Agreement to sell outside statutory transfer ban; specific performance remained available after exemption and extinction of prior mortgage rights.

An agreement to sell a house was held not to fall within the prohibition on transfer under Section 7 of the U.P. Encumbered Estates Act, 1934, because an agreement to sell is not itself a sale, mortgage, lease, exchange or gift of immovable property. The restriction applied only while proceedings under the Act remained pending. Once the house had been exempted from sale and the statutory proceedings had ended, and the mortgagee's rights had been extinguished by the statutory scheme, no surviving bar existed to defeat specific performance. The plea that the agreement was void under the Act therefore failed, and specific performance was maintainable.

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Issues: Whether an agreement to sell a house, executed after the debtor's property had been exempted under the U.P. Encumbered Estates Act, 1934 and after the mortgagee's rights stood extinguished by the statutory decree, was hit by the prohibition in Section 7 of the Act so as to bar a decree for specific performance.

Analysis: The statutory scheme was examined to determine the effect of an order under Section 24 exempting a residential house from sale, the effect of a money decree under Section 14(7), and the consequence of Section 18 by which prior mortgage rights stand extinguished and are replaced by the decree. The Court held that an agreement to sell is not a transfer of rights in immovable property within the prohibition contained in Section 7, and that the restriction in Section 7 operates only while proceedings under the Act are pending. Since the house had been exempted and the proceedings had come to an end, no subsisting statutory bar survived to defeat specific performance. The plea that the transaction was void under the Act therefore failed.

Conclusion: The agreement to sell was not void under Section 7 of the Act, and a decree for specific performance was maintainable in favour of the appellant.

Final Conclusion: The High Court's decree was set aside and the decree for specific performance granted by the courts below was restored, with the appellant succeeding in the appeal.

Ratio Decidendi: A statutory restriction on transfer that prohibits sale, mortgage, lease, exchange, or gift during pending proceedings does not invalidate a mere agreement to sell, and once the proceedings have ended and prior encumbrances stand extinguished, specific performance cannot be refused on that statutory ground.

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