SUPREME COURT DIRECTS THAT PROPERTY CANNOT BE SOLD WHEN MATTER IS SUB-JUDICE

In a recent matter of Chander Bhan (D) Through LR Sher Singh Vs Mukhtiar Singh & Ors. Civil Appeal No. 2991 of 2024, arising out of SLP (Civil) No. 4134 of 2020, a two Judge Bench of the Hon’ble Supreme Court comprising of Justice Sudhanshu Dhulia and Justice Prasanna B. Varale passed a Judgment dated 03-05-2024 and observed that the transactions of sale executed by the subsequent purchasers of the Suit Property i.e. the Respondents No. 1, 2 and 4 would be illegal, as the same were executed during the pendency of the Suit filed by the Appellant.

Facts

i) In the present case, the Appellant- Chander Bhan (now, Deceased) and the Respondent No. 3- Iqbal Singh entered into an Agreement to Sell dated 10-11-2002 in respect of 16 kanals of land (Suit Property) for a total consideration of Rs. 8 Lakhs, out of which Rs. 2.50 Lakhs was paid as earnest money deposit (EMD) at the time of Agreement and remaining Rs. 5.50 Lakhs was agreed to be paid at the time of execution of sale deed, which was to be executed on or before 10-11-2004.

ii) Meanwhile, the Appellant received information that the Respondent No. 3, owner of the Suit Property, is likely to sell / transfer the Suit Property, in contravention of the Agreement to Sell. Thus, the Plaintiff filed a Suit for Permanent Injunction on 22-07-2003 before the Ld. Trial Court, for restraining the Respondent No. 3 from transferring the Suit Property and also filed a Suit for Possession by way of specific performance of Agreement to Sell before the Ld. Trial Court.

iii) But during the pendency of the Suit, the Respondent No. 3-Owner transferred the Suit Property in favour of one, Mr. Harvinder Singh, the Respondent No. 4, vide a Release Deed No. 1998 dated 28-07-2003. The Respondent No. 4, further, executed a Sale Deed No. 2139 dated 16-06-2004 in favor of the Respondents No. 1 and 2, namely, Mukhtiar Singh and Baljeet Singh respectively.

iv) The Trial Court passed a Decree dated 05-02-2010 and allowed the Suit in favor of the Appellant-Plaintiff. The Trial Court further declared the Release Deed dated 28-07-2003 executed in favor of the Respondent No. 4 and the Sale Deed dated 16-06-2004 executed in favor of the Respondents No. 1 and 2 as null and void. Further, the Trial Court directed the Respondent No. 3 to execute the Sale Deed in favor of the Plaintiff and hand over vacant possession of the Suit Property to the Plaintiff.

v) Aggrieved by the Trial Court Order dated 05-02-2010, the Respondents No. 1 and 2 filed an Appeal before the Ld. Additional District Judge (First Appellate Court), which was dismissed.

vi) Aggrieved, the Respondents No. 1 and 2 filed a Regular Second Appeal bearing RSA-2746-2012 before the Hon’ble Punjab and Haryana High Court. The High Court, vide Order dated 03-10-2019, observed that the Respondent No. 3 herein did not file an Appeal against the Trial Court’s Decree to contest the claim of the Appellant-Plaintiff with regard to Agreement to Sell and entitlement for decree of possession by way of specific performance of Agreement in dispute etc. Hence, the High Court held that the Appellant would be entitled to recover the EMD with interest. However, the Appellant-Plaintiff won’t be entitled to suit for specific performance, for the following reasons:

“As the appellants (i.e. Respondents No. 1 and 2) are proved to be bona fide purchasers for valuable consideration without notice of agreement of sale, the respondent-plaintiff is not entitle to specific performance of agreement of sale by assailing the release deed executed in favour of Respondent No. 4 and sale deed executed by him in favour of the appellants. As such, decrees and judgments passed by the courts allowing specific performance of agreement of sale cannot sustain and are accordingly set aside.”

Supreme Court

Aggrieved by the High Court Order dated 03-10-2019, the Appellant-Plaintiff filed SLP (Civil) No. 4134 of 2020 before the Hon’ble Supreme Court, which was registered as Civil Appeal No. 2991 of 2024. The Apex Court, vide Order dated 03-05-2024, made the following observations:

1) That the High Court concluded that Respondents No. 1 and 2 were bonafide purchasers for valuable consideration and deserved protection under Section 41 of the Transfer of Property Act 1882 (TP Act) (Transfer by ostensible owner).

2) However, as Section 52 of TP Act (Transfer of property pending suit relating thereto) that governs the principle of lis pendens, a status quo is maintained that cannot be affected by an act of any party in a pending litigation. The said principle is based on justice, equity and good conscience. “The objective is also to prevent multiple proceedings by parties in different forums. The principle is based on equity and good conscience.”

3) That in the present case, the Suit for Permanent Injunction was filed by the Appellant-Plaintiff on 21-07-2003, which is prior to the execution of the Release Deed dated 28-07-2003 by the Respondent No. 3 in favor of the Respondent No. 4. Hence, the Release Deed was executed during the pendency of the Suit filed by the Appellant-Plaintiff. Thus, the transfer / alienation of the Suit Property by the Respondent No. 3 in favor of the Respondent No. 4 would be covered by the principle of lis pendens and hence, the same would be deemed to be illegal.

4) Further, the Sale Deed dated 16-06-2004 executed by the Respondent No. 4 in favor of the Respondents No. 1 and 2 was also executed during the pendency of the Suit filed by the Appellant-Plaintiff. Thus, the transfer / alienation of the Suit Property by the Respondent No. 4 in favor of the Respondent No. 1 and 2 would also be covered by the principle of lis pendens and thus, the same would be deemed to be illegal.

5) Hence, the Bench held as follows:

“Once it has been held that the transactions executed by the respondents are illegal due to the doctrine of lis pendens, the defense of the respondents 1-2 that they are bonafide purchasers for valuable consideration and thus, entitled to protection under Section 41 of the Act of 1882 is liable to be rejected.”

Conclusion

Thus, based on the aforesaid observations, the Supreme Court held that the Release Deed dated 28-07-2003 and the Sale Deed dated 16-06-2004 executed by and between the Respondents would not have any legal sanctity, as the subsequent purchasers i.e. the Respondents No. 1, 2 and 4 would be bound by lis pendens.

Hence, the Apex Court set aside the High Court Order dated 03-10-2019 that reversed the findings of the Trial Court and the First Appellate Court and thereby, the Bench upheld the Trial Court Decree dated 05-02-2010. Accordingly, the Supreme Court directed the Respondent No. 3 to accept the balance sale consideration from the Appellant and execute the sale deed in favor of the Appellant within 3 months of the date of the judgment.

 

Harini Daliparthy

Senior Associate

The Indian Lawyer