A) ABSTRACT / HEADNOTE

This judgment addresses two narrow but significant questions arising from four connected suits for specific performance:

(1) the legal consequence of the merger of a trial-court conditional decree with a later appellate decree rendered in regular second appeals; and

(2) whether judgment-debtors could successfully seek rescission under Section 28, Specific Relief Act, 1963 on the ground that decree-holders failed to deposit the balance sale consideration within the 20-day period directed by the original trial decree.

The Supreme Court affirmed the High Court’s refusal to rescind, holding that once the High Court allowed the second appeals and restored the trial decree the operative decree became that of the appellate forum the trial decree merged into the appellate decree and execution of the appellate decree could not be defeated merely by pointing to the 20-day direction in the original trial decree where the High Court had not imposed any fixed time for deposit.

The Court reiterated that Section 28 confers discretionary power on the court which passed the decree to extend time for deposit and to decide rescission applications, and, further, that extension of time under relevant rules (and under s.148, CPC paradigms) does not amount to modification of the decree. The Court distinguished Prem Jeevan v. K.S. Venkata Raman (2017) on its facts and relied upon established merger jurisprudence (e.g. Kunhayammed, Chandi Prasad, Shanthi) as well as Section 28 precedents (e.g. Sardar Mohar Singh, Bhupinder Kumar). The appeals were dismissed.

Keywords: doctrine of merger; rescission of contract; Section 28 Specific Relief Act, 1963; specific performance; conditional decree; extension of time; s.148 CPC.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The suits concerned four identical agreements to sell where the Trial Court granted conditional decrees for specific performance on 16.08.1994 directing the plaintiffs to deposit the balance sale consideration within twenty days and the defendants to execute sale deeds (failing which the court could cause execution of sale deeds). Appeals by defendants were allowed by the first appellate court and the trial decrees were set aside. The plaintiffs then filed regular second appeals before the High Court which restored the original trial decrees by orders dated 03.05.2018 and 24.05.2018. Decree sheets were prepared on 31.05.2018; execution petitions followed on 04.09.2018 and the plaintiffs sought permission to deposit the decretal amounts the executing court allowed deposit on 07.09.2018 and the deposits were made the same day.

While Special Leave Petitions were pending before this Court, the executing court proceeded; later the SLPs were dismissed on 18.01.2019 affirming the High Court. Thereafter the judgment-debtors filed applications under Section 28 seeking rescission on the ground that the plaintiffs had failed to pay within the 20-day period mandated by the original trial decree. The executing court rejected rescission; the High Court dismissed revision petitions; the present appeals challenged that conclusion. The Supreme Court framed two central legal questions:

(i) effect of merger of trial decree with High Court decree in second appeals; and

(ii) maintainability and merit of rescission under Section 28 where deposit was made after the original 20-day window but before execution and after High Court restoration.

D) FACTS OF THE CASE

Four separate suits for specific performance produced identical conditional decrees on 16.08.1994 directing deposit within 20 days and execution of sale deeds by defendants. Before the 20-day period expired, defendants preferred appeals (26.08.1994) and the first appellate court reversed the trial decrees on 24.11.1994. Plaintiffs pursued regular second appeals; three were allowed on 03.05.2018 and the fourth on 24.05.2018, thereby restoring the trial decrees; decree sheets issued on 31.05.2018.

Plaintiffs filed execution petitions on 04.09.2018 and sought permission to deposit the balance consideration; the executing court permitted deposit and plaintiffs deposited the amounts on 07.09.2018. The defendants filed applications under Section 28 on 04.04.2019 seeking rescission for non-payment within the 20-day clause; the executing court rejected rescission on 16.08.2019. Sale deeds were executed by defendants in 2019 and possession passed to plaintiffs; execution petitions were ultimately dismissed as withdrawn on 07.12.2022 after warrants of possession issued on 29.11.2022. The High Court rejected revision petitions on 23.09.2022; appeals to this Court ensued.

E) LEGAL ISSUES RAISED

i. Whether the trial court’s conditional decree (with a 20-day deposit direction) revives as operative after the High Court restores the decree in regular second appeal, or whether the operative decree is the appellate decree by virtue of the doctrine of merger?

ii. Whether a judgment-debtor can seek rescission under Section 28, Specific Relief Act, 1963 on the ground that the decree-holder failed to deposit the decretal amount within the time-stipulated in the original trial decree where the High Court in second appeal made no specific time-limit?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The appellants contended that the trial decree directed deposit within 20 days and that when the High Court restored the trial decree in second appeal that original peremptory direction should be treated as revived and binding; non-compliance entitled the vendor to rescind.

ii. Reliance was placed on Prem Jeevan v. K.S. Venkata Raman (2017) to argue that expiry of the stipulated period without deposit and absence of extension leaves the decree-holder without a right to execute and exposes decree to rescission.

G) RESPONDENT’S ARGUMENTS

i. Respondents argued that once the High Court allowed the second appeals and restored the trial decree the operative decree became the High Court’s decree (merger) and, importantly, the High Court did not fix any time for deposit; the executing court correctly allowed deposit when execution petitions were filed promptly and the deposits followed immediately.

ii. It was submitted that Section 28 vests discretion in the court which passed the decree to extend time and to refuse rescission; unless there is willful default or unreasonable delay the decree should not be nullified.

H) JUDGEMENT 

The Court upheld the High Court and executing court. First, applying authoritative merger doctrine (explained in Kunhayammed v. State of Kerala, Chandi Prasad v. Jagdish Prasad, Shanthi v. T.D. Vishwanathan), the Court held that when a superior court disposes of an appeal the operative decree is that of the superior court and the trial court decree merges into it; this principle applies irrespective of whether the appellate court affirms, modifies or reverses. Consequently the operative decree after the High Court’s decisions was that of the High Court in the second appeals and it alone governed execution.

Second, the Court analysed Section 28, Specific Relief Act, 1963, emphasizing its discretionary nature and the statutory design that the court retains control even after a decree for specific performance, because the decree is preliminary in character and the suit remains pending until conveyance/execution is effected. The Court reiterated the settled law that Section 28 contemplates both rescission and extension of time, and that the court which passed the decree (or in practice the executing court where application is maintainable) may extend time on terms. Sardar Mohar Singh v. Mangilal and Bhupinder Kumar v. Angrej Singh were relied on to articulate that the court does not become functus officio and retains jurisdiction under Section 28 to deal with rescission or extension.

The Court distinguished Prem Jeevan on facts in that case the decretal deposit was sought after a long delay without explanation; here, the decree-holders filed execution petitions and sought leave to deposit promptly after the High Court restoration (execution petitions filed within four months; deposit permitted and made the same day). The Court found no unreasonable delay, no evidence of willful default and no express time fixed by the High Court to revive the 20-day clause of the trial decree. It followed that the executing court and High Court were justified in refusing rescission and permitting deposit; the appeals lacked merit and were dismissed.

a. RATIO DECIDENDI

The operative legal ratio is twofold:

(1) merger post-appeal the decree of the appellate court is the operative decree and the trial decree merges into it; therefore execution must conform to the appellate decree, and any procedural directions in the trial decree (e.g., a 20-day deposit direction) cannot be mechanically read back into the appellate order where the appellate court has not adopted or imposed that specific timeframe; and

(2) Section 28’s discretionary scheme empowers the court which passed the decree to extend time and refuse rescission where deposit/non-compliance is not shown to be willful or unreasonably delayed permitting prompt deposit after appellate restoration is consistent with the statutory purpose of avoiding multiplicity and securing complete relief in the same suit.

b. OBITER DICTA

The Court observed, obiter, that there exist conflicting views on whether a peremptory conditional decree that automatically dismisses the suit on non-deposit would bar extension and render the court functus officio; the Court refrained from deciding that larger question because the present decrees were not of such peremptory character. The Court signalled that the Supreme Court may consider that issue in an appropriate case. The Court also emphasized equitable considerations: courts must scrutinize attendant circumstances, conduct of parties and delay before exercising discretion under Section 28.

c. GUIDELINES

1. Where an appellate court disposes a second appeal on merits and restores or passes a decree the operative decree is that of the appellate court (doctrine of merger).

2. Section 28 remains the proper statutory vehicle for a judgment-debtor to seek rescission; the court which passed the decree retains jurisdiction to extend time and grant or refuse rescission depending on justice of the case.

3. Execution courts should examine (a) whether the appellate court fixed any specific time for deposit; (b) promptness of the execution application; (c) conduct of parties; and (d) any cogent explanation for delay, before ordering rescission.

4. A mere failure to deposit within an earlier trial-court timeframe is insufficient ground for rescission where the appellate decree does not resurrect that time limit and where deposit was promptly sought and effected after appellate restoration.

I) CONCLUSION & COMMENTS

The Court’s decision reinforces two stable threads of Indian civil jurisprudence: the doctrine of merger which secures hierarchical coherence in decree enforcement, and the discretionary but protective ambit of Section 28 which keeps preliminary decrees alive for equitable execution while allowing courts to deny rescission where deed-holders act reasonably. Practitioners should note the practical lesson: after appellate restoration, execution strategy must conform to the appellate order and the executing court will look closely at timing and conduct prompt institution of execution and immediate deposit when permitted greatly reduces the risk of successful rescission by judgment-debtors.

Finally, litigants facing conditional decrees with peremptory language should seek early clarity from appellate courts on any time stipulations to avoid factual disputes later; but where appellate courts are silent on time, the merger principle and Section 28 discretion typically protect a decree-holder who acts promptly.

J) REFERENCES

a. Important Cases Referred

1. Kunhayammed v. State of Kerala, (2000) 6 SCC 359.

2. Chandi Prasad v. Jagdish Prasad, (2004) 8 SCC 724.

3. Shanthi v. T.D. Vishwanathan, (2019) 11 SCC 419.

4. Sardar Mohar Singh v. Mangilal, (1997) 9 SCC 217.

5. Bhupinder Kumar v. Angrej Singh, (2009) 8 SCC 766.

6. Prem Jeevan v. K.S. Venkata Raman & Anr., (2017) 11 SCC 57 (distinguished).

7. Gojer Bros. (Pvt.) Ltd. v. Ratan Lal Singh, (1974) 2 SCC 453.

8. Mahanth Ram Das v. Ganga Das, AIR 1961 SC 882 (on s.148 CPC).

b. Important Statutes Referred

1. Specific Relief Act, 1963, §28.

2. Code of Civil Procedure, 1908, §148; Order XX Rule 12-A.