Rescission in Certain Circumstances of Contracts for the Sale or Lease of Immovable Property – Section 28 | Specific Relief Act

Section 28 of the Specific Relief Act, 1963 Provides that:

1. Appeal:

An appeal is a continuation of the suit. Therefore, where a decree for specific performance has been dismissed by the trial Court, but decreed by the appellate Court, it should be construed to be in the same suit. When the decree specifies the time for performance of the conditions of the decree, V on its failure to deposit the money, Section 28 (1) itself gives power to the Court to extend the time on such terms as the Court may allow to pay the purchaser money or other sum which the Court has or­dered him to pay.

2. Application for:

The Supreme Court on aspects of extension of time to make payments has observed in the following words:

“An application for extension of time for payment of balance con­sideration may be filed even in the Court of first instance or the Appellate Court in the same suit as the decree of the Trial Court stands merged with that of the Appellate Court which decree is un­der execution. It is to be seen that the procedure is the hand-maid for justice; and unless the procedure touches upon jurisdictional issue, it should be molded to sub-serve substantial justice. There­fore, technicalities would not stand in the way to sub-serve substan­tive justice.”

An application of extension of time for payment of balance consider­ation may be filed even in the Court of first instance or in the appellate Court in the same suit as the decree of the trial Court stands merged with that of the appellate Court which decree is under execution. It is to be seen that the procedure is the handmaid for justice; and unless the procedure touches upon jurisdictional issue, it should be moulded to sub-serve sub­stantial justice.

Therefore, technicalities would not stand in the way to sub-serve substantive justice. 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 residing 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 off according to law.

3. Comply with decree:

No explanation whatsoever is corning from the decree-holder-respondents as to why they did not pay the balance amount of consideration as per the decree except what the High Court itself thought fit to comment which is certainly not borne out from the record, Equity demands that discretion be not exercised in favour of the decree-holder- respondents and no extension of time be granted to them to comply with the decree.

4. Conditional decree:

An authority for the proposition that a condi­tional decree is a final decree. The question is whether after having passed a conditional decree in a suit for specific performance, the Court can en­large the time indicated in the said decree in view of Section 28 (1) of the specific Relief Act, 1963, notwithstanding the fact that it was provided in the degree that the suit would stand dismissed in case of default in making payment under the decree.

5. Decree:

The Court which passes a decree for specific performance retains control over the decree even after the decree has been passed. It was further held that the Court which passes a decree for specific perfor­mance has the power to extend the time fixed in the decree for the reason that the Court retains control over the decree. It was also held that the contract between the parties is not extinguished by the passing of a decree for specific performance and that the contract subsists notwithstanding the passing of the decree. It was further held as follows:

“As the Court retained control over the matter despite the decree, it was open to the Court, when it was alleged that the party moved against has positively refused to complete the contract to entertain the application and order rescission of the decree if the allegation was proved. We, therefore, think that the application of the appel­lant was competent.”

The Specific Relief Act, 1963, is not an exhaustive enactment and un­der the law relating to specific relief a Court which passes a decree for specific performance retains control over the decree even after the decree had been passed. Therefore, the Court in the present case, retained control over the matter despite the decree.

6. Effect of:

The contention was that since the decree did not specify a time within which the purchase-money should be paid and, since an appli­cation for fixing the time was made by the appellant and dismissed by the

Court, Mundhra cannot be said to have been in default in not paying the purchase-money so that the appellant might apply for rescission of the de­cree. If a contract does not specify the time for performance, the law will imply that the parties intended that the obligation under the contract should be performed within a reasonable time.

Section 46 of the Contract Act pro­vides that where, by a contract, a promisor is to perform his promise with­out application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time and the ques­tion “what is reasonable time” is, in each particular case, a question of fact.

As already indicated that the contract between the parties was not extin­guished by the passing of the decree that it subsisted notwithstanding the decree, it was an implied term of the contract and, therefore, of the decree passed thereon that the parties would perform the contract within a reason­able time. To put it in other words, as the contract subsisted despite the decree and as the decree did not abrogate or modify any of the express or implied terms of the contract, it must be presumed that the parties to the decree had the obligation to complete the contract within a reasonable time.

7. Eviction for premises:

In the instant case, without any decree or order of eviction of the appellant from the demised premises, he has been unlawfully dispossessed from the premises without any due process of law. The first respondent is directed to put the appellant in possession within 24 hours. The Executing Court is directed to dispose of the application filed by respondent Mos. 7, 8 and 9, heirs of the landlady under Section 28 of the Specific Relief Act, 1963 for rescinding the contract along-with the appli­cation filed under Order XXI, Rules 89 and 99, C.P.C. and dispose of it after the former is decided.

8. Execution of decree:

Where decree was executed against lessee, who not party in suit the possession obtained by such execution was held illegal.

9. Execution of:

Under contract for sale, respondent was put in pos­session and after failure of vendor to execute sale-deed respondent filed suit for specific performance. Balance amount deposited after expiry of time granted by appellate Court while passing decree. Appellant carried the matter in second appeal. Meaning of word “same suit” in Section 28 (1) can be construed to be original Court in which decree made. Application for extension of time or for rescinding the contract would lie only in appellate Court and not in trial Court that too on execution side. So, decree of appel­late Court would be construed to be the decree passed by the Court of first instance.

10. Extension of time:

It is perfectly open to the Court in control of a suit for specific performance to extend the time for deposit, and this Court may do so even now to enable the plaintiff to get the advantage of the agreement to sell in her favour.

It is perfectly open to the Court in control of a suit for specific perfor­mance to extend the time for deposit, and this Court may do so even now to enable the plaintiff to get the advantage of the agreement to sell in her favour. The disentitling circumstances relied upon by the defendant-respon­dent are off-set by the false pleas raised in the course of the suit by him and rightly negatived. Nor are we convinced that the application for consider­ation and extension of time cannot be read, as in substance it is, as a petition for more time to deposit.

Even so, specific performance is an equi­table relief and he who seeks equity can be put on terms to ensure that equity is done to the opposite party even while granting the relief. The final end of law is justice, and so the means to it too should be informed by equity.

That is why he who seeks equity shall do equity. Here, the assign­ment of the mortgage is not a guileless discharge of the vendor’s debt as implied in the agreement to sell but a disingenuous disguise to arm herself with a mortgage decree to swallow up the property in case the specific performance litigation misfires. To sterilize this decree is necessary equity to which the appellant must submit herself before she can enjoy the fruits of specific performance.”

Decree holder filed application for execution of the decree of specific performance after five years. No reason was given for not putting the de­cree in execution for five years. Further, under the decree, there was a specific direction to the decree holder to deposit the balance purchase price within the stipulated period. Under the said decree, a further direction was given to the judgment debtor to execute the sale deed on the vendee’s depositing the balance purchase price.

It was a case of a final decree. In the execution application, the judgment debtor applied for rescission of the agreement of sale on the ground of default on the part of the vendee in failing to deposit the balance price. Under the above circumstances, this Court held that the vendee, who had applied for extension of time to de­posit the balance price, was not entitled to such extension.

This Court ob­served that in deciding application under Section 28 (1), the Court has to see all the attendant circumstances including the conduct of the parties. On facts, this Court found that there was no default on the part of the vendor- judgment debtor. That one explanation whatsoever came from the vendee- decree holder for failure to deposit the balance price. In the circumstances, on facts, this Court refused extension of time to deposit the balance price.

The balance sale consideration was not deposited within specified time. Execution application was filed after 5 years of passing of decree by Trial Court and 3 years after dismissal of appeal. Trial Court and executing Court were the same. Application filed for extension of time. Executing Court was competent to entertain the application. Similarly vendor can take up this plea in defence to bar execution of decree.

Plaintiff bound to show his readiness and willing to perform his part of agreement. No fault on part of vendor alleged to explain the delay. No explanation coming for this delay. Hence, no extension of time granted.

The Supreme Court on aspects extension of time for deposit observed as follows:

“It is perfectly open to the Court in control of a suit for specific performance to extend the time for deposit, and this Court may do so even now to enable the plaintiff to get the advantage of the agree­ment to sell in her favour. The disentitling circumstances relied upon by the defendant-respondent are off-set by the false pleas raised in the course of the suit by him and rightly negatived. Nor are we con­vinced that the application for consideration and extension of time cannot be read, as in substance it is, as a petition for more time to deposit. Even so, specific performance is an equitable relief and he who seeks equity can be put on terms to ensure that equity is done to the opposite party even while granting the relief. The final end of law is justice, and so the means to it too should be informed by equity. That is why he who seeks equity shall do equity.”

11. Filing of:

Sub-section (3) of Section 28 clearly contemplates that, if the purchaser or lessee pays the purchase money or other sum which he is ordered to pay under the decree, the Court may on application made in the same suit, award the purchaser or lessee such further relief as he may be entitled to. Sub-clause (b) of sub-section (3) of Section 28 contemplates the delivery of possession or partition and separate possession of the prop­erty on the execution of such conveyance or lease. Sub-section (1) of Sec­tion 28 bars the filing of a separate suit for any relief which may be claimed under this section.

12. Fixation of period:

When the appellant was not in a position to perform the direction given by the Court in view of the holidays, the Court cannot expect the appellant to perform what is impossible. Further, when a period of time has been granted to a party to fulfil a condition, until expira­tion of that period, it cannot be said as to why a particular act has not been done before that time.

13. Grant of:

Specific performance is an equitable relief and he who seeks equity can be put on terms to ensure that equity is done to the oppo­site party even while granting the relief. The final end of law is justice, and so the means to it too should be informed by equity. That is why he who seeks equity shall do equity. Mere, the assignment of the mortgage is not a guileless discharge of the vendor’s debt as implied in the agreement to sell but a disingenuous disguise to arm herself with a mortgage decree to swal­low up the property in case the specific performance litigation misfires. To sterilise this decree is necessary equity to which the appellant must submit herself before she can enjoy the fruits of specific performance.

14. Lease agreement:

In the circumstances, one fails to appreciate the authority of the Trustees to enter into an agreement dated 29.4.1981 to lease out the said property in favour of Tivoli Court Pvt. Ltd. On 25.7.1985, when title Suit came for hearing, no evidence was led on behalf of the Trustees explaining circumstances under which the Trust entered into the agreement dated 29.4.1981 with Tivoli Court Pvt. Ltd.

In the circumstances, it is not open to the appellants to go behind the said decree dated 25.7.1985. Lastly, it may be mentioned that the Trial Court has rescinded the agree­ment dated 16.8.1980 basically on the ground of alleged breaches thereof. In the circumstances, it is not open to the appellants now to submit that the decree dated 25.7.1985 was collusive and not binding on the Trust estate.

15. Maintainability of:

In case of default by vendee, decree of spe­cific performance was granted. Since, balance consideration deposited af­ter expiry of period granted by Court hence, application for rescission of contract moved before Appellate Court was held maintainable as appeal is continuation of suit.

When the decree specifies the time for performance of the conditions of the decree, on its failure to deposit the money, Section 28 (1) itself gives power to the Court to extend the time on such terms as the Court may allow to pay the purchase money or other sum which the Court has ordered him to pay. The Court held, after noticing the conflict of decisions by the Bombay High Court and the Andhra Pradesh High Court, that when the Court which passed the decree and the executing Court is the same application under Section 28 can be filed in the Executing Court. However, where decree is transferred for execution to a transferee executing the certainly the trans­feree Court is not the original Court and the Executing Court is not the “same Court” within the meaning of Section 28 of the Act. But when an application has been made in the Court in which the original suit was filed and the execution is being proceeded with, then certainly an application under Section 28 is maintainable in the same Court.

When the decree specifies the time for performance of the conditions of the decree, on its failure to deposit the , money, Section 28 (1) itself gives power to the Court to extend the time on such terms as the Court may allow to pay the purchase money or other sum which the Court has ordered him to pay an application for extension of time for payment of balance consideration may be filed even in the Court of first instance or in the Appellate Court in the same suit as the decree of the trial Court stands merged with that of the Appellate Court which decree is under execution. It is to be seen that the procedure is the hand-maid for justice; and unless the procedure touches upon jurisdictional issue, it should be moulded to sub-serve substantial justice.

Therefore, technicalities would not stand in the way to sub-serve substantive justice. Take a case where the decree is transferred for execution to a transferee Executing Court, then certainly the transferee Court is not the original Court and execution it is not the “same Court” within the meaning of Section 28 of the Act. But when an applica­tion has been made in the Court in which the original suit was filed and the Execution is being proceeded with, then certainly an application under Sec­tion 28 is maintainable in the same. Court. The question then emerges is whether it should be on the original V 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 off according to law. In this view, the judgment of the Bombay High Court in Mamti Vishnu Kshirsagar v. Вари Keshav Jadhav, AIR 1970 Bom 398, laid down the law correctly and that of the Andhra Pradesh High Court in Ibrahim Shariff v. Masthan Shariff, 1967 (2) AWR 60, is not correct. The High Court, therefore, is not right in dismiss­ing the application treating it to be on execution side, instead of transfer­ring it on the original side for dealing with it according to law.

16. Non-payment of balance:

Where no explanation was given non­payment of balance consideration and the agreement of sale in question was entered into about 19 years ago. Court held that no extension of time could be granted.

17. Passing of decree:

For the purpose of Section 28 the contract between the parties does not get extinguished by the passing of the decree; it subsists even thereafter and that if a contract does not specify the time for performance, the law will imply that the parties intended that the obliga­tion under the contract should be performed within a reasonable time. Even extending the said finding with regard to the deposit for the period after the decree where the decree is silent with regard to the relevant date, the rea­sonableness of the delay has to be considered based on the surrounding circumstances.

18. Power of Court:

The provision of Section 28 (1) of the Specific Relief Act, 1963, were considered by the Hon’ble Supreme Court which, inter alia, observed that under the said provisions the Court, which passed the decree was empowered to extend the time for making the deposit in terms of the decree. In fact, in the facts of the said case, the decree of the Appellate Court was to be construed to be a decree passed by the Court of first instance since the trial Court had dismissed the suit. In the said con­text it was observed by the Hon’ble Supreme Court as follows:

“Where a decree for specific performance has been dismissed by the Trial Court, but decreed by the Appellate Court, it should be construed to be in the same suit. When the decree specifies the time for performance of the conditions of the decree, on its failure to deposit the money, Section 28 (1) itself gives power to the Court to extend the time on such terms as the Court may allow to pay the purchase money or other sum which the Court has ordered him to pay.”

19. Question of:

The execution Court is not the “same Court” within the meaning of Section 28 of the Specific Relief Act. The question that arose there was whether an application under Section 28 of the Specific Relief Act, 1963 should be filed on the original side or execution side. It was held that the 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.

20. Rescinding of agreement:

As far back as 20.8.1970, the Trustees allowed the lessee, Mohammed. Ismail, to assign the leasehold rights in favour of the respondent herein. Further, the assignee was allowed to be put in pos­session. On 16.8.1980, the Trustees entered into oral agreement to renew the above lease for 70 years w.e.f. 1.5.1981 at increased rent of Rs. 30,000/ – per month plus premium of Rs. 30 lacs as found by the Trial Court in title Suit decided on 25.7.1985. In the circumstances, increase in the value of the immovable property, on account of inflation, is no ground to rescind the agreement dated 16.8.1980.

Section 28 (1) postulates that the Court does not lose its jurisdiction after the grant of the decree for specific performance nor it becomes functus officio. Section 28 gives power to grant order of rescission of the agree­ment which itself indicates that till the sale deed is executed, the Trial Court retains its power and jurisdiction to deal with the decree of the specific performance. Therefore, the Court has the power to enlarge the time in favour of the judgment-debtor to pay the amount or to perform the condi­tions mentioned in the decree for specific performance, despite the appli­cation for rescission of the agreement/decree.

The decree in question is not a self operative final decree. It is a pre­liminary decree. It merely directs the Trust to execute the lease on or before 24.10.1985. It does not prescribe any consequence of non deposit of pre­mium. It does not prescribe any consequence of non tender of rent on or before 24. 10. 1985. Till date, the decree holder has paid the premium of Rs. 30 lacs.

It has paid rent amounting to Rs. 96 lacs. In the circumstances, it cannot be said that the decree holder intended to abandon the contract dated 16.8. 1980. There is no positive refusal on the part of the respondent to complete the lease. There is no explanation given by the Trust for not moving the application for rescission of the contract for nine years. The decree was passed on 25.7. 1985 whereas the application for rescission of the agreement is dated 3.10.1994. As stated above, the trust did not lead the evidence in Suit No. 176/81: The corresponding Suit No. 87/81 filed by the Trust was dismissed for non-prosecution. The Trust moved under Order IX, Rule 13, C.P.C. for setting aside the decree dated 25.7.1985. That appli­cation was dismissed for default vide order dated 1.8.1987. The Trust moved the application for restoration which was also dismissed for default on 16.7.1988.

The Trust moved in appeal against the decree dated 25.7.1985. That appeal was also dismissed. The decree holder has referred to the en­tire correspondence between the parties which indicate that during this period of nine years in the guise of negotiations, the decree holder was prevented from filing execution application. The decree holder was repeat­edly assured of settlement.

The decree holder was repeatedly assured that lease would be executed in its favour. Attempt was also made by the Trust­ees during the interregnum to lease the property to Dilip Chand Kankaria and Smt. Sudha Kankaria. Lastly, in the present case, the decree holder was put in possession under the deed of assignment dated 20.8.1970. The respondent was not put in possession under the agreement dated 16.8.1980. In the circumstances, the Trial Court erred in direction rescission of the said agreement dated 16.8.1980.

When the Court passes the decree for specific performance, the con­tract between the parties is not extinguished. That the decree for specific performance is in the nature of preliminary decree and the suit is deemed to be pending even after the decree. Hence, the Court retains control over the entire matter even after the decree. Since the Court retains control over the matter, despite the decree, it is open to the Court to order rescission of the agreement, when it is found that the decree holder is not ready and willing to abide by his obligations under the decree.

21. Rescission of contract:

A person can apply for rescission of con­tract or a decree if there is “default” on the part of the purchaser (or lessee) and such a default can be postulated only when the Court by its decree has appointed time for the performance of the obligations under the decree by the purchaser and obviously where no such time is fixed or the purchaser is not to do anything first in the sequence of mutual obligations under the contract or the decree, no question of default on his part arises and so there can be no basis for application of this Section.

Where balance consideration and draft sale-deed deposited after seek­ing extension of time allowed at the risk of plaintiff, petition seeking rescis­sion of contract rightly rejected.

22. Rescission of decree:

Since Section 28 of the Specific Relief Act, 1963, provides only for an application for rescission of a decree for specific performance for the sale or lease of immovable property, no application to rescind a decree for specific performance of an agreement to sell mov­ables, would lie under that section.

The very fact that Section 28 itself gives power to grant order of rescis­sion of the decree would indicate that till the sale-deed is executed in ex­ecution of the decree, the Trial Court retains its power and jurisdiction to deal with the decree of specific performance. It would also be clear that the Court has power to enlarge the time in favour of the judgment-debtor to pay the amount or to perform the conditions mentioned in the decree for spe­cific performance in spite of an application for rescission of the decree having been filed by the judgment-debtor and rejected. In other words, the Court has the discretion to extend time for compliance of the conditional decree as mentioned in the decree for specific performance.

23. Scope of:

On a construction of sub-section (1) of Section 28 it is clear that it is confined only to sale or lease of immovable property and does not cover agreements for sale of movables.

24. Stage of appeal:

Even at the stage of appeal before the Supreme Court, the time to make deposit could be extended to enable the plaintiff to get the advantage of the agreement to sell.

25. Stipulation time:

The Supreme Court on aspects of time being the essence of contract held as follows:

“At common law, stipulations as to time in a contract giving an op­tion for renewal of a lease of land were considered to be of the essence of the contract even if they were not expressed to be so and were construed as conditions precedent. Equity followed the common law rule in respect of such contracts and did not regard the stipulation as to time as not of the essence of the bargain, the reason being that a renewal of a lease is a privilege and if the tenant wishes to claim the privilege he must do so strictly within the time- limited for the purpose A delay on the part of the lessee to apply for renewal arising by mere neglect on his part and which could have been avoided by reasonable diligence will not entitle him to claim renewal.

26. Time for making deposit:

The Court under Sections 148, 149 and 151 of the Code of Civil Procedure was clothed with sufficient powers to enlarge the time for making deposits even in the case, of a conditional decree, particularly when the application for enlargement of the time was made before the time stipulated expired. It may be kept in mind that in this case also the application for extension of time was made and disposed off before the expiry of the time fixed for making the deposit.