SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.

Page 1 Thursday, April 20, 2023

Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

2022 SCC OnLine SC 60

In the Supreme Court of India

Relied on in Apex Laboratories (P) Ltd. v. CIT, (2022) 7 SCC 98

(BEFORE K.M. JOSEPH AND P.S. NARASIMHA, JJ.)

Civil Appeal No. 380 of 2022

[@ Special Leave Petition [C] No. 6857/2017]
G.T. Girish … Appellant(s);
Versus
Y. Subba Raju (D) by Lrs and Another …
Respondent(s).
With
Civil Appeal No. 381 of 2022
[@ Special Leave Petition [C] No. 6858/2017]
Civil Appeal No. 380 of 2022 [@ Special Leave Petition [C] No.
6857/2017] and Civil Appeal No. 381 of 2022 [@ Special Leave
Petition [C] No. 6858/2017]
Decided on January 18, 2022
The Judgment of the Court was delivered by
K.M. JOSEPH, J.:— Leave granted.
2. The appellants are defendant 1(a), defendant 1(b) and second
defendant in a Suit filed for specific performance. Defendant 1(a) and
Defendant 1(b) have filed SLP(C) No. 6858/2017 while defendant No. 2
has filed SLP(C) No. 6857/2017. The Trial Court while refusing specific
performance, directed the return of the amount paid by the plaintiff
under the contract. By the impugned judgment, the High Court allowed
the plaintiffs appeal and directed the appellants to execute the sale
deed relating to the plaint schedule property in favour of the plaintiffs
(legal representatives of original plaintiff). The parties will be
hereinafter referred to by their status in the Trial Court.
A BRIEF OVERVIEW OF FACTS
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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 2 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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 defendant as Defendant-1(a). A sale
deed came to be executed by the BDA in favour of the son of defendant
no. 1 and defendant-1(a), on 19.06.1996. Thereafter, the son executed
sale deed of the plaint schedule property in favour of the second
defendant. It is further not in dispute that the son of the first defendant
and defendant-1(a) was impleaded as defendant-1(b) in the Suit in the
year 1997. The second defendant came to be impleaded as second
defendant in the Suit in the year 1997. Both the defendant-1(b) and
second defendant filed Written Statements.
4. The Trial Court did not decree the suit for specific performance but
directed return of Rs. 50,000/- with 9 per cent interest. The High Court
found that the Suit is maintainable. It was further found that the
second defendant is not a bonafide purchaser for value without notice
of the Agreement to Sell dated 17.11.1982. It was further found by the
High Court that, the alienation made in favour of the second defendant,
was hit by the provisions of Section 52 of the Transfer of Property Act,
1882. Answering the point, whether the plaintiff was entitled to the
relief of specific performance, it was found that, in the facts, when the
entire sale consideration was paid by the plaintiff to the first defendant,
nothing more remained to be done by the plaintiff, and having found
that the second defendant was not a bonafide purchaser for value
without notice, and taking the view that Section 23 of the Specific
Relief Act, 1963 did not apply at all and there being no reason to not
exercise discretion in favour of the plaintiff, the Suit was decreed by
directing defendant-1(a), defendant-1(b) and the second defendant to
jointly convey the plaint schedule property to the plaintiff.
5. We heard Smt. Kiran Suri, learned Senior Counsel on behalf of the
second defendant and Shri R. Basant, learned Senior Counsel on behalf
of the plaintiff. Mrs. Kirti Renu Mishra, AOR, appears in the Appeal filed
by defendant-1(a) and defendant 1(b).
THE CONTENTIONS OF THE APPELLANTS
6. Smt. Kiran Suri, learned senior counsel appearing on behalf of
second defendant contended that the finding that the Suit was
maintainable, was unsustainable. She contended that an agreement
must be lawful, in order that a court may grant specific relief. It's her
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 3 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

contention that the agreement is unlawful, being opposed to public

policy, and also 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 v. Prahlad Rai1 and Narayanamma v.
Govindappa2 . 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, the first defendant would execute the sale
deed in favour of the plaintiff upon the expiry of three months from the
date of conveyance of sale deed executed by the BDA. The agreement
of lease-cum-sale contemplated such a conveyance in favour of the first
defendant only after the expiry of ten years from the date of allotment
and the date of the lease-cum-sale agreement dated 04.04.1979. The
Suit is filed a good four years prior to even the expiry of ten years. She
attacked the finding of the High Court that the second defendant was
not a bonafide purchaser for value. She pointed out that as far as
knowledge of pendency of Suit is concerned, the evidence pointed to
the second defendant not being aware of the Suit, defendant-1(b) has
admitted to not disclosing about the pendency of the Suit to the second
defendant. The second defendant inspected the site and found it to be
a vacant land except for a small shed. Regarding the finding of the High
Court that the original document, evidencing delivery of possession of
the plaint schedule property by the BDA to the first defendant, was not
given to the second defendant and that only a photocopy was given, it
is contended that second defendant was informed that the original was
lost. There was already an assignment in favour of defendant-1(b).
There was no need for the second defendant to make any further
inquiry. All possible inquiry was conducted by the second defendant.
There is no justification for the High Court to conclude that second
defendant was not a bonafide purchaser for value. As far as finding of
the High Court that the second defendant, a 20-years old, at the time
of the sale, did not have the wherewithal to purchase the property, it
could not be justified, having regard to the evidence which established
that the second defendant was the owner of 10 acres of land. He was
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 4 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

into the business of selling milk and he had the necessary funds and
there is no occasion for the High Court to interfere with the findings of
the Trial Court in this regard.
7. Per contra, Shri R. Basant, learned Senior Counsel for the plaintiff,
reminded us that matter is appreciated by the two courts. The finding
that there was a valid contract by the Trial Court was not challenged by
the appellants. There is no pleading to justify the argument that the
agreement in question was not lawful. He would point out that neither
the lease-cum-sale agreement nor the Rules, prohibited the allotee
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 first defendant, who he points out was the wife of an MLA
and also a Minister, and having regard to Article 54 of the Limitation
Act, 1963, had no choice, except to rush to the civil court and institute
the Suit. He would rely upon large body of case law, including
judgments of the High Court of Karnataka, to contend that an
agreement to sell, in circumstances, such as obtaining in the present
case, was valid and lawful. He would command for our acceptance, the
findings of the High Court regarding the fact that second defendant was
not a bonafide purchaser for value. He did not have the necessary
capacity and he was fully aware of the pendency of the Suit.
THE LAW IN QUESTION
8. The City of Bangalore Improvement Act, 1945, going by the
Preamble, was enacted for the improvement of the city of Bangalore
and to provide space for its future expansion. It contemplated the
appointment of a Board of Trustees, which was to consist of eleven
Trustees with the Chairman and six Trustees being appointed by the
Government. The Act clothed the Board with the power to undertake
improvement schemes. What is of relevance to the present case are the
following provisions:
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 5 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

9. Section 24 read as follows:

“24. Board not to sell or otherwise dispose of sites in certain
cases.—The Board’ shall not sell or otherwise dispose of any sites for
the purpose of constructing buildings thereon for the accommodation
of person until all the improvements specified in Section 23 [have
been substantially provided for the estimates.”
10. Section 29 dealt with the power of the Board to acquire, hold
and dispose of the property and it reads as follows:
“29. Power of Board to acquire, hold and dispose of property.—(1)
The Board shall, for the purposes of this Act, have power to acquire
and hold movable and immovable property, whether within or
outside the City.
(2) Subject to such restrictions, conditions and limitations
as may be prescribed by rules made by the Government, the
Board shall have power or lease, sell or otherwise transfer any
movable or immovable property which belongs to it, and to
appropriate or apply any land vested in or acquire by it for the
formation of open spaces or for building purposes or in any
other’ manner for the purpose of any improvement scheme.
(3) The restrictions, conditions and limitations contained in
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. These
Rules came into force on the 1st Day of September, 1972. These Rules
are the Rules, which would govern the fate of this case.
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 6 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

13. Rule 2(b) defines the word ‘allottee’ as meaning the person to
whom the site is allotted under these Rules. The Rules define backward
class. It also, inter alia, defines stray site.
14. Rule 3 reads as follows:
“3. Offer of sites for allotment.—(1) Whenever the Board has
formed an extension or layout in pursuance of any scheme, the
Board may, subject to the general or special orders of the
Government, offer any or all the sites in such extension or layout for
allotment to persons eligible for allotment of sites under these rules.
(2) Due publicity shall be given in respect of the sites for
allotment specifying their location, number, the amount payable as
earnest money, the last date for submission of applications and,
such other particulars as the Chairman may consider necessary; by
affixing a notice to the notice board of the office of the Board, and
any other office as the Chairman may decide from time to time and
by publication in not less than three daily newspapers published in
the City of Bangalore in English and Kannada having a wide
circulation in the city.”
15. Rule 5 dealt with the allotment of stray sites. Rules 6
contemplated disposal of sites for heritable purposes.
16. Rule 7 proclaimed that the allottee was to be lessee and it reads
as follows:
“7. Allottee to be a lessee. —The site allotted under Rule 3 or Rule
5 shall be deemed to have been leased to the allottee until the lease
is determined or the site is conveyed in the name of the allottee in
accordance with these rules. During the period of the lease, the
allottee shall pay to the Board rent at the rate of rupees three per
annum where the area of the site does not exceed two hundred
square meters, rupees six per annum where the area of the site
exceeds two hundred square meters but does not exceed five
hundred square meters and rupees twelve per annum where the area
of the site exceeds five hundred square meters before the
commencement of each year.”
17. Rule 8 dealt with applications. It contemplated that the
applications for allotment of site was to be in Form I. Several details
are to be furnished. It included the annual income of the applicant,
whether the applicant already owned a house or house 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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 7 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

[See sub-rule (1) of Rule 8]

Form of Application for Purchase of Site
To
The Chairman,
City 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, Nomadic Tribes, Semi-Nomadic Tribes, Backward
Classes, Denotified Tribes.
5. Whether married or single
6. (a) Residential address : Permanent (House No. Name of
street, locality and Town):
(b) Present address : (if different from above) for correspondence
with the Board.
7. (i) Occupation or post.
(ii) Address
(iii) Place of employment or business.
8. (a) Annual income of the applicant (both from profession and
from properties if any)
(b) Any other means indicating the capacity of the applicant to
purchase the site applied for and to building a house thereon.
9. Whether the applicant is ordinarily a resident in Bangalore City
or in the area under the jurisdiction of the Board and the period of
such residence.
10. Whether any member of the family of which the applicant is a
member owns or has been allotted site or a house by the Board or
any other authority, within the area under the jurisdiction of the
Board. (Furnish details).
11. (1) Whether the applicant already owns a house or a house-
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 8 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

site:
(a) in the City (with details)
(b) outside the city (with details)
(2) Whether he/she has any share in such property and the value
of the share thereof.
12. (1) Whether the applicant's wife/husband/minor child owns a
house or a house-site:
(a) in the City (with details)
(b) outside the city (with details)
(2) Whether the applicant's wife/husband/minor child has any
share in such property and the value o 1 the share thereof.
13. Whether the applicant has transferred the ownership or rights
in the house or house-site already allotted to him/her in any of the
schemes of the Board or any other authority to somebody else (if so,
himish details).
14. Whether the applicant or any members or his/her family has
already availed of any housing or loan scheme of Government local
body or Co-operative Society, if so, give details.
15. Whether the applicants applied for allotment of a site or a site
with a building, in any of the scheme of the Board or and other
authority and whether his/her deposit was refund (if so, furnish
details).
16. Amount of earnest money deposited now (with Challan No.
and date).
I hereby solemnly declare that all the above information given by
me is true. I shall furnish any additional information in my
possession which you may require. If there is any delay on my part
to furnish the 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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 9 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

reads as follows:
“10. Eligibility for allotment. —No person.
(1) Nho.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 eligible for allotment of Sites
under these rules.
(2) Who or any member of whose family owns or is a lessee
entitled to demand conveyance eventually or has been allotted
a site or a house by the Board or any other authority, within
the area under the jurisdiction of the Board; or of the
Corporation of the City of Bangalore, shall be eligible to apply
for allotment of a site:
Provided that the Board may relax the restriction in clause (1)
regarding residence in the case of persons. —
(i) who are domiciled in the State of Mysore and who bona fide
intend to reside within the area under the jurisdiction o/the
Board; or,
(ii) who are domiciled. in the State of Mysore but have gone
outside the State on business, employment, study or training
and who bona fide intend to reside within the area under the
jurisdiction of the board;
or
(iii) who though not domiciled in the State of Mysore bona fide
intend to reside within the area under the jurisdiction of the
Board.”
19. Rule 11 provided for the principles for selection of applicants for
allotment of sites. The following principles have been set out in Rule 11
(1):
“11. Principles for selection of applicants for allotment of sites. —
(1) The Board shall consider the case of each applicant on its merits
and shall have regard to the following principles in making selection.
—
(i) the status of the applicant, that is whether he is married or
single and has dependent children;
(ii) the income of the applicant and his capacity to purchase a site
and build a house thereon for his residence:
Provided that this condition shall not be considered in case
of applicants belonging to Scheduled Castes, Scheduled Tribes,
Wandering Tribes, Nomadic Tribes and other Backward Classes.
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 10 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

(iii) the number of years the applicant has been waiting for
allotment of a site and the fact that he did not secure a site
earlier though he is eligible and had applied for a site;
(iv) persons who are ex-servicemen or members of the family of
the deceased servicemen killed in action, during the last ten
years.”
20. The sites were to be allotted among different classes of persons
which included wandering tribes, scheduled tribes, scheduled castes, ex
-servicemen, persons domiciled in Karnataka but serving in the 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 the area exceeds two
hundred square meters and does not exceed five hundred
square meters and rupees one hundred and twenty where the
area exceeds five hundred square meters) shall be paid within
ninety days from the date of receipt of the notice of allotment,
or such extended period not exceeding one year as the
Chairman may specify. Interest at [fifteen per cent]] shall be
paid on the said amount for the extended period. If the said
amount is not paid within the period of ninety days or the
extended period the earnest money paid by the allottee shall
be liable to forfeiture and the allotment may be cancelled:
[Provided that where an allottee is a person.—
(i) whose annual income does not exceed [three thousand and
six hundred rupees], he may choose to pay the balance
value of the site in quarterly, half yearly or annual
installments and the rate of interest on the said amount for
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 11 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

the extended period for quarterly payment will be two per

cent for half yearly payments will be three per cent and
annual payments four per cent;
(ii) whose annual income exceeds [three thousand and six
hundred rupees] but does not exceed seven thousand and
two hundred rupees interest at twelve per cent per annum
shall be paid on the said amount for de extended period:
Provided further that where an allottee is a person belonging
to a Scheduled Caste or Scheduled Tribe or other Backward
Classes or a nomadic tribe or a wandering tribe, or a denotified
tribe or a family of Defence personnel killed or disabled during
the recent war and whose annual income from all sources does
not exceed rupees five thousand, the balance of the value of
the site required to be paid under this sub-rule shall be paid by
him without interest within a period of six years from the date
of receipt of the notice of allotment.]
(3) Until the site is conveyed to the allottee the amount paid by
the allottee for the purchase of the site shall be held by the
Board as security deposit for the due performance of the terms
and conditions of the allotment and the lease-cum-sale
agreement entered into between the Board and the allottee.
(4) After payment under sub-rule (2) is made the Board shall
intimate the allottee the actual measurements of the site and
the particulars thereof and a lease-cum-sale agreement in
Form II shall thereafter 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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 12 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

years from the date of execution of the agreement or such

extended period ‘[as the Chairman may] in any specified case
by written order permit. If the building is not constructed
within the said period the allotment may, after reasonable
notice to the allottee, be cancelled, the agreement revoked, the
lease determined and the allottee evicted from the site by the
Board, and after forfeiting twelve and a half per cent of the
value of the site paid by the allottee, the Board shall refund the
balance to the allottee.
(7)(a) On the expiry of the period of ten years and if the allotment
has not been cancelled or the lease has not been determined in
accordance with these brutes or the terms of the agreement in
the meanwhile the Board shall by notice call upon the allottee
to get the sale deed of tire site executed at his own cost within
the time specified in the said notice.
(7)(b) If the allottee fails to get the sale deed executed within the
time so specified the Board shall itself execute the same and
recover the cost and other charges, if any, incidental thereto
from the allottee as if the same are amount due to the Board.]
(8) The allottee shall ordinarily reside or himself make use of the
building constructed on the site allotted to him.
(9) With effect from the date of taking possession of the site the
allottee or his heirs and successors shall be liable to pay the
taxes, fees and cesses payable in respect of the site and any
building erected thereon.
If the particulars furnished by the applicant in the prescribed
application form for allotment of site are found incorrect or false
subsequently, twelve and half per cent of the site value, shall be
forfeited after the site is resumed by the Board and the balance
amount of site value refunded to the applicant.”
23. Rule 18, likewise, speaks about restrictions, conditions and
limitations on sale of sites and we refer to the same:
“18. Restrictions, conditions and limitation on sales of sites.—(1)
Notwithstanding’ anything contained in.—
(i) these rules or any other rules, bye-laws or orders governing
the allotment, grant or sale of sites by the Board for
construction of buildings; or
(ii) any instrument executed in respect of any site allotted,
granted or sold by the Board for construction of buildings, the
Chairman may at the request 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).
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 13 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

(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 India, the Government of
Mysore, the Life Insurance Corporation of India or the
Mysore Housing Board, or any 1 [any company or Co-
operative Society approved by the Board] or any Corporation
set up, owned or controlled by the State Government or the
Central Government to secure moneys advanced by such
Government, 2 [Corporation, Board, Company J, Society or
Corporations, as the case may be, for the construction of the
building on the site;
(b) in the case of a site on which a building has been constructed,
the purchaser shall not alienate the site and the building
constructed thereon within a period of ten years from the date
of allotment, except.—
(i) by mortgage in favour of the Government of India, the
Government of Mysore, the Life Insurance Corporation of
India or the Mysore Housing Board or any Co-operative
Society approved by the Board to secure moneys advanced
by such Government, 3 [Corporation, Board, Company] or
Society for the construction of the building on the site; or
(ii) with the previous approval of the Board;
(c) in the event of the purchaser committing breach of any of the
conditions in clause (a) or clause (b), the Board may at any
time, after giving the purchaser reasonable notice, resume the
site free from all encumbrances. The purchaser may remove all
things which he has attached to the earth:
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 14 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

‘Provided he leaves the site in the state in which he received

it. All transaction entered into in contravention of the
conditions specified in clauses (a) and (b) shall be null and
void ab initio.
‘Explanation. — In this rule, references to the Board shall be
deemed to include the Chairman when authorised by the Board
by a general resolution to exercise any power vested in the
Board.
[(3) Notwithstanding anything in sub-rule (2), but without
1

prejudice to the provisions of Rule 17 where the lessee applies

that for reasons beyond his control he is unable to reside in the
City of Bangalore or by reasons of his insolvency or
impecuniosity it is necessary for him to sell the site or site and
the building, if any, he may have put up thereon, the
Bangalore Development Authority may, with the previous
approval of the State Government, either. —
(a) require him to surrender the site, where there is no
building, in its favour; or
(b) where there is a building 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. It is clear that what is involved is the allotment of public
property. The allottee was to be a lessee. The allottee, during the period
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 15 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

of lease, was to pay rent, as provided in Rule 7. Allotment was

premised on selection being carried out based on principles for
selection, as provided in Rule 11 and to be carried by the Allotment
Committee under Rule 12. The value of the site is fixed. This is clear
from Rule 17(1). The allottee was to pay 12½ per cent of the price of
the site within 15 days of the receipt of notice of allotment. Within 90
days from the date of receipt of notice of allotment or extended period
not exceeding one year, which may be fixed by the Chairman, the
balance had to be paid. Non-payment attracted interest for the
extended period. If the amount was not paid within 90 days or the
extended period, earnest money was liable to be forfeited and the
allotment may be cancelled. The two provisos of Rule 17 provided for
certain concessions to certain categories. The amount, which was paid
by the allottee, formed the security deposit for the due performance of
the obligation, under the lease-cum-sale agreement between the Board
and the allottee. This was to be so till the conveyance was executed
regarding the site to the allottee. A lease-cum-sale agreement in Form
2 was to be entered into by the allottee. Every allottee was mandated
to construct a building, which, we may clarify was to be a residential
building, on the site in accordance with plan approved by the Board.
The allottee was to comply with the conditions in the agreement. Rule
17(6) fixed the period of two years from the date of execution of the
lease-cum-sale agreement or such extended period, within which the
building had to be put up. Till 29.05.1980, the power to extend the
period was vested with the Board. After 29.05.1980 the power to
extend by a written Order was vested with the Chairman. If the
building was not constructed within the period of two years or extended
period, the allotment could be cancelled and the agreement revoked,
the lease determined and the allottee evicted from the site by the
Board. Such action was to be preceded by according a reasonable
notice to the allottee against the proposed action. In the event of such
action being taken, the allottee was entitled to the refund of the
amount after forfeiting 12½ per cent of the value. It is under 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.
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 16 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

“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 ………hereinafter called Lessee/Purchaser (which term shall
wherever the context so permits mean and include his/her heirs,
executors; administrators and legal representatives) of the OTHER
PART;.
Whereas, the City of Bangalore Improvement Trust Board
advertised for sale building sites in Extension;
And, whereas, one of such building site in Site No:……….. more
fully described in the Schedule hereunder and referred to as
property;
And, whereas, there were negotiation between the
Lessee/Purchaser on the one hand and the Lessor/Vendor on the
other for allowing the Lessee/purchaser to occupy the property as
Lessee until the payment in full of the price of the aforesaid site as
might be fixed by the Lessor/Vendor as hereinafter provided;
And, whereas, the Lessor/Vendor agreed to do so subject to the
terms and conditions specified in the City of Bangalore Improvement
(Allotment of Sites) Rules, 1972, and the terms and conditions
hereinafter contained;
And, whereas, thus the Lessor/Vendor has agreed to lease the
property and the Lessee/Purchaser has agreed to take it on lease
subject to the terms and conditions specified in the said rules and
the terms and conditions specified hereunder:
Now this Indenture Witnesseth
1. ………………………………………………………………………………….. The
Lessee/Purchaser is hereby put in possession of the property
and the Lessee/Purchaser shall occupy the property as a tenant
thereof for a period of ten years from (here enter the date of
giving possession) or in the event of the lease being
determined earlier till the date of such termination. The
amount deposited by the Lessee/Purchaser towards the value
of the property shall, during the period of tenancy, he held by
the Lessor/Vendor as security deposit for the due performance
of the terms and conditions of these presents.
2. ……………………………………………………………….. The lessee/purchaser
shall pay a sum of rupees … per years as rent on or before
……….. commencing from…..
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 17 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

3. The Lessee/Purchaser shall construct a building in the property

as per plans, designs and conditions to be approved by the
Lessee/Vendor and in conformity with the provisions of the City
of Bangalore Municipal Corporations Act, 1949, and the bye-
laws made thereunder within two years from the date of this
agreement:
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 Lessee/Purchaser agrees that the Lessor/Vendor may take
over possession of the property with the structure thereon if
there is any misrepresentation in the application for allotment
of site.
7. The property shall not be put to any use except as a residential
building without the consent in writing of Lessor/Vendor.
8. The Lessee/Purchaser shall be liable to pay all outgoings with
reference to the property including taxes due to the
Government and the Municipal Corporation of Bangalore.
9. On matters not specifically stipulated in these presents the
Lessor/Vendor shall be entitled to give directions to the
Lessee/Purchaser which the Lessee/Purchaser shall carry out
and default in carrying out such directions will be a breach of
conditions of these presents.
10. In the event of the Lessee/Purchaser committing default in
the payment of rent or committing breach of any of the
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 18 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

conditions of this agreement or the provisions of the City of

Bangalore Improvement (Allotment of Sites) Rules, 1972, the
Lessor/Vendor may determine the tenancy at any time after
giving the Lessee/Purchaser fifteen days' notice ending with
the month of the tenancy, and take possession of the property.
The Lessor/Vendor may also forfeit twelve and a half per cent of
the amount treated as security deposit under Clause 1 of these
presents.
11. At the end of ten years referred to in Clause 1 the total
amount of rent paid by the lessee/purchaser for the period of
the tenancy shall be adjusted towards the balance of the value
of the property.
12. If the Lessee/Purchaser has performed all the conditions
mentioned herein and committed no breach thereof the
Lessor/Vendor shall at the end of ten years referred to in
Clause 1, sell the property, to the Lessee/Purchaser and all
attendant expenses in connection with such sale such as stamp
duty, registration charges, etc., shall be borne by the
Lessee/Purchaser.
13. The Lessee/Purchaser hereby also confirms that this
agreement shall be subject to the terms and conditions
specified in the City of Bangalore Improvement (Allotment of
Sites) Rules, 1972, and agreed to by the Lessee/Purchaser in
his/her application for allotment of the site.
14. In case the Lessee/Purchaser is evicted under Clause 9 he
shall not be entitled to claim from the Lessor/Vendor and
compensation towards the value of the improvements or the
superstructure erected 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:
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 19 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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 of Rule 18.
Rule 18, in our view, produces the following effects and is intended to
apply as follows:
It begins with a non obstante clause as far as Rule 18(1) is
concerned. Rule 18(1) is to apply despite anything which is
contained in the Rules itself. That apart, it would operate,
notwithstanding any other Rules, bylaws and orders, which may
occupy the field. Even an instrument executed in respect of any site
allotted, rented or sold by the Board for the construction of
buildings, will not detract from the exercise of power. The power,
under Rule 18, is vested with the Chairman. The scope of the power
is to execute a deed of conveyance. This is premised on the request
being made by the allottee grantee or purchaser of the site. Rule 18
(1) further contemplates that when the power is invoked by the
Chairman under Rule 18(1), the restrictions, conditions and
limitations mentioned in Rule 18(2) will ipso facto apply. Rule 18(2)
divides the categories into two. Rule 18(2)(a) deals with the
situation where no building has been constructed on the site. Rule
18 (2)(b) deals with the situation where a building has been
constructed on the site. Since, we are, in this case, concerned with
the case of a site on which the building has not been constructed,
within the meaning of the Rules, we may indicate that the condition
that is imposed, includes the obligation on the part of the purchaser
to construct the building on the site, within the period as may be
specified by the Board. The purchaser is visited with the restriction
that he shall not, without the approval of the Board, construct on the
site, any building other than the building for which the site was
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 20 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

allotted, rented or sold. The purchaser, who is the beneficiary of

deed of conveyance in his favour under Rule 18(1), is bound by the
further limitation or condition that the purchaser shall not alienate
the site within a period of 10 years from the date of allotment. The
restriction against alienation, however, could not operate against a
mortgage, as provided in Rule 18(2)(iii). The mortgage is, however,
to be one effected for the purpose of construction of the building on
the site. Rule 18(2)(c) visits the purchaser, committing breach of
any of the conditions in clause (a), inter alia, with the resumption of
the site, no doubt, after a reasonable notice. Rule 18(2)(c) further
declares that all transactions 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 other words, an allottee,
who is obliged to enter into a lease-cum-sale agreement is prohibited
from alienating the site or the building, which may be put up for the
period of 10 years. This period of 10 years is adverted to in Rule 17(7).
In other words, for a period of 10 years, the allottee, who is also
described as the lessee and purchaser, cannot alienate the site or the
building. It is to be understood that by virtue of Rule 7 of the Rules,
the allottee is treated as a lessee. What the Rules and agreement
contemplate is, though the entire amount of the value of the site is
payable within a period of 90 days or extended period under Rule 17
(2), the allottee/lessee becomes the purchaser of the site, only when
the conveyance deed is executed in his favour under Rule 17(7). During
this period, the Rules and the agreement contemplate clearly that the
allottee puts up the building for his residence but he cannot alienate
the property during the period of 10 years, which is the period of
tenancy, and this period of 10 years begins, from the time he is put
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 21 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

into possession, based on the agreement. Rule 18(1) and Rule 18(2), in
a manner of speaking, fast tracks the conveyance. In other words, Rule
18(1) enables the Chairman, on the request of an allottee, within the
meaning of Rule 17, to execute a deed of conveyance, even before the
expiry of 10 years, contemplated in Rule 17(7). However, when an
allottee is the beneficiary of the exercise of power under Rule 18(1) and
a conveyance deed is executed to him, the Rule-maker, has still
incorporated the condition against alienation for a period of 10 years,
which is not to operate from the date of the conveyance. The embargo
against alienation in the case of the conveyance deed being executed in
favour of the allottee during the currency of the lease-cum-sale
agreement in Form II will operate for a period of 10 years from the date
of allotment.
31. Thus, in a case of allotment under Rule 17, the condition against
alienation is to exist for a period of 10 years from the date of allotment.
In the case of conveyance deed, which is executed in favour of the
allottee, the condition against alienation will again operate for the
period of ten years from the date of allotment. This is apart from the
other conditions, viz., construction of the building on the site. In short,
the allottee becomes the owner of the site before 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 impecuniosity, it has
become necessary for him to sell the site and or site and the building, if
any, he may have put up thereon.
33. We have already explained the scope of Rule 18 and the
interplay between Rule 17 and Rule 18. Rule 18(3) must be read along
with Rule 17. The argument to the contrary by the plaintiff is
untenable. In fact, it would involve denying relief intended for persons
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 22 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

falling under Rule 17, as will be clear hereinafter. A perusal of Rule 18

(3) would reveal the following:
While a person is a lessee (which means while he is an allottee),
the course open to an allottee/lessee, is to follow the Rules and lease
-cum-sale agreement and put up a residential building on the site.
He may be disabled by the financial condition from fulfilling his
promise under the lease-cum-sale agreement and the Rules to put
up the building. In either case, i.e., when because of the dire
financial straits, he finds himself in, he can apply to the Authority to
permit him to sell the site, if no building has been put up or if he has
put up a building on the site, the site along with the building. The
courses of action open to the BDA would be as follows:
It may with the previous approval of the State Government,
call upon the applicant, when he has not put up the building, to
surrender the site.
Thus, in a case where a lessee/allottee wishes to sell the site,
the Rules contemplate that site would have to be surrendered in
favour of the Authority. The rationale appears to be, instead of
permitting the site being sold to any third party, the site would go
back to the Authority, which in turn, will enable it to allot it to the
eligible persons waiting in the queue. Where a building has been
put up, again, Rule 18(3)(b) contemplates that the lessee can be
permitted to sell the vacant site and the building. When the
lessee, on the basis of his request that he may be permitted to
sell the site, has surrendered the site to the BDA, the further
consequence contemplated is that the lessee will get back the
value of the allotted site, which he has deposited under Rule 17
(1) and (2). Over the above the same, the lessee is to be paid an
additional sum equal to the amount of interest at the rate of 12
per cent per annum. We must, at this juncture, also do justice to
the words in Rule 18(3) “but without provisions of Rule 17”. The
import of this part of Rule 18(3) is as follows - 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 12½ 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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 23 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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 be a mechanical exercise of power, can
be discerned from the requirement that ‘previous’ approval of the
State Government is the sine qua non for the BDA exercising its
power.
THE UNDISPUTED FACTS
34. The BDA made an allotment of the plot on 04.04.1979 to the
first defendant. The lease-cum-sale agreement was also executed on
the same date. It is while so that on 17.11.1982, the plaintiff entered
into the agreement with the first defendant. Under the allotment, the
first defendant was put in possession of the site. A perusal of the
agreement would reveal the following:
“NOW THIS DEED WITNESSETH AS FOLLOWS:
1. The vendor does hereby agrees to sell the schedule site to the
purchaser for a price of Rs. 50,000/- (Rs. Fifty thousand only).
2. The purchaser has hereby agreed with the vendor to purchase
the schedule site for the said price of Rs. 50,000 (Fifty
thousand only).
3. The purchaser has paid a sum of Rs. 30,000/- (Rs. Thirty
thousand only) as advance and part of the purchase money by
cheque No. 81/YA. 709838 dated 17.11.1982, drawn on Indian
Bank, Malleswaram, Bangalore to the vendor, who hereby
acknowledges the receipt of the said amount from the
purchaser.
4. The vendor does hereby agree with the purchaser to obtain the
absolute sale deed from the Bangalore Development Authority
and then complete the sale transaction with the purchaser. It is
agreed that the sale has to be completed on or before the
expiry period of three months from the day the vendor obtains
the absolute sale deed from the Bangalore Development
Authority and intimates the purchaser in writing.
5. The vendor has handed over the original possession certificate
to the purchaser.
6. The vendor has agreed to deliver the following documents to
the purchaser:
(a) Absolute sale deed after obtaining from the Bangalore
Development Authority, Bangalore.
(b) Katha certificate issued by the Bangalore Development
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 24 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

Authority in favour of the vendor.

(c) N I L Encumbrance Certificate.
(d) Uptodate tax paid receipt.
7. The vendor hereby aggress with the purchaser to make
necessary applications to the competent authority under the
Urban Land (Regulations) Act, 1976 and obtain permission to
transfer the schedule (Ceiling and necessary site to the
purchaser. The purchaser has agreed to render necessary
assistance 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. 1588, Block II at
Banashankari I Stage Extension - Regarding.
You have agreed for the sale of the above site, for which an
agreement was made on 17.11.1982 on the condition that you will
register the sale deed within 3 months from the date of obtaining all
the necessary documents required in this connection from BOA. So
far you. have not informed about obtaining the documents from
BDA. You had promised that all the documents will be handed over
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 25 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

to me within 2 weeks time to facilitate me for registering the

property.
Since 3 months are over, I am proposing to sell to my nominee
for the agreed amount of Rs. 50,000/- (Rupees Fifty Thousand only),
as you have failed to produce the clear documents. I am forced to
transfer the property to my nominee at the agreed amount of Rs.
50,00,0/- with you. This is for your kind information and early
necessary action.
Thanking you,
Yours faithfully
Sd/—
(Y. Subbaraju)”
(Emphasis supplied)
37. There is no reference to any threat by the first defendant to sell
to others.
38. The plaintiff did not rest content with the first letter and in the
very next month, on 26.04.1984, complains to the first defendant, by
pointing to the letter dated 01.03.1983 and pointing out that the first
defendant has not replied to his letter, notifying her readiness to
comply with the agreement. Thereafter, it is stated that by the letter
dated 26.04.1984, he was finally calling upon the first defendant to act
in terms of the agreement, execute the sale deed in favour of the
plaintiff or his nominee within one week from the date of receipt of the
letter, failing which, litigation would be launched. This letter provoked
the first defendant to reply through a lawyer on 08.05.1984. The first
defendant admitted the agreement dated 19.11.1982. She, however,
pointed out that it was not as per the terms and conditions of letters
sent by the plaintiff. The plaintiff, it was pointed out, was enjoined
upon to complete the sale within three months from the date of the
agreement. It was pointed out that time was of the essence of the
contract and the contract has lapsed and the advance was forfeited. All
documents of title relating to the site, it was stated, were handed over
to the plaintiff at the time of the agreement itself. In view of the breach
on the part of the plaintiff to pay the balance of the consideration, there
was no legally enforceable 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/-.
39. 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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 26 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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 first defendant, it was pointed out, had
committed default in not complying with the terms of the agreement,
by obtaining absolute sale deed from the BDA. Legal action was spoken
of by the plaintiff. Lastly, on 14.02.1985, a legal notice was sent by the
plaintiff to the first defendant. Thereinafter, referring to the agreement,
it was complained that though it was then more than two years that the
first defendant had entered into the agreement. First defendant had
given a reply on 08.05.1984, pleading excuses for execution of the sale
deed. Thereafter, the first defendant was called upon to act in terms of
the sale agreement and execute the sale deed within fifteen days of the
receipt of the notice. It was held out that failure on the part of the first
defendant would constrain the plaintiff to seek relief from the court.
That the plaintiff meant business, is proved by the fact the Suit, out of
which this Appeal arises, was filed on 16.11.1985.
THE PLEADINGS
40. In the plaint, the plaintiff, inter alia, again reiterated that he was
put in possession of the site at the time of executing the agreement.
After referring to the correspondence, which we have referred to, it is
averred that the first defendant was not willing to perform her part of
the contract. It was complained that the first defendant could not
unilaterally treat the contract as cancelled and that he had unjustly
repudiated her obligation. It was pleaded that he is likely to execute a
sale deed in favour of some other person. To prevent the same, the Suit
for Specific Performance of the agreement and for injunction, it was
stated, was filed. It was further stated that the first defendant is bound
and liable to obtain the absolute sale deed from the BDA and deliver
the same to the plaintiff to execute the sale deed. In the amended
pleadings, there is reference to the husband and the son being brought
on the party array on the death of the first defendant. There is also
reference to the subsequent sale by the son to the appellant. The
prayer sought was a direction to execute the sale deed and to convey
the title and deliver the documents of title including the sale deed,
after obtaining the same from the BDA and injunction was sought
against interfering with the plaintiff's lawful possession. Such relief of
injunction was also sought against the appellant also.
41. First defendant, in her Written Statement, denied the case of the
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 27 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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.
42. 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 the plaintiff was put in possession, was denied as false.
Regarding putting the plaintiff in possession of the possession
certificate, the appellant pleaded no knowledge. It was further pleaded
that the first defendant was the absolute owner in possession of the
site and, after her demise, in view of the death of the husband of the
first defendant, the son became the owner of the property. It was
pleaded that the first defendant was a site-less and houseless person
and permanent resident of Bangalore City. After having made due
enquiries, property was purchased by sale deed dated 19.09.1996. An
additional Written Statement was filed by the appellant to the amended
plaint which was largely devoted to his case about him being a bonafide
purchaser.
THE ORAL EVIDENCE
43. PW2, the son of the plaintiff (the plaintiff died on 05.01.2001)
deposed, inter alia, that possession of the entire property was delivered
to the plaintiff. Subsequently, his legal representatives are in
possession. After the plaintiff was put in possession, he has allegedly
constructed a temporary shed in it. The shed was demolished in the
year 1991 during the Cauvery riots. He has never made any attempts
to go to the BDA to know about the Suit property. He deposed that
since he guessed that since 1960 his father commenced civil contract
work he was doing so till his death. With reference to the question that
the site was inalienable for a period of ten years, PW2 answered that it
could have been sold to them. He confessed to ignorance of the BDA
Rules regarding allotment. He did not know that the lease period was
completed on the 13th Day of May, 1989. He did not know about the
non-alienation clause in the allotment by the BDA. He did not know
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 28 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

that in the year 1985, his father did not have the right to file the Suit.
He was associated with his father in construction work. He refers to
Exhibit-P14, which was a show cause notice received by the plaintiff
from the BDA. He deposed that plaintiff intimated the BDA about the
sale agreement.
44. The following evidence of PW2, the son of the plaintiff is very
relevant. He has deposed interalia as follows:—
‘My father was contractor and real estate business since 30 years.
It is not true that there are 70 to 80 cases pending in different
courts. There are about 35 to 40 cases pending. My elder brother is
doing construction.’
‘I 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.
45. 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 agriculture and milk-vending business to
purchase this property. His father helped him. On the date of purchase,
the possession was handed over to him. Apart from Bettanna, none
acted as broker at the time of purchase. He, inter alia, further states
that he went to the site. He found tin shed. He made inquiries with
regard to ownership of the site and possession. He was told that one
Sudershan was the owner of the site, who use to visit the site often.
He, along with is elder brother, who was residing in Bangalore, went to
the house of Sudershan. Sudershan wanted price of Rs. 6,00,000/-.
Finally, the parties agreed for Rs. 4,50,000/-. Certain xerox copies of
documents, including possession certificate, was handed over to him
and he consulted an Advocate who said that the title was clear. On the
date of sale, the possession was handed over to the appellant. Property
was mutated. The broker was not aware of the pendency of the Suit. He
will be put to great hardship if the Suit is decreed. The original of the
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 29 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

Sale Deed is with the bank. In cross-examination, he, inter alia,

deposed that he has studied up to PUC. His brothers were staying in
Bangalore. His father owned 12 acres. Six acres were irrigated and six
acres was dry land. His brothers were doing jewellery work in
Bangalore. 12 acres was ancestral property. They used to get daily 20
litres of milk per day. They use to get Rs. 195-196/- per day by selling
milk. Father had not spent any money during marriage of elder
brothers. Neither father, second defendant nor his brother Mukund were
income-tax assessees. He has no record to show that he had the money
to the extent of Rs. 4,50,000/- with him. His brothers were staying in
the rented house. He knew the broker since his childhood. He invested
Rs. 3,00,000/- of his own. The remaining was paid by his father. He
earned Rs. 3,00,000/- by selling milk and vegetables. He informed the
broker for the first time in June, 1996 that he intended to purchase the
site at Bangalore. After seeing the site on the next day itself, he
approached the defendant 1(a) and defendant 1(b) for discussion.
Defendant 1(a) was MLA of their Taluk and also former Minister. The
negotiations were completed on the same day. The amount was paid by
cash. His Advocate did not tell him that both defendant 1(a) and
defendant 1(b) had acquired title and informed him to purchase from
both. The entire process 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.
46. 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 not taken any steps to waive-off the non-alienation clause
for the period of 10 years. His father gave consent to the BDA to issue
the sale deed only in his name. He knew the appellant from June, 1996.
The name of the broker-Bettana, is spoken to by him. He speaks about
handing over of xerox copies to DW1. The second defendant had met
him twice in June, 1996. Appellant when he met DW2 for the second
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 30 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

time, showed his interest to purchase the property in September, 1996

for Rs. 4,50,000/-. Appellant took time till September, 1996 to
ascertain whether he was in possession and to mobilise funds. Entire
amount of Rs. 4,50,000/- was paid in cash. DW2 owned a residential
house at Arti Nagar in Judges Colony. The said property was standing in
the name of his father. He owned an industrial site. He did not own any
residential property in Bangalore apart from the residential property.
Since, plaintiff was not having any right, they did not inform the
appellant regarding the pendency of the Suit. The plaintiff never asked
his mother to alienate the suit property before expiry of the non-
alienation period. He took duplicate Possession Certificate from BDA in
June, 1996. He did not hand over the transfer agreement executed by
the BDA at the time of sale in favour of the appellant. His father was
present, when appellant met him twice. His mother has not given any
application to the BDA to waive-off the non-alienation clause. He denied
the suggestion that possession was handed over to the plaintiff on the
date of agreement. There is no document to show that he has received
Rs. 4,50,000/- from the second defendant. There is reference to a site
as Koramangala being allotted to him and it being cancelled by the
High Court. He is confronted with the agreement to sell the said site in
favour of another person (P-19).
THE FINDINGS BY THE TRIAL COURT
47. Seven issues were struck by the Trial Court. Thereafter, two
additional issues were also raised, of which, the first additional issue
was whether the second defendant, second Legal Representative of
deceased defendant, ‘proved that the proved sale agreement’ is void.
The Trial Court found the agreement dated 17.11.1982 as proved. It
further found that the plaintiff has not proved that plaintiff was put in
possession. It was further found that till the year 1989, the first
defendant was unable to take an absolute sale 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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 31 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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 to have waited till year
1989. The first defendant died on 18.07.1994 without obtaining the
absolute sale deed from the BDA. After her death, property stood
transferred in favour of her son and the son sold it to the appellant. On
17.09.1996, when the sale took place, the predecessor in interest of the
second defendant was not a party. The suit property was sold to the
second defendant for a huge sale consideration of Rs. 4,50,000/-. There
was no cause of action to institute the Suit. On these findings, inter
alia, the Trial Court partly decreed the Suit by ordering return of Rs.
50,000/- along with 9 per cent interest per annum by defendants 1(a)
and 1(b). The relief of permanent injunction was rejected.
PARI DELICTO POTIOR EST CONDITIO DEFENDENTIS
48. The principle of in pari delicto potior est conditio defendentis is a
maxim which we must bear in mind. We need only notice the following
discussion by this Court. The decision of this Court in Kedar Nath
Motani (supra) comes to mind:
“9. … Where both parties do not show that there was any
conspiracy to defraud a third person ought to commit any other
illegal act, the maxim, in pari delito etc., can hardly be made
applicable. …”
49. This Court in Kedar Nath Motani (supra) also referred to the
following statement by Lord Mansfield in Holman v. Johnson3 , wherein it
was held as follows:
“12. The law was stated as far back as 1775 by Lord Mansfield in
Holman v. Johnson [(1775) 1 Cowp 341 : 98 ER 1120, 1121] in the
following words:
“The principle of public policy is this; ex dolo malo non oritur
actio. No Court will lend its aid to a man who founds his cause of
action upon an immoral or an illegal act. If, from the plaintiff's
own stating or otherwise, the cause of action appears to arise ex
turpi causa, or the transgression of a positive law of this country,
there the Court says he has no right to be assisted. It is upon that
ground the Court goes; not for the sake of the defendant, but
because they will not lend their aid to such a plaintiff. So if the
plaintiff and defendant were to change sides, and the defendant
was to bring his action against the plaintiff, the latter would then
have the advantage of it; for where both are equally in fault,
potior est conditio defendentis.”
There are, however, some exceptions or “supposed exceptions” to
the 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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 32 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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, and has observed as
follows:
“If recovery is to be allowed by either partner or principal in
any case, it must be where the illegality is of so light or venial a
character that it is deemed more opposed to public policy to allow
the defendant to violate his fiduciary relation with the plaintiff
than to allow the plaintiff to gain the benefit of an illegal
transaction.”
Even in India, certain exceptions to the rule of turpi causa have
been accepted. Examples of those cases are found in Palaniyappa
Chettiar v. Chockalingam Chettiar [ILR (1920) 44 Mad 334] and
Bhola Nath v. Mul Chand [ILR (1903) 25 All 639].”
50. We may also notice the following statement by this Court in
Kedar Nath Motani (supra):
“15. The correct position in law, in our opinion, is that what one
has to see is whether the illegality goes so much to the root of the
matter that the plaintiff cannot bring his action without relying upon
the illegal transaction into which he had entered. If the illegality be
trivial or venial, as stated by Williston and the plaintiff is not
required to rest his case upon that illegality, then public policy
demands that the defendant should not be allowed to take
advantage of the position. A strict view, of course, must be taken of
the plaintiff's conduct, and he should not be allowed to circumvent
the illegality by resorting to some subterfuge or by mis-stating the
facts. If, however, the matter is clear and the illegality is not
required to be pleaded or proved as part of the cause of action and
the plaintiff recanted before the illegal purpose was achieved, then,
unless it be of such a gross nature as to outrage the conscience of
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 33 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

the Court, the plea of the defendant should not prevail.”

51. In Sita Ram v. Radhabai4 , this Court observed as follows:
“11. The principle that the Courts will refuse to enforce an illegal
agreement at the instance of a person who is himself a party to an
illegality or fraud is expressed in the maxim in pari deucto portior est
conditio defendentis. But as stated in Anson's Principles of the
English Law of Contracts, 22nd Edn., p. 343 : there are exceptional
cases in which a man will be relieved of the consequences of an
illegal contract into which he has entered — cases to which the
maxim does not apply. They fall into three classes : (a) where the
illegal purpose has not yet 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’.
52. 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 opinion, is that what one
has to see is whether the illegality goes so much to the root of the
matter that the plaintiff cannot bring his action without relying
upon the illegal transaction into which he had entered. If the
illegality be trivial or venial, as stated by Williston and the plaintiff
is not required to rest his case upon that illegality, then public
policy demands that the defendant should not be allowed to take
advantage of the position. A strict view, of course, must be taken
of the plaintiff's conduct, and he should not be allowed to
circumvent the illegality by resorting to some subterfuge or by
misstating the facts. If, however, the matter is clear and the
illegality is not required to be pleaded or proved as part of the
cause of action and the plaintiff recanted before the illegal
purpose was achieved, then, unless it be of such a gross nature as
to outrage the conscience of the Court, the plea of the defendant
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 34 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

should not prevail.”

16. It could thus be seen, that this Court has held that the correct
position of law is that, what one has to see is whether the illegality
goes so much to the root of the matter that the plaintiff cannot bring
his action without relying upon the illegal transaction into which he
had entered. This Court further held, that if the illegality is trivial or
venial and the plaintiff is not required to rest his case upon that
illegality, then public policy demands that the defendant should not
be allowed to take advantage of the position. It has further been
held, that a strict view must be taken of the plaintiff's conduct and
he should not be allowed to circumvent the illegality by resorting to
some subterfuge or by misstating the facts. However, if the matter is
clear and the illegality is not required to be pleaded or proved as
part of the cause of action and the plaintiff recanted before the
illegal purpose is achieved, then, unless it be of such a gross nature
as to outrage the conscience of the Court, the plea of the defendant
should not prevail.”
53. In Narayanamma (supra), this Court further held as follows:
“24. The transaction between the late Bale Venkataramanappa
and the plaintiff is not disputed. Initially the said Bale
Venkataramanappa had executed a registered mortgage deed in
favour of the plaintiff. Within a month, he entered into an agreement
to sell wherein, the entire consideration 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 of the defendant(s) can be
said to be equally responsible for violation of law.
26. However, the ticklish question that arises in such a situation
is:“the decision of this Court would weigh in side of which party”? As
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 35 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

held by Hidayatullah, J. in Kedar Nath Motani [Kedar Nath Motani v.

Prahlad Rai, (1960) 1 SCR 861 : AIR 1960 SC 213], the question
that would arise for consideration is as to whether the plaintiff can
rest his claim without relying upon the illegal transaction or as to
whether the plaintiff can rest his claim on something else without
relying on the illegal transaction. Undisputedly, in the present case,
the claim of the plaintiff is entirely based upon the agreement to sell
dated 15-5-1990, which is clearly hit by Section 61 of the Reforms
Act. There is no other foundation for the claim of the plaintiff except
the one based on the agreement to sell, which is hit by Section 61 of
the Act. In such a case, as observed by Taylor, in his “Law of
Evidence” which has been approved by Gajendragadkar, J. in
Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi,
(1962) 3 SCR 739 : AIR 1962 SC 370], although illegality is not
pleaded by the defendant nor sought to be relied upon him by way
of defence, yet the Court itself, upon the illegality appearing upon
the evidence, will take notice of it, and will dismiss the action ex
turpi causa non oritur actio i.e. no polluted hand shall touch the pure
fountain of justice. Equally, as observed in Story's Equity
Jurisprudence, which again is approved in Immani Appa Rao
[Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR
739 : AIR 1962 SC 370], where the parties are concerned with
illegal agreements or other transactions, courts of equity following
the rule of law as to participators in a common crime will not
interpose to grant any relief, acting upon the maxim in pari delicto
potior est conditio defendentis et possidentis.”
54. This Court in Narayanamma (supra) finally found as follows:
“28. Now, let us apply the other test laid down in Immani Appa
Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR
739 : AIR 1962 SC 370]. At the cost of repetition, both the parties
are common participator in the illegality. In such a situation, the
balance of justice would tilt in whose favour is the question. As held
in Immani Appa Rao [Immani Appa Rao v. Gollapalli
Ramalingamurthi, (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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 36 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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
55. The decision, which first comes to mind and is oft quoted, is the
decision of the Privy Council in Motilal v. Nanhelal5 . The Court, in the
said case, affirmed the decision of the Judicial Commissioner, decreeing
a Suit for Specific Performance, taking note of Section 50 of the Central
Provinces Act of 1920, which read as follows and the Court, inter alia,
held as follows thereafter:
“If a proprietor desires to transfer the proprietary rights in any
portion of his sir land without reservation of the right of occupancy
specified in s. 49, he may apply to a revenue-officer and, if such
revenue-officer is satisfied that the transferor is not wholly or mainly
an agriculturist, or that the property is self-acquired or has been
acquired within the twenty years past preceding, he shall sanction
the transfer.”
In view of the above mentioned construction of the agreements of
September 4, 1914— namely, that Sobhagmal agreed to transfer the
cultivating rights in the sir land—there was, in their Lordships'
opinion, an implied covenant on his part to do all things necessary to
effect such transfer, which would include an application to the
revenue-officer to sanction the transfer.”
56. In other words, in an agreement wherein the vendor agrees to
convey property, which is permissible only with the permission of some
Authority, the Court can, in appropriate cases, grant relief. We need
only notice two recent Judgments which have reiterated the principle,
the first of which is reported in Vishwa Nath Sharma v. Shyam Shanker
Goela6 , which is relied upon, in fact, by the respondents. The decision
of this Court, again relied upon by the respondents in Ferrodous Estates
(Pvt.) Limited v. Gopiratnam (Dead)7 also reiterates the said view. In
Ferrodous Estates (supra), the matter arose under the Tamil Nadu
Urban Land (Ceiling and Regulation) Act, 1978. The High Court, in the
impugned Judgment, had dismissed the Suit for Specific Performance,
taking the view that till 1999, when the Tamil Nadu Urban Ceiling Act
was repealed, the agreement was not enforceable. That apart, under
the agreement of sale, vacant land, in the aggregate, exceeding the
ceiling limit of the plaintiff, would have to be conveyed to him,
attracting the VETO contained in Section 5(3) read with Section 6 of
the State Act. It was this view, which was reversed by this Court,
following the Judgments, which we have referred to which relate to
conditional decrees. This result was arrived at by this Court, after
finding that agreement to sell contemplated transfer of the land only
after getting exemption. Clause (4) of the Agreement contemplated
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 37 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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
57. 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. Srinivasaiah8 , 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 defendant agreed to sell. According to the plaint
averments, the plaintiff was put in possession and he completed the
construction. It was the plaintiff's further case that he was
dispossessed by the defendant. The High Court, under Point 6,
considered the question whether agreement was legally enforceable.
The Court has referred to Rule 18 of the Rules, which, apparently, was
invoked by the defendant. Answering the point, the Court took the view
that there was no transfer of interest, which results from an agreement
to sell and, therefore, Rule 18(2)(a)(iii), did not apply, as there was no
alienation on a mere agreement to sell being executed. The Court
distinguished the decision, which was relied upon by the defendant in
the said case and, interestingly, the appellant before us, viz., the
decision of a learned Single Judge in K. Chandrashekar Hegde v.
Bangalore City Corporation and N.B. Menon v. Bangalore Development
Authority9 . We may further notice that the high court in the said case
took the view that a period of ten years had expired even during 1985
and there was no impediment with reference to the enforceability, it
was further found. It was next found that the plaintiff in the said case
was, on evidence, found residing in a rented house and that he had
purchased the plaint schedule property for self-occupation. It was
found that the building which was constructed was a residential one. It
was, therefore concluded that the element of public policy (public
interest) was also not affected. The court granted decree for specific
performance. In Yogambika v. Narsingh10 , a Division Bench, followed
the decision in T. Dase Gowda (supra), noting further that the earlier
decision had been affirmed by this Court by the dismissal of the SLP by
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 38 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

Order dated 17.07.1991. We may notice also that, in its discussion, the
Division Bench, has laid store by the line of decisions commencing with
Motilal (supra).
58. In Subbireddy v. K.N. Srinivasa Murthy11 , the question fell for
decision under Section (3) of the Karnataka Village Offices Inam
Abolition Act. The Single Judge found that under the agreement, the
transfer was to be effected only after the expiry of the period of non-
alienation prescribed in Section 5(3) of the Act in question. This case
must be understood in the light of the Clause which contemplated the
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.
59. In Syed Zaheer v. C.V. Siddveerappa12 , 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.
60. In Balwant Vithal Kadam v. Sunil Baburaoi Kadam13 , 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.
61. In Punjab & Sind Bank v. Punjab Breeders Ltd.14 , 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 sell was
found not to be a sale.
62. In Suraj Lamp & Industries (P) Ltd. (2) Through Director v. State
of Haryana15 , this Court, while dealing with the effect of what has been
described as GPA Sales in Delhi, inter alia, and considering the scope of
an agreement to sale, declared that “a transfer of immovable property
by way of sale, can only be by a Deed of Conveyance (Sale Deed)”. No
title is transferred by a mere agreement to sell, it was further found.
63. In K. Chandrashekar Hegde (supra), which is relied upon by the
appellant, a Single Judge of the High Court of Karnataka, was dealing
with batch of Writ Petitions. Among the issues, which prominently
arose, was the objection taken to the construction of multi-storey
buildings, wherein claims were made on the basis of allotment under
the Act, as repealed by the Bangalore Development Act and the Rules.
The learned Single Judge has elaborately considered the scheme of the
Rules. He has further explored the impact of the Forms prescribed
under the Allotment Rules, 1964 and similar provisions were found in
the subsequent Rules. This Judgment has been distinguished by the
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 39 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

Judgment in T. Dase Gowda (supra).

64. Jambu Rao Satappa Kocheri v. Neminath Appayya
Hanamannayar16 is an important decision. This Court was dealing with a
Suit for Specific Performance. One of the questions, which arose was
whether the enforcement of the contract, would defeat the provisions of
the Bombay Tenancy and Agricultural Lands Act, 1948. The appellant
before this Court had agreed to sell 41 acres and odd of jairayat land.
Under Section 5 of the Act, the ceiling area, inter alia, was prescribed
as 48 acres of jairayat land. Section 34 of the Act provided as follows -
“Subject to the provisions of Section 35, it shall not be lawful, with
effect from the appointed day, for any person to hold, whether as owner
or tenant or partly as owner and partly as tenant, land in excess of the
ceiling area”. Section 35 declared acquisition of land in excess of the
area prescribed in Section 34, as invalid. Section 84-C, reads as
follows:
“(1) Where in respect of the transfer of acquisition of any land
made on or after the commencement of the amending Act,
1955, the Mamlatdar suo motu or on the application of any
person interested in such land has reason to believe that such
transfer or acquisition 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); ***”
65. 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, consideration or object of
an agreement is unlawful if it is forbidden by law; or is of such a
nature that, if permitted, it would defeat the provisions of any law;
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 40 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

or is fraudulent. Both the parties to the contract are agriculturists.

By the agreement the appellant agreed to sell jirayat land
admeasuring 41 acres 26 gunthas for a price of Rs. 32,000/-. The
consideration of the agreement per se was not unlawful, for there is
no provision in the Act which expressly or by implication forbids a
contract for sale of agricultural lands between two agriculturists. Nor
is the object of the agreement to defeat the provisions of any law.
The Act has imposed no restriction upon the transfer of agricultural
lands from one agriculturist to another. It is true that by Section 35
a person who comes to hold, after the appointed day, agricultural
land in excess of the ceiling, the lands having been acquired either
by purchase, assignment, lease, surrender or by bequest, the
acquisition in excess of the ceiling is invalid. The expression
“acquisition of such excess land shall be invalid” may appear
somewhat ambiguous. But when the scheme of the Act is examined,
it is clear that the legislature has not declared the transfer or
bequest invalid, for Section 84-C provides that the land in excess of
the ceiling shall be at the disposal of the Government when an order
is made by the Mamlatdar. The invalidity of the acquisition is
therefore only to the extent to which the holding exceeds the ceiling
prescribed by Section 5, and involves the consequence that the land
will vest in the Government.
xxx xxx xxx
8. An agreement to sell land does not under the Transfer of
Property Act create any interest in the land in the purchaser. By
agreeing to purchase land, a person cannot be said in law to hold
that land. It is only when land is conveyed to the purchaser that he
holds that land. Undoubtedly the respondent was holding some area
of land at the date of the agreement and at the date of the suit, but
on that account it cannot be inferred that by agreeing to purchase
land under the agreement in question his object was to hold in
excess of the ceiling. It was open to the respondent to transfer or
dispose of the land held by him to another agriculturist. The Act
contains no general restrictions upon such transfers, and unless at
the date of the acquisition the transferee holds land in 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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 41 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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 invalidate the transfer between the parties.
9. We hold that a contract for purchase of land entered into with
the knowledge that the purchaser may hold land in excess of the
ceiling is not void, and the seller cannot resist enforcement thereof
on the ground that, if permitted, it will result in transgression of the
law.”
66. We may cull out the ratio in the following terms:
Whatever may be intention of the parties, a contract which is
expressly or impliedly prohibited by a Statute, may not be enforced
by the Court. The Bombay Act did not prohibit a contract of sale of
agricultural land between two agriculturists. The invalidity of the
acquisition of land in excess, involved the consequence that the land
would vest in the Government. In the context of the said Act, the
Court has taken the view that a person can be said to hold land only
when it is conveyed to him, which would not take place when there
is a mere agreement to sell. The further reasoning of the Court
appears to be that it is open to the buyer to transfer or dispose of
land already held by him to another agriculturist and unless at the
date of acquisition, the buyer held the land in excess of the ceiling
limit, the acquisition to the extent of the excess over the ceiling,
would not be invalid. It was further declared that the mere
possibility that the respondent/buyer may not have disposed of his
original holding on the date of acquisition of title under the
agreement to sell, would not render the object of the agreement
such that, if permitted, it would defeat the provisions of any law.
Thus, the contract was found to be not void.
67. This Judgment came to be followed in Bhagat Ram v. Kishan17 .
In the said case, the question arose under Section 23 of the Delhi Rent
Reforms Act, 1954, in a Suit for Specific Performance. Section 23 reads
as follows:
“23. Use of holding for industrial purposes.—(1) A Bhumidhar or
Asami shall not be entitled to use his holding or part thereof for
industrial purposes, other than those immediately connected with
any of the purposes referred to in Section 22, unless the land lies
within the belt declared for the purpose by the Chief Commissioner
by a notification in the Official Gazette:
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 42 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

Provided that the Chief Commissioner may, on application

presented to the Deputy Commissioner in the prescribed manner,
sanction the use of any holding or part thereof by a Bhumidhar for
industrial purposes even though it does not lie within such a belt.”
68. 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 court and the High Court on
an erroneous view reversed the same. In our opinion the suit is liable
to be dismissed.”
69. We have set out the provisions of the Rules and the lease-cum-
sale agreement. Before we deal with the question as to whether the
agreement in question, falls foul of Section 23 of the Indian Contract
Act, we shall deal with the contention raised by the respondent that
there is no law, as understood in this case, which would be defeated by
the agreement and what is holding the field is only the Rules. It is true
that this Court in Union of India v. Col. L.S.N. Murthy18 , has observed as
follows:
“17. In Pollock & Mulla, Indian Contract and Specific Relief Acts,
13th Edn., Vol. I published by LexisNexis Butterworths, it is stated at
p. 668:
“The words ‘defeat the provisions of any law’ must be taken as
limited to defeating the intention which the legislature has
expressed, or which is necessarily implied from the express terms
of an Act. It is unlawful to contract to do that which it is unlawful
to do; but an agreement will not be void, merely because it tends
to defeat some purpose ascribed to the legislature by conjecture,
or even appearing, as a matter of history, from extraneous
evidence, such as legislative debates or preliminary memoranda,
not forming part of the enactment.”
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 43 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

It is thus clear that the word “law” in the expression “defeat the
provisions of any law” in Section 23 of the Contract Act is limited to
the expressed terms of an Act of the legislature.”
70. With respect, the principle laid down, does not commend itself
to us. We do agree that the illegality cannot be a matter of conjecture
nor the purpose divined by the Court from parliamentary debates. But
that is not to say that as found by this Court in AIR 1968 SC 1358
(supra), which decision was not considered by this Court, that it cannot
be implied. But we must find that the Court was dealing with a
Notification, which was, in fact, a ‘letter’ written by the Government of
India. We can have no quarrel with the proposition that a ‘letter’ cannot
be law within the meaning of Section 23 of the Indian Contract Act. The
Court, in the said case, was not dealing with Subordinate Legislation in
the form of Statutory Rules. The Rules in question before us are,
undoubtedly, Statutory Rules. Therefore, we do not think 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.
71. 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;14 or is of such a nature that, if permitted, it would
defeat the provisions of any law; or is fraudulent; or involves or
implies, injury to the person or property of another; or the Court
regards it as immoral, or opposed to public policy. In each of these
cases, the consideration or object of an agreement is said to be
unlawful. Every agreement of which the object or consideration is
unlawful is void.”
72. The very first head under which an agreement become unlawful
is, when the consideration or object of agreement is forbidden by law.
In regard to the same, we may notice the view of a Bench of three
learned Judges in Gherulal Parakh v. Mahadeodas Maiya19 . Therein,
quoting from Pollock and Mullah from their work Indian Contract Act,
this Court has stated as follows:
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 44 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

“8. xxx xxx xxx

An act or undertaking is equally forbidden by law whether it
violates a prohibitory enactment of the Legislature or a principle of
unwritten law. But in India, where the criminal law is codified, acts
forbidden by law seem practically to consist of acts punishable under
the Penal Code and of acts prohibited by special legislation, or by
regulations or orders made under authority derived from the
Legislature.”
(Emphasis supplied)
73. In regard to the Commentary by the very same Author, under
the Second Head of “illegal object or consideration” in Section 23 of the
Contract Act, viz., if the consideration or object is of such a nature that
if permitted, it would defeat the provisions of any law, it is that, this
Court took the view that law for the purpose of Section 23 would be,
law made by the Legislature. Quite apart from the fact that what is
involved in the said case was only a letter, the Judgment of this Court
in Gherulal Parakh (supra) and the Commentary from the very same
Author, was not noticed by this Court. Therefore, it becomes all the
more reason as to why we need not refer the matter to a larger Bench.
We may also notice that ‘law’, for the purposes of Clauses (1) and (2)
cannot be different. It is very clear that Regulations or Orders made
under the Authority derived from the Legislature referred to by this
Court, are species of subordinate legislation. Statutory Rules would
also, therefore, clearly be law.
74. In the facts of this case, the question would, therefore, be, as to
whether the enforcement of the agreement to sell dated 17.11.1982,
expressly or impliedly, lead to palpably defeat the law in question,
which is contained in the Statutory Rules or is prohibited by the same.
75. 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 SC 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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 45 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

obligations of the allottee/lessee are unambiguous. He has held himself

out to be in dire need of a plot of land for the purpose of constructing a
residential building. He has to disclose his annual income and any other
means indicating his capacity, not only to purchase the site applied for
but also to construct the house. He has to respond to the query as to
whether any member of the family, of which he is a member, owns or
has been allotted a site or a house by the Board or any other Authority,
within the area under jurisdiction of the Board. The applicant must,
furthermore, disclose whether he already owns a house or house site in
the city or outside the city. Whether the applicant's wife, husband or
minor child owns a house or house site, is another matter, he must
disclose. Incorrect information in any of these matters, would entitle
the Board to resume the site. Rule 11 specifically announces among the
principles as relevant for selecting an applicant for allotment, the
income of the applicant to build the house on the site for his residence.
No doubt, it is not applicable to certain classes, which include the other
backward classes. Rule 11(3) declares further that the number of years,
the applicant has been waiting for allotment of a site, inter alia, as a
relevant principle.
76. It may be true that as contended by Shri R. Basant, learned
senior counsel for the respondent that despite the fact no building was
put up by the allottee, the BDA has not deemed it fit to cancel the
allotment. We gather the impression that the BDA has been lax in the
pursuit of the lofty goals of the law. We do not pursue the matter
further as BDA is not a party.
77. If the agreement between plaintiff and the first defendant is
taken as it is and it is enforced, the following would be the
consequences. The allotment to the first defendant was made on
04.04.1979. In fact, the first defendant was obliged, in law, to
construct a residential building within two years under Rule 17(6). No
doubt, the time could be extended thereunder. But, at the time, the
agreement dated 17.11.1982 was entered into, the first defendant was
already in breach. The result, however, of the agreement dated
17.11.1982, is as follows:
The first defendant would be liable to convey the right in the site
to the plaintiff. The price would be Rs. 50,000/- for the site,
proceeding on the basis 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
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 46 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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 agreement, which, she entered into
with the BDA and, what is even more crucially important, against the
mandate of the law, as contained in the Rules, which contemplated
that the allotment was made for the construction of a residential
building by the allottee and the construction was to be completed
within the period of two years or an extended period? The agreement
between the parties contemplated giving a short shrift to the
mandate of the law. This is clear from the fact that under the
agreement, the first defendant was obliged to sell the site as it is.
Construction of the building became a practical impossibility. The
price, which was agreed upon, was qua the site alone. The
consideration and the other terms of the agreement, in other words,
ruled out the possibility of a residential building being constructed
by the first defendant, who as the allottee, was, under the law,
obliged to construct the building. Assuming for a moment that the
construction was put up, which assumption must be premised on
possession not being handed over to the plaintiff and which is
contrary, not only to the terms of the agreement, but also pleading
of the plaintiff and the consistent stand in the evidence adduced on
behalf of the plaintiff and even proceeding, however, on the basis
that as found by the Trial Court, that the plaintiff has failed to
establish that possession was handed over to him on the date of
agreement and that the possession continued with the first
defendant, the terms of the agreement, which included, the price
being fixed for conveying the right for the site, necessarily, would
have the effect of freezing the first respondent in even attempting to
put up a construction.
78. We, therefore, reject the contention of the plaintiff that there
was nothing, which could have prevented putting up a building. The
argument of plaintiff involves rewriting of the contract. This is different
from a situation where an allottee, without being trammelled by an
agreement, is unable to put up a building even for the whole of ten
years and action is not taken under Rule 17(6) and yet conveyance is
made in his favour under Rule 17(7). The direct impact of the
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 47 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

agreement is that it compelled the party to abstain from performing its

obligation in law apart from breaching the agreement with BDA. In
other words, taking the agreement as it is, it necessarily would be in
the teeth 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.
79. 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 defendant was to
convey her rights in the site to the plaintiff. It is quite clear that the
parties contemplated a state of affairs which is completely inconsistent
with and in clear collision with the mandate of the law. On its term, it
stands out as an affront to the mandate of the law.
80. The illegality goes to the root of the matter. It is quite clear that
the plaintiff must rely upon the illegal transaction and indeed relied
upon the same in filing the suit for specific performance. The illegality
is not trivial or venial. The illegality cannot be skirted nor got around.
The plaintiff is confronted with it and he must face its consequences.
The matter is clear. We do not require to rely upon any parliamentary
debate or search for the purpose beyond the plain meaning of the law.
The object of the law is set out in unambiguous term. If every allottee
chosen after a process of selection under the rules with reference to
certain objective criteria were to enter into bargains of this nature, it
will undoubtedly make the law a hanging stock.
81. To elucidate the matter a little further, let us take another
example. If the agreement was entered into by the first defendant,
under which, the first defendant would abide by her obligations, both
under the lease-cum-sale agreement and, more importantly, the Rules
and were to put up a building and the agreement contemplated,
conveying the site along with the building, to a buyer after the expiry of
ten years and upon getting the conveyance from the BDA, such an
agreement, perhaps, being not an alienation in itself, may have passed
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 48 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

muster.
82. At this juncture, we must also deal with the argument of the
plaintiff that the agreement to sell is not a sale and, what is prohibited
under the Rules and lease-cum-sale agreement, was only alienation.
There can be no quarrel with the proposition that no interest in property
could be conveyed by a mere agreement to sell. But the question is,
whether the agreement to sell in this case is in the teeth of Section 23
of the Contract Act. For reasons, which we have indicated, on a
conspectus of the scheme of the Rules, we have no hesitation in
holding that the contract was unenforceable for reason that it clearly,
both expressly and impliedly, would defeat the object of the Rules,
which are statutory in nature. The contract was patently illegal for
reasons already indicated.
83. 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)
then he can sell the site only as was provided in Rule 18(3), that is to
say, if going by the correspondence by the plaintiff wherein the first
defendant was called upon to execute the sale deed of the site, this
would be clearly in the teeth of Rule 18(3), the scope of which has
already explained. The plaintiff could not have asked for decree
commanding the first defendant to sell the site in terms of the
correspondence with which he began communicating with the first
defendant. In other words, a sale of a site to any other person clearly
stood prohibited and unless the allottee/lessee is compelled to sell in
the circumstances mentioned in Rule 18(3) the law permitted the sale
of the site only to the authority itself. Therefore, if the plaintiff wanted
to enforce the agreement for the sale of the site on an immediate basis
it would clearly attract the embargo that it was completely prohibited.
IS THE SUIT PREMATURE? SCOPE OF ARTICLE 54 OF THE
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 49 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

LIMITATION ACT.
84. The further question which is raised by the second defendant is
that the suit itself was pre-mature. We have found that the trial court
has entered into a clear finding that there is absolutely no evidence to
support the projected apprehension that first defendant was about to
dispose of the property. There is no material to support the finding
otherwise. In fact, any such sale would have been completely illegal
being prohibited by law as that is the inevitable and necessary
implication flowing from Rule 18(3). There is absolutely no foundation
for the plaintiff to have instituted the suit except perhaps the
repudiation.
85. One of the contentions, which is raised by the learned Counsel
for the second defendant is that, under Article 54 of the Limitation Act,
1963, the period of limitation would begin to run from the time of
repudiation of the agreement to sell only when the contract does not
provide for the time at which the contract is to be performed. In other
words, the contention of the second defendant is that the agreement
dated 17.11.1982, contemplated, even according to the plaintiff, in
Clause 4 that the first defendant must convey the title within a period
of three months from the date on which, BDA conveyed the title to her.
According to the second defendant, therefore, in this case, the time for
performance of the obligation by the vendor, was fixed. Therefore, there
was no need 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.
86. 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.”
87. 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.
88. However, we may notice, in this regard, what the Court has
opined. In Ramzan v. Hussaini20 , 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. Bibijan21 , has,
however, taken the view that the word ‘the date’ in Article 54, means
that the specific date must be indicated in an agreement as the date of
performance. No doubt, the Court, in fact, went on to distinguish the
earlier decision Ramzan v. Hussaini (supra) and held as follows:
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 50 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

“Para 5. In Tarlok Singh's case (supra) the factual scenario was

noticed and the case was decided after referring to Article 54 of the
Schedule to the Act. Ramzan's case (supra) related to the specific
performance of contingent contract. It was held that the expression
“date fixed for performance” “need not be ascertainable in the face of
the contract deed and may be ascertainable on the happening of a
certain contingent event specified in the contract”.
Para 8. The judgments in Ramzan and Tarlok Singh cases (supra)
were rendered in a different factual scenario and the discussions do
not throw much light on the controversy at hand.
Para 11. The inevitable conclusion is that the expression “date
fixed for the performance” is a crystallized notion. This is clear from
the fact that the second part “time from which period begins to run”
refers to a case where no such date is fixed. To put it differently,
when date is fixed it means that there is a definite date fixed for
doing a particular act. Even in the second part the stress is on “when
the plaintiff has notice that performance is refused”. Here again,
there is a definite point of time, when the plaintiff notices the
refusal. In that sense both the parts refer to definite dates. So, there
is no question of finding out an intention from other circumstances.”
89. No doubt, the Court took the view, inter alia, that the Judgment
in Ramzan v. Hussaini (supra), was a case of a contingent contract. It
could still be argued that the rights of the defendant were only that, if
all went well, and the BDA conveyed the title to her, she was to convey
her rights within a period of three months. We would think that in the
facts of this case, we need not disturb the finding of the High Court
particularly when we find that the contract itself is unenforceable.
IS IT A NEW CASE?
90. Yet another objection raised by the plaintiff is that the Court
must not permit the plea of the appellant that the contract was void or
that it was unenforceable and that it is a new point. Quite apart from
the fact and ignoring 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?
91. The second defendant has raised a contention that since the first
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 51 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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. Subramani22 . 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:
“Para 36. Since the Plaintiff did not perform his part of contract
within the extended period in the legal notice referred to supra, the
Agreement of Sale was terminated as per notice dated 28.03.1985
and thus, there is termination of the Agreement of Sale between the
Plaintiff and Defendant Nos. 1-4 w.e.f. 10.04.1985.
Para 37. As could be seen from the prayer sought for in the
original suit, the Plaintiff has not sought for declaratory relief to
declare the termination of Agreement of Sale as bad in law. In the
absence of such prayer by the Plaintiff the original suit filed by him
before the trial court for grant of decree for specific performance in
respect of the suit schedule property on the basis of Agreement of
Sale and consequential relief of decree for permanent injunction is
not maintainable in law.”
92. The said view has been followed in the judgment of this Court
reported in Mohinder Kaur v. Sant Paul Singh23 . We do not however
need to rest our decision to non-suit the plaintiff on this score in view
of our finding that the agreement dated 17.12.1982 should not be
enforced.
LIS PENDENS
93. The Doctrine of Lis Pendens is based on the maxim “pendente
lite nihil innovetur”. This means that pending litigation, nothing new
should be introduced. Section 52 of the Transfer of Property Act, 1882
(for short, ‘the TP Act’), which incorporates the Doctrine of Lis Pendens,
is based on equity and public policy. It pours complete efficacy to the
adjudicatory mechanism. This is done by finding that any disposition of
property, as described in the Section by a party to the litigation will, in
not any way, detract from the finality of the decision rendered by the
court. It is clear that it is not based on the ground of Notice as laid
down by Lord Craanworth in Bennamy v. Sabine, which has been
followed by the Privy Council in the decision in 34 Indian Appeals 102.
We may notice the following discussion in this regard in “The Transfer
of Property, by Mulla, 12th Edition:
“The rule is, therefore, based not on the doctrine of notice, but on
expediency, ie, the necessity for fine adjudication. It is immaterial
whether the alienee pendente lite had, or had not, notice of the
pending proceeding. This is, of course, no longer the case in
England, or in Gujarat and Maharashtra, where the doctrine only
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 52 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

affects transactions pendente lite if the lis has been duly registered.”
94. 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.
95. 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
proceeding, is carried out by a party to the proceeding. Section 52 uses
the word ‘party’ twice. It refers to the disability of a party to transfer or
otherwise deal with the property, pending adjudication. This embargo is
intertwined with the beneficiary of the veto against such transfer, being
any other party thereto. In fact, the Special Bench of the Madras High
Court in Manjeshwara Krishnaya v. Vasudeva Mallya24 , puts the Doctrine
of Lis Pendens as an extension of the Doctrine of Res Judicata. Thus,
the sine qua non for the Doctrine of Lis Pendens to apply is that the
transfer is made or the property is otherwise disposed of by a person,
who is a party to the litigation. The Doctrine of Lis Pendens, only
subject, however, the transfer or other disposition of property to the
final decision that is rendered. The person/party, who finally succeeds
in the litigation, can ask the court to ignore any transfer or other
disposition of property by any party to the proceeding. This is subject
to the condition that transfer or other disposition is made during the
pendency of the lis.
96. The first defendant died pending the Suit on 06.08.1994. Her
death was reported before the Court on 16.01.1995. The plaintiff
brought on record, the husband of the first defendant by Order dated
25.08.1995, as defendant No. 1(a). Defendant No. 1(b), who is the son
of the second defendant, sold the property on 19.09.1996, in favour of
the appellant. It is thereafter that on 09.04.1997, the predecessor in
interest of the appellant, viz., the son of the first defendant, and the
second defendant were impleaded on 09.04.1997. The transfer made in
favour of the second defendant was, therefore, made at a time, when
the son of the first defendant was not a party to the Suit. Therefore, it
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 53 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

is that the contention was taken before the Trial Court successfully by
appellants that the transfer in favour of the appellant was not hit by
Doctrine of Lis Pendens.
97. The High Court in the impugned Judgment reversed this finding.
The High Court, in doing so, employs, inter alia, the following
reasoning:
“78. The position of law with regard to the rights and obligation of
a dead person can be succinctly stated thus : The rights which a
dead man thus leaves behind him vests in his representative. They
pass to some person whom the dead man, or the law on his 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 entitled to it, namely, creditors and beneficiaries.
A beneficiary possesses a dual capacity, while he may benefit by
inheriting the dead man's estate is also liable to the dead man's
obligations. He survives even after his death, especially the
obligations concerning immovable property. The beneficiaries who
are entitled to the residue after satisfaction of the creditors, are of
two classes : (1) those nominated by the last will of the deceased
and (2) those appointed by the law in default of any such
nomination. They succeed respectively by testamentary succession
(ex testamento) or intestate succession (ab intestate) (source :
Salmond on Jurisprudence Twelfth Edition, P.J. Fitzgerald). Section 2
(11) of the Civil Procedure Code, 1908 (CPC) defines legal
representative to mean a person who in law represents the estate of
a deceased person, and includes any person who intermeddles with
the estate of the deceased and where a party sues or is sued in a
representative character the person on whom the estate devolves on
the death of • the party so suing or sued. The aforesaid definition is
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 54 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

both exhaustive as well as an inclusive definition. It is exhaustive in

the sense that a legal representative means a person who in law
represents the estate of immovable property. The beneficiaries who
are entitled to the residue after satisfaction of the creditors, are of
two classes : (1) those nominated by the last will of the deceased
and (2) those appointed by the law in default of any such
nomination. They succeed respectively by testamentary succession
(ex testamento) or intestate succession (ab intestate) (source :
Salmond on Jurisprudence Twelfth Edition, P.J. Fitzgerald).”
98. Thereafter, the High Court proceeded to consider the distinction
between a legal representative as defined in Section 2(11) of the Civil
Procedure Code, 1908 and legal heirs. Still further, the Court also
considered the scheme of Order XXII of the CPC and finally proceeds to
find as follows:
“79. … Even though defendant No. 1(b) was not arrayed along
with his father as a legal heir of the deceased defendant No. 1, the
fact remains that the estate of defendant No. 1, which also includes
the suit schedule property was represented through defendant No. 1
(a), the husband of defendant No. 1. Therefore, the contention that
the sale that was made by defendant No. 1(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 Sec.
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 were present. The reason as to why
defendant No. 1(a) did not disclose about the pendency of the suit
when he was by then arrayed as the legal heir of deceased defendant
No. 1 in the said suit is for obvious reasons. Defendant No. 1(a) did
not disclose about the pendency of the suit to defendant No. 2 only
with an intention to deprive the right of the plaintiff in the suit
property i.e., by creating third party rights in the said property. Also,
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 55 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

it cannot be believed that defendant No. 1 (b), though not arrayed

as a legal representative of deceased defendant No. 1 (his mother)
at that point of time was totally unaware about the pendency of the
suit. The legal heirs of deceased defendant No. 1 namely her
husband and only son resided at the same address. Therefore,
constructive, if not actual, notice has to be attributed to defendant
No. l(b) regarding the pendency of the suit. By selling the same to
defendant No. 2 would result in plaintiff's right being jeopardised. As
already noted from the evidence of DW-1 and 2, talks for the sale of
the suit site by defendant Nos. 1 (a) and l(b) were held with
defendant No. in the first week of June, 1996. In fact, at that point
of time, the BDA had not yet conveyed the site in the name of the
defendant No. 1(b). BOA did so only on 14/06/1996. …”
99. The High Court has relied on the decision of the Madras High
Court in Nallakumara Goundan v. Pappayi Ammal25 . In the said case,
after the death of the party, a legal representative disposed of the
plaint schedule property within the period provided for substituting the
dead person with the legal representative. It was in the said context
held by the Madras High Court as under:
“…The same principle should, I think, apply to a case where as
here the original defendant died and the alienation was made after
his death and before the filing of the application to bring his legal
representative on record. The suit must be deemed to be pending
against the legal persona of the deceased i.e., against his legal
representative and must be deemed to continue until at least the
expiration of the time limited by any law of limitation to bring him
on record. Whether if an application is made long after the expiration
of the time fixed for bringing the legal representative on record and
an alienation is made by the legal representative and later on the
plaintiff 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…”
100. Thereafter, the Court concluded that in the circumstances,
Section 52 of the TP Act squarely applied.
101. 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,
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 56 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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.
102. The decision of the Madras High Court in Nallakumara Goundan
(supra) turned on in its own facts as indicated by the said court itself.
In other words, that was a case where even within the period of
limitation for substitution of the legal representative of a deceased
party in a suit, the legal representative purported to deal with the
property. It was in the said context that the court proceeded to hold
that lis pendens would apply. In this case the transfer in favour of the
second defendant took place on 16.09.1996. The vendor and the
vendee namely defendant 1(b) and the second defendant were not
parties on the date of the transaction. They were impleaded only almost
one year thereafter. No doubt we are not oblivious to the role played by
defendant 1(a) namely the husband of the first defendant who gave his
‘no objection’ to the assignment of the entire rights in favour of his son
namely defendant 1(b) without which BDA could not have assigned the
right in favour of defendant 1(b). Though not urged by the plaintiff,
could it be said that as defendant 1(a) was already a party and this
must be treated as a case were defendant 1(a) as ‘otherwise dealt’ with
the property within the meaning of Section 52 without which the title
would not vest in defendant 1(b). A transfer which is made lis pendens
it is settled law, is not a void document. It does create rights as
between the parties to the sale. The right of the party to the suit who
conveys his right by a sale is extinguished. All that Section 52 of the
Transfer Property Act provides is that the transfer which is made during
the pendency of the proceeding is subjected to the final result of the
litigation. Even assuming for a moment that the conduct of defendant 1
(a) the father of defendant 1(b), in giving a no objection and thereby
enabling defendant 1(b) to derive the title exclusively to the property
and which title stood conveyed to the second defendant attracted, the
principle of lis pendens, it would still not invalidate the sale. At best,
the plaintiff can contend that, should he be entitled for a decree of
performance the sale in favour of the second defendant should be
subjected to such decree. As far as the transfer is made by defendant 1
(b) to the second defendant in his own right and in so far as defendant
1(b) was not a party and by the time the sale was effected the period
of limitation 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?
103. The Trial Court has found that the second defendant is a
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 57 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

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.
104. 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(a), who was arrayed as
the legal representative of the first defendant. Only photocopies of
documents were given to the second defendant before the sale.
Defendant No. 2 did not make any inquiry about the original. It must
be presumed that second defendant had notice of the agreement to sell
the Site in respect of which the Decree for Specific Performance was
sought. The Court, then, referred to Section 3 of the TP Act and brings
in the concept of constructive notice. Had the second defendant made
inquiries with regard to the original possession certificate, the truth
would have been revealed. Much is said about no inquiry is being made
about the original possession certificate. The High Court notes that the
agreement to sell with the plaintiff is not registered but, again, it draws
inference from absence of inquires by the second defendant about why
the original possession certificate was not handed over to him. The fact
that defendant 1(a) did not reveal to the second defendant about the
pendency of the Suit, is, on the one hand noted but the Court holds
that even then, the second defendant ought to have made inquiry
about pendency of any litigation. The fact that second defendant 1(b)
as DW2 admitted that he had no material to support the fact that he
had received Rs. 4,50,000/-, was a very valuable in mid 1990s, if
considered.
105. The Court questions the idea that second defendant who was
only 20 years of age and involved in agricultural operations and milk
vending business, who had no intention of settling in Bangalore, would
have thought of purchasing a site in Bangalore. The amount of
consideration was not deposited in any bank. The Court proceeds to
hold that on an overall reappreciation, it was found that he was not a
bonafide purchaser for value without notice. Thereafter the High Court
further proceeds to pose the question as to why the second defendant,
who is the resident of Nagamangala Taluk, engaged in agricultural
operation and milk vending business, should enter into an agreement in
Bangalore, that too, when he is 20 years old. Betanna-the alleged
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 58 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

broker, was not examined. Thereafter, the High Court proceeds to even
find that the entire transaction between defendant No. 1(b) and the
second defendant is a sham transaction, made only to defeat the
plaintiff. In the next paragraph, however, applying Sections 3 and 54 of
the TP Act, it is again 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.
106. 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 second defendant was not a
bonafide purchaser, it is not the same thing as holding that it is a sham
transaction.
107. In the plaint, which was amended, the plaintiff has averred,
inter alia, as follows:
“lOC. The Plaintiff submits that taking advantage of the fact that
the son was not on record, the husband accorded no objection in
favour of the BDA so as to ensure that the Sale Deed was executed
in favour of HK Sudarshan alone and thereafter the Second legal
representative sold the Schedule Property in favour of the Second
Defendant. The Plaintiff submits that the Defendants are aware of
the pendency of the suit and of the subsistence of the Agreement of
Bale in favour of the Plaintiff. The Sale Deed en executed in favour of
the said person i.e., the Second Defendant is hit by the Doctrine of
lis pendens and the Second Defendant's title to the Schedule
Property is subject to the outcome of the present suit.
10D. The Plaintiff submits that the Second Defendant is not a
bonafide purchaser for value. The sale in favour of the Second
Defendant is with the sole intention of complicating the matters in
controversy and to prejudice the case of the Plaintiff. Therefore, the
Plaintiff submits that the Sale Deed executed in favour of the Second
Defendant does not in any way restrict the right of the Plaintiff to
seek Specific Performance of the Agreement of Sale executed in
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 59 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

favour of the Plaintiff.”

108. Therefore, we are inclined to hold, in the first place that the
High Court erred in finding that the transaction was a sham transaction.
As far the question, as to whether second defendant was not a bonafide
purchaser, it is the case of the second defendant that the High Court
has erred in not noticing that in the evidence, the second defendant
deposed that his vendor disclosed to him that the original possession
certificate was lost and produced duplicate possession certificate. This
evidence is incongruous with the finding of the High Court that the
second defendant had not made any inquiry as to why the original
possession certificate was not handed over. The second defendant had
deposed about inquiry being made and being informed that the original
possession certificate was lost. The second defendant further complains
that the High Court itself has found that the vendor of the second
defendant has admitted that no information was given to the 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.
109. 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.
110. 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.
111. We have already found that the agreement to sell dated
17.11.1982, is to be painted with the brush of illegality and pronounced
unenforceable. It is undisputed that the plaintiff has paid Rs. 50,000/-
on the strength of the said agreement. It would appear to be true that
a part of this amount was received on the date of the agreement. It
may be true that further amount were received by defendant 1(a), the
husband of the first defendant. The first defendant died pending the
Suit. It is while the Suit was pending that defendant 1(b), the son of
the first defendant, had executed the sale deed on 16.09.1996 in
favour of the second defendant. It is again undisputed that at the time
when the sale deed was executed, both the second defendant and his
vendor, defendant 1(b), were not parties in the Suit. We have already
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 60 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

found that the sale deed in favour of the second defendant, cannot be
treated as a sham transaction and the finding, in fact, on point No. 2 by
the High Court, also that the second defendant is not a bonafide
purchaser. Once we come to the conclusion that the agreement, relied
upon by the plaintiff, cannot be enforced, as to whether, even
proceeding on the basis that the sale in favour of the second defendant
was made, not in circumstances which would entitle the second
defendant to set up the case that he is a bonafide purchaser, the
question of granting relief to the plaintiff must first be decided. In other
words, in view of the illegality involved in enforcing the agreement
dated 17.11.1982, the question would arise, whether, on principles,
which have been settled by this Court, the Court should assist the
plaintiff or the defendant. We have noted the state of the evidence, in
particular, as it is revealed from the deposition of PW2. We have found
that the agreement, relied upon by the plaintiff, cannot be acted upon.
In such circumstances, we would think that, even if we do not reverse
the finding of the High Court that the second defendant is not a
bonafide purchaser, it will not itself advance the case of the plaintiff.
This is for the reason that his case is in the teeth of the law, as found
by us, making it an unenforceable contract. The plaintiff is seeking the
assistance of the Court which must be refused.
112. We, therefore, need not explore further the complaint of the
second defendant that the High Court erred in arriving at the finding
that the second defendant was not a bonafide purchaser.
NOT A CASE UNDER ARTICLE 136?
113. 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.
114. 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 sell unenforceable for the reason
that it falls foul of Section 23 of the Contract Act, it may declare the law
but not interfere with the judgment of the High Court.
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 61 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

115. We are of the view that on both these grounds we are not with
the plaintiff. It is not a case where the condition of the plaintiff is such
that the interests of justice would overwhelm our findings that the
agreement relied upon by the plaintiff constituted a clear intrusion into
the requirement of the law. In fact, we would consider the contract an
open and brazen instance of parties entering into a bargain with scant
regard for the law. If that were not enough, the very first letter
addressed to the first defendant dated 01.03.1983 betrays the real
purpose of the contract. The plaintiff in no uncertain terms has declared
his intention to sell the property to his nominee. It is clear as day light
that the plaintiff had no intention whatsoever to make use of the site
for the purpose of putting up a residential building. The
communications indicate that the plaintiff was a contractor. The
evidence of PW 2 his son further indicated that he has been in the
business since 1960. What is even more revealing is the admission
relating to the properties belonging to or in the possession of the
plaintiff and his family members which we have dealt with. The final
nail in the coffin, as it were, is driven home in the case by showing the
case of the plaintiff in its true colours when PW 2 deposed that if the
suit is dismissed it would occasion ‘a monetary loss’. Thus, the bargain
was to buy up precious public land which was vested with the
Bangalore Development Authority by acquiring it from some person
with the laudable object of housing a homeless person in Bangalore.
The result of the agreement being enforced would be to clearly frustrate
the object of the law and make the site the subject matter of a property
deal with the object of making a profit.
116. The upshot of the above discussion is, we must hold that the
High Court has clearly erred in holding that the Suit was maintainable.
We would find that the Suit to enforce the agreement dated
17.11.1982, should not be countenanced by the Court.
117. Then, the question would arise, as to the final Order to be
passed in the facts. While, we are inclined to overturn the impugned
Judgment by holding that the Suit itself, was not maintainable, we
must notice that the High Court had decreed the Suit on the appeal by
the plaintiff. The defendants did not challenge the Decree of the Trial
Court. Therefore, the setting aside of the Judgment of the High Court
would not result in dismissal of the Suit. What is more, we are of the
further view that to do complete justice between the parties, while we
allow the appeals, we must pass an Order, which will result in a fair
amount being paid to the plaintiff. Having regard to the entirety of the
evidence and the conduct of the parties, noticing even the admitted
stand of the second defendant that the plaint schedule property has a
value of Rs. 2.5 crores and the plaintiff has paid, in all, a sum of Rs.
50,000/, which constituted the consideration for the agreement to sell
SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 62 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

several years ago, while we dismiss the Suit for Specific Performance,
we should direct the appellants to pay a sum of Rs. 20,00,000/- in
place of the Decree of the Trial Court.
118. Accordingly, Appeals are allowed. The impugned Judgment
shall stand set aside. The Suit for Specific Performance will stand
dismissed. There will be a Decree, however, for payment of Rs.
20,00,000/-(Rupees twenty lakhs) by the appellants to the respondents
(the Legal Representatives of the plaintiff) within a period of three
months from today. If the aforesaid amount is not paid as aforesaid,
the appellants shall be liable to pay interest at the rate of 8 per cent
per annum after the expiry of 3 months from today on the said amount
as well. Parties are directed to bear their respective costs.
———
1
AIR 1960 SC 213

2
(2019) 19 SCC 42

3 [1775 1 COWP 341]

4 AIR 1968 SC 534

5 AIR 1930 PC 287

6
(2007) 10 SCC 595

7 AIR 2020 SC 5041

8 1990 SCC OnLine Kar 613

9
ILR 1988 Kar 356

10 ILR 1992 Kar 717

11 AIR 2006 Kar 4

12 ILR 2010 Kar 765

13 (2018) 2 SCC 82

14 (2016) 13 SCC 283

15 (2012) 1 SCC 656

16 AIR 1968 SC 1358

17 (1985) 3 SCC 128

18 (2012) 1 SCC 718

19
AIR 1959 SC 781

20 (1990) 1 SCC 104

SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.
Page 63 Thursday, April 20, 2023
Printed For: Ritam Legal
SCC Online Web Edition: http://www.scconline.com
© 2023 EBC Publishing Pvt. Ltd., Lucknow.
-----------------------------------------------------------------------------------------------------------------------------------------------------------

21 (2009) 5 SCC 462

22 (2013) 15 SCC 27

23 (2019) 9 SCC 358

24 AIR 1918 Mad 578

25 AIR 1945 Mad 219

Disclaimer: While every effort is made to avoid any mistake or omission, this casenote/ headnote/ judgment/ act/ rule/
regulation/ circular/ notification is being circulated on the condition and understanding that the publisher would not be
liable in any manner by reason of any mistake or omission or for any action taken or omitted to be taken or advice
rendered or accepted on the basis of this casenote/ headnote/ judgment/ act/ rule/ regulation/ circular/ notification. All
disputes will be subject exclusively to jurisdiction of courts, tribunals and forums at Lucknow only. The authenticity of
this text must be verified from the original source.