In a significant ruling, the Supreme Court of India has clarified the jurisdiction of execution courts in matters involving the rescission or extension of time under Section 28 of the Indian Contract Act, 1872. The judgment was delivered in the case titled Ishwar (since deceased) through LRs & Ors. v. Bhim Singh & Anr., Civil Appeal No. 10193 of 2024, arising out of SLP (C) No. 29899 of 2017. The bench, comprising Justice Manoj Misra and Justice J.B. Pardiwala, upheld the decision of the Execution Court that had permitted the decree-holder to deposit the balance consideration and rejected the application for rescission of the contract filed by the judgment-debtors.
Background of the Case
The legal battle began when the respondents, Bhim Singh and another party, filed a suit for specific performance against the appellants, Ishwar (since deceased) through LRs and others, for the enforcement of an agreement to sell dated May 18, 2005. The agreement was for the sale of certain property at a total consideration of Rs. 18 lakhs, out of which Rs. 9.77 lakhs was paid in advance. Despite repeated requests for the execution of the sale deed, the appellants failed to comply.
Initially, the trial court, the Court of Additional Civil Judge (Senior Division), Kaithal, decreed on February 28, 2011, that the appellants were only required to refund the earnest money with interest. Dissatisfied with the partial decree, the respondents appealed to the Additional District Judge, Kaithal, who, on January 12, 2012, allowed the appeal and directed the appellants to execute the sale deed within two months, failing which the decree-holder was permitted to execute the sale deed through court intervention.
Subsequently, the respondents (decree-holders) moved the Execution Court for the enforcement of the decree. Meanwhile, the appellants (judgment-debtors) filed a second appeal before the Punjab and Haryana High Court, which was dismissed on November 7, 2013. An application by the respondents to deposit the balance sale consideration in the Execution Court was filed on March 24, 2014. The appellants objected to this, seeking rescission of the contract under Section 28 of the Specific Relief Act, 1963, citing the failure of the respondents to deposit the balance amount within the stipulated two-month period.
Legal Issues Involved
The principal legal question before the Supreme Court was whether the Execution Court had the jurisdiction to entertain applications for rescission of contract or extension of time under Section 28 of the Specific Relief Act, 1963, particularly when the original decree was passed by the appellate court.
Another related issue was whether the applications under Section 28 should be considered as applications on the original side (in the suit itself) or on the execution side (as part of the execution proceedings).
Decision of the Court
The Supreme Court affirmed that the Execution Court, if it is the same court that originally passed the decree, has the jurisdiction to entertain applications under Section 28 of the Specific Relief Act, 1963. The Court relied on previous judgments, including Ramankutty Guptan v. Avara [(1994) 2 SCC 642] and V.S. Palanichamy Chettiar Firm v. C. Alagappan [(1999) 4 SCC 702], which held that the decree of an appellate court merges with that of the trial court and is considered as one in the same suit.
The Court observed:
“The expression ‘may apply in the same suit in which the decree is made’ as used in Section 28 of the 1963 Act must be accorded an expansive meaning so as to include the court of first instance even though the decree under execution is passed by the appellate court.”
The bench also clarified that the application under Section 28 should have been treated as an application in the original suit and not on the execution side. However, the Supreme Court chose not to interfere with the impugned order on this technical ground, as substantial justice had already been done. The Court noted:
“If we interfere with the impugned order only on the technical ground that the application was not dealt with as one on the original side, grave injustice would be caused to the decree-holder(s). More so, when the judgment-debtor(s) themselves applied to the Execution Court for rescinding the contract under Section 28(1) of the 1963 Act, and raised no such jurisdictional issue either before the Execution Court or the High Court.”
Observations and Conclusion
The Court concluded that the decree-holder had demonstrated a consistent intention to comply with the decree by seeking permission to deposit the balance consideration promptly, and there was no deliberate fault on their part. Thus, the extension of time by the Execution Court was justified.
The appeal was dismissed, and the order of the Execution Court was upheld, providing clarity on the jurisdiction of execution courts in matters of rescission and extension of time under Section 28 of the Specific Relief Act.
The appellants were represented by Shri Subhasish Bhowmick, while Mr. Devendra Singh appeared for the respondents.
