Buyer Not Entitled To Refund Of Earnest Money Once Sale Deed Is Duly Executed Under The Agreement: Calcutta High Court

"The plaintiff, thus, cannot be held to be entitled to refund of the earnest money paid in terms of the agreement, in view of a sale deed having duly been executed in terms of the same." Calcutta High Court, in a significant ruling, held that a plaintiff cannot claim a refund of earnest money advanced under a sale agreement once a registered sale deed has been executed in pursuance of that very agreement.

A division bench comprising Justice Sabyasachi Bhattacharyya and Justice Supratim Bhattacharya observed that variations in land record numbers or a mutually agreed reduction in the final sale consideration do not automatically render the sale deed a separate, unrelated transaction.

The dispute arose when the plaintiff filed a money suit to recover an earnest money advance of Rs. 5,46,000 paid toward a total agreed consideration of Rs. 19 lakh for a plot of land. The plaintiff alleged the defendant failed to execute the sale deed for the agreed property and instead sold a different plot. Conversely, the defendant claimed he was coerced into executing the sale deed for the agreed property at a reduced price of Rs. 14 lakh and filed a counter-claim for the balance amount. The Trial Court decreed the suit in favour of the plaintiff, holding that differing Khatian (land record) numbers meant the executed deed was for a separate property, while dismissing the defendant's counter-claim.

The primary question before the court was whether the executed sale deed pertained to the same property outlined in the initial agreement to sell. The court was also called upon to determine whether the plaintiff was entitled to a refund of the earnest money and if the defendant could claim the balance consideration based on alleged coercion.

Documentary Evidence Establishes Identity Of Property

The court scrutinised the registered sale deed and noted that the Trial Judge had completely overlooked its contents. The bench observed that the deed categorically explained how the property's previous Khatian numbers were subsequently mutated and recorded as the very Khatian number mentioned in the original sale agreement. The descriptive elements of the property, including the Mouza, Police Station, and District, were exactly identical in both the agreement and the deed.

Preponderance Of Probabilities Favours A Single Transaction

Rejecting the Trial Court's finding that a different plot was sold, the bench highlighted the close proximity between the execution of the agreement and the sale deed. The court observed that it was highly improbable for two entirely separate land transactions to occur contemporaneously between the same parties within a span of just 22 days, without any logical build-up or explanation from the plaintiff.

"Such turn of events compels this court to hold that preponderance of probabilities leans in favour of the fact the deed was in consonance with the agreement and not a separate transaction."

Reduced Consideration Does Not Vitiate The Deed

Addressing the discrepancy in the sale price, which dropped from the agreed Rs. 19 lakh to Rs. 14 lakh in the final deed, the court clarified that this alone does not sever the connection between the agreement and the registered document. The bench held that parties are entirely at liberty to renegotiate and settle on a lower sale price prior to registration.

"However, the parties might very well have agreed to a lesser amount and such fact, ipso facto, does not vitiate the deed being executed in pursuance of the agreement in question."

Absence Of Foundational Proof For Coercion

While overturning the decree in favour of the plaintiff, the High Court upheld the dismissal of the defendant's counter-claim for the balance consideration. The bench found that the defendant failed to adduce any independent evidence to substantiate the severe allegation that he was coerced into signing the sale deed at a reduced price.

"The presumption that the parties entered into the sale transaction of September 24, 2012 of their own volition could not be dislodged by the defendant/appellant by adducing any independent evidence whatsoever."

The High Court allowed the primary appeal, setting aside the Trial Court's judgment and dismissing the plaintiff's money suit for the refund of the earnest money. Simultaneously, the court dismissed the connected appeal, affirming the lower court's decision to reject the defendant's counter-claim due to a complete lack of evidentiary proof.

Date of Decision: 21 July 2026