Decree For Specific Performance Can't Be Obtained Behind The Back of A Bona-Fide Purchaser: Supreme Court

Background of the Matter

The question over specific performance arose in a dispute over a land sold by the original owner to the Respondent in the present case. The Respondent claimed that one C.D. Veeraraghavan Mudaliar entered into an agreement of sale with her on 10.04.1961 for sale of 50 acres in patta No.61 and paimash No.987/1 of the Land. The Appellants claimed that the original owner sold the land to one Niraja Devi who further sold it to the Appellants.

The Respondent filed a suit for specific performance of the agreement dated 10.04.1961. The suit was dismissed by the trial court. In the second appeal, the High Court of Madras in terms of its judgement dated 07.07.1970 decreed the specific performance. Controversy over the decree for specific performance arose in subsequent suit for trespass of the land and for execution proceedings.

The Trial Court dismissed the suit opining that the Respondent was aware of subsequent purchasers and yet chose not to implead them as party to the suit for specific performance. The High Court in its impugned judgement set aside the judgement of the lower courts on the ground that they did not properly appreciate the evidence particularly with respect to the execution proceedings. 

Before the Apex Court, the counsel for the Appellants submitted that the purchasers were necessary parties to the suit and a decree for specific performance obtained behind their back would be a nullity. The Counsel placed reliance on Lachhman Dass v Jagat Ram and Ors where the Apex Court had observed that: 

"a party's right to own and possess a suit land could not have been taken away without impleading the affected party therein and giving an opportunity of hearing in the matter, as the right to hold property is a constitutional right in terms of Article 300-A of the Constitution of India" (Para 13)

Additionally, reliance was placed on Section 19 (b) of the Specific Relief Act, 1963 to argue that the decree for specific performance was vitiated by a fraud with the purchaser of the property being deliberately not impleaded in the suit. The Counsel argued that since Niraja Devi was a bona fide purchaser long prior to the institution of the suit for specific performance by the Respondent, specific performance could not be enforced against her or her transferees as they would fall within the exception of transferee for value who had paid money in good faith and without notice of the original contract.

In this backdrop, the judgement authored by Justice Sanjay Kishan Kaul noted that the Respondent's manager had acknowledged that the Respondent had knowledge of the transaction with respect to the same land between third parties and yet chose not to implead the purchasers to the suit. The Court notes:

"The Respondent was fully aware of the prior registered transaction in respect of the same property originally in favour of Niraja Devi. This is as per the deposition of her manager. In such a scenario it is not possible for us to accept that a decree could have been obtained behind the back of a bona fide purchaser, more so when the transaction had taken place prior to the institution of the suit for specific performance. Suffice to say that this view would find support from the judgments in Vidyadhar v. Manikrao and Man Kaur v. Hartar Singh Sangha" (Para 24)

On this basis, the Court observes that the case of subsequent purchasers would fall within the exception set out in Section 19 (b) of the Specific Relief Act being transferees who had paid money in good faith and without notice of the original contract. Accordingly, the Apex Court set aside the impugned judgement of the High Court dated 06.01.2012 and noted that the suit of the Respondent stands dismissed in terms of the judgement of the Trial Court.

Case Title: Seethakathi Trust Madras v Krishnaveni

Coram: Justice Sanjay Kishan Kaul; Justice M M Sundresh

Citation : 2022 LiveLaw (SC) 58

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