Doctrine Of Lis Pendens Applies Where Petition Is Lying In Registry In Defective State: Supreme Court

The Supreme Court held that the doctrine of lis pendens applies where the petition for review was lying in the registry in a defective state.

The Court held thus in review petitions seeking review of the judgment of the three-Judge Bench passed in August 2022 by which it allowed the appeal against the judgment of the Telangana High Court.

The three-Judge Bench comprising CJI D.Y. Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Misra observed, “The purpose of lis pendens is to ensure that the process of the court is not subverted and rendered infructuous. In the absence of the doctrine of lis pendens, a defendant could defeat the purpose of the suit by alienating the suit property. This purpose of the provision is clearly elucidated in the explanation clause to Section 52 which defines “pendency”. Amending Act 20 of 1929 substituted the word “pendency” in place of “active prosecution”. The Amending Act also included the Explanation defining the expression “pendency of suit or proceeding”. “Pendency” is defined to commence from the “date of institution” until the “disposal”. The argument of the respondents that the doctrine of lis pendens does not apply because the petition for review was lying in the registry in a defective state cannot be accepted.”

The Bench added that the review proceedings were “instituted” within the period of limitation of thirty days and hence, the doctrine of lis pendens kicks in at the stage of “institution” and not at the stage when notice is issued by the Court.

Senior Advocates Neeraj Kishan Kaul, Harin P. Raval, and Navin Kumar Pahwa represented the petitioner while Senior Advocates Rakesh Dwivedi and Mukul Rahotgi represented the respondents.

Brief Facts -

The petitioner instituted proceedings under Article 137 of the Constitution read with Order XLVII Rule 1 of the Supreme Court Rules 2013 seeking a review of the 2022 judgment. The Court had allowed the appeal by which the suit for specific performance was partially decreed by directing the registration of suit property in favour of the petitioner proportionate to the extent of the consideration paid. The issue for consideration was whether the judgment suffers from an error apparent on the face of the record which warrants the exercise of the review jurisdiction. In 1994, the original owners entered into an agreement to sell a land to the vendors and upon payment of balance sale consideration, the possession of the entire property was delivered.

A sale deed was not executed, though the full sale consideration was paid, however, an irrevocable power of attorney was executed in favour of the vendors. The vendors executed an agreement to sell in favour of the petitioner (purchaser). In 2000, the petitioner issued a legal notice to the respondents calling upon them to receive the balance sale consideration and execute the sale deed. On issuing a second legal notice, the respondents replied by claiming that the execution is barred by limitation. Hence, the petitioner instituted a suit seeking a decree for specific performance of the agreements to sell. The Trial Court dismissed the suit and hence, an appeal was preferred. The High Court partly allowed the appeal and thereafter, the Apex Court held that the suit was barred by limitation. Resultantly, the review petitions were filed.

The Supreme Court in view of the above facts, noted, “Clauses 3, 21 and 23 cannot be interpreted to mean that a time is fixed for the execution of the sale agreements. Thus, the limitation is governed by the second part of Article 54. The limitation of three years prescribed by the second part of Article 54 runs from the date when the plaintiff has notice that performance has been refused. The petitioner/plaintiff had notice that performance is refused only by the reply dated 14 April 2000 to the first legal notice of the petitioner.”

The Court added that the limitation prescribed by Article 54 sets in from the date when the petitioner received the reply refusing performance and irrespective of whether the suit was instituted on August 2002 or July 2002, it was within limitation.

“Section 10, before the amendment in 2018 stated that the Court can exercise its discretion to award specific performance of contract where (a) there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done; or (b) when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief. The Explanation provided that unless there is anything to the contrary, the court shall presume that the compensation in money is not an adequate relief for the breach of a contract to transfer immovable property. There is nothing in the agreements to sell to rebut this statutory presumption”, it said.

The Court further said that this is a fit case for the Court to exercise its discretion to direct specific performance. It also observed that the doctrine of lis pendens that Section 52 of the Transfer of Property Act encapsulates, bars the transfer of a suit property during the pendency of litigation and the only exception to the principle is when it is transferred under the authority of the court and on terms imposed by it.

“Where one of the parties to the suit transfers the suit property (or a part of it) to a third-party, the latter is bound by the result of the proceedings even if he did not have notice of the suit or proceeding”, it emphasised.

The Court concluded that Section 52 of the Transfer of Property Act would apply to the third-party purchaser once the sale was executed after the review petition was instituted before the Court and any transfer that is made during the pendency is subject to the final result of the litigation.

Accordingly, the Apex Court allowed the review petitions and restored the judgment of the High Court.

Cause Title- M/s Siddamsetty Infra Projects Pvt. Ltd. v. Katta Sujatha Reddy & Ors. (Neutral Citation: 2024 INSC 861)

Appearance:

Petitioner: Senior Advocates Neeraj Kishan Kaul, Harin P. Raval, Navin Kumar Pahwa, AOR Krishna Kumar Singh, Advocates S. Udaya Kumar Sagar, Bina Madhavan, Mohan Rao, Tushar Singh, Urmi H. Raval, Ira S. Mahajan, Shreya Bansal, and Siddharth H. Raval.

Respondents: Senior Advocates Rakesh Dwivedi, Mukul Rahotgi, AOR E. C. Agrawala, Advocates Mahesh Agarwal, Rishi Agrawala, Ankur Saigal, Madhavi Agarwal, Divyanshu Srivastava, Deepsikha Mishra, Madhavi Agarwal, and Yash Jain.

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