Section 28 of SRA

Source: Supreme Court  

Why in News? 

A Division Bench of the Supreme Court of India, comprising Justice Pankaj Mithal and Justice S.V.N. Bhatti, in Habban Shah v. Sheruddin (2026), allowed an appeal filed against the order of the Punjab & Haryana High Court, which had condoned the respondent-plaintiff's delay in depositing the balance sale consideration, despite the trial court's decree specifically stipulating a three-month period for compliance. 

• The Court held that the plaintiff-respondent's failure to deposit the balance sale consideration within the time prescribed under the decree resulted in the automatic rescission of the contract under Section 28 of the Specific Relief Act, 1963, and that a separate application by the judgment-debtor seeking rescission is not mandatory for this purpose. 

What was the Background of Habban Shah v. Sheruddin (2026) Case? 

• The dispute arose from an agreement to sell dated October 19, 2005, concerning agricultural land, under which the buyer had paid an advance of ₹80,000.  
• The sale deed was to be executed by March 15, 2006. Upon the seller's failure to complete the transaction, the buyer instituted a suit for specific performance before the trial court. 
• On October 31, 2012, the trial court decreed the suit, directing the seller to execute the sale deed after receiving the balance sale consideration within a period of three months.  
• However, the buyer failed to deposit the balance amount within the stipulated period. While the seller's appeal was pending, no stay had been granted on the deposit of consideration, and the interim protection — limited to alienation — had lapsed before expiry of the three-month period.  
• Despite this, the buyer neither deposited the amount nor sought an extension of time within the prescribed period. 
• The buyer subsequently initiated execution proceedings, and in the second execution petition filed in 2015, the executing court permitted the deposit of the balance consideration, which was then made.  
• The High Court upheld this approach, holding that the delay stood condoned. The aggrieved seller moved the Supreme Court. 

What were the Court's Observations? 

• On Rescission Upon Non-Compliance with Decree: The Court held that the High Court erred in condoning the delay in depositing the balance sale consideration. The plaintiff-respondent's failure to comply with the condition stipulated in the decree led to the rescission of the contract under Section 28 of the Specific Relief Act, 1963, rendering the decree for specific performance inexecutable. 
• On Mandatory Nature of Application Under Section 28: The Court observed that moving an application under Section 28 of the Act for rescinding the contract on account of non-compliance is not mandatory but merely optional. The court is not powerless to treat the contract as having been rescinded for non-compliance of the condition, even in the absence of a formal application by the judgment-debtor. 
• On Readiness and Willingness: The Court noted that though the plaintiff-respondent had obtained the decree by establishing his readiness and willingness to perform his part of the agreement, he failed to demonstrate continuous readiness and willingness up to the execution of the sale deed. His failure to comply with the decree's condition indicated that he was not actually ready and willing to perform his obligation, thereby disentitling himself from the benefit of the decree of specific performance. 

Conclusions Drawn by the Court: The Court summarised the following principles: 

• The decree passed in a suit for specific performance is in the nature of a preliminary decree. 
• Since the decree is in the nature of a preliminary decree, the court does not become functus officio upon its passing but retains control over it until the sale deed is executed or the decree is rendered inexecutable. 
• Section 28(1) provides for depositing the balance sale consideration within the time allowed or for rescission of the contract in the event of default, even after a decree for specific performance has been granted. 
• Section 28(4) bars a separate suit for any relief that can be claimed in the same suit by moving an application under Section 28. 
• The power of the court under Section 28 is discretionary and must be exercised on equitable considerations, giving due regard to both the seller and the purchaser. 
• Default subsequent to a decree for specific performance, resulting in rescission, must be decided having regard to the broad terms of Sections 28(1) and 28(4) in exercise of equity jurisdiction so as to give quietus to the dispute. 
• It is not mandatory to move an application under Section 28, and the court is not powerless to treat the contract as rescinded for non-compliance of the condition. 

The appeal was accordingly allowed, with a direction to refund the part sale amount received from the respondent-plaintiff. 

What is Section 28 of the Specific Relief Act, 1963? 

Section 28 of Specific Relief Act, 1963 - Rescission in certain circumstances of contracts for the sale or lease of immovable property, the specific performance of which has been decreed: 

Sub-section (1) — Rescission on Purchaser/Lessee's Default: 

• Applies where a decree for specific performance of a contract for sale or lease of immovable property has already been passed. 
• If the purchaser or lessee fails to pay the purchase money or court-ordered sum within the time allowed by the decree or any extended period, the vendor or lessor may apply in the same suit for rescission of the contract. 
• The court may rescind the contract either partially (only against the defaulting party) or altogether, as justice requires. 

Sub-section (2) — Consequences of Rescission: 

• Upon rescission, the court shall direct the purchaser/lessee to restore possession of the property to the vendor/lessor, if possession had been obtained under the contract. 
• The court may further direct payment of all rents and profits accrued from the date of obtaining possession until restoration. 
• The court may also, if justice so requires, order refund of earnest money or deposit paid by the purchaser/lessee. 

Sub-section (3) — Relief to Purchaser/Lessee on Compliance: 

• If the purchaser/lessee pays the ordered amount within the stipulated period, the court may, on application in the same suit, grant further relief, including:  
• Execution of a proper conveyance or lease by the vendor/lessor. 
• Delivery of possession, or partition and separate possession, of the property upon execution of such conveyance or lease. 

Sub-section (4) — Bar on Separate Suit: 

• No separate suit is maintainable by any party (vendor, purchaser, lessor, or lessee) for any relief that can be claimed under this section. 
• All reliefs must be sought by application in the same suit in which the decree for specific performance was passed. 

Sub-section (5) — Costs: 

• The costs of any proceedings under this section are entirely at the discretion of the court.