2011 (1) LW 940, 2011 (1) MWN(Civil) 702
High Court of Judicature at Madras
R.S. RAMANATHAN
D. Kamalavathi
Versus
P. Balasundaram (deceased) & Others
Second Appeal No.62 of 1997
Decided on : 31-01-2011
Specific Performance - Agreement of Sale - Specific Relief Act, 1983 - Section 19(b) - [Specific Performance - Agreement of Sale - Specific Relief Act, 1983 - Section 19(b)] - The court discussed the provisions of Section 19(b) of the Specific Relief Act, which protects bona fide purchasers for value without notice of the original contract. The onus of proof of good faith is on the purchaser, and the court emphasized the importance of making inquiries and obtaining encumbrance certificates to establish bona fide purchase for value without notice. The court held that the subsequent purchasers did not discharge their burden of proving themselves as bona fide purchasers for value, as they failed to make necessary inquiries and did not demonstrate good faith in the purchase.
Fact of the Case:
The plaintiff filed a suit for specific performance of an agreement of sale against the first respondent for failing to execute the sale deed. The Trial Court decreed the suit, but the first appellate court reversed the decision, holding that respondents 2 and 3 were bona fide purchasers for value. The second appeal raised substantial questions of law regarding the bona fide purchase for value without notice.
Finding of the Court:
The court found that the subsequent purchasers did not discharge their burden of proving themselves as bona fide purchasers for value, as they failed to make necessary inquiries and did not demonstrate good faith in the purchase.
Issues: The issues revolved around whether the subsequent purchasers were bona fide purchasers for value without notice, as per Section 19(b) of the Specific Relief Act, and whether they had fulfilled the requirements of good faith and due diligence in the purchase.
Ratio Decidendi: The court emphasized the importance of making inquiries and obtaining encumbrance certificates to establish bona fide purchase for value without notice. It held that the subsequent purchasers did not discharge their burden of proving themselves as bona fide purchasers for value, as they failed to make necessary inquiries and did not demonstrate good faith in the purchase.
Final Decision: The court allowed the second appeal, set aside the judgment and decree of the lower appellate court, and restored the judgment and decree of the Trial Court in favor of the appellant.
1. The plaintiff is the appellant.
2. The plaintiff filed the suit for specific performance of an agreement of sale dated 27.10.1987, Ex.A1 executed between the plaintiff/appellant and the first respondent herein for a consideration of Rs.5750/=. The case of the plaintiff/appellant was that an agreement of sale, Ex.A1 was entered into between him and the first respondent herein who was the first defendant in the suit for a consideration of Rs.5700/= and he paid a sum of Rs.3500/= towards sale consideration and one year time was stipulated for completing the sale and as per the agreement of sale, documents of title were handed over to her and as the first defendant failed to execute the sale deed, she issued a notice and thereafter, obtained the encumbrance certificate and found that the first defendant sold the properties to defendants 2 and 3 under a registered sale deed and respondents 2 and 3 were aware of the sale agreement in her favour and they are not bona fide purchasers of title and therefore, filed the suit for specific performance of agreement of sale dated 27.10.1987.
3. The first respondent herein remained absent and he was set ex parte and respondents 2 and 3 who are defendants 2 and 3 contested the suit stating that they were bona fide purchasers for value and they were not aware of the agreement of sale between the appellant and the first respondent and the sale deed was executed by the first respondent to discharge the family debts and after they purchased the property, they came to know through court notice that there was an agreement of sale and they enquired the first respondent and the first respondent informed that he had not received any money for the agreement of sale and he deposited the original document with the appellant for raising a loan and the appellant's husband cheated him and created the documents and filed the suit and after the sale deed was executed, the possession was handed over to respondents 2 and 3 by removing the person, who was cultivating the property and thereafter, respondents 2 and 3 are in possession of the property and therefore, the plaintiff/appellant is not entitled to the relief prayed for as respondents 2 and 3 are bona fide purchasers for value and purchased the suit property without knowledge of the agreement of sale in favour of the appellant.
4. The Trial Court decreed the suit holding that respondents 2 and 3 were not bona fide purchasers for value and they were aware of the agreement of sale and hence, the plaintiff/appellant is entitled to a decree. The first appellate court reversed the findings of the Trial Court and held that respondents 2 and 3 are bona fide purchasers for value and admittedly, they were not aware of the agreement of sale between the appellant and the first respondent. They purchased the property and paid the entire sale consideration and the sale consideration was used to discharge the debts and therefore, the sale in favour of respondents 2 and 3 is a valid one and the appellant is not entitled to the relief prayed for. Hence, the second appeal.
5. At the time when the second appeal came up for admission, the following substantial questions of law were framed:-
"1. When the ingredients of Section 19(b) of the Specific Relief Act, 1983 were not satisfied by the 2nd and 3rd defendants, whether the lower appellate court was justified in holding that they were bona fide purchasers for value without notice?
2. When the original title deeds of the property in question was not with the vendor (1st defendant) but with the plaintiff and the plaintiff was cultivating the crops on the land in question and the 2nd and 3rd defendants purchased hurriedly even after knowing that there was sale agreement and the 2nd sale deed in favour of the 3rd defendant was after the plaintiff had sent a lawyers notice, whether it could be said that the ingredients of Section 19(b) had been satisfied namely bona fide purchasers for value without notice had been
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