Judgment-Debtor Cannot Frustrate Specific Performance Decree by Concealing Prior Mortgage; Decree-Holder Permitted to Clear Loan from Balance Sale Consideration: Punjab and Haryana High Court

Case Name: Leelawati v. Rameshwar

Date of Judgment: September 11, 2026

Citation: CR No. 5834 of 2026

Bench: Hon’ble Mr. Justice Harsh Bunger

Held: The Punjab and Haryana High Court held that a judgment-debtor cannot frustrate the execution of a decree for specific performance by relying upon a financial encumbrance that she had herself failed to disclose in the agreement to sell or during the trial and appellate proceedings. When an undisclosed mortgage prevents the execution and registration of the sale deed, the executing court may permit the decree-holder to discharge the outstanding loan directly with the creditor bank and adjust the amount so paid against the balance sale consideration.

The Court observed that the decree for specific performance had attained finality after being affirmed by the First Appellate Court and the High Court. It was, therefore, required to be implemented in its true letter and spirit. Since the judgment-debtor had failed to discharge the subsisting loan liability and the bank’s lien continued to obstruct execution of the decree, permitting the decree-holder to clear the liability was necessary for effective enforcement of the decree and advancement of justice.

The Court further held that the judgment-debtor could not derive an advantage from her own concealment. Her failure to disclose the existing mortgage in the agreement to sell, at trial or during appellate proceedings reflected that her conduct was not above board. No ground was consequently made out for interference with the executing court’s order under Article 227 of the Constitution.

Summary: Rameshwar instituted a suit against Leelawati seeking specific performance of an agreement to sell dated January 20, 2015, relating to a residential house measuring 200 square yards at Panchwati Colony, Palwal. The sale consideration was fixed at ₹60 lakh, of which ₹40 lakh had already been paid. The remaining ₹20 lakh was payable at the time of execution of the sale deed.

The suit was decreed on May 8, 2024. Leelawati’s first appeal was dismissed by the District Judge, Palwal, on April 24, 2026. Her regular second appeal was thereafter dismissed by the High Court on May 13, 2026, bringing finality to the decree for specific performance.

During execution proceedings, the decree-holder discovered that the suit property had already been mortgaged with the Faridabad District Primary Co-operative Agriculture and Rural Development Bank Limited. The mortgage arose from a loan of ₹6 lakh obtained by the judgment-debtor’s son in 2010. As of September 9, 2025, an amount of ₹14,90,515 remained outstanding, and the bank retained the original sale deed. Unless the liability was discharged and the bank issued a no-objection certificate, the sale deed in favour of the decree-holder could not be executed and registered.

The decree-holder sought permission to deposit the outstanding loan amount directly with the bank out of the balance sale consideration. He also sought permission to deposit the remaining ₹3,10,685 after adjusting the loan amount and ₹1,98,800 awarded as costs. The executing court allowed the application on May 21, 2026.

The High Court found that the existing mortgage constituted a direct impediment to execution of the decree. The encumbrance had not been disclosed in the agreement to sell or at any stage of the trial and appellate proceedings. The judgment-debtor could not be allowed to use an encumbrance created on her property, and concealed throughout the proceedings, to prevent the decree-holder from obtaining the fruits of a decree that had attained finality.

Accordingly, the Court upheld the executing court’s permission allowing the decree-holder to pay the authenticated outstanding dues directly to the bank and to have that payment adjusted against the balance sale consideration.

Decision: The High Court dismissed the civil revision petition and upheld the order passed by the Additional Civil Judge (Senior Division), Palwal. The decree-holder remained entitled to discharge the outstanding bank loan directly and adjust the amount against the balance sale consideration.