A decree for specific performance does not automatically stand rescinded for delayed deposit of sale consideration; courts retain equitable discretion under S.28 Specific Relief Act to extend time and balance equities.

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Facts

The Appellant instituted a suit for specific performance of an agreement dated 14.11.2011 concerning sale of 3.75 acres of land. The Trial Court decreed the suit on 03.03.2017 and directed the Appellant/decree-holder to pay the balance sale consideration within one month or deposit the same in court, upon which the Respondent/judgment-debtor was to execute the sale deed.

The decree-holder issued notice demanding execution of the sale deed but did not deposit the amount within the stipulated period. Meanwhile, the judgment-debtor preferred a first appeal against the decree. During execution proceedings, the Execution Court repeatedly adjourned the matter and eventually directed deposit of the balance consideration on 26.11.2020, which the decree-holder complied with.

Subsequently, the judgment-debtor sought rescission of the contract under s. 28 Specific Relief Act, 1963 on the ground of delayed deposit. The Execution Court dismissed the execution application and rescinded the decree. The High Court affirmed the order under Art. 227 Const. of India.

Issues Framed

(a) Whether dismissal of the first appeal for non-prosecution resulted in merger of the trial court decree.
(b) Whether the judgment-debtor could seek rescission under s. 28 Specific Relief Act after the Court permitted deposit of the balance amount.
(c) Whether the courts below adopted an unduly technical approach in refusing extension of time for deposit. (Para 19)

Court’s Reasoning

(a) No Merger on Dismissal for Non-Prosecution

The Court held that the doctrine of merger applies only where the appellate court adjudicates the matter on merits. Since the first appeal was dismissed for non-prosecution, there was no merger of the trial court decree into the appellate order. (Paras 20–22)

(b) Nature of Power Under Section 28 Specific Relief Act

The Court emphasized that a decree for specific performance is “in the nature of a preliminary decree” and the court does not become functus officio after passing it. (Paras 24–25)

Relying on Sardar Mohar Singh v. Mangilal, K. Kalpana Saraswathi v. P.S.S. Somasundaram Chettiar, and Ram Lal v. Jarnail Singh, the Court held that s. 28 Specific Relief Act confers discretionary power both to rescind the contract and to extend time for payment/deposit. There is neither automatic rescission nor automatic extension. (Paras 24–33)

The Court observed:

“The Court that passed the decree is vested with the jurisdiction to either rescind the contract/decree for non-payment/non-deposit within the stipulated period or extend the period.” (Para 33)

(c) Equitable Considerations Ignored by Courts Below

The Supreme Court found that the Execution Court and High Court failed to consider relevant circumstances, including:
(i) repeated directions of the Execution Court;
(ii) pendency of the first appeal;
(iii) conduct of the judgment-debtor unwilling to accept payment; and
(iv) disruption caused by the Covid-19 pandemic. (Paras 36–40)

The Court held that since the decree itself did not specify automatic consequences for delayed deposit, rescission was not automatic. The courts were required to examine whether equities could be balanced by imposing compensatory terms rather than rescinding the decree outright. (Para 40)

(d) Principles Summarised by the Court

The Court comprehensively summarised principles governing s. 28 Specific Relief Act, including that:
(a) courts retain jurisdiction after decree;
(b) extension of time may be granted even after expiry;
(c) equity and conduct of parties are central considerations; and
(d) willful negligence alone may justify rescission. (Para 33)

Held

The Supreme Court allowed the appeal, set aside the orders of the Execution Court and High Court, and restored the execution proceedings and connected applications for fresh consideration in accordance with law and the principles laid down in the judgment. (Paras 41–42)


Ratio

Under s. 28 Specific Relief Act, 1963, delayed payment or deposit of balance sale consideration pursuant to a decree for specific performance does not automatically rescind the contract; courts retain equitable discretion to extend time after considering the conduct of parties, surrounding circumstances, and the possibility of compensating the judgment-debtor for delay.


Case Details

Citation: 2026 INSC 463
Decided on: 8 May 2026
Case Title: Anand Narayan Shukla v. Jagat Dhari
Court: Supreme Court of India
Bench: Justice Manoj Misra and Justice Manmohan