Home  > Recent Judgements  > SECTION 28 SPECIFIC RELIEF ACT: SUPREME COURT CLARIFIES THAT SEPARATE APPLICATION IS NOT MANDATORY TO RESCIND CONTRACT FOR BUYER’S DEFAULT

April-07- 2026

SECTION 28 SPECIFIC RELIEF ACT: SUPREME COURT CLARIFIES THAT SEPARATE APPLICATION IS NOT MANDATORY TO RESCIND CONTRACT FOR BUYER’S DEFAULT

Introduction

The Supreme Court, in a significant judgment delivered on May 6, 2026, clarified the legal consequences of a decree-holder’s failure to comply with conditions imposed in a decree for specific performance under Section 28 of the Specific Relief Act, 1963.

In HABBBAN SHAH v. SHERUDDIN, the Court held that when a buyer fails to deposit the balance sale consideration within the time stipulated by the decree, the decree becomes inexecutable and the contract stands rescinded. Importantly, the Court further clarified that a separate application by the judgment-debtor seeking rescission is not mandatory.

The judgment was delivered by a Bench comprising Justice Pankaj Mithal and Justice S. V. N. Bhatti.

Background of the Dispute

The dispute arose from an agreement to sell agricultural land executed on October 19, 2005. Under the agreement:

  • The buyer (plaintiff) paid an advance amount of ₹80,000;
  • The seller agreed to execute the sale deed by March 15, 2006;
  • However, the seller failed to complete the transaction.

As a result, the buyer instituted a suit seeking specific performance of the agreement.

After prolonged litigation, the Trial Court decreed the suit on October 31, 2012. The decree directed the seller to execute the sale deed after receiving the balance sale consideration within three months.

This condition became the central issue in the case.

Failure to Deposit Sale Consideration

Despite obtaining the decree in his favour, the buyer failed to deposit the remaining sale consideration within the prescribed three-month period.

The Supreme Court noted several crucial facts:

  • Although the seller had filed an appeal, there was no stay order restraining the buyer from depositing the amount;
  • The interim protection granted by the appellate court only restricted alienation of the property;
  • Even that interim protection lapsed before expiry of the three-month period;
  • The buyer neither deposited the balance consideration nor sought extension of time from the court.

Subsequently, the buyer has initiated execution proceedings. During the second execution petition filed in 2015, the executing court permitted the buyer to deposit the amount belatedly, and the deposit was eventually made.

The Punjab & Haryana High Court upheld this approach and treated the delay as condoned.

Aggrieved by this, the seller approached the Supreme Court.

Supreme Court’s Decision

Allowing the appeal, the Supreme Court set aside the High Court’s order and held that the decree had become inexecutable due to non-compliance with the mandatory condition requiring deposit within three months.

The Court observed:

“The decree of specific performance dated 31.10.2012 is rendered inexecutable on account of non-compliance of the condition to deposit the balance sale consideration within the time of three months stipulated therein and the contract as a whole stand rescinded in terms of Section 28 of the Act.”

The judgment emphasised that once a decree specifically fixes a timeline for payment, the decree-holder must strictly comply with it unless extension is sought within reasonable time.

Nature of a Decree for Specific Performance

One of the most important legal principles reiterated by the Court is that a decree for specific performance is not a final decree in the ordinary sense.

The Court explained that such a decree is in the nature of a preliminary decree because obligations of both parties continue even after the decree is passed.

Therefore:

  • The court retains supervisory jurisdiction over the decree;
  • The court does not become functus officio immediately after passing the decree;
  • The court continues to exercise control until:
    • the sale deed is executed, or
    • the decree becomes inexecutable.

This principle is significant because it recognises the continuing equitable jurisdiction of courts in specific performance matters.

Section 28 of the Specific Relief Act Explained

Section 28 of the Specific Relief Act, 1963 deals with rescission of contracts after a decree for specific performance has been passed.

The provision gives power to the court to rescind the contract if the purchaser fails to:

  • pay the purchase money, or
  • comply with conditions imposed under the decree.

The provision balances equities between the seller and purchaser even after the decree.

The Supreme Court clarified that Section 28 is not merely procedural it preserves the equitable control of the court over the entire transaction.

Separate Application for Rescission Not Mandatory

A major takeaway from the judgment is the Court’s clarification that filing a separate application under Section 28 is optional and not compulsory.

The Court observed:

“It is settled that moving of an application under Section 28 of the Act for rescinding the contract for non-compliance of the condition is not mandatory rather optional and immaterial.”

This means that where facts clearly demonstrate default by the decree-holder, the court itself can treat the contract as rescinded.

The Court further held that courts are not powerless merely because no formal rescission application was filed.

This observation is legally important because several execution proceedings often become prolonged due to technical objections regarding formal applications under Section 28.

The judgment therefore streamlines enforcement principles in specific performance litigation.

Readiness And Willingness Must Continue Even After Decree

Another critical aspect discussed by the Supreme Court was the doctrine of “readiness and willingness.”

Under specific performance law, the plaintiff must continuously demonstrate readiness and willingness to perform contractual obligations.

The Court held that this obligation does not end with obtaining a decree.

According to the Bench:

  • If the buyer was genuinely ready and willing,
  • there would have been no difficulty in depositing the balance consideration within the stipulated period.

Failure to comply with the decree indicated absence of continuous readiness and willingness.

The Court observed:

“The plaintiff-respondent disentitled himself from the benefit of the decree of specific performance.”

This reinforces the principle that equitable relief under specific performance is available only to parties acting diligently and bona fide throughout the proceedings.

Key Legal Principles Summarised by the Supreme Court

The Court crystallised the following principles relating to Section 28:

  1. Decree For Specific Performance Is Preliminary In Nature

The decree remains under the court’s supervision until execution is complete.

  1. Court Retains Jurisdiction

The court does not become functus officio immediately after passing the decree.

  1. Deposit Within Time Is Essential

Failure to deposit consideration within stipulated time can render the decree inexecutable.

  1. Separate Suit Is Barred

Section 28(4) bars separate suits for reliefs that can be claimed in the same proceedings.

  1. Power Under Section 28 Is Equitable

Courts must balance equities between sellers and purchasers.

  1. Subsequent Default Must Be Evaluated Equitably

Courts must examine conduct after decree while exercising jurisdiction.

  1. Separate Application Is Optional

The court can itself treat the contract as rescinded in appropriate cases.

Importance of the Judgment

This ruling is likely to have major implications in property and specific performance litigation across India.

The judgment:

  • strengthens procedural discipline in execution of decrees;
  • discourages decree-holders from delaying compliance;
  • protects sellers from indefinite uncertainty;
  • reinforces the equitable nature of specific performance jurisdiction;
  • clarifies the scope of Section 28 of the Specific Relief Act.

The ruling also sends a strong message that parties obtaining equitable relief must themselves act equitably and comply strictly with court-imposed obligations.

Final Thoughts

The Supreme Court’s decision in HABBBAN SHAH v. SHERUDDIN is an important reaffirmation of the principles governing specific performance under Indian contract law.

The Court made it clear that:

  • a decree-holder cannot indefinitely delay payment of balance consideration;
  • timelines in decrees are meaningful and enforceable;
  • readiness and willingness must continue throughout execution;
  • courts possess continuing equitable jurisdiction under Section 28;
  • and a separate rescission application is not always necessary.

By restoring balance between contractual rights and equitable obligations, the judgment significantly clarifies the law relating to execution of decrees for specific performance under the Specific Relief Act, 1963.