Madras High Court
Arumugam vs Natarajan on 9 October, 2012
Author: S.Vimala
Bench: S.Vimala
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :09.10.2012 CORAM THE HONOURABLE Mrs. JUSTICE. S.VIMALA Second Appeal No.1348 of 1997 Arumugam .. Appellant / plaintiff Vs. 1. Natarajan, S/o. Senthamaraikannan .. 1st respondent / 2nd defendant 2. Sivakami, W/o.Baskaran .. 2nd respondent / 1st defendant Second Appeal filed under Section 100 of the Civil Procedure Code against the judgement and decree dated 02.02.1996, made in A.S.No.30 of 1994 on the file of the Subordinate Judge's Court, Tindivanam, reversing the judgment and decree dated 24.1.1994 made in O.S.No.180 of 1988 on the file of the Additional District Munsif of Tindivanam. For Appellant : Mr. S.Parthasarathy, Senior Counsel for M/s.Sarvabhauman Associates For Respondent No.1 : Mr.A.K.Kumarasamy - - - - J U D G M E N T
The locus-standi of the pendente-lite purchaser to raise the plea/defence of bonafide purchaser for value without notice of earlier transaction (a plea which is available to a purchaser, but not during the pending litigation) is under challenge. The protection under Section 19(b) of the Specific Relief Act is not available to a pendente-lite purchaser by virtue of Section 52 of the Transfer of Property Act, is the main contention raised in the second appeal. In other words, the contention is that Section 19 (1) of the Specific Relief Act, does not over ride Section 52 of the Transfer of Property Act.
1.1. There may be innocent purchasers who purchase the property bonafide without notice of the earlier agreement/transaction. These purchasers might have purchased it either during pending litigation or no litigation pending. With regard to pending litigation, the subsequent purchasers may have notice or may not have the notice of the lis. Still the protection available to a purchaser during non-litigation period is not available to a purchaser during litigation is the main contention raised in this second appeal.
1.2. In the event of conflict between, the doctrine of lis-pendence enshrined in Section 52 of the T.P. Act and the rule protecting a subsequent transferee without notice as contained in Section 19 (b) of the Specific Relief Act, which, would prevail is the issue ?
2. The plaintiff Arumugam filed the suit in O.S.No.180 of 1988 before the Additional District Munsif, Tindivanam, seeking the relief of specific performance pursuant to the sale agreement dated 24.12.1987. The suit was filed on 17.2.1988. The second defendant purchased the same property on 14.3.1988, but, based on the earlier sale agreement dated 10.12.1987 (Ex.B1), as assignee of the agreement from one Muthuvel. The following issues were framed:
1. Whether the sale agreement dated 24.12.1987 is true, valid, enforceable ?
2. Whether the plaintiff is in possession of the suit property in pursuance of part performance of the agreement ?
3. Whether the plaintiff was ready and willing to perform his part of contract ?
4. Whether the agreement dated 24.12.1987 is unenforceable because of its unconscionable nature ?
5. Whether the agreement dated 10.12.1987 between the first defendant and Muthuvelu is true ?
6. Whether the sale deed dated 14.3.1988 in favour of the second defendant is true and valid ?
7. Whether the second defendant is the bonafide purchaser is a value without notice of the agreement in favour of the plaintiff ?
8. To what other relief ?
3. With reference to issue Nos. 1 and 4, it was held that the sale agreement in favour of the plaintiff was true, valid, enforceable and not unconscionable. With regard to 5, 6 and 7, the findings were
(a) the sale agreement dated 10.12.1987 was brought into existence in order to defeat the sale agreement in favour of the plaintiff. No witness was examined to speak about the agreement dated 10.12.1987.
(b) The second defendant is not the bonafide purchaser for value without notice of plaintiff's agreement and hence, the sale deed is not valid.
So far as issue No. 3 is concerned, it was held that plaintiff was ready and willing to perform his part of contract. So far as issue No.2 is concerned, it was held that plaintiff did not prove his possession pursuant to agreement of sale. The trial court took note of change of patta in the name of the second defendant under Ex.B3 and payment of kist under Exs. B4 to B6 and the evidence of P.W.4 that he came to know about the purchase by the second defendant when the second defendant started ploughing the land. Based on that, it was held that plaintiff did not prove his possession. Ultimately, the suit was decreed, granting two months time to the plaintiff to pay the balance of sale consideration of Rs.2,500/-.
4. Though the agreement is said to have been executed by the first defendant, he did not file any written statement. She was also not examined as a witness. The witnesses to the sale agreement Abdul Hauk and Ananda Baskaran have been examined.
5. Challenging the judgement and decree, appeal was filed in A.S.No.30 of 1994. The first Appellate Court gave a finding that the sale agreement was not proved to be true and valid and that the sale in favour of the second defendant/appellant is not affected by lis pendens. With the following observations, the first Appellate Court did not approve the judgement of the trial court.
a. When the sale agreement enables the plaintiff to avail three months time to pay the balance of sale consideration, there is no necessity for the plaintiff to issue a notice within 6 days from the date of sale agreement.
b. When the agreement is stated to have been written in the early morning on 24.12.1987, i.e. at about 4.30 am., it was held to be unnatural and unusual and unbelievable.
c. Non-examination of critical witnesses like the first defendant, Sivakami, the executant of the document and her husband Bala Baskaran who is the signatory to the agreement were taken note of. P.W.4 is the plaintiff's sister's husband and his evidence is that he do not know anything directly. The writer of the document Devaraj has not been examined. Non- examination of those important witnesses is not explained.
d. With regard to time of execution of document and the amount for which stamp paper was purchased there were vital contradictions in the evidence of witnesses. When there was no transport facility on account of death of the erstwhile Chief Minister, the execution of agreement at 4.30 in the morning at a place called Villupuram which was not the place of neither the plaintiff nor the first defendant, the agreement was disbelieved.
e. With regard to the recitals, regarding handing over possession of the suit property by the first party to the second party, there was found to be an insertion and the witness Abdul Hauk who was examined was not in a position to explain, why there was congestion in the last page of document and when the version regarding handing over possession was not told by anybody.
f. The witness Ananda Baskaran has also deposed that with regard to handing over possession, there was no conversation at Villupuram and the recital regarding handing over possession was not written at Villupuram.
6. With all these factual findings, the first appellate court concluded that the interpolation in the agreement, amounted to material alteration and as the plaintiff did not approach the court with clean hands, the plaintiff is not entitled to the decree of specific performance.
7. As against the judgement and decree of the first Appellate court, the second appeal has been filed by the plaintiff raising the following substantial questions of law:
i) Whether the appeal at the instance of the 2nd defendant who is only a pendente-lite purchaser is maintainable in law when under Section 52 of the Transfer of property Act is bound by the decree in the suit ?
ii) Whether the Lower Appellate Court is correct in sustaining the case of the 2nd defendant that the suit agreement Ex.A1 suffers from material alteration in the absence of any plea or proof of the same ?
iii) Whether the Lower Appellate Court is correct in law in coming to the conclusion that the 2nd defendant is a bonafide purchaser for value without notice of Ex.A1?
8. Before answering the substantial questions of law raised, it is important to look into the decisions relied on by both sides with regard to the legal implication of purchasing the property during pending litigation.
1. AIR 1973 Mysore 131 (V 60 C 46) (Mohammed Ali Abdul Chanimomin Vs. Bisahemi Kom Abdulla Saheb Momin and another) "The principle of lis pendens embodied in Section 52 being a principle of public policy, no amount of good faith or bona fides vests on the transferee any title or interest adverse to the decree-holder."
2. (2008) 5 SCC 796 (Guruswamy Nadar Vs. P.Lakshmi Ammal (dead) through LRs. and Others) "Normally, as a public policy once a suit has been filed pertaining to any subject matter of the property, in order to put an end to such kind of litigation, principle of lis pendens has been evolved so that litigation may finally terminate without intervention of a third party. This is because of public policy otherwise no litigation will come to an end. Therefore, in order to discourage that same subject matter of property being subjected to subsequent sale to a third person, this kind of transaction is to be checked. Otherwise, litigation will never come to an end."
3. AIR 1978 Allahabad 318 (Smt. Ram Peary and others Vs. Gauri and others) "The effect of doctrine of lis-pendence is not to annul the conveyance but only to render it subservient to the rights of the parties in the litigation. The conveyance in favour of the subsequent purchaser is treated as if "it never had any existence"
In the decision it has been pointed out that the doctrine of lis-pendens is based on the concept that there should be a finality to the litigation. The decision of privy council (1907) 31 Ind App 102) where the necessity for final adjudication has been pointed out is also relied upon.
4. (1977) 90 LW 543 (Arunachala Thevar and others Vs. Govindarajan Chettiar and others) "Section 19-A of the Specific Relief Act only lays down the general rule that a stranger to the contract is not a proper or necessary party to a suit to enforce it. But, clause (b) provides exception to the general rule according to which a subsequent purchaser, in order to successfully resist a suit for specific performance of a prior agreement for sale, must establish that he is a purchaser for value without notice of the general agreement of sale and he paid the consideration money for the sale before he had notice of the prior agreement. "
9. The main contention of the learned counsel for the appellant is that the subsequent purchaser has no locus-standi to file the first appeal. This issue ought to have been raised in the first appeal itself. Just because the subsequent purchaser takes the property subject to the result of litigation, it does not mean that he is not entitled to challenge the result of the litigation. Still it is open to him to challenge and to abide the verdict available after challenge. When the owner of the property who is bound to speak with regard to the transaction entered into by him/her and when the erstwhile owner remains exparte then, it is futile to contend that the subsequent purchaser has no right to file the appeal.
10. Material alteration: The learned counsel for the appellant vehemently contended that the lower appellate court is wrong in giving a finding that the suit agreement suffers from material alteration and thereby non-suiting the plaintiff especially when there are no pleadings in the written statement to that effect. Contending that no amount of evidence can be looked into, in the absence of pleadings, the following decisions are placed in support of the contention.
(a) 1994 (II) MLJ 193 (Kanakarathnam v. Perumal);
"It is settled law that as per 0.6. Rule 4 C.P.C., necessary and material facts should be pleaded in support of the case set up and that in the absence of pleading, evidence if any, produced cannot be considered. The object of the rule is that in order to have a fair trial it is imperative that the party should state the essential material facts so that the other party may not be taken by surprise."
(b) AIR 1979 SUPREME COURT 1701 (Union of India v. Surjit Singh);
"Order VIII, Rule 7, Civil Procedure Code prescribes that the defendant must raise by his pleading all matters which show the suit not to be maintainable, or that the transaction is either void or voidable in point of law."
(c) AIR 1966 SUPREME COURT 1861 (Bhagat Singh and Others v. Jaswant Singh);
"Where a claim has been never made in the defence presented no amount of evidence can be looked into upon a plea which was never put forward."
(d) 1995 (II) MLJ 603 (Rajagopal Reddy (died) and others v. Padmini Chandrasekaran (died) and others.
"(B) Negotiable Instruments Act (XXVI of 1881). Sec.87 - Material alteration - Partition deed produced in court containing only 'C' schedule - Extract from registration book maintained by the Sub Registrar's Office containing A, B, C and D schedules - Court finding that the Act of separation into four parts and addition of 20 sheets amounted to material alteration rendering the whole document void - Parties who played a part in separating the original partition document not examined - No trial on the issue - Party not given opportunity to explain alteration - Finding, held, erroneous."
10.1.The submission pertains to the finding of the first appellate court that the alterations in the sale agreement with regard to handing over possession of the suit property under Ex.A1 agreement. It is contended that the plea regarding material alteration was not raised in the written statement and therefore, the plea ought not to have been considered by the first appellate court. No doubt, such a plea is not available in the pleadings. It would be meaningless to say that the plea regarding material alteration is not raised, because the first defendant who would be the most competent person to raise the issue remained exparte. The second defendant who is interested in protecting his property and interested in disputing the agreement in that limited way would not have knowledge and opportunity to say about material alteration. In fact, he cannot say about it because he would not have direct knowledge about the alleged alteration in the sale agreement.
10.2. The object of pleading is to give fair notice to the other side as to the case one has to meet. So far as this case is concerned, the plea of material alteration has been considered by the Court and it is obviously against the plaintiff. The plaintiff had notice about the plea regarding material alteration raised by the other side during cross examination of their witnesses. Therefore, it is not as if the plaintiff was taken by surprise. In fact, the plea regarding material alteration had been consdiered by the Court not on the context of validity of agreement, but on the context of who was in possession of property at the time when the sale agreement was entered into. The alleged material alteration is apparent on the face of the document. Opportunity has been given to the witnesses to explain about the same. Thus the plaintiff had got ample opportunity to explain the alterations found on the face of record. Therefore, the plea of the plaintiff that the material alteration should not have been considered by the appellate court without pleading has no merits.
10.3. Unclean approach: On the other hand, learned counsel for the respondents submitted that the appellant was not only guilty of doing material alteration in the sale agreement, but also guilty of approaching the court with unclean hands and by putting forth false plea. It is further contended that the relief of specific performance being equitable in nature, the plaintiff is not entitled to the same because of unethical conduct. In support of the contention the following decisions are relied upon:
1. 2008 (1) CTC 86 (Sita Ram and Others Vs. Radhey Shyam) "Persons seeking specific performance of contract should manifest blemishless conduct throughout to entitle him to specific relief."
2. 2007 (1) CTC 449 (Jayalakshmi Ammal and 8 others Vs. Chinnasamy Gounder, S/o. Manjini Gounder and another) "Specific Relief Act, 1963 (47 of 1963), Section 19 and 20 - Plaintiff sought specific performance of agreement and arrayed vendor and subsequent purchaser of such property and sought alternative relief of damages against vendor - subsequent purchaser had purchased property without notice of prior agreement and plaintiff could recover amounts paid to vendor and specific performance could not be granted."
3. AIR 1996 SC 2814 (1) (Lourdu Mari David and others Vs.Louis Chinnaya Arogiaswamy and others) "It is settled law that the party who seeks to avail of the equitable jurisdiction of a Court and specific performance being equitable relief, must come to the Court with clean hands. In other words the party who makes false allegations does not come with clean hands and is not entitled to the equitable relief."
4. (1994 2 M.L.J. 207 (K.Krishnan Nair and others Vs. K.Parameswaran Pillai (died) and others) "(C) Specific Relief Act (XLVII of 1963) Secs.9 and 14 - Person seeking specific performance of contract coming to Court with false case - If entitled to specific performance In the present case, the plaintiff has approached the court with a false case regarding delivery of possession and, hence, he is not entitled to get a decree for specific performance."
These decisions applies to the facts of this case and especially the false defence regarding delivery of possession would justify the plaintiff being non suited by the first appellate court.
11. The next contention of the learned counsel for the appellant is that the subsequent purchaser is only entitled to limited defences and that he is not entitled to question the validity of the sale agreement in favour of the plaintiff and in support of the same, the following decisions are relied upon:
(i) 2012-4-L.W. 343 (A. Nawab John & Others Vs. V.N.Subramaniyam) "18. .... two question arises whether a pendente-lite purchaser (1) is entitled to be impleaded as a party to the suit (2) once impleaded what are the grounds on which he is entitled to contest the suit.
19. .... He is entitled to be impleaded in the suit or other proceedings where his predecessor-in-interest is made a party to the litigation; he is entitled to be heard in the matter on the merits of the case."
(ii) AIR 2007 SC 2663 (M.M.S. Investments, Madurai & Others. Vs. V.Veerappan & Others) "Specific Relief Act (47 of 1963), Se.19(b), 16(c) - Specific Performance - Suit for - Agreement for sale between plaintiff and defendants owners - Defendants subsequently sold suit property in favourof appellants - Impleadment of appellants who are subsequent purchasers - Restriction however placed on appellants that they cannot raise plea of readiness and willingness - Proper - Only issue that can be adjudicated in suit is whether appellants were bona fide purchasers for value without notice."
11.1. On the other hand, the learned counsel for the respondents relied upon the following decisions and contended that it is open to the subsequent purchaser to challenge the validity of the sale agreement to the extent permissible to him.
2008 (3) CTC 1 (P.Retnaswamy Vs. A.Raja and another) "....... Subsequent purchaser is entitled to impeach sale agreement between plaintiff and original owner notwithstanding fact that original owner remained exparte in Suit."
11.2. The serious contention raised is with regard to availability of grounds of attack to the subsequent purchaser. Under normal circumstances, the defence open to the purchaser is bona fide purchase without notice of the agreement. But, when the first defendant who is the owner and a person competent to speak about the transaction remains exparte, then what are the defences open to the subsequent purchaser. The erstwhile owner may collude with the plaintiff and can play hide and seek. The erstwhile owner also may take sides with the subsequent purchaser and leave the plaintiff in lurch. Both are possible. In either case, the erstwhile owner would be the beneficiary and in a way the absence would facilitate fraudulent transaction being focussed as genuine transaction. If that risk is to be avoided the possible/plausible defences should be permitted to be raised by either party. Law cannot facilitate the battle field from becoming a play field for the parties and it cannot be a platform for the erstwhile owner to earn profits by entering into transaction between both the parties, ie., the plaintiff as well as the defendants. In other words, limiting the defences to the subsequent purchaser would only be an incentive to create litigation. When the law endeavour to put an end to litigation through Section 52 of the T.P. Act, the procedure cannot facilitate creation/ generation of litigation. The citation of the Hon'ble Supreme Court relied on by the appellant with regard to the defences available to the subsequent purchaser will not apply to the facts of the case because the circumstance of the erstwhile owner remains exparte did not arise in that case. When such a situation arose, the Madras High Court had considered that and had held that the validity of the agreement can be challenged by the subsequent purchaser.
11.3. The facts in this case are peculiar. Even though the second defendant has purchased the property during the pendency of litigation, still the agreement which form the basis for the sale transaction is even prior to the suit sale agreement. The suit sale agreement is dated 24.12.1987. The suit was filed on 17.2.1988. The second defendant purchased the same property on 14.3.1988, but, based on the earlier sale agreement dated 10.12.1987 (Ex.B1), as assignee of the agreement from one Muthuvel. Therefore, it is clear that though the sale is pending litigation the agreement is anterior in point of time.
11.4. The second defendant has been impleaded in the suit by virtue of the order dated 21.11.89 in I.A.No.967 of 1988. The rights of second defendant as a subsequent transferee/purchaser would arise for consideration only in the event of the first sale agreement having been proved, true, valid and enforceable. In this case, the finding is that the suit sale agreement dated 24.12.1987 has been held to be not valid and enforceable and it is tainted with material alteration. When it is found that the suit sale agreement is unenforceable and that the plaintiff is not entitled to the decree for specific performance then automatically the rights of the second defendant as a purchaser remains intact and the phrase subsequent purchaser loses it relevance. His rights as purchaser as pendente -lite would get vanished/dismissed only in the event of plaintiff getting a decree for specific performance. When the plaintiff fails in proving the agreement and fails in getting the decree for specific performance, then the rights of the purchaser pending litigation do not get affected.
11.5. This is a case where the first defendant, the original owner of the property remains exparte. The reply given by the first defendant which is marked as Ex.B9 go to show that the second defendant is the bonafide purchaser for value. The question of without notice of prior sale agreement itself does not arise because the suit sale agreement is subsequent to the agreement of the second defendant. The purchase by the second defendant is during the pendency of the litigation. As per law, irrespective of the notice or non-notice result of litigation is binding upon the second defendant. The second defendant's right title and interest over the property is subject to the result of the litigation, as his purchase is pending litigation. So far as this case is concerned, the plaintiff has been non-suited rightly. Therefore, the purchase made by the second defendant is not affected by lis pendens.
12. The first appellate court has considered the circumstances available in the case and has given a finding that the second defendant is the bonafide purchaser for the value. The findings of the first appellate court are correct factually as well as legally. The circumstances have been considered having regard to ordinary and natural human conduct. Therefore, the findings of the first appellate court are confirmed. The substantial questions of law are answered against the appellant.
In the event of conflict between, the doctrine of lis-pendence enshrined in Section 52 of the T.P. Act and the rule protecting a subsequent transferee without notice as contained in Section 19 (b) of the Specific Relief Act, it is only Section 52 of the T.P.Act which prevails. In principle this is the legal position. But factually considering as the plaintiff has been non suited the pending litigation did not have adverse impact upon the rights of the subsequent purchaser. Hence, the subsequent purchaser succeeds.
13. In the result, the second appeal is dismissed with cost. The judgement and decree dated 02.02.1996, rendered in A.S.No.30 of 1994 on the file of the Subordinate Judge's Court, Tindivanam, reversing the judgment and decree dated 24.1.1994 made in O.S.No.180 of 1988 on the file of the Additional District Munsif of Tindivanam is confirmed. Suit in O.S.No.188 of 1998 is dismissed.
aes / srk To
1.Subordinate Judge's Court, Tindivanam.
2. The learned Additional District Munsif, Tindivanam