Specific Performance Decree Becomes Inexecutable If Balance Sale Consideration Not Deposited Within Stipulated Time: Supreme Court

"Suit for specific performance of a contract stands automatically dismissed when the conditions under the decree are not complied with by the decree holder and he is not entitled to seek execution of the decree as it ceases to exist in the eyes of law due to deemed dismissal of the suit," 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 time stipulated by the court.

A bench of Justice Pankaj Mithal and Justice S. V. N. Bhatti observed that such a decree is a conditional one, and non-compliance with its terms leads to the "deemed dismissal" of the suit itself. The Court emphasized that once the time expires without a deposit or a timely application for extension, the decree ceases to exist in the eyes of law.

The dispute pertained to an agreement to sell agricultural land in Mewat, 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 the plaintiff depositing the balance consideration within three months. Although the decree was challenged up to the High Court, the plaintiff failed to deposit the amount within the initial three-month window, eventually making the payment only in 2015 during execution proceedings.

The primary question before the court was whether the non-deposit of the balance sale consideration within the stipulated time rendered the decree inexecutable. The court also examined whether a formal application under Section 28 of the Specific Relief Act, 1963, is mandatory for the rescission of a contract following a default in payment.

Decree Of Specific Performance Imposes Reciprocal Obligations

The Court noted that under Order XX Rule 12A of the CPC, every decree for specific performance must specify a period for payment. In this case, the direction to the defendant to execute the deed "after receiving the balance consideration within three months" created a reciprocal obligation. The bench observed that the plaintiff was required, by necessary implication, to deposit the money within that same three-month window to trigger the defendant’s obligation.

Specific Performance Decree Is A Conditional And Self-Operative Order

The bench clarified that a decree for specific performance is often conditional and self-operative. Relying on the precedent in P.R. Yelumalai v. N.M. Ravi, the Court held that if a deposit is not made within the permitted time and no extension is sought within that period, the non-compliance is fatal. The judges noted that "conditional decree is self-operative, therefore, non-compliance of any condition leads to automatic dismissal of the suit."

Acceptance Of Late Deposit By Executing Court Does Not Amount To Deemed Extension

The respondent argued that since the executing court eventually permitted the deposit in 2015 and the amount was accepted, the delay should be considered condoned. The Supreme Court rejected this "deemed extension" theory, stating that the answer is an "absolute No." It held that once the suit stands automatically dismissed due to non-payment within the timeframe, the decree vanishes and cannot be revived by a subsequent late deposit.

Formal Application Under Section 28 Of Specific Relief Act Not Mandatory For Rescission

Addressing the procedural aspect of Section 28 of the Specific Relief Act, the Court held that a seller is not strictly required to file a formal application to rescind the contract. Citing Prem Jeevan v. K.S. Venkata Raman, the bench observed that the court is not powerless to treat a contract as rescinded for non-compliance. The power under Section 28 is discretionary and can be exercised by the court to balance equities between the parties even without a formal motion.

Court Retains Control Over Decree Until Execution Or Inexecutability

The bench explained that a decree in a specific performance suit is in the nature of a preliminary decree. Consequently, the court does not become functus officio immediately after passing the judgment. It retains jurisdiction and control over the decree until either the sale deed is executed or the decree is rendered inexecutable due to a default by the decree-holder.

Readiness And Willingness Must Continue Post-Decree

The Court emphasized that the relief of specific performance is equitable and discretionary under Section 16(c) of the Act. The plaintiff must establish "continuous readiness and willingness" not just until the decree, but until the actual execution of the deed. By failing to pay within the court-ordered timeframe, the plaintiff "disentitled himself from the benefit of the decree," indicating he was shying away from his obligations.

"It is not at all equitable to condone the delay on his part in depositing the balance sale consideration or extending the time for the same, more particularly when due to non-compliance, the suit itself stands automatically dismissed and the decree vanishes."

Final Directions And Balancing Of Equities

The Supreme Court concluded that the long passage of time since the 2005 agreement and the manifold increase in land prices made it inequitable to allow execution now. To balance the interests, the Court ordered the defendant to refund the earnest money of Rs. 80,000 with 8% simple interest from 2005. If the defendant cannot pay, he must sell a portion of the land to satisfy the refund amount.

The Supreme Court allowed the appeal and set aside the High Court's order, declaring the 2012 decree inexecutable. The ruling reinforces that time-bound conditions in specific performance decrees are strictly enforceable, and failure to comply leads to the automatic termination of the right to execute.

Date of Decision: May 6, 2026