa5sh Batra v. Sudhir Rawal, (2013) 1 SCC 345, it was observed that earnest money can be forfeited only when it is a genuine pre-es8mate of damages and is reasonable in propor8on to the total considera8on. Where the amount is dispropor8onately large, the Court is duty-bound to examine its reasonableness.

31.

Applying the aforesaid principles to the facts of the present case, it is evident that the vendors have neither pleaded nor led any evidence to show that they suffered any loss on account of the alleged breach by the vendee. There is no material on record to show decrease in value of the property, loss of opportunity, or any other quan8fiable damage. In such circumstances, forfeiture of an amount as substan8al as ₹2 crores would be wholly arbitrary and in the nature of a penalty, which is impermissible in law.

32.

Moreover, the surrounding circumstances, as already discussed, indicate that the transac8on itself was clouded by issues rela8ng to 8tle and encumbrances. In such a situa8on, the vendors cannot be permi&ed to retain a dispropor8onately large sum under the guise of forfeiture, par8cularly when they themselves have failed to establish full compliance with their contractual obliga8ons. 33.

In view of the above discussion, this Court holds that the forfeiture of ₹2 crores by the vendors is legally unsustainable. The finding

[10] recorded by the first Appellate Court seSng aside the forfeiture is in consonance with the se&led principles governing Sec8on 74 of the Indian Contract Act and does not call for any interference. 34.

Conclusion : Consequent to en8re discussion as above, this Court is of the opinion that the findings recorded by the first Appellate Court are based on proper apprecia8on of evidence and se&led legal principles. No perversity or illegality has been shown so as to warrant any interference in exercise of jurisdic8on under Sec8on 100 CPC. 35.

Both the Regular Second Appeals are dismissed. The judgment and decree passed by the first Appellate Court are affirmed. The decree of the Trial Court gran8ng specific performance in favour of the vendors, stands set aside. The respondent-vendee shall be en8tled to a refund of earnest money in terms of the decree passed by the Appellate Court, along with such interest as awarded therein. No order as to costs. A photocopy of this order be placed on the file of connected case. 04.05.2026 (DEEPAK GUPTA) Yogesh JUDGE Whether speaking/reasoned:- Yes/No Whether reportable:- Yes/No Uploaded on: 04.05.2026