Case Note & Summary
The appeal arose from a suit for specific performance of an agreement for sale dated 7th December 1981 executed by the first defendant in favour of the plaintiffs (first and second respondents) for the suit property. The first defendant subsequently sold the property to the second to fourth defendants (appellants) in 1983. The plaintiffs filed the suit on 17th December 1983 seeking specific performance. The Trial Court decreed the suit, holding that the agreement was proved and that the subsequent purchasers had constructive notice under Section 3 of the Transfer of Property Act. The first appellate court and the High Court in second appeal confirmed the decree. The Supreme Court allowed the appeal, setting aside the concurrent findings. The Court held that the suit agreement was sham and bogus, executed only to deter the first defendant from selling the property due to his bad habits, and was never intended to be acted upon. The second plaintiff himself deposed that the agreement was not meant to be enforced. The Court held that Sections 91 and 92 of the Evidence Act do not bar evidence to show that a document is sham. Consequently, the subsequent purchasers were bona fide purchasers for value without notice, and the decree for specific performance could not be sustained. Additionally, even if the agreement were genuine, the decree could not be executed because the first plaintiff was not an agriculturist under the Uttaranchal Zamindari Abolition and Land Reforms Act, and Section 154-B prohibits sale to non-agriculturists.
Headnote
A) Evidence Act - Sections 91 and 92 - Sham Transaction - Sections 91 and 92 of the Indian Evidence Act, 1872 do not bar evidence to show that a document is sham or bogus and not intended to be acted upon - The court held that the bar under Sections 91 and 92 applies only to vary or contradict the terms of a document, but does not prevent a party from proving that the document was never intended to be acted upon and was a sham transaction - The Privy Council decision in Tyagaraja Mudaliyar v. Vedathanni and this Court's decision in Krishnabai v. Appasaheb were relied upon (Paras 8, 10-12). B) Specific Performance - Sham Agreement - Suit for Specific Performance - When an agreement for sale is found to be sham and not intended to be acted upon, no decree for specific performance can be granted - The court found that the suit agreement was executed only to deter the first defendant from selling the property due to his bad habits, and the plaintiffs never intended to enforce it - The second plaintiff himself deposed that the agreement was not meant to be acted upon (Paras 5, 13-15). C) Transfer of Property Act - Bona Fide Purchaser - Constructive Notice - Section 3 Explanation - The subsequent purchasers (defendants 2 to 4) were held to be bona fide purchasers for value without notice of the suit agreement - The court held that since the suit agreement was sham and not intended to be acted upon, the question of constructive notice under Section 3 of the Transfer of Property Act, 1882 does not arise - The subsequent purchasers had no actual or constructive notice of any genuine prior agreement (Paras 16-17). D) Uttaranchal Zamindari Abolition and Land Reforms Act - Section 154-B - Agriculturist - Even if the suit agreement were genuine, the decree for specific performance could not be executed because the first plaintiff was not an agriculturist under Section 3(a) of the Uttaranchal (The Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950) (Adaptation and Modification Order, 2001) (Amendment) Act, 2003, and Section 154-B prohibits sale of land to non-agriculturists (Paras 9, 18).
Issue of Consideration
Whether the suit agreement for sale was sham and bogus and not intended to be acted upon, and whether the subsequent purchasers were bona fide purchasers for value without notice.
Final Decision
The Supreme Court allowed the appeal, set aside the judgments and decrees of the Trial Court, First Appellate Court, and High Court, and dismissed the suit for specific performance.
Law Points
- Sections 91 and 92 of the Indian Evidence Act
- 1872 do not bar evidence to show that a document is sham or bogus
- Sham transaction can be proved by oral evidence
- Bona fide purchaser for value without notice protected
- Specific performance not granted when agreement is sham
- Readiness and willingness not relevant if agreement is sham
