Supreme Court Clarifies Time Limit for Deposit of Balance Sale Consideration in Specific Performance Cases

The Supreme Court of India recently emphasized that appellate courts must specify the time limit for depositing the balance sale consideration under Order XX Rule 12A of the Code of Civil Procedure, 1908 (“CPC”), in cases involving the specific performance of agreements related to the sale or lease of immovable property.

Order XX Rule 12A of the CPC mandates that where a decree for specific performance of a contract for the sale or lease of immovable property directs the purchaser or lessee to pay a certain amount, the court must specify the period within which the payment should be made.

The Supreme Court ruled that due to the doctrine of merger, the decree of the trial court, which specifies the time limit for depositing the balance sale consideration, merges with the appellate court’s order. If the appellate court fails to specify such a time limit, it would be unjust to deny the execution of the decree solely on the ground of delayed deposit of the balance sale consideration.

“This litigation serves as an eye-opener for appellate courts, reminding them of their duty to comply with Order XX Rule 12A of the CPC. When an appeal is filed against a trial court’s decree and is disposed of, the appellate court must specify the time for depositing the balance sale consideration. It is incorrect to assume that the time period granted by the trial court would automatically apply to the decree drawn by the appellate court. What is executable is the decree passed by the appellate court, and it bears the duty of specifying the time period,” the Court observed.

The case was heard by a bench comprising Justices JB Pardiwala and R Mahadevan. The trial court had decreed the suit for specific performance in favor of the appellant and directed him to deposit the balance sale consideration within two months. The First Appellate Court (in 2015) affirmed the trial court’s decree but did not specify the time limit for payment of the balance sale consideration.

As per the doctrine of merger, the trial court’s decision merged with the appellate court’s ruling, rendering the trial court’s order ineffective. Consequently, since the First Appellate Court’s decision took precedence and lacked a specified time limit, the appellant deposited the balance sale consideration only in 2019, four years after the First Appellate Court’s ruling.

The appellant challenged the High Court’s decision, which held that the decree was inexecutable due to the four-year delay in depositing the balance sale consideration. The Supreme Court had to decide whether such a delay could be grounds to deny execution of the First Appellate Court’s decree.

The Supreme Court ruled in favor of the appellant, holding that the delay in depositing the balance sale consideration would not render the decree inexecutable. The Court further clarified that under Section 28 of the Specific Relief Act, 1963 (“SRA”), the trial court has the discretion to grant further time for deposit, even after a delay, provided there was no wilful negligence or abandonment of the contract.

“This discretion must be exercised judiciously, considering factors such as the bona fides of the decree holder, the reasons for failure to deposit within time, the length of the delay, and any equities created in favor of the judgment debtor during the intervening period,” the Court noted.

The Supreme Court also held that when an appellate court does not specify a time limit for the deposit of the balance sale consideration, the decree holder must make the deposit within a reasonable time. However, the Court clarified that a reasonable time does not mean that the decree holder can deposit the amount at his convenience.

“In this case, there was undoubtedly a delay in filing the execution petition and seeking permission to deposit the balance sale consideration. Just because a decree for specific performance can be executed within 12 years from the date of the original decree or its affirmation by the appellate court does not mean that the decree holder can deposit the balance sale consideration at his own discretion,” the Court observed.

The Court further stated, “If the appellate court has failed to stipulate a specific time period, it is expected that the decree holder will deposit the amount within a reasonable period.”

Since the balance sale consideration of Rs. 4,87,000/- had been deposited by the decree holder in 2019, the Supreme Court deemed it inappropriate for the High Court to interfere with the execution of the decree. The Court concluded that the delay in depositing the balance sale consideration did not render the decree inexecutable in the absence of wilful negligence or abandonment of the contract.

In light of this, the Supreme Court allowed the appeal and directed that the respondents be paid 9% simple interest on the balance sale consideration for the period of delay.

Case Title: Ram Lal v. Jarnail Singh (Now Deceased) Through LRs & Ors.
Citation: 2025 (SC) 283