Lis Pendens - Transfer Of Property Not Void Just Because It Is Made During Pendency Of Suit; But Subject To Outcome Of Case : Supreme Court

The Supreme Court has delivered a judgment expounding the doctrine of "lis pendens" under Section 52 of the Transfer of Property Act.

The Court explained that a transfer is not void just because the transfer is made during the pendency of litigation and the effect of Section 52 is that the transfer will be subject to the outcome of the suit. The Court further pointed out that the pleas of bona fide purchase or lack of notice are not defences available to the purchaser against the doctrine of lis pendens.

"The right of the party to the suit who conveys his right by a sale is extinguished. All that Section 52 of the Transfer Property Act provides is that the transfer which is made during the pendency of the proceeding is subjected to the final result of the litigation", the bench comprising Justices KM Joseph and PS Narasimha observed in a judgment.

The court was considering an appeal which arose from a specific performance suit.  The factual background is as follows :

-On 04.04.1979, the plaint schedule property, which consisted of a site, was allotted to the first defendant, by the Bangalore Development Authority

- The plaintiff instituted the Suit in question, seeking specific performance. The first defendant, after filing Written Statement on 14.08.1986, died pending the Suit, on 18.07.1994.

- A sale deed came to be executed by the BDA in favour of the son of defendant no.1 and defendant-1(a), on 19.06.1996.

- The son of the first defendant, sold the property on 19.09.1996. 

- The son of the first defendant, and the second defendant were impleaded on 09.04.1997.

The court noted that the transfer made in favour of the second defendant was made at a time, when the son of the first defendant was not a party to the Suit. This Trial Court accepted the contention that the transfer was not hit by the Doctrine of Lis Pendens. The High Court reversed this finding.

Disagreeing with the High Court view, the bench observed that neither the fact that the transferee had no notice nor the fact that the transferee acted bonafide, in entering into the transaction, are relevant for applying Section 52 to a transaction.

"A transfer which is made lis pendens it is settled law, is not a void document. It does create rights as between the parties to the sale. The right of the party to the suit who conveys his right by a sale is extinguished. All that Section 52 of the Transfer Property Act provides is that the transfer which is made during the pendency of the proceeding is subjected to the final result of the litigation. Even assuming for a moment that the conduct of defendant 1(a) the father of defendant 1(b), in giving a no objection and thereby enabling defendant 1(b) to derive the title exclusively to the property and which title stood conveyed to the second defendant attracted, the principle of lis pendens, it would still not invalidate the sale. At best, the plaintiff can contend that, should he be entitled for a decree of performance the sale in favour of the second defendant should be subjected to such decree. As far as the transfer is made by defendant 1(b) to the second defendant in his own right and in so far as defendant 1(b) was not a party and by the time the sale was effected the period of limitation for impleading defendant 1(b) had already clearly expired even the principle laid down in the decision of the Madras High Court would not apply and the High Court was not correct 125 in finding that the sale by defendant 1(b) in favour of second defendant was hit by lis pendens."

The court made the following observations on the Doctrine of Lis Pendens:

Pending litigation, nothing new should be introduced.

92. Doctrine of Lis Pendens is based on the maxim "pendente lite nihil innovetur". This means that pending litigation, nothing new should be introduced. Section 52 of the Transfer of Property Act, 1882 (for short, 'the TP Act'), which incorporates the Doctrine of Lis Pendens, is based on equity and public policy. It pours complete efficacy to the adjudicatory mechanism. This is done by finding that any disposition of property, as described in the Section by a party to the litigation will, in not any way, detract from the finality of the decision rendered by the court.

When a transaction is done, lis pendens or pending a case, the transaction is, as such, not annulled; But transferee cannot plead bona fides as a defence too

93. It is further important to notice that when a transaction is done, lis pendens or pending a case, the transaction is, as such, not annulled. The transaction is, in other words, not invalidated. In fact, as between the transferor and the transferee, it does not lie in the mouth of the transferor to set up the plea of lis pendens to defeat the disposition of property. Equally, the Principle of Lis Pendens is, not to be confounded with the aspect of good faith or bonafides. In other words, the transferee or the beneficiary of the property, which is disposed of by a party, cannot set up the case that he acted bonafide or in good faith. This enables the court and the parties in a Suit or a proceeding, which otherwise is in conformity with requirements of Section 52, to proceed in the matter on the basis that the adjudication by the court, will not, in any way, be subverted or delayed, when the day of final reckoning arrives.

The Court further explained :

"The sine qua non for the Doctrine of Lis Pendens to apply is that the transfer is made or the property is otherwise disposed of by a person, who is a party to the litigation. The Doctrine of Lis Pendens, only subject, however, the transfer or other disposition of property to the final decision that is rendered. The person/party, who finally succeeds in the litigation, can ask the court to ignore any transfer or other disposition of property by any party to the proceeding. This is subject to the condition that transfer or other disposition is made during the pendency of the lis".

Doctrine of notice not applicable to lis pendens

The Supreme Court noted that the the High Court has, in arriving at the finding that the transfer in favour of the appellant is hit by lis pendens, taken into consideration the Doctrine of Notice/Constructive Notice.  Disagreeing with the High Court's approach, the Supreme Court said that the Doctrine of Notice and Constructive Notice would be inapposite and inapplicable.

"Neither the fact that the transferee had no notice nor the fact that the transferee acted bonafide, in entering into the transaction, are relevant for applying Section 52 to a transaction. This is unlike the requirement of Section 19(1)(b) of the Specific Relief Act whereunder these requirements are relevant", the Top Court said.

The Court allowed the appeals setting aside the High Court judgment.

Also from the judgment :  Subordinate Legislation/Statutory Rules Also A 'Law' Under Section 23 Contract Act: Supreme Court

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