In a significant judgment, the Supreme Court has ruled that a plaintiff seeking specific performance of an agreement to sell is not required to seek cancellation of a subsequent sale deed executed by the seller, even if the plaintiff was aware of it before filing the suit.
The ruling came in Civil Appeal No. 6782 of 2013, titled Maharaj Singh & Ors. vs Karan Singh (Dead) Through Legal Representatives & Ors. A two-judge bench comprising Justice Abhay S. Oka and Justice Sanjay Karol delivered the judgment.
Background:
The case pertains to a dispute over a 2.90 acre agricultural land in Uttarakhand. In 1981, the original first defendant executed a registered agreement to sell the land to the plaintiffs for Rs 20,300. However, in 1983, before executing the sale deed, the first defendant sold the land to other defendants through two separate sale deeds.
The plaintiffs then filed a suit for specific performance of the 1981 agreement. The trial court, first appellate court and the High Court all ruled in favor of the plaintiffs, granting a decree for specific performance.
Key Legal Issues:
1. Whether the plaintiffs were required to seek cancellation of the subsequent sale deeds in their suit for specific performance?
2. Whether the subsequent purchasers could be considered bona fide buyers without notice of the original agreement?
3. Whether evidence could be led to show the original agreement was sham, despite Sections 91 and 92 of the Evidence Act?
Court’s Decision:
On the first issue, the Supreme Court held that there was no requirement for the plaintiffs to seek cancellation of the subsequent sale deeds. The court relied on its earlier larger bench ruling in Lala Durga Prasad & Ors. v. Lala Deep Chand & Ors. (1953), which held that in such cases, the proper form of decree is to direct specific performance of the original contract and direct the subsequent transferee to join in the conveyance to pass on the title.
The court observed: “Therefore, there was no requirement to make a prayer in the plaint for cancellation or setting aside the subsequent sale deeds.”
On the second issue, the court ruled that the subsequent purchasers could not be considered bona fide buyers without notice, as the original agreement was registered and they were deemed to have constructive notice under Section 3 of the Transfer of Property Act.
Regarding the third issue, the court held that while evidence can be led to show if parties intended to contract as per the document, in this case, the contention that the agreement was sham came as an afterthought and was not pleaded properly.
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The court partly allowed the appeal, modifying the decree to grant specific performance for only half the property to the first plaintiff, as the second plaintiff had not supported the claim. It also directed the defendants to apply for necessary government permission for the sale within two months.
Quoting the judgment, the court emphasized: “When, in a given case, the defendants, who are subsequent purchasers, fail to prove that they entered into the sale deed in good faith and without notice of the suit agreement, in view of Section 19(b), a decree for specific performance can be passed against such defendants.”
