Decree of Specific Performance Is Not Automatically Rescinded for Non-Payment Absent Specific Default Clause

The Appellant (plaintiff) obtained a decree for specific performance on 03.03.2017, directing him to pay the balance consideration of ₹57,50,000 within one month

The Appellant issued a notice to the Respondent (defendant) on 01.04.2017 to execute the sale deed, but the Respondent refused and filed an appeal

Although the Appellant applied for execution on 18.07.2017, he did not deposit the money in court until 26.11.2020, following a specific court order to test his bona fides

The Respondent subsequently applied under Section 28 of the Specific Relief Act (1963 Act) to rescind the contract due to non-payment within the period stipulated in the decree

The Execution Court dismissed the execution application and rescinded the contract, a decision upheld by the Madhya Pradesh High Court

1. Whether the decree of specific performance passed by the trial court merged in the order of the appellate court when the appeal was dismissed for non-prosecution?

2. Whether an application under Section 28 of the 1963 Act is maintainable after the court has granted permission to deposit the balance amount and such deposit has been made?

3. Whether the rescission of the contract was vitiated by a failure to consider the equities and the power to extend time for deposit under Section 28?

The court primarily applied Section 28 of the Specific Relief Act, 1963, which allows for the rescission of a contract if the purchaser fails to pay the money within the period allowed by the decree or such further period as the court may allow

It relied on Sardar Mohar Singh v. Mangilal, establishing that a court does not become functus officio after passing a decree and retains the power to extend time

It further applied the principle from Kunhayammed v. State of Kerala regarding the doctrine of merger, noting it does not apply to dismissals for default

Under Order XX Rule 12A of the CPC, the court is required to specify the payment period in a decree for specific performance

The Court first determined that because the Respondent’s appeal was dismissed for non-prosecution, it did not constitute an adjudication on merits; thus, the Trial Court’s decree did not merge into an appellate decree

Regarding Section 28, the Court reasoned that the provision is discretionary (“may rescind”) and does not result in automatic rescission unless the decree expressly provides for dismissal upon default

The Court observed that the lower courts adopted a hyper-technical approach by failing to treat the execution proceedings as a continuation of the suit where time could be enlarged

The Court emphasized that specific performance is an equitable relief; therefore, the conduct of the decree-holder must show "willful negligence" or "positive refusal" to perform before rescission is granted

the lower courts ignored the fact that the Appellant had attempted notice, the Respondent had filed an appeal, and the deposit was eventually made under court direction

The Supreme Court allowed the appeal and set aside the orders of the High Court and Execution Court. The matter was remanded to the Execution Court to decide the applications for rescission and extension of time afresh as interlocutory applications in the original suit