Suit for specific performance - On 17.11.1982, the first defendant entered into the agreement with the plaintiff agreeing to execute the sale deed of the site within three months from the date on which, the plaintiff obtained the sale deed from the BDA.- 01.03.1983 and 26.04.1984, the plaintiff issued letters 3 to the first defendant, calling upon her to execute the sale deed. The first defendant issued letter dated 08.05.1984, intimating that the plaintiff was in breach. The agreement itself had lapsed and the advance amount by the plaintiff was forfeited.- Notice on 14.02.1985, the plaintiff instituted the Suit, seeking specific performance - pending suit 1st defendant died - A sale deed came to be executed by the BDA in favour of the son of defendant no.1 and defendant-1(a), on 19.06.1996. Thereafter, the son executed sale deed of the plaint schedule property in favour of the second defendant. - the son of the first defendant and defendant-1(a) was impleaded as defendant-1(b) in the Suit in the year 1997.- The second defendant came to be impleaded as second defendant in the Suit in the year 1997.-The Trial Court did not decree the suit for specific performance but directed return of Rs.50,000/- with 9 per cent interest. - The High Court found that the Suit is maintainable. - found that the second defendant is not a bonafide purchaser for value without notice of the Agreement to Sell dated 17.11.1982. - found that, the alienation made in favour of the second defendant, was hit by the provisions of Section 52 of the Transfer of Property Act, 1882. - Answering the point, whether the plaintiff was entitled to the relief of specific performance, it was found that, in the facts, when the entire sale consideration was paid by the plaintiff to the first defendant, nothing more remained to be done by the plaintiff, and having found that the second defendant was not a bonafide purchaser for value without notice, and taking the view that Section 23 of the Specific Relief Act, 1963 did not apply at all and there being no reason to not exercise discretion in favour of the plaintiff, the Suit was decreed by directing defendant-1(a), defendant-1(b) 5 and the second defendant to jointly convey the plaint schedule property to the plaintiff. - Apex court held that whether the agreement in question, falls foul of Section 23 of the Indian Contract Act - whether the enforcement of the agreement to sell dated 17.11.1982, expressly or impliedly, lead to palpably defeat the law in question, which is contained in the Statutory Rules or is prohibited by the same.- The direct impact of the agreement is that it compelled the party to abstain from performing its obligation in law apart from breaching the agreement with BDA. In other words, taking the agreement as it is, it necessarily would be in the teeth of the obligation in law of the first respondent to put up the construction. The agreement to sell involved clearly terms which are impliedly 102 prohibited by law in that the first defendant was thereunder to deliver title to the site and prevented from acting upon the clear obligation under law. This is a clear case at any rate wherein enforcing the agreement unambiguously results in defeating the dictate of the law. The ‘sublime’ object of the law, the very soul of it stood sacrificed at the altar of the bargain which appears to be a real estate transaction. It would, in other words, in allowing the agreement to fructify, even at the end of ten-year period of non-alienation, be a case of an agreement, which completely defeats the law for the reasons already mentioned.- The illegality goes to the root of the matter. It is quite clear that the plaintiff must rely upon the illegal transaction and indeed relied upon the same in filing the suit for specific performance. The illegality is not trivial or venial. The illegality cannot be skirted nor got around. The plaintiff is confronted with it and he must face its consequences. The matter is clear. - IS THE SUIT PREMATURE? SCOPE OF ARTICLE 54 OF THE LIMITATION ACT.- In other words, the contention of the second defendant is that the agreement dated 17.11.1982, contemplated, even according to the plaintiff, in Clause 4 that the first defendant must convey the title within a period of three months from the date on which, BDA conveyed the title to her. According to the second defendant, therefore, in this case, the time for performance of the obligation by the vendor, was fixed. Therefore, there was no need for the plaintiff and, what is more, no justification for the plaintiff, to institute the Suit prematurely, almost four years prior to the appointed date.-Article 54 contemplates that when a date is fixed for the performance of the contract, then, the period of limitation begins to run from that date. When such a date is not fixed in an agreement to sell, then, refusal or breach by the vendor will start the clock ticking.- IMPACT OF ABSENCE OF PRAYER QUESTIONING REPUDIATION BY FIRST DEFENDANT? - The second defendant has raised a contention that since the first defendant has repudiated the contract and as the plaintiff has not prayed for a declaration that the repudiation was bad, the Suit would not lie.- We do not however need to rest our decision to non-suit the plaintiff on this score in view of our finding that the agreement dated 17.12.1982 should not be enforced. - The Doctrine of Lis Pendens is based on the maxim “pendente lite nihil innovetur”. This means that pending litigation, nothing new should be introduced. Section 52 of the Transfer of Property Act, 1882 (for short, ‘the TP Act’), which incorporates the Doctrine of Lis Pendens, is based on equity and public policy.- The transfer made in favour of the second defendant was, therefore, made at a time, when the son of the first defendant was not a party to the Suit. Therefore, it is that the contention was taken before the Trial Court successfully by appellants that the transfer in favour of the appellant was not hit by Doctrine of Lis Pendens.- We have already observed that the Doctrine of Notice and Constructive Notice would be inapposite and inapplicable. Neither the fact that the transferee had no notice nor the fact that the transferee acted bonafide, in entering into the transaction, are relevant for applying Section 52 to a transaction. This is unlike the requirement of Section 19(1)(b) of the Specific Relief Act whereunder these requirements are relevant.- As far as the transfer is made by defendant 1(b) to the second defendant in his own right and in so far as defendant 1(b) was not a party and by the time the sale was effected the period of limitation for impleading defendant 1(b) had already clearly expired even the principle laid down in the decision of the Madras High Court would not apply and the High Court was not correct 125 in finding that the sale by defendant 1(b) in favour of second defendant was hit by lis pendens - IS THE SECOND DEFENDANT, A BONAFIDE PURCHASER?- in view of the illegality involved in enforcing the agreement dated 17.11.1982, the question would arise, whether, on principles, which have been settled by this Court, the Court should assist the 134 plaintiff or the defendant. We have noted the state of the evidence, in particular, as it is revealed from the deposition of PW2. We have found that the agreement, relied upon by the plaintiff, cannot be acted upon. In such circumstances, we would think that, even if we do not reverse the finding of the High Court that the second defendant is not a bonafide purchaser, it will not itself advance the case of the plaintiff. This is for the reason that his case is in the teeth of the law, as found by us, making it an unenforceable contract. The plaintiff is seeking the assistance of the Court which must be refused.- We, therefore, need not explore further the complaint of the second defendant that the High Court erred in arriving at the finding that the second defendant was not a bonafide purchaser.- Therefore, the setting aside of the Judgement of the High Court would not result in dismissal of the Suit. What is more, we are of the further view that to do complete justice between the parties, while we allow the appeals, we must pass an Order, which will result in a fair amount being paid to the plaintiff. Having regard to the entirety of the evidence and the conduct of the parties, noticing even the admitted stand of the second defendant that the plaint schedule property has a value of Rs.2.5 crores and the plaintiff has paid, in all, a sum of Rs.50,000/, which constituted the consideration for the agreement to sell several years ago, while we dismiss the Suit for Specific Performance, we should direct the appellants to pay a sum of Rs.20,00,000/- in place of the Decree of the Trial Court. Accordingly, Appeals are allowed.
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 380 OF 2022
[@ SPECIAL LEAVE PETITION [C] NO. 6857/2017]
G.T. GIRISH … APPELLANT(S)
VERSUS
Y. SUBBA RAJU (D) BY LRs AND ANOTHER … RESPONDENT(S)
WITH
CIVIL APPEAL NO. 381 OF 2022
[@ SPECIAL LEAVE PETITION [C] NO. 6858/2017]
J U D G M E N T
K.M. JOSEPH, J.
1. Leave granted.
2. The appellants are defendant 1(a), defendant 1(b)
and second defendant in a Suit filed for specific
performance. Defendant 1(a) and Defendant 1(b) have
filed SLP(C)No.6858/2017 while defendant No.2 has filed
SLP(C)No.6857/2017. The Trial Court while refusing
specific performance, directed the return of the amount
paid by the plaintiff under the contract. By the
2
impugned judgment, the High Court allowed the
plaintiffs appeal and directed the appellants to
execute the sale deed relating to the plaint schedule
property in favour of the plaintiffs (legal
representatives of original plaintiff). The parties
will be hereinafter referred to by their status in the
Trial Court.
A BRIEF OVERVIEW OF FACTS
3. On 04.04.1979, the plaint schedule property, which
consisted of a site, was allotted to the first
defendant (since deceased), by the Bangalore
Development Authority (hereinafter referred to as, ‘the
BDA’). Based on the allotment, a lease-cum-sale
agreement was entered into between the BDA and the
first defendant on 04.04.1979. The first defendant was
put in possession on 14.05.1979. On 17.11.1982, the
first defendant entered into the agreement with the
plaintiff agreeing to execute the sale deed of the site
within three months from the date on which, the
plaintiff obtained the sale deed from the BDA. On
01.03.1983 and 26.04.1984, the plaintiff issued letters
3
to the first defendant, calling upon her to execute the
sale deed. The first defendant issued letter dated
08.05.1984, intimating that the plaintiff was in
breach. The agreement itself had lapsed and the advance
amount by the plaintiff was forfeited. After issuing
Notice on 14.02.1985, the plaintiff instituted the Suit
in question, seeking specific performance. The first
defendant, after filing Written Statement on
14.08.1986, died pending the Suit, on 18.07.1994. The
plaintiff impleaded the husband of the defendant as
Defendant-1(a). A sale deed came to be executed by the
BDA in favour of the son of defendant no.1 and
defendant-1(a), on 19.06.1996. Thereafter, the son
executed sale deed of the plaint schedule property in
favour of the second defendant. It is further not in
dispute that the son of the first defendant and
defendant-1(a) was impleaded as defendant-1(b) in the
Suit in the year 1997. The second defendant came to be
impleaded as second defendant in the Suit in the year
1997. Both the defendant-1(b) and second defendant
filed Written Statements.
4
4. The Trial Court did not decree the suit for
specific performance but directed return of Rs.50,000/-
with 9 per cent interest. The High Court found that
the Suit is maintainable. It was further found that the
second defendant is not a bonafide purchaser for value
without notice of the Agreement to Sell dated
17.11.1982. It was further found by the High Court
that, the alienation made in favour of the second
defendant, was hit by the provisions of Section 52 of
the Transfer of Property Act, 1882. Answering the
point, whether the plaintiff was entitled to the relief
of specific performance, it was found that, in the
facts, when the entire sale consideration was paid by
the plaintiff to the first defendant, nothing more
remained to be done by the plaintiff, and having found
that the second defendant was not a bonafide purchaser
for value without notice, and taking the view that
Section 23 of the Specific Relief Act, 1963 did not
apply at all and there being no reason to not exercise
discretion in favour of the plaintiff, the Suit was
decreed by directing defendant-1(a), defendant-1(b)
5
and the second defendant to jointly convey the plaint
schedule property to the plaintiff.
5. We heard Smt. Kiran Suri, learned Senior Counsel
on behalf of the second defendant and Shri R. Basant,
learned Senior Counsel on behalf of the plaintiff.
Mrs. Kirti Renu Mishra, AOR, appears in the Appeal
filed by defendant-1(a) and defendant 1(b).
THE CONTENTIONS OF THE APPELLANTS
6. Smt. Kiran Suri, learned senior counsel appearing
on behalf of second defendant contended that the
finding that the Suit was maintainable, was
unsustainable. She contended that an agreement must be
lawful, in order that a court may grant specific
relief. It’s her contention that the agreement is
unlawful, being opposed to public policy, and also as
it was a bargain, which would defeat the provisions of
the law in question, within the meaning of Section 23
of the Indian Contract Act, 1872. She invited our
attention to the terms of the lease-cum-sale agreement
entered into between the first defendant and the BDA.
She pointed out that there was clear prohibition
6
against the alienation of the site or the plaint
schedule property for a period of ten years. She drew
support from the Bangalore Rules of Allotment, 1972
(hereinafter referred to as, ‘the Rules’). She pointed
out that the court has erred in not noticing that Rule
18(2) proclaims an embargo against alienation for a
period of ten years. The very agreement relied upon by
the plaintiff was unlawful, and therefore, the court
could not have granted specific performance. She drew
support from Judgment of this Court in Kedar Nath
Motani and others v. Prahlad Rai and others1 and
Narayanamma and another v. Govindappa and others2. She
further contended that the Suit itself, besides being
not maintainable, was premature. She elaborated and
contended that, what the agreement between the
plaintiff and the first defendant contemplated, was
that, the first defendant would execute the sale deed
in favour of the plaintiff upon the expiry of three
months from the date of conveyance of sale deed
executed by the BDA. The agreement of lease-cum-sale
1 AIR 1960 SC 213
2 (2019) 19 SCC 42
7
contemplated such a conveyance in favour of the first
defendant only after the expiry of ten years from the
date of allotment and the date of the lease-cum-sale
agreement dated 04.04.1979. The Suit is filed a good
four years prior to even the expiry of ten years. She
attacked the finding of the High Court that the second
defendant was not a bonafide purchaser for value. She
pointed out that as far as knowledge of pendency of
Suit is concerned, the evidence pointed to the second
defendant not being aware of the Suit, defendant-1(b)
has admitted to not disclosing about the pendency of
the Suit to the second defendant. The second defendant
inspected the site and found it to be a vacant land
except for a small shed. Regarding the finding of the
High Court that the original document, evidencing
delivery of possession of the plaint schedule property
by the BDA to the first defendant, was not given to the
second defendant and that only a photocopy was given,
it is contended that second defendant was informed that
the original was lost. There was already an assignment
in favour of defendant-1(b). There was no need for the
second defendant to make any further inquiry. All
8
possible inquiry was conducted by the second defendant.
There is no justification for the High Court to
conclude that second defendant was not a bonafide
purchaser for value. As far as finding of the High
Court that the second defendant, a 20-years old, at the
time of the sale, did not have the wherewithal to
purchase the property, it could not be justified,
having regard to the evidence which established that
the second defendant was the owner of 10 acres of land.
He was into the business of selling milk and he had the
necessary funds and there is no occasion for the High
Court to interfere with the findings of the Trial Court
in this regard.
7. Per contra, Shri R. Basant, learned Senior Counsel
for the plaintiff, reminded us that matter is
appreciated by the two courts. The finding that there
was a valid contract by the Trial Court was not
challenged by the appellants. There is no pleading to
justify the argument that the agreement in question was
not lawful. He would point out that neither the leasecum-sale agreement nor the Rules, prohibited the
allotee entering into an agreement to sell the site.
9
He pointed out that the Rule, which is relevant to the
fact, is Rule 17. Even Rule 18, relied upon by the
appellants, did not stand in the way of the agreement
to sell or the sale in favour of the plaintiff. He also
emphasised that it does not lie in the mouth of the
appellants to invoke the proposition that agreement in
question was unlawful. He pointed to the findings of
the High Court that by his conduct there was complete
absence of bonafides in the claim. He pointed out that
as correctly found by the High Court, Doctrine of Lis
Pendens, applies. He further submitted that, at any
rate, if the court found that Lis Pendens did not apply,
the fact that the second defendant has not been found
to be a bonafide purchaser for value, was sufficient
for this Court to decline to interfere, particularly,
in a jurisdiction, which originates from the grant of
Special Leave under Article 136 of the Constitution of
India. He would refute the contention that the suit was
not maintainable and further that it was premature. He
would point out that confronted with the definite stand
of the first defendant, who he points out was the wife
of an MLA and also a Minister, and having regard to
10
Article 54 of the Limitation Act, 1963, had no choice,
except to rush to the civil court and institute the
Suit. He would rely upon large body of case law,
including judgments of the High Court of Karnataka, to
contend that an agreement to sell, in circumstances,
such as obtaining in the present case, was valid and
lawful. He would command for our acceptance, the
findings of the High Court regarding the fact that
second defendant was not a bonafide purchaser for
value. He did not have the necessary capacity and he
was fully aware of the pendency of the Suit.
THE LAW IN QUESTION
8. The City of Bangalore Improvement Act, 1945, going
by the Preamble, was enacted for the improvement of the
city of Bangalore and to provide space for its future
expansion. It contemplated the appointment of a Board
of Trustees, which was to consist of eleven Trustees
with the Chairman and six Trustees being appointed by
the Government. The Act clothed the Board with the
power to undertake improvement schemes. What is of
11
relevance to the present case are the following
provisions:
9. Section 24 read as follows:
“24. Board not to sell or otherwise dispose of
sites in certain cases.—The Board’ shall not
sell or otherwise dispose of any sites for
the purpose of constructing buildings
thereon for the accommodation of person until
all the improvements specified in Section 23
[have been substantially provided for the
estimates.”
10. Section 29 dealt with the power of the Board to
acquire, hold and dispose of the property and it reads
as follows:
“29. Power of Board to acquire, hold and
dispose of property.—(1) The Board shall,
for the purposes of this Act, have power to
acquire and hold movable and immovable
property, whether within or outside the
City.
(2) Subject to such restrictions,
conditions and limitations as may be
prescribed by rules made by the
Government, the Board shall have power or
lease, sell or otherwise transfer any
movable or immovable property which
belongs to it, and to appropriate or apply
any land vested in or acquire by it for
the formation of open spaces or for
building purposes or in any other’ manner
for the purpose of any improvement scheme.
12
(3) The restrictions, conditions and
limitations contained in any grant or
other transfer of any immovable property
of any interest therein made by the Board
shall notwithstanding anything contained
in the Transfer of Property Act, 1882
(Central Act 4 of 1882) or any other law
have effect according to their tenor.]”
11. Section 42 conferred power to make Rules. Following
provisions are relevant for the purpose of this case:
“42. Power of Government to make rules.—The
Government may, from time to time; make
rules, not inconsistent with this Act. —
xxx xxx xxx
(aa)regulating the allotment or sale by
auction of sites by Board;
(ab)specifying the conditions, restrictions
and limitations subject to which the
Board may sell, lease or otherwise
transfer movable or immovable property;”
xxx xxx xxx
12. Initially, bylaws regulating the allotment of
sites were published on 08.01.1954. These bylaws came
to be cancelled upon enactment of City of Bangalore
Allotment of Site Rules, 1964. Thereafter, the City of
Bangalore Improvement Disposal of Site Rules, 1971 came
to be enacted. The said Rules came to be repealed with
the making of the City of Bangalore Improvement
13
Allotment of Site Rules, 1972. These Rules came into
force on the 1st Day of September, 1972. These Rules
are the Rules, which would govern the fate of this
case.
13. Rule 2(b) defines the word ‘allottee’ as meaning
the person to whom the site is allotted under these
Rules. The Rules define backward class. It also, inter
alia, defines stray site.
14. Rule 3 reads as follows:
“3. Offer of sites for allotment.—(1)
Whenever the Board has formed an extension or
layout in pursuance of any scheme, the Board
may, subject to the general or special orders
of the Government, offer any or all the sites
in such extension or layout for allotment to
persons eligible for allotment of sites
under these rules.
(2) Due publicity shall be given in
respect of the sites for allotment
specifying their location, number, the amount
payable as earnest money, the last date for
submission of applications and , such other
particulars as the Chairman may consider
necessary; by affixing a notice to the notice
board of the office of the Board, and any other
office as the Chairman may decide from time
to time and by publication in not less than
three daily .newspapers published in the
City of Bangalore in English and Kannada
having a wide circulation in the city.”
14
15. Rule 5 dealt with the allotment of stray sites.
Rules 6 contemplated disposal of sites for heritable
purposes.
16. Rule 7 proclaimed that the allottee was to be
lessee and it reads as follows:
“7. Allottee to be a lessee. —The site allotted
under Rule 3 or Rule 5shall be deemed to have
been leased to the allottee until the lease is
determined or the site is conveyed in the
name of the allottee in accordance with
these rules. During the period of the lease,
the allottee shall pay to the Board rent at
the rate of rupees three per annum where the
area of the site does not exceed two hundred
square meters, rupees six per annum where
the area of the site exceeds two hundred
square meters but does not exceed five hundred
square meters and rupees twelve per annum
where the area of the site exceeds five
hundred square meters before the
commencement of each year.”
17. Rule 8 dealt with applications. It contemplated
that the applications for allotment of site was to be
in Form I. Several details are to be furnished. It
included the annual income of the applicant, whether
the applicant already owned a house or house site in
the city, outside the city and whether he had any share
in such property and the value of the share. It further
included the query as to whether the applicant’s
15
wife/husband/minor child, owned a house or house site
inside or outside the city. Since, it may be relevant
to the decision at hand, we may advert to the Form.
“FORM I
[See sub-rule (1) of Rule 8]
Form of Application for Purchase of Site
To
The Chairman,
City Improvement Trust Board,
Bangalore 20
Sir,
I wish to purchase a building site
measuring ........ in …...Extension,
Bangalore. I agree to abide by the
conditions of allotment and sale of the site
contained in Rule 17 of the City of
Bangalore Improvement (Allotment of Sites)
Rules, 1972, and the terms of the lease-cumsale agreement; copies of which are
enclosed in duplicate. I also enclose the
duplicate copies of the conditions of
allotment and sale and lease-cum-sale
agreement duly signed in token of having
accepted the conditions therein.
Particulars about me are given below. —
1. Namë (in Block letters)
2. Father’s/Husband’s name
3. Age
4. Whether the applicant belongs to
16
Scheduled Caste or Scheduled Tribe,
Nomadic Tribes, Semi-Nomadic Tribes,
Backward Classes, Denotified Tribes.
5.Whether married or single
6. (a) Residential address: Permanent (House
No., Name of street, locality and Town):
(b) Present address: (if different from
above) for correspondence with the Board.
7. (i) Occupation or post.
(ii) Address
(iii) Place of employment or business.
8. (a) Annual income of the applicant (both
from profession and from properties if
any)
(b) Any other means indicating the capacity of
the applicant to purchase the site applied
for and to building a house thereon.
9. Whether the applicant is ordinarily a
resident in Bangalore City or in the area
under the jurisdiction of the Board and
the period of such residence.
10. Whether any member of the family of which
the applicant is a member owns or has been
allotted site or a house by the
Board or any other authority, within the
area under the jurisdiction of the
Board. (Furnish details).
11. (1) Whether the applicant already owns a
house or a house-site:
(a) in the City (with details)
(b) outside the city (with details)
(2) Whether he/she has any share in such
property and the value of the share
thereof.
17
12. (1) Whether the applicant’s wife/
husband /minor child owns a house or a
house-site:
(a) in the City (with details)
(b) outside the city (with details)
(2)Whether the applicant’s
wife/husband/minor child has any share
in such property and the value o1 the
share thereof.
13. Whether the applicant has transferred the
ownership or rights in the house or housesite already allotted to him/her in any of
the schemes of the Board or any other
authority to somebody else (if so, himish
details).
14. Whether the applicant or any members or
his/her family has already availed of any
housing or loan scheme of Government local
body or Co-operative Society, if so, give
details.
15. Whether the applicants applied for
allotment of a site or a site with a
building, in any of the scheme of the
Board or and other authority and whether
his/her deposit was refund (if so,
furnish details).
16. Amount of earnest money deposited now
(with Challan No. and date).
I hereby solemnly declare that all the above
information given by me is true. I shall
furnish any additional information in my
possession which you may require. If there
is any delay on my part to furnish the
necessary information required by the Board,
it will be within the discretion of the
Board to reject my application.
18
If, at any time it is found that the
information given by me above is incorrect,
the Board can cancel the allotment, resume
possession of the site and forfeit part or
whole of the amount paid by me till then
towards cost of the site or deposit.
I am aware that under the Rules, I have to
build the house myself with my own resources.
Signature of Applicant
Station …………………
Date …………………………
Attested Magistrate of the First Class
Date…………….”
18. Rule 10 dealt with the issue of eligibility for
allotment and it reads as follows:
“10. Eligibility for allotment. —No person.
(1)Nho.is not ordinarily resident (living
independently or with his family members).in
the area within the jurisdiction of the Board
for not less than five years immediately
before the last date fixed for making
applications:
Provided that the persons who are
domiciled in the State of Karnataka but
serving in the Armed Forces of the Union
outside the State of Karnataka shall be
eligible for allotment of Sites under these
rules.
(2) Who or any member of whose family owns
or is a lessee entitled to demand conveyance
eventually or has been allotted a site or a house
by the Board or any other authority, within
the area under the jurisdiction of the
19
Board; or of the Corporation of the City of
Bangalore, shall be eligible to apply for
allotment of a site:
Provided that the Board may relax the
restriction in c1ause (1) regarding residence
in the case of persons. —
(i) who are domiciled in the State of Mysore
and who bona fide intend to reside within
the area under the jurisdiction o/ the
Board; or,
(ii) who are domiciled.in the State of Mysore
but have gone outside the State on
business, employment, study or training
and who bona fide intend to reside within
the area under the jurisdiction of the
board;
or
(iii) who though not domiciled in the State of
Mysore bona fide intend to reside within
the area under the jurisdiction of the
Board.”
19. Rule 11 provided for the principles for selection
of applicants for allotment of sites. The following
principles have been set out in Rule 11(1):
“11. Principles for selection of applicants for
allotment of sites. —(1) The Board shall
consider the case of each applicant on its
merits and shall have regard to the following
principles in making selection. —
(i)the status of the applicant, that is
whether he is married or single and has
dependent children;
(ii) the income of the applicant and his
20
capacity to purchase a site and build a
house thereon for his residence:
Provided that this condition shall not be
considered in case of applicants belonging to
Scheduled Castes, Scheduled Tribes,
Wandering Tribes, Nomadic Tribes and other
Backward Classes.
(iii) the number of years the applicant has
been waiting for allotment of a site and
the fact that he did not secure a site
earlier though he is eligible and had
applied for a site;
(iv) persons who are ex-servicemen or
members of the family of the deceased
servicemen killed in action, during the
last ten years.”
20. The sites were to be allotted among different
classes of persons which included wandering tribes,
scheduled tribes, scheduled castes, ex-servicemen,
persons domiciled in Karnataka but serving in the Armed
Forces of the Union outside the State, State Government
servants, Central Government servants and servants of
Corporation. 51 per cent was reserved, in other words,
in specific percentage terms for these categories. 49
per cent was made available for the general public.
Non-availability of applicants was also dealt with.
21
21. Rule 13 provided for selection of an applicant.
The Board was empowered to reject any application
without assigning any reason.
22. Rule 17 provides for conditions of allotment.
Since, much turns on the impact of this Rule, we would
refer to the same.
“17. Conditions of allotment and sale of site.
- The allotment of a site under these rules
shall be subject to the following
conditions. —
(1) The allottee shall within a period
of fifteen days from the date of receipt
of the notice of allotment, pay to the
Board twelve and a half per cent of the
price of the site and if no such payment
is made the allottee shall be deemed to
have declined the allotment.
(2) The balance of the value of the site
(less than a sum of rupees thirty where
the area of the site does not exceed two
hundred square meters, rupees sixty where
the area exceeds two hundred square meters
and does not exceed five hundred square
meters and rupees one hundred and twenty
where the area exceeds five hundred
square meters) shall be paid within
ninety days from the date of receipt of
the notice of allotment, or such
extended period not exceeding one year
as the Chairman may specify. Interest at
[fifteen per cent]] shall be paid on the
said amount for the extended period. If
the said amount is not paid within the
period of ninety days or the extended
period the earnest money paid by the
22
allottee shall be liable to forfeiture
and the allotment may be cancelled:
[Provided that where an allottee is a
person. —
(i) whose annual income does not exceed
[three thousand and six hundred
rupees], he may choose to pay the
balance value of the site in
quarterly, half yearly or annual
installments and the rate of
interest on the said amount for the
extended period for quarterly
payment will be two per cent for half
yearly payments will be three per
cent and annual payments four per
cent;
(ii) whose annual income exceeds [three
thousand and six hundred rupees] but
does not exceed seven thousand and
two hundred rupees interest at
twelve per cent per annum shall be
paid on the said amount for de
extended period:
Provided further that where an allottee
is a person belonging to a Scheduled
Caste or Scheduled Tribe or other
Backward Classes or a nomadic tribe or
a wandering tribe, or a denotified tribe
or a family of Defence personnel killed
or disabled during the recent war and
whose annual income from all sources
does not exceed rupees five thousand,
the balance of the value of the site
required to be paid under this sub-rule
shall be paid by him without interest
within a period of six years from the
date of receipt of the notice of
allotment.]
(3) Until the site is conveyed to the
allottee the amount paid by the
allottee for the purchase of the site
23
shall be held by the Board as security
deposit for the due performance of the
terms and conditions of the allotment
and the lease-cum-sale agreement
entered into between the Board and the
allottee.
(4) After payment under sub-rule (2) is
made the Board shall intimate the
allottee the actual measurements of the
site and the particulars thereof and a
lease-cum-sale agreement in Form II
shall thereafter be executed by the
allottee and the Board and registered
by the allottee. If the agreement is not
executed within forty-five days after
the Board has intimated the actual
measurements and particulars of the
site to the allottee, the earnest money
paid by the allottee may be forfeited,
the allotment of the site may be
cancelled, and the amount paid by the
allottee after deducting the earnest
money refunded to him. Every allottee
shall construct a building on the site
in accordance with the plans and designs
approved by the Board. If in any case
it is considered necessary to add any
additional conditions in the agreement
the Board may make such additions.
Approval of the City of Bangalore
Municipal Corporation for the plans and
designs shall be necessary when the
layout in which the site is situated is
transferred to the control of the said
Corporation.
(5) The allottee shall comply with the
conditions of the agreement executed by
him and the buildings and other byelaws of the Board or the Corporation,
as the case may be, for the time being
in force.
24
(6) The allottee shall construct a
building within a period of two years
from the date of execution of the
agreement or such extended period '[as
the Chairman may] in any specified case
by written order permit. If the building
is not constructed within the said
period the allotment may, after
reasonable notice to the allottee, be
cancelled, the agreement revoked, the
lease determined and the allottee
evicted from the site by the Board, and
after forfeiting twelve and a half per
cent of the value of the site paid by
the allottee, the Board shall refund the
balance to the allottee.
(7) (a) On the expiry of the period of
ten years and if the allotment has not
been cancelled or the lease has not been
determined in accordance with these
brutes or the terms of the agreement in
the meanwhile the Board shall by notice
call upon the allottee to get the sale
deed of tire site executed at his own
cost within the time specified in the
said notice.
(b) If the allottee fails to get the
sale deed executed within the time so
specified the Board shall itself
execute the same and recover the cost
and other charges, if any, incidental
thereto from the allottee as if the same
are amount due to the Board.]
(8) The allottee shall ordinarily
reside or himself make use of the
building constructed on the site
allotted to him.
(9) With effect from the date of taking
possession of the site the allottee or
his heirs and successors shall be liable
to pay the taxes, fees and cesses
payable in respect of the site and any
25
building erected thereon.
If the particulars furnished by the
applicant in the prescribed app1icaüon form
for allotment of site are found incorrect
or false subsequently, twelve and half per
cent of the site value, shall be forfeited
after the site is resumed by the Board and
the balance amount of site value refunded
to the applicant.”
23. Rule 18, likewise, speaks about restrictions,
conditions and limitations on sale of sites and we
refer to the same:
“18. Restrictions, conditions and limitation
on sales of sites.—(1) Notwithstanding'
anything contained in. —
(i) these rules or any other rules, byelaws or orders governing the allotment,
grant or sale of sites by the Board for
construction of buildings; or
(ii) any instrument executed in respect of
any site allotted, granted or sold by
the Board for construction of
buildings,
the Chairman may at the request of the
allottee grantee or purchaser of a site,
execute a deed of conveyance subject to
the restrictions, conditions and
limitations specified in sub-rule (2).
(2) The conveyance by the Chairman of a
site in favour of an allottee, grantee or
purchaser of a site (hereinafter referred to
as “the purchaser”) shall be subject to the
following restrictions, conditions and
limitations, namely.—
(a).in the case of a site on which a building
has not been constructed. —
26
(i)the purchaser shall construct a
building on the site within such
period as may be specified by the
Board, as per plans, designs and
conditions to be approved by the
Board or in conformity with the
provisions of the City of
Bangalore Municipal Corporation
Act, 1949 and the Bye-laws made
thereunder;
(ii) the purchaser shall not
without the approval of the
Board, construct on the site any
building other than a building
for the construction of which the
site was allotted, granted or
sold;
(iii) the purchaser shall not alienate
the site within a period of ten
years from the date of allotment
except by mortgage in favour of
the Government of India, the
Government of Mysore, the Life
Insurance Corporation of India or
the Mysore Housing Board, or any
1[any company or Co-operative
Society approved by the Board] or
any Corporation set up, owned or
controlled by the State
Government or the Central
Government to secure moneys
advanced by such Government,
2[Corporation, Board, CompanyJ,
Society or Corporations, as the
case may be, for the construction
of the building on the site;
(b) in the case of a site on which a
building has been constructed, the
purchaser shall not alienate the
site and the building constructed
thereon within a period of ten years
27
from the date of allotment, except.
—
(i) by mortgage in favour of the
Government of India, the
Government of Mysore, the Life
Insurance Corporation of India or
the Mysore Housing Board or any
Co-operative Society approved by
the Board to secure moneys
advanced by such Government,
3[Corporation, Board, Company] or
Society for the construction of
the building on the site; or
(ii) with the previous approval of
the Board;
(c) in the event of the purchaser
committing breach of any of the
conditions in clause (a) or clause
(b), the Board may at any time, after
giving the purchaser reasonable
notice, resume the site free from
all encumbrances. The purchaser may
remove all things which he has
attached to the earth:
'Provided he leaves the site in the state
in which he received it. All transaction
entered into in contravention of the
conditions specified in clauses (a) and
(b) shall be null and void ab initio.
‘Explanation. — In this rule, references
to the Board shall be deemed to include the
Chairman when authorised by the Board by a
general resolution to exercise any power
vested in the Board.
1[(3) Notwithstanding anything in sub-rule
(2), but without prejudice to the provisions
of Rule 17 where the lessee applies that for
reasons beyond his control he is unable to
reside in the City of Bangalore or by
reasons of his insolvency or impecuniosity
it is necessary for him to sell the site or
28
site and the building, if any, he may have
put up thereon, the Bangalore Development
Authority may, with the previous approval
of the State Government, either. —
(a) require him to surrender the site, where
there is no building, in its favour; or
(b) where there is a building put up, permit
him to sell the vacant site and building:
Provided that. —
(i) in case covered by clause (a), the
Bangalore Development Authority shall
pay to the lessee the allotted value of
the site and an, additional sum equal
to the amount of interest at twelve per
cent per annum thereon; and
in case covered by clause (b), the lessee shall
pay to the Bangalore Development Authority a
sum equal to the amount of interest at
twelve per cent per annum on the allotted
value of the site.]”
24. Rule 19 dealt with voluntary surrender and it read
as follows:
“19. Voluntary surrender. — An allottee may at
any time after allotment, surrender the
site allotted to him to the Board. On such
surrender the Board shall refund all
amounts paid by the allottee to the Board
in respect of the said site.”
25. The Rules did not apply to disposal of corner sites
and commercial sites.
26. We may notice in fact that the City of Bangalore
Improvement Act, 1945 came to be repealed by the
29
Bangalore Development Authority Act, 1976. There were
certain amendments carried out to the 1972 Rules which
need not detain us.
THE PURPORT OF THE ABOVE LAW
27. It is clear that what is involved is the allotment
of public property. The allottee was to be a lessee.
The allottee, during the period of lease, was to pay
rent, as provided in Rule 7. Allotment was premised on
selection being carried out based on principles for
selection, as provided in Rule 11 and to be carried by
the Allotment Committee under Rule 12. The value of the
site is fixed. This is clear from Rule 17(1). The
allottee was to pay 12 ½ per cent of the price of the
site within 15 days of the receipt of notice of
allotment. Within 90 days from the date of receipt of
notice of allotment or extended period not exceeding
one year, which may be fixed by the Chairman, the
balance had to be paid. Non-payment attracted interest
for the extended period. If the amount was not paid
within 90 days or the extended period, earnest money
was liable to be forfeited and the allotment may be
30
cancelled. The two provisos of Rule 17 provided for
certain concessions to certain categories. The amount,
which was paid by the allottee, formed the security
deposit for the due performance of the obligation,
under the lease-cum-sale agreement between the Board
and the allottee. This was to be so till the conveyance
was executed regarding the site to the allottee. A
lease-cum-sale agreement in Form 2 was to be entered
into by the allottee. Every allottee was mandated to
construct a building, which, we may clarify was to be
a residential building, on the site in accordance with
plan approved by the Board. The allottee was to comply
with the conditions in the agreement. Rule 17(6) fixed
the period of two years from the date of execution of
the lease-cum-sale agreement or such extended period,
within which the building had to be put up. Till
29.05.1980, the power to extend the period was vested
with the Board. After 29.05.1980 the power to extend
by a written Order was vested with the Chairman. If the
building was not constructed within the period of two
years or extended period, the allotment could be
cancelled and the agreement revoked, the lease
31
determined and the allottee evicted from the site by
the Board. Such action was to be preceded by according
a reasonable notice to the allottee against the
proposed action. In the event of such action being
taken, the allottee was entitled to the refund of the
amount after forfeiting 12 ½ per cent of the value. It
is under Rule 17(7)(a) that on expiry of 10 years of
the allotment, the time arrived for conveying the
rights over the site. When 10 years expired, if the
allotment had not been cancelled or lease determined,
in accordance with the Rules or in terms of the
agreement, the Board, after issuing a notice to the
allottee, calls upon the allottee to execute the sale
deed at his cost. If the allottee failed to get the
sale deed executed, the Board was to execute the sale
deed and recover the cost.
28. Now, the time is ripe to advert to the statutory
lease-cum-sale agreement referred to in Rule 17(4). It
is in Form II and much turns on its terms and we advert
to the same, which has been, admittedly, entered into
by the first defendant with the BDA.
32
“FORM II
[See Rule 17(4)]
Lease-cum-sale agreement
An agreement made this . . . . . . . . . . . . . . . day of
.......................................... 197.. ,
between the City of Bangalore Improvement Trust Board,
Bangalore, (hereinafter called the “Lessor/Vendor”)
which term shall wherever the context so permits, mean
and include its successors in interest and assigns of the
ONE PART and ………hereinafter called Lessee/Purchaser
(which term shall wherever the context so permits mean
and include his/her heirs, executors; administrators and
legal representatives) of the OTHER PART; .
Whereas, the City of Bangalore Improvement Trust Board
advertised for sale building sites in Extension;
And, whereas, one of such building site in Site No:………..
more fully described in the Schedule hereunder and
referred to as property;
And, whereas, there were negotiation between the
Lessee/Purchaser on the one hand and the Lessor/Vendor
on the other for allowing the Lessee/purchaser to occupy
the property as Lessee until the payment in full of the
price of the aforesaid site as might be fixed by the
Lessor/Vendor as hereinafter provided;
And, whereas, the Lessor/Vendor agreed to do so subject
to the terms and conditions specified in the City of
Bangalore Improvement (Allotment of Sites) Rules, 1972,
and the terms and conditions hereinafter contained;
And, whereas, thus the Lessor/Vendor has agreed to
lease the property and the Lessee/Purchaser has agreed
to take it on lease subject to the terms and conditions
specified in the said rules and the terms and
conditions specified hereunder:
Now this Indenture Witnesseth
1................................................................................................The
Lessee/Purchaser is hereby put in possession of the
property and the Lessee/Purchaser shall occupy the
property as a tenant thereof for a period of ten years
from (here enter the date of giving possession) or
in the event of the lease being determined earlier
till the date of such termination. The amount
deposited by the Lessee/Purchaser towards the value
33
of the property shall, during the period of tenancy,
he held by the Lessor/Vendor as security deposit for
the due performance of the terms and conditions of
these presents.
2. .......................................................................... The lessee/
purchaser shall pay a sum of rupees ... per years as
rent on or before ........... commencing
from.....
3. The Lessee/Purchaser shall construct a building
in the property as per plans, designs and conditions
to be approved by the Lessee/Vendor and in conformity
with the provisions of the City of Bangalore Municipal
Corporations Act, 1949, and the bye-laws made
thereunder within two years from the date of this
agreement:
Provided that where the Lessor/Vendor for
sufficient reasons extends in any particular case the
time for construction of such building, the
Lessee/Purchaser shall construct the building within
such extended period.
4. The Lessee/Purchaser shall not sub-divide the
property or construct more than one dwelling house on
it.
The expression “dwelling house” means a building
constructed to be used wholly for human habitation
and shall not include any apartments to the building
whether attached thereto or not, used as a shop or a
building of ware-house or building in which
manufactory operations are conducted by mechanical
power or otherwise.
5. The Lessee/Purchaser shall not alienate the site
or the building that may be constructed thereon during
the period to the tenancy. The Lessor/Vendor may,
however permit the mortgage of the right, title and
interest of the Lessee/Purchaser in favour of the
Government of Mysore, the Central Government or bodies
corporate like the Mysore Housing Board or the Life
Insurance Corporation of India, Housing Co-operative
Societies or Banks to secure moneys advanced by such
Governments or bodies for the construction of the
building.
6. The Lessee/Purchaser agrees that the Lessor/Vendor
may take over possession of the property with the
structure thereon if there is any misrepresentation in
the application for allotment of site.
34
7.The property shall not be put to any use except as
a residential building without the consent in writing of
Lessor/Vendor.
8.The Lessee/Purchaser shall be liable to pay all
outgoings with reference to the property including taxes
due to the Government and the Municipal Corporation of
Bangalore.
9. On matters not specifically stipulated in these
presents the Lessor/Vendor shall be entitled to give
directions to the Lessee/Purchaser which the
Lessee/Purchaser shall carry out and default in carrying
out such directions will be a breach of conditions of
these presents.
10.. In the event of the Lessee/Purchaser committing
default in the payment of rent or committing breach of
any of the conditions of this agreement or the provisions
of the City of Bangalore Improvement (Allotment of Sites)
Rules, 1972, the Lessor/Vendor may determine the tenancy
at any time after giving the Lessee/Purchaser fifteen
days’ notice ending with the month of the tenancy, and
take possession of the property. The Lessor/Vendor may
also forfeit twelve and a half per cent of the amount
treated as security deposit under Clause 1 of these
presents.
11. At the end of ten years referred to in Clause 1 the
total amount of rent paid by the lessee/purchaser for
the period of the tenancy shall be adjusted towards the
balance of the value of the property.
12. If the Lessee/Purchaser has performed all the
conditions mentioned herein and committed no breach
thereof the Lessor/Vendor shall at the end of ten years
referred to in Clause 1, sell the property, to the
Lessee/Purchaser and all attendant expenses in
connection with such sale such as stamp duty,
registration charges, etc., shall be borne by the
Lessee/Purchaser.
13. The Lessee/Purchaser hereby also confirms that
this agreement shall be subject to the terms and
conditions specified in the City of Bangalore
Improvement (Allotment of Sites) Rules, 1972, and agreed
to by the Lessee/Purchaser in his/her application for
allotment of the site.
14. In case the Lessee/Purchaser is evicted under
Clause 9 he shall not be entitled to claim from the
Lessor/Vendor and compensation towards the value of the
improvements or the superstructure erected by him on the
scheduled property by virtue of and in pursuance of these
35
presents.
15. It is also agreed between the parties hereto
that R s .......(Rupees......) in the hands of the
Lessor/Vendor received by them from the Lessee/Purchaser
shall be held by them as security for any loss or expense
that the Lessor/Vendor may be put to in connection with
any legal proceedings including eviction proceedings
that may be, taken against the Lessee/Purchaser and
,all such expenses shall be appropriated by the
Lessor/Vendor from and out of the moneys of the
Lessee/Purchaser held in their hands.
THE SCHEDULE
Site No................. formed by the City
of Bangalore Improvement Trust Board in Block No. . .
. . . . . . . . . . in the. ........... Extension. Site
bound on.—
East by:
West by:
North by:
South by:
and measuring east to west .....:...north to
south ...... in all measuring ... . square feet.
In witness whereof the parties have affixed
their signatures to this agreement.
Chairman.
The City of Bangalore Improvement Trust Board.
Witnesses:
1.
2.
Witnesses:
1.
2.
Lessee/Purchaser.”
36
29. The question then arises, as to what is the purport
of Rule 18. Rule 18, in our view, produces the following
effects and is intended to apply as follows:
It begins with a non obstante clause as far as
Rule 18(1) is concerned. Rule 18(1) is to apply
despite anything which is contained in the Rules
itself. That apart, it would operate,
notwithstanding any other Rules, bylaws and
orders, which may occupy the field. Even an
instrument executed in respect of any site
allotted, rented or sold by the Board for the
construction of buildings, will not detract from
the exercise of power. The power, under Rule 18,
is vested with the Chairman. The scope of the
power is to execute a deed of conveyance. This is
premised on the request being made by the allottee
grantee or purchaser of the site. Rule 18(1)
further contemplates that when the power is invoked
by the Chairman under Rule 18(1), the restrictions,
conditions and limitations mentioned in Rule 18(2)
will ipso facto apply. Rule 18(2) divides the
categories into two. Rule 18(2)(a) deals with the
37
situation where no building has been constructed
on the site. Rule 18 (2)(b) deals with the
situation where a building has been constructed on
the site. Since, we are, in this case, concerned
with the case of a site on which the building has
not been constructed, within the meaning of the
Rules, we may indicate that the condition that is
imposed, includes the obligation on the part of
the purchaser to construct the building on the
site, within the period as may be specified by the
Board. The purchaser is visited with the
restriction that he shall not, without the approval
of the Board, construct on the site, any building
other than the building for which the site was
allotted, rented or sold. The purchaser, who is
the beneficiary of deed of conveyance in his favour
under Rule 18(1), is bound by the further
limitation or condition that the purchaser shall
not alienate the site within a period of 10 years
from the date of allotment. The restriction against
alienation, however, could not operate against a
mortgage, as provided in Rule 18(2)(iii). The
38
mortgage is, however, to be one effected for the
purpose of construction of the building on the
site. Rule 18(2)(c) visits the purchaser,
committing breach of any of the conditions in
clause (a), inter alia, with the resumption of the
site, no doubt, after a reasonable notice. Rule
18(2)(c) further declares that all transactions
entered into in contravention of the conditions in
Clause (a) and (b) are to be null and void ab
initio. The transactions, which are referred to in
Rule 18(2)(c), are the transactions which are
referred to in Rule 18(2)(a)(iii) or Rule 18(2)(b).
30. Now, the question would arise as to the effect of
the interplay of Rule 17, the lease-cum-sale agreement
and the provisions of Rule 18(1) and Rule 18(2). An
allottee begins his innings as a lessee. The terms of
the lease are set out in the Rules itself, which we
have adverted to. The entire value of the site is to
be paid at the very beginning, as already noticed, or
within the extended period. However, the allottee
continues as a lessee. He is obliged to observe the
conditions of the lease-cum-sale agreement. He is
39
obliged to pay rent, as provided in the Rules and also
the lease-cum-sale agreement. Under Clause (5) of the
lease-cum-sale agreement, the allottee, who is also
described as the lessee/purchaser, is forbidden from
alienating the site or the building that may be
constructed during the period of the tenancy. The
period of tenancy is fixed as a period of 10 years from
the date of giving possession to the allottee. In other
words, an allottee, who is obliged to enter into a
lease-cum-sale agreement is prohibited from alienating
the site or the building, which may be put up for the
period of 10 years. This period of 10 years is adverted
to in Rule 17(7). In other words, for a period of 10
years, the allottee, who is also described as the
lessee and purchaser, cannot alienate the site or the
building. It is to be understood that by virtue of Rule
7 of the Rules, the allottee is treated as a lessee.
What the Rules and agreement contemplate is, though the
entire amount of the value of the site is payable within
a period of 90 days or extended period under Rule 17(2),
the allottee/lessee becomes the purchaser of the site,
only when the conveyance deed is executed in his favour
40
under Rule 17(7). During this period, the Rules and the
agreement contemplate clearly that the allottee puts
up the building for his residence but he cannot
alienate the property during the period of 10 years,
which is the period of tenancy, and this period of 10
years begins, from the time he is put into possession,
based on the agreement. Rule 18(1) and Rule 18(2), in
a manner of speaking, fast tracks the conveyance. In
other words, Rule 18(1) enables the Chairman, on the
request of an allottee, within the meaning of Rule 17,
to execute a deed of conveyance, even before the expiry
of 10 years, contemplated in Rule 17(7). However, when
an allottee is the beneficiary of the exercise of power
under Rule 18(1) and a conveyance deed is executed to
him, the Rule-maker, has still incorporated the
condition against alienation for a period of 10 years,
which is not to operate from the date of the conveyance.
The embargo against alienation in the case of the
conveyance deed being executed in favour of the
allottee during the currency of the lease-cum-sale
agreement in Form II will operate for a period of 10
years from the date of allotment.
41
31. Thus, in a case of allotment under Rule 17, the
condition against alienation is to exist for a period
of 10 years from the date of allotment. In the case of
conveyance deed, which is executed in favour of the
allottee, the condition against alienation will again
operate for the period of ten years from the date of
allotment. This is apart from the other conditions,
viz., construction of the building on the site. In
short, the allottee becomes the owner of the site
before the expiry of 10 years upon power being invoked
under Rule 18(1) but the assignment of the rights,
which would have been otherwise absolute, is subjected
to the conditions, as mentioned in Rule 18(2)(a), which
includes the prohibition against the alienation. We
must remind ourselves that under Section 29(3) of the
Act of 1945, the Transfer of Property Act is eclipsed
by the terms of any grant or transfer. The condition
against alienation is not to be counted from the date
of the execution of the conveyance deed but for the
unexpired period, in the case of the lease-cum-sale
agreement executed.
42
32. The impact of Rule 18(3) is to be noticed. This
Rule was substituted w.e.f. from 21.12.1976. The Rule
contemplates two conditions for its operation. Firstly,
it operates without prejudice to the provisions of Rule
17. Secondly, Rule 18(3) applies, notwithstanding
anything contained in Rule 18(2). Now, coming to the
exact scope of Rule 18(3), it contemplates the
existence of either of the conditions mentioned
therein. They are – (1) the lessee applies pointing out
that for reason beyond his control, he is unable to
reside in the city of Bangalore; (2) by reason of his
insolvency or impecuniosity, it has become necessary
for him to sell the site and or site and the building,
if any, he may have put up thereon.
33. We have already explained the scope of Rule 18 and
the interplay between Rule 17 and Rule 18. Rule 18(3)
must be read along with Rule 17. The argument to the
contrary by the plaintiff is untenable. In fact, it
would involve denying relief intended for persons
falling under Rule 17, as will be clear hereinafter. A
perusal of Rule 18(3) would reveal the following:
43
While a person is a lessee (which means while
he is an allottee), the course open to an
allottee/lessee, is to follow the Rules and leasecum-sale agreement and put up a residential
building on the site. He may be disabled by the
financial condition from fulfilling his promise
under the lease-cum-sale agreement and the Rules
to put up the building. In either case, i.e., when
because of the dire financial straits, he finds
himself in, he can apply to the Authority to permit
him to sell the site, if no building has been put
up or if he has put up a building on the site, the
site along with the building. The courses of action
open to the BDA would be as follows:
It may with the previous approval of the State
Government, call upon the applicant, when he has
not put up the building, to surrender the site.
Thus, in a case where a lessee/allottee wishes to
sell the site, the Rules contemplate that site
would have to be surrendered in favour of the
Authority. The rationale appears to be, instead of
permitting the site being sold to any third party,
44
the site would go back to the Authority, which in
turn, will enable it to allot it to the eligible
persons waiting in the queue. Where a building has
been put up, again, Rule 18(3)(b) contemplates that
the lessee can be permitted to sell the vacant site
and the building. When the lessee, on the basis of
his request that he may be permitted to sell the
site, has surrendered the site to the BDA, the
further consequence contemplated is that the
lessee will get back the value of the allotted
site, which he has deposited under Rule 17(1) and
(2). Over the above the same, the lessee is to be
paid an additional sum equal to the amount of
interest at the rate of 12 per cent per annum. We
must, at this juncture, also do justice to the
words in Rule 18(3) “but without provisions of Rule
17”. The import of this part of Rule 18(3) is as
follows – under Rule 17, it is open to the
Authority to cancel allotment and revoke the
agreement and determine the lease. The allottee
can be evicted from the site. The amount of 12 ½
per cent of the value paid, under Rule 17(1) can
45
be forfeited. No doubt, the Board will refund the
balance to the allottee. This is a consequence
which is contemplated in Rule 17(6). This power
with the Board is kept preserved when an allottee
does not put up the building. Thus, Rule 18(3) must
be understood as a power with the Board to be
exercised with the previous approval of the State
Government. Thus, an allottee, as a Rule, is
expected to hold up to the promise he has made
about his financial capacity to construct the
building. Consequences in Rule 17 would remain
alive. The power under Rule 18(3) appears to us to
encompass situations of insolvency or
impecuniosity, which overtake an allottee after
the allotment takes place. In other words, the
unplanned and uncontemplated vicissitudes of life
may visit him inter alia with insolvency or
impecuniosity, leaving with him no other choice
but to sell the site or even the site with the
building. The fact that power under Rule 18(3) is
not meant to be a mechanical exercise of power,
can be discerned from the requirement that
46
‘previous’ approval of the State Government is the
sine qua non for the BDA exercising its power.
THE UNDISPUTED FACTS
34. The BDA made an allotment of the plot on 04.04.1979
to the first defendant. The lease-cum-sale agreement
was also executed on the same date. It is while so that
on 17.11.1982, the plaintiff entered into the agreement
with the first defendant. Under the allotment, the
first defendant was put in possession of the site. A
perusal of the agreement would reveal the following:
“NOW THIS DEED WITNESSETH AS FOLLOWS :
1.The vendor does hereby agrees to sell the
schedule site to the purchaser for a price
of Rs. 50,000/- (Rs. Fifty thousand
only).
2.The purchaser has hereby agreed with the
vendor to purchase the schedule site for
the said price of Rs.50,000 (Fifty
thousand only).
3.The purchaser has paid a sum of
Rs.30,000/- (Rs.Thirty thousand only) as
advance and part of the purchase money by
cheque No. 81/YA. 709838 dated 17 .11.198
2, drawn on Indian Bank, Malleswaram,
Bangalore to the vendor, who hereby
acknowledges the receipt of the said
amount from the purchaser.
4.The vendor does hereby agree with the
purchaser to obtain the absolute sale
deed from the Bangalore Development
47
Authority and then complete the sale
transaction with the purchaser. It is
agreed that the sale has to be completed
on or before the expiry period of three
months from the day the vendor obtains
the absolute sale deed from the Bangalore
Development Authority and intimates the
purchaser in writing.
5.The vendor has handed over the original
possession certificate to the purchaser.
6.The vendor has agreed to deliver the
following documents to the purchaser :
(a) Absolute sale deed after obtaining
from the Bangalore Development
Authority, Bangalore.
(b) Katha certificate issued by the
Bangalore Development Authority in
favour of the vendor.
(c) N I L Encumbrance Certificate.
(d) Uptodate tax paid receipt.
7.The vendor hereby aggress with the
purchaser to make necessary applications
to the competent authority under the
Urban Land Regulations) Act, 1976 and
obtain permission to transfer the
schedule (Ceiling and necessary site to
the purchaser. The purchaser has agreed
to render necessary assistance to the
vendor in this regard.
8.The vendor has put the purchaser in
possession of the schedule site this day
as part performance of this contract of
sale. The vendor covenants with the
purchaser that the purchaser is entitled
to put up temporary structure on the
schedule site.”
35. Clause 5 shows that the first defendant has handed
over the original possession certificate to the
plaintiff. Clause 8 recites that the first defendant
48
has put the plaintiff in possession of the site on the
date of the agreement as part performance of the
contract of sale. The first defendant further
covenanted with the plaintiff that he is entitled to
construct a temporary structure on the site.
THE CORRESPONDENCE BEFORE THE SUIT
36. The plaintiff, on 01.03.1983, i.e., within four
months of agreement dated 17.11.1982, wrote to the
first defendant as follows:
“Y. SUBBARAJU
ENGINEERING CONTRACTORS
24, 2nd CROSS, KODANDARAMAPURAM,
MALLESWARAM,
' BANGALORE - 560003
Date : 1.3.1983
REGISTERED POST ACK. DUE
To,
Smt. Jayalakshmamma,
W /o K.T. Krishnappa,
Ex. M.L.A., TB Extn.,
Nagamangala,
Mandya District
Madam,
Sub: Agreement for the sale of Site No. 1588,
Block II at Banashankari I Stage
Extension - Regarding.
You have agreed for the sale of the
above site, for which an agreement was made
on 17.11.1982 on the condition that you will
49
register the sale deed within 3 months from
the date of obtaining all the necessary
documents required in this connection from
BOA. So far you. have not informed about
obtaining the documents from BDA. You had
promised that all the documents will be
handed over to me within 2 weeks time to
facilitate me for registering the property.
Since 3 months are over, I am proposing
to sell to my nominee for the agreed amount
of Rs.50,000/- (Rupees Fifty Thousand only),
as you have failed to produce the clear
documents. I am forced to transfer the
property to my nominee at the agreed amount
of Rs.50,00,0/- with you. This is for your
kind information and early necessary action.
Thanking you,
Yours faithfully
Sd/-
(Y. Subbaraju)”
(Emphasis supplied)
There is no reference to any threat by the first
defendant to sell to others.
37. The plaintiff did not rest content with the first
letter and in the very next month, on 26.04.1984,
complains to the first defendant, by pointing to the
letter dated 01.03.1983 and pointing out that the first
defendant has not replied to his letter, notifying her
readiness to comply with the agreement. Thereafter, it
is stated that by the letter dated 26.04.1984, he was
finally calling upon the first defendant to act in
50
terms of the agreement, execute the sale deed in favour
of the plaintiff or his nominee within one week from
the date of receipt of the letter, failing which,
litigation would be launched. This letter provoked the
first defendant to reply through a lawyer on
08.05.1984. The first defendant admitted the agreement
dated 19.11.1982. She, however, pointed out that it was
not as per the terms and conditions of letters sent by
the plaintiff. The plaintiff, it was pointed out, was
enjoined upon to complete the sale within three months
from the date of the agreement. It was pointed out that
time was of the essence of the contract and the contract
has lapsed and the advance was forfeited. All documents
of title relating to the site, it was stated, were
handed over to the plaintiff at the time of the
agreement itself. In view of the breach on the part of
the plaintiff to pay the balance of the consideration,
there was no legally enforceable contract. It was
stated that the first defendant was always willing and
ready to perform her part of the contract and to execute
the sale deed and convey the site. She further set up
51
the case that she had agreed to sell the site for
Rs.1,50,000/-.
38. On 03.07.1984, the plaintiff sent a lawyer notice.
Clause 4, which we have extracted, in the agreement,
was invoked. The plaintiff pointed out that in terms
of the said Clause, the first defendant was obliged,
in the first place, to obtain the sale deed from the
BDA and to inform the plaintiff in writing about having
obtained the sale deed. The plaintiff was also to
obtain the Khata Certificate. Period of three months
would begin to run only from the said date. The claim
of the first defendant that he had handed over the
documents of title, was denied. The further payments,
which were made, after having paid Rs.30,000/- on the
date of the agreement, was stated to be unnecessary but
it was pointed out that the total sum of Rs.50,000/-
stood paid. It was reiterated that on the date of the
sale agreement itself, the plaintiff was put in
possession. The claim that the sale consideration was
Rs.1,50,000/- was denied. The first defendant, it was
pointed out, had committed default in not complying
with the terms of the agreement, by obtaining absolute
52
sale deed from the BDA. Legal action was spoken of by
the plaintiff. Lastly, on 14.02.1985, a legal notice
was sent by the plaintiff to the first defendant.
Thereinafter, referring to the agreement, it was
complained that though it was then more than two years
that the first defendant had entered into the
agreement. First defendant had given a reply on
08.05.1984, pleading excuses for execution of the sale
deed. Thereafter, the first defendant was called upon
to act in terms of the sale agreement and execute the
sale deed within fifteen days of the receipt of the
notice. It was held out that failure on the part of the
first defendant would constrain the plaintiff to seek
relief from the court. That the plaintiff meant
business, is proved by the fact the Suit, out of which
this Appeal arises, was filed on 16.11.1985.
THE PLEADINGS
39. In the plaint, the plaintiff, inter alia, again
reiterated that he was put in possession of the site
at the time of executing the agreement. After referring
53
to the correspondence, which we have referred to, it
is averred that the first defendant was not willing to
perform her part of the contract. It was complained
that the first defendant could not unilaterally treat
the contract as cancelled and that he had unjustly
repudiated her obligation. It was pleaded that he is
likely to execute a sale deed in favour of some other
person. To prevent the same, the Suit for Specific
Performance of the agreement and for injunction, it was
stated, was filed. It was further stated that the first
defendant is bound and liable to obtain the absolute
sale deed from the BDA and deliver the same to the
plaintiff to execute the sale deed. In the amended
pleadings, there is reference to the husband and the
son being brought on the party array on the death of
the first defendant. There is also reference to the
subsequent sale by the son to the appellant. The prayer
sought was a direction to execute the sale deed and to
convey the title and deliver the documents of title
including the sale deed, after obtaining the same from
the BDA and injunction was sought against interfering
54
with the plaintiff’s lawful possession. Such relief of
injunction was also sought against the appellant also.
40. First defendant, in her Written Statement, denied
the case of the plaintiff that he was ready and willing.
According to her, plaintiff had to pay the balance of
Rs. 1,00,000/-, which remains after paying
Rs.50,000/-. Time was pointed out to be essence of the
contract. The first defendant was ready and willing to
perform her part. It was further alleged that the
plaintiff was not put in possession. The defendant
No.1(b) son of the first defendant filed a Written
Statement. He refers to the Clause prohibiting
alienation for a period of ten years from the date of
allotment, and that, absolute rights were not created
by the BDA by the allotment. It was further contended
that the first defendant, his mother, was only the
lessee of the site and she did not have any right to
convey ownership rights. She was not competent to
convey the property. It was pointed out that the
agreement was a void agreement and could not be
enforced.
55
41. The second defendant, in his Written Statement,
inter alia, pleaded no knowledge about the agreement
dated 17.11.1982, providing that the first defendant
must obtain an absolute sale deed from the BDA and it
must be intimated in writing to the plaintiff. The
allegation that the plaintiff was put in possession,
was denied as false. Regarding putting the plaintiff
in possession of the possession certificate, the
appellant pleaded no knowledge. It was further pleaded
that the first defendant was the absolute owner in
possession of the site and, after her demise, in view
of the death of the husband of the first defendant, the
son became the owner of the property. It was pleaded
that the first defendant was a site-less and houseless
person and permanent resident of Bangalore City. After
having made due enquiries, property was purchased by
sale deed dated 19.09.1996. An additional Written
Statement was filed by the appellant to the amended
plaint which was largely devoted to his case about him
being a bonafide purchaser.
THE ORAL EVIDENCE
56
42. PW2, the son of the plaintiff (the plaintiff died
on 05.01.2001) deposed, inter alia, that possession of
the entire property was delivered to the plaintiff.
Subsequently, his legal representatives are in
possession. After the plaintiff was put in possession,
he has allegedly constructed a temporary shed in it.
The shed was demolished in the year 1991 during the
Cauvery riots. He has never made any attempts to go to
the BDA to know about the Suit property. He deposed
that since he guessed that since 1960 his father
commenced civil contract work he was doing so till his
death. With reference to the question that the site was
inalienable for a period of ten years, PW2 answered
that it could have been sold to them. He confessed to
ignorance of the BDA Rules regarding allotment. He did
not know that the lease period was completed on the
13th Day of May, 1989. He did not know about the nonalienation clause in the allotment by the BDA. He did
not know that in the year 1985, his father did not have
the right to file the Suit. He was associated with his
father in construction work. He refers to Exhibit-P14,
which was a show cause notice received by the plaintiff
57
from the BDA. He deposed that plaintiff intimated the
BDA about the sale agreement.
43. The following evidence of PW2, the son of the
plaintiff is very relevant. He has deposed interalia
as follows:-
‘My father was contractor and real estate business
since 30 years. It is not true that there are 70 to 80
cases pending in different courts. There are about 35
to 40 cases pending. My elder brother is doing
construction.’
‘I guess since 1960 my father commenced civil contract
work. He was doing same business till his death.
Simultaneously, he commenced real estate business and
continued till his demise.’
‘My father was getting monthly rental income of
Rs.1,00,000/-.’
‘In the name of our mother, there is commercial complex
at Shehsdripuram. We presently get monthly rent of Rs.
4,50,000/-. The said commercial complex is joint family
property.’ PW 2 has entered into an agreement to
purchase 24 acres land at Tannishandra. He has
58
negotiated to purchase the land at the rate of
Rs.8,00,000/- per acre. At also Ulsoor, they have
vacant site of 90,000/- sq. feet. It is quite expensive
property PW2 deposes. They are staying at a rented
house. At Cunningham Road, they have got a property
which is in dispute. Cunningham property is 1,20,000/-
sq. feet. It is vacant land. Most importantly PW2
deposes that if decree is denied they will have loss
of money.
44. The appellant (second defendant) examined as DW1,
inter alia, deposed that he owned both irrigated and
non-irrigated lands to the extent of 12 acres. He did
not own any site or building in Bangalore. He invested
amount arrived from agriculture and milk-vending
business to purchase this property. His father helped
him. On the date of purchase, the possession was handed
over to him. Apart from Bettanna, none acted as broker
at the time of purchase. He, inter alia, further states
that he went to the site. He found tin shed. He made
inquiries with regard to ownership of the site and
possession. He was told that one Sudershan was the
59
owner of the site, who use to visit the site often.
He, along with is elder brother, who was residing in
Bangalore, went to the house of Sudershan. Sudershan
wanted price of Rs.6,00,000/-. Finally, the parties
agreed for Rs.4,50,000/-. Certain xerox copies of
documents, including possession certificate, was
handed over to him and he consulted an Advocate who
said that the title was clear. On the date of sale, the
possession was handed over to the appellant. Property
was mutated. The broker was not aware of the pendency
of the Suit. He will be put to great hardship if the
Suit is decreed. The original of the Sale Deed is with
the bank. In cross-examination, he, inter alia, deposed
that he has studied up to PUC. His brothers were staying
in Bangalore. His father owned 12 acres. Six acres were
irrigated and six acres was dry land. His brothers were
doing jewellery work in Bangalore. 12 acres was
ancestral property. They used to get daily 20 litres
of milk per day. They use to get Rs.195-196/- per day
by selling milk. Father had not spent any money during
marriage of elder brothers. Neither father, second
defendant nor his brother Mukund were income-tax
60
assessees. He has no record to show that he had the
money to the extent of Rs.4,50,000/- with him. His
brothers were staying in the rented house. He knew the
broker since his childhood. He invested Rs.3,00,000/-
of his own. The remaining was paid by his father. He
earned Rs.3,00,000/- by selling milk and vegetables.
He informed the broker for the first time in June, 1996
that he intended to purchase the site at Bangalore.
After seeing the site on the next day itself, he
approached the defendant 1(a) and defendant 1(b) for
discussion. Defendant 1(a) was MLA of their Taluk and
also former Minister. The negotiations were completed
on the same day. The amount was paid by cash. His
Advocate did not tell him that both defendant 1(a) and
defendant 1(b) had acquired title and informed him to
purchase from both. The entire process of seeing the
site, sale talks, were done in the first week of June,
1996. Defendant 1(a) and defendant 1(b) did not
disclose regarding the pendency of the Suit. He did not
inquire with the BDA as to who is the owner of the
site. He denied the suggestion that till day, the legal
representatives of the original plaintiff were in
61
possession of the property. The suggestion that the
possession of the site was handed over to plaintiff,
was denied. Defendant 1(b) furnished xerox copy of the
possession certificate at the time of negotiations.
After receipt of Suit Summons, he was not on talking
terms with defendant 1(a) and defendant 1(b). Defendant
1(b) disclosed to him that the original possession
certificate was lost and, therefore, he gave the
duplicate certificate.
45. Defendant 1(b) was examined as DW2. He has deposed
about the non-alienation clause and about the agreement
in favour of the plaintiff for Rs.50,000/-. At the time
of the agreement, there was a shed on the site. It was
agreed to execute sale deed in favour of the plaintiff
after getting the absolute sale from the BDA. The BDA
was supposed to execute the sale deed after the 10-year
lease period. The plaintiff had not taken any steps to
waive-off the non-alienation clause for the period of
10 years. His father gave consent to the BDA to issue
the sale deed only in his name. He knew the appellant
from June, 1996. The name of the broker-Bettana, is
spoken to by him. He speaks about handing over of xerox
62
copies to DW1. The second defendant had met him twice
in June, 1996. Appellant when he met DW2 for the second
time, showed his interest to purchase the property in
September, 1996 for Rs.4,50,000/-. Appellant took time
till September, 1996 to ascertain whether he was in
possession and to mobilise funds. Entire amount of
Rs.4,50,000/- was paid in cash. DW2 owned a residential
house at Arti Nagar in Judges Colony. The said property
was standing in the name of his father. He owned an
industrial site. He did not own any residential
property in Bangalore apart from the residential
property. Since, plaintiff was not having any right,
they did not inform the appellant regarding the
pendency of the Suit. The plaintiff never asked his
mother to alienate the suit property before expiry of
the non-alienation period. He took duplicate Possession
Certificate from BDA in June, 1996. He did not hand
over the transfer agreement executed by the BDA at the
time of sale in favour of the appellant. His father was
present, when appellant met him twice. His mother has
not given any application to the BDA to waive-off the
non-alienation clause. He denied the suggestion that
63
possession was handed over to the plaintiff on the date
of agreement. There is no document to show that he has
received Rs.4,50,000/- from the second defendant. There
is reference to a site as Koramangala being allotted
to him and it being cancelled by the High Court. He is
confronted with the agreement to sell the said site in
favour of another person (P-19).
THE FINDINGS BY THE TRIAL COURT
46. Seven issues were struck by the Trial Court.
Thereafter, two additional issues were also raised, of
which, the first additional issue was whether the
second defendant, second Legal Representative of
deceased defendant, ‘proved that the proved sale
agreement’ is void. The Trial Court found the agreement
dated 17.11.1982 as proved. It further found that the
plaintiff has not proved that plaintiff was put in
possession. It was further found that till the year
1989, the first defendant was unable to take an
absolute sale deed from the BDA and, therefore, unable
to execute the sale deed in response to the
communication sent by the plaintiff. It was further
64
found that since the first defendant was not able to
get the sale deed from the BDA, she could not cancel
the agreement unilaterally. It was further found that
the plaintiff ought to have waited till the expiry of
the lease period. It was found, however, that the
plaintiff was always ready and willing, however, at the
same time, the first defendant was not in breach. It
was further found that there was no iota of evidence
to prove that the defendant had tried to sell the
property in favour of the third party. It was further
found that there was no oral agreement of sale for
Rs.1,50,000/- and the plaintiff was not in breach. This
aspect was found against the first defendant. It was
found that the second defendant was a bonafide
purchaser of the site for value without notice of the
earlier agreement of sale as well as pendency of the
Suit. It was further found that in view of the allotment
and the lease-cum-sale agreement, the plaintiff had no
right to file the Suit so as to enforce the agreement
to sell during the year 1985. The plaintiff ought to
have waited till year 1989. The first defendant died
on 18.07.1994 without obtaining the absolute sale deed
65
from the BDA. After her death, property stood
transferred in favour of her son and the son sold it
to the appellant. On 17.09.1996, when the sale took
place, the predecessor in interest of the second
defendant was not a party. The suit property was sold
to the second defendant for a huge sale consideration
of Rs. 4,50,000/-. There was no cause of action to
institute the Suit. On these findings, inter alia, the
Trial Court partly decreed the Suit by ordering return
of Rs.50,000/- along with 9 per cent interest per annum
by defendants 1(a) and 1(b). The relief of permanent
injunction was rejected.
PARI DELICTO POTIOR EST CONDITIO DEFENDENTIS
47. The principle of in pari delicto potior est
conditio defendentis is a maxim which we must bear in
mind. We need only notice the following discussion by
this Court. The decision of this Court in Kedar Nath
Motani (supra) comes to mind:
“9. … Where both parties do not show that
there was any conspiracy to defraud a third
person ought to commit any other illegal
act, the maxim, in pari delito etc., can
hardly be made applicable. …”
66
48. This Court in Kedar Nath Motani (supra) also
referred to the following statement by Lord Mansfield
in Holman v. Johnson3, wherein it was held as follows:
“12. The law was stated as far back as
1775 by Lord Mansfield
in Holman v. Johnson [(1775) 1 Cowp 341,
343 : 98 ER 1120, 1121] in the following
words:
“The principle of public policy is
this; ex dolo malo non oritur actio. No
Court will lend its aid to a man who
founds his cause of action upon an immoral
or an illegal act. If, from the
plaintiff's own stating or otherwise, the
cause of action appears to arise ex turpi
causa, or the transgression of a positive
law of this country, there the Court says
he has no right to be assisted. It is upon
that ground the Court goes; not for the
sake of the defendant, but because they
will not lend their aid to such a
plaintiff. So if the plaintiff and
defendant were to change sides, and the
defendant was to bring his action against
the plaintiff, the latter would then have
the advantage of it; for where both are
equally in fault, potior est conditio
defendentis.”
There are, however, some exceptions or
“supposed exceptions” to the rule of turpi
causa. In Salmond and William on Contracts,
four such exceptions have been mentioned,
and the fourth of these exceptions is based
on the right of restitutio in integrum,
where the relationship of trustee and
beneficiary is involved. Salmond stated the
3 [1775 1 COWP 341]
67
law in these words at p. 352 of his Book
(2nd Edn.):
“So if A employs B to commit a robbery,
A cannot sue B for the proceeds. And the
position would be the same if A were to
vest property in B upon trust to carry out
some fraudulent scheme: A could not sue B
for an account of the profits. But if B,
who is A's agent or trustee, receives on
A's account money paid by C pursuant to
an illegal contract between A and C the
position is otherwise and A can recover
the property from B, although he could not
have claimed it from C. In such cases
public policy requires that the rule
of turpis causa shall be excluded by the
more important and imperative rule that
agents and trustees must faithfully
perform the duties of their office.”
Williston in his Book on Contracts (Revised
Edn.), Vol. VI, has discussed this matter
at p. 5069, para 1785 and in paras 1771 to
1774, he has noted certain exceptional
cases, and has observed as follows:
“If recovery is to be allowed by either
partner or principal in any case, it must
be where the illegality is of so light or
venial a character that it is deemed more
opposed to public policy to allow the
defendant to violate his fiduciary
relation with the plaintiff than to allow
the plaintiff to gain the benefit of an
illegal transaction.”
Even in India, certain exceptions to the
rule of turpi causa have been accepted.
Examples of those cases are found
in Palaniyappa Chettiar v. Chockalingam
Chettiar [(1920) ILR 44 Mad 334] and Bhola
Nath v. Mul Chand [(1903) ILR 25 All 639].”
68
49. We may also notice the following statement by this
Court in Kedar Nath Motani (supra):
“15. The correct position in law, in our
opinion, is that what one has to see is
whether the illegality goes so much to the
root of the matter that the plaintiff cannot
bring his action without relying upon the
illegal transaction into which he had
entered. If the illegality be trivial or
venial, as stated by Williston and the
plaintiff is not required to rest his case
upon that illegality, then public policy
demands that the defendant should not be
allowed to take advantage of the position.
A strict view, of course, must be taken of
the plaintiff's conduct, and he should not
be allowed to circumvent the illegality by
resorting to some subterfuge or by misstating the facts. If, however, the matter
is clear and the illegality is not required
to be pleaded or proved as part of the cause
of action and the plaintiff recanted before
the illegal purpose was achieved, then,
unless it be of such a gross nature as to
outrage the conscience of the Court, the
plea of the defendant should not prevail.”
50. In Sita Ram v. Radhabai and others4, this Court
observed as follows:
“11. The principle that the Courts will
refuse to enforce an illegal agreement at
the instance of a person who is himself a
party to an illegality or fraud is expressed
in the maxim in pari deucto portior est
conditio defendentis. But as stated in
4 AIR 1968 SC 534
69
Anson's Principles of the English Law of
Contracts, 22nd Edn., p. 343: there are
exceptional cases in which a man will be
relieved of the consequences of an illegal
contract into which he has entered — cases
to which the maxim does not apply. They fall
into three classes: (a) where the illegal
purpose has not yet been substantially
carried into effect before it is sought to
recover money paid or goods delivered in
furtherance of it; (b) where the plaintiff
is not in pari delicto with the defendant;
(c) where the plaintiff does not have to
rely on the illegality to make out his
claim'.
51. In Narayanamma (supra), this Court was considering
a Suit for specific performance, which was resisted on
the ground that the agreement to sell was contrary to
the provisions of the Statute. Section 61 of the
Karnataka Land Reforms Act, 1961 provided that no land
for which occupancy was granted, shall within 15 years
of the order of the Tribunal, be transferred by sale,
inter alia. A partition was permitted. Equally, a
mortgage could be effected to secure a loan. Drawing
support from Judgment of this Court in Kedar Nath
(supra), this Court, inter alia, as follows:
“15. The three-Judge Bench of this Court,
after referring to the aforesaid judgments,
70
speaking through M. Hidayatullah, J. (as his
Lordship then was), observes thus: (Kedar Nath
Motani case [Kedar Nath Motani v. Prahlad
Rai, (1960) 1 SCR 861 : AIR 1960 SC 213] , AIR
pp. 218-19, para 15)
“15. The correct position in law, in our
opinion, is that what one has to see is
whether the illegality goes so much to the
root of the matter that the plaintiff
cannot bring his action without relying
upon the illegal transaction into which he
had entered. If the illegality be trivial
or venial, as stated by Williston and the
plaintiff is not required to rest his case
upon that illegality, then public policy
demands that the defendant should not be
allowed to take advantage of the position.
A strict view, of course, must be taken of
the plaintiff's conduct, and he should not
be allowed to circumvent the illegality by
resorting to some subterfuge or by
misstating the facts. If, however, the
matter is clear and the illegality is not
required to be pleaded or proved as part of
the cause of action and the plaintiff
recanted before the illegal purpose was
achieved, then, unless it be of such a gross
nature as to outrage the conscience of the
Court, the plea of the defendant should not
prevail.”
16. It could thus be seen, that this Court has held
that the correct position of law is that, what
one has to see is whether the illegality goes
so much to the root of the matter that the
plaintiff cannot bring his action without
relying upon the illegal transaction into which
71
he had entered. This Court further held, that
if the illegality is trivial or venial and the
plaintiff is not required to rest his case upon
that illegality, then public policy demands that
the defendant should not be allowed to take
advantage of the position. It has further been
held, that a strict view must be taken of the
plaintiff's conduct and he should not be allowed
to circumvent the illegality by resorting to
some subterfuge or by misstating the facts.
However, if the matter is clear and the
illegality is not required to be pleaded or
proved as part of the cause of action and the
plaintiff recanted before the illegal purpose
is achieved, then, unless it be of such a gross
nature as to outrage the conscience of the
Court, the plea of the defendant should not
prevail.”
52. In Narayanamma (supra), this Court further held as
follows:
“24. The transaction between the late Bale
Venkataramanappa and the plaintiff is not
disputed. Initially the said Bale
Venkataramanappa had executed a registered
mortgage deed in favour of the plaintiff.
Within a month, he entered into an agreement
to sell wherein, the entire consideration
for the transfer as well as handing over of
the possession was acknowledged. It could
thus be seen, that the transaction was
nothing short of a transfer of property.
Under Section 61 of the Reforms Act, there
is a complete prohibition on such mortgage
or transfer for a period of 15 years from
72
the date of grant. Sub-section (1) of
Section 61 of the Reforms Act begins with a
non-obstante clause. It is thus clear that,
the unambiguous legislative intent is that
no such mortgage, transfer, sale, etc. would
be permitted for a period of 15 years from
the date of grant. Undisputedly, even
according to the plaintiff, the grant is of
the year 1983, as such, the transfer in
question in the year 1990 is beyond any
doubt within the prohibited period of 15
years. Sub-section (3) of Section 61 of the
Reforms Act makes the legislative intent
very clear. It provides, that any transfer
in violation of sub-section (1) shall be
invalid and it also provides for the
consequence for such invalid transaction.
25. Undisputedly, both, the predecessorin-title of the defendant(s) as well as the
plaintiff, are confederates in this
illegality. Both, the plaintiff and the
predecessor-in-title of the defendant(s)
can be said to be equally responsible for
violation of law.
26. However, the ticklish question that
arises in such a situation is:“the decision
of this Court would weigh in side of which
party”? As held by Hidayatullah, J. in Kedar
Nath Motani [Kedar Nath Motani v. Prahlad
Rai, (1960) 1 SCR 861 : AIR 1960 SC 213] ,
the question that would arise for
consideration is as to whether the plaintiff
can rest his claim without relying upon the
illegal transaction or as to whether the
plaintiff can rest his claim on something
73
else without relying on the illegal
transaction. Undisputedly, in the present
case, the claim of the plaintiff is entirely
based upon the agreement to sell dated 15-
5-1990, which is clearly hit by Section 61
of the Reforms Act. There is no other
foundation for the claim of the plaintiff
except the one based on the agreement to
sell, which is hit by Section 61 of the Act.
In such a case, as observed by Taylor, in
his “Law of Evidence” which has been
approved by Gajendragadkar, J. in Immani
Appa Rao [Immani Appa Rao v. Gollapalli
Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962
SC 370] , although illegality is not pleaded
by the defendant nor sought to be relied
upon him by way of defence, yet the Court
itself, upon the illegality appearing upon
the evidence, will take notice of it, and
will dismiss the action ex turpi causa non
oritur actio i.e. no polluted hand shall
touch the pure fountain of justice. Equally,
as observed in Story's Equity
Jurisprudence, which again is approved
in Immani Appa Rao [Immani Appa
Rao v. Gollapalli Ramalingamurthi, (1962) 3
SCR 739 : AIR 1962 SC 370] , where the
parties are concerned with illegal
agreements or other transactions, courts of
equity following the rule of law as to
participators in a common crime will not
interpose to grant any relief, acting upon
the maxim in pari delicto potior est
conditio defendentis et possidentis.”
53. This Court in Narayanamma (supra) finally found as
follows:
74
“28. Now, let us apply the other test laid
down in Immani Appa Rao [Immani Appa
Rao v. Gollapalli Ramalingamurthi, (1962) 3
SCR 739 : AIR 1962 SC 370] . At the cost of
repetition, both the parties are common
participator in the illegality. In such a
situation, the balance of justice would
tilt in whose favour is the question. As
held in Immani Appa Rao [Immani Appa
Rao v. Gollapalli Ramalingamurthi, (1962) 3
SCR 739 : AIR 1962 SC 370] , if the decree
is granted in favour of the plaintiff on
the basis of an illegal agreement which is
hit by a statute, it will be rendering an
active assistance of the court in enforcing
an agreement which is contrary to law. As
against this, if the balance is tilted
towards the defendants, no doubt that they
would stand benefited even in spite of their
predecessor-in-title committing an
illegality. However, what the court would
be doing is only rendering an assistance
which is purely of a passive character. As
held by Gajendragadkar, J. in Immani Appa
Rao [Immani Appa Rao v. Gollapalli
Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962
SC 370] , the first course would be clearly
and patently inconsistent with the public
interest whereas, the latter course is
lesser injurious to public interest than
the former.”
CASES OF CONDITIONAL DECREE OF SPECIFIC
PERFORMANCE
54. The decision, which first comes to mind and is
oft quoted, is the decision of the Privy Council in
75
Motilal v. Nanhelal5. The Court, in the said case,
affirmed the decision of the Judicial Commissioner,
decreeing a Suit for Specific Performance, taking note
of Section 50 of the Central Provinces Act of 1920,
which read as follows and the Court, inter alia, held
as follows thereafter:
“If a proprietor desires to transfer the
proprietary rights in any portion of his sir
land without reservation of the right of
occupancy specified in s. 49, he may apply
to a revenue-officer and, if such revenueofficer is satisfied that the transferor is
not wholly or mainly an agriculturist, or
that the property is self-acquired or has
been acquired within the twenty years past
preceding, he shall sanction the transfer.”
In view of the above mentioned construction
of the agreements of September 4, 1914—
namely, that Sobhagmal agreed to transfer
the cultivating rights in the sir land—there
was, in their Lordships' opinion, an implied
covenant on his part to do all things
necessary to effect such transfer, which
would include an application to the revenueofficer to sanction the transfer.”
55. In other words, in an agreement wherein the vendor
agrees to convey property, which is permissible only
with the permission of some Authority, the Court can,
5 AIR 1930 PC 287
76
in appropriate cases, grant relief. We need only notice
two recent Judgments which have reiterated the
principle, the first of which is reported in Vishwa
Nath Sharma v. Shyam Shanker Goela and another6, which
is relied upon, in fact, by the respondents. The
decision of this Court, again relied upon by the
respondents in Ferrodous Estates (Pvt.) Limited v.
Gopiratnam (Dead) and others7 also reiterates the said
view. In Ferrodous Estates (supra), the matter arose
under the Tamil Nadu Urban Land (Ceiling and
Regulation) Act, 1978. The High Court, in the impugned
Judgment, had dismissed the Suit for Specific
Performance, taking the view that till 1999, when the
Tamil Nadu Urban Ceiling Act was repealed, the
agreement was not enforceable. That apart, under the
agreement of sale, vacant land, in the aggregate,
exceeding the ceiling limit of the plaintiff, would
have to be conveyed to him, attracting the VETO
contained in Section 5(3) read with Section 6 of the
State Act. It was this view, which was reversed by this
6 (2007) 10 SCC 595
7 AIR 2020 SC 5041
77
Court, following the Judgments, which we have referred
to which relate to conditional decrees. This result was
arrived at by this Court, after finding that agreement
to sell contemplated transfer of the land only after
getting exemption. Clause (4) of the Agreement
contemplated that the vendor was to obtain permission
from the Competent Authority under the Urban Land
Ceiling Act. We need not multiply authorities. All that
is necessary to notice and find is that when an
agreement to sell is entered into, whereunder to
complete the title of the vendor and for a sale to take
place and the sale is not absolutely prohibited but a
permission or approval from an Authority, is required,
then, such a contract is, indeed, enforceable and would
not attract the shadow of Section 23 of the Indian
Contract Act, 1872.
CERTAIN OTHER DECISIONS
56. We may examine some of the decisions, which have
been referred to by the respondents. In the decision
reported in T. Dase Gowda v. D. Srinivasaiah8, a
8 (1990) SCC Online Karnataka 613
78
Division Bench of the High Court of Karnataka was
considering the Suit for Specific Performance in the
context of the very Rules, which arise before us. The
defendant/appellant in the said case, entered into an
oral agreement with the plaintiff therein on
01.09.1981, to sell the Suit site along with an
incomplete structure. The defendant received certain
amounts thereafter. This was followed by a written
agreement on 01.10.1981 wherein the defendant agreed
to sell. According to the plaint averments, the
plaintiff was put in possession and he completed the
construction. It was the plaintiff’s further case that
he was dispossessed by the defendant. The High Court,
under Point 6, considered the question whether
agreement was legally enforceable. The Court has
referred to Rule 18 of the Rules, which, apparently,
was invoked by the defendant. Answering the point, the
Court took the view that there was no transfer of
interest, which results from an agreement to sell and,
therefore, Rule 18(2)(a)(iii), did not apply, as there
was no alienation on a mere agreement to sell being
executed. The Court distinguished the decision, which
79
was relied upon by the defendant in the said case and,
interestingly, the appellant before us, viz., the
decision of a learned Single Judge in K. Chandrashekar
Hegde v. Bangalore City Corporation and N.B. Menon v.
Bangalore Development Authority9. We may further notice
that the high court in the said case took the view that
a period of ten years had expired even during 1985 and
there was no impediment with reference to the
enforceability, it was further found. It was next found
that the plaintiff in the said case was, on evidence,
found residing in a rented house and that he had
purchased the plaint schedule property for selfoccupation. It was found that the building which was
constructed was a residential one. It was, therefore
concluded that the element of public policy (public
interest) was also not affected. The court granted
decree for specific performance. In Yogambika V.
Narsingh10, a Division Bench, followed the decision in
T. Dase Gowda (supra), noting further that the earlier
decision had been affirmed by this Court by the
9 ILR 1988 KAR 356
10 ILR 1992 KAR 717
80
dismissal of the SLP by Order dated 17.07.1991. We may
notice also that, in its discussion, the Division
Bench, has laid store by the line of decisions
commencing with Motilal (supra).
57. In Subbireddy v. K.N. Srinivasa Murthy11, the
question fell for decision under Section (3) of the
Karnataka Village Offices Inam Abolition Act. The
Single Judge found that under the agreement, the
transfer was to be effected only after the expiry of
the period of non-alienation prescribed in Section 5(3)
of the Act in question. This case must be understood
in the light of the Clause which contemplated the sale
being affected, after the expiry of the period, during
which, the alienation was prohibited. The vendor was
to take permission for the execution of the sale deed.
58. In Syed Zaheer and others v. C.V. Siddveerappa12,
a Division Bench decreed a Suit for Specific
Performance wherein the agreement contemplated
execution of sale deed, after the period of nonalienation prescribed under the grant. The Suit was
11 AIR 2006 Karnataka 4
12 ILR 2010 Karnataka 765
81
filed, in fact, after the lapse of the period of fifteen
years.
59. In Balwant Vithal Kadam v. Sunil Baburaoi Kadam13,
this Court rejected the contention that the agreement,
which was sought to be specifically enforced, fell foul
of Section 48 of the Maharashtra Cooperative Societies
Act. It was found that an agreement to sell did not
create an interest in land unlike a sale.
60. In Punjab & Sind Bank v. Punjab Breeders Ltd. and
another14, this Court was dealing with a case of the
effect of violation of the conditions, under which, a
one-time settlement was extended. The conditions
included the stipulation that the mortgaged property
should not be sold for three years without prior
permission, inter alia. An agreement to sell was found
not to be a sale.
61. In Suraj Lamp & Industries (P) Ltd. (2) Through
Director v. State of Haryana and another15, this Court,
while dealing with the effect of what has been
13 (2018) 2 SCC 82
14 (2016) 13 SCC 283
15 (2012) 1 SCC 656
82
described as GPA Sales in Delhi, inter alia, and
considering the scope of an agreement to sale, declared
that “a transfer of immovable property by way of sale,
can only be by a Deed of Conveyance (Sale Deed)”. No
title is transferred by a mere agreement to sell, it
was further found.
62. In K. Chandrashekar Hegde (supra), which is relied
upon by the appellant, a Single Judge of the High Court
of Karnataka, was dealing with batch of Writ Petitions.
Among the issues, which prominently arose, was the
objection taken to the construction of multi-storey
buildings, wherein claims were made on the basis of
allotment under the Act, as repealed by the Bangalore
Development Act and the Rules. The learned Single Judge
has elaborately considered the scheme of the Rules. He
has further explored the impact of the Forms prescribed
under the Allotment Rules, 1964 and similar provisions
were found in the subsequent Rules. This Judgment has
been distinguished by the Judgment in T. Dase Gowda
(supra).
83
63. Jambu Rao Satappa Kocheri v. Neminath Appayya
Hanamannayar16 is an important decision. This Court was
dealing with a Suit for Specific Performance. One of
the questions, which arose was whether the enforcement
of the contract, would defeat the provisions of the
Bombay Tenancy and Agricultural Lands Act, 1948. The
appellant before this Court had agreed to sell 41 acres
and odd of jairayat land. Under Section 5 of the Act,
the ceiling area, inter alia, was prescribed as 48
acres of jairayat land. Section 34 of the Act provided
as follows – “Subject to the provisions of Section 35,
it shall not be lawful, with effect from the appointed
day, for any person to hold, whether as owner or tenant
or partly as owner and partly as tenant, land in excess
of the ceiling area”. Section 35 declared acquisition
of land in excess of the area prescribed in Section 34,
as invalid. Section 84-C, reads as follows:
“(1) Where in respect of the transfer of
acquisition of any land made on or after the
commencement of the amending Act, 1955, the
Mamlatdar suo motu or on the application of
any person interested in such land has
reason to believe that such transfer or
16 AIR 1968 SC 1358
84
acquisition is or becomes invalid under any
of the provisions of this Act, the Mamlatdar
shall issue a notice and hold an inquiry as
provided for in Section 84-B and decide
whether the transfer or acquisition is or
is not invalid.
(2) If after holding such inquiry, the
Mamlatdar comes to a conclusion that the
transfer or acquisition of land is invalid,
he shall make an order declaring the
transfer or acquisition to be invalid.
(3) On the declaration made by the
Mamlatdar under sub-section (2),—
(a) the land shall be deemed to vest
in the State Government, free from all
encumbrances lawfully subsisting
thereon on the date of such vesting, and
shall be disposed of in the manner
provided in sub-section
(4); ***”
64. The contention taken by the defendant was that the
plaintiff was already holding 31 acres and 2 guntas of
jairayat land and, therefore, by acquiring the plaint
schedule property by way of the decree the plaintiff,
would hold land in excess of the ceiling area. We may
notice the following discussion with specific reference
to Section 23 of the Indian Contract Act, in
particular:
85
“6. By Section 23 of the Contract Act,
consideration or object of an agreement is
unlawful if it is forbidden by law; or is
of such a nature that, if permitted, it
would defeat the provisions of any law; or
is fraudulent. Both the parties to the
contract are agriculturists. By the
agreement the appellant agreed to
sell jirayat land admeasuring
41 acres 26 gunthas for a price of Rs
32,000. The consideration of the agreement
per se was not unlawful, for there is no
provision in the Act which expressly or by
implication forbids a contract for sale of
agricultural lands between two
agriculturists. Nor is the object of the
agreement to defeat the provisions of any
law. The Act has imposed no restriction upon
the transfer of agricultural lands from one
agriculturist to another. It is true that
by Section 35 a person who comes to hold,
after the appointed day, agricultural land
in excess of the ceiling, the lands having
been acquired either by purchase,
assignment, lease, surrender or by bequest,
the acquisition in excess of the ceiling is
invalid. The expression “acquisition of such
excess land shall be invalid” may appear
somewhat ambiguous. But when the scheme of
the Act is examined, it is clear that the
legislature has not declared the transfer
or bequest invalid, for Section 84-C
provides that the land in excess of the
ceiling shall be at the disposal of the
Government when an order is made by the
Mamlatdar. The invalidity of the acquisition
is therefore only to the extent to which the
holding exceeds the ceiling prescribed by
86
Section 5, and involves the consequence that
the land will vest in the Government.
xxx xxx xxx
8. An agreement to sell land does not
under the Transfer of Property Act create
any interest in the land in the purchaser.
By agreeing to purchase land, a person
cannot be said in law to hold that land. It
is only when land is conveyed to the
purchaser that he holds that land.
Undoubtedly the respondent was holding some
area of land at the date of the agreement
and at the date of the suit, but on that
account it cannot be inferred that by
agreeing to purchase land under the
agreement in question his object was to hold
in excess of the ceiling. It was open to the
respondent to transfer or dispose of the
land held by him to another agriculturist.
The Act contains no general restrictions
upon such transfers, and unless at the date
of the acquisition the transferee holds land
in excess of the ceiling, the acquisition
to the extent of the excess over the ceiling
will not be invalid. There is nothing in the
agreement, nor can it be implied from the
circumstances, that it was the object of the
parties that the provisions of the Act
relating to the ceiling should be
transgressed. The mere possibility that the
respondent may not have disposed of his
original holding at the date of the
acquisition of title pursuant to the
agreement entered into between him and the
appellant will not, in our judgment, render
the object of the agreement such, that, if
87
permitted, it would defeat the provisions
of any law. The Court, it is true, will not
enforce a contract which is expressly or
impliedly prohibited by statute, whatever
may be the intention of the parties, but
there is nothing to indicate, that the
legislature has prohibited a contract to
transfer land between one agriculturist and
another. The inability of the transferee to
hold land in excess of the ceiling
prescribed by the statute has no effect upon
the contract, or the operation of the
transfer. The statutory forfeiture incurred
in the event of the transferee coming to
hold land in excess of the ceiling does not
invalidate the transfer between the parties.
9. We hold that a contract for purchase
of land entered into with the knowledge that
the purchaser may hold land in excess of the
ceiling is not void, and the seller cannot
resist enforcement thereof on the ground
that, if permitted, it will result in
transgression of the law.”
65. We may cull out the ratio in the following terms:
Whatever may be intention of the parties, a
contract which is expressly or impliedly
prohibited by a Statute, may not be enforced by
the Court. The Bombay Act did not prohibit a
contract of sale of agricultural land between two
agriculturists. The invalidity of the acquisition
88
of land in excess, involved the consequence that
the land would vest in the Government. In the
context of the said Act, the Court has taken the
view that a person can be said to hold land only
when it is conveyed to him, which would not take
place when there is a mere agreement to sell. The
further reasoning of the Court appears to be that
it is open to the buyer to transfer or dispose of
land already held by him to another agriculturist
and unless at the date of acquisition, the buyer
held the land in excess of the ceiling limit, the
acquisition to the extent of the excess over the
ceiling, would not be invalid. It was further
declared that the mere possibility that the
respondent/buyer may not have disposed of his
original holding on the date of acquisition of
title under the agreement to sell, would not render
the object of the agreement such that, if
permitted, it would defeat the provisions of any
law. Thus, the contract was found to be not void.
89
66. This Judgment came to be followed in Bhagat Ram v.
Kishan and others17. In the said case, the question
arose under Section 23 of the Delhi Rent Reforms Act,
1954, in a Suit for Specific Performance. Section 23
reads as follows:
“23. Use of holding for industrial
purposes.—(1) A Bhumidhar or Asami shall not
be entitled to use his holding or part
thereof for industrial purposes, other than
those immediately connected with any of the
purposes referred to in Section 22, unless
the land lies within the belt declared for
the purpose by the Chief Commissioner by a
notification in the Official Gazette:
Provided that the Chief Commissioner may,
on application presented to the Deputy
Commissioner in the prescribed manner,
sanction the use of any holding or part
thereof by a Bhumidhar for industrial
purposes even though it does not lie within
such a belt.”
67. This Court in Bhagat Ram (supra) held as follows:
“5. Bhumidhari right is transferable and the
Defendant 1 is entitled to use the land even
for the purpose other than those enumerated
in Section 22 if he obtains permission of
the Chief Commissioner. Therefore, the
agreement for transfer of land does not
become invalid by itself. The Defendant 1
after obtaining the property could use it
for the intended purpose on obtaining
permission of the Chief Commissioner or if
no such permission was obtained, he could
17 (1985) 3 SCC 128
90
use the land for the purposes authorised
under Section 22 of the Act. In our opinion,
the High Court went wrong in holding that
the agreement was opposed to public policy
or transfer under the agreement was hit by
Section 23 of the Act. Support for our view
is available from the decision of this Court
in Jambu Rao Satappa Kocheri v. Neminath
Appayya Hanammannaver [AIR 1968 SC 1358 :
(1968) 3 SCR 706] . The suit by the plaintiff
for declaration that the agreement is bad
had rightly been dismissed by the trial
court as also the first appellate court and
the High Court on an erroneous view reversed
the same. In our opinion the suit is liable
to be dismissed.”
68. We have set out the provisions of the Rules and
the lease-cum-sale agreement. Before we deal with the
question as to whether the agreement in question, falls
foul of Section 23 of the Indian Contract Act, we shall
deal with the contention raised by the respondent that
there is no law, as understood in this case, which
would be defeated by the agreement and what is holding
the field is only the Rules. It is true that this Court
in Union of India v. Col. L.S.N. Murthy18, has observed
as follows:
“17. In Pollock & Mulla, Indian Contract
and Specific Relief Acts, 13th Edn., Vol. I
18 (2012) 1 SCC 718
91
published by LexisNexis Butterworths, it is
stated at p. 668:
“The words ‘defeat the provisions of
any law’ must be taken as limited to
defeating the intention which the
legislature has expressed, or which is
necessarily implied from the express
terms of an Act. It is unlawful to
contract to do that which it is unlawful
to do; but an agreement will not be
void, merely because it tends to defeat
some purpose ascribed to the legislature
by conjecture, or even appearing, as a
matter of history, from extraneous
evidence, such as legislative debates
or preliminary memoranda, not forming
part of the enactment.”
It is thus clear that the word “law” in the
expression “defeat the provisions of any law”
in Section 23 of the Contract Act is limited
to the expressed terms of an Act of the
legislature.”
69. With respect, the principle laid down, does not
commend itself to us. We do agree that the illegality
cannot be a matter of conjecture nor the purpose
divined by the Court from parliamentary debates. But
that is not to say that as found by this Court in AIR
1968 SC 1358 (supra), which decision was not considered
by this Court, that it cannot be implied. But we must
find that the Court was dealing with a Notification,
which was, in fact, a ‘letter’ written by the
92
Government of India. We can have no quarrel with the
proposition that a ‘letter’ cannot be law within the
meaning of Section 23 of the Indian Contract Act. The
Court, in the said case, was not dealing with
Subordinate Legislation in the form of Statutory Rules.
The Rules in question before us are, undoubtedly,
Statutory Rules. Therefore, we do not think it is
necessary for us to refer the matter to a larger Bench
on account of the observations found in the Judgment
in paragraph-17. What is contemplated under Section 23
of the Indian Contract Act is law, in all its forms,
being immunised from encroachment and infringement by
a contract, being enforced. Not only would a Statutory
Rule be law within the meaning of Article 13 of the
Constitution of India but it would also be law under
Section 23 of the Indian Contract Act.
70. Section 10 of the Contract Act declares as to what
agreements are contracts and all agreements are
declared contracts, if they are made by the free
consent of parties competent to contract with a lawful
consideration and with the lawful object and not
expressly declared to be void under the Contract Act.
93
Section 23 must be read with Section 10. Without the
illustrations, Section 23, reads as follows:
“23. What consideration and objects are
lawful, and what not. —The consideration or
object of an agreement is lawful, unless— —
The consideration or object of an agreement
is lawful, unless—" it is forbidden by
law; 14 or is of such a nature that, if
permitted, it would defeat the provisions
of any law; or is fraudulent; or involves
or implies, injury to the person or property
of another; or the Court regards it as
immoral, or opposed to public policy. In
each of these cases, the consideration or
object of an agreement is said to be
unlawful. Every agreement of which the
object or consideration is unlawful is
void.”
71. The very first head under which an agreement become
unlawful is, when the consideration or object of agreement
is forbidden by law. In regard to the same, we may notice
the view of a Bench of three learned Judges in Gherulal
Parakh v. Mahadeodas Maiya and others19. Therein, quoting
from Pollock and Mullah from their work Indian Contract
Act, this Court has stated as follows:
“8. xxx xxx xxx
An act or undertaking is equally forbidden
by law whether it violates a prohibitory
19 AIR 1959 SC 781
94
enactment of the Legislature or a principle of
unwritten law. But in India, where the criminal
law is codified, acts forbidden by law seem
practically to consist of acts punishable under
the Penal Code and of acts prohibited by
special legislation, or by regulations or
orders made under authority derived from the
Legislature.”
(Emphasis supplied)
72. In regard to the Commentary by the very same Author,
under the Second Head of “illegal object or consideration”
in Section 23 of the Contract Act, viz., if the
consideration or object is of such a nature that if
permitted, it would defeat the provisions of any law, it
is that, this Court took the view that law for the purpose
of Section 23 would be, law made by the Legislature. Quite
apart from the fact that what is involved in the said case
was only a letter, the Judgment of this Court in Gherulal
Parakh (supra) and the Commentary from the very same
Author, was not noticed by this Court. Therefore, it
becomes all the more reason as to why we need not refer
the matter to a larger Bench. We may also notice that
‘law’, for the purposes of Clauses (1) and (2) cannot be
different. It is very clear that Regulations or Orders
made under the Authority derived from the Legislature
referred to by this Court, are species of subordinate
95
legislation. Statutory Rules would also, therefore,
clearly be law.
73. In the facts of this case, the question would,
therefore, be, as to whether the enforcement of the
agreement to sell dated 17.11.1982, expressly or
impliedly, lead to palpably defeat the law in question,
which is contained in the Statutory Rules or is prohibited
by the same.
74. A contract may expressly or impliedly, be
prohibited by provisions of a law. The intentions of
the parties do not salvage such a contract. [See AIR
1968 SCC 1328 (supra)]. What is involved in this case,
may not be a mere case of a conditional decree for
specific performance being granted as was the case in
the line of decisions commencing with Motilal (supra)
and ending with Ferrodous Estates (supra). The Rules
contemplate a definite scheme. Land, which is acquired
by the Public Authority, is meant to be utilised for
the particular purpose. The object of the law is to
invite applications from eligible persons, who are to
be selected by a Committee and the sites are allotted
96
to those eligible persons, so that the chosen ones are
enabled to put up structures, which are meant to be
residential houses. It is implicit in the Rules, and
what is more, in the lease-cum-sale agreement, that the
allottee, who is treated as a lessee under Rule 7, will
remain in possession and, what is more, proceed to
fulfil his obligation under the lease-cum-sale
agreement and the Rules. The obligations of the
allottee/lessee are unambiguous. He has held himself
out to be in dire need of a plot of land for the purpose
of constructing a residential building. He has to
disclose his annual income and any other means
indicating his capacity, not only to purchase the site
applied for but also to construct the house. He has
to respond to the query as to whether any member of the
family, of which he is a member, owns or has been
allotted a site or a house by the Board or any other
Authority, within the area under jurisdiction of the
Board. The applicant must, furthermore, disclose
whether he already owns a house or house site in the
city or outside the city. Whether the applicant’s wife,
husband or minor child owns a house or house site, is
97
another matter, he must disclose. Incorrect information
in any of these matters, would entitle the Board to
resume the site. Rule 11 specifically announces among
the principles as relevant for selecting an applicant
for allotment, the income of the applicant to build the
house on the site for his residence. No doubt, it is
not applicable to certain classes, which include the
other backward classes. Rule 11(3) declares further
that the number of years, the applicant has been
waiting for allotment of a site, inter alia, as a
relevant principle.
75. It may be true that as contended by Shri R. Basant,
learned senior counsel for the respondent that despite
the fact no building was put up by the allottee, the
BDA has not deemed it fit to cancel the allotment. We
gather the impression that the BDA has been lax in the
pursuit of the lofty goals of the law. We do not pursue
the matter further as BDA is not a party.
76. If the agreement between plaintiff and the first
defendant is taken as it is and it is enforced, the
following would be the consequences. The allotment to
98
the first defendant was made on 04.04.1979. In fact,
the first defendant was obliged, in law, to construct
a residential building within two years under Rule
17(6). No doubt, the time could be extended thereunder.
But, at the time, the agreement dated 17.11.1982 was
entered into, the first defendant was already in
breach. The result, however, of the agreement dated
17.11.1982, is as follows:
The first defendant would be liable to convey
the right in the site to the plaintiff. The price
would be Rs.50,000/- for the site, proceeding on
the basis of the concurrent findings by the Court.
This is on the supposition that the parties
contemplated that the site would be conveyed after
the period of ten years from the date of allotment
upon the expiry of which alone, the allottee, viz.,
the first defendant would be entitled to the
conveyance under Rule 17(7) of the Rules. It must
be noticed that in fact, under the lease-cum-sale
agreement and the Rules, what is contemplated is
that on events leading up to the stage where the
elements of Rule 17(7) are satisfied alone, a right
99
or duty would accrue to the allottee/ lie upon the
party. However, what is more important in the
context of the facts of this case is the following
facet.
Under the agreement, the parties contemplated
and have expressly provided that the plaintiff was
to be put in possession of the site on the date of
the agreement, i.e., on 17.11.1982. Did the parties
contemplate the construction of the building
residential in nature, for the purpose of which,
the site was allotted to the first defendant? Is
it not a clear case where enforcing the agreement,
as it is, would necessarily result in the first
defendant not acting in accordance with lease-cumsale agreement, which, she entered into with the
BDA and, what is even more crucially important,
against the mandate of the law, as contained in
the Rules, which contemplated that the allotment
was made for the construction of a residential
building by the allottee and the construction was
to be completed within the period of two years or
an extended period? The agreement between the
100
parties contemplated giving a short shrift to the
mandate of the law. This is clear from the fact
that under the agreement, the first defendant was
obliged to sell the site as it is. Construction of
the building became a practical impossibility. The
price, which was agreed upon, was qua the site
alone. The consideration and the other terms of
the agreement, in other words, ruled out the
possibility of a residential building being
constructed by the first defendant, who as the
allottee, was, under the law, obliged to construct
the building. Assuming for a moment that the
construction was put up, which assumption must be
premised on possession not being handed over to
the plaintiff and which is contrary, not only to
the terms of the agreement, but also pleading of
the plaintiff and the consistent stand in the
evidence adduced on behalf of the plaintiff and
even proceeding, however, on the basis that as
found by the Trial Court, that the plaintiff has
failed to establish that possession was handed over
to him on the date of agreement and that the
101
possession continued with the first defendant, the
terms of the agreement, which included, the price
being fixed for conveying the right for the site,
necessarily, would have the effect of freezing the
first respondent in even attempting to put up a
construction.
77. We, therefore, reject the contention of the
plaintiff that there was nothing, which could have
prevented putting up a building. The argument of
plaintiff involves rewriting of the contract. This is
different from a situation where an allottee, without
being trammelled by an agreement, is unable to put up
a building even for the whole of ten years and action
is not taken under Rule 17(6) and yet conveyance is
made in his favour under Rule 17(7). The direct impact
of the agreement is that it compelled the party to
abstain from performing its obligation in law apart
from breaching the agreement with BDA. In other words,
taking the agreement as it is, it necessarily would be
in the teeth of the obligation in law of the first
respondent to put up the construction. The agreement
to sell involved clearly terms which are impliedly
102
prohibited by law in that the first defendant was
thereunder to deliver title to the site and prevented
from acting upon the clear obligation under law. This
is a clear case at any rate wherein enforcing the
agreement unambiguously results in defeating the
dictate of the law. The ‘sublime’ object of the law,
the very soul of it stood sacrificed at the altar of
the bargain which appears to be a real estate
transaction. It would, in other words, in allowing the
agreement to fructify, even at the end of ten-year
period of non-alienation, be a case of an agreement,
which completely defeats the law for the reasons
already mentioned.
78. Going by the recital in the agreement entered into
between the plaintiff and the first defendant,
possession is handed over by the first defendant to the
plaintiff. The original Possession Certificate is also
said to be handed over to the plaintiff. The agreement,
even according to the plaintiff, contemplated that
within three months of conveyance of the site in favour
of the first defendant, the first defendant was to
convey her rights in the site to the plaintiff. It is
103
quite clear that the parties contemplated a state of
affairs which is completely inconsistent with and in
clear collision with the mandate of the law. On its
term, it stands out as an affront to the mandate of the
law.
79. The illegality goes to the root of the matter. It
is quite clear that the plaintiff must rely upon the
illegal transaction and indeed relied upon the same in
filing the suit for specific performance. The
illegality is not trivial or venial. The illegality
cannot be skirted nor got around. The plaintiff is
confronted with it and he must face its consequences.
The matter is clear. We do not require to rely upon
any parliamentary debate or search for the purpose
beyond the plain meaning of the law. The object of the
law is set out in unambiguous term. If every allottee
chosen after a process of selection under the rules
with reference to certain objective criteria were to
enter into bargains of this nature, it will undoubtedly
make the law a hanging stock.
104
80. To elucidate the matter a little further, let us
take another example. If the agreement was entered into
by the first defendant, under which, the first
defendant would abide by her obligations, both under
the lease-cum-sale agreement and, more importantly, the
Rules and were to put up a building and the agreement
contemplated, conveying the site along with the
building, to a buyer after the expiry of ten years and
upon getting the conveyance from the BDA, such an
agreement, perhaps, being not an alienation in itself,
may have passed muster.
81. At this juncture, we must also deal with the
argument of the plaintiff that the agreement to sell
is not a sale and, what is prohibited under the Rules
and lease-cum-sale agreement, was only alienation.
There can be no quarrel with the proposition that no
interest in property could be conveyed by a mere
agreement to sell. But the question is, whether the
agreement to sell in this case is in the teeth of
Section 23 of the Contract Act. For reasons, which we
have indicated, on a conspectus of the scheme of the
105
Rules, we have no hesitation in holding that the
contract was unenforceable for reason that it clearly,
both expressly and impliedly, would defeat the object
of the Rules, which are statutory in nature. The
contract was patently illegal for reasons already
indicated.
82. Now, let us look at it from a different
perspective. The agreement is dated 17.11.1982. We
have noticed the correspondence by the plaintiff. We
have also noticed the terms of the agreement between
the plaintiff and the first defendant. In the first
letter sent by the plaintiff which incidentally was
within four months of the date of agreement, the
plaintiff called upon the first defendant to execute
the sale deed. There is no mention about the first
defendant attempting to sell the property to anybody.
It is noteworthy that the plaintiff has stated that he
intends to sell the property to his nominee. This
further indicates that he was not a person who was in
need of this site for the purposes of putting up of
residential building unlike even the plaintiff in the
case considered by the High Court of Karnataka and
106
relied upon by the plaintiff, namely, T. Dase Gowda v.
D. Srinivasaiah (supra). We have already noticed the
command of the law as contained in Rule 18(3) of the
Rules read with Rule 17. If an allottee who is treated
as a lessee for reasons which are indicated in Rule
18(3) wishes to sell the site (which is applicable in
this case as no building has been put up) then he can
sell the site only as was provided in Rule 18(3), that
is to say, if going by the correspondence by the
plaintiff wherein the first defendant was called upon
to execute the sale deed of the site, this would be
clearly in the teeth of Rule 18(3), the scope of which
has already explained. The plaintiff could not have
asked for decree commanding the first defendant to sell
the site in terms of the correspondence with which he
began communicating with the first defendant. In other
words, a sale of a site to any other person clearly
stood prohibited and unless the allottee/lessee is
compelled to sell in the circumstances mentioned in
Rule 18(3) the law permitted the sale of the site only
to the authority itself. Therefore, if the plaintiff
wanted to enforce the agreement for the sale of the
107
site on an immediate basis it would clearly attract the
embargo that it was completely prohibited.
IS THE SUIT PREMATURE? SCOPE OF ARTICLE 54
OF THE LIMITATION ACT.
83. The further question which is raised by the second
defendant is that the suit itself was pre-mature. We
have found that the trial court has entered into a
clear finding that there is absolutely no evidence to
support the projected apprehension that first defendant
was about to dispose of the property. There is no
material to support the finding otherwise. In fact, any
such sale would have been completely illegal being
prohibited by law as that is the inevitable and
necessary implication flowing from Rule 18(3). There
is absolutely no foundation for the plaintiff to have
instituted the suit except perhaps the repudiation.
84. One of the contentions, which is raised by the
learned Counsel for the second defendant is that, under
Article 54 of the Limitation Act, 1963, the period of
limitation would begin to run from the time of
repudiation of the agreement to sell only when the
108
contract does not provide for the time at which the
contract is to be performed. In other words, the
contention of the second defendant is that the
agreement dated 17.11.1982, contemplated, even
according to the plaintiff, in Clause 4 that the first
defendant must convey the title within a period of
three months from the date on which, BDA conveyed the
title to her. According to the second defendant,
therefore, in this case, the time for performance of
the obligation by the vendor, was fixed. Therefore,
there was no need for the plaintiff and, what is more,
no justification for the plaintiff, to institute the
Suit prematurely, almost four years prior to the
appointed date.
85. Article 54 of the Limitation Act, reads as follows:
“54. Suits for Specific Performance. 3 years.
The date fixed for the performance, or, if no
such date is fixed, when the plaintiff has
notice that performance is refused.”
86. Article 54 contemplates that when a date is fixed for
the performance of the contract, then, the period of
limitation begins to run from that date. When such a date
109
is not fixed in an agreement to sell, then, refusal or
breach by the vendor will start the clock ticking.
87. However, we may notice, in this regard, what the Court
has opined. In Ramzan v. Hussaini20, a Bench of two learned
Judges of this Court took the view that the word ‘date’ in
Article 54, need not be expressly mentioned in an agreement
and it can be found out from the other terms of the
agreement. If this were so, there may be merit in the
second defendant contention. In a later decision, a Bench
of three learned Judges in Ahmadsahab Abdul Mulla (2)
(dead) v. Bibijan and others21, has, however, taken the
view that the word ‘the date’ in Article 54, means that
the specific date must be indicated in an agreement as the
date of performance. No doubt, the Court, in fact, went
on to distinguish the earlier decision Ramzan v. Hussaini
(supra) and held as follows:
“Para 5. In Tarlok Singh's case (supra) the factual
scenario was noticed and the case was decided after
referring to Article 54 of the Schedule to the
Act. Ramzan's case (supra) related to
the specific performance of contingent contract. It
was held that the expression “date fixed for
performance” “need not be ascertainable in the face
of the contract deed and may be ascertainable on the
20 (1990) 1 SCC 104
21 (2009) 5 SCC 462
110
happening of a certain contingent event specified in
the contract”.
Para 8. The judgments in Ramzan and Tarlok
Singh cases (supra) were rendered in a different
factual scenario and the discussions do not throw
much light on the controversy at hand.
Para 11. The inevitable conclusion is that the
expression “date fixed for the performance” is a
crystallized notion. This is clear from the fact
that the second part "time from which period begins
to run" refers to a case where no such date is fixed.
To put it differently, when date is fixed it means
that there is a definite date fixed for doing a
particular act. Even in the second part the stress
is on “when the plaintiff has notice that performance
is refused”. Here again, there is a definite point
of time, when the plaintiff notices the refusal. In
that sense both the parts refer to definite dates.
So, there is no question of finding out an intention
from other circumstances.”
88. No doubt, the Court took the view, inter alia, that
the Judgment in Ramzan v. Hussaini (supra), was a case of
a contingent contract. It could still be argued that the
rights of the defendant were only that, if all went well,
and the BDA conveyed the title to her, she was to convey
her rights within a period of three months. We would think
that in the facts of this case, we need not disturb the
finding of the High Court particularly when we find that
the contract itself is unenforceable.
IS IT A NEW CASE?
111
89. Yet another objection raised by the plaintiff is that
the Court must not permit the plea of the appellant that
the contract was void or that it was unenforceable and
that it is a new point. Quite apart from the fact and
ignoring even the same that before the Trial Court, the
second additional issue was, as to whether the contract
was void but not ignoring the first point which was raised
by the High Court, which was as to whether the Suit was
maintainable, wherein the High Court has discussed the
matter, it appears to us to be a question of law, which is
to be applied to facts, which are not in dispute and,
therefore, we reject the said contention. Even absent a
plea by the defendant illegality by putting the contract
side by side with the Rules is writ large.
IMPACT OF ABSENCE OF PRAYER QUESTIONING
REPUDIATION BY FIRST DEFENDANT?
90. The second defendant has raised a contention that
since the first defendant has repudiated the contract and
as the plaintiff has not prayed for a declaration that the
repudiation was bad, the Suit would not lie. Reliance is
placed on the judgment of this Court in I.S. Sikandar
112
(Dead) by Lrs. v. K. Subramani and others22. In the said
judgment, we find that this Court has taken the view that
when the vendor has cancelled the agreement, it is
incumbent upon the vendee to seek a declaration that the
cancellation was illegal. This is what the Court has held:
“Para 36. Since the Plaintiff did not perform his
part of contract within the extended period in the
legal notice referred to supra, the Agreement of
Sale was terminated as per notice dated 28.03.1985
and thus, there is termination of the Agreement of
Sale between the Plaintiff and Defendant Nos. 1-4
w.e.f. 10.04.1985.
Para 37. As could be seen from the prayer sought for
in the original suit, the Plaintiff has not sought
for declaratory relief to declare the termination of
Agreement of Sale as bad in law. In the absence of
such prayer by the Plaintiff the original suit filed
by him before the trial court for grant of decree
for specific performance in respect of the suit
schedule property on the basis of Agreement of Sale
and consequential relief of decree for permanent
injunction is not maintainable in law.”
91. The said view has been followed in the judgment of
this Court reported in Mohinder Kaur v. Sant Paul Singh23.
We do not however need to rest our decision to non-suit
the plaintiff on this score in view of our finding that
the agreement dated 17.12.1982 should not be enforced.
22 (2013) 15 SCC 27
23 (2019) 9 SCC 358
113
LIS PENDENS
92. The Doctrine of Lis Pendens is based on the maxim
“pendente lite nihil innovetur”. This means that
pending litigation, nothing new should be introduced.
Section 52 of the Transfer of Property Act, 1882 (for
short, ‘the TP Act’), which incorporates the Doctrine
of Lis Pendens, is based on equity and public policy.
It pours complete efficacy to the adjudicatory
mechanism. This is done by finding that any
disposition of property, as described in the Section
by a party to the litigation will, in not any way,
detract from the finality of the decision rendered by
the court. It is clear that it is not based on the
ground of Notice as laid down by Lord Craanworth in
Bennamy v. Sabine, which has been followed by the Privy
Council in the decision in 34 Indian Appeals 102. We
may notice the following discussion in this regard in
“The Transfer of Property, by Mulla, 12th Edition:
“The rule is, therefore, based not on
the doctrine of notice, but on expediency,
ie, the necessity for fine adjudication. It
is immaterial whether the alienee pendente
lite had, or had not, notice of the pending
proceeding. This is, of course, no longer
114
the case in England, or in Gujarat and
Maharashtra, where the doctrine only affects
transactions pendente lite if the lis has
been duly registered.”
93. It is further important to notice that when a
transaction is done, lis pendens or pending a case, the
transaction is, as such, not annulled. The transaction
is, in other words, not invalidated. In fact, as
between the transferor and the transferee, it does not
lie in the mouth of the transferor to set up the plea
of lis pendens to defeat the disposition of property.
Equally, the Principle of Lis Pendens is, not to be
confounded with the aspect of good faith or bonafides.
In other words, the transferee or the beneficiary of
the property, which is disposed of by a party, cannot
set up the case that he acted bonafide or in good faith.
This enables the court and the parties in a Suit or a
proceeding, which otherwise is in conformity with
requirements of Section 52, to proceed in the matter
on the basis that the adjudication by the court, will
not, in any way, be subverted or delayed, when the day
of final reckoning arrives.
115
94. The cardinal and indispensable requirement, which
flows both from Section 52 and the principle, it
purports to uphold, is that the transfer or dealing of
the property, which is the subject matter of the
proceeding, is carried out by a party to the
proceeding. Section 52 uses the word ‘party’ twice. It
refers to the disability of a party to transfer or
otherwise deal with the property, pending adjudication.
This embargo is intertwined with the beneficiary of the
veto against such transfer, being any other party
thereto. In fact, the Special Bench of the Madras High
Court in Manjeshwara Krishnaya v. Vasudeva Mallya and
Four Others24, puts the Doctrine of Lis Pendens as an
extension of the Doctrine of Res Judicata. Thus, the
sine qua non for the Doctrine of Lis Pendens to apply
is that the transfer is made or the property is
otherwise disposed of by a person, who is a party to
the litigation. The Doctrine of Lis Pendens, only
subject, however, the transfer or other disposition of
property to the final decision that is rendered. The
24 AIR 1918 Madras 578
116
person/party, who finally succeeds in the litigation,
can ask the court to ignore any transfer or other
disposition of property by any party to the proceeding.
This is subject to the condition that transfer or other
disposition is made during the pendency of the lis.
95. The first defendant died pending the Suit on
06.08.1994. Her death was reported before the Court on
16.01.1995. The plaintiff brought on record, the
husband of the first defendant by Order dated
25.08.1995, as defendant No. 1(a). Defendant No. 1(b),
who is the son of the second defendant, sold the
property on 19.09.1996, in favour of the appellant. It
is thereafter that on 09.04.1997, the predecessor in
interest of the appellant, viz., the son of the first
defendant, and the second defendant were impleaded on
09.04.1997. The transfer made in favour of the second
defendant was, therefore, made at a time, when the son
of the first defendant was not a party to the Suit.
Therefore, it is that the contention was taken before
the Trial Court successfully by appellants that the
transfer in favour of the appellant was not hit by
Doctrine of Lis Pendens.
117
96. The High Court in the impugned Judgment reversed
this finding. The High Court, in doing so, employs,
inter alia, the following reasoning:
“78. The position of law with regard to the
rights and obligation of a dead person can
be succinctly stated thus: The rights which
a dead man thus leaves behind him vests in
his representative. They pass to some person
whom the dead man, or the law on his behalf,
has appointed to represent him in the world
of the living. This representative bears the
person of the deceased, and therefore, has
vested in him all the inheritable rights,
and has imposed upon him all the inheritable
liabilities of the deceased. Inheritance is
in some sort a legal and fictitious
continuation of the personality of the dead
man, for the representative is in some sort
identified by the law with him whom he
represents. The rights which the dead man
can no longer own or exercise in propria
persona, and the obligations which he can
no longer in propria persona fulfil, he
owns, exercises, and fulfils in the person
of a living substitute. To this extent, and
in this fashion, it may be said that the
legal personality of a man survives his
natural personality, until, his obligations
being duly performed, and his property duly
disposed of, his representation among the
living is no longer called for. Just as many
of a man's rights survive him, so also do
many of his liabilities; and these
inheritable obligations pass to his
representative, and must be satisfied by
him. As far as the estate of a dead man is
concerned, there are two class of persons
who are entitled to it, namely, creditors
and beneficiaries. A beneficiary possesses
118
a dual capacity, while he may benefit by
inheriting the dead man's estate is also
liable to the dead man's obligations. He
survives even after his death, especially
the obligations concerning immovable
property. The beneficiaries who are entitled
to the residue after satisfaction of the
creditors, are of two classes: (1) those
nominated by the last will of the deceased
and (2) those appointed by the law in
default of any such nomination. They succeed
respectively by testamentary succession (ex
testamento) or intestate succession (ab
intestate) (source: Salmond on
Jurisprudence Twelfth Edition, P.J.
Fitzgerald). Section 2(11) of the Code of
Civil Procedure, 1908 (CPC) defines legal
representative to mean a person who in law
represents the estate of a deceased person,
and includes any person who intermeddles
with the estate of the deceased and where a
party sues or is sued in a representative
character the person on whom the estate
devolves on the death of • the party so suing
or sued. The aforesaid definition is both
exhaustive as well as an inclusive
definition. It is exhaustive in the sense
that a legal representative means a person
who in law represents the estate of
immovable property. The beneficiaries who
are entitled to the residue after
satisfaction of the creditors, are of two
classes: (1) those nominated by the last
will of the deceased and (2) those appointed
by the law in default of any such
nomination. They succeed respectively by
testamentary succession (ex testamento) or
intestate succession (ab intestate)
(source: Salmond on Jurisprudence Twelfth
Edition, P.J. Fitzgerald).”
119
97. Thereafter, the High Court proceeded to consider
the distinction between a legal representative as
defined in Section 2(11) of the Code of Civil
Procedure, 1908 and legal heirs. Still further, the
Court also considered the scheme of Order XXII of the
CPC and finally proceeds to find as follows:
“79. … Even though defendant No. 1(b) was
not arrayed along with his father as a legal
heir of the deceased defendant No.1, the
fact remains that the estate of defendant
No.1, which also includes the suit schedule
property was represented through defendant
No. 1(a), the husband of defendant No.1.
Therefore, the contention that the sale that
was made by defendant No. 1(b) in favour of
defendant No.2 when defendant No. 1(b) was
not a party to the suit is not subject to
any direction that may be issued in the
suit, and that Sec. 52 of the Act would not
apply in the instant case is not a correct
understanding of the position of law.
Further, in the instant case, defendant
No.1(a) also did not inform the trial court
that his son was also a legal representative
of deceased defendant No.1 and therefore,
he also ought to be brought on record as the
heir of the deceased defendant No.1 when the
application was filed by the plaintiff to
bring only him on record as legal heir of
deceased defendant No.1. Therefore, it is
held that in ' the instant case, the estate
of the defendant No.1 was represented
through defendant No.1(a) in the suit and
that the alienation made by defendant
No.1(b) to defendant No.2, even in the
absence of defendant No.1(b) being made a
party to the suit has no significance.
120
That apart, it is also noted from the
evidence of defendant No.2, who has deposed
as DW-1, that when the talks for the sale
of the suit property took place in June,
1996, defendant No.1(a) along with defendant
No.1(b) and the broker Battanna were
present. The reason as to why defendant
No.1(a) did not disclose about the pendency
of the suit when he was by then arrayed as
the legal heir of deceased defendant No.1
in the said suit is for obvious reasons.
Defendant No.1(a) did not disclose about the
pendency of the suit to defendant No.2 only
with an intention to deprive the right of
the plaintiff in the suit property i.e., by
creating third party rights in the said
property. Also, it cannot be believed that
defendant No.1 (b ), though not arrayed as
a legal representative of deceased defendant
No.1 (his mother) at that point of time was
totally unaware about the pendency of the
suit. The legal heirs of deceased defendant
No.1 namely her husband and only son resided
at the same address. Therefore,
constructive, if not actual, notice has to
be attributed to defendant No. l(b)
regarding the pendency of the suit. By
selling the same to defendant No.2 would
result in plaintiff's right being
jeopardised. As already noted from the
evidence of DW-1 and 2, talks for the sale
of the suit site by defendant Nos.1 (a) and
l(b) were held with defendant No. in the
first week of June, 1996. In fact, at that
point of time, the BDA had not yet conveyed
the site in the name of the defendant
No.1(b). BOA did so only on 14/06/1996. …”
The High Court has relied on the decision of the Madras
High Court in Nallakumara Goundan v. Pappayi Ammal and
121
Another25. In the said case, after the death of the
party, a legal representative disposed of the plaint
schedule property within the period provided for
substituting the dead person with the legal
representative. It was in the said context held by the
Madras High Court as under:
“…The same principle should, I think,
apply to a case where as here the original
defendant died and the alienation was
made after his death and before the filing
of the application to bring his legal
representative on record. The suit must
be deemed to be pending against the legal
persona of the deceased i.e., against
his legal representative and must be
deemed to continue until at least the
expiration of the time limited by any law
of limitation to bring him on record.
Whether if an application is made long
after the expiration of the time fixed
for bringing the legal representative on
record and an alienation is made by the
legal representative and later on the
plaintiff in the action seeks to set aside
the abatement and to bring the legal
representative on record, and that is
ordered, the doctrine of lis pendens
applies or not does not arise and need
not be considered. There may be
difficulties in such a case, but where
the alienation is made within the time
prescribed for bringing the legal
representative on record, it is a clear
case and there can be no doubt whatever
that the rule does apply…”
25 AIR 1945 Mad 219
122
98. Thereafter, the Court concluded that in the
circumstances, Section 52 of the TP Act squarely
applied.
99. It would appear that the High Court has, in
arriving at the finding that the transfer in favour of
the appellant is hit by lis pendens, taken into
consideration the Doctrine of Notice/Constructive
Notice. We have already observed that the Doctrine of
Notice and Constructive Notice would be inapposite and
inapplicable. Neither the fact that the transferee had
no notice nor the fact that the transferee acted
bonafide, in entering into the transaction, are
relevant for applying Section 52 to a transaction.
This is unlike the requirement of Section 19(1)(b) of
the Specific Relief Act whereunder these requirements
are relevant.
100. The decision of the Madras High Court in
Nallakumara Goundan (supra) turned on in its own facts
as indicated by the said court itself. In other words,
that was a case where even within the period of
limitation for substitution of the legal representative
123
of a deceased party in a suit, the legal representative
purported to deal with the property. It was in the said
context that the court proceeded to hold that lis
pendens would apply. In this case the transfer in
favour of the second defendant took place on
16.09.1996. The vendor and the vendee namely defendant
1(b) and the second defendant were not parties on the
date of the transaction. They were impleaded only
almost one year thereafter. No doubt we are not
oblivious to the role played by defendant 1(a) namely
the husband of the first defendant who gave his ‘no
objection’ to the assignment of the entire rights in
favour of his son namely defendant 1(b) without which
BDA could not have assigned the right in favour of
defendant 1(b). Though not urged by the plaintiff,
could it be said that as defendant 1(a) was already a
party and this must be treated as a case were defendant
1(a) as ‘otherwise dealt’ with the property within the
meaning of Section 52 without which the title would not
vest in defendant 1(b). A transfer which is made lis
pendens it is settled law, is not a void document. It
does create rights as between the parties to the sale.
124
The right of the party to the suit who conveys his
right by a sale is extinguished. All that Section 52
of the Transfer Property Act provides is that the
transfer which is made during the pendency of the
proceeding is subjected to the final result of the
litigation. Even assuming for a moment that the conduct
of defendant 1(a) the father of defendant 1(b), in
giving a no objection and thereby enabling defendant
1(b) to derive the title exclusively to the property
and which title stood conveyed to the second defendant
attracted, the principle of lis pendens, it would still
not invalidate the sale. At best, the plaintiff can
contend that, should he be entitled for a decree of
performance the sale in favour of the second defendant
should be subjected to such decree. As far as the
transfer is made by defendant 1(b) to the second
defendant in his own right and in so far as defendant
1(b) was not a party and by the time the sale was
effected the period of limitation for impleading
defendant 1(b) had already clearly expired even the
principle laid down in the decision of the Madras High
Court would not apply and the High Court was not correct
125
in finding that the sale by defendant 1(b) in favour
of second defendant was hit by lis pendens.
IS THE SECOND DEFENDANT, A BONAFIDE PURCHASER?
101. The Trial Court has found that the second defendant
is a bonafide purchaser. The High Court holds
otherwise. The purchase of the Suit site is purported
to be made by the second defendant on 17.09.1996. The
High Court, after going through the evidence, enters
the following findings.
The negotiations took place first time in June,
1996 and, at that time, the Suit was pending.
The BDA has not yet registered the conveyance in
favour of defendant 1(b). Even before the BDA
executed the sale deed in favour of defendant
1(b), he had decided to enter into the agreement.
The conveyance in favour of defendant 1(b) was
entered only on 14.06.1996 and he executed the
sale deed in favour of the second defendant on
19.09.1996. The second defendant has deposed
that he met not just DW2 along with the broker
but he had also met the father of DW2, viz.,
126
defendant 1(a), who was arrayed as the legal
representative of the first defendant. Only
photocopies of documents were given to the second
defendant before the sale. Defendant No.2 did
not make any inquiry about the original. It must
be presumed that second defendant had notice of
the agreement to sell the Site in respect of
which the Decree for Specific Performance was
sought. The Court, then, referred to Section 3
of the TP Act and brings in the concept of
constructive notice. Had the second defendant
made inquiries with regard to the original
possession certificate, the truth would have
been revealed. Much is said about no inquiry is
being made about the original possession
certificate. The High Court notes that the
agreement to sell with the plaintiff is not
registered but, again, it draws inference from
absence of inquires by the second defendant about
why the original possession certificate was not
handed over to him. The fact that defendant 1(a)
did not reveal to the second defendant about the
127
pendency of the Suit, is, on the one hand noted
but the Court holds that even then, the second
defendant ought to have made inquiry about
pendency of any litigation. The fact that second
defendant 1(b) as DW2 admitted that he had no
material to support the fact that he had received
Rs.4,50,000/-, was a very valuable in mid 1990s,
if considered.
The Court questions the idea that second
defendant who was only 20 years of age and
involved in agricultural operations and milk
vending business, who had no intention of
settling in Bangalore, would have thought of
purchasing a site in Bangalore. The amount of
consideration was not deposited in any bank. The
Court proceeds to hold that on an overall
reappreciation, it was found that he was not a
bonafide purchaser for value without notice.
Thereafter the High Court further proceeds to
pose the question as to why the second defendant,
who is the resident of Nagamangala Taluk, engaged
in agricultural operation and milk vending
128
business, should enter into an agreement in
Bangalore, that too, when he is 20 years old.
Betanna-the alleged broker, was not examined.
Thereafter, the High Court proceeds to even find
that the entire transaction between defendant
No. 1(b) and the second defendant is a sham
transaction, made only to defeat the plaintiff.
In the next paragraph, however, applying
Sections 3 and 54 of the TP Act, it is again
found that the second defendant is not a bonafide
purchaser for value. Finally, it was found, by
answering point No.2, that second defendant is
not a bonafide purchaser for value without notice
of the agreement to sell in favour of the
plaintiff.
102. We must, in the first place, notice that on a
perusal of the plaint, even after the amendment, there
is no case set up by the plaintiff that the sale deed
executed in favour of the second defendant, is a sham
transaction. A sale deed, which is a mere sham and a
purchase, which is not bonafide, are two different
things. In the case of sham transaction, no title is
129
conveyed to the purchaser. In the case a sale
transaction, which is not a sham, the title of the
transfer is, indeed, conveyed to the transferee. A
purchase may be bonafide or not bonafide. In a sale,
which is not a bonafide, words “bonafide sale”, is used
in the context of pending Suit and from the point of
view of Section 19(1)(b) of the Specific Performance
Act. It is difficult to dub it as a sham transaction.
A transaction cannot be a sham transaction and a sale,
which is afflicted with absence of bonafides, at the
same time. Even proceeding on the basis that the second
defendant was not a bonafide purchaser, it is not the
same thing as holding that it is a sham transaction.
103. In the plaint, which was amended, the plaintiff
has averred, inter alia, as follows:
“lOC. The Plaintiff submits that taking
advantage of the fact that the son
was not on record, the husband
accorded no objection in favour
of the BDA so as to ensure that
the Sale Deed was executed in
favour of HK Sudarshan alone and
thereafter the Second legal
representative sold the Schedule
Property in favour of the Second
Defendant. The Plaintiff submits
that the Defendants are aware of
the pendency of the suit and of
130
the subsistence of the Agreement
of Bale in favour of the
Plaintiff. The Sale Deed en
executed in favour of the said
person i.e., the Second Defendant
is hit by the Doctrine of lis
pendens and the Second
Defendant's title to the Schedule
Property is subject to the outcome
of the present suit.
10D. The Plaintiff submits that the
Second Defendant is not a bonafide
purchaser for value. The sale in
favour of the Second Defendant is
with the sole intention of
complicating the matters in
controversy and to prejudice the
case of the Plaintiff. Therefore,
the Plaintiff submits that the
Sale Deed executed in favour of
the Second Defendant does not in
any way restrict the right of the
Plaintiff to seek Specific
Performance of the Agreement of
Sale executed in favour of the
Plaintiff.”
104. Therefore, we are inclined to hold, in the first
place that the High Court erred in finding that the
transaction was a sham transaction. As far the
question, as to whether second defendant was not a
bonafide purchaser, it is the case of the second
defendant that the High Court has erred in not noticing
that in the evidence, the second defendant deposed that
his vendor disclosed to him that the original
131
possession certificate was lost and produced duplicate
possession certificate. This evidence is incongruous
with the finding of the High Court that the second
defendant had not made any inquiry as to why the
original possession certificate was not handed over.
The second defendant had deposed about inquiry being
made and being informed that the original possession
certificate was lost. The second defendant further
complains that the High Court itself has found that the
vendor of the second defendant has admitted that no
information was given to the second defendant regarding
the pendency of the Suit and, therefore, the High Court
has erred in reversing the finding of the Trial Court,
which had found that inquiry as contemplated in Section
3 of the TP Act had been made by the second defendant
for purchasing the property. Second Defendant had
visited the Site. The finding based on defendant being
20-years old or the husband of the vendor, being an
MLA, was pointed out to be irrelevant. It is further
the case of the second defendant that construction was
made and he is living in the property since more than
132
17 years. The value of the property is stated to be
about 2.5 crores.
105. Per contra, the learned Senior Counsel for the
plaintiff, would support the finding of the High Court.
It was pointed out that the High Court is the final
fact-finding Court.
106. We have already found that the sale in favour of
the second defendant is wrongly found to be a sham
transaction, a case, which even the plaintiff did not
have. If it is not a sham transaction and the issue is,
as to whether the second defendant, is not a bonafide
purchaser, the following aspect looms large.
107. We have already found that the agreement to sell
dated 17.11.1982, is to be painted with the brush of
illegality and pronounced unenforceable. It is
undisputed that the plaintiff has paid Rs.50,000/- on
the strength of the said agreement. It would appear to
be true that a part of this amount was received on the
date of the agreement. It may be true that further
amount were received by defendant 1(a), the husband of
the first defendant. The first defendant died pending
133
the Suit. It is while the Suit was pending that
defendant 1(b), the son of the first defendant, had
executed the sale deed on 16.09.1996 in favour of the
second defendant. It is again undisputed that at the
time when the sale deed was executed, both the second
defendant and his vendor, defendant 1(b), were not
parties in the Suit. We have already found that the
sale deed in favour of the second defendant, cannot be
treated as a sham transaction and the finding, in fact,
on point No.2 by the High Court, also that the second
defendant is not a bonafide purchaser. Once we come to
the conclusion that the agreement, relied upon by the
plaintiff, cannot be enforced, as to whether, even
proceeding on the basis that the sale in favour of the
second defendant was made, not in circumstances which
would entitle the second defendant to set up the case
that he is a bonafide purchaser, the question of
granting relief to the plaintiff must first be decided.
In other words, in view of the illegality involved in
enforcing the agreement dated 17.11.1982, the question
would arise, whether, on principles, which have been
settled by this Court, the Court should assist the
134
plaintiff or the defendant. We have noted the state of
the evidence, in particular, as it is revealed from the
deposition of PW2. We have found that the agreement,
relied upon by the plaintiff, cannot be acted upon. In
such circumstances, we would think that, even if we do
not reverse the finding of the High Court that the
second defendant is not a bonafide purchaser, it will
not itself advance the case of the plaintiff. This is
for the reason that his case is in the teeth of the
law, as found by us, making it an unenforceable
contract. The plaintiff is seeking the assistance of
the Court which must be refused.
108. We, therefore, need not explore further the
complaint of the second defendant that the High Court
erred in arriving at the finding that the second
defendant was not a bonafide purchaser.
NOT A CASE UNDER ARTICLE 136?
109. Is it a case which should not be allowed under
Article 136? The argument of the plaintiff is that
having regard to the facts as it emerges this is not a
fit case for this court to exercise its jurisdiction
135
which originated from grant of special leave under
Article 136. It is undoubtedly true that at both the
stages namely while granting special leave and also
even after special leave has been granted under Article
136 that is when the court considers an appeal the
court would not be oblivious to the special nature of
the jurisdiction it exercises. It is not axiomatic that
on a case being made otherwise that the court would
interfere. The conduct of the parties and the question
as to whether interference would promote the interests
of justice are not irrelevant considerations. Being the
final court, it is not without reason that this court
is accordingly also clothed with the extraordinary
powers under Article 142 to do compete justice between
the parties.
110. There is another aspect which is also projected by
the plaintiff which must receive our attention. The
plaintiff sought to persuade us should the court find
the agreement to sell unenforceable for the reason that
it falls foul of Section 23 of the Contract Act, it may
declare the law but not interfere with the judgment of
the High Court.
136
111. We are of the view that on both these grounds we
are not with the plaintiff. It is not a case where the
condition of the plaintiff is such that the interests
of justice would overwhelm our findings that the
agreement relied upon by the plaintiff constituted a
clear intrusion into the requirement of the law. In
fact, we would consider the contract an open and brazen
instance of parties entering into a bargain with scant
regard for the law. If that were not enough, the very
first letter addressed to the first defendant dated
01.03.1983 betrays the real purpose of the contract.
The plaintiff in no uncertain terms has declared his
intention to sell the property to his nominee. It is
clear as day light that the plaintiff had no intention
whatsoever to make use of the site for the purpose of
putting up a residential building. The communications
indicate that the plaintiff was a contractor. The
evidence of PW 2 his son further indicated that he has
been in the business since 1960. What is even more
revealing is the admission relating to the properties
belonging to or in the possession of the plaintiff and
his family members which we have dealt with. The final
137
nail in the coffin, as it were, is driven home in the
case by showing the case of the plaintiff in its true
colours when PW 2 deposed that if the suit is dismissed
it would occasion ‘a monetary loss’. Thus, the bargain
was to buy up precious public land which was vested
with the Bangalore Development Authority by acquiring
it from some person with the laudable object of housing
a homeless person in Bangalore. The result of the
agreement being enforced would be to clearly frustrate
the object of the law and make the site the subject
matter of a property deal with the object of making a
profit.
112. The upshot of the above discussion is, we must hold
that the High Court has clearly erred in holding that
the Suit was maintainable. We would find that the Suit
to enforce the agreement dated 17.11.1982, should not
be countenanced by the Court.
113. Then, the question would arise, as to the final
Order to be passed in the facts. While, we are inclined
to overturn the impugned Judgment by holding that the
Suit itself, was not maintainable, we must notice that
138
the High Court had decreed the Suit on the appeal by
the plaintiff. The defendants did not challenge the
Decree of the Trial Court. Therefore, the setting aside
of the Judgement of the High Court would not result in
dismissal of the Suit. What is more, we are of the
further view that to do complete justice between the
parties, while we allow the appeals, we must pass an
Order, which will result in a fair amount being paid
to the plaintiff. Having regard to the entirety of the
evidence and the conduct of the parties, noticing even
the admitted stand of the second defendant that the
plaint schedule property has a value of Rs.2.5 crores
and the plaintiff has paid, in all, a sum of Rs.50,000/,
which constituted the consideration for the agreement
to sell several years ago, while we dismiss the Suit
for Specific Performance, we should direct the
appellants to pay a sum of Rs.20,00,000/- in place of
the Decree of the Trial Court.
114. Accordingly, Appeals are allowed. The impugned
Judgement shall stand set aside. The Suit for Specific
Performance will stand dismissed. There will be a
Decree, however, for payment of Rs.20,00,000/-(Rupees
139
twenty lakhs) by the appellants to the respondents (the
Legal Representatives of the plaintiff) within a period
of three months from today. If the aforesaid amount is
not paid as aforesaid, the appellants shall be liable
to pay interest at the rate of 8 per cent per annum
after the expiry of 3 months from today on the said
amount as well. Parties are directed to bear their
respective costs.
………………………………………………………………………J.
[K.M. JOSEPH]
………………………………………………………………………J.
[PAMIDIGHANTAM SRI NARASIMHA]
NEW DELHI;
DATED: JANUARY 18, 2022.
