Court Not Empowered To Grant Extension For Payment Of Purchase Money In A Decree Of Specific Performance Based On Compromise Agreement: Kerala High Court

The Kerala High Court recently held that the court has no power to extend the time for the payment of purchase money in a decree of specific performance based on a compromise agreement containing self operative clauses between the parties.

Justice V.G. Arun also remarked that such an extension would lead to rewriting the terms of the compromise:

"The petitioner had neither paid the amounts within time nor sought extension before the expiry of the period stipulated in the decree. By the time the application for extension was filed, the self operative clause had come into effect. Being so, an extension of the time will definitely amount to rewriting of the terms of the compromise, which the court cannot do even in the exercise of the power under Section 28(1) of the Specific Relief Act."

Background:

A suit was filed before the trial court for a decree of specific performance directing the respondent to execute a sale deed in terms of the agreement between the parties.

During the pendency of the suit, the parties arrived at a settlement and the lower court rendered judgment and decree in terms of the settlement. As per the terms of the compromise decree, the sale consideration was fixed at Rs.70 lakhs, out of which Rs.5 lakhs had already been paid to the defendant.

The balance sale consideration was to be paid off by depositing Rs.25 lakhs in the respondent's account on or before 30.1.2018 and Rs.40 lakhs, on or before 31.3.2018.

Thereupon, the sale deed was to be registered in the petitioner's favour. It was also stipulated that on the failure of the petitioner to deposit the balance amount, the respondent could adjust the advance amount of Rs.5 lakhs towards the loss sustained by him and the petitioner's right to get back the amount will stand forfeited. 

Later on, the petitioner failed to pay the balance sale consideration within the stipulated time. Instead, he caused a lawyer notice to be issued, requiring the respondents to hand over the original documents of the property for raising funds.

The respondents issued a reply notice stating that handing over of original documents was not part of the agreement and that the petitioner had already breached the terms of the agreement.

Thereafter, the petitioner filed an application under Section 28(1) of the Specific Relief Act, 1963 seeking an extension of time for paying the balance sale consideration.

The respondent opposed the prayer for extension, contending that since the court had rendered a compromise decree, extension of time at the instance of one party will amount to varying of the decree unilaterally.

The respondent also drew attention to the stipulation in the agreement that failure to deposit the balance sale consideration would result in the advance sale consideration of Rs.5 lakhs received by the respondent being adjusted towards the loss sustained by him and the petitioner not being entitled to get back the amount. In the light of the said self-working stipulation, it was argued that the petitioner was not entitled to an extension of time. 

By the impugned order, the trial court dismissed the application for extension, holding that a compromise decree is passed based on the agreement between the parties and the terms of the said agreement cannot be varied without the consent of both parties.

Advocate M. Satheesan Alakkadan represented the petitioner and Advocate Kaleeswaram Raj appeared for the respondent in the revision petition. 

Observations of the Court:

On a reading of Section 28 of the Specific Relief Act, the Court noticed that the court which passed the decree has the power to extend the time for payment of the purchase money.

The primary question before the Court was whether such power could be exercised in cases where the specific performance decree is based on a compromise agreement containing self operative clauses between the parties.

From the facts of the case, it was evident that the petitioner had neither paid the amounts within time nor sought extension before the expiry of the period stipulated in the decree.

By the time the application for extension was filed, the self operative clause had come into effect, resulting in the advance amount of Rs.5 lakhs paid by the petitioner being forfeited.

"Being so, an extension of the time will definitely amount to rewriting of the terms of the compromise, which the court cannot do even in the exercise of the power under Section 28(1) of the Specific Relief Act."

Therefore, it was found that the general proposition that the court which passed the decree for specific performance does not become functus officio and has the power to extend the period of payment of purchase price, will not apply.

Accordingly, the civil revision petition was dismissed and it was held that the court below was justified in rejecting the application for an extension of time.

Case Title: M.K Raghavan v. Seerakath Mariyam Beevi 

Click Here To Read/ Download The Order