Specific Relief Act, 1963 – Section 28(1) – Rescission of Contract – Parameters – Sale Agreement annulled at execution stage.T.L. Rajagopal v. S.N. Shivakumar, 2014 SCC OnLine Kar 10072 : ILR 2014 KAR 4035 : (2014) 3 KCCR 2182 : (2014) 4 AIR Kant R 701 : (2014) 6 Kant LJ 423 : (2014) 4 ICC 275 : AIR 2015 (NOC 433) 160, at page 4052 :
HELD: Decree for specific performance being in the nature of a preliminary decree, the Court after passing of the said decree does not become functus officio. It retains the jurisdiction to conclude the further steps to be taken in the suit. The decree holder chooses to file an execution petition for getting the sale deed registered through the Court when the defendant who suffered the decree fails to obey the same. Though called ‘execution proceedings’, it is nothing but continuation of the original suit. In a suit for partition, after the preliminary decree is passed, to give effect to the preliminary decree, it is necessary to initiate final decree proceedings. But in a suit for specific performance it is called as ‘execution proceedings’. Thus when the Court that passed the decree for specific performance and the Court executing the said decree are one and the same, Section 28 of the Act gives equal opportunity to the parties to the suit. If the plaintiff/decree holder for any reason is unable to deposit the balance sale consideration, he is given a right to apply to the Court that passed the decree seeking extension of time to deposit the money and the Court is vested with the power to grant such extension. At the same time when the plaintiff commits default in making payment, a right is conferred upon the defendant/judgment debtor to approach the Court under Section 28 of the Act seeking rescission of the contract. Here again the Court has the discretion to rescind the contract notwithstanding the fact that the decree has attained finality.
KUMAR, J.:— This writ petition is preferred by the defendant/judgment debtor challenging the order passed by the Executing Court dismissing his application under Section 28(1) of the Specific Relief Act, 1963 (Hereinafter referred to as ‘The Act’ for short).
2. For the purpose of convenience, the parties are referred as per their original rank in the suit.
3. The plaintiff filed a suit for a decree of specific performance of the agreement of sale dated 16.08.1997 against the defendant alleging that the defendant had agreed to sell the schedule property in his favour for Rs. 4,60,000/-. Under the said agreement a sum of Rs. 1,75,000/- was paid as advance by him. The balance sale consideration of Rs. 2,85,000/- had to be paid at the time of registration of the sale deed. He was constrained to file the suit when the defendant failed to execute the sale deed in his favour as agreed. Though duly served with the suit summons, the defendant did not contest the suit and therefore, the decree came to be passed on 26.03.2003 directing the defendant to receive the balance sale consideration from the plaintiff and to execute the registered sale deed failing which he was reserved the liberty of taking steps to get the sale deed executed and registered through the Court Commissioner by depositing the balance sale consideration amount after the appeal time is over.
4. After the decree, the plaintiff issued a notice to the defendant expressing his readiness to pay the balance sale consideration and called upon the defendant to receive the consideration and execute the sale deed. The defendant did not oblige. Therefore, the plaintiff filed Ex. No. 34/2003 to execute the decree.
5. The record shows that the judgment debtor/defendant, to stall the execution proceedings not only filed an application under Order XXI Rule 97 of CPC but also got filed another application under the same provision through his daughter-in-law. However these applications came to be dismissed by the Executing Court. Thereafter, the defendant/judgment Debtor filed I.A. 7 under Section 28 of the Act on 08.03.2011 for rescission of the contract and dismissal of the execution petition.
6. It is the defendant/judgment debtor’s case that the suit came to be decreed exparte on 26.03.2003 and the time to file an appeal against the exparte decree expired on 25.04.2003. The decree is silent as to the outer limit within which the plaintiff should deposit the balance sale consideration from 25.04.2003 and therefore the exparte decree passed in favour of the plaintiff/decree holder is a nullity being contrary to the provisions of Section 28 of the Act. Further the decree holder has not deposited the balance amount till date and therefore, the alleged contract of sale agreement needs to be rescinded and cancelled in the interest of justice and equity. The decree is not executable. The plaintiff/decree holder filed objections to I.A. 7 and sought its dismissal contending that since the defendant/Judgment Debtor failed to comply with the decree, he initiated the execution proceedings well in time and the question of depositing the amount would arise only at the time of the execution of the registered sale deed.
7. The executing Court, after considering the rival contentions and taking note of the decisions relied on by the parties, has dismissed the I.A. holding that no time limit is prescribed in the decree for depositing the balance sale consideration, by the plaintiff. After passing of the decree, the decree holder has filed the execution case only after issuing notice to the judgment debtor stating that he is ready with the balance sale consideration. The defendant did not reply to the notice nor came forward to comply with the decree. Nor has the judgment debtor filed any appeal against the exparte judgment and decree. On the other hand, he got an application filed through his son seeking stay of the further proceedings in the execution petition and another application through one Parvathi under Order XXI Rule 97 of CPC to stall the execution of the proceedings. The Decree holder in fact has deposited the balance sale consideration in the Court on 14.07.2011. The judgment debtor has not come to the Court with clean hands and therefore he is not entitled to the discretionary relief.
8. The present writ petition is filed against the above order passed by the executing Court.
9. Learned Counsel for the defendant/judgment Debtor assailing the impugned order argued that, under the terms of the decree, the plaintiff was expected to deposit the balance sale consideration after expiration of the time prescribed for filing an appeal and therefore, the executing Court could not have held that no time is fixed for payment of the sale consideration. Secondly, it was argued that even after filing of the execution petition, balance sale consideration was not deposited and it was deposited only after the Judgment debtor filed I.A. 7 under Section 28 of the Act. The plaintiff/decree holder had not even filed an application seeking extension of time to deposit the balance sale consideration. The decree is dated 26.03.2003 and the balance sale consideration is deposited nearly 8 years thereafter i.e., on 14.07.2011. In view of these circumstances, it was urged that the agreement entered into by the parties is to be rescinded in terms of Section 28 of the Act and execution petition be dismissed. :
10. Per contra, Learned Counsel for the plaintiff/decree holder arguing in support of the impugned order submitted that, as no time is fixed in the decree, the decree holder, after passing of the decree, issued notice expressing his readiness and willingness to pay the balance sale consideration and obtain the sale deed. When this request was not acceded to, the decree holder was constrained to file the execution petition within five months, which conduct clearly demonstrates that, he was ready to perform his part of the contract. The execution petition was stalled by the judgment debtor by filing applications after applications through his daughter-in-law as well as the son for which the decree holder cannot be blamed. In fact, the decree holder has deposited the amount on 14.07.2011. I.A. 7 is not maintainable on the execution side and it ought to have been filed in the original suit itself as is clear from the provisions of Section 28 of the Act.
11. In the light of the aforesaid facts and rival contentions, the points that arise for my consideration in this writ petition are as under:—
1. Whether an application U/s. 28 of the Act is maintainable on the original side or in the execution proceedings initiated by the decree holder to execute the decree?
2. Whether the Judgment debtor has made out a case for rescission of the contract as provided U/s. 28 of the Act?
12. In order to answer the above questions, it is necessary to have a look at Section 28 of the Act which deals with rescission of contracts for sale or lease of immovable property in certain circumstances when already specific performance has been decreed by the Court. The said provision reads thus:—
“28. Rescission in certain circumstances of contracts for the sale or lease of immovable property, the specific performance of which has been decreed. —
(1) Where in any suit a decree for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser or lessee does not, within the period allowed by the decree or such further period as the court may allow, pay the purchase money or other sum which the court has ordered him to pay, the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require.
(2) Where a contract is rescinded under subsection (1), the court:—
(a) shall direct the purchaser or the lessee, if he has obtained possession of the property under the contract, to restore such possession to the vendor or lessor, and
(b) may direct payment to the vendor or lessor of all the rents and profits which have accrued in respect of the property from the date on which possession was so obtained by the purchaser or lessee until restoration of possession to the vendor or lessor, and if the justice of the case so requires, the refund of any sum paid by the vendee or lessee as earnest money or deposit in connection with the contract.
(3) If the purchaser or lessee pays the purchase money or other sum which he is ordered to pay under the decree within the period referred to in sub-section (I), the court may, on application made in the same suit, award the purchaser or lessee such further relief as he may be entitled to, including in appropriate cases all or any of the following reliefs, namely:
(a) the execution of a proper conveyance or lease by the vendor or lessor;
(b) the delivery of possession, or partition and separate possession, of the property on the execution of such conveyance or lease.
(4) No separate suit in respect of any relief which may be claimed under this section shall lie at the instance of a vendor, purchaser, lessor or lessee, as the case may be.
(5) The costs of any proceedings under this section shall be in the discretion of the court.”
13. Therefore, to invoke the above provision, the person who has obtained a decree for specific performance ought to have failed to pay the money or other sum which the Court has ordered him to pay, within the period allowed by the decree or such further period as the Court may allow. In such an event the person who has suffered the decree has a right to apply to the Court in the same suit in which the decree was passed to have the contract rescinded. On such an application being made, the Court may by order rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require. Once such an order for rescission of contract is made, the Court shall direct the purchaser or the lessee, if, he has obtained the possession of the property under the contract, to restore such possession to the vendor or lessor and also may direct payment to the vendor or lessor to pay the rents and profits which have accrued in respect of the property from the date on which the possession was obtained by the purchaser or lessee until restoration of possession to any vendor or lessor, and if the justice of the case so requires, the refund of any sum paid by the vendee or lessee or earnest money or deposit in connection with the contract.
14. The question whether an application under Section 28 of the Act is to be made in the same suit in which the decree is passed, has been the subject matter of interpretation by various High Courts in the country. In view of divergent opinion expressed by various High Courts, the Apex Court had an occasion to consider the same in the case of Ramankutty v. Avara1 where in para 6 it is held as under.“6. The question then emerges is whether it should be on the original side or execution side. Section indicates that it should be “in the same suit”. It would obviously mean in the suit itself and not in the execution proceedings. It is equally settled law that after passing the decree for specific performance, the Court does not cease to have any jurisdiction. The court retains control over the decree even after the decree has been passed. It was open to the court to exercise the power under Section 28(1) of the Act either for extension of time or for rescinding the contract as claimed for. Since the execution application has been filed in the same court in which the original suit was filed, namely, the court of first instance, instead of treating the application on the execution side, it should have as well been numbered as an interlocutory application on the original side and disposed of according to law. In this view, we feel that the Andhra Pradesh High Court is not correct. The High Court, therefore, is not right in dismissing the application treating of transferring it on the original side for dealing with it according to law.”
15. The Apex Court in the case of V.S. Plalanichamy Chettiar Firm v. C. Alagappan2 has reiterated above position of law in para 16 of the judgment:“16. In view of the decision of this Court in Ramankutty Guptan’s case (1994) AIR SCW 1533) when the trial Court and the executing Court are same, executing Court can entertain the application for extension of time though the application is to be treated as one filed in the main suit. On the same analogy, the vendor judgment—holder can also seek rescission of the contract of sale or take up this plea in defence to bar the execution of decree. One of the ground on which the trial Court dismissed the execution application was that the decree holder did not pay the balance of consideration as per the sale agreement and also did not pay within the time stipulated by the Court in the decree.”
16. Again in the case of Chanda (Dead) through LRs. v. Rattni3. at para 10 the Apex Court has held that:“10. The decree for specific performance has been described as a preliminary decree. The power under Section 28 of the Act is discretionary and the Court cannot ordinarily annul the decree once passed by it. Although the power to annul the decree exists yet Section 28 of the Act provides for complete relief to both the parties in terms of the decree. The Court does not cease to have the power to extend the time though the trial Court had earlier directed in the decree that payment of balance price to be made by certain date and on failure suit to stand dismissed. The power exercisable under this Section is discretionary.”
17. In the light of the ratio laid down in the aforementioned judgments, the law on the point can be said to be fairly settled: A decree for specific performance being in the nature of a preliminary decree, the Court after passing of the said decree does not become functus officio. It retains the jurisdiction to conclude the further steps to be taken in the suit. The decree holder chooses to file an execution petition for getting the sale deed registered through the Court when the defendant who suffered the decree fails to obey the same. Though called ‘execution proceedings’, it is nothing but continuation of the original suit. In a suit for partition, after the preliminary decree is passed, to give effect to the preliminary decree, it is necessary to initiate final decree proceedings. But in a suit for specific performance it is called as ‘execution proceedings’. Thus when the Court that passed the decree for specific performance and the Court executing the said decree are one and the same, Section 28 of the Act gives equal opportunity to the parties to the suit. If the plaintiff/decree holder for any reason is unable to deposit the balance sale consideration, he is given a right to apply to the Court that passed the decree seeking extension of time to deposit the money and the Court is vested with the power to grant such extension. At the same time when the plaintiff commits default in making payment, a right is conferred upon the defendant/judgment debtor to approach the Court under Section 28 of the Act seeking rescission of the contract. Here again the Court has the discretion to rescind the contract notwithstanding the fact that the decree has attained finality.
18. Specific performance being a discretionary relief, the Court has ample power to do justice between the parties, if anyone of them were to not act in terms of the decree. As such the contention that an application under Section 28 of the Act ought to be filed in the suit and not in execution proceedings cannot be accepted. I.A. 7 filed under Section 28 of the Act by the defendant/judgment debtor in the execution proceedings seeking rescission of contract therefore is perfectly maintainable and it is to be treated as an interlocutory application filed in the suit for specific performance itself.
19. Admittedly, the defendant/judgment debtor was duly served with the summons in the suit for Specific Performance. He appeared through an Advocate, sought for time but did not file the written statement or participate in the proceedings. Therefore, the suit of the plaintiff/decree holder came to be decreed exparte and the operative portion of judgment of the Trial Court reads as under:—“The suit is decreed with costs.The defendant is directed to receive balance sale consideration of Rs. 2,85,000-00 from the plaintiff and to execute and register the sale deed in favour of the plaintiff at his costs in pursuance of the sale agreement dated 16.08.1997 with respect to suit property.Failure on the part of the defendant to execute the sale deed the plaintiff is at liberty to take steps to get the sale deed executed and registered through the Court Commissioner by depositing the balance sale consideration amount after the appeal time is over.”(Underlining by me)
20. What the plaintiff has to do if the defendant were to not obey the decree passed by the Court is therefore, clearly spelt out in the judgment of the Trial Court. The plaintiff was given the liberty to take steps to get the sale deed executed and registered through the Court by depositing the balance sale consideration after the time prescribed for filing the appeal expired. In other words, the plaintiff had to deposit the balance sale consideration only after expiry of the appeal period.
21. The judgment and decree was delivered on 26.03.2003 and an appeal against the said decree ought to have been filed within 30 days, but the defendant admittedly has not chosen to file any appeal. After expiry of the appeal period, without depositing the balance consideration in Court, the plaintiff issued a legal notice calling upon the defendant to receive the balance sale consideration and execute the sale deed. The defendant did not reply. Then the execution proceedings came to be initiated. The balance consideration was not deposited either before or along with the execution petition.
22. The Judgment debtor/defendant entered appearance, in the execution case. Then he filed I.A. 7 under Section 28(1) of the Act seeking rescission of the contract on the ground of non-deposit of the amount in terms of the decree. Thereafter, the balance sale consideration came to be deposited on 14.07.2011 by the decree holder. The plaintiff/decree holder was expected to file an application under Section 28(1) of the Act seeking extension of time to deposit the amount by showing sufficient cause for the lapse on his part. Till date no such application is filed by the plaintiff/decree holder.
23. If the defendant was at fault, he was not willing to obey the decree, if the plaintiff had deposited the money after the expiry of the appeal period as stipulated in the decree or at least on the day he filed the execution petition, that would have been sufficient to demonstrate his bona fides. The balance sale consideration of Rs. 2,85,000/- had to be deposited on the date of the suit or the date of the decree or at least on the date of filing of the execution petition. But the plaintiff/decree holder appears to have woken up after seeing the averments in I.A. under Section 28 of the Act and made up his mind to deposit the money on 14.07.2011 which is nearly 8 years after the passing of the decree and 14 years from the date of the agreement.
24. The subject matter of the suit is an immovable property situated in Tiptur Town. The value of the immovable properties situated in towns and cities is multiplying every year. The plaintiff/decree holder who had the benefit of the decree also had the benefit of having Rs. 2,85,000/- with him for 14 long years and did not even seek extension of time to deposit the said amount. Today if the Court were to direct the defendant/judgment debtor to execute the sale deed for a consideration which he should have received 14 years ago, it would cause great hardship and irreparable injury, as the said amount would be of no value at all. In that view of the matter, the contract of sale requires to be rescinded and consequently, the decree for specific performance also requires to be annulled.
25. Where a contract is rescinded under sub-Section (1) of Section 28 of the Act, if the justice of the case so requires, the Court can as provided under Section 28 (2)(b) of the Act order for refund of any sum paid by the vendee or lessee as earnest money or deposit in connection with the contract. Similarly Section 65 of the Contract Act, 1872 also casts an obligation on the person who has received an advantage under void agreement or contract that becomes void, to restore it or make compensation for it, to the person from whom he received it. Therefore the defendant/judgment debtor shall refund the advantage/earnest money received from the plaintiff/decree holder under the agreement i.e., a sum for Rs. 1,75,000/- together with interest @ 18% p.a. from the date of receipt of amount till the date of payment, if he wants the rescission of the contract.
26. In the result I pass the following:
ORDERThe writ petition is allowed. The impugned order is hereby set-aside and I.A. filed under Section 28 of the Specific Relief Act is allowed.The agreement of sale dated 16.08.1997 is rescinded and the decree for specific performance dated 26.03.2003 is annulled subject to the condition that the defendant/judgment debtor shall refund earnest money of Rs. 1,75,000/- received under the agreement to the plaintiff/decree holder with interest @ 18% p.a. from the date of receipt of the said amount till the date of payment, within three months from this day.In the event of the defendant/judgment debtor failing to pay the amount to the plaintiff/decree holder or deposit the same in the Court within 3 months from the date of receipt of this order, the order of this Court rescinding the agreement stands vacated and order of the executing Court on I.A. 7 stands restored.———
1. (1994) 2 SCC 642 : AIR 1994 SC 16992. (1999) 4 SCC 702 : AIR 1999 SC 9183. (2007) 14 SCC 26 : AIR 2007 SC 1514
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