Application U/S 28 Specific Relief Act Not Mandatory; Court Not Powerless To Treat Contract As Rescinded For Non-Compliance Of Condition: Supreme Court

The Court set aside the High Court and Executing Court orders, rendering the decree inexecutable due to the respondent’s failure to deposit the balance sale consideration within the stipulated three-month period. Finding that the respondent failed to seek a time extension and showed a lack of continuous readiness, the Bench directed the closure of execution proceedings and ordered the appellant to refund the ₹80,000 earnest money with 8% simple interest from the date of receipt in 2005.

Justice Pankaj Mithal and Justice S. V. N. Bhatti observed, “...it is settled that moving of an application under Section 28 of the Act for rescinding the contract for non-compliance of the condition is not mandatory rather optional and immaterial and that the court in a given circumstance is not powerless to treat the contract as having rescinded for non-compliance of the condition".

Senior Advocate Manoj Swarup appeared for the defendant-appellant and Advocate Divyesh Pratap Singh appeared for the plaintiff-respondent.

An agreement to sell an agricultural land measuring 12 kanals and 19 marlas in Mewat, Haryana, dated October 19, 2005 was made, whereby the appellant agreed to sell the land to the respondent for ₹5,00,000 per acre and received an advance of ₹80,000.

The sale deed was to be executed by March 15, 2006, upon payment of the balance consideration. Following a dispute over execution, the respondent filed a suit for specific performance.

On October 31, 2012, the trial court decreed the suit, directing the appellant to execute the sale deed provided the respondent deposited the balance amount within three months. Although the decree was upheld by the first appellate court and the High Court, the respondent did not deposit the funds until 2015, long after the three-month deadline had expired.

The Executing Court and High Court initially dismissed the appellant's objections regarding the delay, prompting the current appeal to the Supreme Court.

The Court noted that under Order XX Rule 12A of the CPC, a decree for specific performance must specify a payment period. It held that the respondent had a reciprocal obligation to deposit the amount within the three months provided in the decree.

The Bench referring to the settled principles on the subject matter, noted the following conclusions:

-The decree passed in a suit for specific performance is in the nature of a preliminary decree.

-Since the decree of a specific performance is in the nature of preliminary decree, the Court passing the same does not become functus officio as soon as the decree is passed but retains control over the decree even after the passing of the decree till the sale deed is executed or the decree is rendered inexecutable.

-Section 28 (1) of the Act provides for depositing or paying the balance sale consideration within the time allowed or to seek recession of the contract in the event of default even though the decree of specific performance has been granted.

-Sub-Section (4) of Section 28 of the Act bars a separate suit for any relief which can be claimed in the same suit by moving an application under Section 28 of the Act.

-The power of the Court under Section 28 of the Act is discretionary and can be exercised on equitable consideration. The exercise of such discretion must be equitable to both the sellers and purchasers.

-The default, if any, subsequent to decree for the specific performance resulting in the recession of contract has to be decided having regard to the broad terms of Section 28 (1) and Section 28 (4) in exercise of equity jurisdiction so as to give quietus to the dispute; and

-It is not mandatory to move an application under Section 28 and that the Court in the given circumstances is not powerless to treat the contract as having rescind it for non-compliance of the condition.

“…The first appellate Court and the Court of second appeal have not granted any time either for the execution of the sale deed or for the deposit of balance sale consideration. Therefore, the time provided by the Court of first instance under the decree is the material time within which the parties were required to fulfil their reciprocal obligations…In view of the aforesaid facts and circumstances, the decree of specific performance dated 31.10.2012 is rendered inexecutable on account of non-compliance of the condition to deposit the balance sale consideration within the time of three months stipulated therein and the contract as a whole stand rescinded in terms of Section 28 of the Act”, the Bench noted further.

Cause Title: Habban Shah v. Sheruddin (Neutral Citation: 2026 INSC 451)

Appearances:

Appellant: Manoj Swarup, Senior Advocate.

Respondent: Divyesh Pratap Singh, Advocate.

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