TaxTMI 
TaxTMI 
2013 (2) TMI 898
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.... 4. Mrs. Lakhbir Sawhney, Respondent No. 2 and son Mr. H.S. Sawhney, the predecessor of Respondent No. 3 (a) to (d) were the owners of the property known as "Ojha House" / "Sawhney Mansion", F-Block, Connaught Place, New Delhi. (These Respondents shall be referred as "the Sawhneys" for the sake of convenience). M/s Nanak Builders and Investors Pvt. Ltd., Respondent No. 1 is the Plaintiff in the Suit. The Plaintiff -Respondent No. 1 filed a suit in the High Court of Delhi being Suit No. 3426 of 1991 against the Defendants-Respondents Sawhneys' for a decree for specific performance of agreement. The case of the Plaintiff -Respondent is that on 29.05.1986 the Defendant-Respondent entered into an agreement with the Plaintiff -Respondent for sale of an area measuring about 4000 sq. ft. on the 1st Floor of F-26, Connaught Place, New Delhi on the consideration of Rs. 50 lakhs. Out of the said consideration, a sum of Rs. 1 lakh was paid by the Plaintiff s to the Defendants vide cheque No. 0534224 drawn from Union Bank of India, New Delhi. The aforesaid property shall be referred to as the "suit property" which was in the tenancy of M/s Peerless General Finance Company Limited. In the ....
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....that the aforesaid suit filed by LMI was compromised and an order was passed on 08.04.1991 whereby, as per the compromise, the suit property was leased out by Defendant-Sawhneys' in favour of LMI and possession of the property was given to it. 5. On 01.11.1991, the Plaintiff -M/s Nanak Builders in the meantime filed a suit against the Defendant-Respondent Sawhneys' being suit No. 3426/1991 for specific performance of agreement to sell dated 29.05.1986. In the said suit pursuant to summons issued against the Defendants- Sawhneys' one Mr. Raj Panjwani, Advocate accepted notice on behalf of Sawhneys' and stated before the Court that possession of the flat in question is not with the Defendants, rather with M/s LMI which delivered to them by virtue of the lease. Mr. Panjwani further stated that till disposal of the suit the property in question would not be transferred or alienated by the Defendants. The Defendants- Sawhneys' also filed a written statement in the said suit. It appears that the Defendants-Sawhneys' took loan from Vijaya Bank and to secure the loan, equitable mortgage was created in respect of the suit property. In 1977 a suit was filed by the ....
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....a matter of right but a matter of judicial discretion to be exercised in favour of a necessary and proper party. Ld. Senior Counsel further submitted that where a subsequent purchaser has purchased a suit property and is deriving its title through the same vendor then he would be a necessary party provided it has purchased with or without notice of the prior contract. He further submitted that after one transaction a pendency of the suit arising there from, Section 52 of the Transfer of Property Act does not prohibit the subsequent transaction of transfer of property nor even declares the same to be null and void. Ld. Senior Counsel, however, has not disputed the legal proposition that the court would be justified in denying impleadment at the instance of the applicant who has entered a subsequent transaction knowing that there is a court injunction in a pending suit restraining and prohibiting further transaction or alienation of the property. Ld. Senior Counsel put heavy reliance on the decisions of the Supreme Court in Kasturi v. Iyyamperumal and Ors. 2005(6) SCC 733, for the proposition that an application by the subsequent purchaser for impleadment in a suit for specific perfo....
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....ummons on their behalf and filed vakalatnama. The said Advocate Mr. Panjwani, inter-alia, stated before the Court that the Defendants would not transfer or alienate the flat in question. The order dated 04.11.1991 was incorporated in the order sheet as under: Mr. Panjwani accepts notice. Mr. Panjwani states that the possession of the flat in question is not with the Defendants. The possession is with M/s. Living Media India Limited which was delivered to them under the orders of this Court. Mr. Panjwani states that till the disposal of this application the Defendants would not transfer or alienate the flat in question. Let the reply be filed within 6 weeks with advance copy to the counsel for the Plaintiff, who may file the rejoinder within 2 weeks thereafter. List this I.A. for disposal on 10.3.1992. 12. It is also not in dispute that before the institution of the suit the Plaintiff -Respondent got a notice published in the newspaper on 12.02.1990 in Hindustan Times, Delhi Edition. When this came to the notice of the Appellant, the sister concern of the Appellant, namely, M/s. Living Media India Limited sent a legal notice to the Defendants Sawhneys' dated 24.06.19....
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.... The question is whether the person who has got his interest in the property declared by an independent decree but not a party to the agreement of sale, is a necessary and proper party to effectually and completely adjudicate upon and settle all the question involved in the suit. The question before the court in a suit for the specific performance is whether the vendor had executed the document and whether the conditions prescribed in the provisions of the Specific Relief Act have been complied with for granting the relief of specific performance. Sub-rule(2) of Rule 10 of Order 1 provides that the Court may either upon or without an application of either party, add any party whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all questions involved in the suit. Since the Respondent is not a party to the agreement of sale, it cannot be said that without his presence the dispute as to specific performance cannot be determined. Therefore, he is not a necessary party. 16. In the case of Surjit Singh (Supra) a similar question arose for consideration before this Court. In that case, on the death ....
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.... parties to the suit, in disobedience of its orders. The principles of lis pendens are altogether on a different footing. We do not propose to examine their involvement presently. All what is emphasised is that the assignees in the present facts and circumstances had no cause to be impleaded as parties to the suit. On that basis, there was no cause for going into the question of interpretation of paragraphs 13 and 14 of the settlement deed. The path treaded by the courts below was, in our view, out of their bounds. Unhesitatingly, we upset all the three orders of the courts below and reject the application of the assignees for impleadment under Order 22 Rule 10 Code of Civil Procedure. 17. In the case of Savitri Devi v. District Judge, Gorakhpur and Ors. (1999) 2 SCC 577, a 3 Judges' Bench of this Court considered a similar question under Order 1 Rule 10 Code of Civil Procedure. The fact of the case was that the Appellant filed a suit for maintenance and for creation of charge over the ancestral property. She also applied for an interim order of injunction restraining her sons from alienating the property during the pendency of the suit. But a vakalatnama was filed on behalf....
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....gh's case (supra). Allowing the application this Court held: The facts set out by us in the earlier paragraphs are sufficient to show that there is a dispute as to whether the first Defendant in the suit was a party to the order of injunction made by the Court on 18-8-1992. The proceedings for punishing him for contempt are admittedly pending. The plea raised by him that the first Respondent had played a fraud not only against him but also on the Court would have to be decided before it can be said that the sales effected by the first Defendant were in violation of the order of the Court. The plea raised by Respondents 3 to 5 that they were bona fide transferees for value in good faith may have to be decided before it can be held that the sales in their favour created no interest in the property. The aforesaid questions have to be decided by the Court either in the suit or in the application filed by Respondents 3 to 5 for impleadment in the suit. If the application for impleadment is thrown out without a decision on the aforesaid questions, Respondents 3 to 5 will certainly come up with a separate suit to enforce their alleged rights which means a multiplicity of proc....
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....ere. If the Petitioners have got any remedy it is open to them to avail of the same according to law. 21. In Kasturi's case (supra) a three Judges' Bench of this Court said that in a suit for specific performance of contract for sale an impleadment petition was filed for addition as party Defendant on the ground that the Petitioners were claiming not under the vendor but adverse to the title of the vendor. In other words, on the basis of independent title in the suit property the Petitioner sought to be added as a necessary party in the suit. Rejecting the petition this Court held as under: As noted herein earlier, two tests are required to be satisfied to determine the question who is a necessary party, let us now consider who is a proper party in a suit for specific performance of contract for sale. For deciding the question who is a proper party in the suit for specific performance the guiding principle is that the presence of such a party is necessary to adjudicate the controversies involved in the suit for specific performance of the contract for sale. Thus, the question is to be decided keeping in mind the scope of the suit. The question that is to be deci....
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....not a party to the agreement for sale, it cannot be said that in his absence, the dispute as to specific performance cannot be decided. In this case at paragraph 9, the Supreme Court while deciding whether a person is a necessary party or not in a suit for specific performance of a contract for sale made the following observation: Since the Respondent is not a party to the agreement for sale, it cannot be said that without his presence the dispute as to specific performance cannot be determined. Therefore, he is not a necessary party. (Emphasis Supplied) 22. In the case of Vidhur Impex (supra), the Supreme Court again had the opportunity to consider all the earlier judgments. The fact of the case was that a suit for specific performance of agreement was filed. The Appellants and Bhagwati Developers though totally strangers to the agreement, came into picture only when all the Respondents entered into a clandestine transaction with the Appellants for sale of the property and executed an agreement of sale which was followed by sale deed. Taking note all the earlier decisions, the Court laid down the broad principles governing the disposal of application for impleadment....
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....not be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose. [Explanation - For the purposes of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceeding in a Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force. 24. It is well settled that the doctrine of lis pendens is a doctrine based on the ground that it is necessary for the administration of justice that the decision of a court in a suit should be binding not only on the litigating parties but on those who derive title pendente lite. The provision of this Section does not indeed annul the conveyance or....
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....ld to be bound, by an application of the doctrine, by the decree passed in the suit even though they may not have been impleaded in it. The whole object of the doctrine of lis pendens is to subject parties to the litigation as well as others, who seek to acquire rights in immovable property which are the subject matter of a litigation, to the power and jurisdiction of the Court so as to prevent the object of a pending action from being defeated. 27. In the light of the settled principles of law on the doctrine of lis pendens, we have to examine the provisions of Order 1 Rule 10 of the Code of Civil Procedure. Order 1 Rule 10 which empowers the Court to add any person as party at any stage of the proceedings if the person whose presence before the court is necessary or proper for effective adjudication of the issue involved in the suit. Order 1 Rule 10 reads as under: 10. Suit in name of wrong Plaintiff.- (1) Where a suit has been instituted in the name of the wrong person as Plaintiff or where it is doubtful whether it has been instituted in the name of the right Plaintiff, the Court may at any stage of the suit, if satisfied that the suit has been instituted t....
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....a person a necessary party is not merely that he has relevant evidence to give on some of the questions involved; that would only make him a necessary witness. It is not merely that he has an interest in the correct solution of some questions involved and has thought of relevant arguments to advance. The only reason which make it necessary to make a person a party to an action is that he should be bound by the result of the action and the question to be settled, therefore, must be a question in the action which cannot be effectually and completely settled unless he is a party. The line has been drawn on a wider construction of the rule between the direct interest or the legal interest and commercial interest. It is, therefore, necessary that the person must be directly or legally interested in the action in the answer, i.e., he can say that the litigation may lead to a result which will affect him legally that is by curtailing his legal rights. It is difficult to say that the rule contemplates joining as a Defendant whose only object is to prosecute his own cause of action. Similar provision was considered in Amon v. Raphael Tuck and Sons Ltd. (1956) 1 All E.R. 273, wherein after q....
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....re the institution of suit for specific performance when the Plaintiff came to know about the activities of the Sawhneys' to deal with the property, a public notice was published at the instance of the Plaintiff in a newspaper "The Hindustan Times" dated 12.02.1990 (Delhi Edn.) informing the public in general about the agreement with the Plaintiff s. In response to the said notice the sister concern of the Appellant M/s Living Media India Limited served a legal notice on the Defendants- Sawhneys' dated 24.06.1990 whereby he has referred the 'agreement to sell' entered into between the Plaintiff s and the Defendants- Sawhneys'. 34. Even after the institution of the suit, the counsel who appeared for the Defendants-Sawhneys' gave an undertaking not to transfer and alienate the suit property. Notwithstanding the order passed by the Court regarding the undertaking given on behalf of the Defendants- Sawhneys', and having full notice and knowledge of all these facts, the sister concern of the Appellant namely Living Media India Ltd. entered into series of transaction and finally the Appellant M/s. Thomson Press got a sale deed executed in their favour by Sa....
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....s in different forms. In Chunder Kanta Roy v. Krishna Sundar Roy (5) the decree passed against the contracting party only was upheld. So it was in Kannan v. Krishan (6). In Himmatlal Motilal v. Basudeb (7) the decree passed against the contracting Defendant and the subsequent purchaser was adopted. In Gangaram v. Laxman (9) the suit was by the subsequent purchaser and the decree was that he should convey the property to the person holding the prior agreement to sale. It would appear that the procedure adopted in passing decrees in such cases is not uniform. But it is proper that English procedure supported by the Specific Relief Act should be adopted. The apparent reasoning is that unless both the contracting party and the subsequent purchaser join in the conveyance it is possible that subsequently difficulties may arise with regard to the Plaintiff's title. 39. The Supreme Court referred the aforementioned decision of the Calcutta High Court in the case of Durga Prasad and Anr. v. Deep Chand and Ors. AIR (1954) SC 75, and finally held: In our opinion, the proper form of decree is to direct specific performance of the contract between the vendor and the Plaintiff an....
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....R, J. 44. I have had the advantage of going through the order proposed by my Esteemed Brother M.Y. Eqbal, J. While I entirely agree with the conclusion that the Appellant ought to be added as a party-Defendant to the suit, I wish to add a few lines of my own. 45. There are three distinct conclusions which have been drawn by Eqbal, J. in the judgment proposed by his Lordship. The first and foremost is that the Appellant was aware of the "agreement to sell" between the Plaintiff and the Defendants in the suit. Publication of a notice in the Hindustan Times, Delhi Edition, and the legal notice which Living Media India Limited, Appellant's sister concern, sent to the Defendants indeed left no manner of doubt that the Appellant was aware of a pre-existing agreement to sell between the Plaintiff and the Defendants. It is also beyond dispute that the sale of the suit property in favour of the Appellant was in breach of a specific order of injunction passed by the trial Court. As a matter of fact, the sale deeds executed by the Defendants falsely claimed that there was no impediment in their selling the property to the Appellant even though such an impediment in the form of a res....
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....o the extent that it might conflict with rights decreed under the decree or order. It is in this view that transfers pendente lite have been held to be valid and operative as between the parties thereto. 49. To the same effect is the decision of this Court in Vinod Seth v. Devinder Bajaj (2010) 8 SCC 1 where this Court held that Section 52 does not render transfers affected during the pendency of the suit void but only render such transfers subservient to the rights as may be eventually determined by the Court. The following passage in this regard is apposite: 42. It is well settled that the doctrine of lis pendens does not annul the conveyance by a party to the suit, but only renders it subservient to the rights of the other parties to the litigation. Section 52 will not therefore render a transaction relating to the suit property during the pendency of the suit void but render the transfer inoperative insofar as the other parties to the suit. Transfer of any right, title or interest in the suit property or the consequential acquisition of any right, title or interest, during the pendency of the suit will be subject to the decision in the suit. 50. The decision of t....
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.... the suit under Order 1 Rule 10 Code of Civil Procedure. I have no hesitation in concurring with the view that no one other than parties to an agreement to sell is a necessary and proper party to a suit. The decisions of this Court have elaborated that aspect sufficiently making any further elucidation unnecessary. The High Court has understood and applied the legal propositions correctly while dismissing the application of the Appellant under Order 1 Rule 10 Code of Civil Procedure. What must all the same be addressed is whether the prayer made by the Appellant could be allowed under Order XXII Rule 10 of the Code of Civil Procedure, which is as under: Procedure in case of assignment before final order in suit. - (1) In other cases of an assignment, creation or devolution of any interest during the pendency of a suit, the suit may, by leave of the court, be continued by or against the person to or upon whom such interest has come or devolved. (2) The attachment of a decree pending an appeal therefrom shall be deemed to be an interest entitling the person who procured such attachment to the benefit of Sub-rule (1). 54. A simple reading of the above provision wo....
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....ired that interest. Rule 10 of Order 22 of the Code of Civil Procedure clearly recognises the right of a transferee to be impleaded as a party to the proceedings and to be heard before any order is made. It may be that if he does not apply to be impleaded, he may suffer by default on account of any order passed in the proceedings. But if he applies to be impleaded as a party and to be heard, he has got to be so impleaded and heard. He can also prefer an appeal against an order made in the said proceedings but with the leave of the appellate court where he is not already brought on record. The position of a person on whom any interest has devolved on account of a transfer during the pendency of any suit or a proceeding is somewhat similar to the position of an heir or a legatee of a party who dies during the pendency of a suit or a proceeding, or an official receiver who takes over the assets of such a party on his insolvency. An heir or a legatee or an official receiver or a transferee can participate in the execution proceedings even though their names may not have been shown in the decree, preliminary or final. If they apply to the court to be impleaded as parties they cannot be ....