Supreme Court Affirms Doctrine of Lis Pendens: Upholds Specific Performance, Rejects Bona Fide Purchaser Claim for Sale Executed During Pending Litigation

Court’s Decision:

The Supreme Court dismissed the appeal and upheld the High Court’s decision, affirming that the sale deed executed during the pendency of the suit was invalid under the doctrine of lis pendens. The Court ordered specific performance of the sale agreement, reversing the decisions of the Trial Court and the First Appellate Court.

Facts:

The case involves a land sale agreement dated August 17, 1990, between the plaintiff and defendant No. 1, where the plaintiff paid Rs. 40,000 as earnest money with the agreement to pay the remaining Rs. 7,54,000 on or before November 30, 1992. The plaintiff claimed to have appeared at the Sub-Registrar’s office on the agreed date but alleged that defendant No. 1 failed to execute the sale deed.

Subsequently, on January 8, 1993, during the pendency of the suit filed on December 24, 1992, defendant No. 1 sold the property to defendant No. 2. Defendant No. 2 claimed to be a bona fide purchaser without knowledge of the prior agreement, arguing that the sale deed executed in his favor was legitimate.

Issues:

1. Whether the agreement to sell between the plaintiff and defendant No. 1 was fraudulent and collusive.
2. Whether the doctrine of lis pendens applied to the sale deed executed in favor of defendant No. 2.
3. Whether defendant No. 2 was a bona fide purchaser without notice of the pending litigation.

Petitioner’s Arguments:

The appellant (defendant No. 2) argued that the High Court should not have disturbed the concurrent findings of the Trial Court and the First Appellate Court, which both dismissed the claim for specific performance. The appellant emphasized that the doctrine of lis pendens should not apply, as he was a bona fide purchaser without knowledge of the prior agreement.

Respondent’s Arguments:

The respondent (plaintiff) argued that the High Court correctly applied the doctrine of lis pendens and contended that the appellant was not a bona fide purchaser, given that both the appellant and defendant No. 1 were residents of the same village and the sale deed was executed for a lower price than the original agreement.

Analysis of the Law:

The Court analyzed the applicability of the doctrine of lis pendens under Section 52 of the Transfer of Property Act, which prevents any alienation of property that is the subject matter of a pending suit. The Court noted that lis pendens serves to prevent parties from defeating the rights of the other party by transferring the property during litigation.

Precedent Analysis:

The Court referred to precedents like Banarsi vs. Ram Phal and Usha Sinha vs. Dina Ram, which clarify that any alienation of property during a pending suit is subject to the outcome of the litigation, irrespective of the purchaser’s knowledge or good faith.

Court’s Reasoning:

The Supreme Court reasoned that defendant No. 2 could not claim to be a bona fide purchaser, as the sale deed was executed during the pendency of the suit. The Court also emphasized that the difference in sale consideration between the two agreements and the proximity of the parties suggested that defendant No. 2 was aware of the ongoing dispute. As the plaintiff had proven readiness and willingness to perform his part of the contract, and since no cross-objections were filed by the defendants, the High Court’s decree for specific performance was justified.

Conclusion:

The Court dismissed the appeal, affirming the High Court’s judgment for specific performance of the sale agreement and rejecting defendant No. 2’s claim as a bona fide purchaser.

Implications:

This judgment reinforces the principle of lis pendens and underscores the risks associated with purchasing property during pending litigation. The ruling clarifies that subsequent purchasers cannot override the rights established under earlier agreements, particularly when a suit is already pending.

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