No Automatic Rescission of a Specific Performance Decree for Delay in Deposit; Equity-Based Section 28 Discretion and “Same Suit” Procedure

1) Introduction

Case: ANAND NARAYAN SHUKLA v. JAGAT DHARI (Supreme Court of India, 08-05-2026).
Context: The appellant (decree-holder/purchaser) obtained a decree for specific performance of an agreement to sell 3.75 acres of land (agreement dated 14.11.2011; price Rs.16,00,000 per acre; advance Rs.2,50,000). The trial court’s decree dated 03.03.2017 required the appellant to pay/deposit the balance sale consideration within one month, whereupon the respondent (judgment-debtor/vendor) was to execute and register the sale deed.

The appellant initiated execution in 2017 without depositing the balance within the decree’s one-month period. Multiple execution dates followed, with inconsistent directions by the executing court about payment/deposit. Ultimately, on 26.11.2020, the executing court directed deposit “to ascertain bona fides,” and the appellant deposited Rs.57,50,000. The respondent later applied under Section 28 of the Specific Relief Act, 1963 seeking rescission due to delayed deposit. The executing court dismissed the execution as inexecutable (12.07.2023), and the High Court affirmed (05.03.2025).

Core issues: (A) whether the trial decree merged into the appellate order when the appeal was dismissed for non-prosecution; (B) whether Section 28 rescission remained maintainable after the court permitted deposit and deposit was made; and (C) whether the courts below adopted a pedantic approach by treating delay as fatal without equity-based consideration and possible compensation.

2) Summary of the Judgment

  • Issue (A): No merger. Dismissal of an appeal for non-prosecution does not result in merger of the trial court decree into an appellate decree/order (because there is no adjudication on merits, and dismissal for default is excluded from “decree” under Section 2(2) CPC).
  • Issue (B): Section 28 application maintainable. Permission to deposit on 26.11.2020 did not decide or foreclose the judgment-debtor’s right to seek rescission; deposit was permitted to test bona fides.
  • Issue (C): Orders set aside and matter remanded. The executing court and High Court failed to consider Section 28’s discretionary, equity-driven framework; there is no “automatic” rescission merely because deposit was beyond the decree’s timeline (especially where the decree did not specify consequences of default). The execution and connected Section 28 applications were restored to be reconsidered as applications “in the suit,” to be appropriately numbered and decided afresh.

3) Analysis

3.1 Precedents Cited (and How They Shaped the Court’s Decision)

A. Doctrine of Merger and What Triggers It

  • Kunhayammed and others v. State of Kerala and another, (2000) 6 SCC 359 and Chandi Prasad & Ors. v. Jagdish Prasad & Ors., (2004) 8 SCC 724
    These authorities were used to restate the general doctrine: once a superior forum disposes of a matter on merits, the operative decree/order is that of the superior forum, whether it confirms/modifies/reverses the lower decision.
  • State of Kerala & Anr. v. Kondottyparambanmoosa & Ors, (2008) 8 SCC 65
    This decision supplied the crucial limitation: merger does not apply where a higher forum dismisses an appeal/revision on non-merits grounds such as delay. The Supreme Court extended the same logic to dismissal for non-prosecution, reinforcing that there is no “appellate decree” replacing the trial decree in such circumstances.

Net effect in this case: The appellant’s “merger” argument failed because the first appeal was dismissed for non-prosecution; the trial court decree remained the operative decree.

B. Section 28 Specific Relief Act: Continuing Control, Rescission, and Extension of Time

  • Sardar Mohar Singh v. Mangilal, (19 9 7) 9 SCC 217
    Cited for the proposition that the court does not become functus officio after a specific performance decree; it retains power to rescind or enlarge time. Importantly, extension under Section 28 is not akin to Section 5 Limitation Act: “every day’s delay” need not be explained; the focus is discretionary justice and (where needed) compensation.
  • K. Kalpana Saraswathi v. P.S.S. Somasundaram Chettiar, (1980) 1 SCC 630
    Used to reinforce that courts controlling specific performance proceedings can extend time even later, and that specific performance being equitable relief allows courts to impose terms to “do equity” to the other side.
  • Bhupinder Kumar v. Angrej Singh, (2009) 8 SCC 766
    Relied upon for two linked principles: a specific performance decree does not extinguish the contract; and Section 28 requires attending circumstances and parties’ conduct to be weighed.

C. “In the Same Suit” Requirement and Execution-Court Handling

  • Ramankutty Guptan v. Avara, (1994) 2 SCC 642
    Central to procedure: Section 28 applications must be in the “same suit,” but where execution proceeds in the court of first instance, that court may entertain such an application—though it should be treated/numbered as an interlocutory application on the original suit file. The judgment also emphasizes that procedure is a “handmaid of justice,” not an obstacle.
  • V.S. Palanichamy Chettiar Firm v. C. Alagappan & Anr., (1999) 4 SCC 702
    Adopted the Ramankutty approach and clarified symmetry: if a decree-holder can seek extension, a vendor/judgment-debtor can seek rescission or resist execution on that basis.
  • Ishwar (Since Deceased) thr. Lrs and Others v. Bhim Singh and Another, 2024 SCC OnLine SC 2338
    Reaffirmed that Section 28 relief must be decided in the original suit even if the suit has been disposed of; as a sequitur, even if the execution court is the court of first instance, it must shift the application to the suit file before deciding it.

Net effect in this case: The Supreme Court explicitly directed that on remand, the executing court must treat the rescission/extension applications as applications in the suit and number them accordingly.

D. Order XX Rule 12A CPC and Appellate Court Duty to Fix Time

  • Ram Lal v. Jarnail Singh, 2025 SCC OnLine SC 584
    Cited for a structured summary of the law: (i) a specific performance decree is in the nature of a preliminary decree; (ii) Section 28 vests continuing jurisdiction; (iii) extension is discretionary and equity-based; (iv) rescission requires something akin to willful negligence/positive refusal; and (v) appellate courts should comply with Order XX Rule 12A CPC by specifying time for deposit when disposing of appeals. The present judgment drew upon this framework to criticise mechanical rescission for delay.

E. Automatic Inexecutability Only Where Decree Itself Provides Default Consequences

  • P.R. Yelumalai v. N.H. Ravi, (2015) 9 SCC 52
    Used to mark the boundary: where the decree itself stipulates that on failure to deposit within time, the suit stands dismissed/decree stands rescinded, then failure renders the decree inexecutable. The Supreme Court contrasted that scenario with the present decree, which fixed time but did not specify an automatic consequence.

F. Timing/Form of Extension Prayer

  • Johri Singh v. Sukhpal Singh and others, (1989) 4 SCC 403
    Cited to establish that extension can be sought even after expiry of the stipulated period, reinforcing Section 28’s flexible remedial design.

3.2 Legal Reasoning (How the Supreme Court Reached Its Result)

(i) Merger rejected because there was no merits adjudication

The Court applied the doctrine of merger as a merits-based hierarchical principle and combined it with Section 2(2) CPC’s explicit exclusion of dismissal for default from “decree.” Since the first appeal was dismissed for non-prosecution, the trial court decree did not merge. This matters because Section 28 operates with reference to the decree that governs performance obligations; here, the trial decree remained operative.

(ii) Deposit permitted to test bona fides does not amount to extinguishing the rescission remedy

The Court read the executing court’s 26.11.2020 order as provisional and facilitative: it allowed deposit “today itself” to ascertain whether the decree-holder truly intended to comply. It was not a judicial determination extending time in a manner that foreclosed the vendor’s statutory right to seek rescission under Section 28. Thus, maintainability of the respondent’s rescission application survived the deposit.

(iii) The key error: treating delay as automatically fatal despite Section 28 discretion and the decree’s silence on default consequence

The executing court’s reasoning was essentially: the decree required deposit within one month; deposit happened in 2020; therefore decree cannot be executed. The Supreme Court held this to be an impermissibly mechanical approach because:

  • Section 28’s text (“may… rescind” and “such further period as the court may allow”) makes rescission discretionary, not automatic.
  • The decree did not stipulate automatic rescission/dismissal on default; hence the court was obliged to evaluate whether rescission was justified or whether time should be extended on equitable terms (including compensatory terms).
  • The execution record contained inconsistent directions and procedural irregularities (e.g., repeated “pay the judgment debtor” directions when the judgment debtor was not accepting; delayed clear direction to deposit; service issues; pandemic adjournments). These circumstances were relevant to discretionary assessment but were not weighed.

(iv) The Court crystallised guiding principles under Section 28

The judgment’s most operational contribution is the Court’s consolidation of principles (enumerated as (i)–(vii)), including: (a) specific performance decree as preliminary in nature; (b) no automatic rescission/extension; (c) extension may be sought even after time expires; (d) form of prayer is flexible; (e) equity and compensation are central; (f) focus on intent/willful negligence; and (g) duty under Order XX Rule 12A CPC to specify time and, absent that, “reasonable time” compliance.

(v) Remedy chosen: remand rather than final extension/rescission by Supreme Court

Instead of itself extending time or refusing rescission, the Supreme Court set aside both orders and remitted the matter for fresh consideration “in accordance with law,” directing proper procedural treatment (applications to be treated as in-suit applications). This reflects judicial discipline: the discretion under Section 28 is fact-sensitive, and the first-instance court is best placed to balance equities after hearing both sides.

3.3 Impact (Why This Judgment Matters)

  • Strengthened anti-formalism in Section 28 practice: Executing courts cannot treat mere delay in deposit as automatically terminating enforceability unless the decree itself provides an automatic consequence.
  • Clearer procedural discipline: Section 28 applications must be handled as proceedings in the original suit (even if prompted during execution). This reduces jurisdictional confusion and aligns with Ramankutty Guptan v. Avara / Ishwar (Since Deceased) thr. Lrs and Others v. Bhim Singh and Another.
  • Merger doctrine clarified for dismissal for non-prosecution: Parties cannot rely on “merger” where the appeal is dismissed for non-prosecution; the trial decree remains operative, affecting limitation, execution strategy, and Section 28 timelines.
  • Encourages equity-based compensation solutions: The judgment signals that courts should consider whether the judgment-debtor can be compensated for delay rather than reflexively rescinding—aligning remedies with fairness rather than forfeiture.

4) Complex Concepts Simplified

Doctrine of merger
When a higher court decides an appeal on merits, the lower court’s decree/order “merges” into the higher court’s decree/order; only one operative decision remains. But if the appeal is dismissed without deciding merits (e.g., for non-prosecution), merger does not occur.
Functus officio
A court becomes “functus officio” when it has completed its task and has no further power over the matter. Section 28 ensures that in specific performance decrees, the court does not become functus officio; it retains control to extend time or rescind.
Specific performance decree as a “preliminary decree” in effect
Although labelled a final decree in form, a specific performance decree often requires further steps (payment/deposit, execution of conveyance). Hence, courts treat it as preliminary in nature: rights/obligations remain to be completed, and the court supervises completion.
Rescission under Section 28, Specific Relief Act
If the purchaser/decree-holder fails to pay/deposit within time, the vendor may ask the court to cancel (rescind) the contract and thereby defeat enforcement of the decree. But rescission is discretionary: the court can also extend time, often on terms (such as interest/compensation).
Order XX Rule 12A CPC
It requires courts granting specific performance to specify the time for the purchaser to pay/deposit the purchase money. The broader objective is to prevent uncertainty and future disputes in execution and Section 28 proceedings.

5) Conclusion

The Supreme Court’s central message is that Section 28 is an equity-based discretionary control mechanism over specific performance decrees, not a trapdoor that automatically nullifies a decree on delayed deposit (unless the decree itself mandates that consequence). The Court also clarified that dismissal of an appeal for non-prosecution does not bring merger, and that permitting deposit to test bona fides does not extinguish the vendor’s rescission remedy.

By remanding the matter for a fresh, principled consideration—requiring the court to weigh conduct, surrounding circumstances (including execution-court directions and disruptions such as the pandemic), and the possibility of compensatory terms—the judgment reinforces a justice-oriented approach to enforcing (or rescinding) specific performance decrees and imposes procedural rigor on how Section 28 applications must be handled.