JURISDICTION OF EXECUTION COURT TO RESCIND CONTRACT UNDER SPECIFIC RELIEF ACT

Author: Utkarsh Srivastava
Advocate-on-Record, Supreme Court of India

In this paper we are going to discuss the rights of the parties to rescind contract at the time of execution. About the provisions of Specific Relief Act providing the right to rescind as well as jurisdiction and powers of Execution Court in this regard.

Suppose A and B entered into a contract for sale of house (immovable property) belonging to A at a price consideration of INR 50 Lakhs. Subsequently, A refused to sell the house. B then filed a suit for specific performance of the contract and got a decree in his favour.

While passing the decree, B was directed by the court to deposit the consideration amount before the executing court within a period of 3 months from the date of the decree and get the decree executed in his favour.

B goes and files an application for execution of the decree but fails to deposit the amount specified by the decreeing court within the period of 3 months.

Then these questions arise in the above situation:

1. What rights does A have against B?
2. Whether A can rescind contract before the Executing Court? or
3. Whether B can request the Execution Court to grant more time to deposit the amount?
4. What are the powers of the Execution Court, does it have the jurisdiction to deal with the application to rescind contract or an application for extension of time to deposit the sale consideration?

Section 28 of the Specific Relief Act 1963 provides that where a decree for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser fails to pay the purchase money within the period as directed by the court, then the vendor or lessor may apply “in the same suit in which the decree is made” to rescind contract.

However, the catch is in the phrase “in the same suit in which the decree is made”. It means that Section 28 of the Specific Relief Act 1963 although gives right to the vendor to apply to rescind contract but also emphasizes that the application for rescission shall be filed in the same court where the decree was made.

In those cases, where the court passing the decree and the execution court are the same, it is amply clear that such execution court can entertain such application but what about those situations where the execution court and the decreeing court are not the same, like,

• Where the decree was passed by an appellate court, or
• Where the decree was to be executed by another court having territorial jurisdiction over the property?

This issue had been dealt by the Hon’ble Supreme Court of India in Ramankutty Guptan v. Avara (1994) 2 SCC 642, wherein it was held that the decree of the appellate court is to be construed as decree passed by the court of first instance. An appeal is in continuation of the suit. Therefore, when an appellate court has decreed the suit for specific performance, it should be construed that the decree has been made in the same suit.

If the decree specifies the time for performance of the conditions like deposit of money, then in the failure to doe so the same can be extended by the execution court as the decree of the trial court is merged with the appellate court.

It was further held that the procedure is the handmaid for justice and unless the procedure touches upon the jurisdictional issue, it should be molded to subserve the substantial justice.

Following the ratio in the above-mentioned judgment, Hon’ble Supreme Court of India in V.S. Palanichamy Chettiar Firm v. C. Alagappan & Anr. (1999) 4 SCC 702, held that when trail court and the executing court are the same, the execution court can entertain the application for extension of time though the application is to be treated as one filed in the same suit. Similarly, the judgment-debtor can also seek recission of contract of sale or take up this plea of defence to bar the execution of the decree.

Recently, Hon’ble Supreme Court has dealt with the same issue and finally settled the position of law in Ishwar (Since Deceased) Through LRs. & Ors. v. Bhim Singh & Anr. (2024 INSC 651), holding that, the expression “may apply in the same suit in which the decree is made” as used in Section 28 of the Specific Relief Act 1963 must be accorded expansive meaning so as to include the court of first instance even though the decree under execution is passed by an appellate court.

Thus, an application either for recission of contract or extension of time can be entertained and decided by the Execution Court.  

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