Stranger to the Contract Cannot Claim Earnest Money – Punjab & Haryana High Court

“There is nothing on the record to even remotely suggest that the plaintiff-appellant was ever associated with the agreement to sell” –  In a judgment Punjab & Haryana High Court dismissed a second appeal filed under Section 100 of the Code of Civil Procedure, reaffirming that a person not party to a registered agreement to sell cannot seek relief of declaration or recovery of earnest money under the Specific Relief Act, 1963, in the absence of cogent proof of consideration or contractual connection.

Justice Alka Sarin, while upholding the concurrent findings of the Trial Court and First Appellate Court, observed: “In the absence of any cogent and reliable evidence to prove the case set-up by the plaintiff-appellant, no fault can be found with the judgments and decrees passed by both the Courts.”

“No Substantial Question of Law When Findings Are Based on Pure Facts and Bank Records” – High Court Rejects Section 100 CPC Invocation

The appeal was filed by Vinod, who claimed that although the registered agreement to sell dated 14.10.2011 named Respondent No.1 (Ramesh Kumar Bisla) as the purchaser, he himself was the real buyer and had paid ₹46,85,625 in cash towards earnest money. He alleged that he had inserted the respondent’s name in the agreement “in good faith,” relying on a promise that the money would be returned.

However, both the Trial Court (05.01.2022) and the First Appellate Court (23.05.2022) held that the agreement to sell (Ex.P1) explicitly showed respondent no.1 as the purchaser, and the bank records (Ex.DW3/1 and Ex.DW3/2) established that the payment was made by respondent no.1 using funds withdrawn from his and his wife’s accounts.

Dismissing the appeal, Justice Alka Sarin held: “Both the Courts concurrently found that the agreement to sell records the name of the defendant-respondent No.1 as the buyer… No question of law, much less any substantial question of law, arises.”

“Being the Alleged Source of Money Is Not Enough – Legal Identity in the Agreement is What Governs the Transaction”

Vinod’s entire claim was premised on the assertion that although his name was not on the agreement, he had financed the deal. He argued that Ramesh Kumar Bisla was never involved and that the sale deed was wrongly executed in Ramesh’s favour, thereby depriving him of both the property and the money.

However, the Court found this assertion completely unsupported by evidence. The plea that the plaintiff “inserted the name of respondent no.1 in good faith” was rejected by both lower courts, and this rejection was upheld by the High Court:

“The plaintiff-appellant failed to produce any evidence to support the case as set up in the plaint… Even remotely, nothing on the record suggests that the plaintiff was part of the agreement.”

This ruling underscores a fundamental principle of contract law: a person who is not a party to a contract has no locus to sue under it, especially when the written document and supporting bank records clearly affirm otherwise.

“No Fraud, No Concealment, No Claim – Attempt to Bypass Registered Sale Transaction Rightly Rejected”

The defendant–respondent no.1 (Ramesh Kumar Bisla) and the seller-respondents (Nos.2 to 5) maintained that the agreement was directly between them. Respondent no.1 also stated that the plaintiff had merely acted as his agent in facilitating the transaction. The sale deed was later executed in favour of M/s. UV3 Landbase Pvt. Ltd., as a nominee of Ramesh Kumar Bisla, upon full payment of balance consideration.

Justice Sarin noted that the plaintiff had not approached the Court with clean hands, had failed to join necessary parties appropriately, and could not establish any enforceable right either through contractual documents or financial records.

“Learned counsel for the plaintiff-appellant has not been able to point out any evidence to even remotely suggest that the plaintiff was ever a part of the agreement to sell or had paid any part of the consideration amount.”

No Contractual Standing, No Recovery of Earnest Money or Declaratory Relief

The High Court concluded that the appeal was devoid of merit and that no substantial question of law had been raised for consideration under Section 100 CPC. The attempt to bypass a formal and registered transaction through vague assertions of oral arrangements and “good faith” insertions was summarily rejected.

“The appeal being devoid of any merit is accordingly dismissed.”

With this ruling, the High Court has reaffirmed the inviolability of written contracts and the limited scope of interference under second appeal, especially where concurrent findings of fact are based on documentary and financial evidence.

Date of Decision: 09.09.2025