Supreme Court: While considering the instant review petition Article 137 of the Constitution read with Order XLVII Rule 1 of the Supreme Court Rules 2013 seeking a review of the judgment of the Court dated 25-8-2022, on the ground that the judgement suffered from an error apparent on the face of record; the 3-Judge Bench of Dr DY Chandrachud, CJ*., JB Pardiwala and Manoj Misra, JJ., explained that the doctrine of lis pendens as enshrined in Section 52 of Transfer of Property Act 1882, kicks in or commences at the stage of “institution” and not at the stage when notice is issued by the Court. Thus, Section 52 of the Transfer of Property Act would apply to the third-party purchaser once the sale was executed after the review petition was instituted before the Court. Any transfer that is made during the pendency is subject to the final result of the litigation.
Background and Legal Trajectory:
The matter revolves around an agreement to sell land entered into in March 1994. In the dispute that arose, the petitioner instituted a suit seeking a decree for specific performance of the first and the second agreements to sell in 2002. The petitioner prayed for a decree for specific performance upon the receipt of the balance sale consideration and sought alternative reliefs of (a) delivery of possession of the suit land; or (b) a direction to refund the consideration paid with interest.
By a judgment dated 12-12-2010, the Additional District Judge dismissed the suit instituted by the petitioner. The Trial Court held that the petitioner is not entitled to a decree or specific performance. The petitioner preferred an appeal before Telangana High Court which partly allowed the appeal. The High Court directed that since the petitioner had paid 90 percent of the sale consideration, the suit for specific performance can be decreed in favour of the petitioner to the extent proportionate to the consideration paid.
Proceedings under Article 136 were instituted against the judgment of the High Court and by the judgment dated 25-8-2022, the Bench consisting of the then Chief Justice NV Ramana, Justice Krishna Murari and Justice Hima Kohli allowed the appeal. The Court therein held that the suit was barred by limitation since the suit had to be instituted within three years of the time fixed for completing the performance (which was three months from the sale agreements). The three years ended in June 2000 and the suit ought to have been instituted within that period to not be barred by limitation.
The Court then directed the respondents to repay the sale consideration received with an interest of 7.5% from the date on which the payment was made till the time the entire amount is paid back. The payment was directed to be made within six months.
The afore-stated decision by the Supreme Court then led to the instant review petition.
Court’s Assessment:
Perusing the facts of the case and decision rendered by the Trial Court, High Court and the 2022 decision of the Supreme Court, analysed whether the 2022 judgment requires review.
The Court observed that erstwhile 3-Judge Bench considered the matter on 2 issues- first, whether the suit instituted by the petitioner was barred by limitation; and second, whether the suit for specific performance must be decreed. It was observed that the finding regarding time was of essence to the contract was central to the Court’s reasoning on both the issues.
The Bench in the instant petition then took note of the period of limitation for a suit for specific performance of a contract as stated in Article 54 of the Schedule to Limitation Act, 1963. It was observed that the erstwhile Bench referred to certain clauses of the agreement between the parties to hold that the agreement fixes a date of three months for performance.
The current Bench noted that if the erstwhile Bench completely disregarded the phrase “and this agreement of sale will be cancelled” in Clause 3. Clause 21 of the agreement stipulates that the parties of the “first part” are not concerned with the sale consideration as they have already received the agreed sale consideration from the parties of the “second part” by an agreement dated 19-3-1994. The Court in 2022 had interpreted the reference to the agreement dated 19-3-1994 as the agreement between the petitioner and the respondents which did not materialise. This is an obvious and apparent error on the face of the record. The agreements refer to the original owners from whom the vendors purchased the suit property as parties of the “first part”. The vendors are referred to as parties to the “second part”. The agreement dated 19-3-1994 was the agreement to sell that was executed by the original owners in favour of the vendors. The petitioner was not a party to this agreement. The 1997 agreements in favour of the petitioner were executed by the original owners in addition to the vendors because though the vendors were put in possession of the suit property after the sale agreement, a sale deed was not executed. Instead, an irrevocable power of attorney was executed in favour of the vendors. Though only the first and the second respondents offered to alienate the suit property to the petitioner, the agreement is executed by the original owners and vendors other than the first and the second respondent as well to prevent any litigation in the future.
Hence the instant Bench concluded that that the interpretation of Clauses of the Sale Agreements in the 2022 judgment was erroneous. The Court pointed out that the limitation is governed by the second part of Article 54. The limitation of three years prescribed by the second part of Article 54 runs from the date when the plaintiff has notice that performance has been refused.
Coming onto the issue of specific performance, the instant Bench noted that the erstwhile Bench committed a grave error in its analysis of whether the Court ought to use its discretionary power in this matter. It was noted that Section 16(c) of the Specific Relief Act states that specific performance of a contract cannot be enforced in favour of the person who fails to prove that he is ready and willing to perform the essential terms of the contract.
The erstwhile Bench concluded that the petitioner was not ready and willing to perform his part (as required by Section 16(c)) because the balance sale consideration was not paid within three months as required by Clause 3 of the agreement. The instant Bench found that this finding on basis of interpretation of the Clauses 3 and 21 of the agreement was erroneous because of the factual misconception and omission, respectively.
The instant Bench opined that the petitioner was ready and willing to perform the contract in terms of Section 16(c) of the Specific Relief Act. The first agreement to sell noted that the purchaser paid a sum of Rs.11,30,00 as earnest money. Subsequently, the petitioner paid Rs. 13,00,000 on the same day by cheque and paid another Rs. 5,00,000 by Demand Draft in April 1997. If the petitioner was unwilling to perform the contract, he would not have paid nearly 75 percent of the sale consideration. Thus, the petitioner with the payment of the additional sum above the earnest money, had proved his readiness and willingness to perform the contract.
Henceforth, the Court concluded that the instant matter is a fit case for the Court to exercise its discretion to direct specific performance.
Taking note of the doctrine of lis pendens as enshrined under Section 52 of Transfer of Property Act 1882, the Court explained that during the pendency in any court of any suit in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceedings. The Explanation to the provision states that for the purposes of the Section, the pendency of a suit or proceedings shall be deemed to commence from the date of the presentation of the plaint or institution of the proceeding in a Court, and shall continue until the suit or proceeding is disposed by a “final decree or order” and complete satisfaction of the order is obtained, unless it has become unobtainable by reason of the expiry of any period of limitation.
The doctrine of lis pendens that Section 52 of the Transfer of Property Act encapsulates, bars the transfer of a suit property during the pendency of litigation. The only exception to the principle is when it is transferred under the authority of the court and on terms imposed by it.
The Court further clarified that “pendency” commences from the “date of institution” until the “disposal”.
Decision:
The Court concluded that errors apparent on the face of the record in the 2022 decision went to the root of the reasoning on both the issues of limitation and specific performance. Henceforth, the Court allowed the review petition and recalled its judgment dated 25-8-2022.
CASE DETAILS
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Advocates who appeared in this case For Petitioner(s): For Respondent(s): |
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