2024 (10) TMI 674 - SC - Indian Laws

Suit for specific performance of the agreement dismissed - suit decreed partially only for the alternative relief of recovery - doctrine of lis pendens - whether the agreement dated 17.08.1990 is a result of fraud and collusion, therefore, not binding on defendant no. 1? - HELD THAT - 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. In Usha Sinha vs. Dina Ram 2008 (3) TMI 753 - SUPREME COURT this 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. This Court in Sanjay Verma vs. Manik Roy 2006 (12) TMI 559 - SUPREME COURT was dealing with a suit for specific performance. During pendency of the suit, a temporary injunction was granted in favour of the plaintiff and different portions of the suit land were sold whereafter the purchasers applied for impleadment, which was rejected by the Trial Court but allowed by the High Court against which special leave to appeal was filed. In the case in hand also, it is an admitted position that the suit was filed on 24.12.1992 and the sale deed was executed on 08.01.1993 by defendant no. 1 in favour of defendant no. 2/appellant during pendency of the suit. 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. The High Court has not committed any error of law in rendering the judgment impugned which is hereby affirmed and the instant appeal deserves to be and is hereby dismissed.

Summary

Issues Involved:
1. Specific performance of the agreement dated 17.08.1990.
2. Validity of the sale deed executed on 08.01.1993.
3. Applicability of the doctrine of lis pendens.
4. Determination of bona fide purchaser status.
5. Allegation of fraud and collusion in the execution of the agreement.

Detailed Analysis:

1. Specific Performance of the Agreement:
The plaintiff sought specific performance of an agreement to sell dated 17.08.1990 for land measuring 79 Kanals 09 marlas. The Trial Court found that the plaintiff proved the agreement to sell and was ready and willing to perform his part of the contract. However, the Trial Court denied specific performance, granting only the alternative relief of recovering Rs. 40,000/- with interest, as the land had already been sold to defendant no. 2. The High Court, however, reversed this decision, granting specific performance, citing the doctrine of lis pendens.

2. Validity of the Sale Deed Executed on 08.01.1993:
Defendant no. 2 claimed ownership through a sale deed executed by defendant no. 1 on 08.01.1993. The Trial Court and First Appellate Court initially upheld this sale, considering defendant no. 2 a bona fide purchaser. However, the High Court invalidated the sale deed under the doctrine of lis pendens, as it was executed during the pendency of the suit.

3. Applicability of the Doctrine of Lis Pendens:
The High Court applied the doctrine of lis pendens, which prevents the alienation of property during litigation. It noted that the sale deed to defendant no. 2 was executed after the suit was filed but before the next hearing date, making the transaction subject to the pending litigation. The High Court emphasized that this doctrine serves public policy by ensuring that litigation outcomes are binding on all parties, including those acquiring interest during the suit.

4. Determination of Bona Fide Purchaser Status:
The Trial Court initially found defendant no. 2 to be a bona fide purchaser without notice of the prior agreement. However, the High Court disagreed, noting the improbability of defendant no. 2's lack of knowledge, given the proximity of the parties and the lesser consideration in the subsequent sale. Thus, defendant no. 2 could not claim the protection typically afforded to bona fide purchasers.

5. Allegation of Fraud and Collusion:
The issue of whether the agreement was fraudulent or collusive was decided against the defendant by the Trial Court, which found no evidence of fraud. The First Appellate Court, however, considered the agreement collusive without any cross-appeal or objections from the defendants, which was improper. The High Court corrected this by adhering to the findings of the Trial Court, as the defendants had conceded to the decree for refund and did not challenge the findings on fraud and collusion.

Conclusion:
The Supreme Court affirmed the High Court's judgment, which set aside the decisions of the Trial Court and the First Appellate Court, granting specific performance of the agreement. The application of the doctrine of lis pendens was crucial in determining the outcome, and the High Court's decision was upheld, dismissing the appeal with no order as to costs.