Executing Court Cannot Grant 'Deemed Extension' Of Time For Deposit In Specific Performance Decree: Supreme Court

"Question, therefore, is whether such permission to deposit or the deposit itself would ipso facto amount to condoning the delay in making the deposit and resultantly it amounts to deemed extension of time. The answer of the above proposition is an absolute ‘No’," Supreme Court, in a significant ruling dated May 6, 2026, held that a decree for specific performance becomes inexecutable if the decree-holder fails to deposit the balance sale consideration within the period stipulated by the court.

A bench of Justices Pankaj Mithal and S.V.N. Bhatti observed that the mere act of an executing court permitting a late deposit does not amount to a "deemed extension" of time, and such a default leads to the automatic dismissal of the suit.

The matter originated from an agreement to sell agricultural land in Haryana executed in 2005. The trial court decreed the suit for specific performance on October 31, 2012, directing the defendant to execute the sale deed upon receiving the balance consideration within three months. Although the decree was challenged in various appeals, the plaintiff-respondent failed to deposit the money within the three-month window or seek an extension during that period, eventually depositing the amount only in 2015 with the executing court's permission.

The primary question before the court was whether the non-deposit of balance sale consideration within the time stipulated in a specific performance decree renders it inexecutable. The court was also called upon to determine if the subsequent permission by an executing court to deposit the amount constitutes a "deemed extension" of time or condonation of delay.

Decree Of Specific Performance Is Conditional In Nature

The Court noted that a decree for specific performance is essentially a preliminary and conditional decree that imposes reciprocal obligations on both parties. While the court directed the defendant to execute the deed within three months, it carried a necessary implication that the plaintiff must pay the balance consideration within the same period.

The bench emphasized that under Order XX Rule 12A of the CPC, it is mandatory for every decree of specific performance to specify the period for payment. In this case, the court found that the three-month window was the essence of the judicial direction, making the decree self-operative upon the expiration of that period.

No Deemed Extension By Executing Courts

The Supreme Court categorically rejected the argument that an executing court’s order allowing a deposit after the deadline acts as a "deemed extension." The bench held that once the stipulated time expires without an application for extension being moved under Section 148 of the CPC or Section 28 of the Specific Relief Act, the decree ceases to exist.

"The permission to deposit or the deposit itself would not ipso facto amount to condoning the delay in making the deposit and resultantly it does not amount to deemed extension of time."

Automatic Dismissal Of Suit Upon Default

Relying on the precedent in P.R. Yelumalai v. N.M. Ravi, the Court observed that a conditional decree is self-operative. If the condition of deposit is not met within the permitted time and no extension is sought within that same timeframe, it leads to the automatic dismissal of the suit.

The Court clarified that the suit for specific performance ceases to exist in the eyes of the law due to the deemed dismissal triggered by non-compliance. Therefore, the decree-holder cannot seek execution of a decree that has effectively vanished because of their own default.

"The suit for specific performance of a contract stands automatically dismissed when the conditions under the decree are not complied with by the decree holder."

Section 28 Specific Relief Act: Formal Rescission Application Not Mandatory

The bench addressed the contention that the defendant had not filed a formal application to rescind the contract under Section 28 of the Specific Relief Act. It held that the power of the court to treat a contract as rescinded for non-compliance is discretionary and can be exercised even without a formal application from the judgment debtor.

The Court noted that the failure of a judgment debtor to seek recession under Section 28 does not revive an inexecutable decree. The judiciary retains control over the decree until the sale deed is executed or the decree is rendered inexecutable, allowing it to balance equities between the parties.

Plaintiff Must Show Continuous Readiness And Willingness

The Court emphasized that the relief of specific performance is an equitable and discretionary remedy under Section 16(c) of the Act. It is not enough to prove readiness and willingness at the trial stage; the plaintiff must demonstrate a continuous willingness to perform the contract until the actual execution of the sale deed.

By failing to deposit the amount within the three months provided by the court, the plaintiff demonstrated a lack of actual readiness. The bench observed that it would be inequitable to condone such a delay, especially given the significant rise in land prices since the original agreement in 2005.

"The plaintiff-respondent having failed to abide by such a condition indicates that he was not actually ready and willing to perform his obligation under the decree."

The Supreme Court allowed the appeal, setting aside the orders of the High Court and the Executing Court. It held that the decree dated October 31, 2012, was inexecutable due to non-compliance. To balance the equities, the Court directed the defendant to refund the earnest money of Rs. 80,000 with 8% simple interest from the date of receipt in 2005.

Date of Decision: May 6, 2026