IMPORTANT POINT
Section 19(b) of Specific Relief Act talks of notice and not knowledge of existence of contract.

Headnote:(i) Specific Relief Act, 1963-Sections 19(b) and 20-Transfer of Property Act, 1881-Section 3 Explanation II-Specific performance of sale agreement-Tenant in possession entering into sale agreement-Subsequent sale of property to respondents by vendor-Suit against vendor and purchasers-Purchasers deemed to have notice of sale agreement-Genuineness of sale agreement not properly decided on basis of evidence on record by single Judge of High Court-Matter remanded to single Judge to decide issue and as to whether discretionary relief could be granted to plaintiff.
       Section 19 provides the categories of persons against whom specific performance of a contract may be enforced. Among them is included, under clause (b), any transferee claiming under the vendor by a title arising subsequently to the contract of which, specific performance is sought. However, a transferee for value, who has paid his money in good faith and without notice of the original contract, is excluded from the purview of the said clause. To fall within the excluded class, a transferee must show that : (a) he has purchased for value the property (which is the subject-matter of the suit for specific performance of the contract); (b) he has paid his money to the vendor in good faith; and (c) he had no notice of the earlier contract for sale (specific performance of which is sought to be enforced against him). (Para 3)
       The said provision is based on the principle of English law which fixes priority between a legal right and an equitable right. If A purchases any property from B and thereafter B sells he same to C , the sale in favour of A , being prior in time, prevails over the sale in favour of C as both A and C acquired legal rights. But where one is a legal right and the other is an equitable right "a bona fide purchaser for valuable consideration who obtains a legal estate at the time of his purchase without notice of a prior equitable right is entitled to priority in equity as well as at law". (Snell s Equity - Thirteen Edition - P. 48). This principle is embodied in Section 19(b) of the Specific Relief Act. (Para 4)
       Section 3 of the Transfer of Property Act defines, inter alia, "a person is said to have notice" of a fact when he actually knows that fact, or when but for wilful abstention from an enquiry or search which he ought to have made, or gross negligence, he would have known it . A statutory presumption of notice arises against any person who acquires any immovable property or any share or interest therein of the title, if any, of the person who is for the time being in actual possession thereof. (Paras 6 and 7)
       Section 19(b) uses the word notice . From the definition of the expression, "a person is said to have notice" in Section 3 of the Transfer of Property Act, it is plain that the word notice is of wider import than the word knowledge . A person may not have actual knowledge of a fact but he may have notice of it having regard to the aforementioned definition and Explanation II thereto. If the purchasers have relied upon the assertion of the vendor or on their own knowledge and abstained from making enquiry into the real nature of the possession of the tenant, they cannot escape from the consequences of the deemed notice under Explanation II to Section 3 of the Transfer of Property Act. On this point, in the light of the above discussion, we hold that the purchasers will be deemed to have notice of Ext. 1, should it be found to be true and valid. (Para 18)
       In the instant case the learned Single Judge having noted the plea in the written statement that the purchasers denied execution of any agreement by the vendor in favour of the tenant and stated that any such alleged agreement was forged, observed : "It may be mentioned that I have assumed the original contract because although Smt. Bano and others have challenged it on the ground that it was fictitious and not genuine, the finding of the lower court on this aspect of the case that there was agreement to sell between Ram Narain and Satya Narain calls for no interference." It appears to us that he assumed the finding of the trial Court as correct and proceeded to decide the appeal presumably because on issue No. 10, he found that the purchasers did not have actual knowledge of Ext. 1. In our considered view, the learned Single Judge ought to have considered the evidence and recorded his own positive finding on the question whether Ext. 1 was a true and valid agreement. This feature of the case was not adverted to by the Division Bench. Therefore, issue No. 1 has to be considered afresh by the learned Single Judge.
       (ii) Specific Relief Act, 1963-Section 19(b)-Transfer of Property Act, 1881-Section 3-Specific performance of sale agreement-Subsequent purchaser s defence/right-Notice of existence of prior sale agreement-Section 19(b) talks of notice and not actual knowledge-Tenant in possession entering into sale agreement-Subsequent purchaser must be deemed to have notice of sale agreement. (Para 18)

Judgement Key Points

Based on the legal document provided, here are the key points summarized with the corresponding references:

Legal Principle of Specific Performance: Section 19(b) of the Specific Relief Act, 1963 allows specific performance to be enforced against any transferee claiming under the vendor by a title arising subsequently to the contract, with the exception of a transferee for value who has paid in good faith and without notice of the original contract (!) (!) (!) (!) .
Requirements for Excluded Transferees: To be excluded from specific performance, a transferee must prove they purchased for value,

JUDGMENT

Syed Shah Mohammed Quadri, J.-The scope of Section 19(b) of the Specific Relief Act read with Explanation II to Section 3 of the Transfer of Property Act and the provisions of Section 20(2) of the Specific Relief Act, 1963, determine the result of this appeal.

2. It will be apt to begin our discussion with Section 19(b) of the Specific Relief Act, 1963 which is in the following terms :

"19. Relief against parties and persons claiming under them by subsequent title -Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against-

(a) xxx xxx xxx

(b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract;

3. Section 19 provides the categories of persons against whom specific performance of a contract may be enforced. Among them is included, under clause (b), any transferee claiming under the vendor by a title arising subsequently to the contract of which, specific performance is sought. However, a transferee for value, who has paid his money in good faith and without notice of the original contract, is excluded from the purview of the said clause. To fall within the excluded class, a transferee must show that : (a) he has purchased for value the property (which is the subject-matter of the suit for specific performance of the contract); (b) he has paid his money to the vendor in good faith; and (c) he had no notice of the earlier contract for sale (specific performance of which is sought to be enforced against him).

4. The said provision is based on the principle of English law which fixes priority between a legal right and an equitable right. If A purchases any property from B and thereafter B sells he same to C , the sale in favour of A , being prior in time, prevails over the sale in favour of C as both A and C acquired legal rights. But where one is a legal right and the other is an equitable right "a bona fide purchaser for valuable consideration who obtains a legal estate at the time of his purchase without notice of a prior equitable right is entitled to priority in equity as well as at law". (Snell s Equity - Thirteen Edition - P. 48). This principle is embodied in Section 19(b) of the Specific Relief Act.

5. It may be noted here that notice may be (i) actual, (ii) constructive or (iii) imputed.

6. Section 3 of the Transfer of Property Act defines, inter alia, "a person is said to have notice" of a fact when he actually knows that fact, or when but for wilful abstention from an enquiry or search which he ought to have made, or gross negligence, he would have known it . And Explanation II appended to this definition clause says : "Any person acquiring any immovable 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."

7. Thus, it is seen that a statutory presumption of notice arises against any person who acquires any immovable property or any share or interest therein of the title, if any, of the person who is for the time being in actual possession thereof.

8. The principle of constructive notice of any title which a tenant in actual possession may have, was laid down by Lord Eldon in Daniels v. Davison1. The learned law Lord observed, "Upon one point in this cause there is considerable authority for the opinion I hold; that, where there is a tenant in possession under a lease or an agreement, a person, purchasing part of the estate, must be bound to inquire, on what terms that person is in possession."

9. That principle has been followed by various High Courts in India. (See : Faki Ibrahim v. Faki Gulam Mohidin2); Mahadeo v. S.B Kesarkar3; Tiloke Chand v. J.B. Bettie & Co.4; Parthasaradh

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2000 Supreme(SC) 1240

IMPORTANT POINTSection 19(b) of Specific Relief Act talks of notice and not knowledge of existence of contract.

Cases Referred (1)

IMPORTANT POINT
Section 19(b) of Specific Relief Act talks of notice and not knowledge of existence of contract.