REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No 5360 of 2019 @Special Leave Petition (C) No  26508 of 2018

Surinder Pal Soni                                                                         .... Appellant         

Versus

Sohan Lal (D) Thru LR & Ors                        ....Respondents

J U D G M E N T

Dr Dhananjaya Y Chandrachud, J

1 A learned Single Judge of the High Court of Punjab and Haryana allowed a

Civil  Revision  instituted  by  the  respondents  and  in  the  process  dismissed  the

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application  of  the  appellant  for  the  execution  of  a  decree  in  a  suit  for  specific

performance.  Accepting  the  objections  of  the  judgment  debtor,  the  High  Court

directed  a  refund  of  earnest  money  in  substitution  of  the  decree  for  specific

performance.  

2 In  2006,  the  appellant  instituted  a  suit  for  specific  performance  of  an

agreement  to  sell  dated 8  December  2003.  The appellant  sought  to  enforce an

agreement for the sale of land bearing 12 kanals and 9 marlas, representing a half

share out of the land bearing Khewat Khatauni No. 565/525, Khasra No. 94/18 (7-8),

19(8-0), 20/1 (6-3), 21/1 (1-7) and 94/21/3 (2-0) situated in village Billa, Tehsil and

District Panchkula. On 20 March 2012, the Civil Judge (Senior Division), Panchkula

decreed the suit  except for land bearing 2 kanals mentioned in the sale deed in

exhibit-D3. Insofar as is material, the decree provided thus :

"Resultantly,  a  decree  for  possession  by  way  of  specific performance  of  the  agreement  to  sell  Ex.  P1  dated 08.12.2003 is passed in favour of the plaintiff  in respect of remaining  suit  land,  i.e.,  except  the  land  of  2  kanals mentioned  in  sale  deed  Ex.  D3,  on  making  balance  sale consideration amount  to the L.Rs.  of  defendant  No.1,  after deducting the consideration of aforesaid 2 kanals land. The L.Rs of the defendant No.1 are directed to execute the sale deed in respect of the remaining suit land within a period of two months from today in receipt of remaining balance sale consideration  after  deduction  of  consideration  of  2  kanals land and in case of failure of the L.Rs. of defendant No.1 to do so, the plaintiff  is entitled to get the sale deed executed and  registered  quo  the  aforesaid  land  through  the  Court agency."

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3 Both the appellant and the respondent filed appeals against the judgment of

the Trial Court. On 23 April 2012, the Additional District Judge, Panchkula issued

notice in the appeal and on the application for stay filed by the respondent.

4 On  15  June  2012,  the  appellant  filed  proceedings  before  the  Civil  Judge

(Senior Division), Panchkula for seeking the execution of the decree passed in his

favour, pending the first appeal.

5 On 19 May 2014, the respondent filed objections to the execution petition.  

6 On 17 January 2015, the Additional District Judge upheld the judgment and

order of the Trial Court while dismissing both sets of appeals filed respectively by the

appellant and the respondent.  

7 On  23  February  2015,  the  executing  court  rejected  the  objections  of  the

respondents to the execution of the decree and allowed the appellant’s execution

petition.  The  respondent  then  filed  a  civil  revision  before  the  High  Court  which

resulted in the judgment of the learned Single Judge dated 1 June 2018 by which

the order of the executing court was set aside. The High Court held that there was a

failure on the part of the appellant to deposit the balance of the sale consideration

within a period of two months from the date of the decree and as a consequence the

decree had been rendered inexecutable by virtue of the provisions of Section 281 of

1 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.  

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the  Specific  Relief  Act  19632.  The  High  Court  noted  that  of  the  total  sale

consideration  of  Rs.  8,35,000/-  under  the  terms  of  the  agreement  to  sell,  the

appellant in 2004 had paid an amount of Rs. 5,85,000/- while the balance of Rs.

1,15,864/-, consequent upon the partial decree in the suit had been deposited on 19

February 2015 after the dismissal of the first appeals on 17 January 2015. The High

Court opined thus:  

“A  perusal  of  the  operative  portion  of  the  decree  under execution  shows  that  though  the  lower  court  has  not specifically  fixed  any  time  for  deposit  of  the  amount  of balance  sale  consideration  but  it  has  been  provided  in unambiguous  terms  that  the  sale  deed  is  to  be  executed within two months from the date of judgment upon deposit of balance sale consideration.”

8 According to the High Court, the time frame for the deposit of the balance sale

consideration was implicit in the decision of the Trial Court which had ordered the

execution of the sale deed within two months from the date of the judgment upon

deposit of the remaining sale consideration. The High Court held that the judgment

and 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

(2) Where a contract is rescinded under sub-section (1), the court— (a) shall direct the purchaser or the lessee, if he has obtained possession of the property under the contract, to restore such possession to the vendor or lessor; and (b) may direct payment to the vendor or lessor of all the rents and profits which have accrued in respect of the property from the date on which possession was so obtained by the purchaser or lessee until restoration of possession to the vendor or lessor, and, if the justice of the case so requires, the refund of any sum paid by the vendee or the lessee as earnest money or deposit in connection with the contract.  

(3) If the purchase or lessee pays the purchase money or other sum which he is ordered to pay under the decree within the period referred to in sub-section (1), the court may, on application made in the same suit, award the purchaser or lessee such further relief as he may be entitled to, including in appropriate cases all or any of the following reliefs, namely:— (a) the execution of a proper conveyance or lease by the vendor or lessor; (b) the delivery of possession, or partition and separate possession, of the property on the execution of such conveyance or lease. (4) No separate suit in respect of any relief which may be claimed under this section shall lie at the instance of a vendor, purchaser, lessor or lessee, as the case may be.  

(5) The costs of any proceedings under this section shall be in the discretion of the court.  2 Specific Relief Act

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of  Civil  Procedure  19083.  Hence,  it  was  not  open  to  the  appellant  to  seek  the

execution  of  the decree on account  of  the lapse of  the period  stipulated  in  the

decree for its execution. The High Court has relied upon the provisions of Section 28

of the Specific Relief Act. It also observed that no application for the enlargement of

time  had  been  filed  by  the  appellant.  The  correctness  of  this  view  falls  for

determination in the present appeal.  

9 Mr A Tewari, learned Counsel appearing on behalf of the appellant urged the

following submissions :

(i) The judgment and decree of the Trial Court dated 20 March 2012 has merged

with the decree of the First  Appellate Court4 dated 17 January 2015.  The

doctrine of merger applies whether the judgment of  a subordinate court  is

reversed,  modified  or  upheld  by  a  court  superior  to  it  (Chandi  Prasad  v

Jagdish Prasad5);  

(ii) The decree for specific performance is in the nature of a preliminary decree

and  the  court  passing  it  does  not  become  functus  officio (Sardar  Mohar

Singh v Mangilal6). Since the decree of the appellate court dated 17 January

2015 makes no mention of the transaction becoming time barred, limitation

would commence from 17 January 2015;

3 CPC 4 “Appellate Court” 5 (2004) 8 SCC 724 6 (1997) 9 SCC 217

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(iii) 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;

(iv) 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 (Sardar

Mohar Singh) (supra). What is of prime importance is to gauge the readiness

and the willingness of the decree holder. The judgment debtor did not seek

the  rescission  of  the  contract  under  the  provisions  of  Section  28  of  the

Specific Relief Act;

(v) The  balance  of  equities  lies  in  favour  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; and

(vi) The provisions of Order 41 Rule 5 do not detract from the doctrine of merger.  

10 On the other hand, Mr Gopal Jha, learned Counsel appearing on behalf of the

respondents submitted that :

(i) The doctrine of merger applies to a situation when the limitation for the filing

of an execution application is to be computed;

(ii) The decree of the Trial Court was conditional since it contained a direction for

the execution of the sale deed of the suit land except 2 kanals within a period

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of  2  months  on  receipt  of  the  balance  sale  consideration.  The  decree

contained three conditions, each of which had to be fulfilled;

(iii) In the present case, the decree of the Trial Court was not modified by the

appellate court;

(iv) No application was filed by the appellant for the extension of time to effect

deposit nor was any amount deposited while filing the execution application.

The High Court while dismissing the appeal of the judgment debtor did not

grant an extension of time to the decree holder for the deposit of the balance;

(v) The decree holder has not shown reasonable grounds for extension of time

and the filing of an appeal does not constitute a valid ground particularly in the

absence of a stay under Order 41 Rule 5; and

(vi) The  respondent  deposited  the  balance  of  the  sale  consideration  on  19

February 2015 without an application under Section 148 of the CPC for the

extension of time.  

For the above, it was submitted that the appellant having failed to comply with the

conditions specified in the decree dated 20 March 2012, the High Court was justified

in allowing the respondent’s  civil  revision and holding that  the decree had been

rendered inexecutable.

11 The rival submissions fall for our consideration.  

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12 By its judgment dated 20 March 2012, the Trial Court decreed the suit  for

specific  performance  filed  by  the  appellant  save  and  except  for  the  land

admeasuring 2 kanals. The decree of the Trial Court envisaged performance of the

agreement to sell dated 8 December 2003 in respect of the land which formed the

subject matter of the suit, except for 2 kanals. The judgment debtor was directed to

execute the sale deed in respect of the remaining portion of the suit land  

(i) within a period of 2 months;

(ii) on receipt of the balance sale consideration; and

(iii) upon deducting the consideration for 2 kanals of land.  

The decision of the Trial Court was carried in appeal both by the decree holder and

by the judgment debtor. The Appellate Court issued notice on the appeal and the

application for stay filed by the judgment debtor, while the decree holder moved for

execution of the decree. The judgment debtor had filed objections to the execution

of the decree. The Appellate Court dismissed both sets of appeals by confirming the

judgment and decree of the Trial Court.  

13 Upon the decision of the Appellate Court, there was a merger of the judgment

of the Trial Court with the decision which was rendered in appeal. Consequent upon

the passing of the decree of an Appellate Court, the decree of the Trial Court merges

with that of the Appellate Court. The doctrine of merger is founded on the rationale

that there cannot be more than one operative decree at a given point in time. The

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doctrine of merger applies irrespective of whether the Appellate Court has affirmed,

modified or reversed the decree of the Trial Court. In  Kunhayammed  v State of

Kerala7, while explaining the doctrine of merger, this Court held thus:

“12. The logic underlying the doctrine of merger is that there cannot  be  more  than  one  decree  or  operative  orders governing the same subject-matter at a given point of time. When a decree or order passed by an inferior court, tribunal or authority was subjected to a remedy available under the law before a superior forum then, though the decree or order under  challenge  continues  to  be  effective  and  binding, nevertheless its finality is put in jeopardy. Once the superior court has disposed of the lis before it either way — whether the decree or order under appeal is set aside or modified or simply  confirmed,  it  is  the  decree or  order  of  the  superior court,  tribunal  or  authority  which  is  the  final,  binding  and operative decree or order wherein merges the decree or order passed by the court, tribunal or the authority below. However, the doctrine is not of universal or unlimited application. The nature of jurisdiction exercised by the superior forum and the content  or  subject-matter  of  challenge  laid  or  which  could have been laid shall have to be kept in view.”

Further,  while explaining the position that emerges on the grant of special leave to

appeal by this Court, it was observed:

“41. Once  a  special  leave  petition  has  been  granted,  the doors for the exercise of appellate jurisdiction of this Court have been let open. The order impugned before the Supreme Court becomes an order appealed against. Any order passed thereafter would be an appellate order and would attract the applicability  of  doctrine  of  merger.  It  would  not  make  a difference  whether  the  order  is  one  of  reversal  or  of modification  or  of  dismissal  affirming  the  order  appealed against. It would also not make any difference if the order is a speaking or non-speaking one…”

7 (2000) 6 SCC 359

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This  position  of  law has been recently  affirmed and reiterated by a three judge

Bench  decision  of  this  Court  in  Khoday  Distilleries  Ltd v  Sri  Mahadeshwara

Sahakara Sakkare Karkhane Ltd8.

14 The decision in Kunhayammed (supra) was followed by a three judge Bench

decision of this Court in Chandi Prasad (supra), which held thus:

“23.  The  doctrine  of  merger  is  based  on  the  principles  of propriety  in  the  hierarchy  of  justice  delivery  system.  The doctrine of merger does not make a distinction between an order  of  reversal,  modification  or  an  order  of  confirmation passed  by  the  appellate  authority.  The  said  doctrine postulates  that  there  cannot  be  more  than  one  operative decree governing the same subject matter at a given point of time.  

24. It is trite that when an Appellate Court passes a decree, the decree of the trial  court merges with the decree of the Appellate Court and even if and subject to any modification that may be made in the appellate decree, the decree of the Appellate Court supersedes the decree of the trial court. In other words, merger of a decree takes place irrespective of the fact as to whether the Appellate Court affirms, modifies or reverses the decree passed by the trial court…”

15 More recently, the decision in Chandi Prasad (supra) was followed by a two

judge Bench of this Court in Shanthi v T D Vishwanathan9 rendered on 24 October

2018 in the following terms :

“7. …When an appeal is prescribed under a statute and the appellate forum is invoked and entertained, for all intents and purposes, the suit continues. When a higher forum entertains an  appeal  and  passes  an  order  on  merit,  the  doctrine  of merger would apply. The doctrine of merger is based on the principles  of  the  propriety  in  the  hierarchy  of  the  justice delivery  system.  The doctrine  of  merger  does not  make a distinction between an order of  reversal,  modification or  an

8 (2019) 4 SCC 376 9 Civil Appeal No. 10442 of 2011, 2018 SCC OnLine SC 2196

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order of confirmation passed by the appellate authority. The said doctrine postulates that there cannot be more than one operative  decree  governing  the  same  subject  matter  at  a given point of time.”

16 Learned  Counsel  appearing  on  behalf  of  the  respondents  submitted  that

under  Order 41 Rule 5 of the CPC, an appeal does not operate as a stay of the

proceedings under a decree or order appealed from except so far as the Appellate

Court may order, nor shall execution of the decree be stayed only by reason of an

appeal  having  been preferred  from the  decree.  The  Appellate  Court  is  however

vested with the authority to stay the execution of the decree for sufficient cause. The

submission is that  since the decree was not  stayed pending the disposal  of  the

appeal,  there  was  no  impediment  in  its  execution  and,  upon  the  failure  of  the

appellant to deposit the balance in the execution proceedings, the decree becomes

inexecutable. Learned Counsel submitted that in such a situation, application of the

doctrine of merger stands obviated.  

17 We are unable to accept the submission. The doctrine of merger operates as

a principle upon a judgment being rendered by the Appellate Court. In the present

case,  once the Appellate  Court  confirmed the judgment  and decree of  the Trial

Court,  there  was evidently  a merger  of  the judgment of  the Trial  Court  with  the

decision of the Appellate Court. 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.  

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18 The  issue  can  be  looked  at  from  another  perspective  in  terms  of  the

provisions of Section 28 of the Specific Relief Act. Section 28 provides :

“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.”

19 Interpreting the provisions of Section 28 of the Specific Relief Act,  a three

judge Bench of this Court held in Sardar Mohar Singh (supra):  

“4. From the  language  of  sub-section  (1)  of  Section  28,  it could be seen that the court does not lose its jurisdiction after the  grant  of  the  decree  for  specific  performance  nor  it becomes functus officio.  The very fact that Section 28 itself gives power to grant order of rescission of the decree would indicate that till the sale deed is executed in execution of the decree, the trial court retains its power and jurisdiction to deal with the decree of specific performance. It would also be clear that the court has power to enlarge the time in favour of the judgment-debtor  to  pay  the  amount  or  to  perform  the conditions mentioned in the decree for specific performance, in spite of an application for rescission of the decree having been  filed  by  the  judgment-debtor  and  rejected.  In  other words,  the  court  has  the  discretion  to  extend  time  for compliance  of  the  conditional  decree  as  mentioned  in  the decree for specific performance…”  

In Bhupinder Kumar v Angrej Singh10, this Court held thus:

10 (2009) 8 SCC 766

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“21. It is clear that Section 28 gives power to the court either to extend the time for compliance with the decree or grant an order  of  rescission  of  the  agreement.  These  powers  are available to the trial court which passes the decree of specific performance.  In  other  words,  when  the  court  passes  the decree  for  specific  performance,  the  contract  between  the parties is  not  extinguished.  To put  it  clearly  the decree for specific performance is in the nature of a preliminary decree and the suit is deemed to be pending even after the decree.

22. Sub-section (1) of Section 28 makes it clear that the court does  not  lose  its  jurisdiction  after  the  grant  of  decree  for specific  performance nor it  becomes functus officio.  On the other hand, Section 28 gives power to the court to grant an order of rescission of the agreement and it has the power to extend the time to pay the amount or perform the conditions of decree for specific performance despite the application for rescission  of  the  agreement/decree.  In  deciding  an application under Section 28(1) of the Act, the court has to see all the attending circumstances including the conduct of the parties.”

20 Learned Counsel appearing on behalf of the respondents placed reliance on

the decision in V S Palanichamy Chettiar Firm v C Alagappan11. While adverting

to the decision of this Court in Ramankutty Guptan v Avara12, the two judge Bench

held:  

“15.  …This Court  observed that  when the decree specifies the time for performance of the conditions of the decree, on its  failure  to  deposit  the  money,  Section  28(1)  itself  gives power to the court to extend the time on such terms as the court  may allow to  pay  the purchase money or  other  sum which the court has ordered him to pay. The Court held, after noticing the conflict of decisions by the Bombay High Court and  the  Andhra  Pradesh  High  Court,  that  when  the  court which passed the decree and the executing court is the same, application under  Section  28 can be filed in  the executing court. However, where a decree is transferred for execution to a  transferee  executing  court  then  certainly  the  transferee

11 (1999) 4 SCC 702 12 (1994) 2 SCC 642

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court is not the original court and the executing court is not the “same court” within the meaning of Section 28 of the Act. But when an application has been made in the court in which the  original  suit  was  filed  and  the  execution  is  being proceeded with, then certainly an application under Section 28 is maintainable in the same court…”

21 In the above case, the facts before this Court were that an agreement to sell

had been executed nineteen years earlier on 16 February 1980 and no explanation

was forthcoming as to why the balance of the sale consideration was not deposited

within the time granted by the court. No application for extension was made under

Section 28 of the Specific Relief Act. This Court observed that merely because a suit

was filed within a period of three years prescribed by Article 54 of the Limitation Act

1963, that did not absolve the vendee-plaintiff from demonstrating that he was ready

and willing  to perform the agreement and whether  the non-performance was on

account of obstacles placed by the vendor or otherwise. In that context, this Court

held:

“17. …The court has to see all the attendant circumstances including if the vendee has conducted himself in a reasonable manner under the contract of sale. That being the position of law for filing the suit for specific performance, can the court, as  a  matter  of  course,  allow extension  of  time for  making payment of  balance amount  of  consideration in terms of  a decree after 5 years of passing of the decree by the trial court and 3 years of its confirmation by the appellate court? It is not the case of the respondent decree-holders that on account of any  fault  on  the  part  of  the  vendor  judgment-debtor,  the amount could not be deposited as per the decree. That being the  position,  if  now  time  is  granted,  that  would  be  going beyond the period of limitation prescribed for filing of the suit for  specific  performance  of  the  agreement  though  this provision may not be strictly applicable. It is nevertheless an important circumstance to be considered by the Court. That apart,  no  explanation  whatsoever  is  coming  from  the

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respondent  decree-holders as to why they did not  pay the balance amount  of  consideration as per the decree except what  the High Court  itself  thought  fit  to  comment  which is certainly not borne out from the record. Equity demands that discretion  be  not  exercised  in  favour  of  the  respondent decree-holders and no extension of time be granted to them to comply with the decree.”

The facts noted in the above extract from the judgment indicate a situation which is

factually distinct. In that case, the balance of the sale consideration was sought to

be deposited three years after the confirmation of the decree by the Appellate Court.

In  the  present  case,  the  facts  clearly  are  to  the  contrary.  The  appellant  had

deposited an amount of Rs. 5,85,000/- The partial decree of the Trial Court in the

suit for specific performance was placed in issue before the Appellate Court. After

the Appellate Court affirmed the decree on 17 January 2015, the decree of the Trial

Court  merged with that of  the Appellate Court.  Barely a month thereafter,  on 19

February 2015 the appellant deposited the balance of the sale consideration. The

appellant acted bona fide. The equities in a matter arising out of a decree in a suit

for specific performance must weigh in his favour. The executing court was justified

in rejecting the specious objections of  the respondents.  The High Court acted in

excess of  its  revisional jurisdiction. The High Court  impermissibly  substituted the

decree for specific performance with an order for refund of the sale consideration,

beyond the earnest  money of  Rs.  2,00,000/-  to  the decree holder.  The reasons

which weighed with the High Court in doing so as well as its ultimate directions are

unsustainable. 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.  

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22 We accordingly allow the appeal and set aside the impugned judgment and

order  dated 1  June 2018 of  the learned Single  Judge in  CR No.  3372 of  2015

(O&M). In consequence, the order passed by the Executing Court on 23 February

2015, dismissing the objections of the respondent – judgment debtor in Execution

Petition No. 2489 of 2013 shall accordingly stand restored.  

23 The appeal is allowed in the above terms. There shall be no order as to costs.

 …….……..…...…...….......………………........J.                                                            [DR DHANANJAYA Y CHANDRACHUD]

……....…..…....…........……………….…........J.                    [INDIRA BANERJEE]

New Delhi;  July 23, 2019.         

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