S.52 TP Act | Once Transaction Is Hit By Lis Pendens, Bona Fide Purchase Or Lack Of Notice Of Agreement Not Defences : Supreme Court

The Supreme Court has reiterated that once a transaction is found to be hit by the doctrine of lis pendens, then the defences of being a bona fide purchaser and lack of notice regarding the sale agreement are not available.

A bench comprising Justices Hrishikesh Roy and Pankaj Mithal was hearing an appeal against a High Court judgment, which directed the specific performance of a sale agreement, ignoring a subsequent sale deed executed during the pendency of the suit.

The matter arose out of a agreement for sale executed on 17.08.1990. The plaintiff filed the suit on 24.12.1992 seeking specific performance of the agreement. The defendant denied the execution of the agreement. During the pendency of the suit, defendant no.2 was impleaded on the ground that he purchased the land on 08.01.1993. He claimed that he was a bona fide purchaser and had no notice of the sale agreement.

The trial court found the agreement to be genuine however refrained from decreeing specific performance of the agreement in view of the sale deed executed during the pendency of the suit. The trial court held that defendant no.2 was a bona fide purchaser and had no notice of the sale agreement. The trial court allowed the alternate prayer for recovery of the advance amount. The First Appellate Court held that the sale agreement was a collusive agreement between the plaintiff and the defendant no.1 and refused the decree of specific performance.

However, the High Court decreed the specific performance of the agreement. On facts, the High Court held that defendant no.2 was not a bona fide purchaser, as the transaction was done shortly before the date fixed for the appearance of the defendant. Being the resident of the same village, the High Court found it hard to believe that defendant no.2 had no knowledge about the prior agreement.

Challenging the High Court's verdict, defendant no.2 approached the Supreme Court.

First Appellate Court could not have found against the agreement in the absence of a cross-appeal

At the outset, the Supreme Court took exception to the First Appellate Court finding the agreement to be collusive in the absence of a cross-appeal by the defendant.

"In the case at hand, the Trial Court had partly decreed the suit to the extent of recovery of Rs. 40,000/-. This part of the decree was not challenged by the defendants either by filing a separate appeal or by way of cross objections. They did not prefer any cross objection challenging the finding on issue no.5. In this situation the defendants have conceded to the decree for refund and finding on issue no. 5. Therefore, in absence of cross-appeal or cross-objections by the defendants, the First Appellate Court could not have recorded a finding that the subject agreement was a result of collusion between the plaintiff and defendant no. 1"

On lis pendens

The judgment authored by Justice PK Mishra cited various precedents on the point of lis pendens. In Usha Sinha vs. Dina Ram (2008) 7 SCC 144, the Court held that the doctrine of lis pendens applies to an alienation during the pendency of the suit whether such alienees had or had no notice of the pending proceedings.

In Sanjay Verma vs. Manik Roy (2006) 13 SCC 608, the Court observed :

"A transferee pendente lite is bound by the decree just as much as he was a party to the suit. The principle of lis pendens embodied in Section 52 of the TP Act being a principle of public policy, no question of good faith or bona fide arises."

In Guruswamy Nadar vs. P. Lakshmi Ammal (2008) 5 SCC 796, it was held that the principle of lis pendens is applicable even to a person who purchased the land in good faith.

In the recent judgment in Chander Bhan (D) through Lr. Sher Singh vs. Mukhtiar Singh & Ors, it was observed, “once it has been held that the transactions executed by the respondents are illegal due to the doctrine of lis pendens the defence of the respondents 1 – 2 that they are bona fide purchasers for valuable consideration and thus, entitled to protection under Section 41 of the Transfer of Property Act, 1882 is liable to be rejected."

Applying these principles, the Court observed in the present appeal :

"The doctrine of lis pendens as contained in Section 52 of the Transfer of Property Act, 1882 applies to a transaction during pendency of the suit... The plaintiff was non-suited only on the ground that defendant no. 2 had no notice of the agreement and is a bona fide purchaser. However, once sale agreement is proved and the subsequent sale was during pendency of the suit hit by the doctrine of lis pendens, the High Court was fully justified in setting aside the judgment and decree of the Trial Court and the First Appellate Court and passing a decree for specific performance."

Senior Advocate Harin P Raval appeared for the appellant. Senior Advocate Manoj Swarup appeared for the respondent.

Case : Shingara Singh v. Diljith Singh and another

Citation : 2024 LiveLaw (SC) 795

Click here to read the judgment