Case Note & Summary
The appeal arises from a suit for specific performance of an agreement to sell dated 10.11.2002 for 16 kanals of land for Rs. 8 lakhs, with Rs. 2.50 lakhs paid as earnest money. The appellant-plaintiff filed a suit for permanent injunction on 21.07.2003 upon learning that respondent no. 3 might alienate the property, and obtained a temporary injunction on 28.07.2003. On the same day, respondent no. 3 executed a release deed in favour of his son, respondent no. 4, who then sold the land to respondents 1-2 on 16.06.2004. The appellant filed a suit for specific performance on 10.11.2004 when the sale deed was not executed. The trial court decreed the suit, holding that respondent no. 3 admitted the agreement in the earlier suit, and that respondents 3 and 4 refused to depose, leading to an adverse inference. The first appellate court affirmed, noting that PW-7, the appellant's lawyer in the injunction suit, was an attesting witness to the sale deed in favour of respondents 1-2, indicating their knowledge of the injunction. The High Court in second appeal reversed, holding that respondents 1-2 were bona fide purchasers under Section 41 of the Transfer of Property Act, 1882, and granted only refund of earnest money with interest. The Supreme Court allowed the appeal, restoring the concurrent findings of the lower courts. The Court held that the High Court erred in interfering with concurrent findings of fact, as the circumstances clearly showed that respondents 1-2 had notice of the injunction through PW-7, and the transfers were hit by lis pendens under Section 52. The Court directed specific performance of the agreement by respondent no. 3, with respondents 1-2 to join in the conveyance, and the appellant to pay the balance consideration.
Headnote
A) Transfer of Property Act - Bona Fide Purchaser - Section 41 - The defence of bona fide purchaser for valuable consideration requires the transferee to prove that after taking reasonable care to ascertain the transferor's power to transfer, he acted in good faith. The burden is on the transferee to show that he had no notice of any defect in title. (Paras 15-18) B) Transfer of Property Act - Lis Pendens - Section 52 - The principle of lis pendens applies to transfers made during the pendency of a suit, including a suit for injunction, and such transfers are subject to the outcome of the suit. The High Court erred in holding that the release deed and sale deed were not hit by lis pendens merely because the injunction suit was later dismissed. (Paras 14, 18) C) Civil Procedure Code - Second Appeal - Interference with Concurrent Findings - The High Court in a second appeal under Section 100 CPC should not interfere with concurrent findings of fact unless they are perverse or based on no evidence. The High Court's reversal of concurrent findings on the issue of bona fide purchaser was not justified. (Paras 10, 18) D) Evidence Act - Adverse Inference - Section 114(g) - Where a party refuses to depose in the witness box, an adverse inference may be drawn against him. The trial court and first appellate court rightly drew an adverse inference against respondents 3 and 4 for not appearing as witnesses. (Para 6) E) Evidence Act - Privileged Communication - Section 126 - A lawyer who acts as an attesting witness to a sale deed in favour of the opposite party after having been the advocate of the plaintiff in an earlier suit commits a breach of privileged communication. (Para 7)
Issue of Consideration
Whether the High Court was justified in reversing the concurrent findings of the trial court and first appellate court and granting protection under Section 41 of the Transfer of Property Act, 1882 to the subsequent purchasers (respondents 1-2) despite the pendency of an injunction suit and the circumstances indicating lack of good faith.
Final Decision
The Supreme Court allowed the appeal, set aside the impugned judgment of the High Court, and restored the concurrent findings of the trial court and first appellate court. The Court directed specific performance of the agreement to sell dated 10.11.2002, with respondent no. 3 to execute the sale deed upon payment of the balance consideration of Rs. 5.50 lakhs by the appellant, and respondents 1-2 to join in the conveyance. The appellant was also entitled to costs.
Law Points
- Bona fide purchaser defence under Section 41 of Transfer of Property Act
- 1882 requires reasonable care and good faith
- lis pendens under Section 52 applies to transfers during pendency of a suit
- concurrent findings of fact should not be lightly interfered with in second appeal
- adverse inference can be drawn against a party who refuses to depose
- violation of injunction order may attract proceedings under Order 39 Rule 2A CPC but does not render transfer void ab initio.
