Source: Supreme Court  

Why in News? 

The Supreme Court recently ruled that an execution court can extend the time limit to pay the balance amount under Section 28 of the Specific Relief Act, 1963,(SRA) even though such applications are typically decided in the original suit. The Court upheld the execution court's decision, noting that the decree lacked specific terms for payment and the decree-holder's willingness to pay warranted the extension. 

• Justices J. B. Pardiwala and Manoj Misra held this in the matter of Ishwar (Since Deceased) Thr. Lrs & Ors. v. Bhim Singh & Anr.  

What was the Background of Ishwar (Since Deceased) Thr. Lrs & Ors. v. Bhim Singh & Anr. Case? 

• On 18^th May 2005 the parties enter in a sell Agreement. 
• The total consideration for the property in dispute was set at Rs. 18 lakhs. 
• The respondents (buyers) paid an advance of Rs. 9.77 lakhs to the appellants (sellers). 
• Despite receiving a notice requesting execution of the sale deed, the appellants failed to execute the same. 
• The respondents instituted a suit for specific performance against the appellants to enforce the agreement to sell. 
• After the initial court decision, the respondents filed an appeal seeking specific performance of the agreement. 
• Following the appellate court's decree, the respondents filed an execution application on 20^th March 2012, seeking execution and registration of the sale deed. 
• While the execution application was pending, the appellants challenged the appellate court's decree by filing a Second Appeal before the High Court. 
• After the dismissal of the Second Appeal, the respondents filed an application before the Execution Court on 24th March 2014, seeking permission to deposit the balance consideration. 
• The appellants, opposing this application, submitted an application under Section 28 of the Specific Relief Act, 1963, seeking rescission of the contract on the grounds that the decree holders had failed to make the deposit within the stipulated two-month period. 
• There are two issues before the Court: 
  • Whether the Execution Court had jurisdiction to deal with the application(s) for  
    • (a) Recission of contract and  
    • (b) Extension of time to deposit the balance sale consideration? 
  • If the Execution Court had the Jurisdiction whether those applications ought to have been decided as one in the suit (i.e. Original Side)?  
    • If yes, then whether in the facts of the case, on that of the case, that ground alone, the impugned order warrants interference in exercise of jurisdiction under Article 136 of the Constitution of India, 1950 (COI).

What were the Court’s Observations? 

• The Supreme Court affirmed that an application under Section 28 of the Specific Relief Act, 1963, seeking rescission of contract or extension of time, must be decided in the original suit where the decree was passed, not in Execution Proceedings. 
• The Court held that the expression "may apply in the same suit in which the decree is made" as used in Section 28 of the 1963 Act must be accorded an expansive meaning to include the court of first instance, even if the decree under execution was passed by an appellate court. 
• The Court stated that an application under Section 28 of the 1963 Act can be entertained and decided by the Execution Court, provided it is the Court which passed the decree in terms of Section 37 of the Code of Civil Procedure,1908 (CPC). 
• The Court reiterated that the power to rescind the contract under Section 28 of the 1963 Act is discretionary in nature and is to be exercised to do complete justice to the parties. 
• The Court observed that the Execution Court does not cease to have the power to extend time even if the decree directed payment of balance price by a certain date. 
• The Court held that while exercising discretion under Section 28, the Court must consider whether the default was intentional or if there was a bona fide reason for the delay. 
• The Court noted that if there appears to be no fault on the part of the decree holder, the Court may refuse to rescind the contract and may extend the time for deposit of the defaulted amount. 
• The Court emphasized that its jurisdiction under Article 136 of the Constitution is discretionary and is to be exercised to advance the cause of justice, not merely because it is lawful to do so. 
• The Court stated that for the purpose of doing complete justice, it may not interfere with an order even if it suffers from some legal error. 
• The Court observed that substantial justice had been done to the parties in this case, and interfering with the impugned order on technical grounds would cause grave injustice to the decree holders. 

What is Section 28 SRA? 

About:

• Section 28 of the SRA provides a mechanism for rescission of contracts for the sale or lease of immovable property in cases where a decree for specific performance has been granted. 
• It allows the vendor or lessor to apply for rescission in the same suit if the purchaser or lessee fails to pay the decreed amount within the specified time or any extended period granted by the court. 
• The court has discretionary power to rescind the contract partially or wholly, and can order restoration of property possession, payment of rents and profits, and refund of earnest money as deemed appropriate. 
• The section also provides for further relief to the purchaser or lessee if they pay within the specified time and prohibits separate suits for reliefs claimable under this section. 

Legal Provision of Section 28 SRA:  

• The court has the power to rescind a contract for the sale or lease of immovable property after a decree for specific performance has been made, if the purchaser or lessee fails to pay the required sum within the specified time period. 
• The vendor or lessor must apply for rescission in the same suit where the decree for specific performance was made, not in a separate proceeding. 
• The court's power to rescind the contract is discretionary, allowing it to rescind either partially (for the defaulting party) or entirely, based on the justice of the case. 
• Upon rescission, if the purchaser or lessee has obtained possession of the property, the court shall direct them to restore possession to the vendor or lessor. 
• The court may order the purchaser or lessee to pay the vendor or lessor all rents and profits accrued from the property since they took possession until its restoration. 
• If justice requires, the court may order a refund of any earnest money or deposit paid by the purchaser or lessee in connection with the contract. 
• If the purchaser or lessee pays the required sum within the specified period, they may apply in the same suit for further relief they may be entitled to. 
• Potential further relief for the purchaser or lessee includes the execution of a proper conveyance or lease by the vendor or lessor. 
• Another form of further relief may be the delivery of possession, or partition and separate possession of the property upon execution of the conveyance or lease. 
• The statute explicitly prohibits the filing of separate suits for any relief claimable under this section by any party to the contract. 
• The court has discretion in awarding costs for any proceedings under this section. 
• The court retains the power to extend the time period for payment beyond what was initially specified in the decree. 
• The provision applies equally to both sale and lease contracts for immovable property. 
• The section provides a comprehensive framework for addressing defaults in specific performance decrees, balancing the rights of both parties to the contract. 
• The court's power to rescind is triggered by non-payment, emphasizing the importance of timely performance of monetary obligations in such contracts. 

Scope of Section 28 of SRA: 

• Section 28 applies specifically to contracts for the sale or lease of immovable property where a decree for specific performance has been granted. 
• It empowers the court to rescind such contracts under certain circumstances, primarily when the purchaser or lessee fails to pay the required sum within the specified time. 
• The court has the discretion to extend the time period for payment beyond what was initially specified in the decree. 
• The provision requires that applications for rescission or time extension be made in the same suit where the decree for specific performance was originally granted. 
• The court's power under this section is discretionary, allowing it to consider the justice of the case and the conduct of the parties. 
• The court can rescind the contract either partially (affecting only the defaulting party) or entirely, based on the circumstances of the case. 
• Upon rescission, the court can order the restoration of property possession to the vendor or lessor if the purchaser or lessee had obtained it under the contract. 
• The court may direct payment of rents and profits accrued from the property and refund of earnest money or deposits, as justice requires. 
• If payment is made within the specified or extended time, the court can grant further relief to the purchaser or lessee, including proper conveyance or delivery of possession. 
• The section explicitly prohibits separate suits for any relief claimable under this section. 
• The court has discretion in awarding costs for proceedings under this section. 
• The scope of this section aims to balance the interests of both parties in cases of default in specific performance decrees.