TaxTMI 
TaxTMI 
2022 (3) TMI 265
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....CTS 3. On 04.04.1979, the plaint Schedule property, which consisted of a site, was allotted to the first Defendant (since deceased), by the Bangalore Development Authority (hereinafter referred to as, 'the BDA'). Based on the allotment, a lease-cum-sale agreement was entered into between the BDA and the first Defendant on 04.04.1979. The first Defendant was put in possession on 14.05.1979. On 17.11.1982, the first Defendant entered into the agreement with the Plaintiff agreeing to execute the sale deed of the site within three months from the date on which, the Plaintiff obtained the sale deed from the BDA. On 01.03.1983 and 26.04.1984, the Plaintiff issued letters to the first Defendant, calling upon her to execute the sale deed. The first Defendant issued letter dated 08.05.1984, intimating that the Plaintiff was in breach. The agreement itself had lapsed and the advance amount by the Plaintiff was forfeited. After issuing Notice on 14.02.1985, the Plaintiff instituted the Suit in question, seeking specific performance. The first Defendant, after filing Written Statement on 14.08.1986, died pending the Suit, on 18.07.1994. The Plaintiff impleaded the husband of the Def....
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....lso as it was a bargain, which would defeat the provisions of the law in question, within the meaning of Section 23 of the Indian Contract Act, 1872. She invited our attention to the terms of the lease-cum-sale agreement entered into between the first Defendant and the BDA. She pointed out that there was clear prohibition against the alienation of the site or the plaint Schedule property for a period of ten years. She drew support from the Bangalore Rules of Allotment, 1972 (hereinafter referred to as, 'the Rules'). She pointed out that the court has erred in not noticing that Rule 18(2) proclaims an embargo against alienation for a period of ten years. The very agreement relied upon by the Plaintiff was unlawful, and therefore, the court could not have granted specific performance. She drew support from judgment of this Court in Kedar Nath Motani and Ors. v. Prahlad Rai and Ors. AIR 1960 SC 213 and Narayanamma and Anr. v. Govindappa and Ors. (2019) 19 SCC 42. She further contended that the Suit itself, besides being not maintainable, was premature. She elaborated and contended that, what the agreement between the Plaintiff and the first Defendant contemplated, was that, th....
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....e-cum-sale agreement nor the Rules, prohibited the allottee entering into an agreement to sell the site. He pointed out that the Rule, which is relevant to the fact, is Rule 17. Even Rule 18, relied upon by the Appellants, did not stand in the way of the agreement to sell or the sale in favour of the Plaintiff. He also emphasised that it does not lie in the mouth of the Appellants to invoke the proposition that agreement in question was unlawful. He pointed to the findings of the High Court that by his conduct there was complete absence of bonafides in the claim. He pointed out that as correctly found by the High Court, Doctrine of Lis Pendens, applies. He further submitted that, at any rate, if the court found that Lis Pendens did not apply, the fact that the second Defendant has not been found to be a bonafide purchaser for value, was sufficient for this Court to decline to interfere, particularly, in a jurisdiction, which originates from the grant of Special Leave Under Article 136 of the Constitution of India. He would refute the contention that the suit was not maintainable and further that it was premature. He would point out that confronted with the definite stand of the fir....
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....any grant or other transfer of any immovable property of any interest therein made by the Board shall notwithstanding anything contained in the Transfer of Property Act, 1882 (Central Act 4 of 1882) or any other law have effect according to their tenor. 11. Section 42 conferred power to make Rules. Following provisions are relevant for the purpose of this case: 42. Power of Government to make rules.--The Government may, from time to time; make rules, not inconsistent with this Act.-- xxx xxx xxx (aa) regulating the allotment or sale by auction of sites by Board; (ab) specifying the conditions, restrictions and limitations subject to which the Board may sell, lease or otherwise transfer movable or immovable property; xxx xxx xxx 12. Initially, bylaws regulating the allotment of sites were published on 08.01.1954. These bylaws came to be cancelled upon enactment of City of Bangalore Allotment of Site Rules, 1964. Thereafter, the City of Bangalore Improvement Disposal of Site Rules, 1971 came to be enacted. The said Rules came to be repealed with the making of the City of Bangalore Improvement Allotment of Site Rules, 1972....
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....se site in the city, outside the city and whether he had any share in such property and the value of the share. It further included the query as to whether the applicant's wife/husband/minor child, owned a house or house site inside or outside the city. Since, it may be relevant to the decision at hand, we may advert to the Form. FORM I [See Sub-rule (1) of Rule 8] Form of Application for Purchase of Site To The Chairman, Improvement Trust Board, Bangalore 20 Sir, I wish to purchase a building site measuring........ in ......Extension, Bangalore. I agree to abide by the conditions of allotment and sale of the site contained in Rule 17 of the City of Bangalore Improvement (Allotment of Sites) Rules, 1972, and the terms of the lease-cum-sale agreement; copies of which are enclosed in duplicate. I also enclose the duplicate copies of the conditions of allotment and sale and lease-cum-sale agreement duly signed in token of having accepted the conditions therein. Particulars about me are given below.-- 1. Name (in Block letters) 2. Father's/Husband's name 3. Age 4. Whether the applicant belongs to Scheduled Caste or Scheduled Tribe, ....
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....e necessary information required by the Board, it will be within the discretion of the Board to reject my application. If, at any time it is found that the information given by me above is incorrect, the Board can cancel the allotment, resume possession of the site and forfeit part or whole of the amount paid by me till then towards cost of the site or deposit. I am aware that under the Rules, I have to build the house myself with my own resources. Signature of Applicant Station ..................... Date .............................. Attested Magistrate of the First Class Date................ 18. Rule 10 dealt with the issue of eligibility for allotment and it reads as follows: 10. Eligibility for allotment.--No person. (1) Who is not ordinarily resident (living independently or with his family members) in the area within the jurisdiction of the Board for not less than five years immediately before the last date fixed for making applications: Provided that the persons who are domiciled in the State of Karnataka but serving in the Armed Forces of the Union outside the State of Karnataka shall be e....
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....Armed Forces of the Union outside the State, State Government servants, Central Government servants and servants of Corporation. 51 per cent was reserved, in other words, in specific percentage terms for these categories. 49 per cent was made available for the general public. Non-availability of applicants was also dealt with. 21. Rule 13 provided for selection of an applicant. The Board was empowered to reject any application without assigning any reason. 22. Rule 17 provides for conditions of allotment. Since, much turns on the impact of this Rule, we would refer to the same. 17. Conditions of allotment and sale of site.-The allotment of a site under these Rules shall be subject to the following conditions.-- (1) The allottee shall within a period of fifteen days from the date of receipt of the notice of allotment, pay to the Board twelve and a half per cent of the price of the site and if no such payment is made the allottee shall be deemed to have declined the allotment. (2) The balance of the value of the site (less than a sum of rupees thirty where the area of the site does not exceed two hundred square meters, rupees sixty where t....
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....ter be executed by the allottee and the Board and registered by the allottee. If the agreement is not executed within forty-five days after the Board has intimated the actual measurements and particulars of the site to the allottee, the earnest money paid by the allottee may be forfeited, the allotment of the site may be cancelled, and the amount paid by the allottee after deducting the earnest money refunded to him. Every allottee shall construct a building on the site in accordance with the plans and designs approved by the Board. If in any case it is considered necessary to add any additional conditions in the agreement the Board may make such additions. Approval of the City of Bangalore Municipal Corporation for the plans and designs shall be necessary when the layout in which the site is situated is transferred to the control of the said Corporation. (5) The allottee shall comply with the conditions of the agreement executed by him and the buildings and other bye-laws of the Board or the Corporation, as the case may be, for the time being in force. (6) The allottee shall construct a building within a period of two years from the date of execution ....
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....equest of the allottee grantee or purchaser of a site, execute a deed of conveyance subject to the restrictions, conditions and limitations specified in Sub-rule (2). (2) The conveyance by the Chairman of a site in favour of an allottee, grantee or purchaser of a site (hereinafter referred to as "the purchaser") shall be subject to the following restrictions, conditions and limitations, namely.-- (a) in the case of a site on which a building has not been constructed.-- (i) the purchaser shall construct a building on the site within such period as may be specified by the Board, as per plans, designs and conditions to be approved by the Board or in conformity with the provisions of the City of Bangalore Municipal Corporation Act, 1949 and the Bye-laws made thereunder; (ii) the purchaser shall not without the approval of the Board, construct on the site any building other than a building for the construction of which the site was allotted, granted or sold; (iii) the purchaser shall not alienate the site within a period of ten years from the date of allotment except by mortgage in favour of the Government of Ind....
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....ilding put up, permit him to sell the vacant site and building: Provided that.-- (i) in case covered by Clause (a), the Bangalore Development Authority shall pay to the lessee the allotted value of the site and an, additional sum equal to the amount of interest at twelve per cent per annum thereon; and in case covered by Clause (b), the lessee shall pay to the Bangalore Development Authority a sum equal to the amount of interest at twelve per cent per annum on the allotted value of the site.] 24. Rule 19 dealt with voluntary surrender and it read as follows: 19. Voluntary surrender.--An allottee may at any time after allotment, surrender the site allotted to him to the Board. On such surrender the Board shall refund all amounts paid by the allottee to the Board in respect of the said site. 25. The Rules did not apply to disposal of corner sites and commercial sites. 26. We may notice in fact that the City of Bangalore Improvement Act, 1945 came to be repealed by the Bangalore Development Authority Act, 1976. There were certain amendments carried out to the 1972 Rules which need not detain us. THE PURPORT OF THE ABOVE LAW 27. ....
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....Rule 17(7)(a) that on expiry of 10 years of the allotment, the time arrived for conveying the rights over the site. When 10 years expired, if the allotment had not been cancelled or lease determined, in accordance with the Rules or in terms of the agreement, the Board, after issuing a notice to the allottee, calls upon the allottee to execute the sale deed at his cost. If the allottee failed to get the sale deed executed, the Board was to execute the sale deed and recover the cost. 28. Now, the time is ripe to advert to the statutory lease-cum-sale agreement referred to in Rule 17(4). It is in Form II and much turns on its terms and we advert to the same, which has been, admittedly, entered into by the first Defendant with the BDA. FORM II [See Rule 17(4)] Lease-cum-sale agreement An agreement made this...............day of...................................................................................................197.., between the City of Bangalore Improvement Trust Board, Bangalore, (hereinafter called the "Lessor/Vendor") which term shall wherever the context so permits, mean and include its successors in interest and assigns of the ONE PART and .........he....
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.... Provided that where the Lessor/Vendor for sufficient reasons extends in any particular case the time for construction of such building, the Lessee/Purchaser shall construct the building within such extended period. 4. The Lessee/Purchaser shall not sub-divide the property or construct more than one dwelling house on it. The expression "dwelling house" means a building constructed to be used wholly for human habitation and shall not include any apartments to the building whether attached thereto or not, used as a shop or a building of ware-house or building in which manufactory operations are conducted by mechanical power or otherwise. 5. The Lessee/Purchaser shall not alienate the site or the building that may be constructed thereon during the period to the tenancy. The Lessor/Vendor may, however permit the mortgage of the right, title and interest of the Lessee/Purchaser in favour of the Government of Mysore, the Central Government or bodies corporate like the Mysore Housing Board or the Life Insurance Corporation of India, Housing Co-operative Societies or Banks to secure moneys advanced by such Governments or bodies for the construction of the building. 6. The Lesse....
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....cted by him on the scheduled property by virtue of and in pursuance of these presents. 15. It is also agreed between the parties hereto that Rs. ....... (Rupees......) in the hands of the Lessor/Vendor received by them from the Lessee/Purchaser shall be held by them as security for any loss or expense that the Lessor/Vendor may be put to in connection with any legal proceedings including eviction proceedings that may be, taken against the Lessee/Purchaser and, all such expenses shall be appropriated by the Lessor/Vendor from and out of the moneys of the Lessee/Purchaser held in their hands. THE SCHEDULE Site No................. formed by the City of Bangalore Improvement Trust Board in Block No............. in the............ Extension. Site bound on.-- East by: West by: North by: South by: and measuring east to west.....:...north to south...... in all measuring.... square feet. In witness whereof the parties have affixed their signatures to this agreement. Chairman. The City of Bangalore Improvement Trust Board. Witnesses: 1. 2. Witnesses: 1. 2. Lessee/Purchaser. 29. The question then arises, as to what is the purport ....
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....ions entered into in contravention of the conditions in Clause (a) and (b) are to be null and void ab initio. The transactions, which are referred to in Rule 18(2)(c), are the transactions which are referred to in Rule 18(2)(a)(iii) or Rule 18(2)(b). 30. Now, the question would arise as to the effect of the interplay of Rule 17, the lease-cum-sale agreement and the provisions of Rule 18(1) and Rule 18(2). An allottee begins his innings as a lessee. The terms of the lease are set out in the Rules itself, which we have adverted to. The entire value of the site is to be paid at the very beginning, as already noticed, or within the extended period. However, the allottee continues as a lessee. He is obliged to observe the conditions of the lease-cum-sale agreement. He is obliged to pay rent, as provided in the Rules and also the lease-cum-sale agreement. Under Clause (5) of the lease-cum-sale agreement, the allottee, who is also described as the lessee/purchaser, is forbidden from alienating the site or the building that may be constructed during the period of the tenancy. The period of tenancy is fixed as a period of 10 years from the date of giving possession to the allottee. In ot....
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.... the expiry of 10 years upon power being invoked Under Rule 18(1) but the assignment of the rights, which would have been otherwise absolute, is subjected to the conditions, as mentioned in Rule 18(2)(a), which includes the prohibition against the alienation. We must remind ourselves that Under Section 29(3) of the Act of 1945, the Transfer of Property Act is eclipsed by the terms of any grant or transfer. The condition against alienation is not to be counted from the date of the execution of the conveyance deed but for the unexpired period, in the case of the lease-cum-sale agreement executed. 32. The impact of Rule 18(3) is to be noticed. This Rule was substituted w.e.f. from 21.12.1976. The Rule contemplates two conditions for its operation. Firstly, it operates without prejudice to the provisions of Rule 17. Secondly, Rule 18(3) applies, notwithstanding anything contained in Rule 18(2). Now, coming to the exact scope of Rule 18(3), it contemplates the existence of either of the conditions mentioned therein. They are-(1) the lessee applies pointing out that for reason beyond his control, he is unable to reside in the city of Bangalore; (2) by reason of his insolvency or impec....
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....lows-Under Rule 17, it is open to the Authority to cancel allotment and revoke the agreement and determine the lease. The allottee can be evicted from the site. The amount of 12 ½ per cent of the value paid, Under Rule 17(1) can be forfeited. No doubt, the Board will refund the balance to the allottee. This is a consequence which is contemplated in Rule 17(6). This power with the Board is kept preserved when an allottee does not put up the building. Thus, Rule 18(3) must be understood as a power with the Board to be exercised with the previous approval of the State Government. Thus, an allottee, as a Rule, is expected to hold up to the promise he has made about his financial capacity to construct the building. Consequences in Rule 17 would remain alive. The power Under Rule 18(3) appears to us to encompass situations of insolvency or impecuniosity, which overtake an allottee after the allotment takes place. In other words, the unplanned and uncontemplated vicissitudes of life may visit him inter alia with insolvency or impecuniosity, leaving with him no other choice but to sell the site or even the site with the building. The fact that power Under Rule 18(3) is not meant to ....
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....e to the vendor in this regard. 8. The vendor has put the purchaser in possession of the Schedule site this day as part performance of this contract of sale. The vendor covenants with the purchaser that the purchaser is entitled to put up temporary structure on the Schedule site. 35. Clause 5 shows that the first Defendant has handed over the original possession certificate to the Plaintiff. Clause 8 recites that the first Defendant has put the Plaintiff in possession of the site on the date of the agreement as part performance of the contract of sale. The first Defendant further covenanted with the Plaintiff that he is entitled to construct a temporary structure on the site. THE CORRESPONDENCE BEFORE THE SUIT 36. The Plaintiff, on 01.03.1983, i.e., within four months of agreement dated 17.11.1982, wrote to the first Defendant as follows: Y. SUBBARAJU ENGINEERING CONTRACTORS 24, 2nd CROSS, KODANDARAMAPURAM, MALLESWARAM, ' BANGALORE-560003 Date: 1.3.1983 REGISTERED POST ACK. DUE To, Smt. Jayalakshmamma, W/o K.T. Krishnappa, Ex. M.L.A., TB Extn., Nagamangala, Mandya District Madam, Sub: Agreement for the sale of Site No. 15....
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....forceable contract. It was stated that the first Defendant was always willing and ready to perform her part of the contract and to execute the sale deed and convey the site. She further set up the case that she had agreed to sell the site for Rs. 1,50,000/-. 38. On 03.07.1984, the Plaintiff sent a lawyer notice. Clause 4, which we have extracted, in the agreement, was invoked. The Plaintiff pointed out that in terms of the said Clause, the first Defendant was obliged, in the first place, to obtain the sale deed from the BDA and to inform the Plaintiff in writing about having obtained the sale deed. The Plaintiff was also to obtain the Khata Certificate. Period of three months would begin to run only from the said date. The claim of the first Defendant that he had handed over the documents of title, was denied. The further payments, which were made, after having paid Rs. 30,000/- on the date of the agreement, was stated to be unnecessary but it was pointed out that the total sum of Rs. 50,000/- stood paid. It was reiterated that on the date of the sale agreement itself, the Plaintiff was put in possession. The claim that the sale consideration was Rs. 1,50,000/- was denied. The f....
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....her Written Statement, denied the case of the Plaintiff that he was ready and willing. According to her, Plaintiff had to pay the balance of Rs. 1,00,000/-, which remains after paying Rs. 50,000/-. Time was pointed out to be essence of the contract. The first Defendant was ready and willing to perform her part. It was further alleged that the Plaintiff was not put in possession. The Defendant No. 1(b) son of the first Defendant filed a Written Statement. He refers to the Clause prohibiting alienation for a period of ten years from the date of allotment, and that, absolute rights were not created by the BDA by the allotment. It was further contended that the first Defendant, his mother, was only the lessee of the site and she did not have any right to convey ownership rights. She was not competent to convey the property. It was pointed out that the agreement was a void agreement and could not be enforced. 41. The second Defendant, in his Written Statement, inter alia, pleaded no knowledge about the agreement dated 17.11.1982, providing that the first Defendant must obtain an absolute sale deed from the BDA and it must be intimated in writing to the Plaintiff. The allegation that ....
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....guess since 1960 my father commenced civil contract work. He was doing same business till his death. Simultaneously, he commenced real estate business and continued till his demise. My father was getting monthly rental income of Rs. 1,00,000/-. In the name of our mother, there is commercial complex at Shehsdripuram. We presently get monthly rent of Rs. 4,50,000/-. The said commercial complex is joint family property.' PW 2 has entered into an agreement to purchase 24 acres land at Tannishandra. He has negotiated to purchase the land at the rate of Rs. 8,00,000/- per acre. At also Ulsoor, they have vacant site of 90,000/- sq.feet. It is quite expensive property PW2 deposes. They are staying at a rented house. At Cunningham Road, they have got a property which is in dispute. Cunningham property is 1,20,000/- sq.feet. It is vacant land. Most importantly PW2 deposes that if decree is denied they will have loss of money. 44. The Appellant (second Defendant) examined as DW1, inter alia, deposed that he owned both irrigated and non-irrigated lands to the extent of 12 acres. He did not own any site or building in Bangalore. He invested amount arrived from agricultu....
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....ess of seeing the site, sale talks, were done in the first week of June, 1996. Defendant 1(a) and Defendant 1(b) did not disclose regarding the pendency of the Suit. He did not inquire with the BDA as to who is the owner of the site. He denied the suggestion that till day, the legal representatives of the original Plaintiff were in possession of the property. The suggestion that the possession of the site was handed over to Plaintiff, was denied. Defendant 1(b) furnished xerox copy of the possession certificate at the time of negotiations. After receipt of Suit Summons, he was not on talking terms with Defendant 1(a) and Defendant 1(b). Defendant 1(b) disclosed to him that the original possession certificate was lost and, therefore, he gave the duplicate certificate. 45. Defendant 1(b) was examined as DW2. He has deposed about the non-alienation Clause and about the agreement in favour of the Plaintiff for Rs. 50,000/-. At the time of the agreement, there was a shed on the site. It was agreed to execute sale deed in favour of the Plaintiff after getting the absolute sale from the BDA. The BDA was supposed to execute the sale deed after the 10-year lease period. The Plaintiff had....
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....le deed from the BDA and, therefore, unable to execute the sale deed in response to the communication sent by the Plaintiff. It was further found that since the first Defendant was not able to get the sale deed from the BDA, she could not cancel the agreement unilaterally. It was further found that the Plaintiff ought to have waited till the expiry of the lease period. It was found, however, that the Plaintiff was always ready and willing, however, at the same time, the first Defendant was not in breach. It was further found that there was no iota of evidence to prove that the Defendant had tried to sell the property in favour of the third party. It was further found that there was no oral agreement of sale for Rs. 1,50,000/- and the Plaintiff was not in breach. This aspect was found against the first Defendant. It was found that the second Defendant was a bonafide purchaser of the site for value without notice of the earlier agreement of sale as well as pendency of the Suit. It was further found that in view of the allotment and the lease-cum-sale agreement, the Plaintiff had no right to file the Suit so as to enforce the agreement to sell during the year 1985. The Plaintiff ought....
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....he Rule of turpi causa. In Salmond and William on Contracts, four such exceptions have been mentioned, and the fourth of these exceptions is based on the right of restitutio in integrum, where the relationship of trustee and beneficiary is involved. Salmond stated the law in these words at p. 352 of his Book (2nd Edn.): So if A employs B to commit a robbery, A cannot sue B for the proceeds. And the position would be the same if A were to vest property in B upon trust to carry out some fraudulent scheme: A could not sue B for an account of the profits. But if B, who is A's agent or trustee, receives on A's account money paid by C pursuant to an illegal contract between A and C the position is otherwise and A can recover the property from B, although he could not have claimed it from C. In such cases public policy requires that the Rule of turpis causa shall be excluded by the more important and imperative Rule that agents and trustees must faithfully perform the duties of their office. Williston in his Book on Contracts (Revised Edn.), Vol. VI, has discussed this matter at p. 5069, para 1785 and in paras 1771 to 1774, he has noted certain exceptional cases,....
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....been substantially carried into effect before it is sought to recover money paid or goods delivered in furtherance of it; (b) where the Plaintiff is not in pari delicto with the Defendant; (c) where the Plaintiff does not have to rely on the illegality to make out his claim. 51. In Narayanamma (supra), this Court was considering a Suit for specific performance, which was resisted on the ground that the agreement to sell was contrary to the provisions of the Statute. Section 61 of the Karnataka Land Reforms Act, 1961 provided that no land for which occupancy was granted, shall within 15 years of the order of the Tribunal, be transferred by sale, inter alia. A partition was permitted. Equally, a mortgage could be effected to secure a loan. Drawing support from judgment of this Court in Kedar Nath (supra), this Court, inter alia, as follows: 15. The three-Judge Bench of this Court, after referring to the aforesaid judgments, speaking through M. Hidayatullah, J. (as his Lordship then was), observes thus: (Kedar Nath Motani case [Kedar Nath Motani v. Prahlad Rai, (1960) 1 SCR 861 : AIR 1960 SC 213] AIR pp. 218-19, para 15) 15. The correct position in law, in our opi....
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....ration for the transfer as well as handing over of the possession was acknowledged. It could thus be seen, that the transaction was nothing short of a transfer of property. Under Section 61 of the Reforms Act, there is a complete prohibition on such mortgage or transfer for a period of 15 years from the date of grant. Sub-section (1) of Section 61 of the Reforms Act begins with a non-obstante clause. It is thus clear that, the unambiguous legislative intent is that no such mortgage, transfer, sale, etc. would be permitted for a period of 15 years from the date of grant. Undisputedly, even according to the Plaintiff, the grant is of the year 1983, as such, the transfer in question in the year 1990 is beyond any doubt within the prohibited period of 15 years. Sub-section (3) of Section 61 of the Reforms Act makes the legislative intent very clear. It provides, that any transfer in violation of Sub-section (1) shall be invalid and it also provides for the consequence for such invalid transaction. 25. Undisputedly, both, the predecessor-in-title of the Defendant(s) as well as the Plaintiff, are confederates in this illegality. Both, the Plaintiff and the predecessor-in-title o....
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....ngamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370], if the decree is granted in favour of the Plaintiff on the basis of an illegal agreement which is hit by a statute, it will be rendering an active assistance of the court in enforcing an agreement which is contrary to law. As against this, if the balance is tilted towards the Defendants, no doubt that they would stand benefited even in spite of their predecessor-in-title committing an illegality. However, what the court would be doing is only rendering an assistance which is purely of a passive character. As held by Gajendragadkar, J. in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370], the first course would be clearly and patently inconsistent with the public interest whereas, the latter course is lesser injurious to public interest than the former. CASES OF CONDITIONAL DECREE OF SPECIFIC PERFORMANCE 54. The decision, which first comes to mind and is oft quoted, is the decision of the Privy Council in Motilal v. Nanhelal AIR 1930 PC 287. The Court, in the said case, affirmed the decision of the Judicial Commissioner, decreeing a Suit for Specific Performance, taking note of Se....
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....e (4) of the Agreement contemplated that the vendor was to obtain permission from the Competent Authority under the Urban Land Ceiling Act. We need not multiply authorities. All that is necessary to notice and find is that when an agreement to sell is entered into, whereunder to complete the title of the vendor and for a sale to take place and the sale is not absolutely prohibited but a permission or approval from an Authority, is required, then, such a contract is, indeed, enforceable and would not attract the shadow of Section 23 of the Indian Contract Act, 1872. CERTAIN OTHER DECISIONS 56. We may examine some of the decisions, which have been referred to by the Respondents. In the decision reported in T. Dase Gowda v. D. Srinivasaiah, a Division Bench of the High Court of Karnataka was considering the Suit for Specific Performance in the context of the very Rules, which arise before us. The Defendant/Appellant in the said case, entered into an oral agreement with the Plaintiff therein on 01.09.1981, to sell the Suit site along with an incomplete structure. The Defendant received certain amounts thereafter. This was followed by a written agreement on 01.10.1981 wherein the ....
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....sale being affected, after the expiry of the period, during which, the alienation was prohibited. The vendor was to take permission for the execution of the sale deed. 58. In Syed Zaheer and Ors. v. C.V. Siddveerappa ILR 2010 Karnataka 765, a Division Bench decreed a Suit for Specific Performance wherein the agreement contemplated execution of sale deed, after the period of non-alienation prescribed under the grant. The Suit was filed, in fact, after the lapse of the period of fifteen years. 59. In Balwant Vithal Kadam v. Sunil Baburaoi Kadam (2018) 2 SCC 82, this Court rejected the contention that the agreement, which was sought to be specifically enforced, fell foul of Section 48 of the Maharashtra Cooperative Societies Act. It was found that an agreement to sell did not create an interest in land unlike a sale. 60. In Punjab & Sind Bank v. Punjab Breeders Ltd. and Anr. (2016) 13 SCC 283, this Court was dealing with a case of the effect of violation of the conditions, under which, a one-time settlement was extended. The conditions included the stipulation that the mortgaged property should not be sold for three years without prior permission, inter alia. An agreement to ....
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....quisition is or becomes invalid under any of the provisions of this Act, the Mamlatdar shall issue a notice and hold an inquiry as provided for in Section 84-B and decide whether the transfer or acquisition is or is not invalid. (2) If after holding such inquiry, the Mamlatdar comes to a conclusion that the transfer or acquisition of land is invalid, he shall make an order declaring the transfer or acquisition to be invalid. (3) On the declaration made by the Mamlatdar Under Sub-section (2),-- (a) the land shall be deemed to vest in the State Government, free from all encumbrances lawfully subsisting thereon on the date of such vesting, and shall be disposed of in the manner provided in Sub-section (4); *** 64. The contention taken by the Defendant was that the Plaintiff was already holding 31 acres and 2 guntas of jairayat land and, therefore, by acquiring the plaint Schedule property by way of the decree the Plaintiff, would hold land in excess of the ceiling area. We may notice the following discussion with specific reference to Section 23 of the Indian Contract Act, in particular: 6. By Section 23 of the Contract Act, consideratio....
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....excess of the ceiling, the acquisition to the extent of the excess over the ceiling will not be invalid. There is nothing in the agreement, nor can it be implied from the circumstances, that it was the object of the parties that the provisions of the Act relating to the ceiling should be transgressed. The mere possibility that the Respondent may not have disposed of his original holding at the date of the acquisition of title pursuant to the agreement entered into between him and the Appellant will not, in our judgment, render the object of the agreement such, that, if permitted, it would defeat the provisions of any law. The Court, it is true, will not enforce a contract which is expressly or impliedly prohibited by statute, whatever may be the intention of the parties, but there is nothing to indicate, that the legislature has prohibited a contract to transfer land between one agriculturist and another. The inability of the transferee to hold land in excess of the ceiling prescribed by the statute has no effect upon the contract, or the operation of the transfer. The statutory forfeiture incurred in the event of the transferee coming to hold land in excess of the ceiling does not....
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....the use of any holding or part thereof by a Bhumidhar for industrial purposes even though it does not lie within such a belt. 67. This Court in Bhagat Ram (supra) held as follows: 5. Bhumidhari right is transferable and the Defendant 1 is entitled to use the land even for the purpose other than those enumerated in Section 22 if he obtains permission of the Chief Commissioner. Therefore, the agreement for transfer of land does not become invalid by itself. The Defendant 1 after obtaining the property could use it for the intended purpose on obtaining permission of the Chief Commissioner or if no such permission was obtained, he could use the land for the purposes authorised Under Section 22 of the Act. In our opinion, the High Court went wrong in holding that the agreement was opposed to public policy or transfer under the agreement was hit by Section 23 of the Act. Support for our view is available from the decision of this Court in Jambu Rao Satappa Kocheri v. Neminath Appayya Hanammannaver [AIR 1968 SC 1358 : (1968) 3 SCR 706]. The suit by the Plaintiff for declaration that the agreement is bad had rightly been dismissed by the trial court as also the first appellate ....
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.... it is necessary for us to refer the matter to a larger Bench on account of the observations found in the judgment in paragraph-17. What is contemplated Under Section 23 of the Indian Contract Act is law, in all its forms, being immunised from encroachment and infringement by a contract, being enforced. Not only would a Statutory Rule be law within the meaning of Article 13 of the Constitution of India but it would also be law Under Section 23 of the Indian Contract Act. 70. Section 10 of the Contract Act declares as to what agreements are contracts and all agreements are declared contracts, if they are made by the free consent of parties competent to contract with a lawful consideration and with the lawful object and not expressly declared to be void under the Contract Act. Section 23 must be read with Section 10. Without the illustrations, Section 23, reads as follows: 23. What consideration and objects are lawful, and what not.--The consideration or object of an agreement is lawful, unless----The consideration or object of an agreement is lawful, unless--" it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or....
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....ably defeat the law in question, which is contained in the Statutory Rules or is prohibited by the same. 74. A contract may expressly or impliedly, be prohibited by provisions of a law. The intentions of the parties do not salvage such a contract. [See AIR 1968 SCC 1328 (supra)]. What is involved in this case, may not be a mere case of a conditional decree for specific performance being granted as was the case in the line of decisions commencing with Motilal (supra) and ending with Ferrodous Estates (supra). The Rules contemplate a definite scheme. Land, which is acquired by the Public Authority, is meant to be utilised for the particular purpose. The object of the law is to invite applications from eligible persons, who are to be selected by a Committee and the sites are allotted to those eligible persons, so that the chosen ones are enabled to put up structures, which are meant to be residential houses. It is implicit in the Rules, and what is more, in the lease-cum-sale agreement, that the allottee, who is treated as a lessee Under Rule 7, will remain in possession and, what is more, proceed to fulfil his obligation under the lease-cum-sale agreement and the Rules. The obliga....
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....of the concurrent findings by the Court. This is on the supposition that the parties contemplated that the site would be conveyed after the period of ten years from the date of allotment upon the expiry of which alone, the allottee, viz., the first Defendant would be entitled to the conveyance Under Rule 17(7) of the Rules. It must be noticed that in fact, under the lease-cum-sale agreement and the Rules, what is contemplated is that on events leading up to the stage where the elements of Rule 17(7) are satisfied alone, a right or duty would accrue to the allottee/lie upon the party. However, what is more important in the context of the facts of this case is the following facet. Under the agreement, the parties contemplated and have expressly provided that the Plaintiff was to be put in possession of the site on the date of the agreement, i.e., on 17.11.1982. Did the parties contemplate the construction of the building residential in nature, for the purpose of which, the site was allotted to the first Defendant? Is it not a clear case where enforcing the agreement, as it is, would necessarily result in the first Defendant not acting in accordance with lease-cum-sale agreem....
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....of the obligation in law of the first Respondent to put up the construction. The agreement to sell involved clearly terms which are impliedly prohibited by law in that the first Defendant was thereunder to deliver title to the site and prevented from acting upon the clear obligation under law. This is a clear case at any rate wherein enforcing the agreement unambiguously results in defeating the dictate of the law. The 'sublime' object of the law, the very soul of it stood sacrificed at the altar of the bargain which appears to be a real estate transaction. It would, in other words, in allowing the agreement to fructify, even at the end of ten-year period of non-alienation, be a case of an agreement, which completely defeats the law for the reasons already mentioned. 78. Going by the recital in the agreement entered into between the Plaintiff and the first Defendant, possession is handed over by the first Defendant to the Plaintiff. The original Possession Certificate is also said to be handed over to the Plaintiff. The agreement, even according to the Plaintiff, contemplated that within three months of conveyance of the site in favour of the first Defendant, the first D....
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....d. 82. Now, let us look at it from a different perspective. The agreement is dated 17.11.1982. We have noticed the correspondence by the Plaintiff. We have also noticed the terms of the agreement between the Plaintiff and the first Defendant. In the first letter sent by the Plaintiff which incidentally was within four months of the date of agreement, the Plaintiff called upon the first Defendant to execute the sale deed. There is no mention about the first Defendant attempting to sell the property to anybody. It is noteworthy that the Plaintiff has stated that he intends to sell the property to his nominee. This further indicates that he was not a person who was in need of this site for the purposes of putting up of residential building unlike even the Plaintiff in the case considered by the High Court of Karnataka and relied upon by the Plaintiff, namely, T. Dase Gowda v. D. Srinivasaiah (supra). We have already noticed the command of the law as contained in Rule 18(3) of the Rules read with Rule 17. If an allottee who is treated as a lessee for reasons which are indicated in Rule 18(3) wishes to sell the site (which is applicable in this case as no building has been put up) th....
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....for the Plaintiff and, what is more, no justification for the Plaintiff, to institute the Suit prematurely, almost four years prior to the appointed date. 85. Article 54 of the Limitation Act, reads as follows: 54. Suits for Specific Performance 3 years. The date fixed for the performance, or, if no such date is fixed, when the Plaintiff has notice that performance is refused. 86. Article 54 contemplates that when a date is fixed for the performance of the contract, then, the period of limitation begins to run from that date. When such a date is not fixed in an agreement to sell, then, refusal or breach by the vendor will start the clock ticking. 87. However, we may notice, in this regard, what the Court has opined. In Ramzan v. Hussaini (1990) 1 SCC 104, a Bench of two learned Judges of this Court took the view that the word 'date' in Article 54, need not be expressly mentioned in an agreement and it can be found out from the other terms of the agreement. If this were so, there may be merit in the second Defendant contention. In a later decision, a Bench of three learned Judges in Ahmadsahab Abdul Mulla (2) (dead) v. Bibijan and Ors. (2009) 5 SCC 462, has....
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....ring even the same that before the Trial Court, the second additional issue was, as to whether the contract was void but not ignoring the first point which was raised by the High Court, which was as to whether the Suit was maintainable, wherein the High Court has discussed the matter, it appears to us to be a question of law, which is to be applied to facts, which are not in dispute and, therefore, we reject the said contention. Even absent a plea by the Defendant illegality by putting the contract side by side with the Rules is writ large. IMPACT OF ABSENCE OF PRAYER QUESTIONING REPUDIATION BY FIRST DEFENDANT? 90. The second Defendant has raised a contention that since the first Defendant has repudiated the contract and as the Plaintiff has not prayed for a declaration that the repudiation was bad, the Suit would not lie. Reliance is placed on the judgment of this Court in I.S. Sikandar (Dead) by Lrs. v. K. Subramani and Ors. (2013) 15 SCC 27. In the said judgment, we find that this Court has taken the view that when the vendor has cancelled the agreement, it is incumbent upon the vendee to seek a declaration that the cancellation was illegal. This is what the Court has held....
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....ndente lite if the lis has been duly registered. 93. It is further important to notice that when a transaction is done, lis pendens or pending a case, the transaction is, as such, not annulled. The transaction is, in other words, not invalidated. In fact, as between the transferor and the transferee, it does not lie in the mouth of the transferor to set up the plea of lis pendens to defeat the disposition of property. Equally, the Principle of Lis Pendens is, not to be confounded with the aspect of good faith or bonafides. In other words, the transferee or the beneficiary of the property, which is disposed of by a party, cannot set up the case that he acted bonafide or in good faith. This enables the court and the parties in a Suit or a proceeding, which otherwise is in conformity with requirements of Section 52, to proceed in the matter on the basis that the adjudication by the court, will not, in any way, be subverted or delayed, when the day of final reckoning arrives. 94. The cardinal and indispensable requirement, which flows both from Section 52 and the principle, it purports to uphold, is that the transfer or dealing of the property, which is the subject matter of the ....
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....s behalf, has appointed to represent him in the world of the living. This representative bears the person of the deceased, and therefore, has vested in him all the inheritable rights, and has imposed upon him all the inheritable liabilities of the deceased. Inheritance is in some sort a legal and fictitious continuation of the personality of the dead man, for the representative is in some sort identified by the law with him whom he represents. The rights which the dead man can no longer own or exercise in propria persona, and the obligations which he can no longer in propria persona fulfil, he owns, exercises, and fulfils in the person of a living substitute. To this extent, and in this fashion, it may be said that the legal personality of a man survives his natural personality, until, his obligations being duly performed, and his property duly disposed of, his representation among the living is no longer called for. Just as many of a man's rights survive him, so also do many of his liabilities; and these inheritable obligations pass to his representative, and must be satisfied by him. As far as the estate of a dead man is concerned, there are two class of persons who are entit....
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....b) in favour of Defendant No. 2 when Defendant No. 1(b) was not a party to the suit is not subject to any direction that may be issued in the suit, and that Section 52 of the Act would not apply in the instant case is not a correct understanding of the position of law. Further, in the instant case, Defendant No. 1(a) also did not inform the trial court that his son was also a legal representative of deceased Defendant No. 1 and therefore, he also ought to be brought on record as the heir of the deceased Defendant No. 1 when the application was filed by the Plaintiff to bring only him on record as legal heir of deceased Defendant No. 1. Therefore, it is held that in ' the instant case, the estate of the Defendant No. 1 was represented through Defendant No. 1(a) in the suit and that the alienation made by Defendant No. 1(b) to Defendant No. 2, even in the absence of Defendant No. 1(b) being made a party to the suit has no significance. That apart, it is also noted from the evidence of Defendant No. 2, who has deposed as DW-1, that when the talks for the sale of the suit property took place in June, 1996, Defendant No. 1(a) along with Defendant No. 1(b) and the broker Battanna ....
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....intiff in the action seeks to set aside the abatement and to bring the legal representative on record, and that is ordered, the doctrine of lis pendens applies or not does not arise and need not be considered. There may be difficulties in such a case, but where the alienation is made within the time prescribed for bringing the legal representative on record, it is a clear case and there can be no doubt whatever that the Rule does apply... 98. Thereafter, the Court concluded that in the circumstances, Section 52 of the TP Act squarely applied. 99. It would appear that the High Court has, in arriving at the finding that the transfer in favour of the Appellant is hit by lis pendens, taken into consideration the Doctrine of Notice/Constructive Notice. We have already observed that the Doctrine of Notice and Constructive Notice would be inapposite and inapplicable. Neither the fact that the transferee had no notice nor the fact that the transferee acted bonafide, in entering into the transaction, are relevant for applying Section 52 to a transaction. This is unlike the requirement of Section 19(1)(b) of the Specific Relief Act whereunder these requirements are relevant. 100. Th....
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....ation for impleading Defendant 1(b) had already clearly expired even the principle laid down in the decision of the Madras High Court would not apply and the High Court was not correct in finding that the sale by Defendant 1(b) in favour of second Defendant was hit by lis pendens. IS THE SECOND DEFENDANT, A BONAFIDE PURCHASER? 101. The Trial Court has found that the second Defendant is a bonafide purchaser. The High Court holds otherwise. The purchase of the Suit site is purported to be made by the second Defendant on 17.09.1996. The High Court, after going through the evidence, enters the following findings. The negotiations took place first time in June, 1996 and, at that time, the Suit was pending. The BDA has not yet registered the conveyance in favour of Defendant 1(b). Even before the BDA executed the sale deed in favour of Defendant 1(b), he had decided to enter into the agreement. The conveyance in favour of Defendant 1(b) was entered only on 14.06.1996 and he executed the sale deed in favour of the second Defendant on 19.09.1996. The second Defendant has deposed that he met not just DW2 along with the broker but he had also met the father of DW2, viz., Defendant 1....
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.... found that the second Defendant is not a bonafide purchaser for value. Finally, it was found, by answering point No. 2, that second Defendant is not a bonafide purchaser for value without notice of the agreement to sell in favour of the Plaintiff. 102. We must, in the first place, notice that on a perusal of the plaint, even after the amendment, there is no case set up by the Plaintiff that the sale deed executed in favour of the second Defendant, is a sham transaction. A sale deed, which is a mere sham and a purchase, which is not bonafide, are two different things. In the case of sham transaction, no title is conveyed to the purchaser. In the case a sale transaction, which is not a sham, the title of the transfer is, indeed, conveyed to the transferee. A purchase may be bonafide or not bonafide. In a sale, which is not a bonafide, words "bonafide sale", is used in the context of pending Suit and from the point of view of Section 19(1)(b) of the Specific Performance Act. It is difficult to dub it as a sham transaction. A transaction cannot be a sham transaction and a sale, which is afflicted with absence of bonafides, at the same time. Even proceeding on the basis that the sec....
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....he second Defendant regarding the pendency of the Suit and, therefore, the High Court has erred in reversing the finding of the Trial Court, which had found that inquiry as contemplated in Section 3 of the TP Act had been made by the second Defendant for purchasing the property. Second Defendant had visited the Site. The finding based on Defendant being 20-years old or the husband of the vendor, being an MLA, was pointed out to be irrelevant. It is further the case of the second Defendant that construction was made and he is living in the property since more than 17 years. The value of the property is stated to be about 2.5 crores. 105. Per contra, the learned Senior Counsel for the Plaintiff, would support the finding of the High Court. It was pointed out that the High Court is the final fact-finding Court. 106. We have already found that the sale in favour of the second Defendant is wrongly found to be a sham transaction, a case, which even the Plaintiff did not have. If it is not a sham transaction and the issue is, as to whether the second Defendant, is not a bonafide purchaser, the following aspect looms large. 107. We have already found that the agreement to sell dat....
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....haser. NOT A CASE UNDER ARTICLE 136? 109. Is it a case which should not be allowed Under Article 136? The argument of the Plaintiff is that having regard to the facts as it emerges this is not a fit case for this Court to exercise its jurisdiction which originated from grant of special leave Under Article 136. It is undoubtedly true that at both the stages namely while granting special leave and also even after special leave has been granted Under Article 136 that is when the court considers an appeal the court would not be oblivious to the special nature of the jurisdiction it exercises. It is not axiomatic that on a case being made otherwise that the court would interfere. The conduct of the parties and the question as to whether interference would promote the interests of justice are not irrelevant considerations. Being the final court, it is not without reason that this Court is accordingly also clothed with the extraordinary powers Under Article 142 to do compete justice between the parties. 110. There is another aspect which is also projected by the Plaintiff which must receive our attention. The Plaintiff sought to persuade us should the court find the agreement to ....