The Aurangabad Bench of the Bombay High Court has upheld a directive requiring Khandesh Gosevashrmantatgat Goshala, a public charitable trust, to refund ₹2,00,000 in earnest money. The court ruled that a seller cannot forfeit deposits when their own failure to provide clear title documents stalls a property transaction. In a judgment delivered on January 29, 2026, Mehroz K. Pathan, J.
dismissed the second appeal filed by the Khandesh Gosevashrmantatgat Goshala trust and its officials, including Secretary Balmukund Shriram Poddar and Vice President Radheshyam Shriram Poddar, following a two-decade legal battle over land in the Dhule district.
Decades-Long Legal Battle Over Dhule Property
This enduring dispute originated from the proposed sale of 71 R land within Survey No.483/A/1 on Agra Road, Dhule. The Khandesh Gosevashrmantatgat Goshala, a public charitable trust, had advertised the property for sale, leading to the Late Sau. Taisaheb Sunanda Gopalrao Kele Mahila Nagari Sahkari Patsanstha Maryadit Dhule, a cooperative credit society, submitting the highest bid.
The cooperative society deposited an earnest amount of ₹2,00,000 with the trust on January 23, 2002, as part of the agreement. However, the transaction soon encountered significant hurdles, setting the stage for a protracted legal conflict that has now reached a definitive conclusion from the High Court.
The Pivotal Problem of Property Title
Central to the entire dispute was the issue of clear property title. On August 30, 2002, a notice published in the daily newspaper Dainik Aapla Maharashtra prompted an objection from Babulal Shaligram Bhartia.
Bhartia asserted that the trust lacked proper title, rights, or interest in the property, thereby questioning its authority to sell the land. This objection immediately cast a shadow over the legitimacy of the proposed sale.
Trust’s Failure to Provide Documents
The plaintiff cooperative society, represented by its Secretary and Manager Smt. Bharti Hemant Joshi, subsequently issued a notice on October 25, 2002. This notice formally requested the trust to produce the necessary title documents for Survey No.483/A/1.
However, the trust, through its Chairman (defined as Defendant No.2 in the court documents), chose not to comply. Instead, on November 30, 2002, the trust informed the plaintiff that the ₹2,00,000 earnest amount had been forfeited.
This refusal and unilateral forfeiture became a key point of contention. The cooperative society maintained its readiness and willingness to perform its part of the contract, but argued it couldn’t proceed without clear title. They sought to recover the forfeited amount with interest.
Objections Before the Charity Commissioner
Adding another layer of complexity, Babulal Shaligram Bhartia also raised objections before the Charity Commissioner. This indicated a failure by the Khandesh Gosevashrmantatgat Goshala to secure the necessary permission for the sale from the Charity Commissioner, which is crucial for public charitable trusts.
Such a procedural misstep further undermined the trust’s position and its claim to validly sell the land. The confluence of a title dispute and missing regulatory approvals made the transaction unviable despite the cooperative society’s clear intent.
Procedural History and Key Rulings
The journey through the Indian judicial system spanned nearly two decades, involving multiple courts and appeals. The cooperative society initially filed Regular Civil Suit No. 16 of 2005 (later renumbered as Regular Civil Suit No. 25 of 2012) seeking the refund of their earnest money.
The trial court, the 2nd Joint Civil Judge, Senior Division, Dhule, ruled in favor of the cooperative society on March 26, 2012. This judgment determined that the plaintiffs were indeed ready and willing to perform, and thus, the forfeiture was invalid.
Appellate Court Affirms Trial Court Decision
Aggrieved by the trial court’s decision, the Khandesh Gosevashrmantatgat Goshala filed an appeal before the Adhoc District Judge-2, Dhule, registered as Regular Civil Appeal No. 236 of 2012. The appellate court, in its judgment dated January 3, 2018, upheld the trial court’s findings.
It reiterated that the cooperative society had complied with its obligations, including issuing notices for documents and expressing readiness, while the trust failed to provide clear title. This consistent appellate finding reinforced the initial decision against the trust.
Supreme Court Precedent on Earnest Money
The Bombay High Court, in its latest ruling, referenced significant Supreme Court precedents concerning the refund of earnest money. Specifically, it cited Desh Raj Vs. Rohtash Singh, (2023) 3 SCC 714, which clarifies that a plaintiff filing a suit for specific performance can seek alternative relief, including the refund of earnest money, provided it is specifically claimed in the plaint or via amendment.
The court also highlighted Section 24 of the Specific Relief Act, which allows plaintiffs to seek other reliefs, such as the refund of earnest money, even after a suit for specific performance might be dismissed. This ensures that legal remedies are flexible enough to address the nuances of contractual disputes and prevent unjust enrichment.
The High Court’s Affirmation of Justice
Mehroz K. Pathan, J., presiding over the Second Appeal No. 495 of 2022, systematically addressed the substantial questions of law raised by the appellants. The primary questions revolved around whether the subsequent suit for earnest money refund was barred by Order II Rule 2 of the Code of Civil Procedure, 1908, whether the plaintiffs were ready and willing to perform, and their entitlement to the refund with interest.
The court meticulously reviewed the arguments and the evidence presented in the lower courts. It found no error in the earlier rulings, concluding that the factual findings regarding the plaintiff’s readiness and the defendant’s failure to provide a clear title were well-supported.
Rejection of 'Res Judicata' Plea
A crucial aspect of the trust’s appeal was the argument that the cooperative society’s subsequent suit for earnest money was barred by principles of res judicata, owing to an earlier withdrawn suit (Regular Civil Suit No. 63 of 2003). The High Court firmly rejected this argument.
The court noted that the earlier suit, filed on March 31, 2003, was for a simpliciter injunction to prevent the trust from selling the property to anyone else. Its cause of action was distinct from the later suit for earnest money recovery. The previous suit was withdrawn when the cooperative society decided to pursue the refund, making the later action permissible.
This distinction is vital for understanding the nuances of civil procedure in India, where the Supreme Court of India has also issued directives on what constitutes new defense in civil trials.
Interest Award Upheld
The Bombay High Court also upheld the award of 9% annual interest on the refunded amount. This rate, in line with lending rates of nationalized banks, was deemed just and proper given that the Khandesh Gosevashrmantatgat Goshala had retained the ₹2,00,000 since January 19, 2002.
The court acknowledged the discretion of judicial bodies to determine appropriate interest rates and payment commencement dates, especially in commercial transactions lacking specific agreements. This aligns with recent Supreme Court observations, including the case of I.K. Merchants Pvt. Ltd. & Ors. Vs. the State of Rajasthan & Ors. (2025 LiveLaw (SC) 377).
Implications for Public Trusts and Property Transactions
This ruling carries significant implications for public charitable trusts engaging in property transactions. It underscores the paramount importance of possessing and being able to demonstrate clear title to any property they intend to sell.
Furthermore, the judgment reinforces the principle that trusts, like other entities, cannot unfairly enrich themselves by forfeiting deposits when their own procedural or documentary shortcomings prevent a sale. Buyers, particularly cooperative societies or other organizations, can take solace in the court’s emphasis on protecting their interests when diligently pursuing a purchase.
The case serves as a reminder that proper due diligence extends beyond the buyer to the seller, particularly when title is questioned. Trustees are expected to act with transparency and ensure all legal prerequisites, such as Charity Commissioner permissions, are fulfilled before offering trust properties for sale.
Key Transactional Milestones in the Dhule Land Dispute
| Event | Date | Amount/Reference |
|---|---|---|
| Plaintiff deposits earnest money | January 23, 2002 | ₹2,00,000 |
| Defendants publish sale terms | January 26, 2002 | Agreed consideration: ₹64,25,000 |
| Public notice of sale published | August 30, 2002 | Dainik Aapla Maharashtra (Exhibit-67) |
| Plaintiff demands title documents | October 25, 2002 | Notice Exhibit-72 |
| Defendants refuse documents | November 19, 2002 | Reply Exhibit-73 |
| Defendants forfeit earnest money | November 30, 2002 | ₹2,00,000 (Exhibit-74) |
| RCS No. 63 of 2003 filed by Plaintiff | March 31, 2003 | Seeking injunction |
| RCS 196 of 2003 filed by Babulal Bhartia | 2003 | Claiming ownership of the property |
| RCS No. 16 of 2005 (old) filed by Plaintiff | January 19, 2005 | Seeking refund |
| Trial Court judgment | March 26, 2012 | In favor of Plaintiff |
| Appellate Court judgment | January 3, 2018 | Upholding trial court |
| High Court judgment | January 29, 2026 | Dismissing trust’s appeal |
Frequently Asked Questions
What was the core issue in the Khandesh Gosevashrmantatgat Goshala case?
The central issue revolved around the trust’s forfeiture of an earnest money deposit for a land sale when a third party raised objections to the property’s title, and the trust failed to provide clear title documents. The court determined that the trust could not legitimately forfeit the deposit under such circumstances.
Why did the High Court dismiss the trust’s argument based on a previous lawsuit?
The High Court dismissed the trust’s argument of a bar under Order II Rule 2, Code of Civil Procedure, 1908, because the previous suit (Regular Civil Suit No. 63 of 2003) had a different cause of action—an injunction to prevent the sale—compared to the later suit for the refund of earnest money. The previous suit was also withdrawn before the current one was fully pursued.
What impact does this ruling have on property sales by charitable trusts?
This ruling reinforces the obligation of charitable trusts to ensure absolutely clear title to properties they offer for sale. It also mandates that they obtain all necessary permissions, such as from the Charity Commissioner, before entering into sale agreements to avoid disputes and potential forfeiture claims. The judgment protects buyers from losing deposits due to a seller’s inability to fulfill their end of the contract regarding title.