The Supreme Court has held that there is no automatic rescission of a decree for specific performance merely because the decree-holder failed to deposit the balance sale consideration within the time stipulated in the decree.
The bench of Justice Manoj Misra and Justice Manmohan has clarified that courts retain discretionary powers under Section 28 of the Specific Relief Act, 1963 to extend the time for deposit and must adopt an equitable and justice-oriented approach while deciding such matters.
The dispute arose out of a suit for specific performance of an agreement for sale dated 14 November 2011 concerning 3.75 acres of land. The Trial Court decreed the suit on 3 March 2017 and directed the purchaser to pay the balance sale consideration within one month or deposit the same before the Court. Upon such payment or deposit, the seller was required to execute and register the sale deed.
Following the decree, the decree-holder issued a notice to the judgment-debtor on 1 April 2017 calling upon him to execute the sale deed after receiving the balance amount of Rs. 57.50 lakh. However, the amount was neither accepted by the judgment-debtor nor deposited before the Court within the stipulated period.
Meanwhile, the judgment-debtor filed a first appeal challenging the decree. Since there was no stay on execution, the decree-holder initiated execution proceedings in July 2017. In the execution application, the decree-holder specifically stated that he was ready to deposit the balance amount before the Court as the judgment-debtor was unwilling to accept payment.
The Execution Court repeatedly adjourned the matter while issuing notices to the judgment-debtor. Though the Court intermittently directed payment of the balance amount, it did not consistently order deposit before the Court. It was only on 26 November 2020 that the Court expressly directed the decree-holder to deposit Rs. 57.50 lakh on the same day to establish his bona fides. The amount was thereafter deposited through six cheques.
Subsequently, the judgment-debtor sought rescission of the contract under Section 28 of the Specific Relief Act on the ground that the balance amount had not been deposited within the time stipulated by the decree.
The Execution Court dismissed the execution proceedings holding that the decree was conditional and the amount had not been deposited within one month as directed by the Trial Court. The Madhya Pradesh High Court upheld the order in revision proceedings under Article 227 of the Constitution.
Before the Supreme Court, the decree-holder argued that the courts below adopted a hyper-technical approach and failed to consider that the judgment-debtor himself had challenged the decree in appeal and was unwilling to comply with it. It was also contended that Section 28 of the Specific Relief Act empowers courts not only to rescind contracts but also to extend time for deposit in appropriate cases.
The Supreme Court examined the scope of Section 28 of the Specific Relief Act and reiterated that a decree for specific performance is in the nature of a preliminary decree and the Court does not become functus officio after passing such decree. The Court retains control over the decree until execution of the sale deed.
The Court emphasized that Section 28 confers discretionary powers and does not mandate automatic rescission upon delay in deposit. It observed that the provision expressly permits the Court to extend time for payment or deposit “as the court may allow.”
The Supreme Court comprehensively summarized the legal principles governing Section 28 of the Specific Relief Act.
The Court held that a decree for specific performance remains under the control of the Court until execution of the sale deed. There is no automatic rescission merely because the amount was not deposited within the stipulated period. Courts have the power to extend time even after expiry of the original period. Applications seeking permission to deposit delayed amounts may be treated as applications for extension of time. Courts must consider the conduct of parties, equities involved, and whether the judgment-debtor can be compensated for delay. The crucial test is whether the decree-holder demonstrated wilful negligence or abandonment of the contract.
The Court further stressed that specific performance is an equitable relief and therefore courts must adopt a justice-oriented approach rather than a pedantic or mechanical interpretation.
The Supreme Court also clarified that the doctrine of merger would not apply where an appeal is dismissed for non-prosecution. Since the first appeal against the decree was dismissed for default and not on merits, the Trial Court decree did not merge into the appellate order.
Applying the settled principles to the facts of the case, the Supreme Court observed that neither the Execution Court nor the High Court considered relevant factors such as the absence of any automatic rescission clause in the decree, the repeated directions and procedural inconsistencies during execution proceedings, the pending first appeal filed by the judgment-debtor, the decree-holder’s willingness to deposit the amount, and the fact that the amount was ultimately deposited pursuant to court orders.
The Court held that the lower courts failed to examine whether the delay deserved condonation by imposing suitable compensatory terms upon the decree-holder. Consequently, the Supreme Court set aside both the Execution Court’s order and the High Court judgment and restored the execution application and connected applications for fresh consideration in accordance with law.
Case Details
Case Title: Anand Narayan Shukla Versus Jagat Dhari
Citation: JURISHOUR-1172-SC-2026
Case No.: Civil Appeal No. 7355 Of 2026
Date: 08/05/2026
