The Supreme Court has ruled that a buyer who fails to deposit the remaining sale amount within the timeline fixed by a court decree risks losing the very benefit of specific performance, even if the seller does not separately seek cancellation of the agreement.
A Bench comprising Justice Pankaj Mithal and Justice S. V. N. Bhatti held that once a decree-holder defaults on the condition requiring payment within the prescribed period, the decree can become unenforceable and the contract may stand rescinded under Section 28 of the Specific Relief Act.
The ruling came while setting aside a decision of the Punjab and Haryana High Court, which had earlier excused the purchaser’s delay in depositing the balance consideration despite a clear three-month deadline contained in the decree.
The dispute traced back to a 2005 agreement involving the sale of agricultural land. The purchaser had paid ₹80,000 in advance, while the sale deed was scheduled to be executed by March 15, 2006. When the transaction did not materialise, the buyer approached the civil court seeking specific performance of the contract.
In October 2012, the trial court ruled in favour of the buyer and directed the seller to execute the sale deed after receiving the remaining sale consideration within three months. Yet the purchaser did not deposit the amount during that period.
The seller’s appeal against the decree remained pending for some time, but there was no judicial stay restraining the buyer from making the payment. Interim protection granted during the appeal only prevented alienation of the property and had already expired before the three-month deadline ran out.
Despite this, the buyer neither deposited the money nor moved any application seeking extension of time.
Years later, during execution proceedings initiated by the purchaser, the executing court permitted the delayed deposit in 2015. The High Court later approved that approach, effectively condoning the delay. The seller then carried the matter to the Supreme Court.
Reversing the High Court’s view, the apex court observed that the timeline mentioned in a decree for specific performance cannot be treated casually. According to the Bench, failure to comply with the payment condition rendered the decree incapable of execution.
The Court said the contract itself stood rescinded because the buyer failed to honour the obligation imposed under the decree.
The Bench further clarified that Section 28 of the Specific Relief Act does not make it compulsory for the seller to file a separate application seeking rescission of the agreement. Such an application, the Court said, is merely optional. Courts are empowered to treat the contract as rescinded where there is clear non-compliance with the decree’s conditions.
The judgment also took a sharp view of the buyer’s conduct, noting that a litigant who secures a decree by claiming “readiness and willingness” must continue demonstrating that intent until the transaction is completed.
According to the Court, a genuinely willing purchaser would ordinarily have deposited the balance consideration immediately within the period fixed by the decree. The prolonged inaction, it observed, revealed a lack of continuous readiness to perform contractual obligations.
On that reasoning, the Court concluded that the buyer had forfeited the equitable relief of specific performance.
