Back
2000(5) Supreme 147
SUPREME COURT OF INDIA
(From Madras High Court)
D.P. Mohapatra & Shivaraj V. Patil, JJ.
R.K. Mohammed Ubaidullah & Ors. -Appellants
versus
Hajee C. Abdul Wahab (D) by LRs. & Ors. -Respondents
Civil Appeal No. 5182 of 1993
Decided on 18-7-2000
Counsel for the Parties :
For the Appellants : A.T.M. Sampath and V. Balaji, Advocates.
For the Respondents : K. Parasaran, Sr. Advocate, Krishnamurthi Swami and Mrs. Prabha Swami, Advocates.
Held : Section 19(b) protects the bona fide purchaser in good faith for value without notice of the original contract. This protection is in the nature of exception to the general rule. Hence the onus of proof of good faith is on the purchaser who takes the plea that he is an innocent purchaser. Good faith is a question of fact to be considered and decided on the facts of each case. Section 52 of the Penal Code emphasizes due care and attention in relation to the good faith. In the General Clauses Act emphasis is laid on honestly. (Para 14)
Notice is defined in Section 3 of the Transfer of Property Act. It may be actual where the party has actual knowledge of the fact or constructive. "A person is said to have notice" of a fact when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought to have made, or gross negligence, he would have known it. Explanation II of said Section 3 reads :
"Explanation II-Any person acquiring any immoveable property or any share or interest in any such property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof."
Section 3 was amended by the Amendment Act of 1929 in relation to the definition of notice . The definition has been amended and supplemented by three explanations, which settle the law in several matters of great importance. For the immediate purpose Explanation-II is relevant. It states that actual possession is notice of the title of the person in possession. Prior to the amendment there had been some uncertainty because of divergent views expressed by various High Courts in relation to the actual possession as notice of title. A person may enter the property in one capacity and having a kind of interest. But subsequently while continuing in possession of the property his capacity or interest may change. A person entering the property as tenant later may become usufructuary mortgagee or may be agreement holder to purchase the same property or may be some other interest is created in his favour subsequently. Hence with reference to subsequent purchaser it is essential that he should make an inquiry as to title or interest of the person in actual possession as on the date when sale transaction was made in his favour. The actual possession of a person itself is deemed or constructive notice of the title if any, of a person who is for the time being in actual possession thereof. A subsequent purchaser has to make inquiry as to further interest, nature of possession and title under which the person was continuing in possession on the date of purchase of the property. (Para 15)
In the case on hand defendants 2 to 4 contended that they were already aware of the nature of possession of the plaintiff over the suit property as a tenant and as such there was no need to make any inquiry. At one stage they also contended that they purchased the property after contacting the plaintiff, of course, which contention was negatived by the learned trial Court as well as the High Court. Even otherwise the said contention is self-contradictory. In view of Section 19(b) of the Specific Relief Act and definition of notice given in Section 3 of the Transfer of Property Act read along with explanation II, it is rightly held by the trial Court as well as by the High Court that the defendants 2 to 5 were not bona fide purchasers in good faith for value without notice of the original contract. The trial Court as well as the High Court have given reasons based on evidence and have indicated several circumstances for not accepting the version of defendants 2 to 4 that they had no knowledge of the prior agreement A-3; one of the circumstances being that the parties are neighbours in place of business as well as in residential locality. We have also already referred to that briefly. It is clear that the defendants 2 to 5 were not bona fide purchasers for value without prior notice of the original contract and that they were required to make inquiry as to the nature of possession or title or further interest if any of the plaintiff over the suit property at the time when they entered into sale transaction notwithstanding they were already aware that the plaintiff was in possession of the property as the tenant. What is material is the inquiry at the time when subsequent sale transaction was entered into. (Paras 15, 18 and 19)
Key Points: - The onus of proof of good faith lies on the purchaser who claims to be an innocent purchaser (!) . - Actual possession of immovable property is deemed constructive notice of the title of the person in possession to any person acquiring an interest in that property (!) (!) . - A subsequent purchaser is required to make inquiries about the title or interest of the person in actual possession at the time of the sale transaction (!) (!) . - Being neighbors in business and residential localities can be a circumstance leading to the inference that subsequent purchasers had notice of a prior agreement (!) (!) . - Wilful abstention from inquiry or gross negligence in investigating the nature of possession can lead to constructive notice for a subsequent purchaser (!) (!) . - The protection afforded to a bona fide purchaser for value without notice is an exception to the general rule regarding specific performance (!) . - The trial court and High Court found that the defendants were not bona fide purchasers in good faith for value without notice of the original contract (!) (!) . - The appeal was dismissed, confirming the judgment and decree of the lower courts (!) . - The plaintiff was in possession of the suit property as a tenant for about 20 years prior to the suit [1000046690007]. - The defendants 2 to 5 purchased the property despite the plaintiff's prior agreement and possession [1000046690007].
JUDGMENT
Shivaraj V. Patil, J.-The unsuccessful Defendants 2 to 5 in both the courts below in a suit for specific performance are the appellants herein. Hereinafter the parties will be referred to as arrayed in the original suit No. 241/71. Briefly stated the facts leading to filing of this appeal are : The Plaintiff filed the original suit in the Court of the Principal Subordinate Judge, Vellore for specific performance of the contract and other reliefs. According to the plaintiff, the suit scheduled property belonged to the defendant No. 1. He is carrying on business in hardware in the premises Door No 39, Long Bazar, Vellore, the property belonging to the brother of the first defendant. He is in exclusive occupation and possession of the suit property Door No. 36 as a tenant of the first defendant from about 1962 on a monthly rent of Rs. 200 using it as godown for his business purpose. The Defendants 2-4 and the husband of the 5th defendant are also hardware merchants carrying on similar business in adjoining shop Door No. 38. The first defendant intended to sell the suit property and intimated the plaintiff about the same and requested him to permit intending purchasers and brokers to inspect the property. The first defendant offered to sell the property to the Plaintiff also. The plaintiff intimated Shri Yousuf Sharif, the husband of the 1st defendant by letter dated 8.1.1971 that he was interested in purchasing it. In July, 1971 one Tangvelli Chetty, the broker of the first defendant informed the plaintiff that the first defendant was prepared to sell the property to him. Therefore, the plaintiff and his son went to the house of the first defendant at Madras and negotiated. The first defendant agreed to sell the suit property to the Plaintiff for a sum of Rs. 55,000/-. Accordingly, the first defendant executed the agreement on 27.7.1971 having received a sum of Rs. 10,000/- as advance. It was agreed that the first defendant should execute the sale deed within 90 days from the date of the agreement after receiving the balance of sale price of Rs. 45,000/-. The plaintiff was always ready and willing to perform his part of the contract. The first defendant refused to execute the sale deed even after receiving notice from the plaintiff for completing the sale transaction taking a stand that the plaintiff had issued a notice asking her to execute the sale deed before the expiry of the 90 days fixed under the agreement. According to the first defendant, the notice was issued by the plaintiff before the expiry of 90 days only to create litigation. While the correspondence was going on between the plaintiff and the first defendant, the defendants 2 to 4 and the husband of the 5th defendant brought into existence a sale deed executed and registered on 9.11.1971 for a sum of Rs. 50,000/- at Madras. The first defendant dishonestly sold the suit property to the defendants 2-5 who had knowledge of the prior agreement dated 27.7.71 executed in favour of the plaintiff. The subsequent transaction of sale by the defendant No. 1 in favour of defendants 2 to 5 was not bona fide. Hence the plaintiff filed the suit for specific performance and other reliefs against the defendants 1 to 5.
2. The first defendant filed the written statement resisting the suit among others that the plaintiff was not ready and willing to purchase the property as per the conditions in the agreement within the specified time of 90 days. However, the defence set up by the first defendant was struck off as per order dated 23.7.1974 of the trial Court passed in I.A. No. 1050 of 1973.
3. The defendants 2 to 4 filed the written statement stating that the plaintiff be put to strict proof of everyone of the allegations made in the plaint in regard to the execution of the suit agreement. They also claimed that they were bona fide purchasers of the suit property for value without notice of the prior agreement of sale executed in favour of the plaintiff. The 5th defendant remai
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
