The Supreme Court has clarified that a decree for specific performance of a contract for sale of immovable property does not automatically become unenforceable due to delayed deposit of the balance consideration. The Court emphasized that Section 28 of the Specific Relief Act, 1963, vests discretionary power in the court to either rescind the contract or extend the time for compliance, depending on the conduct of the parties and equitable considerations.
Background & Facts
The Dispute
The appellant, Anand Narayan Shukla, entered into an agreement for sale dated 14.11.2011 with the respondent, Jagat Dhari, for the purchase of 3.75 acres of land at Rs. 16,00,000 per acre, with an advance payment of Rs. 2,50,000. The appellant filed a suit for specific performance, which was decreed by the Trial Court on 03.03.2017. The decree directed the appellant to pay the balance consideration of Rs. 57,50,000 within one month, or deposit it in court, after which the respondent was to execute and register the sale deed.
Key Facts
- The agreement was dated 14.11.2011
- Advance payment of Rs. 2,50,000 was made on or before the agreement date
- Trial Court decree dated 03.03.2017 ordered payment of Rs. 57,50,000 within one month
- Appellant filed application for execution on 03.04.2017, alleging refusal by respondent to accept payment
- First Appeal No. 311 of 2017 filed by respondent against the decree on 03.03.2017
- Execution Case No. 27A/2017 filed on 18.07.2017
- No order directing deposit in court was passed until 23.04.2019
- Multiple hearing dates fixed between 06.12.2017 and 28.11.2019, with repeated failures to serve summons on respondent
- On 26.11.2020, under court direction, appellant deposited Rs. 57,50,000 via six cheques (Nos. 840602 - 840607)
- First Appeal dismissed for non-prosecution on 06.11.2023
- Respondent filed application to rescind contract on 14.03.2023, after learning of deposit
- Execution Court dismissed execution application on 12.07.2023 on grounds of delay
- High Court dismissed revision petition on 05.03.2025
Procedural History
- 14.11.2011: Agreement for sale executed
- 03.03.2017: Trial Court decreed specific performance
- 03.04.2017: Appellant filed application for execution
- 18.07.2017: Execution Case No. 27A/2017 filed
- 06.12.2017 to 28.11.2019: Multiple hearing dates; no deposit ordered until 23.04.2019
- 23.04.2019: First direction to deposit in court issued
- 26.11.2020: Appellant deposited Rs. 57,50,000 in court
- 10.12.2022: Execution Court adjourned matter for respondent’s compliance
- 10.01.2023: Court granted last opportunity to respondent to comply
- 30.01.2023: Respondent filed application alleging lack of notice
- 14.03.2023: Respondent formally appeared and applied for rescission
- 12.07.2023: Execution Court dismissed execution application
- 05.03.2025: High Court dismissed revision petition under Article 227
- 08.05.2026: Supreme Court delivered judgment
Relief Sought
The appellant sought setting aside of the High Court’s order dated 05.03.2025 and the Execution Court’s order dated 12.07.2023, restoration of the execution application, and direction to execute the sale deed upon deposit of Rs. 57,50,000. Alternatively, he offered to compensate the respondent for delay.
The Legal Issue
The central question was whether the failure to deposit the balance sale consideration within the period stipulated in the decree for specific performance automatically triggers rescission of the contract under Section 28 of the Specific Relief Act, 1963, or whether the court retains discretionary power to extend the time for deposit, considering the conduct of the parties and equitable principles.
Arguments Presented
For the Appellant
The appellant’s counsel argued that the deposit made on 26.11.2020 was made in compliance with the Execution Court’s direction and demonstrated bona fides. He relied on Sardar Mohar Singh v. Mangilal, K. Kalpana Saraswathi v. P.S.S. Somasundaram Chettiar, and Ram Lal v. Jarnail Singh to assert that Section 28 confers discretionary power to extend time, and that automatic rescission is not contemplated. He emphasized that the delay was due to the respondent’s refusal to accept payment and the pendency of appeal, and that the court could have compensated the respondent for delay rather than rescind the contract.
For the Respondent
The respondent’s counsel contended that the decree was conditional and the time for deposit was clear. He argued that the appellant’s failure to deposit for over three years, despite repeated court directions, amounted to abandonment. He relied on the absence of service of summons and the fact that the appeal was dismissed for non-prosecution to argue that the decree remained subject to its original terms, and that rescission under Section 28 was maintainable.
The Court's Analysis
The Supreme Court undertook a comprehensive review of Section 28 of the Specific Relief Act, 1963, and a series of precedents, including Sardar Mohar Singh, K. Kalpana Saraswathi, Ramankutty Guptan, and Ram Lal v. Jarnail Singh. The Court held that a decree for specific performance is a preliminary decree and the court retains jurisdiction until the sale deed is executed. The phrase "may, by order, rescind" in Section 28(1) clearly indicates that rescission is discretionary, not automatic.
"The court does not become functus officio after the grant of the decree for specific performance and it retains its power and jurisdiction to deal with the decree till the sale deed is executed."
The Court observed that the Execution Court and High Court adopted a hyper-technical approach by focusing solely on the delay without examining the conduct of the parties. The respondent had filed an appeal against the decree and refused to accept payment, thereby creating the very impediment to performance. The appellant’s deposit on 26.11.2020, though delayed, was made in response to a court order and not in defiance.
The Court further noted that Order XX Rule 12A of the CPC requires the court to specify the time for deposit, but where no consequence for non-compliance is stated, rescission cannot be presumed. The failure to fix consequences in the decree meant that the court was obligated to exercise its equitable discretion under Section 28.
The Court also clarified that the dismissal of the appeal for non-prosecution did not result in merger of the decree, and thus the original decree remained operative. However, this did not justify mechanical rescission. The court below failed to consider whether the appellant’s conduct indicated willful negligence or merely a procedural delay caused by the respondent’s non-cooperation.
The Verdict
The appeal was allowed. The Supreme Court set aside the orders of the High Court dated 05.03.2025 and the Execution Court dated 12.07.2023. The execution application and all related applications for rescission or extension of time were restored to their original numbers on the file of the Execution Court (Court of first instance). The court was directed to treat such applications as applications in the original suit and decide them afresh in accordance with the principles laid down, including consideration of equitable compensation to the respondent for the delay. The deposit of Rs. 57,50,000 made on 26.11.2020 shall be deemed valid and shall be refunded to the appellant if the contract is rescinded.
What This Means For Similar Cases
Rescission Is Not Automatic
- Practitioners must argue that delay alone does not justify rescission under Section 28
- Courts must examine whether the defaulting party showed willful negligence or merely faced procedural obstacles
- The burden shifts to the party seeking rescission to prove the other party’s conduct amounted to a positive refusal to perform
Equity Demands Compensation, Not Cancellation
- Where delay is established but not malicious, courts must consider ordering compensation (e.g., interest, additional deposit) rather than rescission
- The appellant’s offer to compensate the respondent for delay was recognized as a valid equitable solution
- This creates a new benchmark: rescission should be the last resort, not the default remedy
Procedural Compliance Must Be Interpreted Flexibly
- Applications for extension of time may be made orally or in writing, even during execution proceedings
- If the executing court is the same as the trial court, Section 28 applications are maintainable
- Courts must treat such applications as part of the original suit, not as independent execution matters
- Failure to specify consequences in the decree renders automatic rescission legally untenable