The top court stated that courts cannot suo moto grant a refund of earnest money and held that the decree granted by the courts below was hinged on a logical fallacy wherein the Appellants were held to be unjustly enriched on the premise that the contract was rendered impossible to perform due to acquisition proceedings.
On the contrary, the contract automatically stood terminated as per the stipulated contractual terms and the Sale Agreements should have been rightly held to be terminated instead of being declared impossible to perform.
The Hon’ble Supreme Court judges highlighted that it is difficult to accept that the courts would suo moto grant the refund of earnest money irrespective of the fact as to whether Section 22(2) of the SRA Act is to be construed as directory or mandatory in nature. During the entirety of proceedings, the forfeiture was justified and within the confines of reasonable compensation as per Section 74 of the Indian Contract Act,1872 illustrated by the SC.
Firstly, the nature of forfeiture was never contested by the Respondent, and secondly, the Respondent never prayed for the refund of earnest money. Consequently, the judgments rendered by the Courts deserved to be set aside and the suit was liable to be dismissed.