Mandatory refund of advance payments made subsequent to earnest money

Amounts paid as part payment towards sale consideration subsequent to the initial execution of an agreement to sell stand on a completely different legal footing than earnest money. Even where an agreement contains a clause permitting forfeiture of earnest money upon buyer default, additional part payments advanced later cannot be arbitrarily confiscated by the seller. The law mandates that any additional sum paid towards part performance of the contract must be refunded to the buyer upon failure of the transaction. Directing the refund of such post-agreement advance amounts alongside reasonable interest from the date of payment protects the buyer against unjust financial deprivation. Sellers have no legal or equitable right to retain part payment sums when the sale deed fails to materialize. Consequently, courts consistently enforce the refund of advance part payments as a fundamental element of contractual restitution. (Subhash Aggarwal v. Mahender Pal Chhabra & Anr. | 2026 INSC 11)