Recently, the Supreme Court examined whether a decree for specific performance becomes inexecutable when the decree-holder fails to deposit the balance sale consideration within the period fixed by the court. The Court ultimately held that failure to comply with the condition within the stipulated time rendered the decree inexecutable and resulted in rescission of the contract.
Brief Facts
The dispute arose out of an agreement for sale of agricultural land situated in Haryana. The seller had agreed to transfer the property for a fixed consideration and received earnest money in advance. The agreement provided that the sale deed would be executed within a specified period. After the sale deed was not executed, a suit for specific performance was filed. The trial court decreed the suit and directed execution of the sale deed upon payment of the balance sale consideration within three months. Appeals were subsequently filed against the decree, and a temporary interim order restraining alienation of the property remained in force for a limited period.
Although execution proceedings were initiated, the decree-holder failed to deposit the balance sale consideration within the stipulated period. Applications seeking permission to deposit the amount were moved later, and the Executing Court eventually permitted the deposit in 2015. The judgment-debtor objected to the execution proceedings, arguing that the decree had become inexecutable due to non-compliance with the condition regarding timely deposit.
Contentions of the Appellant
The counsel for the Appellant argued that the decree clearly required deposit of the balance sale consideration within three months and that failure to comply with this condition rendered the decree inexecutable. It was contended that no application for extension of time had been filed within the prescribed period and that subsequent deposit could not automatically condone the delay. The Appellant further submitted that continuous readiness and willingness are essential for obtaining equitable relief of specific performance and that the respondent’s conduct showed non-compliance with the decree.
Contentions of the Respondent
The counsel for the Respondent contended that the decree remained executable and that the delay occurred because appeals and interim orders were pending before appellate courts. It was argued that once the Executing Court permitted deposit of the balance sale consideration and the amount was deposited, the delay stood effectively condoned. The Respondent also argued that no separate application for rescission of the contract had been filed under Section 28 of the Specific Relief Act, and therefore the decree could not be treated as inexecutable.
Observation of the Court
The Supreme Court observed that a decree for specific performance is in the nature of a preliminary decree and therefore the court does not become functus officio immediately after passing such decree. The Court held that the decree imposed reciprocal obligations upon both parties and that the decree-holder was under an obligation to deposit the balance sale consideration within the stipulated period.
While examining the effect of non-compliance, the Court categorically stated that “the decree ceases to exists due to non-compliance and becomes inexecutable.” The Court rejected the argument that subsequent permission granted by the Executing Court for deposit of the amount would amount to deemed condonation of delay or automatic extension of time.
The Court further emphasized that specific performance is not an automatic relief but “an equitable and a discretionary relief” under the Specific Relief Act. Stressing the importance of fairness and conduct of parties, the Court reiterated the equitable principle that “he who seeks equity must do equity.” According to the Court, continuous readiness and willingness must exist not only at the stage of filing the suit but also during execution proceedings.
The Court found that the decree-holder neither deposited the balance consideration within three months nor sought extension of time within the prescribed period. Such conduct, according to the Court, showed reluctance in performing contractual obligations and disentitled the decree-holder from obtaining equitable relief.
Decision of the Court
The Court allowed the appeal and held that failure to deposit the balance sale consideration within the stipulated period rendered the decree inexecutable, resulting in rescission of the contract under Section 28 of the Specific Relief Act. Consequently, the orders of the High Court and the Executing Court were set aside and the execution proceedings were directed to be closed. The Court further directed refund of the earnest money of Rs. 80,000 along with simple interest at the rate of 8% per annum from the date of receipt till repayment.
Case Title: Habban Shah v. Sheruddin
Case No.: Arising out of SLP (C) No. 14479 of 2025
Coram: Hon’ble Mr. Justice Pankaj Mithal and Hon’ble Mr. Justice S. V. N. Bhatti
Advocate for the Appellant: Mr. Manoj Swarup, Senior Advocate
Advocate for the Respondent: Mr. Divyesh Pratap Singh, Advocate
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