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Sspecific Pperformance: Delay in Payment – Surrounding equities or the purchaser’s bona fides.

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The validity of rescinding a contract and dismissing an execution case under Section 28 of the Specific Relief Act, 1963, solely due to a delay in depositing the balance sale consideration, without the court evaluating the surrounding equities or the purchaser’s bona fides.

Appeal allowed. The Supreme Court set aside the orders of the High Court and the Execution Court, restoring the execution application and the rescission applications back to the original court for a fresh, equity-based consideration.

Details

1. Factual Background

  • The Suit and Decree: The appellants filed a civil suit for the specific performance of a land sale agreement dated November 14, 2011, covering 3.75 acres of land at ₹16,00,000 per acre. On March 3, 2017, the Trial Court decreed the suit, directing the appellants to pay or deposit the balance sale consideration of ₹57,50,000 within one month.
  • Execution & Partial Compliance: The appellants sent a legal notice on April 1, 2017, calling upon the respondent to execute the sale deed, but did not deposit the money in court within the initial one-month limit. In July 2017, they filed an execution application stating they were ready to deposit the money. Meanwhile, the respondent challenged the trial court’s decree by filing a First Appeal.
  • Procedural Delays and Covid-19 Lockdown: Between 2017 and 2019, the Execution Court repeatedly directed the appellants to pay the judgment-debtor directly, but summons could not be served on the respondent. Specific court orders to deposit the money in court were issued intermittently in late 2019, but a scheduled deposit date in April 2020 was disrupted by the Covid-19 pandemic lockdown.
  • The Deposit and Dismissal: On November 26, 2020, the Execution Court formally ordered the appellants to deposit the ₹57,50,000 that same day to test their bona fides, which the appellants did via six cheques. Subsequently, in March 2023, the respondent filed an application under Section 28 of the Specific Relief Act, 1963, seeking to rescind the contract due to the delay in payment. On July 12, 2023, the Execution Court dismissed the execution application, ruling that because the decree was conditional and the amount was not deposited within one month, it could not be executed.

2. High Court’s Ruling

The appellants challenged the dismissal before the High Court of Madhya Pradesh at Jabalpur via a revision petition under Article 227 of the Constitution. The High Court dismissed the petition through a brief order, affirming the Execution Court’s strict approach regarding the conditional timeline of the decree.

3. Arguments Raised

  • On Behalf of the Appellants (Decree-Holders): They argued that the delay was not deliberate because the respondent was evasive and had filed an appeal. They maintained that since the court explicitly permitted the deposit on November 26, 2020, and the respondent’s appeal was ultimately dismissed for non-prosecution on November 6, 2023, the contract could not be mechanically rescinded. They also expressed readiness to pay an additional sum to compensate the respondent for any financial losses caused by the delay.
  • On Behalf of the Respondent (Judgment-Debtor): The respondent countered that the old CrPC/CPC principles apply strictly to conditional decrees, and the appellants failed to explain the extensive delay between 2017 and 2020. They contended that the pendency of a first appeal does not automatically stay a trial court’s decree, meaning the timeline remained binding.

4. Key Legal Issues & Findings of the Supreme Court

A. Doctrine of Merger vs. Dismissal for Default

The Court assessed whether the Trial Court’s decree had merged into the Appellate Court’s order. It clarified that the doctrine of merger applies only when a superior forum reviews a matter on its merits. Because the respondent’s first appeal was dismissed for non-prosecution (default), it did not constitute an adjudication on the merits under Section 2(2) of the CPC; therefore, the Trial Court’s decree did not merge and remained the operative decree.

B. Maintainability of Section 28 Applications After Deposit

The Court ruled that when the Execution Court permitted the appellants to deposit the money on November 26, 2020, it did so strictly to verify their bona fides, without settling the statutory rights of the parties regarding rescission. Therefore, allowing the deposit did not automatically erase the respondent’s right to apply for a contract rescission under Section 28.

C. Discretionary Power of Rescission and Extension of Time

The Supreme Court held that both the lower courts had approached the issue with a flawed, hyper-technical perspective:

  • No Automatic Rescission: Unless a specific performance decree explicitly mandates that a suit will stand automatically dismissed upon a default of payment, there is no automatic rescission of the contract.
  • Control Over Decree: A court does not become functus officio after passing a specific performance decree; it retains ongoing jurisdiction and equity-based discretion to either rescind the agreement or extend the payment timeline.
  • The Willful Negligence Test: To invoke Section 28, a court must find an element of willful negligence or positive refusal by the decree-holder to complete their contractual duties. The court must look at the entire conduct of the parties.
  • Balancing Equities: Since specific performance is an equitable remedy, courts must balance the scales of justice. Instead of choosing mechanical dismissal, a court should evaluate whether the judgment-debtor can be fairly compensated for the transactional delay by directing the decree-holder to pay an adjusted, additional sum.

5. Final Direction

The Supreme Court set aside the judgments of both the High Court and the Execution Court. The execution application and the respondent’s applications for rescission were restored to their original numbers on the file of the Court of first instance. The lower court was directed to evaluate the applications freshly as interlocutory applications within the original civil suit, adhering strictly to the balanced principles of equity detailed by the apex court.

2026 INSC 463

Anand Narayan Shukla V. Jagat Dhari (D.O.J. 08.05.2026)

2026 INSC 463 click here to view full text of judgment

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Admissibility of Deceased Witness Testimony Against Absconding Accused

July 18, 2026 No Comments

Supreme Court allowed the appeals filed by the State of West Bengal, ruling that the deposition of a deceased witness recorded in an earlier trial is admissible in a subsequent trial against an absconding accused, provided the requirements of Section 299 of the Code of Criminal Procedure (CrPC) are met. The Court clarified that the provision serves to preserve evidence when an accused deliberately absconds, preventing them from benefiting from the unavailability of material witnesses due to the passage of time. The Court set aside the High Court’s order, which had denied the admission of the victim’s testimony, confirming that the statutory preconditions—the accused absconding and no immediate prospect of arrest—were satisfied at the time the witness deposed.

  • Background: In a 2012 gang-rape case, the respondent and another accused were absconding while three others were tried and convicted. The victim, a key witness, testified in the first trial but passed away in 2015. After the respondent was arrested in 2016, the prosecution sought to admit the victim’s earlier deposition as evidence under Section 33 of the Indian Evidence Act read with Section 299 of the CrPC.
  • High Court Order: The High Court of Calcutta had rejected the application, observing that the prosecution had a duty to obtain a specific direction from the Trial Court to record evidence against the absconder during the first trial, and thus the earlier deposition could not be used against the respondent.
  • Interpretation of Section 299 CrPC: The Supreme Court held that Section 299 CrPC acts as an exception to the general rule requiring a witness to be examined in the presence of the accused. It does not mandate a formal, prior order from a Magistrate to record that the accused is absconding; rather, what is relevant is whether the conditions—that the accused is absconding and there is no immediate prospect of arrest—were established at the time the evidence was recorded.
  • Preventing Misuse of Process: The Court reasoned that taking a restrictive view of Section 299 would jeopardize the criminal justice system by incentivizing accused persons to wilfully abscond and await the death or unavailability of material witnesses.
  • Application to Facts: The Court noted that the respondent was a declared absconder when the victim’s testimony was recorded (2013), and he remained at large until his arrest in 2016. As the two essential conditions of Section 299(1) were met, the deceased victim’s evidence is admissible in the trial against the respondent.

Legislative Continuity: The Court noted that the legislature has maintained this principle in Section 335 of the recently enacted Bharatiya Nagarik Suraksha Sanhita, 2023, reinforcing the intent to ensure evidence is preserved against those who evade trial.

2026 INSC 718

The State of West Bengal v. Kader Khan – (D.O.J. 17.07.2026)

2026 INSC 718 click here to view full text of judgment

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Insolvency and Bankruptcy: Finality of Resolution Plans and Extinguishment of Sub-judice Claims

July 18, 2026 No Comments

Supreme Court allowed the appeals filed by the Successful Resolution Applicant (Appellant-SRA), ruling that upon the approval of a Resolution Plan under the Insolvency and Bankruptcy Code, 2016 (IBC), all claims—including those pending adjudication (sub-judice)—that are not specifically provided for in the plan stand extinguished. The Court held that the “clean slate” doctrine is fundamental to the IBC, preventing unresolved or contingent claims from resurfacing and undermining the revival of the corporate debtor. Consequently, the Court set aside the High Court orders and dismissed the civil suit and arbitration proceedings initiated by operational creditors, affirming that they are bound by the terms of the approved Resolution Plan.

  • Background: The Appellant-SRA challenged Bombay High Court orders that allowed a civil recovery suit and arbitration proceedings to continue against the corporate debtor (Bhushan Steel Limited) despite the approval of its Resolution Plan. The respondents, operational creditors, sought to pursue claims that were pending at the time of the Corporate Insolvency Resolution Process (CIRP).
  • Treatment of Claims: During the CIRP, the Resolution Professional admitted the respondents’ disputed claims at a notional value of Rupee One (1) each. The approved Resolution Plan stipulated that because the liquidation value was NIL, no amounts were due to operational creditors; however, a settlement fund was provided for those with admitted claims.
  • The “Clean Slate” Doctrine: The Court emphasized that a successful resolution applicant must start on a “clean slate,” free from “hydra-headed” surprise claims. Once a Resolution Plan is approved under Section 31(1) of the IBC, it becomes binding on all stakeholders, and claims not incorporated therein are deemed extinguished, withdrawn, or abated.
  • Finality of the Plan: The Court noted that the Final List of Creditors attained finality, and the respondents could not seek to reopen or question the commercial wisdom of the Committee of Creditors after the plan’s approval. The Court found no merit in the allegations of fraud, noting that no proceedings had been initiated under Rule 11 of the NCLT Rules to challenge the plan’s integrity.
  • No Express Carve-out: Upon a harmonious reading of the Resolution Plan, the Court concluded there was no express “carve-out” protecting sub-judice claims from extinguishment. The plan explicitly mandated that all legal proceedings relating to the period prior to the effective date stand extinguished, except to the extent of the specific settlement amount provided.
  • Observation on MSMEs: In an “Afterword,” the Court observed that the current insolvency framework does not adequately account for the position of small operational creditors and MSMEs, who are often placed at the bottom of the repayment waterfall. The Court suggested that the Legislature and Law Commission examine this to ensure a more balanced repayment mechanism.
  • Outcome: The Court allowed the appeals, set aside the contrary High Court orders, and dismissed the pending civil suit and arbitration proceedings, enforcing the finality of the Resolution Plan.

2026 INSC 717

M/S Tata Steel Ltd. v. Varsha & Anr. (D.O.J. 17.07.2026)

2026 INSC 717 click here to view full text of judgment

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Excluding Nominated Members from Local Authority Elections

July 18, 2026 No Comments

The Supreme Court upheld the High Court of Karnataka’s decision to exclude nominated members of Town Panchayats from participating in Legislative Council elections for Local Authorities’ Constituencies. The Court ruled that under the constitutional framework established by the 74th Amendment (Part IX-A), nominated members, who serve only in an advisory capacity, lack the democratic mandate of elected representatives. Consequently, their inclusion in the electoral roll was declared unconstitutional, and the Court affirmed the direction to conduct a recount of votes after segregating the invalid votes cast by these nominated members.

  • Background: The election to the Karnataka Legislative Council (Chikkamagaluru Local Authorities Constituency) was challenged because 12 nominated members from four Town Panchayats were included in the electoral roll and participated in the voting. The appellant, who won by a narrow margin of 6 votes, contended that the electoral roll’s finality should be respected.
  • Constitutional Interpretation: The Court held that while Article 171(3)(a) mentions “members” of local authorities, this must be interpreted through the lens of the 74th Constitutional Amendment. Article 243-R establishes that while nominated members may be appointed for their expertise, they are expressly barred from voting in municipal meetings, underscoring their advisory rather than representative role.
  • Democratic Representation: The Supreme Court emphasized that allowing nominated members to vote in Legislative Council elections would undermine the democratic nature of the electoral process, as they are not democratically elected. The Court affirmed that “members” in the context of electoral colleges refers to democratically elected representatives.
  • Finality of Electoral Rolls: While acknowledging the principle that electoral rolls typically attain finality, the Court distinguished this case by noting that the inclusion of the nominated members was void ab initio and unconstitutional. Therefore, the finality of the roll could not be used to validate an illegality that strikes at the core of the electoral college’s composition.
  • Secrecy of the Ballot: The Court rejected the argument that segregating these votes would violate the secrecy of the ballot. It maintained that the higher constitutional goal of preserving free and fair elections and ensuring the purity of the electoral process outweighs the requirement for absolute secrecy in this specific context.
  • Outcome: The Supreme Court dismissed the appeals and affirmed the High Court’s orders. The Court directed the authorities to proceed with the consequential actions based on the recount results already obtained, ensuring that the election outcome reflects only the valid votes cast by elected representatives.

2026 INSC 716

Pranesh M.K. v. Shanthegowda & Ors. – (D.O.J. 16.07.2026)

2026 INSC 716 click here to view full text of judgment

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Railway: Establishing Liability in Untoward Railway Incidents

July 18, 2026 No Comments

The Supreme Court set aside the concurrent dismissal of a compensation claim by the Railway Claims Tribunal and the High Court of Madhya Pradesh. The Court held that when a passenger dies in an “untoward incident” (falling from a running train), the absence of a recovered ticket does not automatically negate the status of a bona fide passenger. Emphasizing the “no-fault liability” principle under Section 124A of the Railways Act, 1989, the Court ruled that once the claimant establishes the foundational facts through an affidavit, the burden shifts to the Railways. Technical lapses and the inability to recover personal belongings should not defeat the humanitarian and welfare objectives of the legislation.

  • Background: The appellant filed a claim for compensation following the death of her husband, who fell from a running train while traveling from Raipur to Ahmedabad. The Railway Claims Tribunal and the High Court previously rejected the claim, citing a lack of proof regarding the deceased being a bona fide passenger (specifically due to the missing ticket).
  • Legal Principle (No-Fault Liability): The Court reiterated that Section 124A of the 1989 Act is a beneficial, “no-fault” provision. It is designed to provide expeditious relief to victims of untoward incidents without requiring proof of negligence by the Railway Administration.
  • Burden of Proof: Relying on Union of India v. Rina Devi and Doli Rani Saha v. Union of India, the Court clarified that:
    • The mere absence of a ticket does not disprove that a person was a bona fide
    • The initial burden is on the claimant, which is sufficiently discharged by filing an affidavit stating the facts.
    • Once this is done, the burden shifts to the Railways to disprove the claim based on attending circumstances.
  • Operational Concerns: The Court highlighted the critical issue of chronic overcrowding in Indian Railways. It noted that while the Railway Manuals contain detailed safety and ticketing protocols, the execution often fails. The Court suggested that Railways should increase manpower to better manage safety and ticketing, which could simultaneously reduce such tragedies and provide employment.
  • Constitutional Perspective: The Court observed that using terms like “second class passenger” is outdated and potentially offensive to the spirit of the Constitution of India; it suggested that class designations should refer to the “coach” rather than the “passenger.”

Decision: The Supreme Court allowed the appeal and set aside the lower court judgments. It ordered the Railways to pay compensation of ₹8,00,000 to the appellant within four weeks, failing which the amount would attract interest at 8% from the date of the original claim filing.

2026 INSC 715

Lata v. Union of India & Anr. – (D.O.J. 17.07.2026)

2026 INSC 715 click here to view full text of judgment

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