2019 (7) TMI 2074 - SC - Indian Laws

Specific performance decree merges into appellate decree; timely deposit makes it executable, revision cannot convert to refund only

SC held that upon dismissal of cross-appeals and confirmation of the trial court's partial decree for specific performance, the trial decree merged into ... Dismissal of application for the execution of a decree in a suit for specific performance - Refund of earnest money in substitution of the decree for specific performance - applicability of doctrine of merger - HELD THAT:- 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 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. 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 doctrine of merger applies irrespective of whether the Appellate Court has affirmed, modified or reversed the decree of the Trial Court. 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. 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. The impugned judgment and order set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the doctrine of merger applies upon the confirmation of a trial court decree by an appellate court, and the legal effect of such merger on the executability of the decree. 2. Whether the failure of a decree-holder to deposit the balance sale consideration within a time period specified in a trial court decree (but not expressly reinstated or altered by the appellate court) renders the decree inexecutable, particularly where the appellate court confirms the decree. 3. The scope and operation of Section 28 of the Specific Relief Act in relation to: (a) the court's power to rescind a decree for specific performance where the purchaser fails to pay within the period allowed by the decree; and (b) the court's power to enlarge time for compliance with conditions of a decree; and whether those powers can be exercised by an appellate or executing court when the trial court decree has merged with an appellate decree. 4. Whether a High Court in revisional jurisdiction may, in a civil revision arising out of execution proceedings, substitute a decree for specific performance with an order for refund (rescission) where the executing court had rejected objections and allowed execution. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Doctrine of Merger: scope and effect Legal framework: The doctrine provides that when an appellate forum disposes of an appeal on merit, the appellate decree becomes the final, binding and operative decree and the subordinate (trial court) decree merges into it; there cannot be more than one operative decree governing the same subject-matter. Precedent treatment: Applied consistently; doctrine is not of unlimited application but generally applies whether the appellate court affirms, modifies, or reverses the trial decree. Prior decisions explain that once a superior court passes its order on the lis, the superior court's decree supersedes the inferior court's decree. Interpretation and reasoning: The Court holds that on confirmation of the trial decree by the appellate court there is merger and it is the appellate decree which becomes executable. The fact that an appeal does not automatically stay execution under Order 41 Rule 5 CPC does not negate merger once the appellate court has rendered judgment - merger operates upon the appellate decision, not upon procedural stays. Ratio vs. Obiter: Ratio - the appellate decree supersedes and merges the trial decree and becomes the operative decree for execution; the doctrine applies irrespective of whether the appellate order is one of affirmation, modification or reversal. Conclusion: Doctrine of merger applies; entitlement to execute the appellate decree cannot be defeated by reference to conditions in the now-merged trial decree unless the appellate decree itself imposes or alters such conditions. Issue 2 - Effect of non-deposit within time specified in trial decree when appellate court confirms decree Legal framework: A conditional decree for specific performance may specify time within which the purchaser must pay balance consideration and the vendor must execute conveyance. The executing entitlement depends on compliance with conditions of the decree as finally operative. Precedent treatment: Authorities recognise that a decree-holder must show readiness and willingness and that failure to comply with time fixed in a decree may render the decree open to rescission under Section 28, but also that courts have power to enlarge time and that each case turns on attendant circumstances. Interpretation and reasoning: The Court reasons that once the appellate court confirmed the trial decree, the appellate decree merged and became the operative decree; therefore executability must be judged by reference to the appellate decree. The appellate decree did not impose a fresh or express time-bar; the time stipulation in the trial decree cannot be invoked to defeat execution after merger unless the appellate decree itself preserves that condition or otherwise orders rescission. The executing court's rejection of objections was justified where the decree-holder deposited the balance shortly after appellate confirmation and acted bona fide; equities favoured enforcement. Ratio vs. Obiter: Ratio - non-deposit within a time frame specified only in a merged trial decree does not automatically render the appellate decree inexecutable where the appellate decree is silent on such bar and the decree-holder subsequently deposits the balance promptly after appellate confirmation. Conclusion: Failure to deposit within the period stipulated in the trial court's decree did not, post-merger, bar execution of the appellate decree in the facts where the appellate court confirmed the decree and the decree-holder deposited the balance soon after confirmation; entitlement to execute the appellate decree remains. Issue 3 - Scope and operation of Section 28 (rescission and enlargement of time) Legal framework: Section 28 empowers the court in the same suit to rescind the contract (in whole or in part) if the purchaser does not pay within the period allowed by the decree or such further period as the court may allow; the court may also enlarge time and grant relief including conveyance and possession where payment is made within the period allowed. Precedent treatment: Prior decisions hold that (a) the trial court retains jurisdiction to entertain applications under Section 28 and is not functus officio; (b) the court may extend time for compliance; (c) executing court's power to entertain a Section 28 application depends on whether it is the same court that passed the decree; (d) discretion to enlarge time requires consideration of attendant circumstances including conduct of parties and equities; courts have refused extension where inordinate delay or lack of explanation persisted. Interpretation and reasoning: The Court reiterates that Section 28 confers equitable jurisdiction to rescind or enlarge time. However, the power must be exercised on consideration of attendant facts - readiness and willingness of the decree-holder, promptness in depositing balance, absence of fault on decree-holder's part, and limitation considerations. Where the executing court is the appropriate forum and the decree-holder pays promptly after appellate confirmation, equity may warrant enforcement rather than rescission. Conversely, egregious delay without explanation may justify rescission (distinguished facts in precedent where deposit occurred years later). Ratio vs. Obiter: Ratio - Section 28 permits enlargement of time or rescission but exercise is discretionary and fact-sensitive; where appellate decree merges and the decree-holder promptly deposits the balance, rescission is not an inevitable consequence; the executing court (if same court) can entertain appropriate applications under Section 28. Conclusion: Section 28 remains available to judgment-debtors and decree-holders; courts should exercise discretion considering conduct and equities. In cases of prompt compliance following appellate confirmation, courts may decline rescission and permit execution; long unexplained delays may justify rescission. Issue 4 - Power of High Court in revisional jurisdiction to substitute decree with refund order in execution proceedings Legal framework: Revisional jurisdiction to examine legality or propriety of subordinate orders is circumscribed; a High Court ordinarily should not, in revision of execution proceedings, modify or substitute the operative decree passed by the court of competent jurisdiction. Precedent treatment: Principles limit revisional interference where the executing court has correctly applied the law and exercised discretion; substitution of a decree by a revisional court is impermissible unless the original order is shown to be illegal or without jurisdiction. Interpretation and reasoning: The Court found that the High Court, in civil revision arising out of execution, impermissibly substituted the decree for specific performance with an order for refund (rescission) and went beyond its revisional jurisdiction. The executing court had accepted the decree-holder's execution petition and rejected objections; the High Court's direction for refund exceeded permissible revisional interference. The corrective jurisdiction could not be used to modify the operative decree where the executing court's order was sustainable on facts and law. Ratio vs. Obiter: Ratio - a revisional court should not, in a civil revision out of execution, substitute a decree for specific performance with an order for refund unless the executing court's order is legally unsustainable; substitution in the present facts was impermissible. Conclusion: The High Court exceeded its revisional jurisdiction by substituting rescission and refund for the confirmed decree; the executing court's order allowing execution stood restored. Cross-References and Interaction of Issues The doctrine of merger (Issue 1) is foundational to the analysis of executability (Issue 2) because once merger occurs the appellate decree alone governs execution; Section 28 (Issue 3) provides the statutory route to rescission or enlargement of time but must be applied by reference to the operative decree and equitable considerations; and the limits on revisional jurisdiction (Issue 4) prevent a higher court in revision from substituting an executing court's enforcement of a merged appellate decree by ordering rescission absent legal infirmity.