Section 28 Specific Relief Act: Separate Application Not Needed To Rescind Agreement To Sell For Buyer’s Default
- Introduction
In Habban Shah v. Sheruddin, 2026 INSC 451, decided on 06 May 2026, the Hon’ble Supreme Court of India, comprising Justice Pankaj Mithal and Justice S. V. N. Bhatti, clarified a crucial aspect of specific performance under the Specific Relief Act, 1963, the procedural requirement for rescinding a contract under Section 28. The Apex Court held that a separate, formal application by the Judgment Debtor is not mandatory to rescind an Agreement to Sell, allowing courts to treat conditional specific performance decrees as automatically inexecutable when a successful buyer fails to deposit the balance sale consideration within the court-stipulated timeframe.
- Brief Facts
The dispute originated from an Agreement to Sell agricultural land in Haryana, executed on October 19, 2005. The Appellant (seller) agreed to sell the property to the Respondent (buyer) for Rs. 5,00,000 per acre, receiving an advance earnest money payment of Rs. 80,000.
When the Sale Deed was not executed, the Buyer filed a Suit for Specific Performance. On October 31, 2012, the Trial Court decreed the suit in favor of the Buyer, explicitly directing the seller to execute the Sale Deed, provided the Buyer deposited the balance sale consideration within three months.
The Buyer failed to deposit the money within the stipulated three-month window and made no effort to file an application seeking an extension of time. Nearly three years later, on October 9, 2015, the Buyer finally deposited the amount, which the Executing Court allowed. The seller objected, arguing that the decree had become inexecutable due to the severe delay. Both the Executing Court and the High Court dismissed the seller’s objections, prompting the present appeal to the Supreme Court.
- Issue of Law
The Supreme Court was tasked with adjudicating two interconnected legal questions:
- Does a conditional Decree of Specific Performance become automatically inexecutable if the Decree-Holder fails to deposit the balance payment within the time stipulated by the Trial Court?
- Is it mandatory for a Judgment Debtor to file a formal application under Section 28 of the Specific Relief Act to have the contract rescinded, or can the court pass such an order based on the evident default of the Decree-Holder?
- Analysis of Judgment
The Supreme Court allowed the seller’s appeal, delivering a strong critique of the Buyer’s conduct.
- Self-Operative Nature of Conditional Decrees The Court noted the Trial Court’s Decree created reciprocal obligations. While the Seller was directed to execute the Deed, it was inherently contingent upon the buyer depositing the funds within three months. Relying on R. Yelumalai v. N.M. Ravi, (2015) 9 SCC 52, the Bench reiterated that Conditional Decrees are self-operative. If the Plaintiff fails to deposit the amount and does not seek an extension within the granted timeframe, the suit essentially faces an automatic dismissal. The Executing Court’s subsequent decision to accept the late deposit in 2015 did not amount to a legally valid “deemed extension” of the Decree.
- Interpretation of Section 28 of the Specific Relief Act Examining Section 28 of the SRA and relying on Prem Jeevan v. K.S. Venkata Raman, (2017) 11 SCC 57, the Supreme Court clarified that an application to rescind the contract is not a rigid mandate. The court retains the inherent power to treat the contract as rescinded when a Decree-Holder blatantly fails to comply with the financial conditions. The absence of a formal, written application from the Seller asking for rescission does not strip the court of its authority to enforce the consequences of the Buyer’s default.
- Equity and Readiness The Bench emphasized that specific performance is rooted in equity. A Plaintiff must demonstrate continuous readiness and willingness to perform their obligations straight through to the execution stage. By sitting idle for three years, the buyer destroyed any claim to equitable relief.
- Conclusion
The Supreme Court ultimately set aside the orders of the High Court and the Executing Court, declaring the 2012 Decree inexecutable. Treating the original contract as rescinded under Section 28 of the SRA, the Court directed the closure of execution proceedings. To balance equities, the seller was ordered to refund the initial Rs. 80,000 earnest money with 8% simple interest per annum calculated from the date of receipt in 2005.
This judgment serves as a strong precedent for property disputes. It sends a clear message: winning a Specific Performance Suit is not an indefinite license to acquire property at leisure. Strict compliance with court-mandated timelines is non-negotiable. For Judgment Debtors, it provides significant relief by stripping away the hyper-technical requirement of a separate rescission application, allowing courts to invalidate the execution based directly on the Buyer’s defaulting conduct.
ANIKET KUMAR PARCHA
Legal Associate
The Indian Lawyer & Allied Services
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