Case Name: HABBAN SHAH VERSUS SHERUDDIN
Petition Number: Civil Appeal 2026 arising out of Special Leave Petition (C) No. 14479 of 2025
Neutral Citation: 2026 INSC 451
Date of Judgment: 06.05.26
Coram: HON’BLE JUSTICE PANKAJ MITHAL & HON’BLE. JUSTICE. S.V.N. BHATTI
INTRODUCTION
This case examines the legal consequences of a holder’s failure to deposit the balance sale consideration within the timeframe stipulated in a decree for specific performance. The Supreme Court held that where the decree made payment within a fixed period a condition for performance, failure to comply without seeking timely extension can render the decree inexecutable and the contract rescinded under Section 28 of the Specific Relief Act. The Court clarified that a specific performance decree is in the nature of a preliminary decree and the trial court retains control over it until execution or until it becomes inexecutable. The Court also held that a separate application by the judgment-debtor is not mandatory to rescind the contract for the buyer’s default.
FACTS AND PROCEDURAL HISTORY
In 2005, Habban (Appellant/Defendant) agreed to sell agricultural land in Haryana to Sheruddin (Respondent/Plaintiff). The agreed sale price was Rs. 5,00,000 per acre and the purchaser paid Rs. 80,000 as advance. The sale deed was to be executed on or before 15 March 2006. When the sale deed was not executed, Sheruddin filed a suit for specific performance. On October 31, 2012, the trial court decreed the suit, directing the defendant to execute the sale deed after receiving the balance consideration within three months. The Court also allowed execution through court if the defendant failed to do so.
The decree was challenged in appeal and second appeal, but both were dismissed and the decree was upheld by the first appellate court (2014) and the High Court (2017). While a brief interim stay on alienation existed in the first appeal, no stay on the deposit of money was ever granted. The plaintiff did not deposit the balance amount within the three-month window, making the decree inexecutable. He eventually deposited the amount (Rs. 6,92,410) in October 2015 nearly three years later after seeking permission from the Executing Court. The defendant objected to the execution, arguing the decree was inexecutable due to non-compliance with the time condition. The Executing Court and High Court dismissed these objections, prompting this appeal.
ISSUES
- Whether a decree of specific performance becomes inexecutable if the balance sale consideration is not deposited within the time stipulated by the court?
- Whether such a default leads to the automatic rescission of the contract ?
SUBMISSIONS OF THE PARTIES
Appellant (Defendant): The appellant argued that the decree was conditional. Since the decree expressly required deposit/payment within three months and because the amount was not deposited within that time, the decree ceased to be executable. He contended that no extension had been sought within the original three months and that the respondent could not rely on Section 28 without a proper application for rescission.
Respondent (Plaintiff): The respondent contended that the decree was clear and executable, that he had been ready and willing to perform and that the interim order in the first appeal prevented alienation of the property, making deposit unnecessary or impractical. They also argued that once the Executing Court permitted the late deposit, the delay was deemed condoned and that the defendant never explicitly moved to rescind the contract under Section 28.
JUDGMENT AND ANALYSIS
The Supreme Court allowed the appeal and set aside the execution. It held that although the decree of specific performance is executable, it was a conditional decree because execution of the sale deed depended on payment of the balance sale consideration within the stipulated time. The Court read the decree as imposing reciprocal obligations on both parties and held that the purchaser had to deposit the amount within three months by necessary implication.
While examining the respondent’s conduct, the Court relied on N.P. Thirugnanam (Dead) by LRs v. Dr. R. Jagan Mohan Rao and Others (1995) 5 SCC 115, wherein it was held that readiness and willingness must be judged from the plaintiff’s conduct before and after filing the suit and that specific performance is an equitable relief that cannot be granted mechanically. The Court applied that principle to hold that the respondent’s later inaction showed a lack of continuous readiness and willingness, because if he had truly been ready to perform, he would have deposited the balance consideration within the time fixed by the decree.
The Court also rejected the argument that the interim order in appeal prevented deposit of the amount, noting that the order only restrained alienation and did not bar deposit of consideration. It held that the later permission to deposit the money did not amount to automatic extension of time or condonation of delay. Following P.R. Yelumalai v. N.M. Ravi (2015) 9 SCC 52, the Court reiterated that non-compliance with the time condition in a conditional decree leads to automatic failure of the decree holder’s claim, and the decree becomes inexecutable unless extension is sought in time.
The Court further referred to Prem Jeevan v. K.S. Venkata Raman and Another (2017) 11 SCC 57, to hold that a separate application by the defendant for rescission under Section 28 is not mandatory; the court can still treat the contract as rescinded for non-compliance. It also relied on Balbir Singh and Another v. Baldev Singh (Dead) Through LRs and Others (2025) 3 SCC 543, to reaffirm that the court retains jurisdiction under Section 28 and can extend time or rescind the contract depending on the justice of the case.
Accordingly, the Court found that the respondent had failed to establish continuous readiness and willingness, had not deposited the balance sale consideration within the time allowed and had not sought extension in time. It therefore held that the decree had become inexecutable and the contract stood rescinded in terms of Section 28. The Court also observed that granting a belated extension years later would be inequitable, particularly in a land transaction where prices may have increased substantially.
CONCLUSION
The appeal was allowed by the Supreme Court, after setting aside the High Court and Executing Court orders. It held that the decree for specific performance dated 31 October 2012 had become inexecutable due to non-deposit of the balance sale consideration within the prescribed three months. The Court further noted that the contract was rescinded under Section 28 of the Specific Relief Act, 1963. To balance the equity, the Court also ordered the defendant to refund the original Rs. 80,000 earnest money with 8% interest per annum from the date of receipt.
