Supreme Court: Non-Payment Of Balance Sale Consideration Within Time Fixed By Trial Court In Specific Performance Suit Doesn't Amount To Rescinding Of Contract
The Supreme Court held that in every decree of specific performance of a contract, the Court has to specify the period within which the payment has to be made.
Justice J.B. Pardiwala, Justice R. Mahadevan, Supreme Court
The Supreme Court has held that the non-payment of the balance sale consideration within the time period fixed by the Trial Court in a suit for specific performance of contract does not amount to abandonment of the said contract and consequent rescinding of the same.
The Court allowed the Appeal against the Judgment of the Punjab and Haryana High Court which set aside the Order by the Executing Court and held that in every decree of specific performance of a contract, the Court has to specify the period within which the payment has to be made.
A Bench of Justice JB Pardiwala and Justice R Mahadevan held, “The decree enforces specific performance of the contract. The contract between the parties is thus not extinguished by passing of a decree for specific performance and it subsists despite the decree. Section 28 (1) of the Act, makes it clear that the Court does not become a 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 Advocate Disha Singh appeared for the Appellant, while AOR Aakriti Jain represented the Respondents.
Brief Facts
The Appellant had filed a suit for specific performance based on an agreement to sell executed between him and the Respondents. The Trial Court decreed the suit directing the Respondents to execute and register the sale deed upon the Appellant depositing the balance sale consideration within two months. The Respondents’ appeal was dismissed by the First Appellate Court, after which, the decree attained finality as no further appeal was filed.
The Appellant filed an execution Petition seeking permission to deposit the balance sale consideration, which was granted by the Executing Court. The Appellant deposited the amount, however, the High Court, in a civil revision, set aside the Executing Court’s Order, holding that the delay rendered the decree inexecutable.
Court’s Observations
The Supreme Court held, “In the considered view of this Court, the Appellate Court, after deciding the appeal on merits, could have called upon the plaintiff to deposit the balance sale consideration by fixing a time limit. This would have at least given an opportunity to the plaintiff to fulfil his obligation. The non-payment of the balance sale consideration within the time period fixed by the Trial Court does not amount to abandonment of the contract and consequent rescinding of the same.”
The Court clarified that the trial court has the jurisdiction to fix time-limit for depositing the money by the decreeholder under Section 28 of the Specific Relief Act, 1963 (the Act). “The real test must be to see if the conduct of the plaintiff will amount to a positive refusal to complete his part of the contract,” it held.
The Court explained that the ratio of the decision in Prem Jeevan v. K.S. Venkata Raman (2017) should be understood as laying down a proposition of law that it is incorrect to say that unless the judgment debtor seeks rescission of the contract in terms of Section 28 of the Specific Relief Act, the decree remains executable in spite of expiry of the period for deposit, with the only obligation on the part of the decree holders to pay interest. In the said case the Court took the view that “merely because rescission of contract was not sought by the judgment debtor the same would not automatically result in extension of time.”
Therefore, in Prem Jeevan (supra) the Court directly considered the effect of non compliance of the time period prescribed in the original decree passed by the Trial Court for the purpose of deposit of the balance sale consideration.
“This litigation is an eye-opener for the appellate courts reminding that they owe a duty to comply with the provisions of Order XX Rule 12A of the CPC. Where an appeal is filed against the decree passed by the trial court and the appeal is disposed of, the appellate court should specify time to deposit the balance sale consideration. It is too much to say that since the trial court had granted two months time to the decree holder to deposit the balance sale consideration the same time period would apply even to the decree that may be drawn by the appellate court. What is executable is the decree passed by the appellate court. The appellate court owes a duty to specify the time period,” the Bench remarked.
Consequently, the Court held, “In view of the aforesaid, the appeal succeeds and hereby allowed. The impugned order passed by the High Court is set aside and that of the executing court is affirmed.”
Accordingly, the Supreme Court allowed the Appeal.
Cause Title: Ram Lal v. Jarnail Singh (D) Through LRs & Ors. (Neutral Citation: 2025 INSC 301)
Appearance:
Appellant: Advocates Disha Singh, S.K. Pabbi, Shivendu Gaur, and Nidhi Sharma; AOR Ajay Kumar Singh
Respondents: AOR Aakriti Jain