Thomson Press (India) Ltd. v. Nanak Builders and Investors Pvt. Ltd.
Supreme Court of India · 21 February 2013 · 2 judges
A purchaser who bought the suit property during a specific performance suit, with notice of the prior agreement and in breach of a restraint order, was not a bona fide purchaser but was allowed to be added as a defendant.
Facts
The owners of property in Connaught Place, New Delhi (the Sawhneys) agreed in 1986 to sell part of it to Nanak Builders. Their counsel undertook in Nanak Builders' 1991 suit for specific performance that the property would not be transferred or alienated, and the undertaking was recorded on 4 November 1991. Nanak Builders had earlier published a public notice of its agreement, to which the appellant's sister concern, Living Media India Ltd., responded by a legal notice referring to that agreement. Living Media later took the premises on lease, cleared the owners' bank dues, and in 2001 the owners executed five sale deeds in favour of the appellant. The appellant applied under Order 1 Rule 10 CPC to be impleaded as a defendant. The Delhi High Court, Single Judge and Division Bench, rejected the application because the sale breached the undertaking.
Questions before the Court
- Can a transferee pendente lite who had notice of the pending suit for specific performance and of the restraint order be added as a party defendant?
- Is such a transferee a bona fide purchaser without notice protected by Section 19(b) of the Specific Relief Act, 1963?
- What is the effect of Section 52 of the Transfer of Property Act on a transfer made during the pendency of the suit?
What the Court held
- On the facts, including the public notice, the sister concern's legal notice and the recorded undertaking, the appellant entered into a clandestine transaction with the owners and cannot be held to be a bona fide purchaser without notice.
- Under Section 19(b) of the Specific Relief Act, specific performance can be enforced against a person claiming under the vendor by a later title, except a transferee for value who paid in good faith and without notice of the original contract. The appellant does not fall within that exception.
- Section 52 of the Transfer of Property Act does not annul a transfer made pendente lite; it makes the transfer subservient to the rights of the parties to the litigation, and the transferee is bound by the decree.
- For the ends of justice the appellant was to be added as a party defendant. After impleadment it may raise only the defences available to the vendors, since it derives title, if any, from them. The appeal was allowed and the High Court's orders set aside.
Why it matters
The judgment explains the position of a purchaser pendente lite in a suit for specific performance: such a purchaser with notice is bound by the outcome and is not protected by Section 19(b) of the Specific Relief Act, yet may be added as a defendant, limited to the vendor's defences. In his concurrence Thakur, J. held that a transfer in breach of an injunction is not void between the parties, and that addition can be made under Order XXII Rule 10 CPC where the transferee acquires the entire estate.
In the Court's words
Copied from the official judgment; each passage links to its page.
“Taking into consideration all these facts, we have no hesitation in holding that the appellant entered into a clandestine transaction with the defendants-Sawhneys’ and got the property transferred in their favour.”
“Having regard to the law discussed hereinabove and in the facts and circumstances of the case and also for the ends of justice the appellant is to be added as party-defendant in the suit. The appeal is, accordingly, allowed and the impugned orders passed by the High Court are set aside.”
“In the light of the above finding it is futile to deny that the specific performance prayed for by the plaintiff was and continues to be enforceable not only against the original owner defendants but also against the appellant their transferee. Sale of immovable property in the teeth of an earlier agreement to sell is immune from specific performance of an earlier contract of sale only if the transferee has acquired the title for valuable consideration, in good faith and without notice of the original contract.”
“There is, therefore, little room for any doubt that the transfer of the suit property pendete lite is not void ab initio and that the purchaser of any such property takes the bargain subject to the rights of the plaintiff in the pending suit.”
Provisions interpreted
Case and bench
- Parties
- Thomson Press (India) Ltd. v. Nanak Builders & Investors P. Ltd.
- Case
- Civil Appeal No. 1518 of 2013 (arising out of SLP (Civil) No. 24159 of 2009)
- Decided
- 21 February 2013
- Bench
- T.S. Thakur, M.Y. Eqbal
- Opinions
- Unanimous. Judgment by M.Y. Eqbal, J., signed by both judges; T.S. Thakur, J. wrote a separate concurring opinion with additions.
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