Supreme Court Clarifies Execution of Specific Performance Decrees After Appeal: Surinder Pal Soni vs. Sohan Lal (2019)

Introduction

Date of the Judgment: July 23, 2019
Citation: Civil Appeal No 5360 of 2019 @Special Leave Petition (C) No 26508 of 2018
Judges: Dr. Dhananjaya Y Chandrachud, J. and Indira Banerjee, J.

Can a decree for specific performance of a property sale be deemed inexecutable if the balance payment isn’t made within the timeframe set by the trial court, even after an appeal? The Supreme Court of India addressed this critical question in a recent case, clarifying the interplay between trial court and appellate court decrees in specific performance suits. The core issue revolved around whether the time limit for payment of balance consideration, as set by the trial court, continues to apply even after the appellate court confirms the trial court’s decree. The Supreme Court bench, comprising Justice Dr. Dhananjaya Y Chandrachud and Justice Indira Banerjee, delivered the judgment.

Case Background

In 2006, Surinder Pal Soni (the appellant) filed a suit seeking specific performance of an agreement to sell dated December 8, 2003, against Sohan Lal (the respondent). The agreement involved the sale of land measuring 12 kanals and 9 marlas. The Civil Judge (Senior Division), Panchkula, partially decreed the suit on March 20, 2012, directing the sale of the land, except for 2 kanals, upon payment of the balance sale consideration. The decree required the sale deed to be executed within two months of the judgment.

Both parties appealed the trial court’s decision. While the appeals were pending, the appellant initiated execution proceedings on June 15, 2012. The respondent objected to the execution on May 19, 2014. The Additional District Judge upheld the trial court’s judgment on January 17, 2015, dismissing both appeals. Subsequently, the executing court allowed the appellant’s execution petition on February 23, 2015, rejecting the respondent’s objections. The respondent then filed a civil revision before the High Court.

Timeline

Course of Proceedings

The High Court of Punjab and Haryana, in a civil revision, set aside the executing court’s order, holding that the appellant failed to deposit the balance sale consideration within two months from the trial court’s decree, as required by Section 28 of the Specific Relief Act, 1963. The High Court also noted that no application for extension of time was filed by the appellant. The High Court directed a refund of the earnest money instead of specific performance. The High Court reasoned that though the trial court did not specifically fix a time for deposit of the balance sale consideration, it was implicit that the sale deed was to be executed within two months from the date of judgment upon deposit of the balance sale consideration. The High Court held that the decree had not been stayed during the pendency of the first appeals and the mere filing of an appeal did not amount to a stay under Order 41 Rule 5 of the Code of Civil Procedure, 1908.

Legal Framework

The case primarily revolves around Section 28 of the Specific Relief Act, 1963, which deals with the rescission of contracts for the sale or lease of immovable property when a decree for specific performance has been made. According to Section 28(1) of the Specific Relief Act, 1963:

“28. Rescission in certain circumstances of contracts for the sale or lease of immovable property, the specific performance of which has been decreed.— (1) Where in any suit a decree for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser or lessee does not, within the period allowed by the decree or such further period as the court may allow, pay the purchase money or other sum which the court has ordered him to pay, the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require.”

Additionally, the Court also considered Order 41 Rule 5 of the Code of Civil Procedure, 1908, which states that an appeal does not automatically stay the execution of a decree unless the appellate court orders a stay. The doctrine of merger, which states that a lower court’s decree merges with the appellate court’s decree, was also a key consideration.

Arguments

Appellant’s Submissions:

• The decree of the Trial Court merged with the decree of the First Appellate Court. The doctrine of merger applies whether the judgment of a subordinate court is reversed, modified or upheld by a court superior to it.
• The decree for specific performance is a preliminary decree, and the court does not become functus officio after passing it. Since the appellate court’s decree did not mention any time bar, limitation would commence from the date of the appellate decree.
• The appellate court did not impose a time limit, making the decree enforceable from the date of its issuance.
• The power under Section 28 of the Specific Relief Act is equitable, allowing the court to grant additional time for performance. The readiness and willingness of the decree holder is paramount. The judgment debtor did not seek rescission under Section 28 of the Specific Relief Act.
• The balance of equities favored the appellant, who had already paid a substantial portion of the sale consideration.
• Order 41 Rule 5 does not detract from the doctrine of merger.

Respondent’s Submissions:

• The doctrine of merger applies only to compute the limitation for filing an execution application.
• The trial court’s decree was conditional, requiring the sale deed to be executed within two months upon receipt of the balance sale consideration.
• The appellate court did not modify the trial court’s decree.
• The appellant did not apply for an extension of time to deposit the balance amount, nor was any amount deposited with the execution application.
• The appellant has not shown reasonable grounds for an extension of time, and filing an appeal does not constitute a valid ground without a stay order.
• The respondent deposited the balance sale consideration without applying for an extension under Section 148 of the Code of Civil Procedure, 1908.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the judgment and decree of the Trial Court dated 20 March 2012 has merged with the decree of the First Appellate Court dated 17 January 2015.
2. Whether the decree for specific performance is in the nature of a preliminary decree and the court passing it does not become functus officio.
3. Whether the appellate court did not impose a time limit and, in consequence, the decree dated 17 January 2015 became enforceable from the date on which it was issued.
4. Whether the power which is entrusted to the court under Section 28 of the Specific Relief Act is equitable in nature and it is open to the court to grant additional time for the performance of any condition laid down in the decree.
5. Whether the balance of equities lies in favor of the appellant who has paid Rs. 5,85,000/- out of the total sale consideration in 2004 and only an amount of Rs. 1,15,864/- remained to be paid after the judgment of the Trial Court.
6. Whether the provisions of Order 41 Rule 5 detract from the doctrine of merger.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court relied on the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

How each authority was viewed by the Court?

• Kunhayammed v. State of Kerala [2000] 6 SCC 359*: The Court followed this case to establish the principle of merger, stating that there cannot be more than one operative decree at a given point in time.
• Khoday Distilleries Ltd v Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd [2019] 4 SCC 376*: The Court affirmed this case, reiterating the doctrine of merger.
• Chandi Prasad v. Jagdish Prasad [2004] 8 SCC 724*: The Court followed this case to reinforce that the appellate decree supersedes the trial court decree.
• Shanthi v. T D Vishwanathan Civil Appeal No. 10442 of 2011, 2018 SCC OnLine SC 2196*: The Court followed this case to reiterate that there cannot be more than one operative decree governing the same subject matter.
• Sardar Mohar Singh v. Mangilal [1997] 9 SCC 217*: The Court followed this case to determine that the court retains jurisdiction after a decree for specific performance and can extend time.
• Bhupinder Kumar v Angrej Singh [2009] 8 SCC 766*: The Court followed this case to establish that a decree for specific performance is preliminary and the court can extend time or rescind.
• V S Palanichamy Chettiar Firm v C Alagappan [1999] 4 SCC 702*: The Court distinguished this case, noting that the facts were different, as the balance of consideration was sought after a long delay.
• Ramankutty Guptan v Avara [1994] 2 SCC 642*: The Court referred to this case to establish that the court can extend time for performance of decree conditions.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the doctrine of merger and the equitable nature of specific performance decrees. The Court emphasized that the appellate court’s decree supersedes the trial court’s decree, and the time limit set by the trial court does not automatically apply after the appellate court confirms the decree. The Court also highlighted the fact that the appellant had already paid a substantial portion of the sale consideration and acted bona fide by depositing the remaining amount shortly after the appellate court’s decision.

The Court’s reasoning also focused on the inherent power of the court under Section 28 of the Specific Relief Act, 1963, to extend the time for compliance with a decree for specific performance. The Court noted that the decree for specific performance is in the nature of a preliminary decree, and the court retains jurisdiction to deal with the decree until the sale deed is executed. The Court also considered the conduct of the parties and the balance of equities in determining whether to grant relief to the appellant.

Logical Reasoning

Judgment

The Supreme Court allowed the appeal, setting aside the High Court’s judgment. The Court held that the High Court had acted beyond its revisional jurisdiction by substituting the decree for specific performance with an order for refund of the sale consideration. The Court restored the executing court’s order, which had dismissed the respondent’s objections to the execution petition. The Court reasoned that the doctrine of merger applied, and the time limit set by the trial court did not automatically apply after the appellate court confirmed the decree. The court stated, “Once the Appellate Court renders its judgment, it is the decree of the Appellate Court which becomes executable. Hence, the entitlement of the decree holder to execute the decree of the Appellate Court cannot be defeated.”

The Court also emphasized the equitable nature of specific performance decrees and the court’s power under Section 28 of the Specific Relief Act, 1963, to extend the time for compliance. The Court noted that the appellant had acted bona fide and that the balance of equities favored him. The Court further stated, “The executing court was justified in rejecting the specious objections of the respondents. The High Court acted in excess of its revisional jurisdiction.” The Court also noted that, “In a Civil Revision arising out of an execution proceeding, the High Court has modified the decree. Such a course was not open in law.”

Key Takeaways

• Doctrine of Merger: A trial court’s decree merges with the appellate court’s decree, and the appellate decree becomes the operative decree.
• Time Limits: Time limits set by the trial court for specific performance do not automatically apply after the appellate court confirms the decree, unless the appellate court specifies a time limit.
• Section 28, Specific Relief Act: Courts have the power to extend time for compliance with a decree for specific performance.
• Equitable Considerations: Courts must consider the conduct of the parties and the balance of equities in specific performance cases.
• Bona Fide Conduct: A party that acts bona fide and demonstrates readiness and willingness to comply with the decree will be viewed favorably by the court.

Directions

The Supreme Court set aside the High Court’s judgment and restored the executing court’s order, which had dismissed the respondent’s objections to the execution petition.

Development of Law

The ratio decidendi of this case is that the decree of the trial court merges with the decree of the appellate court and the time limit set by the trial court does not automatically apply after the appellate court confirms the decree. This clarifies the position of law regarding the execution of specific performance decrees after an appeal, ensuring that the appellate decree is the operative decree and that courts have the power to extend time for compliance.

Conclusion

The Supreme Court’s judgment in Surinder Pal Soni vs. Sohan Lal clarifies the legal position on the execution of specific performance decrees after an appeal. The Court emphasized the doctrine of merger, the equitable nature of specific performance, and the court’s power to extend time for compliance. This decision ensures that the appellate decree is the operative decree and that parties are not penalized for delays caused by the appeal process, provided they act bona fide and demonstrate readiness to comply.