Relief against Parties and Persons Claiming under them by Subsequent Title – Section 19 | Specific Relief Act

It has been held that the proper form of decree is to direct specific performance of the contract between the vendor and the prior transferee and direct the subsequent transferee to join in the conveyance so as to pass on the title which resides in him, to the prior transferee. He does not join in any special covenants made between the prior transferee and his vendor, all that he does not is to pass on his title to the prior transferee.

2. Agreement of sale:

Where the subsequent purchasers were bona fide purchasers for value without notice of earlier agreement between par­ties but the Court recorded no finding as to whether earlier agreement of sale was forged or not the case remanded for decision a fresh.

3. Applicability of:

Under Section 19 (b) a specific performance of a contract can be enforced not only against either party thereto against any other person claiming under him by a title arising subsequently to the con­tract, except a transferee for value who has paid his money in good faith and without notice of original contract.

4. Bona fide purchaser:

When subsequent purchaser already was aware of plaintiff being in possession of suit property as tenant and he did not make any inquiry at the time of purchase, then subsequent purchaser could not be aid to bona fide purchaser for value without notice of prior agreement in favour of plaintiff.

Section 19(b) protects the bona fide purchaser in good faith for value without notice of the original contract. Which is in the nature of exception to the general rule. Hence the onus of proof of good faith is on the pur­chaser who takes the plea that he is an innocent purchaser. Good faith is a question of fact to be considered and decided on the facts of each case. Section 52 of the Penal Code emphasized due care and attention in relation to good faith.

Hence with reference to subsequent purchaser it is essential that he should make an inquiry as to the title or interest of the person in actual possession as on the date when the sale transaction was made in his favour. The actual possession of a person itself is deemed or constructive notice of the title if any, of a person who is for the time being in actual possession thereof. A subsequent purchaser has to make inquiry as to further interest, nature of possession and title under which the person was continuing in possession on the date of purchase of the property.

5. Burden of proof:

The onus of proof of good faith is on the purchaser who takes the plea that he is an innocent purchaser. It is his duty to inquire from persons in possession as to the precise character at the time when subsequent sale transaction was entered into.

6. Contract for sale:

From a plain reading of the expression used in sub-rule (2) Order I, Rule 10 of the C.P.C. all the questions involved in the suit” it is abundantly clear that the legislature clearly meant that the contro­versies raised as between the parties to the litigation must be gone into only, that is to say, controversies with regard to the right which is set up and the relief claimed on one side and denied on the other and not the contro­versies which may arise between the plaintiff/appellant and the defendants interse or questions between the parties to the suit and a third party. In our view, therefore, the Court cannot allow adjudication of collateral matters so as to convert a suit for specific performance of contract for sale into a complicated suit for title between the plaintiff/appellant on one hand and respondent Nos. 2 & 3 and respondent Nos. 1 and 4 to 11 on the other. This addition, if allowed, would lead to a complicated litigation by which the trial and decision of serious questions which are totally outside the scope of the suit would have to be gone into. As the decree of a suit for specific performance of the contract for sale, if passed, cannot, at all, affect the right, title and interest of the respondent Nos. 1 and 4 to 11 in respect of the contracted property and in view of the detailed discussion made herein earlier, the respondent Nos. 1 and 4 to 11 would, not, at all, be necessary to be added in the instant suit for specific performance of the contract for sale.

The appellant, who has filed the instant suit for specific performance of the contract for sale is dominus litus and cannot be forced to add parties against whom he does not want to fight unless it is a compulsion of the rule of law.

7. Decree-holder:

The objectors have laid evidence before the ex­ecuting Court to show that after obtaining by recitals in the sale deeds delivery of possession of the property, the names of purchasers were also mutated in the Municipal’s records. Merely because at the time of execution of the decree through Court Nazir, the objectors were not physically present on the property, it cannot be said that the delivery of possession to the decree-holder by the Court does not amount to the objectors’ legal ouster or dispossession.’ The word ‘possession’ therefore, has to be given con­textual meaning on facts of a particular case and the nature of the property involved.

8. Determination of:

It is well settled that in a suit for specific perfor­mance of a contract for sale the Us between the appellant and the respon­dent Nos. 2 and 3 shall only be gone into and it is also not open to the Court to decide whether the respondent Nos. 1 and 4 to 11 have acquired any title and possession of the contracted property as that would not be ger­mane for decision in the suit for specific performance of the contract for sale, that is to say in a suit for specific performance of the contract for sale the controversy to be decided raised by the appellant against respondent Nos. 2 and 3 can only be adjudicated upon, and in such a Us the Court cannot decide the question of title and possession of the respondent Nos. 1 and 4 to 11 relating to the contracted property.

The two tests by which a person who is seeking addition in a pending suit for specific performance of the contract for sale must be satisfied. First there must be a right to the suit property for the same relief against a party relating to the same subject-matter involved in the proceedings for specific performance of contract for sale, and secondly, it would not be possible for the Court to pass effective decree or order in the absence of such a party.

If we apply these two tests in the facts and circumstances of the present case, it would be evident that the respondent Nos. 1 and 4 to 11 cannot satisfy the above two tests for determining the question whether a stranger/third party is entitled to be added under Order I, Rule 10 of the C.P.C. only on the ground that if the decree for specific performance of the contract for sale is passed in absence of respondent Nos. 1 and 4 to 11, their possession over the contracted property can be disturbed or they can be dispossessed from the contracted property in execution of the decree for specific performance of the contract for sale obtained by the appellant against respondent Nos. 2 and 3. Such being the position in our view, it was not open to the High Court or the trial Court to join other cause of action in the instant suit for specific performance of the contract for sale, and therefore, the two Courts below acted illegally and without jurisdiction in allowing the application for addition of parties in the pending suit for specific performance of contract for sale filed at the instance of respondent Nos. 1 and 4 to 11.

For the reasons aforesaid, the stranger to the contract, namely, the respondent nos. 1 and 4 to 11 making claim independent and adverse to the title of respondent Nos. 2 and 3 are neither necessary nor proper par­ties, and therefore, not entitled to join as party defendants in the suit for specific performance of contract for sale.

To decide the right, title and interest in the suit property of the stranger to the contract is beyond the scope of the suit for specific performance of the contract and the same cannot be turned into a regular title suit.

9. Doctrine:

The doctrine of privity of contract which debars third party to enforce a contract forbids the parties to the contract from enforc­ing any obligation there under against a stranger. A person cannot be sub­ject to the obligation of a contract to which he is not a party and the logical consequence is that a stranger cannot acquire rights under a contract. This general rule, no doubt, is subject to certain exceptions.

10. Enforcement of:

The specific performance of a contract may be enforced against (a) either party thereto; (b) any other person claiming un­der him by a title arising subsequently to the context, except a transferee for value who has paid his money in good faith and without notice of the original contract.

The specific performance of a contract can be enforced against (a) either party thereto; and (b) any person claiming under him by a title arising subsequent to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract.

11. Entitlement for:

In a suit for specific performance of agreement to sell if the case of the plaintiff that third party purchasers had prior notice of agreement for sale between himself and vendor was not made out then the third party purchases can be said to be bona fide purchasers without prior notice. Therefore, plaintiff would not be entitled to relief of specific performance.

12. Equitable reliefs:

It is settled-law that the party who seeks to avail of the equitable jurisdiction of a Court and specific performance being eq­uitable relief, must come to the Court with clean hands. In other words the party who makes false allegations does not come with clean hands and is not entitled to the equitable relief.

13. Execution of decree:

A third party resisting or obstructing the execution of the decree can also seek adjudication of his rights under Or­der XXI, Rule 97 in the same way as the decree-holder. If that be so, it seems illogical that the third party which complains of actual dispossession because of the delivery of possession in execution to the decree-holder should not be allowed to claim adjudication of his rights through the ex­ecuting Court. An interpretation of the provision which promotes or fulfils the object of the amended provisions of the Code of curtailing litigation has to be preferred to the one which frustrates it.

The High Court also lost sight of the fact that the property involved was a vacant land and it could have been possessed only by having ownership and control over it. Mere physical absence of the third party at the time of execution of the decree was not a relevant fact to reject application under Order XXI, Rule 99 of the Code.

From the trend and ratio of decisions of this Court surveyed above, if the objectors would have been present at or near the vacant land at the time of execution of a decree and had offered obstruction or resistance to the execution, they would have been entitled to seek adjudication of their rights and claims through the executing Court under Order XXI, Rule 97.

On the same legal position and reasoning even though the objectors were not in actual and physical possession of the vacant land, but as a result of delivery of possession of the land through Nazir to the decree-holder, lost their right and control over the land to put to it their use, they will have to be treated to have been “dispossessed” within the meaning of Order XXI, Rule 99 of the Code. Such interpretation would fulfil aim and object of the amended provisions of the Code by allowing adjudication of disputes of title between the decree-holder and the third party in the executing Court itself without relegating them to an independent litigation.

The remedy under Order XXI, Rule 99 in execution is available to a party only on his dispossession but a third party who is resisting or ob­structing the execution of decree can also seek adjudication of his claims and rights by making application under Order XXI, Rule 97 of the Code.

14. Execution of pronote:

Admittedly, in the instant case, the full amount agreed between the parties was not paid when the Sale Deed was executed in favour of the 6th defendant. Execution of pronote cannot be said to be full payment, for invoking protection under Section 19(b) of Spe­cific Relief Act, the subsequent purchaser should have entered into a trans­action bona fide and that he ought to have paid the entire amount and that he had no notice. These ingredients have to be established by the subse­quent purchaser and onus Hew on him and in the instant case, these ingre­dients are totally lacking. Hence the protection of Section 19(b) is also not available to the appellant-defendant No. 6.

15. Filing of independent suits:

The provisions of Order XXI, Rules 97 and 99 have been widely and liberally construed to enable the executing Court to adjudicate the inter se claims of the decree-holder and the third parties in the executing proceedings themselves to avoid prolongation of litigation by driving parties to file independent suits.

16. Grant of:

A promissory note was executed of the decretal amount and an agreement for sale was also executed on that very day for discharge of promissory note debt. The agreement to sale the property was entered into because the appellant was not in a position to pay the amount due under promissory note. The predominant object was for recovery of dues with interest. Be who demands equity must do equity The Court has discre­tion. Court is not bound to grant specific performance. The decree for re­fund of money with interest was granted.

In a suit instituted by a purchaser against, the vendor and a subse­quent purchaser for specific performance of the contract of sale the proper form of the decree is to direct specific performance of the contract between the vendor and the plaintiff and further direct the subsequent transferee to join in the conveyance so as to pass on the title which resides in him to the plaintiff.

17. Interference in:

In hearing a second appeal, if the High Court is satisfied that the decision is contrary to law or some usage having the force of law, or that the decision has failed to determine some material issue of law or usage having the force of law, or if there is a substantial error or defect in the procedure provided by the Code, or by any other law for the time being in force which may have produced error or defect in the decision of the case upon the merits, it can interfere with the conclusions of the lower Appellate Court.

18. Legality of:

Plaintiff was always ready and willing to perform his part of contract and he also gave notice to owner but in spite of it, owner sold that property to another person, who purchased it without ascertaining its real position. Purchaser had knowledge too, about contract between plaintiff and owner. Therefore he could not claim protection of Section 19 (b) because of his conduct which clearly shows that he was not a bona fide purchaser in good faith. Decree for specific performance, therefore, rightly granted.

19. Maintainability of:

In an agreement for sale suppressing earlier mortgage the time for sale-deed was subsequently extended. Half of the share was purchased by another person and remaining half by third one subsequently. Thereafter purchaser of second half share getting sale in his favour of first half share from its purchaser. Thereafter suit for specific performance filed.

Defence taken up of being transferee for value without notice of original agreement. Initial burden of establishing the defence lying on subsequent purchaser. Documentary evidence as well as oral evidence showing original vendor to be in dire necessity and making sales even for a loss of Rs. 10,000/-.

Probabilities indicating that vendor must not have dis­closed prior sale agreement to the purchasers. Purchaser must have no knowledge of the prior sale agreement. Damages in lieu of specific perfor­mance of Rs. 10,000/- granted by High Court. Ultimate purchaser ready to pay Rs. 1, 00,000/- more to avoid heart-burning. Consequently amount of damages in lieu of decree is enhanced by Rs. 1, 00,000/-.

20. Meaning of:

Salmond on jurisprudence explains that the word “possession” is a word of ‘open texture’. Its legal meaning has to be ascer­tained from the context. The property involved in the present case is open vacant land. Such property is possessed by a person who has control over the same. This ‘control’ over the property means ‘power to exclude all oth­ers’. The test then for determining whether a man is in possession of any­thing is whether he is in ‘general control’ of it, may be that he is not in actual and physical possession or using the same.

21. Notice:

The word ‘notice’ should have been used instead of ‘knowledge’ because Section 19 (b) uses the word notice’ from the definition of the expression “a person is said to have notice in Section 3 of the Transfer of Property Act, it is plain that the word ‘notice’ is of wider import than the word ‘knowledge’. The purchasers will be deemed to have notice of the agreement to sell should it be found to be true and valid.

22. Notice of agreement to the vendee:

Where on the question of notice of agreement to the vendee the lower Appellate Court failed in taking into consideration the various relevant materials and valuable evidence and also totally ignored to consider regarding possession of the plaintiff-appel­lant with effect from the date of agreement itself and the circumstances that both the plaintiff and the defendants were residing in the same house and that the plaintiff was realising rent from the tenants of the house from the date of the agreement. This failure on the part of the lower Appellate Court, amounted to a defect of procedure contemplated by Section 100, Code of Civil Procedure as held by their Lordships.

23. Onus of proof—Discharge of:

The appellants contended that the onus of proof was very light on the appellants and they had discharged it by entering the witness-box and stating that they had no knowledge. It is not possible to agree with him that in the circumstances of this case the onus was light on the appellants. The circumstances that tell heavily against the version of the appellants are these.

First, all the parties are residents or have shops in the same vicinity and in places like this it is not probable that the appellants would not come to know of the execution of the agreement of the plaintiff. Secondly, the haste with which the sale-deed in favour of the appellants was executed was unusual. It is more usual for an agreement to be executed in such cases rather than arrive at an oral agreement on one day and have the sale-deed executed the next day and registered the follow­ing day.

24. Permissibility of:

In a suit for specific performance of a contract for sale, the issue to be decided is the enforceability of the contract entered into between the appellant and the respondent Nos. 2 and 3 and whether contract was executed by the appellant and the respondent Nos. 2 and 3 for sale of the contracted property, whether the plaintiffs were ready and willing to perform their part of the contract and whether the appellant is entitled to a decree for specific performance of a contract for sale against the respondent Nos. 2 and 3.

It is an admitted position that the respondent Nos. 1 and 4 to 11 did not seek their addition in the suit on the strength of the contract in respect of which the suit for specific performance of the contract for sale has been filed. Admittedly, they based their claim on inde­pendent title and possession of the contracted property. It is, therefore, obvious as noted here in earlier that in the event, the respondent Nos. 1 and 4 to 11 are added or impleaded in the suit, the scope of the suit for specific performance of the contract for sale shall be enlarged from the suit for specific performance to a suit for title and possession which is not permis­sible in law.

25. Purchaser:

It was the case of rest of defendants subsequent pur­chasers that they were aware of the fact that the plaintiff was in possession of the suit property occupying it as a tenant for the last several years and that they did not make any inquiry if the plaintiff had any further or other interest in the suit property on the date of execution of sale deed in their favour apart from that he was in possession of the property as a tenant, field, that the defendants subsequent purchasers could not be said to be bona fide purchasers of suit property for value without notice of suit agree­ment and plaintiff was entitled for relief of specific performance.

26. Regarding:

Where purchasers did not make enquiry into real nature of possession of tenant and they had relied on assertion of vendor, they will be deemed to have notice of earlier agreement between parties.

27. Requirement of:

In interpreting the provisions of Order XXI, Rule 97 of the Code and the other provisions in the said order, the aims and objects for introducing amendment to the Code cannot be lost sight of. Under the unamended Code, third parties adversely affected or dispossessed from the property involved, were required to file independent suits for claim­ing title and possession. The Legislature purposely amended provisions in Order XXI to enable the third parties to seek adjudication of their rights in execution proceedings themselves with a view to curtail the prolongation of litigation and arrest delay caused in execution of decrees.

28. Right and title:

In the case, the third party who was in possession of a part of premises had filed a separate suit for declaration of its right and title. In executing proceedings, the decree-holder in respect of the entire decretal property, complained of obstruction and resistance to the execu­tion by the third party. Even on these facts, this Court held that the applica­tion of decree-holder required adjudication under Order XXI, Rule 97 of the Code and the application of the third party also necessitated adjudication of its rights under Order XXI, Rule 99 of the Code irrespective of the fact that for part of the property, the third party had filed an independent suit for declaration of its title to the suit property.

29. Rights by lessor:

Section 53-A of Transfer of Property Act is only meant to bring about a bar against enforcement of rights by a lessor in respect of property of which the lessee had already taken possession, but does not give any right to the lessee to claim possession or to claim any other rights on the basis of an unregistered lease. Section 53-A of the Trans­fer of Property Act is only available as a defence to a lessee and not as conferring a right on the basis of which the lessee can claim rights against the lessor. His right against a subsequent purchaser is protected not by principle of equity as such but by the statutory provision in the proviso to Section 53-A, read with the definition of notice and Explanation II in Section 3 of the Transfer of Property Act.

Under Section 19 (b) of the Specific Relief Act, part performance is not required. Under that section the plaintiff has to depend on notice on the part of the subsequent, purchaser as a matter of fact. He has to show that the subsequent purchaser had or ought to have had notice of his prior contract. There is no doubt that the burden of proof lies on the person who claims validity of the subsequent purchase on the ground of being a bona fide purchaser for value without notice. He has to prove it as a fact.

30. Rights under the lease:

On the question whether a person, who sues as a plaintiff, may still be regarded as defending the rights sought to be conferred upon him by an unregistered deed, there is no need to express any opinion. In the present case, before, the claim which was put forward by the firm in the plaint can by no means be construed as a mere defence of the firm’s rights. What the firm is actually seeking to do is to enforce the rights under the lease and in such a case, Section 53-A of the Transfer of Property Act is clearly inapplicable.

31. Scope of:

From the relevant observations which shall be repro­duced hereinafter, it is discernible that the necessary party is that in whose absence the suit cannot be effectually disposed off. The relevant observa­tion from the aforesaid decision is reproduced here in below:

“He rightly pointed out, and there was no controversy between the parties before us, that the added defendants do not come within the purview of the words ‘who ought to have been joined’ which appar­ently have reference to necessary parties in the sense that the suit cannot be effectively disposed off without their presence on the record.”

Section 19 provides for the relief against parties and persons claiming under them by subsequent title.

32. Written statement:

The plea in the written statement that the pur­chasers denied execution of any agreement by the vendor in favour of the tenant and stated that any such alleged agreement was forged. It appears that single Judge assumed the finding of the Trial Court as correct and proceeded to decide the appeal presumably because on issue he found that the purchasers did not have actual knowledge of agreement to sell. The Single Judge ought to have considered the evidence and recorded his own positive finding on the question whether agreement to sell was a true and valid agreement. This feature of the case was not adverted to by the Division Bench. Therefore, issue has to be considered afresh by the Single Judge.