G.T. Girish vs Y Subba Raju (D) By Lrs

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]

JUDGMENT

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 Signature Not Verified Digitally signed by Rajni Mukhi Date: 2022.01.18 17:44:09 IST

paid by the plaintiff under the contract. By the Reason:

1

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

2 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.

3

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)

4 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

5 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 6 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 7 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 lease-

cum-sale agreement nor the Rules, prohibited the

allotee entering into an agreement to sell the site. 8 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 9 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

10 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.

11 (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 12 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.”

13

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 14 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-cum- sale 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 15 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.

16 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 house- site 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.

17 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

18 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

19 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.

20

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 21 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 22 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 bye-

laws of the Board or the Corporation, as the case may be, for the time being in force.

23

(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 24 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, bye-

laws 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. —

25

(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

26 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 27 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

28 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

29 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 30 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.

31 “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

32 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.

33

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

34 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.”

35

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 36 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 37 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 38 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 39 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.

40

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.

41

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:

42

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 lease-

cum-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, 43 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 44 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 45 ‘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

46 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

47 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 48 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 49 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

50 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 51 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

52 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

53 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.

54

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

55

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 non-

alienation 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 56 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 57 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

58 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 59 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 60 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 61 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 62 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

63 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 64 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. …”

65

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] 66 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].” 67

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 mis- stating 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 68 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, 69 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

70 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

71 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 predecessor-

in-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

72 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:

73

“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

74 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 revenue- officer 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 revenue- officer 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 75 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 76 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 77 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 78 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 self-

occupation. 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 79 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 non-

alienation prescribed under the grant. The Suit was

11 AIR 2006 Karnataka 4 12 ILR 2010 Karnataka 765 80 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 81 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).

82

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 83 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:

84

“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 85 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 86 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

87 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.

88 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 89 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 90 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

91 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. 92 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 93 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 94 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

95 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 96 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

97 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 98 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-cum-

sale 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 99 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 100 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 101 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 102 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.

103

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

104 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 105 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 106 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

107 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

108 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 462 109 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?

110

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

111 (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 358 112 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 113 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.

114

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 578 115 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.

116

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 117 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).”

118

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.

119 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

120 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 219 121

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

122 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. 123 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 124 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.,

125 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 126 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 127 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 128 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 129 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 130 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

131 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

132 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 133 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

134 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.

135

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 136 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

137 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 138 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.

139