Thursday, 30 July 2015

Whether subsequent purchaser is necessary party in suit for specific performance of contract?

 In the case of Dwarka Prasad Singh v. Harikant Prasad
Singh – (1973) 1 SCC 179, the Supreme Court observed thus:
“There appears to be some divergence between the
High Courts on the question whether in a suit for
specific performance against a purchaser with notice
of a prior agreement of sale the vendor is a necessary
party or not. In other words the conflict has arisen
on the question whether the decree in a suit for
specific performance when the property in dispute has
been sold to a third party should be to only direct the
subsequent purchaser to execute a conveyance or
whether the subsequent purchaser and the vendor
should both execute a conveyance in favour of the
plaintiff : See Gourishankar & Others v. Ibrahim Ali

and Kafiladdin & Others v. Samiraddin & Others.
This Court has, however, held in Lala Durga Prasad
& Another v. Lala Deep Chand & Others that in a suit
instituted by a purchaser against the vendor and a
subsequent purchaser for specific performance of the
contract of sale the proper form of the decree is to
direct specific performance of the contract between
the vendor and the plaintiff and further direct the
subsequent transferee to join in the conveyance so as
to pass on the title which resides in him to the
plaintiff. This was the course followed by the Calcutta
High Court in the above case and it appears that the
English practice was the same. Thus according to this
decision, the conveyance has to be executed by the
vendor in favour of' the plaintiff who seeks specific
performance of the contract in his favour and the
subsequent transferee has to join in the conveyance
only to pass his title which resides in him. It has been
made quite clear that he does not join in any special
covenants made between the plaintiff and his vendor.
All that he does is to pass on his title to the plaintiff.
In a recent decision of this Court in R. C. Chandiok &
Another v. Chunni Lal Sabharwal & Others while
passing a decree for specific performance of a
contract a direction was made that the decree should
be in the same form as in Lala Durga Prasad's case
(supra). It is thus difficult to sustain the
argument that the vendor is not a necessary
party when, according to the view accepted by
this Court, the conveyance has to be executed by
him although the subsequent purchaser has also
to join so as to pass on the title which resides in
him to the plaintiff.”
(emphasis supplied)
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.42 OF 2014
IN
CHAMBER SUMMONS NO.2087 OF 2011
IN
SUIT NO.1241 OF 2007
Nitin Gandhi & anr. ..Appellants
vs.
Dinyar Pheroz Dubash & ors. .. Defendants.




CORAM: MOHIT S. SHAH, C.J. &
M.S.SONAK, J.

JUDGMENT PRONOUNCED ON : 09 Oct. 2014



1] This appeal is directed against the order dated 28
October 2013 in Chamber Summons No.2087 of 2011 in Suit
No.1241 of 2007 declining the appellants (original plaintiffs)
leave to implead subsequent purchaser of the suit property and for
consequential amendments to the plaint.
2] We have heard Mr. Shailesh Shah, learned senior
counsel for the appellants, Mr. Pradeep Sancheti, learned senior
counsel for respondent No.5 (subsequent purchaser), Mr.
Ramchandran N. for respondent Nos.1 to 3 (original defendant
Nos.1 to 3) and Ms. Usha R. Tiwari for respondent No.4 (original
defendant No.4). With the consent of learned counsel for the
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parties, we have taken up not merely this appeal, but also Notice
of Motion No.2308 of 2007 in Suit No.1241 of 2007 (Motion
seeking interim reliefs in the Suit), for final hearing and disposal.
3] For the purposes of present appeal, the parties shall be
referred to by their descriptions in the trial court, i.e., the
appellants shall be referred to as the plaintiffs, respondent Nos.1
to 4 as the defendants and respondent No.5 as the 'subsequent
purchaser', for the sake of convenience.
4] By four separate agreements dated 2 January 2014,
defendant Nos.1 to 4 agreed to assign their undivided rights in
respect of the two properties being CTS No.725 and 515C
at
Matunga in favour of the plaintiffs for total consideration of
Rs.3.20 Crores (approximately) payable by the plaintiffs in the
following manner:
(i) 10% upon execution of the agreement dated 2
January 2014;
(ii) 40% on obtaining commencement certificate to
erect new buildings in place of old buildings;
(iii) The balance 50% on obtaining building
completion certificate for the newly constructed
buildings.
5] In addition to the aforesaid, since defendant Nos.1 to 4
were occupants in the building situated upon the property bearing
CTS No.515C,
the plaintiffs have agreed to construct and allot to
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the said defendants six apartments in the new building to be
constructed in or upon the said property.
6] In pursuance of the aforesaid, there is no dispute that
defendant Nos.1 to 4 have received from the plaintiffs a sum of
Rs.31,50,000/,
which corresponds to the 10% of consideration
due and payable at the stage of execution of the agreement dated
2 January 2004. Defendant Nos.1 to 4 have also executed a Power
of Attorney in favour of the plaintiffs, in order to enable the
plaintiffs to undertake development in or upon the said property.
In pursuance of the agreement and/or Power of Attorney, the
plaintiffs obtained clearance under the Urban Land (Ceiling and
Regulation ) Act, 1976 on 29 July 2004.
7] It is the case of the plaintiffs that in pursuance of the
agreements dated 2 January 2004, the plaintiffs obtained extract
of property assessment in respect of the said properties; engaged
services of competent architects to prepare plans for development
and reconstruction of the said property; approached the tenants of
the buildings in the suit properties with a view to obtain their
consents for redevelopment; entered into agreement with one out
of the two tenants in the building in property bearing CTS
No.515C.
8] It is the case of the plaintiffs that in the building in or
upon property bearing No.CTS No. 515C,
apart from defendant
Nos.1 to 4, there were two other occupants, i.e., Mr. K.R. N.
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Shenoy and Mr. Mody. In so far as Mr. K.R.N. Shenoy is concerned,
the plaintiffs have entered into an agreement with him, which
signifies his consent for the redevelopment. In so far as Mr. Mody
is concerned, on account of noncooperative
attitude of defendant
Nos.1 to 4, the plaintiffs were unable to enter into any agreement
with him. Further, it is the case of the plaintiffs that the Public
Interest Litigation No.3189 of 2004, which concerns interpretation
of D.C. Regulation 37(7) came to be instituted and this Court vide
interim order dated 26 October 2004 restrained the Municipal
Corporation of Greater Mumbai from sanctioning proposals for
redevelopment of cess buildings and appointed Committees to
monitor reconstruction of cess buildings. In view of such interim
order, it is the case of the plaintiffs, they could not submit plans
for development of buildings in and upon the said properties or
obtain commencement certificates.
9] Defendant Nos.1 to 4, by their lawyer's notice dated 30
June 2005 terminated the agreements dated 2 January 2004 on
the ground that it was understood between the parties that the
construction would be commenced within six months from the
date of the agreement and since no construction had commenced
within the said period, the agreements were being terminated.
10] The plaintiffs replied to the aforesaid legal notice,
refuting the allegations made therein. In particular, it was pointed
out that there was no understanding that the
construction/development work would commence within a period
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of six months from the date of agreements. In any case, it was
submitted that in the wake of written contracts in the form of
agreements dated 2 January 2004, there was no question of
raising any plea of 'oral understanding' to vary the terms of such
written contract. The plaintiffs also adverted to the interim order
in the Public Interest Litigation, which according to the plaintiffs
was the cause for the inability to obtain clearance and approvals
from the Municipal Corporation to proceed with the construction
works.
11] It is the case of the plaintiffs that after about a period
of two months from the aforesaid response, i.e., on or about 5
August 2005, the plaintiffs received a letter dated 3 August 2005
from the advocate of defendant nos.1 to 3 substantially reiterating
the contents of the legal notice dated 30 June 2005 and
purporting to return by way of cheques the amount of
Rs.31,50,000/,
which was styled as 'earnest money deposit'.
12] The plaintiffs, thereupon, by letter dated 23 August
2005, joined issue with the allegations in the letter dated 3 August
2005 and declined to accept or encash the cheques. Thereafter the
plaintiffs claim to have received from unnamed person a packet
containing advertisement published in Bombay Samachar dated
31 August 2005 under the signature of Ms Kanchan Pamnani,
advocate, which indicated that her client intended to purchase the
properties, which formed the subject matter of the agreements
dated 2 January 2004 (suit properties). The plaintiffs, therefore,
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by letter dated 22 November 2005 brought to the notice of Ms
Kanchan Pamnani, the factum of agreements dated 2 January
2004. The plaintiffs also issued an advertisement on 28 November
2005 in the Free press Journal, informing the public at large about
the agreements dated 2 January 2004 and warning them against
dealing with defendant Nos.1 to 4, and suit properties, to the
prejudice of the plaintiffs right in respect thereof.
13] The plaintiffs claim that there were no overtacts
on
the part of the defendants in pursuance of the purported
termination though defendant Nos.1 to 4 were not cooperative
with the plaintiffs in the matter of proceeding with construction
and development activity in or upon the said property. Ultimately,
on or about 10 April 2007, the plaintiffs instituted a Suit No.1241
of 2007, seeking inter alia decree of specific performance as
against defendant Nos.1 to 4 by reference to the agreements dated
2 January 2004. The plaintiffs, in such suit have averred that they
have always been ready and willing and continue to be ready and
willing to perform their part of the bargain.
14] The plaintiffs applied for adinterim
injunction, which
was rejected by the learned Single Judge of this Court on 17
December 2007, primarily on the ground of delay.
15] On 6 August 2010, the Solicitors for respondent No.5,
i.e., subsequent purchaser issued a public notices/advertisements
in Free Press Journal and Navshakti inviting objection from the
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members of the general public, to the proposed sale/purchase of
the property bearing CTS No.515C.
In response thereto, no claims
were received by the Solicitors of subsequent purchaser from any
person or entity, including in particular, the plaintiffs.
16] On 31 May 2011, defendant No.4 entered into an
agreement with the subsequent purchaser, agreeing to assign his
undivided rights in respect of two suit properties for a
consideration of Rs.80 Lacs.
17] On 8 September 2011, when the plaintiffs Notice of
Motion No.2308 of 2007 came up for hearing before the trial
court, counsel for defendant Nos.1 to 3 informed the Court that
they had learnt about defendant No.4 having transferred his
undivided rights in respect of the suit property in favour of some
third party. In view of such statement, the hearing in notice of
motion was adjourned.
18] The plaintiffs' Solicitor on 8 September 2011 itself by
letter bearing same date, made enquiries with regard to the
subsequent purchasers and requested defendant No.4 to furnish a
copy of agreement, if any, to them for the purposes of taking
further necessary steps in the matter.
19] In the meantime, on 21 September 2011 defendant
Nos.1 to 3 executed a Deed of Assignment in favour of the
subsequent purchaser transferring their undivided rights in the
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property bearing CTS No.515C.
20] On 5 December 2011, when Notice of Motion No.2308
of 2007 came up for hearing, on behalf of defendant Nos.1 to 3, a
letter was handed over to the plaintiffs' advocate, informing them
about the Deed of Assignment dated 21 September 2011.
21] Within a period of eight days from the aforesaid, i.e.,
on 13 December 2011, the plaintiffs took out the Chamber
Summons No.2087 of 2011, seeking inter alia to implead the
subsequent purchaser as a party defendant in Suit No.1241 of
2007 and for consequential amendments. A copy of the Chamber
Summons was duly served upon the defendants, as also the
subsequent purchaser.
22] On 3 January 2012, the subsequent purchaser filed an
affidavitinreply
opposing the Chamber Summons, inter alia,
setting out a case that they are 'bona fide purchasers of value
without notice' in respect of the entire 100% stake in the property
bearing CTS No.515C
and in respect of 16.67% stake in the
property bearing CTS No.725.
23] On 12 January 2012, i.e., after the receipt of Chamber
Summons No.2087 of 2011 and filing of response thereto on 3
January 2012, the subsequent purchaser obtained a conveyance
from defendant No.4, in respect of his undivided rights in the
property bearing CTS No.515C
and CTS No.725.
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24] In the course of arguments upon Chamber Summons
No.2087 of 2011, the plaintiffs deleted certain portions of the
proposed amendment as also prayer clause (C1),
which had
sought for a declaration to declare the three Deeds of Assignment
dated 21 September 2011 executed by defendant Nos.1to 3 with
the subsequent purchaser as illegal and void. Therefore, the
Chamber Summons was restricted to seeking the following
amendments:
SCHEDULE
I. Add the following as Defendant No.5 in the cause
title of the Plaint.
M/s. Aastha Associates ]
A partnership firm, having their office ]
At Office No.7, Ashirwad Building ]
48, Dr. Ambedkar Road, above ]
Jankalayan Bank, Sion (East) ]
Mumbai 400 022 ]
II. Add the following paragraphs after paragraph 39
of the Plaint.
39A. The Plaintiff states that after filing
of the present suit, the Defendant Nos.1,2 and 3
have by separate Deeds of Assignments, all
executed on 21st September 2011, assigned their
right, title or interest in one of the suit
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properties described in Exhibit 'B' hereto to the
Defendant No.5. The Plaintiffs state that the
said transactions have been entered into by the
Defendant Nos.1 to 3 behind the back and
without the knowledge of the Plaintiffs. The said
transactions have been entered into only with a
view to prejudice the rights of the Plaintiffs. The
Plaintiffs state that the present Suit is still
pending. The Defendant No.5 cannot therefore
be termed as “bona fide purchasers”. In any
event even assuming that Defendant No.5 are
bona fide purchasers still the Defendant No.5
would also be bound by any order and decree
that may be passed in the present suit.
39B. The Plaintiffs state that in the event,
this Hon'ble Court holds that the Plaintiffs are
entitled to specific performance of their
agreements with Defendant Nos.1 to 4, then
such a decree would also be binding upon
Defendant No.5.
25] By the impugned order dated 28 October 2013,
learned Single Judge has rejected the Chamber Summons,
primarily on the ground that the plaintiffs had failed to plead and
establish that the subsequent purchaser was not a bona fide
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purchaser without notice of the earlier agreement and therefore,
in terms of section 19(b) of the Specific Relief Act, 1963 (said
Act), there was no question the plaintiffs claiming any specific
performance against such subsequent purchaser. Learned Single
Judge noted that there were no allegations in the affidavit
supporting the chamber summons to the effect that the
subsequent purchaser was not a bona fide purchaser. Learned
Single Judge went on to note that in the statement in the
proposed text of amendment that the subsequent purchaser
cannot be termed as a 'bona fide purchaser' was woefully
insufficient in the context of positive evidence led by the
subsequent purchaser to establish primafacie
that it was a
purchaser for value and without notice of the original contract.
Learned Single Judge has reasoned that if a subsequent purchaser
against whom there are no allegations or materials indicating
want of bonafides, is made a party to a suit seeking specific
performance, the same would be contrary to the exception carved
out by section 19(b) of the said Act, apart from leading to
inconvenience and harassment to bona fide purchaser for value.
Learned Single Judge placed reliance upon the decision of this
Court in the case of M/s. Shree Kamal Constructions & Ors. vs.
Shri. Kamlakar Jiwan Patil & ors (Appeal No.330 of 2012 in
Chamber Summons No.250 of 2012 in Suit No. 327 of 2012 decided
on 9 April 2013).
26] Mr. Shailesh Shah, learned senior advocate for the
plaintiffs in support of the appeal, made the following
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submissions:
(i) In the Schedule to the Chamber Summons
containing the proposed text of the amendments, there
were clear pleadings to the effect that the subsequent
purchaser cannot be termed as a 'bona fide purchaser'.
As defined in the Law Lexicon, the expression 'bona fide
purchaser' means the purchaser who purchases property
without notice, actual or constructive of any adverse
rights, claims, interest or equities of the other any and
to the property sold. The view taken by the learned
Single Judge that there were no pleadings, is therefore,
clearly erroneous;
(ii) At the stage of seeking impleadment of a
subsequent purchaser there is no necessity to place any
evidence on record to establish want of bona fides on
the part of subsequent purchaser. Similarly, the so
called 'evidence' produced by the subsequent purchaser
by way of his affidavitinreply
to oppose impleadment,
is also irrelevant, at this stage. The denial of leave to
implead subsequent purchaser, on the ground that
mere denials by the plaintiffs were woefully insufficient
in the context of positive evidence led by the
subsequent purchaser, was clearly erroneous;
(iii) The burden of proving good faith and lack of
notice of the first contract is upon the subsequent
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purchaser and not the plaintiffs. Therefore, as long as it
is established that the subsequent purchaser claims title
under the vendor of the plaintiff, as opposed to setting
up of an independent title in himself, leave to implead
has to be necessarily granted by the trial court, in order,
that an effective decree for specific performance can be
passed in the matter;
(iv) Learned Single Judge misread or in any case
misinterpreted the decision of the Division Bench of
this Court in the case of M/s. Shree Kamal Constructions
(supra). Further, learned Single Judge erred in not
following the decision of the Supreme Court in the case
of Kasturi v. Iyyamperumal & ors (
2005) 6 Supreme
Court Cases 733, in which it is clearly held that
subsequent purchaser is a necessary party, as he would
be affected, if he had purchased the property with or
without notice of the contract;
27] In the context of Notice of Motion No. 2308 of 2007,
Mr. Shah, learned senior counsel for the plaintiffs submitted that
repudiation of agreements dated 2 January 2004 by defendant
Nos. 1 to 4 on the ground of some 'oral understanding' is patently
illegal. In pursuance of the agreements dated 2 January 2004, the
plaintiffs had not only paid defendant Nos.1 to 4 an amount of
Rs.31,50,000/,
way back in the year 2004, but further the
plaintiffs had undertaken several acts and activities, incurring
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both, efforts and expenses in the bargain. The suit was instituted
within the prescribed period of limitation and no equities can be
said to have arisen in favour of the defendant Nos.1 to 4 between
the date of repudiation, i.e., 30 June 2005 and the date of the
institution of the suit, i.e., 10 April 2007. The conduct of
defendant Nos.1 to 4 reeks of bad faith, particularly, if the
sequence of events between 31 May 2011 and 12 January 2012 is
taken into consideration. During this period, defendant Nos.1 to 4
have attempted to create third party rights in or upon the suit
properties in a clandestine manner. For all these reasons, Mr.
Shah submitted that the plaintiffs have made out a primafacie
case and the balance of convenience is also in favour of grant of
interim reliefs. Mr. Shah submitted that in matters of contracts
relating to immovable properties, there is a presumption of law
that compensation in terms of money is never an adequate relief
and therefore, if interim reliefs are declined, the plaintiffs will
suffer irreparable loss and injury.
28] Mr. Sancheti, learned senior counsel for the
subsequent purchaser defended the impugned order by urging
following:
(i) Neither in the proposed text of amendment nor in
the affidavit in support of the Chamber Summons, is
there any positive pleading/allegation to the effect that
the subsequent purchaser is not a bona fide purchaser
for value and without notice of the original contract. In
absence of such pleading/material, no specific
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performance of a contract can be enforced against the
subsequent purchaser in view of a categorical
provisions of section 19(b) of the said Act;
(ii) No amount of evidence, which is not backed by
pleadings, can ever be looked into in the course of a
civil trial. Therefore, even if, the subsequent purchaser
is impleaded as a party, in absence of pleadings to the
effect that such subsequent purchaser is not a bona fide
purchaser for value and without notice of the original
contract, it will be impermissible for the plaintiffs to
lead any evidence on this score. In such circumstances,
the joinder of a subsequent purchaser would be a
useless and vexatious exercise. Such a joinder, will,
unnecessarily create a cloud over the perfect title of the
subsequent purchaser. This, in turn, would encourage
the plaintiffs' extortionate monetary demands. Upon
consideration of such relevant circumstances, learned
Single Judge has rightly dismissed the Chamber
Summons;
(iii) Even if, leave as prayed for were to be granted,
upon meaningful reading of the plaint after
incorporation of amendment in its truncated form, no
cause of action would be disclosed as against the
subsequent purchaser. Further, upon the plaintiffs
giving up relief in terms of prayer clause (C1)
in the
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proposed text of amendment, no relief could ever be
granted in respect of the conveyance in favour of the
subsequent purchaser. The Trial Court, in such a
situation, would have no option but to reject the plaint
as against the subsequent purchaser by resort to the
provisions contained in Order 7 and Rule 11 of the
Code of Civil Procedure (CPC). Rather than prolong
this inevitable result, Mr. Sancheti submitted that the
learned Single Judge was entirely right in nipping in
the bud, the attempt to implead the subsequent
purchaser in the suit;
(iv) Finally, by adverting to the provisions contained
in section 15 of the said Act, Mr. Sancheti submitted
that primarily, specific performance of a contract may
be obtained only by the parties thereto. Impleadment of
the subsequent purchaser particularly, where the
material on record establishes that such subsequent
purchaser is a bona fide purchaser for value and
without notice of the original contract, would
substantially change the nature and character of the
original suit seeking relief of specific performance. This,
submits Mr. Sancheti, is clearly impermissible.
29] In the context of Notice of Motion No.2308 of 2007,
Mr. Sancheti submitted that in pursuance of Deeds of Assignment
dated 21 September 2011 and 12 January 2012, the subsequent
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purchaser has been placed in possession of the property bearing
CTS No.515C.
The subsequent purchaser has, after entering into
agreements with occupants of the building situated thereon,
proceeded to demolish the same. The subsequent purchaser has
purchased the property bearing CTS No.515C
after having carried
out due diligence and payment of very substantial consideration to
the tune of Rs.3.5 Crores (approximately). In contrast, the
plaintiffs failed to register any notice of lis pendens in terms of
section 52 of the Transfer of Property Act, 1881; failed to respond
to the public notices issued by the Solicitors of the subsequent
purchaser ; and approached the civil court after considerable
delay. In such circumstances, Mr. Sancheti submitted that the
plaintiffs have made out no primafacie
case. In any event, the
balance of convenience is clearly against the grant of any interim
relief, in favour of the plaintiffs. For all these reasons, Mr. Sancheti
submitted that Notice of Motion No.2308 of 2007 is liable to be
dismissed.
30] Mr. Ramchandran N., learned counsel for defendant
Nos.1 to 3 submitted that the original agreements dated 2 January
2004, contemplated completion of development and construction
within a period of 18 months from the date of the agreements. For
a period of almost 15 months, there was no construction or
development carried out by the plaintiffs. The interim reliefs in
public interest litigation were clearly irrelevant and in any case,
the same were issued much after the parties entered into
agreement dated 2 January 2004. As such, it was contended that
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the termination of the agreements is legal and valid and in any
case it was submitted that there is gross and unexplained delay
and laches on the part of the plaintiffs, on account of which the
plaintiffs ought not to be granted any interim reliefs.
31] Ms Usha Tiwari, learned counsel for defendant No.4
adopted the submissions made by Mr. Sancheti and Mr.
Ramchandran N. and further submitted that in the Chamber
Summons, there is no relief whatsoever applied for with regard to
the Deed of Conveyance entered into by defendant No.4 with the
subsequent purchaser.
32] Having heard the rival contentions and perused the
record, we now proceed to evaluate the same.
33] The first issue to be determined is whether on the
basis of pleadings or what is contended to be the lack of them in
the proposed text of amendments, leave to implead the
subsequent purchaser and carry out consequential amendments
could have been denied to the plaintiffs. As noted earlier, in the
context of amendment, the plaintiffs have undoubtedly averred
that the subsequent purchaser 'cannot be termed as a bona fide
purchaser'. Order 6 Rule 2 of CPC provides that pleadings must
contain material facts and not evidence. The Law Lexicon, upon
which reliance was placed by Mr. Shah, the expression 'bona fide
purchaser' is defined thus:
'Bona fide purchaser is one who at the time of
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the purchase advances a new consideration,
surrenders some security, or does some other act
which leaves him in a worse position if his purchase
should be set aside, and purchases in the honest
belief that his vendor had a right to sell, without
notice, actual or constructive of any adverse rights,
claims, interest or equities of other in and to the
property sold.'
34] At the stage of considering the chamber summons
seeking leave to implead/amend, the Court is really not concerned
with the veracity or otherwise of the statements made in the
proposed text of the amendment. Therefore, at that stage,
pleadings to the effect that the subsequent purchaser is not a bona
fide purchaser would suffice. There is no requirement of
producing any material or evidence for establishing that the
subsequent purchaser is not a bona fide purchaser, at the stage
when leave for impleadment/consequential amendments is being
applied for. As noted earlier, the expression 'bona fide purchaser'
means and implies a purchaser who purchases a property without
notice, actual or constructive of any adverse rights, claims, interest
or equities of other in and to the property sold. Therefore, at the
stage of seeking leave to implead/carry out consequential
amendment, in our opinion, there was no question of adverting to
any evidence or the lack of it in determining whether the
subsequent purchaser was indeed a bona fide purchaser for value
and without notice of the original contract.
35] The provision contained in section 19(b) of the said
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Act which affords protection to a subsequent purchaser who
purchases the contracted property in good faith and for value
without notice of the original contract, is in the nature of an
exception to the general rule. Therefore, it is a settled position in
law that the onus of proof of good faith is upon the subsequent
purchaser who takes a plea that he is an innocent or bona fide
purchaser for value and without notice of the original contract. In
the case of Shankarlal Narayandas Mundade v The New Mofussil
Co. Ltd. & ors. AIR (33) 1946 Privy Council 97, in the context of
section 27 of the Specific Relief Act, 1877, which corresponds to
section 19 of the Specific Relief Act 1963, the Privy Council, by
relying upon its earlier authority in the case of Bhup Narain Singh
V. Gokul Chand Mahton AIR
1934 PC 68 has held thus:
“Their Lordships have found it unnecessary to
examine the evidence which was called on behalf of
the plaintiff to show that these defendants in fact had
notice of the earlier contract, since a decision of this
Board is clear authority for the proposition that the
burden of proving good faith and lack of notice lay
upon the defendants”.
36] In the case of R.K.Mohaammed Ubadullah Vs. Hajee C.
Abdul Wahab (D) by L.Rs. AIR
2001 SC 1658 , in the context of
section 19 of the Specific Relief Act, 1963, the Supreme Court has
observed thus :
14. ….........
As can be seen from Section 19(a) and (b)
extracted above specific performance of a contract
can be enforced against (a) either party thereto and
(b) any person claiming under him by a title arising
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subsequent to the contract, except a transferee for
value who has paid his money in good faith and
without notice of the original contract. Section 19(b)
protects the bona fide purchaser in good faith for
value without notice of the original contract. This
protection is in the nature of exception to the general
rule. Hence, the onus of proof of good faith is on
the purchaser who takes the plea that he is an
innocent purchaser. Good faith is a question of
fact to be considered and decided on the facts of
each case.
(emphasis supplied)
37] The pleadings in the context of the proposed
amendment have therefore to be construed in the light of legal
position that the protection afforded to the subsequent purchaser
by section 19(b) of the said Act is in the nature of an exception to
the general rule and therefore, the onus of proving good faith is
on the purchaser who takes the plea that he is an innocent
purchaser. Ultimately, good faith is also question of fact to be
considered and decided on the facts of each case. For this purpose,
an opportunity has to be afforded to the parties to lead evidence
in the course of trial. We are, therefore, unable to share the view
taken by the learned Single Judge that in the facts and
circumstances of the present case there were insufficient pleadings
or evidence on the aspect of the subsequent purchaser not being a
bona fide purchaser for value and without notice of the original
contract.
38] Mr. Sancheti placed reliance upon the decision of the

Supreme Court in the cases of National Textile Corporation Limited
v. Nareshkumar Badrikumar Jagad & ors. (
2011) 12 SCC 695
and Union of India vs. Ibrahim Uddin & anr. (
2012) 8 SCC 148, to
contend that no amount of evidence, which is not backed by
pleadings can ever be looked into in the course of a civil trial. The
position that evidence cannot travel beyond the pleadings, is quite
well settled. However, since we are of the opinion that the
pleadings as contained in the text of the proposed amendment
constitute sufficient pleadings, there is no question of invocation
of the said principle to the facts and circumstances of the present
case. Besides, as noted earlier since the protection afforded to a
subsequent purchaser is in the nature of an exception to the
general rule, onus of proving good faith is on the purchaser who
takes the plea that he is an innocent purchaser.
39] Mr. Sancheti then relied upon the decision of the
Supreme Court in the case of Sopan Sukhdeo Sable & ors vs.
Assistant Charity Commissioner – (2004) 3 SCC 137, to contend
that the reading of the plaint has to be meaningful and not merely
formal. Further, upon such meaningful reading of the plaint, if no
cause of action is disclosed as against the subsequent purchaser,
then no useful purpose would be served by grant of leave to
implead and amend. There is no dispute regards the proposition
that the reading of plaint, in the context of the provisions of Order
7 Rule 11 of the CPC, has to be meaningful and not merely formal.
However, the very same decision also lays down that there cannot
be any compartmentalization, dissection, segregation and

inversions of the language of various paragraphs in the plaint.
Although it is the substance and not merely the form that has to
be looked into, the pleading has to be construed as it stands
without any addition or subtraction or words or change of its
apparent grammatical sense. The intention of the party concerned
is to be gathered primarily from the tenor and terms of his
pleadings taken as a whole. The real object of Order 7 Rule 11 of
the Code is to keep out of courts irresponsible law suits. As we
have already noted, the pleadings in the present case are quite
sufficient, particularly since the onus of proving good faith is on
the purchaser who takes the plea that he is an innocent purchaser.
Therefore, we see no merit in the contention of Mr. Sancheti based
upon the provisions contained in Order 7 Rule 11 of the CPC and
the consequent futility in grant of leave to implead and amend.
40] In a suit for specific performance, when a subsequent
purchaser is sought to be impleaded, the true test to be applied by
the court is to determine whether the purchaser claims title under
the vendor of the plaintiff or whether he claims a title
independent of or adverse to the title of the vendor. There are
decisions, both of the Supreme Court as also this court which take
view that impleadment is permissible where the party which is
proposed to be joined claims through the vendor and under a
subsequent agreement. This is to be distinguished from a case
where title adverse to or independent of the vendor is
sought to be asserted. In the former case, it is but necessary to
join the subsequent purchaser in order to ensure that when a

decree is passed by the court at the trial of the suit, the
subsequent purchaser can be directed to join in completing the
title which may be required to be conferred upon the plaintiff.
41] In the case of Durga Prasad vs. Deep Chand – AIR 1954
SC 75, the Supreme Court held thus:
“42. In our opinion, the proper form of decree is to
direct specific performance of the contract between
the vendor and the plaintiff and direct the
subsequent transferee to join in the conveyance so as
to pass on the title which resides in him to the
plaintiff. He does not join in any special covenants
made between the plaintiff and his vendor; all he
does is to pass on his title to the plaintiff. This was
the course followed by the Calcutta High Court in
Kafiladdin v. Samiraddin, AIR 1931 Cal 67 (C), and
appears to be the English practice. See Fry on Specific
Performance, 6th Edn., page 90, Paragraph 207 ;
also 'Potter v. Sanders'(1846) 67 ER 1057 (D). We
direct accordingly”.
42] In the case of Dwarka Prasad Singh v. Harikant Prasad
Singh – (1973) 1 SCC 179, the Supreme Court observed thus:
“There appears to be some divergence between the
High Courts on the question whether in a suit for
specific performance against a purchaser with notice
of a prior agreement of sale the vendor is a necessary
party or not. In other words the conflict has arisen
on the question whether the decree in a suit for
specific performance when the property in dispute has
been sold to a third party should be to only direct the
subsequent purchaser to execute a conveyance or
whether the subsequent purchaser and the vendor
should both execute a conveyance in favour of the
plaintiff : See Gourishankar & Others v. Ibrahim Ali

and Kafiladdin & Others v. Samiraddin & Others.
This Court has, however, held in Lala Durga Prasad
& Another v. Lala Deep Chand & Others that in a suit
instituted by a purchaser against the vendor and a
subsequent purchaser for specific performance of the
contract of sale the proper form of the decree is to
direct specific performance of the contract between
the vendor and the plaintiff and further direct the
subsequent transferee to join in the conveyance so as
to pass on the title which resides in him to the
plaintiff. This was the course followed by the Calcutta
High Court in the above case and it appears that the
English practice was the same. Thus according to this
decision, the conveyance has to be executed by the
vendor in favour of' the plaintiff who seeks specific
performance of the contract in his favour and the
subsequent transferee has to join in the conveyance
only to pass his title which resides in him. It has been
made quite clear that he does not join in any special
covenants made between the plaintiff and his vendor.
All that he does is to pass on his title to the plaintiff.
In a recent decision of this Court in R. C. Chandiok &
Another v. Chunni Lal Sabharwal & Others while
passing a decree for specific performance of a
contract a direction was made that the decree should
be in the same form as in Lala Durga Prasad's case
(supra). It is thus difficult to sustain the
argument that the vendor is not a necessary
party when, according to the view accepted by
this Court, the conveyance has to be executed by
him although the subsequent purchaser has also
to join so as to pass on the title which resides in
him to the plaintiff.”
(emphasis supplied)
43] In the case of Kasturi (supra), the Supreme Court has
observed thus:
“7. In our view, a bare reading of this provision,

namely, second part of Order 1 Rule 10 subrule
(2)
CPC would clearly show that the necessary parties in
a suit for specific performance of a contract for sale
are the parties to the contract or if they are dead,
their legal representatives as also a person who had
purchased the contracted property from the vendor. In
equity as well as in law, the contract constitutes
rights and also regulates the liabilities of the parties.
A purchaser is a necessary party as he would be
affected if he had purchased with or without
notice of the contract, but a person who claims
adversely to the claim of a vendor is, however,
not a necessary party. From the above, it is now
clear that two tests are to be satisfied for determining
the question who is a necessary party. Tests are (
1)
there must be a right to some relief against such
party in respect of the controversies involved in the
proceedings; (2) no effective decree can be passed in
the absence of such party.”
(emphasis supplied)
44] In the case of M/s. Shree Kamal Constructions & ors.
(supra), the Division Bench of this court, upon analyzing the
aforesaid decisions of the Supreme Court has ruled that a
subsequent purchaser who claims under the vendor of the plaintiff
and does not claim an independent title adverse to the vendor of
the plaintiff can always be impleaded as a defendant in a suit for
specific performance. In the facts and circumstances of the said
case, no doubt, the plaintiffs had made a specific averment in the
text of the amendment that the subsequent purchasers were not
bona fide purchasers, but were purchasers who were aware of the
rights and claims of the plaintiffs. However, the ratio of the said
decision is not that in the absence of such pleadings, a subsequent

purchaser cannot be impleaded as a defendant in the suit for
specific performance. In fact, such an issue did not arise for
consideration in the case of M/s. Shree Kamal Constructions
(supra).
45] In the case of Sawstik Developers vs. Saket Kumar Jain
& Anr. 2014
(2) ALL MR 183, the Division Bench of this court, by
reference to the decision in the case of M/s. Shree Kamal
Constructions (supra), explained the position by observing the
following :
4. “Section 19 of the Specific Relief Act, 1963,
provides that specific performance of a contract may
be enforced against a party to the contract or any
other person claiming under him by a title arising
subsequently to the contract, except a transferee for
value who has paid his money in good faith and
without notice of the original contract. In allowing
an application for impleadment under Order 1 Rule
10 of the Code of Civil Procedure, 1908, the Court is
required to consider whether the proposed addition is
of a party who is either necessary or proper. Now, in
a suit for specific performance, when a
subsequent purchaser is sought to be impleaded,
the true test that has to be applied by the Court
is to determine whether the purchaser claims
title under the vendor of the Plaintiff or whether,
contrariwise, he claims a title independent of or
adverse to the title of the vendor. Impleadment is
permissible where the party which is proposed to be
joined claims under the vendor of the Plaintiff and
under a subsequent agreement. This is to be
distinguished from a case where a title adverse to or
independent of the vendor is sought to be asserted. In
the former case, it is but necessary to join the

subsequent purchaser in order to ensure that
when a decree is passed by the Court at the trial
of the suit, the subsequent purchaser is directed
to join in completing the title which is to be
conferred upon the Plaintiff.”
(emphasis supplied)
46] The circumstance that prayer clause (C1)
from the
text of the proposed amendment has been given up by the
plaintiffs makes no difference particularly in the light of the law
laid down by the Supreme Court in the case of Durga Prasad
(supra) and Dwarka Prasad Singh (supra) which deal with the
form of a decree to be passed in a suit for specific performance of
a contract where the vendor has transferred the property to some
other party. Therefore, if the trial court were to ultimately come to
the conclusion that the plaintiffs are entitled to specific
performance of the original contract, then conveyance has to be
directed to be executed by the vendors in favour of the plaintiffs
and the subsequent purchaser has to join in the conveyance only
to pass the title which resides in him. Such subsequent purchaser
cannot be compelled to join in any special covenants made
between the plaintiffs and his vendors. Accordingly, the deletion of
certain portion of the text of amendment, or prayer clause (C1)
cannot be regarded as bar to grant leave to implead and amend.
47] In the facts and circumstances of this case, the
subsequent purchaser by virtue of Deeds of Assignment dated 21
September 2011 obtained undivided rights to the extent of 83% in
the property bearing CTS No.515C
from defendant Nos.1 to 3. On

13 December 2011, the subsequent purchaser was served with the
chamber summons seeking his impleadment in the suit. The
subsequent purchaser filed an affidavitinreply
opposing the said
chamber summons on 3 January 2012. Within a period of nine
days thereafter, i.e., on 12 January 2012, the subsequent
purchaser, however, entered into the conveyance with defendant
No.4 for acquiring his undivided rights to the extent of remaining
17% in the suit properties bearing CTS Nos.725 and 515C.
48] Accordingly, we are of the view that this is a fit case
where leave to implead/amend ought to have been granted to the
plaintiffs. Accordingly, we set aside the impugned judgment and
order and make the Chamber Summons absolute in terms of
prayer clause (a) and grant leave to the plaintiffs to amend the
plaint in terms of the text extracted in paragraph '24' of this
judgment and order. The Chamber Summons is accordingly, made
absolute to the aforesaid extent.
49] In so far as Notice of Motion No.2308 of 2007 is
concerned, the facts and circumstances relating to two plots
bearing Nos.725 and 515C
shall have to be considered separately,
at least in so far as the issue of balance of convenience and
irreparable loss and prejudice is concerned.
50] On the aspect of primafacie
case, the material on
record discloses that there was no legal infirmity as such in so far
as the agreements dated 2 January 2004 were concerned. The

allegations in the notice of termination dated 30 June 2005 to the
effect that there was some fraud in the matter of execution
thereof, are too vague to be accorded any credence at this primafacie
stage. Further the allegations that there was an oral
understanding that the construction upon the suit property was to
commence within a period of six months from the execution of the
agreements cannot be accepted at least at this primafacie
stage.
This is because, the parties have entered into a written contract, in
pursuance of which, defendant Nos.1 to 4 have received an
amount of Rs.31,50,000/in
the year 2004. The allegation with
regard to oral understanding has surfaced almost 15 months after
the date of execution of the agreements. Normally, the contents of
a written contract cannot be permitted to be varied by setting up
some oral contract.
51] Further at least primafacie
there is no material
whatsoever to indicate that the plaintiffs were either not ready or
wiling to perform the part of the contract. In fact, in the course of
the hearing, the plaintiffs even offered to deposit in this court the
entire consideration as promised in the agreements dated 2
January 2004. It is settled position in law that unless established
otherwise, there is a presumption that compensation in terms of
money is never adequate, when it comes to enforcement of rights
in respect of immovable property. Similarly, unless agreed
otherwise, time is also not of the essence of the contract in matters
of contracts concerning immovable property. Therefore, we are of
the opinion that the plaintiffs have succeeded in making out a

primafacie
case that they have a valid agreement, in their favour
and that the purported repudiation thereof is neither legal nor
valid.
52] In so far as the aspect of delay is concerned,
undoubtedly there is some delay on the part of the plaintiffs in
instituting the suit for specific performance. However, there is no
dispute that the suit has been instituted within the prescribed
period of limitation. Further in the matters of delay what has to be
considered is not the mere physical running of time. What is
relevant, is whether, on account of such delay any equities have
arisen in the defendants, which it would be harsh or inequitable to
dislodge at this point of time.
53] In so far as property bearing CTS No.515C
is
concerned, defendant Nos.1 to 4 have already executed Deeds of
Assignment/Conveyance in favour of the subsequent purchaser.
Further, defendant Nos.1 to 4 claim to have placed the subsequent
purchaser in possession of the said property bearing CTS No.515C.
The subsequent purchaser also claims to have entered into
settlement with both the tenants of the building in the said
property and thereafter demolished the building upon the said
property, with a view to carry on construction and development
thereon. Further, the subsequent purchaser prior to acquisition of
the said property had caused an advertisement/public notice to be
inserted in the Newspaper on or about 6 August 2010, to which
there was no response from the plaintiffs. In Mumbai, the

principle of lis pendens as provided in Section 52 of the Transfer of
Property Act 1882 is primafacie
unenforceable, unless notice of lis
pendens is duly registered. In the present case, the plaintiffs have
admittedly not registered the notice of lis pendens. In these
circumstances, whatever the primafacie
case, certainly, balance of
convenience is not in favour of the plaintiffs, in the matter of
grant of any interim reliefs qua the property bearing CTS No.
515C.
54] However, in so far as the property bearing CTS No.725
is concerned, no such equities can be said to have arisen.
Defendant Nos.1 to 3 continue to retain their rights in the
property bearing CTS No.725. Defendant No.4 vide Deed of
Conveyance dated 12 January 2012 has conveyed his undivided
rights to the extent of only about 17% in the said property to the
subsequent purchaser. Admittedly, such conveyance is after the
subsequent purchaser was served with a copy of the Chamber
summon No.2087 of 2011 and had filed its reply thereto on 3
January 2012. Therefore, in so far as the Conveyance dated 12
January 2012 is concerned, at least primafacie
there is no
question of the subsequent purchaser claiming to be a bona fide
purchaser without notice of the original contract. Besides, the
position in so far as property bearing CTS No.725 has also not
undergone any change. The building thereon continues in its
original condition. Thus, in so far as the property bearing CTS
No.725 is concerned, it would be just, fair and proper, if the
defendants are restrained from parting with the possession and

/or creating any third party rights and/or inducting any new
tenants.
55] Although Notice of Motion No.2308 of 2007 seeks
appointment of receiver, as also directions to both plaintiffs and
defendants to deposit certain amounts referred to therein, we are,
at this stage, not inclined to grant such reliefs, as we are of the
view, that the interests of justice would be served if the Notice of
Motion is made absolute in terms of the prayer clause (b)
restricted of course, to the suit premises described in ExhibitA
or
the 1st Schedule to the plaint, being the property bearing CTS
No.725.
56] Accordingly, we pass the following order;
(a) The impugned judgment and order dated 28
October 2013 is hereby set aside and leave
is granted to the plaintiffs to amend the
plaint in terms of the text extracted at
paragraph 24 of this judgment and order.
The Chamber Summons No.2087 of 2011 is,
accordingly, made absolute to the aforesaid
extent;
(b) Amendment to be carried out by the
plaintiffs within a period of four weeks from
today;
(c) Notice of Motion No.2308 of 2007 in Suit
No.1241 of 2007 is made absolute in terms

of prayer clause (b) thereof, however, the
same shall be restricted to the suit premises
described in Exhibit A or the 1st Schedule to
the plaint, being the property bearing CTS
No.725.
57] Appeal No.42 of 2014 and Notice of Motion No.2308
of 2007 in Suit No.1241 of 2007 are disposed of accordingly. In
the facts and circumstances of the present case, there shall be no
order as to costs.
58] In view of the disposal of Appeal No.42 of 2014,
Notice of Motion No.537 of 2014 does not survive and is
accordingly disposed of.
CHIEF JUSTICE
(M.S.SONAK, J.)

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