The Supreme Court has reaffirmed that a decree for specific performance does not automatically collapse merely because the purchaser fails to deposit the balance sale consideration within the timeline fixed by the court. Stressing that equity continues to guide such disputes, the Court said judges retain the authority to extend the deadline even after the original period expires.
A Bench of Justice Manoj Misra and Justice Manmohan set aside orders of the Madhya Pradesh High Court and the execution court which had refused to proceed with execution of a specific performance decree.
The case revolved around a 2011 land transaction involving nearly 3.75 acres, priced at ₹16 lakh per acre. In March 2017, the trial court decreed specific performance and directed the buyer to pay the remaining ₹57.5 lakh within one month.
Although the purchaser issued notice to the seller within the stipulated period seeking execution of the sale deed, the actual deposit of the remaining amount into court took place only in November 2020, after directions from the execution court.
That delay became the basis for dismissal of the execution proceedings. Both the execution court and later the High Court took the view that failure to deposit the amount within the original timeline disentitled the decree-holder from relief.
Before the apex court, the purchaser argued that the approach adopted by the lower courts ignored practical realities. The seller had already challenged the decree in appeal and was unwilling to accept payment, while the execution proceedings themselves witnessed repeated adjournments. The purchaser also relied on Section 28 of the Specific Relief Act, which empowers courts to enlarge the time for compliance.
The seller, however, maintained that the purchaser had shown prolonged inaction despite repeated opportunities and therefore could not seek equitable indulgence after years of delay.
The Supreme Court noted several factors that had been overlooked. It observed that the execution court itself continued granting time and directing future deposits instead of treating the decree as terminated. The Court also recorded that the seller’s appeal against the decree remained pending until 2023 and that the Covid-19 disruption intervened during the relevant period.
Faulting the lower courts for adopting a rigid interpretation, the Bench said they failed to examine whether the circumstances justified extension of time or whether compensation could offset the delay caused to the seller.
Summarising the legal position under Section 28 of the Specific Relief Act, the Court held that a decree for specific performance carries the character of a preliminary decree, meaning the court retains control over the matter until execution of the sale deed.
The Court laid down broad principles, including:
- Courts retain jurisdiction to either rescind the contract or extend time for payment until the decree is fully worked out.
- Delay in deposit does not automatically result in rescission.
- Equally, expiry of the original timeline does not automatically extend the period either.
- However, where the decree itself clearly states that failure to deposit within time would automatically rescind the contract or dismiss the suit, such a decree becomes incapable of execution upon default.
The ruling is expected to have significant bearing on execution proceedings in property disputes, particularly where courts are called upon to balance procedural compliance with equitable considerations.
