APEX COURT HELD THAT
Specific Relief Act, 1963 — Section 28 — Specific performance — Delay in deposit of balance sale consideration — Rescission of contract — Extension of time — Equitable jurisdiction of Court.
Plaintiff obtained decree for specific performance directing him to pay balance sale consideration of Rs.57,50,000 within one month or deposit same in Court, whereupon defendant was directed to execute sale deed. Though plaintiff issued notice to judgment-debtor calling upon him to execute sale deed and thereafter filed execution petition, balance amount was not deposited within stipulated period. Execution Court repeatedly adjourned matter and at different stages directed decree-holder to pay or deposit amount. Ultimately, on 26.11.2020, pursuant to Court order, decree-holder deposited entire balance amount. Thereafter, judgment-debtor sought rescission of contract under Section 28 of Specific Relief Act on ground of non-deposit within time stipulated in decree. Execution Court dismissed execution petition and rescinded decree holding that conditional decree had not been complied with in time. High Court affirmed same.
Held, decree for specific performance is in nature of preliminary decree and Court passing decree does not become functus officio after passing decree. Under Section 28 of Specific Relief Act, Court retains jurisdiction either to rescind contract for non-compliance or extend time for deposit. There is no automatic rescission merely because amount was not deposited within stipulated period unless decree itself specifically provides such consequence. While exercising power under Section 28, Court must adopt justice-oriented and equitable approach by considering conduct of parties, surrounding circumstances, bona fides of decree-holder, pendency of appeal, and whether judgment-debtor could be compensated for delay by imposing appropriate terms. Execution Court and High Court erred in adopting hyper-technical approach without considering relevant equities and circumstances surrounding delay in deposit. Orders were therefore set aside and matter remanded for fresh consideration. (Paras 3 to 14, 24 to 41)
Specific Relief Act, 1963 — Section 28 — Power to rescind contract and power to extend time — Nature and scope.
Supreme Court examined scope of Section 28 of Specific Relief Act in context of decree for specific performance where decree-holder had deposited amount after expiry of period fixed in decree.
Held, Section 28 confers discretionary power on Court both to rescind contract and to extend time for payment or deposit of purchase money. Court passing decree retains control over decree till sale deed is executed and does not become functus officio. Prayer for extension of time may be made even after expiry of stipulated period and no particular form is prescribed for such request. Delay in deposit is not to be examined like application under Section 5 of Limitation Act requiring explanation of every day’s delay. Real test is whether conduct of decree-holder demonstrates wilful negligence or intention to abandon contract. (Paras 24 to 33)
Specific Relief Act, 1963 — Section 28 — Equitable relief — Conduct of parties — Compensation to judgment-debtor.
Decree-holder contended that even if delay in deposit existed, decree could be saved by compensating judgment-debtor. Supreme Court considered equitable principles governing extension of time.
Held, since specific performance is equitable relief, Court while considering extension of time must balance equities between parties. Court may impose additional terms or compensation to adequately compensate judgment-debtor for delay in deposit. Relevant considerations include bona fides of decree-holder, cause for delay, conduct of parties, length of delay and equities created during intervening period. (Paras 17, 24 to 33, 40)
Civil Procedure Code, 1908 — Doctrine of merger — Appeal dismissed for non-prosecution — Effect.
Judgment-debtor’s first appeal against decree for specific performance was dismissed for non-prosecution. Decree-holder contended that trial court decree merged with appellate court decree and therefore stipulation regarding deposit in trial court decree ceased to operate.
Held, doctrine of merger applies only where superior Court entertains appeal and passes adjudicatory order on merits whether by reversal, modification or confirmation. Dismissal of appeal for non-prosecution does not result in merger of trial court decree with appellate order because dismissal for default is not decree within meaning of Section 2(2) CPC. Consequently, trial court decree continued to operate. (Paras 19 to 22)
Specific Relief Act, 1963 — Section 28 — Deposit permitted by Court — Whether judgment-debtor loses right to seek rescission.
Execution Court permitted decree-holder to deposit balance sale consideration on 26.11.2020 and amount was accordingly deposited. Decree-holder contended that once Court permitted deposit, right of judgment-debtor to seek rescission stood extinguished.
Held, permission granted by Court to deposit amount merely to test bona fides of decree-holder did not amount to final extension of time nor did it extinguish right of judgment-debtor to seek rescission under Section 28 of Specific Relief Act. Deposit pursuant to Court order was relevant factor while considering readiness and willingness of decree-holder, but application seeking rescission remained maintainable. (Paras 23 and 24)
Civil Procedure Code, 1908 — Order XX Rule 12A CPC — Duty of Appellate Court in decree for specific performance.
Supreme Court reiterated obligation of appellate courts while disposing appeals arising out of decrees for specific performance.
Held, where appellate court disposes appeal concerning decree for specific performance, it should specifically fix time for deposit of balance sale consideration in terms of Order XX Rule 12A CPC. If appellate decree does not prescribe time, deposit must be made within reasonable period depending upon facts and circumstances of case. (Paras 32 and 33(vii))
Specific Relief Act, 1963 — Section 28 — Principles summarized by Supreme Court.
Supreme Court summarized principles governing exercise of jurisdiction under Section 28 of Specific Relief Act including nature of decree for specific performance, discretionary power to rescind or extend time, maintainability of application before Court of first instance, equitable considerations and absence of automatic rescission. (Para 33)
