S.28 Specific Relief Act | Separate Application Not Needed To Rescind Agreement To Sell For Buyer's Default : Suprme Court

The Supreme Court on Wednesday (May 6) observed that a decree-holder's failure to deposit the balance sale consideration within the time stipulated renders the decree for specific performance of the agreement to sell inexecutable, resulting in rescission of the contract.

The Court held that a separate application by the judgment-debtor is not mandatory to rescind the contract for the buyer's default.

A bench of Justice Pankaj Mithal and Justice S.V.N. Bhatti set aside the Punjab & Haryana High Court's order, which had condoned the Respondent-plaintiff's delay in depositing the balance sale consideration, despite the decree specifically mentioning that the balance sale consideration had to be deposited within three months.

The dispute arose from an agreement dated October 19, 2005 for the sale of agricultural land, under which the buyer had paid an advance of ₹80,000. The sale deed was to be executed by March 15, 2006. Upon the seller's failure to complete the transaction, the buyer instituted a suit for specific performance.

On October 31, 2012, the trial court decreed the suit, directing the seller to execute the sale deed “after receiving the balance sale consideration within a period of three months.” However, the buyer did not deposit the balance amount within the stipulated time.

Although the seller's appeal was pending for some time, there was no stay on deposit of consideration, and the interim protection granted—limited to alienation—lapsed before expiry of the three-month period. Despite this, the buyer neither deposited the amount nor sought an extension of time within the prescribed period.

Subsequently, the buyer-initiated execution proceedings, and in the second execution petition filed in 2015, the executing court permitted the deposit of the balance consideration, which was made. The High Court upheld this approach, holding that the delay stood condoned, prompting the defendant to move to the Supreme Court.

Allowing the appeal, the judgment authored by Justice Mithal observed that the High Court erred in condoning the delay for the Respondent to deposit the balance sale consideration, despite the decree mentioning the timeline for the same. The Court said that the plaintiff's failure to deposit the balance amount in compliance with the decree, led to the rescission of the contract under Section 28 of the Specific Relief Act, 1963.

“…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 court held.

A separate application seeking rescission of the contract is not mandatory

“…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.”, the court observed.

Respondent-plaintiff failed to show readiness and willingness to perform his part of the obligation

“In the present case, the plaintiff-respondent got the decree by establishing his readiness and willingness to perform his part of the agreement but nonetheless he failed to establish his continuous readiness and willingness till the execution of the sale deed. If he was ready and willing to perform his part of the agreement till the stage of decreeing the suit, there would have been no problem on his part in immediately complying with his obligation under the decree by depositing the balance sale consideration within the time permitted. The plaintiff-respondent having failed to abide by such a condition indicates that he was not actually ready and willing to perform his obligation under the decree which obligation, in essence, took the shape of a condition under the agreement. In such circumstances, the plaintiff-respondent disentitled himself from the benefit of the decree of specific performance.”, the court observed.

The following conclusions were drawn :

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

ii. 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.

iii. 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.

iv. 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.

v. 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.

vi. 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

vii. 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.

In terms of the aforesaid, the appeal was allowed, with a direction to refund the part sale amount received from the Respondent-plaintiff.

Cause Title: HABBAN SHAH VERSUS SHERUDDIN

Citation : 2026 LiveLaw (SC) 466

Click here to download judgment

Appearance:

For Petitioner(s) Mr. Manoj Swarup, Sr. Adv. Mr. Hamad Tariq, Adv. Mr. Neelmani Pant, Adv. Ms. Apoorva Singh, Adv. Mr. Ankit Swarup, AOR

For Respondent(s) Mr. Divyesh Pratap Singh, AOR Mr. Amit Sangwan, Adv. Mr. Bharat Mishra, Adv. Ms. Tiwari Prashantipriya Awadesh, Adv. Mr. Mohammad Arshad, Adv.