Madras High Court
M.M.S. Investments Through Its ... vs V. Veerappan And 8 Others on 25 January, 2000
Equivalent citations: 2000(1)CTC538, (2000)IIMLJ59
Author: K.G. Balakrishnan
Bench: K.G. Balakrishnan
ORDER Judgement pronounced by K.P. Sivasubramaniam, J.
1. In this appeal, the correctness or otherwise of the order passed by the learned single Judge in A.S.No.796 of 1987 dated 2.11.1999 is called in question. The order of the learned single Judge appears to have been passed on a preliminary objection raised by the respondents in the appeal.
2. O.S.No.247 of 1981 on the file of the Sub Court, Madurai, was filed by one Veerappan, the first respondent for specific performance of an agreement for sale dated 23.1.1978. Respondents 2 to 9 were impleaded in the suit as owners of the property and it was alleged that the owners had entered into an agreement with him and as the agreement was not complied with, the suit was filed. After the decree was passed by the trial Court, the defendants through their power of attorney, sold large extent of properties including the subject matter of the suit in favour of certain other persons who are the present appellants. In the mean time, defendants 1 to 5 filed appeal in A.S.No.796 of 1987 before this Court against the judgment and decree in O.S.No.247 of 1981 and the appellants herein being subsequent purchasers filed C.M.P.No.3707 of 1989 to implead themselves as appellants 6 to 9 in the appeal on the ground that the original appellants 1 to 5, the erstwhile owners, were trying to collude with the first respondent. Appellants I to 5 filed C.M.P.No.4388 of 1990 to withdraw their power of attorney given in favour of one Chakrapani and Sethuraman. A learned single Judge, of this Court dismissed C.M.P.No.3707 of 1989 filed by the appellants herein seeking impleadment and allowed C.M.P.No.4388 of 1990 by order dated 28.6.1990. The appellants filed L.P.A.No.113 of 1990 against the order of dismissal of C.M.P.No.3707 of 1989 and also sought for leave to file an appeal against the order allowing C.M.P.No.4388 of 1990. Both the L.P.A. and C.M.P.No.9570 of 1990 seeking leave to appeal were disposed of by a common order dated 28.3.1990. L.P.A.NO. 113 of 1990 was allowed and with the result the appellants were impleaded as appellants 6 to 9 in the appeal and A.S.No.796 of 1987 was also directed to be disposed on merits.
3. Before the learned single Judge who took up the appeal for hearing, an objection was taken on behalf of the first respondent/plaintiff contending that having regard to the fact that the present appellants being only subsequent purchasers, they were hot entitled to raise any ground other man the issue that they are bona fide purchasers for value without notice of the earlier agreement.
For this proposition, reliance was placed upon the judgment of the Supreme Court in Jugraj Singh v. Raj Singh, A.I.R.1995 S.C.945. On the strength of the said judgment it was contended that the appellants were not entitled to raise any other issue. The learned single Judge upheld the objection and held as a preliminary order that the appellants were not entitled to raise any point other than the issue as mentioned above. Hence the present appeal.
4. Mr.R.Muthukumarasamy, learned counsel for the appellants contends that the law laid down by the Supreme Court in Jugraj Singh's Case, AIR 1995 S.C. 945 does not create any such bar as pleaded by the respondent and upheld by the learned single Judge. According to him, the judgment was rendered only in the context of Section 16(c) of the Specific Relief Act. At any rate, the decision will not apply to a case where they had pleaded collusion between the plaintiff and the original owners and in L.P.A.No. 113 of 1990 this Court had specifically upheld their allegation of collusion. He would also submit that the decision in L.P.A.No.113 of 1990 being inter-parties was binding on both sides.
5. Mr.T.R.Rajagopalan, learned Additional Advocate General, appearing for the respondents contends that the judgment of the Supreme Court would strictly cover the present case and the law laid down by the Supreme Court clearly held that it was not open to a subsequent purchaser to deal with any of the issues other than whether they are bona fide purchasers without notice of the lis. He would further contend that the bar under Section 52 of the Transfer of Property Act was absolute and admits of no exception. As regards the findings rendered in L.P.A.No. 113 of 1990, he would state that the Division Bench did not render any specific finding holding that there was collusion between the vendor and the agreement holder and the Division Bench had merely permitted the appellants to be impleaded as parties under Order 1 Rule 10 C.P.C. in view of their allegation of collusion.
6. We have very carefully considered the ruling of the Supreme Court reported in Jugraj Singh v. Raj Singh, A.I.R. 1995, S.C. 945, as well as the content of the bar of lis pendens under Section 52 of the Transfer of Property Act.
7. While dealing with the rights of a subsequent purchaser in a suit for specific performance, we may visualise two types of subsequent purchasers. The first would be a purchaser subsequent to an agreement for sale in favour of the plaintiff, but prior to the filing of the suit and the second would be a purchaser after the filing of the suit for specific performance. The bar of lis pendens would apply only to the second case.
8. As regards the first category of subsequent alienee prior to the filing of the suit is concerned, there is nothing either under the provisions of the Specific Relief Act, 1963 or the Indian Contract Act or any common law principle which would disentitle him to plead that the prior agreement of sale in favour of another person was illegal and not binding on him. He merely steps into the shoes of the vendor and is bound to suffer a decree as would be enforceable against his vendor. It is true that Section 16(c) of the Specific Relief Act, 1963 (hereinafter called "the Act") entitles the decree holder for specific performance to enforce it as against another person claiming transfer of title subsequent to the agreement for sale other than a transferee in good faith for value and without notice of the agreement for sale. In other words, the decree cannot be enforced against a subsequent purchaser if his purchase is bona fide and without notice of the sale agreement. That is only an enabling provision which entitles the decree holder to have it enforced against all subsequent alienees who had notice of the agreement and who had not acted in good faith. Section 40 of the Transfer of Property Act also recognises similar rights. But no disability is cast upon a subsequent purchaser whether he had prior notice of the agreement or not, to plead that the prior sale agreement was illegal and unenforceable. For instance, the terms of the sale agreement may be totally void or opposed to public policy or entered into by a person who had no proper legal authority, for example in the case of a minor's property and the subsequent purchaser may choose to purchase the same after he attains majority. The agreement may be a collusive or fraudulent or a sham one specifically intended to defeat the claim of the creditors. The vendor as on the date of the agreement may have no capacity to deal with the property. For example, the person who had executed the agreement may be only a limited life estate holder or only a joint owner or the agreement may have become unenforceable by efflux of time or due to negligence -of the buyer not having complied with the conditions of the agreement. In such circumstances, the subsequent purchaser, though he is aware of the sale agreement, is also aware that the agreement is totally illegal and unenforceable and is prepared to take the risk of purchasing the property. There is no reason why he cannot do so and to assail the legality of the prior sale agreement. He is prepared to face the risk by stepping into the shoes of the vendor. If is a matter of common experience that whenever the legality of alienation by a Hindu Family manager or by an undivided coparcener or any co-owner asserting title to specific items of properties is called in question, it is the alinee who pleads and seeks to prove legal necessity or the fact of an alleged earlier partition so as to justify his purchase. If so, afortiori, there is no reason why a subsequent purchaser cannot plead and prove any illegality attached to a prior sale agreement in favour of a third party. It has to be borne in mind that a mere agreement, for sale does not by itself create interest in the property (Section 54 of the Transfer of Property Act). Indian Law stands specifically departed from and does not recognise the English doctrine that a contract for sale transfers an equitable estate to the agreement holder. Therefore, the rights of a holder of agreement for sate is far lesser and an inchoate right compared to the rights of a coparcener or a co-owner. In fact, the relief to be granted under the Specific Relief Act is a discretionary one and not to be granted "merely because it is lawful to do so" (Section 20). The equity Court has to take into consideration all circumstances before granting or refusing the relief and one of the paramount issues for consideration would be the comparative hardship.
9. Therefore, we are unable to hold that there is a legal bar for the subsequent purchaser for valuable consideration, with or without knowledge of prior sale agreement to raise grounds other than the issue as to whether he is a bona fide purchaser with notice or not. The judgment of the Supreme Court relied upon by the respondents is a decision rendered only in the context of Section 16(c) of the Act namely, on the issue as to whether it was open to the subsequent purchaser to resist the suit for specific performance on the ground of absence of readiness and willingness. It is only in the context of Section 16(c) of the Act, the Supreme Court held that the plea of readiness and willingness was personal to the vendor/defendant. It is a short judgment and in paragraph Nos.3,4 and 5 after having made specific reference to the mandatory nature of Section 16(c) of the Act, the Court ultimately held as follows:-
"That plea is specifically available to the vendor/defendant. It is personal to him. The subsequent purchasers have got only the right to defend their purchase on the premise that they have no prior knowledge of the agreement of sale with the plaintiff. They are bona fide purchasers for valuable consideration. Though they are necessary parties to the suit, since any decree obtained by the plaintiff would be binding on the subsequent purchasers, the plea that the plaintiff must always be ready and willing to perform his part of the contract must be available only to the vendor or his legal representatives, but not to the subsequent purchasers. The High Court, therefore, was right in rejecting the petitioners' contention and rightly did not accept the plea. We do not find any ground warranting interference."
10. The ratio of the judgment is restricted only to the extent of invoking the defence of readiness and willingness as provided under Section 16(c) of the Act which is held to be personal to the vendor and cannot be held to be operative to other issues and defences as may be raised in a specific performance suit.
11. In fact in a subsequent civil appeal, it was prayed before the Supreme Court that the views expressed in Jugraj Singh's case, A.I.R, 1995 S.C.945 under Section 16(c) of the Act require a reconsideration. But the Court felt that there was no need to go into the said issue, as their Lordships did not deem fit to consider whether the said decision requires reconsideration by a larger Bench having regard to the facts of the case, vide the judgment reported in Lakhi Ram (dead) v. Trikha Ram, . We are referring to this judgment only for the limited purpose as to how the Supreme Court itself interpreted the ratio of the judgment in Jugraj Singh's case, A.I.R. 1995 S.C. 945 which is evident from the following observations:-
"In this connection, reliance was placed on a latter decision of two learned Judges of this Court in the case of Jugraj Singh and Another v, Labh Singh and others, . In that case, a Bench of this Court consisting of K.Ramaswamy and N.Venkatachala, JJ. observed that the plea about Section 16(c) of the Specific Relief Act provides that the plaintiff must plead and prove that he was always ready and witling to perform his part of the essential terms of the contract. The plea is specifically available to the vendor as it is personal to him. The subsequent purchasers have got only the right to defend their purchase on the premise that they have no prior knowledge of the agreement of sale with plaintiff. They are bona fide purchasers for valuable consideration.
Though they are necessary parries to the suit, since any decree obtained by the plaintiff would be binding on the subsequent purchasers, the plea that the plaintiff must always be ready and willing to perform his part of the contract must be available only to the vendor or his legal representatives but not to the subsequent purchasers.
12. The later decision in Lakhi Ram (dead) v. Trikha Ram, , relied upon before us has not been brought to the notice of the learned single Judge. Therefore, we are inclined to hold that the ratio and the dicta of the Supreme Court in Jugraj Singh's case, A.I.R. 1995 S.C. 945 has to be applied only in the context of Section 16(c) of the Act and not in respect of all other defences open to the purchasers.
13. The next issue to be considered is the effect of Section 52 of the Transfer of Property Act. It is settled proposition of law that a transaction which is hit by lis pendens does not become void but is made only subject to the rights declared under the decree. In Nagubai v. B.Shama Rao, which is a leading judgment Of the Supreme Court on. Section 52 of the Transfer of Property Act, the Supreme Court held that the effect of the provision was not to wipe out a sale pendete lite altogether but to subordinate it to the rights based on the decree and that as between the parties to the transaction, it was perfectly valid and operative to vest the title of the transferor in the transferee.
14. But even while raising the defence of lispendens the Section itself excludes its applicability to proceedings which are collusive in nature. The proceedings may be collusive at the very inception of the suit or subsequently, it may become collusive vide judgment of this Court in Peria Murugappa v. Manicka, A.I.R.1926 Mad.50.
15. In the present case, as stated earlier, the subsequent purchasers/appellants filed C.M.P.No.3707 of 1989 seeking their impleadment on the ground that there was collusion between the plaintiffs and the defendants. In disposing of L.P.A. No.113 of 1990, the Division Bench allowed the C.M.P.No.3707 of 1989 after observing thus:-
"On a careful reading of the provisions of 0.1, Rule 10, Code of Civil Procedure and the various decisions cited above, we find that the appellants herein entered into an agreement of purchase with the original owners, namely, respondents 1 to 5 who had authorised by an irrevocable power of attorney to execute sale deeds and in pursuance of the same, the sale deeds were executed in favour of the appellants herein who are the proposed parties and they now want to be impleaded themselves as parties to safeguard their interest in view of the change of circumstances, namely, the original owners colluded with the plaintiff-sixth respondent herein, in the appeal and withdrew the appeal to their detriment after revoking the vakalat of the power of attorney agents who executed the sale deed. In the circumstances, for the reasons discussed above, their presence is absolutely necessary for deciding the main appeal on merits. The reasons given by the learned Single Judge dismissing the petition directing them to work out their remedy by initiating independent proceedings are not at all sustainable and as such, the application C.M.P.No.3707 of 1989 is to be allowed. This point is answered in favour of the appellants."
16. It was strenuously urged by learned counsel for the appellants that the Division Bench had specifically found in their favour on the issue of collusion and therefore Section 52 of the Transfer of Property Act, was not at all applicable to this case.
17. Per contra, learned Additional Advocate General points out that the Division Bench had only taken note of the grounds on which the appellants sought to be impleaded as parties under Order 1, Rule 10, C.P.C. and any collusion or not. There was neither any discussion of that issue nor any specific finding by the Division Bench. As regards this controversy, we refrain from stating anything having regard to the fact that it would be one of the issues to be decided by the learned Judge while dealing with the appeal on its merits namely, as to whether there was any collusion or not. But this controversy really appears to be immaterial in the context of the rights of the subsequent purchaser to raise all defences when once he had been brought on record. Order 22, Rule 10 (1), C.P.C. reads as follows:-
"Procedure in case of assignment before final order in suit. - (1) In other cases of an assignment, creation or devolution of any interest during the pendency of a _suit, the suit may, by leave of the Court, be continued by or against the person to or upon whom such interest has come or devolved."
18. It is true that the impleadment of the present appellants was effected under Order 1, Rule 10, C.P.C. and not under Order 22, Rule 10, C.P.C. But that circumstance does not alter the effect of the impleadment, considering that the provisions of Order l, Rule 10, C.P.C. are general in nature which includes a situation arising under Order 22, Rule 10 (1), C.P.C. Therefore, when once the subsequent alienee had come on record, there is bound to be a disposal of the suit on merits. In Nanjamal v. Eswaramurthi, 1954 (I) M.L.J. 530 a Division Bench of this Court, after relying on an earlier decision by Full Bench of this Court in Veeraraghava Reddi v. Subba Reddi, 37 M.L.J. 449 held as follows:-
"An alienation pendente lite is subject to the rule of lis pendens enacted in Section 52 of the Transfer of Property Act, and the alienee if he is not impleaded as a party and does not object to any compromise behind his back between his alienor and the other party to the suit, would be bound by the compromise reached between them, unless thereafter he would be able to establish in a separate suit that the compromise was collusive and fraudulent. His right to get himself impleaded as a party and to object to a compromise arrived at between his alienator and the opposite party has been recognised in this Court by the Full Bench decision in Veeraraghava Reddi v. Subba Reddi, 37 M.L.J. 449. It was there laid down that an alienee pendente lite who had been added as a party to the litigation was entitled to object to a decree being passed in terms of a compromise arrived at between his alienor and the opposite party."
19. The Division Bench dealt with a case of alienation pendete lite and the issues arising out of Section 52 of the Transfer of Property Act and it was held as extracted above. Therefore, we are of the view that when once the subsequent alienee had been impleaded as party to the proceeding and brought on record, there can be no prohibition against him for continuing the appeal in the place of vendors/defendants on its merits. It is also noteworthy that in this appeal, in L.P.A.No.113 of 1990, while allowing the appellants to be impleaded, the Division Bench ordered that "their presence is absolutely necessary for deciding the main appeal on merits."
20. Therefore, we are inclined to hold that having regard to the facts and circumstances of the case, there is no bar for the appellants to raise any issue on the merits of the appeal for consideration in the appeal except the defence of readiness and willingness as provided under Section 16(c) of the Specific Relief Act, 1963.
21. In the result, the appeal is ordered accordingly. No costs. Consequently, connected C.M.P. is dismissed.