2009 (4) TMI 984 - SC - Indian Laws

Suit for specific performance - Application for interim injunction to restrain the appellant from entering into the land and disturbing the possession of the Respondent No.1 and to further restrain the appellant from alienating the land to any third party - filing a suit after 19 years - 280 transferees to whom plots have been conveyed by the owners - leave to construct on the vacant land - suit seeking enforcement of an agreement alleged to have been entered into between the parties on 19th May, 1980, when exemption u/s 20 of the said Act was no longer required - Whether High Court followed the basic principles for granting injunction, when the orders of injunction were passed - HELD THAT - It is well established, that while passing an interim order of injunction under Order XXXIX Rules 1 and 2 CPC, the Court is required to consider three basic principles, namely, (i) prima facie case; (ii) balance of convenience and inconvenience; and (iii) irreparable loss and injury. None of the said principles have been considered by the High Court while passing the second and third interim orders dated 22nd April, 2008 and 7th May, 2008, nor has the High Court taken into account the long silence on the part of the Respondent No.1 Corporation in filing a suit after 19 years. In our view, while passing the interim order dated 7th May, 2008, the High Court ought to have considered the effect which its order would have on the 280 transferees to whom some portions of the land had already been sold and who had commenced construction thereupon, particularly when they were not even parties in the appeal, nor were they heard before they were injuncted from continuing with the construction work. Such an order affecting third party rights in their absence, as they were not parties to the proceedings, cannot be sustained having further regard to the manner in which the said order was passed. An application for an order which would have far and wide reaching consequences was sought to be disposed of by the Division Bench on the very next day without giving an opportunity of controverting the allegations made therein even to those who were parties in the suit, though it had been brought to the notice of the Court that conveyances had been executed in favour of 280 purchasers. This is not a case where the appellant and the other co-owners had violated any restraint order passed by the Court in transferring the plots in question to the said 280 transferees. The said transfers were effected at a point of time when there was no injunction or restraint order against the appellant and the other owners of the property and as far as the said transfers are concerned, the only order that could have been passed on the said application is the order which was passed at the first instance on 29th January, 2008, based on the principles of Section 52 of the Transfer of Property Act, 1882. The restraint order on the transferees must, therefore, be held to be bad and liable to be set aside. As far as the lands which the appellant and the other joint owners have been restrained from alienating by the second order dated 22nd April, 2008, are concerned, we are of the view that in the event the order of 22nd April, 2008, is set aside, the Respondent No.1 can be compensated in terms of money and no irreparable loss and injury will be caused to it on account thereof. On the other hand, if the owners of the property remain restrained from developing the same, it is they, who will suffer severe prejudice, as they will be deprived of the benefit of the user of their land during the said period. The balance of convenience and inconvenience is against grant of such injunction. The success of the suit for specific performance filed by the Respondent No.1 depends to a large extent on tenuous proof of genuineness of the agreement sought to be enforced after 19 years, despite the finding of the Trial Court that the suit was not barred by limitation. We, accordingly, set aside the orders dated 22nd April, 2008 and 7th May, 2008, passed by the Division Bench of the Gujarat High Court and maintain the initial order dated 29th February, 2008. The appeals and the connected Interlocutory Applications are, accordingly, disposed of. The High Court is requested to dispose of the appeals pending before it at an early date without being influenced by any observations made in this judgment.

Summary

Issues Involved:
1. Validity of the Agreement dated 19th March 1980.
2. Rejection of Application under Section 20 of the Land Ceiling Act, 1976.
3. Specific Performance of the Agreement.
4. Refund of Earnest Money and Damages.
5. Interim Injunction and Restraint Orders.
6. Effect on Third-Party Transferees.
7. Principles of Granting Injunction.
8. Conduct of the Respondent No.1.

Detailed Analysis:

1. Validity of the Agreement dated 19th March 1980:
The appellant and other joint owners of the suit land entered into an Agreement with Tirupati Cooperative Housing Society for development. The application for necessary permission under Section 20 of the Urban Land (Ceiling & Regulation) Act, 1976, was rejected, and the Agreement was declared cancelled through a Public Notice on 24th April 1988.

2. Rejection of Application under Section 20 of the Land Ceiling Act, 1976:
The Tirupati Cooperative Housing Society's application under Section 20 was rejected. This rejection led to the cancellation of the Agreement as the proposed Society failed to obtain the required permission.

3. Specific Performance of the Agreement:
Respondent No.1 filed a Special Civil Suit for a declaration of possession and specific performance of the Agreement dated 19th March 1980. Alternatively, they sought a decree for refund of the earnest money and damages. The Trial Court rejected the prayer for specific performance but directed the refund of the earnest money.

4. Refund of Earnest Money and Damages:
The Trial Court directed the refund of the earnest money. Respondent No.1 appealed against this decision, and the High Court admitted the appeal but did not grant a stay on the property dealings, making any transactions subject to the appeal's decision.

5. Interim Injunction and Restraint Orders:
Respondent No.1 issued a Public Notice to prevent dealings with the property. The High Court passed an order on 22nd April 2008, directing that the property should not be sold. A further application for injunction was filed, leading to an order on 7th May 2008, restraining any construction on the disputed land and allowing Respondent No.1 to approach police authorities to stop any construction.

6. Effect on Third-Party Transferees:
The High Court's order on 7th May 2008 adversely affected 280 transferees who had purchased plots and started construction. The Court passed this order without giving these transferees an opportunity to be heard, which was deemed legally untenable.

7. Principles of Granting Injunction:
The High Court failed to consider the three basic principles for granting an injunction: prima facie case, balance of convenience and inconvenience, and irreparable loss and injury. The Court also did not consider the long delay by Respondent No.1 in filing the suit.

8. Conduct of the Respondent No.1:
Respondent No.1's conduct was questioned as they had waited 19 years to file the suit. The Court noted that it would be inequitable to restrain the property owners from dealing with their land after such a long delay, especially when a large portion had already been sold to third parties.

Conclusion:
The Supreme Court set aside the interim orders dated 22nd April 2008 and 7th May 2008 passed by the Gujarat High Court, maintaining the initial order dated 29th February 2008. The High Court was requested to dispose of the appeals expeditiously without being influenced by the observations made in this judgment. No order as to costs was made.